A key focus area for the Group has been Excellence in all that we do.As part of the Mission of Nation Building we have taken on ourselves we try and ensurethat we keep a strong focus on excellence not only in the construction of high qualityassets but also in their continuing operations. We have achieved significant recognitionfor operating excellence across our areas of operation. As part of this quest forexcellence we also have a strong focus on sustainability and the environment.
It gives me great pleasure to welcome you all to the 21stAnnual General Meeting of the Company.
This past year has been an important one from the perspective of ourjourney of "Building an Institution in perpetuity" and we have emerged strongerat the end of it. It is my belief that we have made a significant progress in resolutionof many challenges and in particular our continued focus on debt reduction. We haveduring this period worked very closely and with full sincerity with all stakeholdersincluding our lenders and investors to work out resolutions which are balanced andacceptable to all.
While the global economy is improving with global GDP growth projectedto pick up from 3.1 in 2016 to around 3.5 in Financial Year (FY) 2017-18 it remainssusceptible to geo-political and other macroeconomic risks. Potential rise inprotectionism may also be a cause for concern and could impact the global economy. Webelieve Central Bank actions in major economies may impact global financial marketscurrency flows currency strength and interest rates.
Meanwhile India is expected to become the world's fifth largesteconomy in 2017 surpassing UK and France. The Indian economy has the potential to becomethe world's third largest economy by the next decade and one of the two largesteconomies by mid-century. The International Monetary Fund has described the Indian economyas the "bright spot" in the global landscape. As such the Indian economy hasbeen doing relatively well compared to others notwithstanding several short term eventsthat increased uncertainty in the business environment. The Government has taken a numberof structural reforms which are expected to have long term sustainable impact on theeconomy including demonetization and the move towards a digital economy the introductionof the Insolvency and Bankruptcy Code and the implementation of GST. The focus on fiscaldiscipline and the concerted attempt to reduce subsidies through a gradual reduction andbetter targeting through bank transfers are also likely to have a sustainable impact onthe economy. However while RBI has brought down interest rates significantly in line withinflation the transmission of the same has not been effected and industry continues tostruggle with the high cost of debt relative to international peers.
A key challenge facing the economy is the delay in pick-up of privateinvestment along with the stressed asset situation. The RBI has brought strong focus andmomentum on the resolution of these issues in the past year but the process may stilltake time. While the Government has attempted to step in with public spending oninfrastructure in particular Highways and Railways to fill this gap it will still needto facilitate private sector investment for the economy to achieve its true potential.
Global sovereign and pension funds are also keenly tracking the Indianmarket and a number of investments have been announced in the past few years. Given thelong term nature of these investments this funding is particularly of interest toInfrastructure players. However the appetite of such Investors is more suited foroperating infrastructure assets and less for assets which are under development. With theconstrained capacity of many Indian private developers on account of stressed assets andlimited international strategic or financial interest in financing the early stagedevelopment of assets the country needs to introspect on the changes in the frameworkrequired to facilitate fresh investment in infrastructure creation which is critical forIndia at this juncture. The single biggest challenge that needs to be addressed in thisregard is the stability and consistency of policy framework over the life of a projectwhich can allow developers investors and lenders to generate predictable cash flowstreams.
From an environment perspective the other key factor impacting allindustries is digitalization and technology disruptions. We are already seeing the impactof some of these changes in sectors across the world as also in India. These changes arealready impacting job creation and business models and are only expected to accelerateover the medium term. This also throws up a number of business opportunities. The factthat India has emerged as the fourth largest start-up hub in the world and is attractingsignificant global venture capital funding is very positive in this context.
As I have already mentioned FY 2016-17 has been a milestone year forthe GMR Group and we have made progress on various fronts.
With domestic air traffic growing at a fast pace we have emerged asthe fourth largest private airport operator in the world (by traffic). We have done sowhile ensuring that our Airports continue to dominate service rankings across the globe.Your Company won the prestigious BOT bid for Goa's second airport and has alsosuccessfully partnered with a Greek firm to win the bid to build a new airport at Cretewhich is the most visited tourist destination in Greece. I am also happy to report that wewere vindicated on our stance on the wrongful cancellation of concession agreement forMal Airport by the Government of Maldives and were able to not only obtain acompensation award from the International Arbitration Tribunal but were also able toreceive the compensation. We continue to build strength in our Airports Business as aplatform across India and other parts of the world.
We have also made good progress with our portfolio in the Energysector despite the ongoing stressful conditions due to unfavorable business environmentregulatory challenges and legacy issues plaguing the sector. Notwithstanding such adverseindustry environment GMR Group announced a strategic partnership with Malaysian utilitiesmajor Tenaga who invested US$ 300 mn in GMR Energy Limited demonstrating our inherentcommitment to build a sustainable business.
The Thermal Power sector including both gas and coal based plantshave been struggling with a variety of challenges. We have worked closely with allstakeholders in an attempt to address the issues but challenges remain as thedemand for power languishes while renewable energy growth has been incentivized. Weengaged closely with our lenders and were able to restructure debt through the StrategicDebt Restructuring (SDR) mechanism for two of our power plants i.e. Rajahmundry andChhattisgarh Power Plants whereby the banks have converted part of their debt into equityand now hold a controlling majority in these companies. We continue to dialogue with allstakeholders to address some of the issues which impact these plants to enable aresolution of these issues. During this period as part of our strategy for debtreduction we also sold our transmission assets to a strategic investor and entered into ashare purchase agreement to divest 100 of our shareholding in PT Barasentosa Lestari(PTBSL) to PT Golden Energy Mines (PTGEMS).
We have continued to exit some of our earlier investments in theHighways sector to create additional liquidity for the Group. In the Railways segment weare executing works on the DFCC corridor projects which will provide us insights into thisnew domain.
We have also made good progress in the development of the SpecialInvestment Region in Kakinada where we have entered into an MoU with a consortium ofHindustan Petroleum Corporation Ltd. (HPCL) and Gas Authority of India Ltd. (GAIL). Theconsortium plans to set up a Cracker and Petrochemical complex over a 2000-acre areawhich could bring significant investment to the region. With the Government's strongfocus on Make in India' and India emerging as the fastest growing market inthe world initial interest for industrial land is now visible and we are positive aboutthe opportunity to monetize land in our industrial regions.
As such we are optimistic about the outlook for FY 2017-18 on thebasis of an uptick in pent up consumer demand post demonetization healthy monsoonprojections implementation of GST and increased public expenditure. Further supportiveoil prices benign interest rate environment and continued efforts to make banking sectorstronger should help the economy grow at a faster rate in FY 2017-18.
While we continue to remain upbeat on the momentum generated by thedomestic economy at the same time we recognize there could be some risks from globalfactors due to geo-political issues in various parts of the world rising trend ofprotectionism potential impact on global currency flows etc. that may intermittentlyslow down the pace of global trade expansion which in turn may have an impact on theIndian economy also.
As I have indicated while the Company has made significant progress interms of debt reduction we believe that we need to continue to focus on resolution ofsome of the outstanding issues in the short to medium term. As we come to the end of ourconsolidation phase we have also begun preparing for the future. We are building on ourstrengths on the Airport business to address emerging opportunities in that area. Ourstrategy for the Energy sector is being built jointly with our strategic partner in thesector Tenaga. In addition we continue to evaluate a range of other opportunities forgrowth.
GMR-ites are our most valuable assets. The Assessment Year 2016-17 hasbeen remarkable from the perspective of our people processes. There were severalinitiatives taken to restart revive repair and recover taking on new things like theformation of Group Corporate Services Integration Council establishment of HR StrategicAdvisory Council initiation of several HR audits and preparing for transition towardsDigital HR and FMS in the cloud. The HR team has also taken up Group-wide Talent Reviewprocess to create a robust succession plan and strong leadership pipeline for ourimpending business expansion. All our employees were covered by Hay Group re-gradingexercise and the organization was made flatter with 4 less levels for greaterorganizational agility.
This was also an important year from the perspective of cultureenhancement. GMR Values & Beliefs were reviewed after 15 years and the Value iconswere made more contemporary. Inner Excellence was brought in to ensure the mental andspiritual wellbeing of our employees in an increasingly stressful world. EmployeeEngagement Survey Pulse' was resumed to hear the voice of our fellow colleaguesand make GMR a more vibrant place to work in.
I believe all these measures will establish a digital platform forend-to-end HR and FMS address areas for improvement arising out of audits &assessments provide opportunity to young leaders to take up higher responsibilityincrease external orientation for learning and GMR employer brand enhancement.
Large scale initiatives are also being taken to increase digitalawareness of employees for future readiness as we are in the process to digitize theentire employee lifecycle i.e. from Hire to Retire.
We have also continued on our efforts on frugality and the Anushistainitiative we began in FY 2015-16. I am happy to report that our efforts have starteddelivering results. We will build on this momentum to create a more cost conscious culturenecessary to compete effectively in the emerging environment.
Furthermore as you are aware we have completed transition of ourCorporate office to Delhi during this period and I want to take this opportunity to thankall our employees who have moved and worked selflessly during this difficult period andhelped us make this transition smooth and successful while continuing to deliverexcellence in performance.
A key focus area for the Group has been Excellence in all that we do.As part of the Mission of Nation Building we have taken on ourselves we try and ensurethat we keep a strong focus on excellence not only in the construction of high qualityassets but also in their continuing operations. We have achieved significant recognitionfor operating excellence across our areas of operation. As part of this quest forexcellence we also have a strong focus on sustainability and the environment. We havemade great strides on this front and our Airports in particular have emerged as leadersin this area.
Your Company has continued its tradition of caring for the communitiesand stakeholders as part of its Corporate Social Responsibility programme through GMRVaralakshmi Foundation (GMRVF) CSR arm of the GMR Group. The Foundation is currentlyworking across 27 locations in India and supporting 2 locations in Nepal.
All the educational institutions under GMRVF have performed exceedinglywell during the last year. There are over 10000 students in these institutions. GMRIT(GMR Institute of Technology) continues to earn good ranking among engineering colleges inthe country including being among the top 65 engineering colleges in the country and topfive private engineering colleges in Andhra Pradesh. GMRIT puts considerable emphasis onresearch and has received funding from the University Grants Commission and the Departmentof Science and Technology. The schools run by GMRVF has shown exceptional performance bothin academics as well as extra-curricular activities. GMRVF partnered with around 350government schools towards improving the quality of education reaching out to over 38000students across India. GMRVF provides an opportunity for under-privileged meritoriouschildren to access quality education in reputed schools through Gifted ChildrenScheme' and supported 175 children through this. GMR CARE Hospital served about75000 people from under-served areas with high quality care. GMRVF's 7 MobileMedical Units provided free medical care to over 10000 elderly monthly.
GMRVF helped the Group companies and several JVs to fulfil their CSRobligations through grass root development initiatives around the GMR businesses. Threenew vocational training centres were inaugurated this year enabling GMRVF to contributemore to the national mission of Skilling India through training around 6000 unemployedyouth in the year in its twelve vocational training centers. GMRVF's twenty-fivepublic toilets in villages and slums served over 35000 community members. GMRVF alsosupported close to 300 families in the construction of Individual Sanitary Lavatoriesduring the year. GMRVF worked with over 300 Self Help Groups with a membership of over3500 women across India. Similarly close to 3500 farmers received various livelihoodrelated support. GMRVF initiated CSR activities in Goa Hosur and areas around itsDedicated Freight Corridor.
It would be noteworthy that all our above efforts initiated many yearsago are very much in tune with the current policy initiatives of the Government ofIndia like the "Swachh Bharat Abhiyan" "Make in India" "SkillIndia" etc.
GMRVF has received many accolades in recent years as recognition forachievements in education health care community service Skill India Swachh BharatEmpowering women etc. Those in 2016-17 include:
Golden Globe Tigers award 2017 for Excellence & Leadershipin CSR in the category of Best CSR Practices'.
Golden Peacock Award for Corporate Social Responsibility 2016.
EPC World Media Award for Outstanding Contribution to CSR 2016.
Viswakarma Award for Social Impact and Development 2016 fromConstruction Industry Development Council.
Nav Bharat popular Hindi Newspaper from Maharashtra honoredGMRVF with CSR Leadership Award in the category of Best CSR Practices for WomenEmpowerment.
"Excellence in Social Welfare Initiatives for WomenEmpowerment (Smt. Jamunadevi Tibrewala Award)" Award from Federation of Telangana andAP Chambers of Commerce.
CSR Health Impact Award 2017 for the Nutrition Center initiativeof GMRVF.
Finally I would like to thank you for the unstinted support andunwavering confidence in the Company. I look forward to your continued and valuablesupport in taking the Company to greater and newer heights in the future.
|Thank You |
|G M Rao |
|Executive Chairman GMR Group |