The year 2018-19 proved to be a challenging year for the Indian economy. fterreasonably strong growth in the first half of the Ayear economic growth slowed visibly inthe second half. The result was a liquidity paralysis which translated into a weakerconsumer sentiment that affected the offtake of a variety of products and services. Thegrowth within the Indian economy declined quarter on quarter touching the slowest in thefourth quarter of 2018-19 at 5.8% the weakest in years. As a result the overall growthof the Indian economy was 6.8% during 2018-19 40 bps lower than the previous year.
The impact of the slowdown was perceptible on the countrys automobile sector. Thetwo-wheeler industry was not spared reporting a growth of 6.29% during the year underreview against 15.44% in FY2017-18 while domestic offtake growth of two-wheelers was evenslower at 4.86%.
Despite a challenging environment your company reported 16.77% growth in revenues10.83% growth in EBIDTA and 7.6% growth in PAT.
Consolidated PAT was Rs. 55.64 Cr during FY2018-19 as against Rs 52.56 Cr in FY2017-18.The company declared a dividend of 120% or Rs12 per share for the year under review whichrepresented a payout of 34% of profits.
The companys outperformance during the year under review was driven by the launchof a new LED auto model and increased wallet share across existing customers. Thecompanys principal accounts continued to grow; revenues from Yamaha and Suzuki grew82% and 67% respectively while modest growth was maintained with Honda and TVS.
Your Company is pleased to report that it continued to be a preferred supplier to OEMsduring the year under review. Your Company supplied products to more than 35 domestic andglobal OEMs including leading market share with key OEMs. Your Company continued toaccount for leading market share with some of the most prominent customers validating yourCompanys leadership position. Going forward your Company will focus on the coretwo-wheeler business based on long-term optimism.
During the year under review Indias two-wheeler industry was marked bychallenges and constraints. These comprised a five year mandatory insurance ABS CBS andimpending BS-VI norms. These regulatory norms have increased the cost of two-wheelers; afurther impact is yet to materialize following the implementation of BS-VI norms. Besidesthe default of a non-banking financial institution in 2018-19 staggered the financing oftwo-wheelers impacting sales. In a country where almost 75 per cent of all two-wheelersales are financed by external agencies the decline in financing arrangements affectedsales.
Beside there is a confusion over BS6 norms with customers hoping for increaseddiscounts (like what happened in BS3 and BS4 transition) in end of FY20 and fear of ban onthe internal combustion engine in two wheelers for electric vehicles.
Increased documentation and risk a version by financiers are the after effect of aslowdown resulting in a lower mobilization of funds.
Despite this aberration we see the long-term outlook of the company with optimism. Theslowdown in Indias automotive sector is expected to be temporary as the two-wheelerremains the most affordable commuting mode for a large part of Indias population -virtually a necessity rather than a luxury.
Our focus has been on the development of in-house Design and Testing capabilities andgoing ahead with the new technology products like the Bank Angle Sensor Fuel Pump Moduleand Canister etc. by forging partnerships with the world renowned manufacturers. Duringthe year we also formed a wholly owned subsidiary in Italy - Fiem Research and TechnologyS.r.l. and set up a Design Center which we believe will significantly strengthen ourdesigning capabilities.
Our leadership in Technology and R&D was further reinforced as we received theGlobal Award from Yamaha Motor Company Japan for Excellence in Technology andDevelopment. We developed the worlds smallest bi-functional LED lighting module fortwo-wheelers. Validating the Companys credentials in partnering some of the mostrespected global companies in cutting-edge research.
I would like to share that we added another prestigious customer India Kawasaki Motorfor the development and supply of headlamps tail lamps and rear view mirrors for theirupcoming model.
The automotive lighting equipment is a safety and styling product for the vehicle andsignificantly enhances the aesthetics of a vehicle any change in the vehicle designwarrant a change in lighting style. This flexibility and creativity encouraged us toremain innovative in offering new technology products to OEM customers.
Indias automotive sector could face challenges till the implementation of BS-6norms and up to few months there after hence we remain cautious for some time and hopefor a better growth momentum in medium to long term.
I am thankful to all our stakeholders for staying with us and trusting our businessmodel. We expect to enhance value in a significant way across the coming years.
J. K. Jain
Chairman & Managing Director