I present to you the Company's Annual Report for the fiscal 2020-21.
This financial year was an aberration in terms of financial performance but did provideglimpses of things to come. The nationwide lockdown took everyone by surprise and no onewas prepared to plan for enduring it. We announced very dismal financial performance forthe first quarter with operational losses before tax to the tune of over Rs.83 crores. Itwas however very heartening to see the Company bounce back in the latter part of the year.Not only did we wipe out the initial reported loss but also posted decent profits led bythe gradual recovery and eventual surge in the freight volumes which our team couldcapture.
I feel sad at the overall vulnerability seen in the pandemic era which saw a lot ofloss of life and several employees and their family members were also affected and I offermy deepest condolences on their suffering. Covid-19 has taught us some important lessonsthough be it in terms of health or business preparation. A lot of marginal and smallsurface transport businesses succumbed to the brunt of the pandemic leading to increaseddemand for stronger and organized players such as your Company. Our entire team at VRL wasready to meet the challenges posed and remained alert to new business opportunities comingour way.
Coming to the present day scenario the situation is no different. Just like the yeargone by the first quarter of the current financial year 2021-22 would definitely beadverse for one and all as the current regime of State imposed lockdowns has affected themanufacturing operations across the country and also restricted freight volumes. Wehowever are much better prepared this time and would not be as much affected when comparedwith the previous year.
I have alerted the entire Logistics team to be prepared to take on the freight volumesonce the markets gradually open up and seize opportunities to generate higher businessvolume.
In terms of financial performance during the year 2020-21 your Company recordedoverall revenues of Rs.1775 crores which was no mean task given the challenges posed. Thelatter half of the year ushered in a very satisfying financial performance and the Companyended the year with very good cash profits. Given the same we decided to undertake thesecond Open Market Buyback of equity shares in the Company's history and completed thesame in the last quarter of the year. Lesser profits recorded in the books apart giventhe cash accruals and no committed capex we have also decided to reward the shareholderswith a decent dividend and have recommended final dividend of Rs.4/- per equity share forthe approval of the members.
Our Bus operations were severely affected during the year. Operations were fully shutduring the initial few months of the financial year and the subsequent resumption also sawlower occupancy rates as also lower demand where the fleet could not be meaningfullydeployed. The work from home' and remain at home' culture persisted throughoutthe year and I expect this to see normal days only towards the end of the currentfinancial year. There is however a bright time ahead for this segment given the recentdecision by the Government to allow the much awaited All India Permit for buses in linewith that for Goods Vehicles. This segment would thereby see lower costs and encourageoperators to look beyond their existing route limitations to access newer markets. We atVRL would keenly observe market developments before we decide our stance with respect tothis segment and would finalize our strategy only upon gaining confidence of this marketregaining the desired traction.
I have been interacting with several individuals investors peers and also competitorsthese days. The market perception has seen a drastic change and in the present dayDisruptors' have also disrupted the investor sentiment. Newer technology basedentrants be it aggregators or otherwise now command the attention as also businessvaluations across traditional industries. The Logistics industry is no different. Thoughthe recent decade has seen the emergence of higher number of organized surface logisticsbusinesses very few have managed to develop a sustainable business model. The eventualdominance of organized players would take quite some time.
A lot of news is being generated on the new age operators who claim the betterment ofthe industry by bringing in more technology based efficiency which has excited one andall. However fundamentally the surface logistics industry would continue to do what itdid and no drastic ground level changes are envisaged. I personally feel that owning andsuccessfully operating a goods transportation fleet requires a lot of courage and this issomething at which even some of the bigger business houses of our country have failed.Even the hotel industry recently demonstrated that aggregator model could pose some riskif the underlying businesses which get aggregated are not in sync with the ideology of theprincipal.
I remain positive on technology and it definitely presents newer opportunities. Toensure the timely correct and safe delivery of consignments from point to point onewould still need vehicles dedicated and trained manpower as also business knowledge toeffectively transact freight irrespective of whether such ingredients are owned oroutsourced. Logically owned infrastructure would definitely be desirable as it wouldprovide the necessary flexibility. This is what your Company has been successfully doingsince the last four decades. We would continue to focus on what we do best and try toimbibe newer practices whether technology based or otherwise to bring in moreefficiency. I remain confident of the suitability of the Company's Asset ownershipbusiness model and can proudly say that replication of the fleet operation and maintenancecapability that we have is a herculean task for anyone.
On the expenditure front fuel costs continue to remain our single largest expense andthe continuous price increase in this cost element could tend to erode margins asbusinesses are yet to fully recover from the impact they have had from the lockdowns.However we would pass on these ever increasing costs on a periodic basis to ourcustomers. We have also initiated meaningful dialogue with bigger Commercial Vehiclemanufacturers to understand the dynamics both cost wise as also from an operationalperspective of electric vehicles as these would eventually be inevitable in the days tocome. Though we have added 22 electric autos to our fleet these are only smaller vehiclesand we continue to closely monitor their performance for a better understanding.
Iand my entire team have been extensively travelling across the country and conductingregional meetings to ensure that no available opportunity is given up as also for newbusiness development. Whereas we do anticipate volume growth that comes at the expense ofthe closed down smaller operators in the industry we remain prepared to knock the doorsof potential clients to source additional business volumes. Region centric consigneemarketing has always worked in the Company's favour and your Company aims to set ambitiousgrowth goals for future.
The vehicle scrapping policy announced by the Ministry of Road Transport and Highwayswould be a blessing in disguise for your Company. Older vehicles would need to be scrappedand this would cause a massive vehicle reduction across the country as lakhs of truckswhich are beyond the age threshold continue to ply on Indian roads. This capacityshrinkage would work to the benefit of those operators who have an operational fleet andyour Company betters everyone else in the Industry on this front. Assuming implementationat this year end we expect around 800+ vehicles to be scrapped from our fleet. Though itwould appear to be a very big number in terms of fleet carrying capacity it works out tohardly a 12% reduction. Also there would be a significant one time revenue arising out ofscrap salvage. Needless to say we would also ensure that all useful spare parts fromthese vehicles are taken out and remain available for usage or replacement on thecontinuing vehicles.
Overall I see good tidings from here on. I am confident of business growth as alsogrowth in the profitability of the Company in the days to come.
I request you to go through the Annual report and send your queries email@example.com. I invite all the members to join us at Hubballi at yourCompany's Annual General Meeting on the 7th of August 2021 where we would seek yourguidance and suggestions.
As always I sincerely thank our shareholders for their trust support and confidencein us. A special note of thanks to our employees who braved the pandemic and stoodstrongly at their branch posts even during these difficult days for the Company's sake. Iacknowledge that their absolute dedication and efforts are the Company's biggest strength.I also take this opportunity to express my gratitude to all the other stakeholdersincluding Customers Suppliers Bankers Government authorities regulators and themanagement team including my peer Directors on the Company's Board for their hard work andcommitment and seek the continued association of one and all for the Company's advancementin the days to come.
DR. VIJAY SANKESHWAR
CHAIRMAN & MANAGING DIRECTOR.