STATEMENT OF THE CHAIRMAN, A. H. TOBACCOWALA
TO THE SHAREHOLDERS
1. Shareholders of Voltas can look back with satisfaction at the past forty
years of steady growth, of satisfactory returns and an enviable reputation.
Equally, we can look forward to a future of accelerated development and
rising profitability. In each of these forty years your Company has paid a
dividend and, except in 1984-85, achieved a higher turnover.
The Year in Retrospect:
2. In my Statement to you last year I had urged that the widespread practice
of judging the financial performance of a company by EPS should be replaced
by the criteria of Return on Net Worth as "Aanagement should be accountable
for the return on the entirety of Shareholders' funds rather than on that
portion which is represented by equity capital". l am glad that not only in
1993-94 but for the decade 1984-85 to 1993-94 Voltas significantly exceeded
the average performance of the Economic Times 101 Private Sector Giants both
in terms of growth of Net Worth as well as of PAT. We also did better in
these years than almost all of the seven comparable engineering companies to
which I referred last year.
3. In 1993-94 Voltas earned the highest profit in its history. The large
non-operating income we received was almost entirely offset by the loss we
had to absorb on the Allwyn Unit for the year prior to BlFR's Order
amalgamating Allwyn with Voltas. However, high profitability is not the only
measure of our recent accomplishments. Already yielding positive benefits is
the re-structuring process of Voltas started two-and-a-half years ago to take
advantage of opportunities and to face the challenges of the radically
changed external environment. In the past year, we exited from several
businesses in which we could not become major players: beverages, food
products and pharmaceutical distribution. The Electrical Business is now
being operated through two wholly-owned subsidiaries which will facilitate
technology upgradation and appropriate reorganisation of these businesses
which are inherently different from most of the other activities in which
your Company is engaged.
4. The most important development is, of course, the amalgamation into Voltas
of Hyderabad Allwyn Limited excluding its Watch and Auto Divisions which were
of no interest to us. We are grateful to the Andhra Pradesh Government for
agreeing to absorb a little more than half of the large losses incurred by
Allwyn in the period before the BIFR approved its retrospective amalgamation.
The Allwyn Unit can be an invaluable asset as it more than doubles our
refrigerator capacity, secures entry into other promising businesses and
brings into Voltas a core of skilled and experienced employees. We have
already successfully implemented a Voluntary Retirement Scheme which, on
acceptable terms, has separated a significant number of surplus employees
earlier recruited in Allwyn for non-commercial considerations. Though the
manufacturing activities at Allwyn had ceased for over twenty months, we have
been able to quickly re-establish production to a level of over 11,000 refrigerators per month which output should be considerably enhanced as the
rehabilitation programme proceeds. Our aim is to convert the enormous
potential of Allwyn into production capacity and performing assets.
5. In recommending to you an increased dividend of 30%, your Board had to
balance the higher profit figures for 1993-94 with the knowledge that the
process of the rehabilitation of the Allwyn Unit can take place only during
this and following years as vital capital equipment that we need will not be
installed till the last months of the current financial year, which will be a
Our Core Business:
6. Voltas is the premier Indian Company in airconditioning and refrigeration
with the widest product range: refrigerators, water coolers, room
airconditioners of all kinds, packaged units and large central plant. We
believe that in these products we have unmatched experience in marketing,
installation and servicing.
7. The liberalisation process of the last three years has been sincerely
welcomed by companies such as ours which have for decades operated under the
straight-jacket of irrational controls. However, the new environment which
gives us much greater operational freedom, easier access to technology, and
minimal import controls also poses the challenges of increased competition
and greater customer expectations.
8. Members are undoubtedly aware that the potentially large Indian market for
white goods -- refrigerators, washing machines and the like -- has attracted
the major multinationals who have acquired a controlling interest in several
of the hitherto Indian-owned and managed companies. This unquestionably poses
a threat to Indian companies. The danger we apprehend is not the technology
that MNCs can bring or the design and quality of the products that they can
quickly introduce--because in these respects it is our obligation to match
what our competitors offer. Our concern is the ability of MNCs to pour very
large sums into increasing their market share by selling products for long
periods at prices which do not cover costs and by large dealer incentives.
The losses incurred in such a policy of gaining market share and driving out
competition would be negligible in relation to the world-wide profits and
resources of the MNCs whereas Indian companies cannot sustain such deficits.
9. Your Board has decided that while we will seek technology and establish
strategic alliances or partnerships in certain high technology areas, in the
principal consumer durables business Voltas should retain managerial and
ownership control. We are endeavouring to upgrade to international standards
our product designs, quality and service and greatly increasing our R&D. New
consumer durables will be progressively launched.
10. It has been my personal good fortune that in my many years in Telco I was
closely associated with Mr. Sumant Moolgaokar. From him I learnt much,
including the importance of courage in times of business adversity, the
ability of teams of carefully-selected Indian technical personnel inspired by
visionary leadership to design and produce to international standards, the
need for uncompromising product quality and outstanding service. I am
grateful that most of my colleagues on the Voltas Board share this outlook
and have confidence in our Company's ability to upgrade products, improve quality, market effectively and provide customer satisfaction
A Vision of Voltas:
11. Your Directors are clear that it would be inappropriate for Voltas to
undertake mega projects involving investments of hundreds or thousands of
crores as so many other companies are doing. We believe our present and
contemplated businesses have great growth potential. Also that we must have
sustained high profitability to provide attractive returns for our investors
12. For years we have interpreted the three arrows in the Voltas logo as
representing our involvement in Manfacturing, Marketing and Engineering.
While we remain very much committed to these activities, l believe a re-
interpretation of the three arrows in our logo is appropriate in the new
environment in which we operate and in which we do desire to maintain our
identity as a company that is different.
13. One arrow must represent the vigour our organization needs--the muscle,
the will, the ability to do and to get things done. We have now to respond
more quickly to change -- in technology, in markets, in customer
expectations, in the financial environment and in the global economy. This
entails not only attitudince changes but also greater team work utilising the
revolutionary technologies now available for better management.
14. The second arrow represents the vision we need, the strategic plan we
must follow, the ability to foresee and anticipate change, the capacity to
differentiate between a growth opportunity and a disastrous gamble, Poor
execution of a well conceived strategy will yield less than optimal results
but a misconceived strategy is disastrous even with the best management.
15. Many companies do have Vigour and Vision,-- some highly successful ones
have exhibited these in greater measure than Voltas has hitherto
demonstrated. However, it is to the third arrow--Values--to which we should
attach special importance. In addition to some important characteristics we
inherited from our Swiss Volkart ancestry, we have imbibed much from The
great Tata tradition--exemplified not only by Jamsetji and J.R.D. Tata but
also by the several other Tata stalwarts who have been closely associated
with Voltas or have influenced senior Executives and Directors of Voltas.
16. I do hope that concern for the larger community-- extending much beyond
our investors, customers, employees and associates--will continue to inspire
our Company. It is easy and painless to donate money to worthwhile causes; it
is much more difficult to devote managerial resources and time to projects
intended to benefit some of the unfortunate masses who constitute the
majority of our countrymen. Our association with several foundations has
brought us recognition which, while unsought, does encourage our further
efforts. However, that is not enough.
17. It is fortunate that many of our Board of Directors accept that Voltas
should earmark quite modest resources to actively create opportunities for
greater productive employment; to develop and implement specific technologies
which increase rural welfare and similar objectives. The success of the
Voluntary Retirement Schemes in Voltas and in its Allwyn Unit, though
essential for the well being--and even survival --of our Company, can give us
little satisfaction unless we can create in other ways, and through other organizations even larger employment opportunities. The activities and
organizations we promote and support with limited funding and managerial
assistance must be inheritably viable and self-sustaining within a
predetermined period. By pursuing this and other similar objectives we can be
not only a highly profitable and progressive company but also a somewhat
different one, continuing the traditions we have inherited.
18. On a. personal note I would like to record my thanks to mv colleaaues on
the Board and in Management for the support and co-operation received during
my tenure as Executive Chairman, a position which I relinquished on 1st
April, 1994. I am delighted that for the first time the Chief Executive of
Voltas has been appointed from within the organization. Mr. Munshi, the new
M.D., knows Voltas well and can be relied upon not only to maintain the
growth and profitab'ility of the Company but also to preserve those elements
of our tradition and culture which have abiding value. The coming years will
be exciting and challenging for Voltas as for the country. I have no doubt
that with the support of all our shareholders and the Financial Institutions
our Company can accelerate its growth and while improving its profitability
retain its specific identity which has earned for it a reputation and image
disproportionate to its financial position.
A. H. Tobaccowala
Bombay, 29th July, 1994.