We are having this virtual AGM is a sign that the times have changed. It is a first foryour Company.
While businesses and educational institutions all shut down in an attempt to containthe virus our Covid warriors in our blend plant warehouses and in the field toiledtaking safety under their belt to ensure the wheels of the Country kept rolling in asmall way. Our employees and our Network of distributors and dealers truly are our heroesin these challenging times.
While I miss the warmth of your physical presence and the joy of seeing some familiarfaces at the AGM as Shakespeare said "the show must go on!" Once again Iwelcome you all to this virtual AGM.
Changing Economic Scenario
The Indian economy that was witnessing a slowdown for several quarters till December2019 did show some signs of recovery during the beginning of 2020. However the outbreakof the Covid 19 pandemic in March 2020 destroyed any hopes of revival and worse plungedthe entire globe into darkness. The GDP of the Indian economy registered the lowest everannual growth rate in the last two decades of 4.3%.
The resources meant for development are being diverted to protect the lives safety andbasic needs of a vulnerable sections of society besides augmenting healthcareinfrastructure that is the need of the hour. This process of deficit financing to fundwelfare as well as development can have inflationary impact on consumer prices in theshort/medium run.
As I speak only the agricultural sector and about 60% of the industrial and commercialsectors are grinding their way to recovery. Transport travel tourism and hospitalitysectors remain totally shut. The silver lining is that the monsoon has been bountiful andwidespread and this augurs well for the agricultural sector food security and revival ofrural economy. The GST collection in July 2020 was close to 90% of normal indicating thattrade and consumption are picking up following partial opening up of the economy. Howeverthere does exist a fair probability of conditions remaining uncertain over a longerduration as the pandemic is yet to abate both globally and locally with no concretesolutions for cure or vaccination being available as of date.
Robust recovery in private final consumption is dependent on the opening up of theremaining sectors faster restoration of lost jobs revival of small and medium businesses& vocations and providing gainful employment to migrant workmen at places where theyhave resettled.
Lubricant Sector & External Factors
The reduction in crude oil prices has been a blessing in disguise for the Indianeconomy which imports 84% of its domestic demand and it is one of the largest importers ofoil in the world. Indian Oil imports account for nearly 27% of its total imports. Thelubricant sector benefitted from falling base oil prices which is the major input for itsfinished products. However the foreign exchange rates remained volatile and devaluationof rupee had partially offset the advantage accruing from declining base oil price.Moreover per capita volume consumption of lubricants in India declined over past few yearsas a result of improving lubricant and engine quality.
During the FY 2020 the sales in Auto sector crashed to its lowest and had cascadingimpact on ancillary sectors including lubricants leading to erosion in volume and toplinefor most of the established and reputed players in the industry. The situation worsenedfrom March onwards due to covid 19 and lockdowns thereof. In the long run the market isexpected to return to its normal growth rates as the fundamental demand drivers are stillin place. Your Company is tapping the rural markets where it has strong presence androbust network. The Company with its new leadership and strategic focus has been able toregister precovid sales and I am sure they shall overcome all the challenges and use it asan opportunity to up their performance with new and innovative ideas.
Last year At a Glance
In the second half of last year your company went for next five years strategy bootcamp and as a result started a journey of transformation across the organization to makeit fit-for-purpose. With the appointment of a new CEO and the core executive managementteam the capability enhancement and driving performance culture was put on a fast track.The core strategy is based on 4C's of Customer-centricity Cash flow efficiencyCapability building and Communication. To drive the cash-flow efficiency the companyembarked on a concept branded "tank-to-bank velocity'' to ensure the oil in stock isconverted to cash in fastest possible time through the involvement of every function.
In Automotive we will be driving both top line and bottom line through range sellingand twin brand offering IPOL and Repsol at value for money and premium segments.Motorcycle oil will be the key focus segment as it is also the fastest growing segment. In2019 the company already started a drive to increase reach in tier 2-3 towns whichaccount for 50% of market size. To address Distributor working-capital and liquidityconcerns the company appointed a Channel-finance partner Mintifi Ltd which has ensuredbetter cash-flows for your company. We started on a major digitization drive by puttingthe front-line sales team on mobile app for sales order booking and tracking. The drivewill be continued through
Distributor-Sales Digitization and Loyalty programs for Mechanics and Dealers.
Very happy to say that your company did a major CSR-drive with mechanic health-checkprograms across 13 cities with 2000+ mechanics.
The product portfolio was improved with a launch of synthetic offering for passengercar segment named IPOL-Durasynth which received a good response from market.
In Industrial segment our strategy is addressing to de-risk the overall business astoday the entire business is focused on automotive segment. The RPO (Rubber processingoil) business continued to be the no.1 Indian private player in the category with supplypositions to all major tyre makers.
The new challenges posed by covid have forced the leaders to think differently andIndian leadership aspires to become self-reliant in manufacturing sector to curb andcontain the trade deficit with developed economies of the world. The Indian leadershipcall for Atma Nirbar Bharat aimed at giving a new boost to the economic potential of theCountry using modern technologies enriching human resource and creating robust supplychains. Your company joined the clarion call by driving the # Vocal for Local initiativethrough multiple digital-micro video for internal and external stakeholders. Brand IPOLhas been providing bespoke lubricant solutions since 1973 and the brand-com will use thelegacy for all customer touch points with "Trusted since 1973" position. Yourcompany is building the Brand in the hearts of Dealers/Mechanics/ Customers throughvarious Digital-Marketing and loyalty programs.
Every business and every venture has to discover its own ways to adapt to the newnormal find innovative ways in every aspect - design development strengthening digitalprocesses manufacturing processes utilization of human resources logistics marketingdistribution and so on. In a nutshell not just the country every citizen and everyinstitution should learn to be "self-reliant". The one who moves swiftly andtakes proactive measures is bound to sail through these turbulent times and emergestronger.
With the above background I shall proceed to briefly cover the highlights of FY 20 andthe steps being taken by your Company to stay stronger.
With gradual relaxations your company resumed Vasai plant operations on April29 2020 with approvals duly obtained from the competent local authorities to supportindustries like Western Coalfields Limited and Sugar Mills in Maharashtra and Haryana withdue observance of all the guidelines prescribed by the authorities towards safety andwellbeing of the staff at the Plant depots and other locations.
Implemented motivation and engagement programmes for its employees through videoconference sessions and engaging the family of the staff members through creative channelsto help keep the morale high during lockdown.
Conducted 50000 hours leadership and skill development programmes for alllevels of employees so that they come to terms with the new normal and work moreefficiently than before. Conducted 4500 hours trainings sessions for industrial customersand mechanics and engaged stakeholders like distributors stockists retail and franchiseeoutlets mechanics through video conference for revival of its business.
Your company educated and supported the general trade channels and oriented themto online booking of orders and home delivery so that not a single opportunity to sell ismissed. In the same way service network was also geared up to attend to all the pendingservice requests that accumulated in sizable numbers during the lockdown period.
Sales force have been trained and provided necessary IT support to deal with thetrade partners digitally without the need to undertake the risk of travelling till theconditions for travel improved.
The above steps are yielding good results. Your Company was able to seize theopportunity to start selling the moment the lockdown eased in early May 2020.
New distributors were appointed despite lockdown.
Active engagement of top management through regular Rapid Response Room videoconference sessions helped in motivation and registered decent sales during lockdown.Month on Month from April 2020 onwards the sales have improved.
Cost efficiencies were achieved by identifying and analyzing all elements andrationalization of variable cost which helped in reducing costs.
I am proud to say building on the people as agenda initiative taking a humaneposition we have neither terminated any employees due to Covid 19 impact nor reduced thesalary.
Financial Highlights of 2019-20:
The audited financials for FY 2019-20 are provided in the report for information ofshareholders. I shall touch upon few achievements despite challenging market conditions:
EBIDTA was ' 29.46 Crores as against ' 35.30 Crores in previousyear. Though the EBIDTA declined the margin was higher at 5.93% as against 5.81% in FY2018-19.
PAT for the year was ' 15.81 Crores against ' 16.61 Crores in FY 2018-19. ThePAT margin increased by 0.5%.
Inventory debtors reduced by ' 90 crores and better realization helpedin improving the EBIDTA margin.
The Company has consolidated the plant operations by migrating the entire Damanoperations to VASAI plant operations and it helped in plant productivity andrationalization of operational and manpower costs.
Though practically half of Q1 of FY 21 was lost and despite the fact that manychannels had not opened up your company achieved around 60% of its revenue of thecomparable quarter of FY 20.
The sales performance for Q2 of FY 21 is gaining momentum and it is expectedthat at the end of August 2020 sales would mostly attain pre-covid levels in spite ofmany markets still being disturbed and many channels yet to start off. All themanufacturing and sourcing locations are operational and capacity utilisation is in syncwith the market requirements and inventory norms.
Your company imbibes values that guide us to bring about positive transformation andaugment inclusive growth. As a responsible corporate citizen our policy is to nurture aculture that imbibes the attributes of quality management and environment friendliness.This policy along with the Clean and Green Policy' forms an integral part of theCompany's culture and is communicated through established channels of communication Onbehalf of your Company's Board I convey our gratitude to all the stakeholders businessassociates and the Central and State Governments for their co-operation and support. Iwould like to thank GPPL Staff for their strong resolve and commitment. Their dedicationperseverance and commitment to tide over the crisis posed by covid pandemic isinstrumental for your Company's revival from survival and bounce back with renewed vigourand success.
Let me express my deepest gratitude to each one of you our shareholders. I lookforward to your continued trust confidence and support.
|With my best wishes |
|Manan Goel |