Letter to Shareholders
As we all know the world around us is going through changes ofunprecedented complexity scale and speed. While the Covid 19 pandemic continues to impactthe economies the intensity of supply chain challenges has increased. The geo-politicaltensions due to the Ukraine war and increasing inflation have further added to thetroubles of the business world over. While all this turmoil has ramifications on ourcompany we are committed to address the customer requirements demonstrate resilienceand respond positively to the future. At Centum we continue to build capabilitiesbroaden our relationship with our customers and offer innovative solutions.
During the year 21-22 our consolidated Total Income was Rs 7880 M& EBITDA was Rs 742 M (EBITDA margin 9.52%) Total income declined from Rs 8232 M in20-21 to Rs 7880 M in 21-22 and Profit Before Tax (before exceptional item) decreasedfrom Rs 205 M to Rs 127 M mainly due to the pandemic and supply chain challenges.However on the Balance sheet we continued our focus on working capital management andmaintained a tight control over the inventories and obtained customer advances wherever wehad to secure the materials under the current challenging supply chain situation. Weclosely monitored and reduced the receivables. We also reduced our debt at consolidatedlevel from Rs 3184 M in 2020-21 to Rs 2726 M (reduction of Rs 458 M) in 2021-22.
Your company had an exceptional expenditure of Rs 604 M mainly due todiminution of the investment value in the associate company (the business that wasdiscontinued and divested in the previous year).
The global Electronics System Design and Manufacturing (ESDM) sectorcontinues to be impacted by the abovementioned factors. This is reflected in thesignificant increase in lead times in deliveries from simple electronic products toexpensive automobiles. During the year Centum was also affected adversely. Major sectorslike Airlines Defence Space and Transportation continued to witness significantslowdown not necessarily because of demand alone but due to supply chain issues also. Thechanging realities of business environment have led your company to play a balancing actbetween staying profitable and keeping the balance sheet healthy while devising strategiesfor emerging opportunities.
The global supply chain in the electronics industry continues to beunder enormous pressure. With the continuing components shortages manufacturers arescrambling to meet the growing customer demand. Demand for electronic products continuesto outweigh supply putting pressure on manufacturers. The market reports predict that thecomponent shortage will continue into 2023. At Centum we are mitigating this risk to alarge extent by focusing on careful planning close customer and supplier interactions andtransform the supply chain to be more resilient flexible and efficient to reduce theadverse business impact due to the Supply chain challenges.
While the immediate challenges need to be attended in a focused mannerthe outlook for the future remains very bright. Connectivity (IoT) Sustainability/Cleantech Electrification and Security are the key themes that are driving demand forelectronics and Software engineering design services across verticals. Furthermore demandfor manufacturing in India is also increasing as labour costs rise in China and thegeopolitical trade and security environment has compelling many global companies to lookat alternative manufacturing destinations and diversifying their supply chains. We atCentum are seeing the benefits of this trend in the form of new opportunities fromexisting and new customers.
The growth potential and strategic importance of electronics industryhas been well acknowledged by Government of India in the National Policy for Electronics(NPE). Moreover ESDM industry has been recognized as one of the 25 priority sectors inthe Make in India initiative to contribute to economic growth.
To facilitate indigenization Government of India released three"positive indigenization lists stressing the need for self-reliance under AatmaNirbhar Bharath. In the Defence sector GOI has brought in significant focus onindigenization and procurement of Defence & Aerospace products from India and due tothis policy contracts which hitherto would have been Buy Global have been converted toMake in India opening up significant opportunities for India Companies. With this majorchange Centum has invested in sales and marketing in addressing the Tri-services directlyand also exploring collaborations with Global OEMs for technology transfer to meet the newdemand that has been made accessible by the "Positive indigenization lists".Also the Government of India has unleashed Reforms in Space sector to promote privatesector and enable the Indian Space program to remain competitive within the global spacemarket.
I am excited with all these initiatives will bring significantopportunities to your company and Centum with its long history of Technology DevelopmentNew Product introductions and the credibility it has with its strong Customer base is verywell positioned to see significant growth in the coming years.
I am very grateful to all our Customers for the business and unstintedsupport they give us and I would like to express my sincere appreciation to the employeesfor the commitment and grit they have shown especially during the difficult times of Covidand supply chain disruptions. I sincerely thank all the stakeholders for their continuedtrust and support and we will continue to grow our business by offering innovativeproducts and solutions and exploring new avenues for future growth.
Apparao V Mallavarapu