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Finolex Cables Ltd.

BSE: 500144 Sector: Engineering
NSE: FINCABLES ISIN Code: INE235A01022
BSE 00:00 | 20 Mar 496.90 -1.50
(-0.30%)
OPEN

496.45

HIGH

506.75

LOW

494.00

NSE 00:00 | 20 Mar 497.30 -1.60
(-0.32%)
OPEN

497.80

HIGH

507.85

LOW

492.20

OPEN 496.45
PREVIOUS CLOSE 498.40
VOLUME 3618
52-Week high 740.00
52-Week low 356.00
P/E 22.29
Mkt Cap.(Rs cr) 7,600
Buy Price 496.90
Buy Qty 15.00
Sell Price 502.00
Sell Qty 49.00
OPEN 496.45
CLOSE 498.40
VOLUME 3618
52-Week high 740.00
52-Week low 356.00
P/E 22.29
Mkt Cap.(Rs cr) 7,600
Buy Price 496.90
Buy Qty 15.00
Sell Price 502.00
Sell Qty 49.00

Finolex Cables Ltd. (FINCABLES) - Director Report

Company director report

To

The Members

Your Directors are pleased to present their 50th Annual Report and AuditedAccounts for the year ended 31st March 2018.

FINANCIAL RESULTS

Rs. In Million

STANDALONE

CONSOLIDATED

2017-2018 2016-2017 2017-2018 2016-2017
INCOME
Revenue From Operations (Net) 28842.3 26707.5 28842.3 26707.5
Other Income 1274.0 1002.1 811.8 593.5
Total 30116.3 27709.6 29654.1 27301.0
EXPENDITURE
Material Costs 21032.9 19527.7 21032.9 19527.7
Employee Benefit Expenses 1354.6 1191.9 1354.6 1191.9
Finance Costs 14.4 42.9 14.4 42.9
Depreciation Amortization and impairment 438.0 480.3 438.0 480.3
Other Expenses 2231.6 2273.6 2046.8 2028.6
Total 25071.5 23516.4 24886.7 23271.4
Profit before share of Net profit of Investments accounted for using equity method and tax 5044.8 4193.2 4767.4 4029.6
Share of Net Profits of an Associate and 724.0 1007.3
Joint Ventures accounted for using equity Method
Profit Before Tax 5044.8 4193.2 5491.4 5036.9
Tax Expenses:
Current Tax 1316.6 1080.7 1316.6 1080.7
Deferred Tax 146.2 (46.3) 873.7 (46.3)
Total Tax 1462.8 1034.4 2190.3 1034.4
Profit After Tax 3582.0 3158.8 3301.1 4002.5
Total Other Comprehensive Income for the year 134.7 37.7 131.8 24.7
Total Comprehensive Income for the year 3716.7 3196.5 3432.9 4027.2

GLOBAL ECONOMIC SCENARIO

The global economy witnessed an upswing in economic activities and trade led byinvestment recovery in advanced nations improvement in emerging Europe sustainedmomentum in emerging Asia and signs of recovery among commodity exporting countries. Theyear saw a broad-based recovery across majority of the countries globally resulting inglobal economy recording its fastest growth since 2011 at 3.8% in 2017. Growth amongstboth the Advanced Economies and Emerging Market and Developing Economies was strong at2.3% and 4.8% respectively compared to 1.7% and 4.4% respectively achieved in 2016. Goingforward it is expected that the current favorable market sentiment along withaccommodative financial conditions and partial recovery in commodity prices will continueto buoy the global economic activity with growth expected at 3.9% in both 2018 and 2019.

INDIAN ECONOMIC SCENARIO

In the Indian context the economic activity during the FY 2017-18 witnessed a slowdownmired by short-term challenges in the form of fading impact of demonetisation and tradeactivity slowdown a head of Goods and Services Tax (GST)implementation. Resultantly theGDP grew 6.6% in FY 2017-18 compared to 7.1% in FY 2016-17. However recent developmentsin the country in the form of FDI liberalization to attract investments Insolvency andBankruptcy Code to assist banks address NPA issues Real Estate (Regulation andDevelopment) Act to bring in more transparency in the real estate sector strengthen theoutlook both in the near and mid term.

GST is one major revolutionary move that will enable the country to overcome the issuesof multiple taxation tax evasion and parallel economy while bringing in more e3ciency inmovement of goods and services across the country. Though the initial implementation ofGST saw some challenges in the form of delays in refund of input credit tax and challengesto small and medium enterprises to keep up with the regulatory issues over the long runit is expected to be beneficial. Another important initiative was the Rs. 2.11 lakh crorerecapitalisation plan for stressed public sector banks to enable them improve balancesheet health and resume lending necessary to boost economic activities. The impact of allthese is already beginning to reflect with the country's ease of doing business rankingimproving by 30 spots to 100th position indirect taxpayer base increasing by 50% to 34lakh businesses and a credit rating upgrade from Moody's Investors Services to Baa2.

The country is also making significant investment in infrastructure to sustain itsgrowing economy. In its Union Budget FY 2018-19 the government has made a totalallocation of Rs. 5.97 lakh crore for infrastructure development which is nearly threefold rise from the levels in 2014. The government has also envisaged plans to buildintegrated logistics supply chain through developing 50 economic corridors 35 multimodallogistics parks at 15 locations and ten intermodal stations. Apart from these thegovernment plans to build 100 smart cities target to reduce carbon emission by adding 175GW of renewable power generating capacity by 2022 focus on Make in India and buildingdigital infrastructure to ensure fixed line broadband access to 50% of household by 2022are all heading the country towards an unmatched development.

With these positive developments in the Indian economy IMF forecasts the country's GDPto grow by 7.4% in FY 2018-19 and then pick up momentum to 7.8% in FY 2019-20.

OPERATIONS

OVERALL: Sales net of duties were Rs 28151.2 million as against Rs 24448.4million in the previous year with a 15% revenue growth. Growth was across all productlines. In volume terms Electrical Cables saw a growth of 5% and Communication Cables grewby 35%.

Total Income for the year under review was higher at Rs. 30116.3 million (previousyear Rs. 27709.6 million) representing a growth of 9% over the previous year. YourCompany has recorded a Net Profit Before Tax of Rs. 5044.8 million as against Rs. 4193.2million in the previous year – a growth of 20.3%.

Highlights of the performance are discussed in detail in the Management Discussion andAnalysis Report (MDAR) attached as Annexure A to this Report.

EXPORTS: The market conditions overseas continue to be di3cult and hence FOB valueof exports for the year was lower than the previous year at Rs 274.9 million (Previousyear's export value of Rs. 316.1 million).

FINANCE

The short-term debt programs of your Company continue to be rated by CRISIL. Since thelast few years these have been accorded the highest ratings that CRISIL issues (A1+).CRISIL has also retained the AA+/stable rating for the Company's long term non-convertibledebentures – during the year however no debentures were issued. As on date of thisreport your Company continues to remain debt free.

Financial costs have been contained to the minimum required levels. The Companycontinues to meet all its financial commitments in a timely manner.

FIXED DEPOSITS

Your Company has stopped accepting deposits from the year 2003 and accordingly nofixed deposits have been accepted during the year under review.

DIVIDEND

Your Directors have pleasure in recommending a dividend on equity shares of 200%. Theamount thereof per equity share will be Rs.4/-. The total dividend outgo (includingdividend tax) will be Rs. 736.3 million.

Payment of Dividend is subject to the approval of the members at the ensuing AnnualGeneral Meeting.

NEW PRODUCTS & EXPANSION

As you are aware your Company ventured into newer product segments such as LED basedlamps low duty switchgear fans and water heaters over the previous two years. During theyear under review your Company expanded both its market reach as well as the productofferings in each of these new segments. Several new models were launched during the yearcovering multiple price and feature points. The volume growth has been encouraging acrossall new products and at the same time customer feedback to the products in terms ofappearance quality perception and price/performance expectations has been very positive.Simultaneously your Company has realigned the field sales force into separate verticals(cables lighting switch/ mcb and fans/water heaters) to better address market needs.

Your Company announced its decision to enter the "Conduit Pipe" line ofbusiness last year – work on the manufacturing plant has commenced and is expected tobe complete by December 2018.

As part of its expansion strategy your Company is in the process of acquiring approx.40 acres of land near Vadodara. This site would be used for future expansion needs of theCompany.

JOINT VENTURES SUBSIDIARIES AND ASSOCIATES

Pursuant to Section 129(3) of the Companies Act 2013 read with Rule 5 of the Companies(Accounts) Rules 2014 the statement containing salient features of the financialstatements of the Company's Joint Ventures / Associates (in form AOC-1) is attached tothis Report as Annexure I.

FINOLEX J-POWER SYSTEMS PRIVATE LIMITED

As part of infrastructural development the power sector is an extremely importantcomponent. Various measures have been announced by the Power Ministry to reform and growthis sector. The demand push for EHV cables is witnessed in many states which are eyingfor faster development and many tenders have been floated by State Utilities in thecurrent financial year.

The JV has registered itself with most of the private power companies and participatesin tenders floated by them.

While the level of tender participation has improved the tender conclusion process isstill very slow and the JV is awaiting the results in many tenders that it hasparticipated in. At the end of 2017-18 the JV had an order backlog of approximately Rs400.00 million.

The JV's 400kV Extra High Voltage Cable has now been certified. Currently this is theonly Indian Company to be certified at this voltage grade. This would be extremely helpfulin future tender participation giving the JV a prime mover advantage.

It is currently estimated that the JV will gradually be profitable to achieve breakeven and will need financial support in the form of equity infusion until then. While thelong term outlook of the JV is positive in the short term there has been an erosion ofnet worth in the JV. Taking a prudent view of the same an amount of Rs 184.8 million hasbeen recognized as a diminution in the value of investment. During the year your Companyinjected equity of Rs 159.2 million taking the Company's participation up to Rs 1337.7million at the end of FY 2017-18.

CORNING FINOLEX OPTICAL FIBER PRIVATE LIMITED

During the financial year ended on 31st March 2018 the JV clocked sales of Rs.2372.6 million (previous year Rs. 2015.9 million) and was profitable with a profitafter tax of Rs. 113.1 million.

With consumer demand increasing for mobile data services and e commerce it is hopedthat the fiber penetration in India will improve. Further Government initiatives such asBharat Net and Digital India have been adding to the buoyancy to demand. Demand for betterquality and feature rich products is on the increase and the JV expects to capitalize onthe same. Your Company's participation in the JV's equity at the end of FY 2017-18 remainsat Rs. 17.5 million.

EMPLOYEES

Your Company recognizes the importance of a motivated and skilled human resource. YourCompany endeavors to create a challenging and favorable work environment that encouragesentrepreneurial behavior innovation and the drive towards business excellence. Severalskilled based training programs were conducted during the year with the help of externalconsultants especially for the sta3 in Sales and Marketing functions. Your Company isalso in the process of revamping its hiring and appraisal processes in line withbenchmarked practices in industry.

Industrial relations continued to be cordial during the year.

The Company had 1828 permanent employees on its rolls as on 31st March 2018 (previousyear 1748 permanent employees as on 31st March 2017).

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES:

In terms of provisions of Section 197(12) of Companies Act 2013 read with Rules 5(2)& 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 a statement showing the names and other particulars of employees drawingremuneration in excess of the limits set out in the said rules are provided in theAnnexure E to this Report.

Disclosures pertaining to remuneration and other details as required under Section197(12) of the Companies Act 2013 read with Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are provided in the Annexure F to thisReport.

KEY MANAGERIAL PERSONNEL

The following persons continued as Key Managerial Personnel during the year 2017-18:

Name Title
Mr. D K Chhabria Executive Chairman
Mr. Mahesh Viswanathan Deputy Managing Director and
Chief Financial Officer
Mr. R G D'Silva Company Secretary &
President (Legal)