For many years we have been talking about increasing volatility and unpredictability.The events of the last 24 months have heralded a new era of uncertainty where both theamplitude and frequency of shifts have vastly exceeded anything we have seen in recentdecades. The unprecedented pandemic was followed by supply chain whiplash and furtherdisruption was brought on by the Russia-Ukraine war. We are now staring at the spectre ofa high-interest rate and high- inflation regime globally.
Over the years corporations have tried to find a balance between efficiency andresilience with successive decades of growth having swung the pendulum in the directionof efficiency. The events of the last two years have again taught us all the virtues ofreserves and resilience.
This era of disruption also presents a unique opportunity for renewal. The exigenciesof this disruption has pushed the boundaries of innovation.
A world where traditional rules didn't apply freed thinking from its conventionalshackles. And we are clearly staring at a new age with new paradigms and newideas.
Global economy: The storm before the calm?
The Global economy recovered from the pandemic shock in 2022 on the back of supportivefiscal and monetary policies and mass vaccination programmes. However at the end of FY22the war in Ukraine and the subsequent economic sanctions on Russia posed a large shock. Itdisrupted energy markets and supply chains and added to the already evolving inflationarypressures and concerns over consumer demand. Consequently growth forecasts have beenslashed. The International Monetary Fund (IMF) now expects the world economy to grow by3.6% in CY22 which is 0.8 percentage points lower than its pre-war projections.
Many economies have experienced a sharp surge in inflation recently particularly infood and fuel prices taking their inflation rates to multi-decade highs. Central bankshave been forced to respond to surging prices with aggressive rate hikes. The pace ofmonetary tightening is turning out to be quite swift as central bankers attempt to catchup with the rising inflation from their ultra-accommodative stance during the pandemic.
As the stance of monetary policy shifts there is greater turbulence in currencymarkets. The dollar has strengthened while emerging economies have witnessed downwardpressure on their currencies. At the same time energy and commodity markets havewitnessed heightened volatility. Global supply chain disruptions due to pandemic-inducedlockdowns have been replaced by new disruptions caused by the war in Ukraine and theeconomic sanctions.
While the global economic backdrop remains challenging there are reasons to remainoptimistic. First despite the slowdown IMF's projection of world GDP growth in CY22 isstill tracking the pre-pandemic average. Second fiscal support in developed economiesremains above the prepandemic trend even if somewhat diluted versus past years. Thirdmega-trends around sustainability green investments digitisation and disintermediationremain well-entrenched and will support growth and productivity enhancement in the mediumterm.
Thus while businesses will need to remain on guard regarding financial marketvolatility and cost pressures this year one could expect the medium- term growth recoveryto remain on track.
India: An engine of global growth
The Indian economy has not remained unscathed by these global developments. Partly onaccount of the elevated commodity prices in global markets India's inflation has pushedhigher than the target of the Reserve Bank of India (RBI). To control inflationary risksand reduce the pressure on the rupee RBI has been selling reserves and unwinding theextraordinary liquidity support provided by it during the pandemic.
On the positive side economic activity in India has witnessed a sharp recovery topre-pandemic levels on the back of a rapid and widespread rollout of the vaccinationprogramme. A strong digital ecosystem fiscal and monetary policy and various governmentschemes helped small and medium enterprises and the worst affected sections of thepopulation to survive while reviving demand and bringing the economy back on track.
Even as the global headwinds are being felt India's growth recovery is progressingwell and most estimates peg economic growth during FY23 around the 7% range. Indiatherefore is poised to be the fastest-growing major economy in the world and an engine ofglobal growth.
India's exports are exhibiting a strong buoyancy and economic sentiment has beensupported by a robust pipeline of infrastructure projects as well as the government'spragmatic policies such as the production-linked incentives schemes. Many industries havewitnessed fresh project investment announcements. Foreign direct investment flows haveremained strong. The burden of non performing assets in the banking sector seems to havepeaked out and is easing.
Dynamism in India's digital ecosystem diversification of global supply chains awayfrom China and the greater emphasis of investors on sustainable finance offer newopportunities for India.
The above trends lend confidence to a robust economic narrative for India in the mediumterm which augurs well for the corporate sector as well.
Aditya Birla Group: Dynamism and resilience at play
The Aditya Birla Group's pace of activity range of businesses and depth of globalpresence provide a useful compass to navigate this age of disruption. Against the backdropof our long history as a group dynamism leaps out as a common theme. Over the years wehave witnessed multiple business cycles. Across businesses and markets our evolution is astory of continuous renewal and regeneration as we aggressively invested in growth andcreated long-term value for all stakeholders.
This institutional dynamism and resilience helped us navigate an unprecedented businessenvironment in FY22.
The pandemic inordinately impacted the future of work workforce and workplace. Wehave moved with the new work ethic by focusing on a holistic employee experience that putsequal emphasis on growth engagement and wellbeing. Our employees value and appreciatethe One ABG culture which is profoundly embedded across the organisation. This culturegives the ultimate competitive edge in a world where business models are easily upended.
It has been a matter of great pride for us that our employee engagement has continuedto be strong despite the stresses of the pandemic. 87% of our employees stated in a surveythat they have a colleague/friend at work to lean on during difficult times. 96% of ouremployees experienced considerate behaviour from their managers during this period.
We are only as strong as our people.
The Group's continued focus and investment in its people processes in good times havehelped us build and sustain a robust and agile workforce that is able to be nimble andresponsive at all times.
When corporates across the world are facing a rather unusual phenomenon - The GreatResignation our employee survey score for intent to stay' remained strong. Itis higher than the Global High Performing organisations and almost similar to pre-COVIDlevels. This strong affinity is a testimony to our relentless commitment to delivering aworld of opportunities with care to our employees.
Internal employee movements of over 5000 (within the businesses) were up 18% from theaverage of the last two fiscals. We also focussed on bringing in young talent with 73% ofnew hires being under 35 years of age. Last year over 9000 new employees joined theGroup refreshing our competence base.
Building an aspirational workplace for a diverse workforce was identified as one of theimportant aspects of our new HR strategy. Enhancing the diversity of our Group is ajourney and it is getting strengthened with targeted efforts over time. Our commitment togender diversity is evident through the appointment of seven women to senior leadershiproles. 21% of all new hires were women and we had 102 women engineering graduates join usat plant locations.
VBhe Aditya Birla Group's pace of activity range of businesses and depth of globalpresence provide a useful compass to navigate this age of disruption. Against the backdropof our long history as a group dynamism leaps out as a common theme. Over the years wehave witnessed multiple business cycles. Across businesses and markets our evolution is astory of continuous renewal and regeneration as we aggressively invested in growth andcreated long-term value for all stakeholders.
Our approach of integrating sustainability across ^ the value chain of our operationshas served us well. In many ways it has contributed to the resilience demonstrated by thebusiness in navigating the challenges posed by the pandemic.
We have always looked for opportunities to showcase the power of our women leadership.This year our cement business UltraTech launched India's first all-women' operatedReady-Mix Concrete (RMC) manufacturing plant at Bhugaon Pune. Our list of firsts includesAditya Birla AMC's all-women Mutual Fund branch in Bhilai Chhattisgarh and Aditya BirlaFashion and Retail's Madura manufacturing plants in the south zone which has 85% womenemployees.
Our learning strategy evolved continually to adapt in response to the dynamic externalenvironment.
This was achieved by re-designing innovative learning properties and methodologiesfocussing on building contemporary and contextual skills. We shifted gears across digitalblended and now hybrid learning making it easier to shift across modes of learning fordifferent sets of learners. We strategically increased the adoption and penetration of ourdigital learning platform (Gyanodaya Virtual Campus) to cover 94% of our employees in themanagement cadre. Leveraging the power of internal and external networks 500+high-quality digital content modules were created on various themes and topics across ABG.
The spirit of ABG's resilience and dynamism was displayed at an individual team andbusiness level. This has been reflected in the business results for FY22. This year alsosaw the launch of new businesses units capacity products and brands. This happenedseamlessly presenting a unique human story of innovation and grit and bringing alive ourGroup values of commitment and passion. We have together navigated an unprecedented periodof disruption and emerged stronger and sharper demonstrating that care empathyand results are mutually compatible. And especially so in periods of turmoil.
Your Company's performance
During FY22 your Company recorded net revenues of US$ 7.1 billion (Rs.52599 crores)and an EBITDA of US$ 1.6 billion (Rs.12022 crores).
The Indian cement industry will add 80-100 million tonnes capacity by FY25 driven byincreased spending on housing and infrastructure. As India's building solutions championyour Company is committed to meeting the nation's future needs for housing roads andother infrastructure.
Your Company commissioned cement capacity of 3.2 mtpa at Patliputra Cement WorksBihar; Dankuni Cement Works West Bengal and Line II of Bara Grinding Unit Uttar Pradesh.This is the first phase of the 19.5 mtpa capacity expansion announced in December 2020 andwill help your Company service the fast-growing cement demand in the Eastern and Centralregions of India.
Your Company has also commenced operations from the bulk terminal at Kalamboli NaviMumbai which is your Company's 7th bulk terminal.
In addition your Company's Board of Directors has recently approved a fresh capex ofRs.12886 crores towards increasing capacity by 22.6 mtpa with a mix of brownfield andgreenfield expansion. The additional capacity would be created across the country andachieved by setting-up integrated and grinding units as well as bulk terminals. Commercialproduction from these new capacities is expected to go on stream in a phased manner byFY25.
Upon completion of the latest round of expansion your Company's capacity will grow to159.25 mtpa reinforcing its position as the third largest cement company in the worldoutside of China.
Sustainability is at the core of our business and continues to guide our strategicchoices. For your Company sustainable growth is of utmost priority.
Our approach of integrating sustainability across the value chain of our operations hasserved us well. In many ways it has contributed to the resilience demonstrated by thebusiness in navigating the challenges posed by the pandemic.
Your Company's strong commitment to sustainable growth is visible in its actions.UltraTech has aligned itself with the climate goals set in the Paris agreement.UltraTech's GHG emission reduction targets are validated by the Science Based TargetsInitiative (SBTi). This is yet another marker of your Company's commitment to buildingsustainable infrastructure.
Your Company has also adopted the recommendation of the Task Force on Climate- RelatedFinancial Disclosure (TCFD) and has integrated its findings into risk managementbusiness planning and strategy. It has always been your Company's endeavour to enhance itsenvironment conservation measures and remain sensitive towards societal wellbeing.
As per the S&P's Dow Jones Sustainability Index (DJSI) your Company's performancehas improved by 11 points to 79 a 16% increase from the previous year. Your Company isnow ranked 7th globally on the DJSI in the Construction Materials category.This disclosure has helped your Company to benchmark itself against the world's bestcompanies in sustainability performance.
Your Company is embracing digitalisation as a key driver of business value. Digitaltools are being leveraged to improve productivity and efficiency. Being a customer-centricorganisation your Company is designing digital solutions that keep customers at the coreof innovation and achieve a connected and smart ecosystem. With a deep understanding ofcustomers the teams learn fast pivot rapidly and leverage the best possibletechnologies to craft state-of-the-art digital solutions. These solutions enhance customerexperience by empowering internal stakeholders and partners improving efficiencies anddriving collaboration.
The forces of change engulfing the world are creating a whole new set of excitingpossibilities and unbelievable opportunities. Many that didn't even exist yesterday. Weare uniquely privileged in a way that we are not passive recipients of changingcircumstances but can actively shape our destiny. And this tomorrow is for us to discoverand build.
Across businesses we are at the cusp of a transformational growth cycle. As a businesshouse we have always made investment decisions based on long-term fundamental driverslike market opportunity demography technology etc. Our strong leadership position acrosskey businesses has come on the back of bold but calibrated long-term bets. Given theinherent strengths of your Company we are again at a moment where we are uniquelypositioned to invest for long-term growth and explore new paradigms. An exciting journeybeckons.
Kumar Mangalam Birla