I am delighted to share with you the events developments and achievements of yourCompany during course of financial year 2017-18. The overall performance of your Companyhas witnessed a growth in profits with consolidated net profits increasing by 41.91% incomparison with previous year. We have continued to do well in our core businesses andhave alongside paved path for new ventures. The year has witnessed the sustained healthygrowth and your company continues to create value for all its stakeholders.
Financial year 2017-18 will go down in the economic history of India as a decisive yeartowards unlocking the potential of the Country's future.
The government under the leadership of the Honorable Prime Minister of India Sh.Narendra Modi completely transformed its tax regime from an Indirect tax system to acomprehensive GST with an aim to integrate the whole country into a single market. Thisrevolutionary reform coupled with last year's demonetization exercise as well continuedfocus on technology driven transformation has paved a strong and sustainable growthpath towards building a new India.
The positive outcomes of these foundational changes could be observed this year itself.India jumped 30 points to join top 100 countries inthe World Bank's ease of doingbusiness' index. Moody's the global credit rating agency upgraded India's sovereigncredit rating to Baa2 for the time since 2004 India's stock markets stood among theworld's best performing markets as they grew by more than 30% year on year basis.
Clearly having emerged as the fastest growing major economy in the world our nationnow stands on the cusp of explosive growth and its is up to businesses like us andstakeholders like you to transform this potential into performance. At High GroundEnterprises the ambition of our companies has long remained intertwined with theexpectations of the country.
As a conglomerate with diverse business interest growth at consolidated level ispursued through competitively growing your Company's core businesses building anenvironment to achieve transformation while also nurturing and investing in emergentbusinesses of the future.
Your Company believes in inclusive growth that aims at enhancing the competitiveness ofthe businesses while simultaneously advancing the economic and social conditions of thecommunities in which it operates.
In the year gone by we have taken significant steps to strengthen our businesses andare committed to continue investing in them for the future. The reforms in the Governmentpolicies have fashioned a transparent environment for doing business in India resulting inbetter governance. Your Company believes in following the best governance and transparencyin its business operations.
The recent changes in the government reforms have opened several opportunities forEngineering Procurement and Construction Management (EPCM) entities like your Companyacross various sectors viz Oil and Gas Road Infrastructure development Power&renewable energy and Inspection body Services (Consultancy). The Company has beencurrently working on expanding and diversifying its offerings to capitalize onopportunities thrown open by such government initiatives.
Your company is engaged in consulting project management and EPC (EngineeringProcurement & Construction) in the infrastructure space and has built a strongportfolio of projects in a very short span of time. Your company has grown at a steadyrate over the last few years. The Company has executed an order book of more than Rs.13000 lakhs in its first quarter of the FY 2018-19 and is in process of implementing anorder book of over Rs. 37000 lakhs.
The revenue from EPCM business segment of the Company increased from Rs. 25865.02 lacsin the financial year 2016-17 to Rs. 41924.86lacs for the financial year 2017-18registering an year-on-year (YoY) growth of over 62.09%. With new opportunities opening inthis sector and the expansion activities undertaken by your Company the EPCM division ofthe Company will continue to be a major growth driver for the company going ahead.
It gives me immense pleasure to inform that in furtherance to our earlier associationwith Shapoorji Pallonji and Group Companies whereby we bagged the work orders of 73.26crores in the last FY17-18 for Infrastructural development work across various states inIndia. In the previous financial year 2017-18 the Company has successfully executed thework order aggregating to Rs. 47.7 Crores as per the terms of the contract and theremaining being in process this year. This contract has boosted the growth of the Companyin the EPCM sector and has resulted in overall profitability of the Company. Pursuant tothis extension of contract the overall contract amount with the group has reached to Rs.100 Crores.
Further during the year the Company has received approval from the Government authorityfor setting up a Unit in the Arshiya Ltd SEZ at Mumbai. The continuous effort of themanagement of the company has resulted in entering into an Agreement for development ofSEZ Work of Rs. 40 Crores (Forty Crores Only) for the FY 2017-18. This Agreement shallboost the Company's overall revenue and also help the Company to diversify the businessscope to procurement and supply in EPCM sector.
Further Company has successfully completed work orders of more than 100 crores from theprestigious companies like L&T GVK (Mumbai International Airport Limited) AdaniPorts and others.
Under the expansion plan Company has stepped forward to take advantage of the newgovernment initiative wherein The Government has decided to introduce Hybrid Annuity Model(HAM) to revive PPP (Public Private Partnership) in highway construction. At presentthree different models PPP Annuity PPP Toll and EPC (Engineering Procurement andConstruction) were followed by the government while adopting private sector participation.Launch of the new model is due to the many problems with the existing ones. Large numberof stalled projects are blocking infrastructure projects and at the same time adding toNPAs of the banking system. In this context the government has introduced Hybrid AnnuityModel (HAM) to rejuvenate PPP. By features the HAM is a mix between the existing twomodels BOT Annuity and EPC.
In India the new The Hybrid Annuity Model (HAM) is a mix of BOT Annuity and EPCmodels. As per the design the government will contribute to 40% of the project cost inthe first five years through annual payments (annuity). The remaining payment will be madeon the basis of the assets created and the performance of the developer. Here hybridannuity means the first 40% payment is made as fixed amount in five equal instalmentswhereas the remaining 60% is paid as variable annuity amount after the completion of theproject depending upon the value of assets created.
Our Company in Consortium / JV with KMC Constructions and some other establishedentities in the sector has been bidding under the above schemeto target 1000 crore of workorders in the next 2 years.
Media and Allied Activities (M&A):
Though the EPCM division will continue to be a major growth driver for the companygoing ahead nevertheless our Media & Allied activities too have shown theproportionate growth and is gearing up for the substantial leap.
The Indian Media and Entertainment (M&E) industry which saw a temporary slash downafter 2010 not only in India but globally has witnessed major corrections in the recentyears and is now a shining sector for the economy making high growth strides. Proving itsresilience to the world the Indian M&E industry is on the cusp of a strong phase ofgrowth backed by rising consumer demand and improving advertising revenues. The dynamicsof the sector has majorly changed with changing technology and consumption mediums.Lifestyles have evolved Audiences are consuming content very differently. Tabs phabs andtouch screens have shrunk the silver screen. And the attention span is dropping fast.
We at HGEL strive to satisfy the Niche demands of the market and its clients theCompany has been making constant efforts to negotiate dynamic deals to integrate suitablecontent & Intellectual Property Rights (IPR) and has successfully cracked a deal ofRs. 25 Crores (Twenty Five Crore) of Selective Rights of 41 Films produced by ErosInternational for a period of 3 (Three) years. This shall add a greater value to the M& A segment of your company.
With commissioned work from Pernod Ricardo Optimyx Entertainment (India) Pvt LtdBajaj AXA Dalmia Cement (Bharat) Ltd. Reliance Nippon Life Asset Management Andco-production projects with Venus and Satish Kaushik Entertainment Under its belt Yourcompany is spearheading well in the media sector not only integrating media space forprints and Outdoors; but also integrating content and executing events line productionand post-production work for our advertising clients and corporates.
Our Media division has reported a 3 year CAGR of ~65.45% despite witnessing aconsolidation phase in FY15. The media division contributes 22% to our overallturnover.We have taken a lot of steps in the last 12-15 months to invigorate the growthin this division which should start paying dividends from this year onwards. We haveprogressed aheadwith our recent but synergistic Tie-ups and take-overs in the previousyears
- Sunflower Advertising a 20 year old INS accredited full service ad agency and 361Degree Entertainment (into the business of media management Research Film marketing IPRand Content syndication) will help strengthen our bargaining power in the media buying andenable the company to enjoy better credit periods and incentives impacting us positively.Likewise setting up our own post production studio in ColourbarPvt Ltd (wholly ownedsubsidiary) and taking substantial stake in the talent management & event company(MAGNIFIQUE
- Chitra Talent management Pvt Ltd) has helped us immensely. These strategic tie-upsand takeovers not only have given us a bargaining edge by complimenting the services ofeach other but also cumulatively makes a larger bouquet with larger scope for growth.
Going further under our expansion plan your company has taken following steps:
1. The Company has upgraded equipment's and expanded the facilities and services of itsdigital post-production studio which already has some award winning projects under itsbelt
2. The company has streamlined a dedicated Development team to process and developin-house creative content for the new media digital platforms like Netflix Amazon PrimeZee5 Hotstar Applause etc.
3. To set-up a marketing and line production streams to not only market its own contentbut also to integrate external libraries and IPR of varied content for advertisinginternet/IPTV broadcast and other digital platforms.
The revenue from the media and allied business segment of the Company stands at Rs.11805.27 lakhs for the financial year 2017-18 as compared to Rs. 4887.86 lakhs for thefinancial year 2016-17. The operating profits earned by the Company from this businesssegment stands at Rs. 756.70 lakhs for the financial year 2017-18 as compared to Rs.417.40 lacs for the financial year 2016-17.
In view of the profits earned by the Company in both these segments it gives me greatpleasure to inform you that the Board of Directors of the Company has recommended aDividend of Re. 0.10 per equity share on a face value of Re. 1 per share for the year.
In the years ahead I hope that the steps taken by the Management of the Company willfructify in making the Company a leading player in the EPCM as well as the Allied mediasector.
To conclude we have had a reasonably good year. The Company stocks are listed on theboth the esteemed Stock Exchange of India where the investor can have nationwide tradingterminals. We remain encouraged and confident of achieving our long-term objectives ofinclusive sustainable and profitable growth. I am confident that our disciplinedstrategy prudent approach focus on agile execution and our committed team will enable usto improve performance further and create greater shareholder value.
I would like to take this opportunity to thank all our employees for their contributionin the continued success of High Ground Enterprise. I would also like to extend mygratitude towards our business partners associates vendors and also the Central Stategovernments and government agencies for their sustained support. I would also like toexpress my sincere appreciation to all of our shareholders for your continued faithtrust encouragement and support.
Your support is the foundation on which this Company will scale new heights.
Sandeep R. Arora
Chairman and Managing Director