"The Company's FY17 performance showed that we have truly come of age."
Q: Were you pleased with the Company's performance during the year under review?
The Company's FY17 performance showed that we have truly come of age. These numbershere are proof of our maturity: we not only generated revenues worth C906 crore but alsorecorded a profit after tax of C43.47 crore. We continued to report profitable growth:revenues increased by 9.15% while our PAT increased by 64.95%. We strengthened our EBIDTAmargins as well - from 8.92% in FY16 it increased to 11.17% in FY17.
Q: You used the word 'maturity'. Why?
Because of the sheer challenges that we countered during the year under review and themanner in which we overcame them. The biggest challenge during the year under review wasdealing with demonetisation and its after-effects. Besides we experienced two successivemild winters. Cotton prices hardened and affected our profitability. The aggregation ofthese realities within the space of a few months made it a particularly challenging yearfor us.
Q: Let us start with demonetisation and its impact on the sector and the Company.
Most consumers who buy our products do so using cash. As cash availability declined andconsumer sentiment took a beating we experienced a sales decline starting the second weekof November 2016. In the aftermath of this landmark event our growth plans for Q3 FY17were hampered.
Nevertheless I must report that the sales losses were not as extensive as one wouldhave feared. Dollar Industries reported C 166.28 crore in revenues in Q3 of FY17 comparedto C200.01 crore in Q3 of FY16 a decline of 17%. Thereafter Dollar Industries reportedC281.81 crore in Q4 FY17 revenues compared to C228.63 crore in Q4 FY16 a growth of 23%indicating its ability to rebound decisively.
This performance validates something that we have consistently professed: that duringsectoral troughs our Company's decline would be less steep than that of the overallsector and during periods of rebound our resurgence would be correspondingly higher andquicker.
Q: How did the Company address the demonetisation challenge?
Through a number of initiatives.
One we forbade the sales and marketing channels to pile on the growing mood ofpessimism and instead focused on effective counter-initiatives. The result was that afterthe first few days we began to educate distributors that what appeared to be a setbackwas in fact a positive opportunity. We communicated constantly with them to make thistransition as seamless as possible.
Two we stayed consistent with our brand ambassador for better brand recall. The resultwas that even though most sectoral players continued to change we continued to reinvestto rebound faster.
Three when we realised that this winter was going to be milder than usual we slowedour manufacturing throughput and began to clear inventory. This proactive responsivenessliberated our working capital and prevented a late-winter panic from setting in whichcould have forced us to liquidate stocks at a discount.
Four we relied on our integrated business model to absorb the increase in raw cottoncosts. Our extensive value chain served as an effective shock absorber during the yearunder review.
I am pleased to report that a combination of these initiatives allowed us to reportconsecutive years of profitable growth.
Q: What were some of the other aspects of the Company's performance that proved to bedecisive?
During any downtrend the first casualty is usually a company's terms of trade.
Hence it would be reasonable for most companies to play the concession game: offerlonger credit to trade partners or discount products with the objective to carve out alarger market share. One of the first things that we resolved was that this kind ofkneejerk response would affect brand robustness. In view of this we continued to offerthe same credit terms and responded with a 'business as usual' consistency. In the weeksfollowing the demonetisation our trade partners worked harder and ensured that our brandremained protected during one of the most challenging quarters in recent memory. Theresult: Dollar Industries repaid some debt during the year and thereby ensured access tocompetitively-priced debt across the foreseeable future.
Q: How does the Company intend to strengthen its competitiveness in FY18??
We recognise the overarching importance of growing revenues and profits withoutcorrespondingly growing our Balance Sheet. We believe this forms the basis of ourlong-term sustainability. Consequently we devised a structured plan to make this areality which will be reinforced during the current financial year. The essence of thisinitiative will be premiumisation. We intend to introduce a larger number of products thatwill figure on the high-end section of the value chain. We believe that enhancedrealisations will bolster our profitability. In view of this we are optimistic about ourprospects during FY18 and hope to report revenues in excess of C 1000 crore.
|Shri Din Dayal Gupta |