Towards the close of our third year as a public listed company I am delighted to sharewith you our journey on the trajectory of growth during FY18.
What once began as an idea to bring coffee culture into mainstream India at a pricethat was affordable yet competitive led to the starting of the first Caf Coffee Day wayback in 1996. Today in 2018 we are India's largest caf chain with close to 2700 retailcoffee points across the country and 47500+ vending machines across corporate India.
None of this would have been even remotely possible without the support of our valuablecustomers and other esteemed stakeholders who have reposed their faith in us as wetraversed this journey. Thank you once again.
FY2018: AN UPBEAT YEAR IN A NUTSHELL
With our strong brand presence and singular focus on customer delight the coffeeretail business has been promising in spite of intense competition and regulatory changesin the country. Over the last 25 quarters we have seen consistently positive same storesales growth.
We intend to continue on this growth path unabated with our strong businessfundamentals and brand customer loyalty leading the way.
Thanks to significant steps towards introducing new and exciting meal and snack optionsin our cafs we have been able to expand the food menus on offer to our customers. Theseinclude an enticing array of eats along with your favourite beverages throughout the day.Milkshakes as a new category have garnered a very positive response and helped increaseour overall sales. Constant food innovation allows us to be seen perhaps for the firsttime as a place not only for conversations over coffee but also a rendezvous over aquick bite.
The response to our innovative food launches in the wellness range has beenencouraging and in a country that is fast becoming health conscious we will continue tofocus on healthy menu offerings. Overall at the caf level this year we have employedthe two-pronged approach of widening our product portfolio while also offering valueoptions to our customers.
Over and above our cafs we continue to rapidly make inroads into the corporatesector. With the addition of over 8000 coffee vending machines targeting key channelssuch as auto and jewellery showrooms our coffee drinker footprint continues to expand.
It merits a mention here that Indus Plus our new age video-enabled coffee machine withits IoT-enabled interface and intuitive screen is fast catching people's attention. Whatis more the launch of Tetra Pak cow's milk across the country has met with a hearteningresponse for health-conscious customers while at the same time living up to our highquality standards.
COFFEE INDUSTRY: THE FRAGRANT AROMA OF SUCCESS
On account of caf culture becoming popular among the youth in India the coffeeindustry is set to grow at a CAGR of over 11% in the next 3 years. The Company reported aCoffee Retail Gross Revenue growth of 12% in FY17-18 and this is only poised to rise.
While still at a nascent stage the demand for coffee beverages will slowly growincreasing our caffeine footprint from metro cities to Tier II and Tier III cities acrossthe country. Fueled by the government's plan to develop various smart cities'coupled with increasing disposable incomes and a dynamic work-life balance we at CoffeeDay have much to be optimistic about in the near future.
In addition to cafs the availability of vending machines in corporate spaces hasdriven up the demand for hot beverages and this contributes to an increasing demand fortea and coffee among the workforce in India. Your Company controls more than 70% of thevending business in fresh milk coffee in India Inc. and for this you should only beproud.
With online food delivery platforms evolving with disruptive technologies everyday weanticipate 10-15% of our caf sales from delivery as a new revenue stream one thatwill show rapid organic growth in the years to come.
SICAL: MINING FOR NEWER POSSIBILITIES
The supply chain and logistics industry has been a big gainer on the rolling out ofGST. With most forward-looking organisations reevaluating their supply chain and logisticsstrategies we believe this sector is headed towards significant growth.
The Company reported a robust growth in FY17-18 with 31% increase in revenues. Newinitiatives around supply chain solutions for FMCG and retail industries coupled withcontract wins in the existing business verticals contributed to this growth.
A consortium led by our Company (with a 51% equity stake) has been awarded a MineDevelopment and Operations (MDO) contract by the Damodar Valley Corporation. To beexecuted over the next 20 years the cumulative revenue from this operation will yield usover Rs 10000 crore. Furthermore SICAL has secured two contracts from subsidiaries ofCoal India Limited with a total contract value of Rs 1624 crore. These contracts will beexecuted over the next 4 years and will help us boost our revenue significantly.
We are also proud to inform you that SICAL Iron Ore
Terminals Limited a subsidiary of SICAL Logistics Limited has received all clearancesand financial approvals for the modification of the existing Iron Ore Terminal to handlecommon user grade coal at the Kamarajar Port TN. The Company is in the process ofexecuting this project and will start becoming revenue positive in 12-18 months.
TANGLIN & THE BRIGHT PATH AHEAD
Office space absorption is a domain that is expected to grow owing to robust demandfrom IT/ITeS companies in key markets such as Bengaluru.
Tanglin offers customised office spaces for various multi-national technologyenterprises in Bengaluru and Mangaluru. A steady and sustained demand from technologycompanies during the year resulted in Tanglin recording a gross revenue of Rs 150 crore inFY18. And it only gets better.
Over the next 8-12 months an upcoming metro station is expected close to the GlobalVillage property in Bengaluru. This will boost the demand for our location and providefaster connectivity to the city center. Revenues from Tanglin are expected to cross Rs 200crore in the next 12-15 months.
WAY2WEALTH: THE ROAD TO PROSPERITY
The revenue from our financial services business stood at Rs 574 crore in FY18 anincrease of a significant 21% over FY17. These contributions can be attributed to growthin revenues from institutional treasury and market operations through quantitativetechniques and our futuristic approach.
In the year ahead we expect our financial markets to be range-bound and our businessesdependent on them to maintain the status quo; particularly the equity derivativescommodities debt markets and related businesses that might show slow growth.
However the present government's policy focus and regulatory clarities are bound toencourage the FDI and FII inflows into the country thereby assisting the markets to movehigher and correspondingly help us leverage our business strengths to our advantage.
MINDTREE MINDS : AN APPETITE FOR TOMORROW
We are thankful to Mindtree Minds for their extraordinary performance and we areconfident that they will continue to add to our profitability and performance.
GLOBALEDGE : EARNING FROM LEARNING
During the year we successfully exited a majority stake of equity held in Global Edgegiving us a very healthy return on our initial investment made in 2001. We are expectingan additional consideration from the remaining stake in Global Edge during FY18-19.
GIVING BACK MORE THAN WE TAKE SINCE 1996
Being a socially and environmentally responsible Company is not just a mandate; it isan ongoing commitment to our society and surroundings. Being the first Indian company toreceive the UTZ certification our shade-grown coffee is consciously cultivated on estatesthat support a varied flora and fauna endemic to the region.
People are our greatest asset and we have a deep commitment towards bolstering thefortunes of the communities and talent we work with. We firmly believe that the strategiesand values highlighted below will help us stay on course:
Talent Management: Great talent will shape the future of our businesses each ofwhich is committed to providing a platform and opportunity to help our people bring outtheir talent and potential at work. Our people initiatives are designed to continuallyreinvigorate and organise our human capital in order for our work force to step up tochanging demands of our businesses while accelerating personal growth.
Technology: In these times of a rapidly digitising business environment wecontinue to develop nuanced strategies that enable us to remain in touch with our customerbase. As technological trends evolve we intend to stay on course by recognising andreacting to our customers' needs without delay. Our emphasis on keeping up with thesetrends will ensure that Coffee Day continues to hold a place in people's hearts as one ofthe most loved and future-positive caf chains in the country.
Quest for Excellence: Our motto is to constantly challenge ourselves to explorenewer better and quicker ways of doing things. Looking at everything with a sense ofcuriosity while never settling for anything but the best is the way we attain excellence.Never hesitating to question the norm we are always looking for new ideas and innovationsthat help us to transform businesses and power us to serve our customers better.
COFFEE DAY GROUP: A FUTURE REIMAGINED
At the group level we are excited about the possibilities that lie ahead of us. AsIndia is poised towards accelerating GDP growth we believe we are entering an excitingphase of possibilities; who knows but this could be the start of India's upswing boommuch akin to what the last 20 years have been for China.
We have tremendous conviction in our abilities to pursue the growth trajectory we havecharted for ourselves and significantly benefit from being part of this vibrant economy.With cites growing at a rapid pace and rural populations migrating to towns ourbusinesses are poised to soar rapidly. Our objective remains to continue growing at adouble-digit rate while maintaining the financial strength of our Company.
We are pleased to have you as our shareholders and I take this opportunity to thankyou for your continued trust and support on this journey. We are deeply passionate aboutbuilding a great company; a passion that is reflected in every cup of coffee we serve.
We would also like to thank the Board management employees and all other stakeholdersfor their significant contribution over the years for making us one of India's biggest andmost iconic brands.
Finally as always I would like to reiterate our commitment towards deliveringconsistent results and enhancing shareholder value.
After all who would have guessed that so much can indeed happen over coffee-
V.G. Siddhartha Chairman and Managing Director