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Schaeffler India Ltd.

BSE: 505790 Sector: Engineering
NSE: SCHAEFFLER ISIN Code: INE513A01014
BSE 00:00 | 17 Jul 5301.00 -101.55
(-1.88%)
OPEN

5380.15

HIGH

5471.95

LOW

5282.00

NSE 00:00 | 17 Jul 5292.05 -68.65
(-1.28%)
OPEN

5399.95

HIGH

5466.00

LOW

5273.45

OPEN 5380.15
PREVIOUS CLOSE 5402.55
VOLUME 89
52-Week high 5960.00
52-Week low 4136.05
P/E 35.73
Mkt Cap.(Rs cr) 8,810
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 5380.15
CLOSE 5402.55
VOLUME 89
52-Week high 5960.00
52-Week low 4136.05
P/E 35.73
Mkt Cap.(Rs cr) 8,810
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Schaeffler India Ltd. (SCHAEFFLER) - Chairman Speech

Company chairman speech

Dear Shareholders

It gives me immense pleasure to present to you the 2017 Annual Report of SchaefflerIndia Limited. It was in many ways a milestone year for your Company.

The corporate makeover has been a key turning point for the company this year. YourCompany completed the process of changing its name from ‘FAG Bearings India Limited'to ‘Schaeffler India Limited'. A step towards strengthening the umbrella brand"Schaeffler" this change marks a new beginning that builds strong foundationtowards our Group strategy of "Mobility for Tomorrow".

Another historic step was the announcement of the merger of the two unlisted entities‘INA Bearings India Pvt Limited' and ‘LuK India Pvt Limited' with SchaefflerIndia Limited (formerly FAG Bearings India Limited) creating one strong organisation andleveraging our collective strength for faster growth. We are at the advanced stage ofobtaining all the requisite regulatory approvals to complete the merger. We look forwardto successfully completing the merger process by Q3 of 2018.

From a business strategy perspective this consolidation will accrue significantlong-term benefits to your Company. The merger will strengthen the position of the unifiedSchaeffler brand helping to consistently improve its market positioning in India. It willallow us to leverage our superior technologies to deliver quality innovative solutions toour customers. The union will also help us to extend our reach and benefit from anoptimised and effective distribution channel network.

Macro-Economic Overview

The environment in which we operate has become increasingly dynamic volatile and lesspredictable. This holds true for the macro-economic uncertainties to which we are exposedas well as for the overall operating conditions and technological changes that affect ourbusiness worldwide. The financial year 2017 in particular was a challenging year. Adifficult economic environment short term policy impacts specifically demonetisationdrove us to work even harder to sustain our performance. The implementation of the Goods& Services Tax (GST) from July 1st 2017 also impacted various businesses includingour customers. For many the transition of complying with this new change and policypresented initial adoption challenges in terms of regulation and systems. While thiscreated a temporary disruption in value chain we consider this to be a game changer forthe industry and economic scenario of India in the long run.

We believe that the host of reforms and initiatives adopted by the Government over thelast three years have been driving India towards becoming an attractive destination to dobusiness and establish manufacturing activities. Not surprisingly India has jumped 30spots on the World Bank's "Ease of Doing Business Rankings" published during theyear. As a participant in the Indian market for more than 50 years we are very excited ofthe opportunities ahead of us.

Our Performance

For 2017 Schaeffler India delivered sustained performance in a challenging businessenvironment. The sluggishness in the overall economy was aggravated by muted consumptionand investment demand including growth deceleration in some industry segments notablythe wind energy sector where we operate in.

However the overall economic climate failed to deter Schaeffler India's determination.Instead we made creditable progress towards achieving our goal of leadership and superiorperformance. We reported a net total income of Rs. 19867 mn in 2017 registering a 6.5%growth over the previous financial year. Our EBITDA grew by a significant 19.5% to Rs.3739 mn while our net profit grew by a solid 22% to Rs. 2380 mn. The EBIDTA and PATmargins improved by 200 bps and 150 bps respectively in contrast to the previous year.

A key driving force behind our top and bottom line growth has been the superiorperformance of our plants. Both our units in Maneja and Savli contributed attractivelythrough improved production volumes and cost management. During the year we concentratedon enhancing our manufacturing proficiencies and delivery performance. At the same timewe took a hard look at minimising our overall operating expenses which enabled us toprotect and improve our margins. Furthermore with the launch of new production lines theSavli plant continued to ramp up its operational capacity helping us to meet the demandwith local production with less dependency on imports. This allowed us to address ourhome market requirements with swiftness and precision while creating flexibility to evenaddress exports markets.

The profitable growth has also been a result of our concerted intent to widen ourattention beyond top-line revenue and to focus acutely on profitability. We weresuccessful in this in large part due to our emphasis on localisation and greater costefficiencies. Consequently our profit-oriented approach resulted in free cash flows ofRs. 4334.3 mn which further strengthened our accruals and our ability to invest intofuture capabilities.

Our superior bottom line numbers stands testimony to the relevance of our businesswhich is closely aligned to external opportunities and new technological trends. Ourperformance also showcases the effort of the entire team in raising the productivity bar.We are confident that we will sustain this cost-control momentum over the coming years.

Recognition

We believe in enduring customer relationships. We constantly strive to improve customersatisfaction and deepen our engagement with them. This appreciation is reflected throughmultiple awards bestowed on us. During the year Schaeffler India was accredited withawards from leading corporates including RIETER India Radicon Powerbuild Maruti Suzukiand John Deere among others. These awards recognise the quality service and technologyleadership of the Company. I am also pleased to inform you that the order execution ofsignificant wins from Alstom and GE on new locomotives for Indian Railways and fromMaruti Suzuki for the new DZire are progressing well.

Outlook

India's industrial production displayed a welcomed growth revival during the lastquarter of the year. This trend was an indicator that on a macro level factory outputwas gradually reviving from the temporary slowdown triggered by GST and demonetisation.Going forward we expect India's industrial performance to sustain the momentum andpositively influence our business.

Furthermore we expect a steady growth in the domestic automotive industry as a resultof the Central Government's multiple initiatives. The Union Budget for FY2018-19 clearlyoutlined the Government's continued thrust on stimulating rural incomes and buildinginfrastructure by increasing the allocation for roads and railways.

India's strong economic reforms; rising infrastructure spend; and generally robustconsumption demand all augur well for our business. They certainly brighten the prospectsfor a comprehensive automotive and industrial component supplier like us.

Our presence in key business segments that overlap with the high priority initiativesof the Government positions us well to advance in our journey of growth. We are confidentthat a healthy momentum in demand and improved cost management at our end will lead to asustained improvement in both our revenues and returns. The aftermarket segment too isshowing signs of stability and revival in addition to our services business.

Going forward your Company hopes to continuously enhance its strength andcapabilities; widen its network; enhance its product portfolio; and reinforce operationalexcellence. These enterprising measures will take us closer to our vision and enrich ourstakeholders.

Furthermore as our industry converges towards the next-generation technologybreakthroughs of E-Mobility Industry 4.0 and Digitalisation we are confident Schaefflerwill be at the forefront with products shaping the future of mobility.

The merger further enhances our prospects. Together our companies will be betterpositioned to win competitively in the marketplace. Additionally our joint commitment tooffer added value to all our customers and attain operational excellence should make thecombined entity the "preferred technology partner".

Having said this we are also sensitive to challenges emanating from the economyspecifically the industrial and automotive sectors. The increase in import duties onautomotive components and rising global steel prices could adversely impact our inputcosts and challenge our profitability. We are committed to expedite our localisation plansand increase investments in the country while optimising our cost framework to offsetthese challenges.

Acknowledgement

The responsibility for our employees and good corporate citizenship are deeply embeddedin our core. Your Company has a track record of investing in the development andwell-being of its people and communities. In recent years our efforts to connect closelywith the society through our contribution in the areas of education and skill developmentfor the underprivileged; healthcare for under-served; and preservation of heritage havebeen recognised and applauded by all stakeholders. Your Company not only produces productsthat help increase efficiency and reduce environmental impact but also accepts itscorporate responsibility to minimise any adverse ecological and social impact associatedwith its operations above and beyond legal requirements.

In closing I would like to thank our skilled employees for their passion commitmentand ongoing pursuit of excellence. We thank our customers for the opportunity to earntheir trust and business. We are also thankful to our bankers and financial institutionsfor their continuous support.

We are grateful for the support extended by all our stakeholders particularly ourshareholders. With your support we have reached an exciting tipping point in our journeyand we are optimistic about the long-term opportunities that lie ahead. I am confidentthat with your continued support we will chart a new growth path for ‘One StrongSchaeffler'.

Sincerely

Dharmesh Arora