THE MANAGEMENT STATEMENT
"OUR YEARS OF DISCIPLINED
PERSEVERANCE SEEM TO BE PAYING OFF AS SOME OF OUR PATHBREAKING TECHNOLOGY-BASEDSOLUTIONS ARE ON THE THRESHOLD OF COMMERCIALISATION."
Fiscal 2018-19 was an outlier as it truly tested the robustness of the business modeland the resilience of the organisation to withstand disruptive headwinds that derailedtelecom sectoral growth into the negative zone.
We had anticipated that volatility in the telecom battery space would be significant.However the intensity of the disruptions that prevailed during the year was way beyondour expectation. It adversely impacted our telecom battery business which is the keyrevenue generator for the Company.
Despite this adversity we remained in the profit zone although our performance dippedconsiderably. The Company's Revenue from Operations declined from Rs.1593 crore in2017-18 to Rs.1257 crore in 2018-19 while the Net Profit dropped from Rs.30 crore in201718 to Rs.25 crore in 2018-19. More importantly the batteries' business remainedprofitable.
Even as revenue and profits dipped business liquidity increased over the previousyear. The net cash from operating activities increased from Rs.159 crore in 2017-18 toRs.165 crore in 2018-19. We utilised the liquidity to deleverage our financial statements.During 2018-19 we reduced our overall borrowing by Rs.134 crore. Our efforts in pruningour debt over the last three years have substantially reduced the finance costs.
From a performance standpoint Fiscal 2018-19 remained subdued. However it wassignificant for our transformation journey. Our transformation journey has been pivoted onfour pillars - 1) Grow nascent business verticals 2) Evaluate every business (product orsolution) opportunity from a Return on Resource perspective 3) Focus on operatingefficiencies and 4) Monetise surplus assets and we made considerable headway in eachaspect.
1) Grow our nascent business verticals
Our patient perseverance over more than a decade in developing technology-basedsolutions for the Indian Railways and the Indian Defence is on the verge ofcommercialisation.
Electronics division: We expect the electronics division to transform into an importantgrowth driver over the next 12-18 months. Our optimism is based on clear visibilities.
One our decade long efforts in developing the Train Collision Avoidance System (TCAS)solution is about to yield results. We expect to receive our first order for ourindigenously developed TCAS solution in the current year. This acceptance holdsconsiderable significance as it can potentially open doors to exciting growthopportunities over the coming years.
Two after the successful commissioning of our Train Management System (TMS) solutionat the Howrah Division of Eastern Railways the Indian Railways is considering thedeployment of such solutions pan India. We have received our second order for thissolution from the Sealdah Division of Eastern Railways - a positive which builds ourcredibility with the Indian Railways and will hopefully usher in new businessopportunities from other divisions of the Indian Railways over the coming years.
Defence division: Our relentless perseverance in developing and delivering products andsolutions customised for the Indian Defence has established our credentials with thisimportant customer. This trust equity is strengthening business relations.
We have been awarded the design development and manufacture of Submarine Type II (SSKclass) battery from the Indian Navy. Moving a step higher we are also bidding for supplyof the Type I (Kilo class) submarine battery with the Indian Navy.
The Company has also bid for the supply of batteries to the "Varunasthra"Torpedo for the Indian Navy. We expect to get a sizable order in the current fiscal year.Success in this product will open up multiple growth avenues in global markets over themedium-term.
2) Return on resource
We had adopted a disciplined strategy of investing in those opportunities where thereturns on resources invested would align with the Company's desire of being insustainable profitable businesses.
In this regard the developments of niche solutions which are underway are continuouslybeing evaluated in line with our articulated product and business development strategy.Each such solution could transform into an attractive revenue spinner in the medium-termElectronics: We are working on a drive-train solution that holds the potential to makee-mobility a viable proposition in the Indian ecosystem. We hope to develop and deliverthis solution commercially competitive in the medium-term.
Defence: We are developing the advanced technology power solutions for Light WeightTorpedoes (LWT) and Heavy Weight Torpedoes (HWT) for the Indian Navy. We hope to deliverthese challenging solutions in the current year. We also commenced the design anddevelopment of Type- II (SSK class) submarine battery against an order from the IndianNavy and readying resources to manufacture Type I (Kilo class) submarine batteries.
Batteries: We are intensifying our development efforts in lead carbon batteries andworking on new chemistries beyond lead acid including lithium to create niche productsthat will find application in the e-mobility and energy storage solutions.
The telecom sector is expected to face disruptive headwinds in next couple of years. Asa de-risking strategy we will carefully select our product spaces and customers in thelead-acid battery segment. In the PLT battery segment we see a considerable potential togrow business volumes over the coming years. To capitalise on emerging opportunities inthis space we will expand our capacity in this segment.
The Ni-Cd battery segment is equally offering a growth opportunity; we will continue tofocus on increasing the volumes of this product from domestic and global customers.
Exports: After stabilising our TCAS TMS solutions and naval products in the domesticmarket we plan to explore opportunities across the globe. We expect our efforts tofructify over the medium-term.
3) Operational efficiency and surplus asset monetisation
We are consolidating our major lead-acid battery operations in a single plant from theearlier two sites. Besides we are striving to create fungibility in our batterymanufacturing infrastructure which we believe will drive operational efficiencies andassist in improving man-machine productivity.
We have made considerable headway in monetising surplus assets. So far we havemonetised real assets cumulating to Rs.50+ crore in the last 18 months. We continue ourefforts in monetising the remaining surplus assets. We will utilise a significant part ofthe proceeds in reducing our debt. This would facilitate in reducing finance cost andimproving profitability.
These developments should bring an interesting balance in our business mix over thenext 24 months - de-risking the organisation from an overdependence on any one businesssegment and making our success sustainable.
As we step into fiscal 2019-20 we look forward to better times and improvedperformance. The current year could emerge as an inflection point in our transformationjourney.
From a performance perspective the volatility in the telecom sector and the overallslowdown in India's economic progress will cast a shadow on the Company's performance inthe current year. Hence despite the positive developments in our electronics and defencebusiness verticals we expect a subdued performance in the current year in terms of growthand profitability.
In closing we would like to thank our esteemed customers shareholders bankerspartners governments and other stakeholders for believing in our story and reposing theirconfidence in our capability and extending their support in our long journey ofperseverance. We would also like to thank our colleagues on the Board for their commitmentand professionalism in paving HBLs long-term path.
The management team