The irrational exuberance that marked global markets and economies in 2017 has beenreplaced with a mood of cautious optimism. The world economy is showing early signs ofstrong growth and employment figures in US the world's largest economy reign high. Theabundance of easy liquidity over the last several years has been tempered and inflationarypressures stable.
We are living in the midst of the 4th Industrial Revolution driven this time around byArtificial Intelligence. With a recent global survey predicting the first 3D-printed carto be in production by 2025 we are cognizant of the need to be Future Ready as technologyraises customer expectations and clients increasingly rely on companies to anticipatetheir needs and offer personalised solutions.
For the Indian economy the next two quarters will be critical. Inflation is undercontrol but corporate earnings need to record the much anticipated double digit growthrate and credit offtake especially from the manufacturing sector pick up. Withmultiple elections around the corner investors both local and foreign are choosing toadopt a wait and watch attitude delaying fresh investment.
The automotive industry which contributes 7.1 per cent to the country's Gross DomesticProduct (GDP) began the calendar year 2018 on a positive note and we will endeavour tosustain the growth trajectory in the coming months. A boost from the Union Budget inFebruary for the rural sector successive good monsoons and an emphasis on infrastructurecreation is expected to power further demand in automotive sector especially motorcyclesand two-wheelers as the growing middle class and the young realise their aspirations.
Year of Growth
Despite initial hiccups of GST implementation a sudden spurt in raw material pricesand the lingering traces of a demonetisation driven slowdown fading away the Companyperformed commendably. I am pleased to inform you that 2017-18 was a successful year withNet Revenue surging 15 per cent to Rs 1111 Crore while PAT grew by 41 per cent to Rs 49Crore.
Beginning of 2018 our Chakan plant received the TPM Excellence Award from Bajaj AutoLimited. Other milestones for 2017-18 include the inauguration of the new plant with abackup assembly line at Gujarat customised to cater to an important customer signing oftwo new joint ventures; with FAE Spain for the manufacture of Oxygen sensors and withIturan Israel for Telematics products and services. In the coming years this associationwill enable Lumax Auto Technologies Limited to manufacture and introduce innovative highmargin products.
In the first six months Lumax Auto Technologies Limited showed improved volumes in theGear shifter and Plastic moulded business. In the third quarter fresh orders poured infrom one of our largest customer and the Aftermarket business which accounts for nearly afifth of our top line witnessed sequential growth throughout the year.
We successfully navigated the challenge posed by the sudden spike in raw materialprices from October onwards through our business model of ensuring a diversified supplychain.
Our dynamic product mix enabled us to maximise margins across all our productcategories.
The Road Ahead
Shareholders our industry is poised on the cusp of a paradigm shift. Most vehicleswould need to adhere to the new Bharat Stage-VI emission and safety norms by 2020.Government incentives like proposed green number plates with free parking for three yearsand toll waivers convince us that the future lies with electric vehicles and sharedmobility.
I am happy to inform you that Lumax has been sourcing world-class technology andmodifying its manufacturing and product lines to meet changed standards and will striveto remain the market leader and preferred supplier for all major OEMs. With the increasedemphasis on safety and energy efficiency BS-VI norms demand we see incremental growthcoming from the need for lighter vehicles with lower emission footprints. Riding the trendtowards automatic shifters we are producing the gear shift lever for India's best knownautomobile brand and going forward we expect considerable demand from this segment. Withautomatic shifter priced significantly higher than the manual one we see it accretingpositive towards our bottom-line.
The introduction of GST has disrupted the price differential of many unorganisedplayers providing a further fillip to the auto Aftermarket segment growing 10-15 percent annually and expected to reach USD 16.5 billion by 2021. Lumax has a significantnumber of new open architecture products lined up in its pipeline ranging from lightingsolutions to mirrors and filters. With a higher investment-to-sales ratio compared to theoriginal equipment segment we foresee margins to be healthier as there is increasedtraction enabling us to garner strong growth over the previous year.
Financially we remain very sound. The second half of this year was especiallyprofitable with our PBT margin expanding considerably compared to the same period lastyear due to drivers like the optimisation of the Bengaluru plant a strong momentum inelectronic products and the trending Aftermarket sector.
Our balance sheet remains healthy with little leverage and a robust working capitalmanagement cycle. With a recovery in OEM demand acquisition of new clients healthygrowth in value-added products and improvement in overall margins we expect to havebetter growth in our bottom line in the coming years.
As we work steadily towards creating a vibrant world-class Future Ready Company poweredby Partnerships Products and Progress we pledge to remain committed to the valuesenshrined in our heart: Respect Integrity Passion and Excellence.
|D.K. Jain ||anmol Jain ||Deepak Jain |
|Executive Chairman ||Managing Director ||Director |