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Endurance Technologies Ltd.

BSE: 540153 Sector: Auto
NSE: ENDURANCE ISIN Code: INE913H01037
BSE 00:00 | 11 Jun 1496.70 -3.60
(-0.24%)
OPEN

1500.00

HIGH

1501.00

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1479.45

NSE 00:00 | 11 Jun 1497.25 -1.65
(-0.11%)
OPEN

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HIGH

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OPEN 1500.00
PREVIOUS CLOSE 1500.30
VOLUME 4291
52-Week high 1540.00
52-Week low 796.25
P/E 52.59
Mkt Cap.(Rs cr) 21,053
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 1500.00
CLOSE 1500.30
VOLUME 4291
52-Week high 1540.00
52-Week low 796.25
P/E 52.59
Mkt Cap.(Rs cr) 21,053
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Endurance Technologies Ltd. (ENDURANCE) - Chairman Speech

Company chairman speech

Dear Shareholders I am pleased to bring you the Endurance Technologies Annual Report2019-20. This year was certainly challenging overall but it saw us proving our mettle oncemore. True to our reputation as an end-to-end automotive solution provider that cancompete on the world stage we posted a good set of financial results despite the generalslowdown in the automobile industry. Indeed we have delivered ‘better than industry'results which indicates the trust that our OEM clients place in us.

We are one of India's leading automotive component manufacturing companies and thelargest aluminium die casting company. The sustained demand for our products iscomplemented by our focus on profitable growth in the domestic and overseas markets. Ourplant operations in India and Europe were suspended during the lockdown. Going forward weexpect several uncertainties in the first half of FY 2020-21 in the wake of the pandemicand this is likely to leave an impact on the second half of the financial year too.

However we are in it for a marathon not a sprint and we are working on our owncapabilities to seize the opportunities that will emerge from the pandemic. We took thelockdown as an opportunity to become leaner and focused on lowering our fixed and variablecosts and capital expenditure. A combination of robust top line cost and capex controlengineering innovation productivity and quality enhancement has allowed us to remain afinancially robust Company with strong ROCE (return on capital employed) and ROE (returnon equity) and with positive cash and cash equivalent. Today we are better prepared toface the auto market slump and are also working on austerity measures to face industrychallenges. Regardless of the macro-economic conditions we shall remain committed to theenduring sustainability of our business.

Profitable and Sustainable Growth

During the year under review the automotive industry in India and Europe reportednegative growth. Amidst this scenario we continued our trend of outperforming theindustry as we reported Consolidated Total Income of Rs 69653 million compared to Rs75375 million in the previous year. Our Net Profit stood at Rs 5655 million up 14.2%compared to

Rs 4950 million in the previous year. EBITDA was at Rs 11784 million as against Rs11558 million a year earlier.

Consolidated EBITDA margin was at 16.9% ROCE at 21.7% and ROE at 20.3%. For the firsttime in our history there was no consolidated net debt; instead we had net cash of Rs 361million. We had new orders worth

Rs 5860 million during the financial year ended 31st March 2020. Inaddition Rs 12770 million worth of order enquiries received from OEMs are currentlyunder discussion.

The Indian business contributed 71.4% to the Consolidated Income and recorded TotalSales of Rs 49386 million compared to Rs 54175 million a year ago. Sales in theAftermarket segment at Rs 2977 million grew 10%. Our Exports stood at Rs 2167 million.The European operations contributed 28.6% to our Consolidated Income. Total Sales inEurope stood at €251.3 million compared to €258.6 million in the previous year.

Despite a challenging market environment we reported a satisfactory performance duringthe year. In fact we earned better profit margins in spite of de-growth in the automobileindustry. In brief although total sales fell our profitability increased by a fairlygood margin – both in absolute terms and percentage. During the year we lowered ourcosts including raw material costs which led to better profit margins. Our value-addedproducts drove margin expansion. Further we exercised greater control over our capitalexpenditure and working capital.

All major 2-wheeler and 3-wheeler OEMs in India are our customers today. In theoverseas markets we continue to be associated with major OEMs and have been supportingthem in their value-addition journey as they drive forward to produce state-of-the-artvehicles including electric and hybrid vehicles. We also grew our presence in thereplacement market.

Towards Better Product Mix with more Value-adds

The year under review was a challenging one even before the impact of the Coronaviruspandemic began to shut down markets. Even so we were ahead of the industry winning newbusiness and supplying all four product categories to existing customers gaining businessshare being on their new product platforms and getting orders for higher value-addedparts.

Our focus continued to be on more value adds and a profitable product mix in our futurebusiness. These included the 200cc-plus motorcycle brakes and clutch assemblies;paper-based clutch assemblies for motorcycles; continuous variable transmissions orautomatic clutches for scooters; anti-lock brake system for 150cc-plus motorcycles;inverted front forks and adjustable rear mono shock absorbers for 200cc-plus motorcyclesfront forks and shock absorbers for electric two-wheelers and three-wheelers; andfully-finished machined castings for two three and four-wheelers.

Our recent investments in companies with strengths in braking and clutch technologieswill help us offer further value addition to our customers. We have won significant ordersfor automotive components of electric and hybrid cars which we have begun manufacturingthis year.

Strengthening Our Presence

We have continued to establish the Endurance brand and our leadership position. Duringthe year we scaled up and strengthened our product offerings expanded our presence byleveraging our relationships with OEM manufacturers and won significant new business.Today we command a 31% share in front forks 34% in shock absorbers 16% in clutchassemblies and 24% in brake systems in the domestic market.

In the overseas market we continue to nurture strong relationships with our OEMcustomers. Our largest customer today is a German group which has key ICE hybrid andelectric vehicles in its stable and we serve them in all these categories.

In the Aftermarket segment we forayed into two more countries and now we serve 28countries overseas. Our distribution network spans to 335 dealers in India and 40distributors overseas. During FY 2020-21 we plan to foray into three more countries andadd at least 35-40 new dealers.

One of the ways in which we are strengthening the organisation is by diversifying ourclient base and reducing dependence on a few major clients. This will help us withstandthe stressed macro-economic conditions that may prevail from time to time.

New Product Platforms

We are entering a new product area that of aluminium forging which will enable us tointegrate backwards. Today we are importing Axle clamps from Western Europe for ourinverted front forks. With our new venture we will begin manufacturing of such clampsin-house the production of which is aimed to start in April 2021. For this we havesigned a technical collaboration with a leading company in Italy. This will give us anopportunity to grow the aluminium forging proprietary business for other usage in2-wheelers 3-wheelers 4-wheelers and electric vehicles.

Acquiring New Technologies

We are constantly on the lookout for acquisition and collaboration opportunities tolaunch new products in India and overseas to gain technology and market share. We haveacquired ownership of two of our long-standing technology partners recently. Our Italiansubsidiary Endurance Overseas Srl acquired 99% stake in two-wheeler clutch company AdlerSpA in April this year to become Endurance Adler SpA. Adler is a leader in systemssolutions for clutches gears friction plates with a niche in R&D engineeringservices and product development for customers in Europe. This is indeed a strategicacquisition as it gives us complete access to Adler's technical knowhow and itsintellectual property rights. Furthermore it provides us growth opportunities for thedomestic market and for exports. With Adler's manufacturing plant at Rovereto Italy ourGroup today has 10 manufacturing plants in Europe of which 7 are in Italy and 3 inGermany.

In May 2020 Endurance Adler SpA acquired the two-wheeler brake company Grimeca Srlwhich specialises in designing of brake systems for motorcycle applications. Thetransaction involves the acquisition of "G Grimeca" brand intellectualproperty patents and know-how for brake systems for two-wheelers and three-wheelers.Grimeca has several years of development expertise and design of high-tech solutions forlarge series motorcycles and for innovative and high-performance applications.

Both Adler and Grimeca have been our technology partners in the past and have been animportant part of our journey of growing our clutch and brakes business in India in thelast 15-17 years. These acquisitions give a new impetus to our technological leadershipwith the prospect of creating a centre of excellence in Italy for designing andmanufacturing of motorcycle components. It gives us access to improved technology inbraking and transmissions and also access to new customers. Both these acquisitions willhelp us get new business for clutch assemblies and brakes mainly for 200cc-plusmotorcycles in our Indian operations. Further these acquisitions are expected to get usnew business from the European market too.

Endurance has successfully deployed technology sourced from overseas in the Indianmarkets. Our R&D teams engage in value engineering exercises to ensure that theimported technology serves the end customer on Indian roads driving conditions and alsoprovides value in terms of better performance durability and cost.

Strategic Priorities

Through our technological capabilities we maintain our focus on supplying "firsttime right" products to OEMs. Our recently commissioned 29-acre test track (provingground) goes a long way in achieving this objective.

Stringent focus is being maintained on QCDDM (Quality Cost Delivery Development andManagement) parameters to the satisfaction of our customers for keeping our sales growthhigher than industry average gaining business share in the markets we serve andincreasing wallet share from our customers.

Meanwhile through the Endurance Vendor Association we work with our suppliers toimprove quality of their components and satisfy us in QCDDM.

We are also improving operational efficiency and ROCE by utilising our assets betterand reducing the need for further capital expenditure.

Sweating Existing Assets

Our focus continues to be on sweating the existing assets more in lean times. Today wehave 17 plants in India that are running optimally. Our new plant at Vallam near Chennaifor supplying machined aluminium castings is expected to get commissioned by October2020. Our emphasis is on enabling multi-product development at these plants dependingupon orders received from customers. This will help us optimise our operations and reducecapex. Any new capex will now be taken up only based on business demand and size of theopportunity.

Replacement Market

In keeping with our commitment to offer end-to-end solutions we augmented our range ofofferings and have lined up the launch of value-added products. In a strategic approach tomake core and new products available across India we continued our channel expansiondrive to Tier 2 & 3 cities and rural India. Moving forward we expect the aftermarketbusiness to be our strategic growth driver. In the overseas market we will maintain ourfoothold in the existing 28 countries. Our aim is to expand our presence to at least twonew countries during FY 2020-21. We are considering geographies like Latin America andSouth East Asia. Going ahead we are targeting three key segments: private branding;launch of products for international make of 2-wheelers; and launch of value-addedproducts.

Moving Forward

Over the years we have managed to build a robust organisation and strong financials.We have established a reputation of manufacturing products that are designed to lastlonger and have set up business relationships that have stood the test of time. Ouremphasis on safety community welfare and the environment continues.

Moving forward we will continue our single-minded aim on technology and newproduct-oriented organic and inorganic growth. We aim to increase the share of businesswith existing clients add new clients add and upgrade latest technologies throughproduct collaborations and in-house

R&D growth in new product areas increase aftermarket and exports business andlook at inorganic opportunities in India and Europe.

Today we have the ability to sustain ourselves in the market by virtue of some of oursustained efforts: ensuring better control on capex; maintaining a strong focus onquality; control on costs; and continuing to hold customer centricity as our core value.

We will do all this while reaffirming our long-standing reputation for leadershiptrust and integrity. We will continue to build momentum and find innovative ways to addvalue for our clients. With our highly differentiated capabilities and disciplinedmanagement of the business I am very confident about gaining market share and satisfyingall the stakeholders.

On behalf of the management and the Board of Directors I thank all our shareholderscustomers supply chain members technology partners and all our employees for helping usbuild a sustainable and technological future together.

Thank you for being a part of our ongoing success story.

Sincerely
Anurang Jain
Managing Director