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Varroc Engineering Ltd.

BSE: 541578 Sector: Auto
NSE: VARROC ISIN Code: INE665L01035
BSE 00:00 | 17 Jan 443.25 -3.05
(-0.68%)
OPEN

447.00

HIGH

451.75

LOW

434.45

NSE 00:00 | 17 Jan 443.25 -3.15
(-0.71%)
OPEN

446.50

HIGH

451.80

LOW

434.10

OPEN 447.00
PREVIOUS CLOSE 446.30
VOLUME 62885
52-Week high 499.95
52-Week low 260.20
P/E 68.72
Mkt Cap.(Rs cr) 6,773
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 447.00
CLOSE 446.30
VOLUME 62885
52-Week high 499.95
52-Week low 260.20
P/E 68.72
Mkt Cap.(Rs cr) 6,773
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Varroc Engineering Ltd. (VARROC) - Chairman Speech

Company chairman speech

ACTION@CONVICTION

Dear Shareholders

It is a pleasure to share our Annual Report for FY20. The automotive industry is at thecusp of rapid transformation led by the need for greener modes of transport along withshared and autonomous mobility defining the technology imperative. At Varroc we enablethe world Rs s leading OEMs to deliver on these expectations.

The world moves in a smarter smoother faster and greener way when we Perform@Change.

Industry Performance

The global automotive market was on a downtrend during FY20. Europe North America andChina showed a decline of 7.9% 5.6% and 16.1% Y-o-Y respectively. EU emissionregulations and impact of US - China trade war continued to weigh on the industryperformance. The COVID-19 outbreakand its rapid spread dampened the industry recovery. Theimpact of COVID-19 is likely to be felt mainly on the performance of the first quarter ofFY21 and also on the rest of the financial year to some extent.

The Indian automobile industry saw consumer sentiment weaken across segments throughthe year with the 2W industry registering a 14.1% Y-o-Y decline in volumes as compared toa 5.8% growth in FY19. The 3W segment reported a 10.6% decline in the overall productionvolume during FY20.

In India GDP growth for FY21 is estimated to remain in negative territory with somepick-up in growth impulses from second half of FY21. The Government of India in May rolledout a substantial package of relief measures aimed at helping the country Rs s small andmedium enterprises which is likely to benefit the economy.

• The Year at Varroc

Our revenues slid 7.6% Y-o-Y to H 111.2 billion in FY20 from H 120.36 billion in FY19due to the prevailing macroeconomic environment. Our India business witnessed 10.7% Y-o-Ydecline and our Lighting business (VLS) declined by 5.7% as compared to FY19. Ourconsolidated EBITDA declined by 18.7% to H 9.13 billion in FY20 vs H 11.24 billion in FY19and EBITDA margin fell to 8.2% in FY20 from 9.3% in FY19. At H25 million our consolidatedPAT for the year registered a steep decline.

At the same time order wins in both the businesses were encouraging at Rs 39 billionin equivalent annual revenue in both our businesses put together. In our Global LightingBusiness we received an order for the newest EV platform from one of our existing EVcustomers and two large orders for popular platforms from our largest customer in NorthAmerica. Some of our orders in India were from new customers as well as for new productssuch as Traction Motor & Inverter and our range of BS VI product offerings.

That said our sales have rapidly begun to recover globally. China is growing again andUS is looking in a better position than Europe when it comes to making a recovery. Theshort-term outlook is positive as pent-up demand will drive sales growth especially sinceconsumers will attempt to avoid public transport and shared mobility solutions. Ouroutlook over the long term while positive does expect the recovery to be more gradual.The COVID-19 scenario has disrupted the supply chains and this will take a while tostabilise. We see this as an opportunity to learn and improve and we will.

During the year we slowly ramped-up production at our new facilities in Brazil andMorocco while also starting production in Poland facility for our Global LightingBusiness.

• Looking Ahead

Globally the automotive industry is transitioning towards electrification innovativemobility concepts and autonomous driving. Leading OEMs are exploring this space forincreasingly innovative solutions. What this means to us at Varroc is the massiveopportunity to create a bigger impact. We see ourselves at the forefront of thistechnology-driven change aimed at furthering sustainability for the business as well asthe environment.

We have invested in ventures that will allow us to play a bigger role in these areas.Our R&D team is developing technologies focused on minimising the carbon footprint andmanufacturing light weight products that consume less energy.

At Varroc we are focused on leveraging our key strengths for long-term value creation:unmatched design expertise strong adherence to quality and precision standards andstrong partnerships with the world Rs s leading OEMs as well as automotive engineeringexperts. For the successes we continue to build on I would like to thank our peoplewhose expertise and commitment make our organisation perform@change.

I am extremely thankful to our customers employees bankers and investors for theirtrust in us.

Tarang Jain

Managing Director

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