"As the domestic markets are entering a renaissance players with high capacitiescoupled with cost advantages are likely to achieve superior growth.
At Skipper Limited we have strengthened our capabilities to accelerate our ability tocapture the surging demand.
Today we are well positioned to harness these opportunities and convert this marketmomentum into steady and sustainable growth."
I am pleased to report that the Company had another successful year making progresstowards fortifying its identity as leaders in the regions and sectors of its presence.
At Skipper we understood that at a time when the domestic market conditions wereshowing signs of revival it would be prudent to strengthen our capabilities to cater tothe vast Indian opportunities. Consequently we responded by recalibrating our focus andcapacities towards the domestic markets.
Our superior growth numbers testify the relevance of our strategies which are closelyaligned to external opportunities and the government's key policies. The Company recordedsales growth of 14.8% from Rs.14624 million in FY2016 to Rs.16786 million in FY2017.This coupled with innovative cost engineering measures to drive down costs facilitated a12.7% growth in operating EBITDA from Rs.2011 million in FY2016 to Rs.2267 million inFY2017. The Company registered a 17.2% growth in net profit from Rs.951 million in FY2016to Rs.1115 million in FY2017. A testimony to our performance is that Skipper has beenawarded with the 'The Largest Tower Supplier' Award by Power Grid Corporation of Indiaconsecutively for the second time.
While we reinstated focus towards our strong domestic base we were agile in respondingto global opportunities. Globally the power transmission sector has a robust emphasis onsetting up capacities for renewable generation.
This in turn demands new transmission lines for transmitting renewables. With thesefavourable opportunities worldwide Skipper has successfully transformed itself from beingan India-oriented entity to a predominant global player.
Also I am happy to report that the order inflow during the year despitedemonetisation has been robust. Our closing order book position stood at Rs.25890million as of March 312017. The Company also reduced its debt in FY2017 even afterincurring a capex of Rs.941 million. Subsequently our gearing improved to 0.89 from 1.24in FY2016.
One of the remarkable achievements for the past year was the commissioning of our twonew polymer products manufacturing unit in Hyderabad and Palasbari (Guwahati) and one newunit for engineering Products in Palasbari (Guwahati). This has expanded our polymercapacity to 51000 MTPA from 35000 MTPA and engineering capacity from 200000 MTPA to230000 MTPA making Skipper the largest manufacturer of T&D Structures in India.
Engineering Products Business
We have emerged as India's only company of our size focusing on transmission towermanufacturing and not just EPC. We are one of the world's largest integrated unit withforte in manufacturing of angle rolling tower accessories and fastener manufacturing andEPC line construction. As a result we enjoy considerable revenue visibility across thevalue chain.
Over the last four years Skipper has increased its T&D manufacturing capacity from100.000 MTPA in FY2013 to 230.000 MTPA in FY2017.
Despite doubling of capacity.
With the growing oppurtunities in our market we expect to play a modest role intransforming India into a global manufacturing hub. Over the years we aspire to emerge asa preferred global manufacturing partner for complex solutions while being an enduringvalue creator.
The Company has been able to maintain utilisation levels of over 85% over the lastthree years. This is primarily because of our strategy towards gradual capacity additionin a disciplined manner which in turn enabled the Company to seize opportunities withoutstraining its cash flows and balance sheet or comprising on margins.
Power transmission capex in India remains strong. The transmission capex is pegged atRs.2.6 tn in the 13th Plan a jump of 44% over the 12th Plan. Skipper continues to enjoythe benefits of low-cost integrated operations. Further our strong cashflow gives us anadequate financial leverage to scale the business as the demand improves. While thedomestic demand remains promising we continued to focus on geographical diversificationin the export market. During the year the Company entered two new geographies ofBotswana Philippines Tanzania Ghana Cameroon Kenya Congo and Malaysia.
The Company has also embarked on the growing long-term opportunity coming frommonopoles. India as of now is largely a lattice tower market. However the increasingchallenges with respect to land acquisition present a strong case for the adoption ofmonopole towers. Skipper tested its first 66KV transmission monopoles during the yearqualifying itself for more transmission monopoles projects. Of the total capacity of230.000 MTPA our monopole capacity stands at 15000 MTPA which can be further increasedto 40.000 MTPA.
Considering India is at the cusp of a data revolution we believes that the time isright for telecom poles. With new entrants in the sector and increasing proliferation ofsmartphones among the Indian masses mobile data will grow exponentially requiring asignificant number of towers over the next few years. During the year we commencedoperations of telecom poles to cater to this next phase of growth.
Polymer Products Business
The polymer business witnessed a couple of months of stagnancy owing to demonetisation.Despite that our PVC business successfully grew by 30% over the previous year.
At Skipper we are ramping up our manufacturing capacities exploring newer marketsand strengthening our dealers network. This coupled with the policy push by the governmentis expected to accelerate business. During the year we increased our capacity by 16000MTPA and our channel partners from 1500 to 3500. With an increase in penetration andbetter product mix we expect higher and sustainable margins. Further GST is expected tocreate a shift from the unorganised to organised segment and will positively impact us.
Within our polymer business the plumbing pipes and fittings are gaining larger shareover the agri pipes. With this we expect margins to improve as the plumbing and fittingsproducts bring higher realisations.
The government's growing emphasis on 'Housing for All' will also drive our revenuesand hence profitability.
Further we've realised that a strong brand not only differentiates us fromcompetitors but also helps build trust with customers. In line with this we are buildingthe Skipper brand to accelerate the pace of acceptance of our product at the B2B as wellas B2C levels. We have developed a strong marketing team focused towards establishing theSkipper brand. While we understand that this is a long journey we are determined to buildlong-term intrinsic value for the Company. Going forward we are optimistic that India'smarket size and growth will allow us to carve out our space and market share in time.
Transforming the Culture
We have successfully transformed the entrepreneurial family-run operation into aprofessionally managed one. Over the years we have built a strong management team withprofessionals who have extensive sectoral experience. At Skipper we have set benchmarksfor norms of governance aimed at ensuring that the Company protects the interests of theinvestors through sound and honest strategy systems and operations.
The Government's enthusiasm in the sectors of our presence a healthy growth in orderbooks and improved cost management will lead to better revenue assurance. Going forwardthe Company expects to continuously enhance its strength and capabilities widen itsnetwork enhance product mix and reinforce operational excellence. These initiatives areexpected to help Skipper move closer to its vision consolidate its leadership and enhancevalue for its vast and diverse stakeholder family. Our vision is to be the world's leadingplayer in Power T&D business and amongst the major player in Polymer productscategory.
Furthermore riding this wave in the domestic market we expect to play a modest rolein transforming India into a global manufacturing hub.
Over the course of several years we aspire to emerge as a preferred globalmanufacturing partner for complex solutions while being an enduring value creator.
Finally I would like to thank our employees as our growth also showcases the effort ofthe entire team in raising the efficiency bar which allowed the Company to capitalise onimportant growth opportunities and delight the customers. I would also like to thank ourstakeholders for their support and assure them that we will remain focused on improvingour profitability and cash flows.
Sajan Kumar Bansal