As I write this year's letter the world is confronting a health crisis unlike anyother in recent history one that not only has upended human lives but is also having anextraordinary impact on the global economy. In these overwhelming and unchartered timeswe would like to reassure you that your Company remains confident in its fundamentallystrong business model and growth prospects. By demonstrating unyielding resilience we aredetermined to navigate the expected headwinds in the coming months and emerge from thesechallenges as a stronger enterprise.
The Indian economy was confronting several headwinds even before the coronaviruspandemic. To relight the economy the government took several steps - including thesteepest ever cut in corporate tax to boost investment. However the nationwide lockdownthat ensued to contain the spread of the virus brought all economic activity to a grindinghalt in Q4 FY 2019-20. To steady the economy and contain the impact of the viruscomprehensive interventions are being rolled out on several fronts by the government.
As a manufacturing entity in the non-essential category the unexpected turn of eventsadversely impacted our fourth-quarter results especially as
March is historically a month of high sales due to year-end targets given todistributors. The ramifications of the fourth quarter persisted on the full-year numbersas well. Our business was also affected by sluggish growth in certain end-user sectorsespecially telecommunications and real estate. Against this tough operating backdrop werecorded Rs. 3049 crores as revenue in FY 2019-20 as against Rs. 3200 crores in theprevious year a degrowth of 4.7%. Profit before tax stood at Rs. 501 crores for the yearas against Rs. 532 crores for the previous year while the adoption of the lower tax ratesenabled us to record a post-tax profit of Rs. 402 crores for the year as against Rs. 344crores in the previous year.
Notwithstanding the muted financial results I am pleased to share that we madesubstantial progress in growing our B2C segment. Our recent introductions of fans andother product lines clocked between 25% and 60% growth in volume terms. While in terms ofvalue this business is still at a nascent stage the impressive results corroborate thatour strategy is headed in the right direction to usher a stronger performance as consumerconfidence rises and demand returns.
Looking beyond immediate challenges our capex plan of Rs. 200 crores over the next18-20 months remains unchanged. We have multiple ongoing projects one of which is at Goato manufacture electrical conduits. While plant construction has been completed theequipment testing by experts has been delayed due to travel restrictions. In Pune we havecommenced the construction of a plant for the manufacture of solar cables.
The plant will be deploying electron beam accelerators the most advanced technologyfor the manufacture of abrasion-resistant and long-lasting solar cables. Besides servingthe renewable energy sector these electron-beam cured cables are also being used in theconstruction and automobile segments due to their ability to withstand higher temperatureopening up more growth avenues. As part of our efforts to strengthen backward integrationwe are installing a new line to make tinned copper and foray into instrumentation cables.While the lockdown and reverse migration of labourers from cities to villages has impactedour project timelines we are working towards restoring construction speed following thegradual normalisation of the economy.
In my previous year's message I had shared with you our ambitious plan of growing ourdistribution network to 150000 retail touchpoints by connecting with 500 distributorseach reaching out to around 300 retailers. While we could achieve taking up our retailtouchpoints to 50000 retailers this year we are continuing with renewed vigour towardsthe goal of 150000 this year. Further we are bringing our dealers on a common softwareplatform to get better visibility of secondary data. By deepening our reach and leveragingtechnology solutions we are upbeat about growing the sales of our consumer products. Ourcontinued investments in brand building and channel partner engagement will also help usto strengthen our market visibility and connect.
Controlling the external environment is not possible; however we are taking decisiveactions to help ensure our continued competitiveness financial resilience and businesscontinuity in the new normal. Every overhead expenditure is being minutely scrutinised tocontain costs where possible. To operate more efficiently and effectively we are lookingat greater automation at our sites. The lockdown period was utilised to identify new waysto make our business leaner and more agile along with conducting various skill-enhancingtraining programmes for specific group of employees. At the same time with safety of ouremployees business partners and consumers our top priority utmost precaution and thehighest safety standards are being followed across all our locations. While all ourfacilities are currently operating at lower capacity operations will be stepped up as andwhen conditions normalise. Finally our robust balance sheet with a zero-debt status givesus added strength to weather the uncertain times ahead.
Challenges notwithstanding in the short-term our growth potential remains high. Ourcore business of wires and cables has a comprehensive range of products that are usedacross various aspects of infrastructure be it in power communication roads or buildinginfrastructure. The government has unveiled the National Infrastructure Pipeline (NIP)under which Rs. 100 lakh crores would be invested on infrastructure over the next fiveyears to realise the vision of a $5 trillion economy by 2025. Besides the continuedthrust on government flagship programmes such as Power for All Housing for All SmartCities and Deendayal Upadhyaya Gram Jyoti Yojana (to boost rural electrification) willboost the demand for electrical wires and cables. The Integrated Power Development Schemeto drive efficiency in power transmission and distribution and the impending investmentsby the telecom sector to transmit data more efficiently and at higher speeds also holdpromising prospects for our business in the medium to long-term.
In closing I would like to take this opportunity to thank our talented team ofemployees whose unwavering resolve and commitment has enabled us to conquer many achallenge and achieve new benchmarks. I am certain that as we navigate this unprecedentedcrisis they will rise to the occasion once again. I would also like to extend myappreciation to our distribution partners suppliers customers consumers bankers andshareholders for their constant trust. Finolex has a five-decade rich legacy of thrivingdespite challenges. This time too with your continued support we shall continue tothrive.
Wish you all good health.
|D.K. Chhabria |
|Executive Chairman |