Letter from MD to shareholders
The revenue for the group for FY2018 was Rs. 110 billion out of which our GlobalLighting Business contributed Rs. 69 billion* and our India Business contributed Rs. 36billion.
Global and Indian economic scenario
According to the International Monetary Fund the global economic recovery that beganaround mid-2016 has become broader and stronger. It pegged global GDP growth at 3.9% in2017 compared with 3.2% in 2016.
FY2018 i.e. the year ending 31st March 2018 was a good year for India as it benefitedfrom the positive impact of the implementation of GST. The GST bottlenecks were beingironed out and the effect of demonetization has already faded. The GDP growth for Indiawas at 6.7% for the full year. The past couple of years have witnessed progressivepolicy-level changes and effective implementation in key sectors. This had a positiveimpact on the automobiles industry as the improved infrastructure within the country alongwith demographic advantage rising income levels and aspirational rural and urbanpopulation together impacted positively the demand for automobiles especiallytwo-wheelers.
Global lighting industry
According to Yole global Passenger Car and Light Commercial Vehicle sales reached 90million units in 2016 compared to 64 million units in 2006. The global passenger vehiclemarket volume grew at a CAGR of 3.4% during the period 2006-2016 and at a CAGR 3.8% during2011-2016. The global automotive exterior lighting market generated USD 17.8 billion interms of revenue in 2016 and grew at a CAGR of 4.5% during the year 2011-2016.
Indian two-wheeler industry
The two-wheeler industry in India grew by 14.8% YoY basis in FY18 according to thedata published by SIAM. The exports from India also saw a strong growth of 20.3% over theprevious year. According to CRISIL Research overall domestic two-wheeler production isexpected to grow at a robust pace of 8-10% CAGR in the next three years.
Varroc performance during FY2018
In the context of the economic scenario outlined above we have performed well. OurIndia Business revenue grew by 23% to cross Rs. 36 billion. Our Global Lighting Businessrevenue growth was 4% and has crossed Rs. 63 billion ( Rs. 69 billion including our shareof China JV). The growth in our lighting business was negatively impacted due to thedisposal of our interior plastics business in the US and the adverse impact of currencyexchange rates. The overall consolidated Revenue was at Rs. 104 billion a YoY growth of8%. Including our share of China JV the revenue for the group was at Rs. 110 billion.
The consolidated EBITDA for the full year was at Rs. 9.2 billion a growth of 36% overthe previous year ( Rs. 10.1 billion including our share of China JV a growth of 28%YoY). The India Business contributed EBITDA of Rs. 3.9 billion for while our GlobalLighting Business contributed 4.9 billion ( Rs. 5.9 billion including our share of ChinaJV). Our Consolidated PAT for the year was Rs. 4.5 billion a growth of 49% over FY2017.
During the year we entered into a joint venture agreement with DellOrto S.p.A.Italy for the development of Electronic Fuel Injection Control Systems for two-wheelersand three-wheelers. We also entered into a technical collaboration with Heraeus atechnology group based in Germany for Catalytic Convertors for two-wheelers andthree-wheelers. Both of these products will help us in increasing our business revenuewhen the new BS-VI emission norms come into effect in April 2020.
We continue to expand our global manufacturing and R&D footprint and we are in theprocess of setting up a manufacturing facility in Brazil another manufacturing facilityin Morocco in our Global Lighting business and a facility in Halol Gujarat for our IndiaBusiness. We intend to set up two additional manufacturing facilities in Chennai Indiaand in Poland for our Global Lighting Business.
Our key strengths are strong competitive position in attractive growing markets strongand long-standing customer relationships comprehensive product portfolio and low coststrategically located manufacturing and design footprint. We also have robust in-housetechnology innovation and R&D capabilities which gives us a clear edge over ourcompetition and helps us to meet our customer requirements for customised solutions in acost-effective manner.
The rapid penetration of new lighting technologies like LED leading to faster growthin lighting content per car presents a very attractive opportunity to grow our globallighting business. We plan to capitalise on the same by expanding our geographical reachstrengthening our design engineering and software capabilities and pursuing JVs andacquisitions in areas of strategic importance.
In our India business in addition to capitalising on the strong industry growth wealso plan to increase our share of business with leading OEMs as well as leverage on theopportunities created by the introduction of new safety and emission norms especially inour Electrical business.
We have opportunities that are ahead of us and our strategies are precisely aligned totrack these opportunities.
Thank you for your ongoing commitment to the Varroc Group. I would also like to thankour Clients Creditors Banks Financial Institutions and other Stakeholders withoutwhose patronage we could not have been where we are.
- TARANG JAIN