FISCAL 2011-12 WAS ONE OF THE CHALLENGING YEARS FOR THE INDIAN ECONOMY
AND INDIA INC., AS WE WERE FACED WITH THE DIFFICULT TASK OF MANAGING
Stubborn inflation compelled the RBI to resort to interest rate hikes
primarily due to lack of innovation in managing inflationary pressures.
This adversely impacted capital intensive initiatives by India Inc.
Besides, the surfacing of various high-level improprieties forced the
active involvement of the Indian judiciary which diverted the policy
makers'' attention on managing tough situations and compulsions of
coalition politics have resulted in a freeze on growth- oriented
policies. The other roadblock that severely challenged economic
progress was the sharp rupee depreciation and increasing fuel prices.
The prevailing overall uncertainty and lack of optimism, bulging fiscal
deficit, rising cost of funds and increased cost of living forced India
Inc., and the average Indian to postpone investment and consumption
respectively - clearly borne out in India''s economic progress - a 6.5%
GDP growth, lower than what we achieved in the 2008 global slowdown.
Our performance in 2011 -12 was very satisfying even as the external
environment remained challenging.
We sustained the growth momentum, increased market share and reinforced
our leadership across our key business verticals. Net sales grew 34%
and profit after tax grew 45%.
The Company''s ability to grow in the rapidly evolving and adverse
external environment was due to its customer- centric approach,
balanced nature of the business portfolio and entrenched presence
across India and strengthening footprint in international markets -
which resulted in a positive divergence - high sales growth and an even
higher profit growth.
For the automotive battery business, we focused on strengthening our
presence in the aftermarket segment. We filled the gaps in our product
offering, widened our distribution network and invested in enhancing
brand visibility resulting in increased market share. Besides, we
developed batteries for some fast-moving OEM diesel platforms which
improved the share of business and strengthened our market share.
In the industrial battery business, our alliance with Bharti Airtel
generated large exports to Africa, Sri Lanka and Bangladesh. Besides,
our transformation from a product vendor to a solution provider
generated good business in the telecom space. Strengthening
penetration, enhanced recognition of product performance in BFSI,
government and corporate circles delivered sizeable volumes for our UPS
batteries - we grew faster than the industry.
On the cost front, our shop floor teams successfully implemented various
measures germinating out of their rich knowledge capital and lateral
thinking ability - partly neutralizing the impact of inflationary
headwinds on business profitability.
The result is that we exceeded our business target for 2011 -12 even as
the country passed through economic slowdown.
Prospects for 2012-13
The challenges posed by an adverse external environment are expected to
continue. India''s economy is expected to grow at 6.5-7%. Inflation
remains high at 7.5%-plus levels. The political instability continues
to withhold the passage of important growth-oriented policies. The
rupee value continues to hover around 55 against the US$, making
imports dearer. As a result, the performance of India Inc., will
largely remain subdued during the current fiscal. This is already
reflected in low IIP growth and significant underperformance by the
The immediate action plan
At Amara Raja, we continue to defy these challenging times.
We have created a business plan with stretch targets. We are confident
that we will be able to catalyse growth and meet aggressive targets
through stronger capabilities.
Leadership and management: We plan to expand our operations - new
capacities, new products, new technologies and new markets. As a
precursor to this expansion, we are reinforcing the leadership team and
nurturing leaders to make our targeted goals a reality. We are
fast-tracking the growth of star performers to undertake larger
Research and development: We will continue to invest in R&D and
engineering capabilities that strengthen innovation, widen product
offerings and improve our performance.
Technology alliance: We leveraged the rich intellectual capital of
Johnson Controls for the manufacture of automotive batteries leading to
sectoral leadership in a short time. We will explore strategic alliance
for the industrial battery business and cater to dynamic technology
changes in the standby power segment.
Information technology: We will strengthen our investments in IT
solutions that provide the critical backbone for strategic and informed
Visibility & Reach: Our objective is to transform the ''give some
battery'' customer response to ''give Amaron®'' through innovative
branding and visibility initiatives and widespread reach.
The big question
The big question is whether Amara Raja will now reconcile to a mature
growth rate on a larger base or sustain its growth percentage. At our
Company, the answer is clear: having crossed an important revenue
milestone of Rs20 billion in 2011 -12, we are forging ahead to emerge as
Rs40 billion revenue company in the next four years.
The medium-term aspiration
In the next three years, we will invest more than what we invested in
the past. Our medium-term blueprint comprises a dual strategy: create
demand faster than what the industry provides and augment supplies in
existing and new technologies.
Automotive battery space
Creating demand: As India strengthens its position to emerge as a
global automotive hub, we work with leading global and domestic OEMs to
customise products that meet their standby power requirements and to
position us as a preferred vendor of automotive majors (four-and
two-wheelers). We intend to continue the growth momentum in the
aftermarket by increasing visibility, through attractive product
offering and enhancing Amaron''Bl and Power Zone™ network pan- India.
We will enable PowerZone™ to emerge as the second national brand,
accelerating off take. We will also make exports more strategic in
certain geographies in the Indian Ocean Rim.
Augmenting supply: We will be expanding our four-wheeler and two-
wheeler battery capacity to six million units during 2013-14 in our
existing location. We also intend to commission new manufacturing
facilities to further augment four-wheeler automotive capacities at a
strategic second location, while we continue to augment the two-
wheeler capacities, as and when required, at the existing location.
Innovation: We are evaluating novel process technologies that promise
cost optimization and enhanced product performance. We also intend to
introduce new range of products for micro hybrid application, inverter
batteries and will explore opportunities for introducing VRLA
Industrial battery space
Creating demand: As the telecom space upgrades its operating platforms
to 3G and 4G and deepens its presence in rural India, incremental
demand will be derived through new roll- outs and upgrades; while the
replacement demand for existing infrastructure will continue to provide
enough opportunity. Besides, as India''s power demand and supply gap
continues to widen, we expect that the demand for UPS batteries will
increase. We will strengthen our dominance in these spaces through
collaborative customer partnerships with the objective to develop
customized products and comprehensive solutions. Besides, we are
analyzing market realities to establish a
presence in the tubular flooded/gel space, widening our opportunities.
Augmenting supply: We are expanding the medium VRLA product line
capacity from existing 1.80 million units to 3.00 million units in a
strategic second location, which will go on stream in the next 12-1 6
months. We will also create tubular flooded/gel product lines in
existing or new location in line with emerging market dynamics.
The proposed investment in the second location will provide enough room
for future expansions both in industrial and automotive battery
We are very much excited about the long-term prospects of the industry
and our Company. In the past, we demonstrated our ability to provide
superior shareholder returns than they would otherwise have earned
through alternative investment options. We continue to be confident of
doing the same over the foreseeable future.
On behalf of the Company, the management takes this opportunity to
convey their sincere thanks to all shareholders and place on record
their gratitude to their employees, customers, channel partners,
bankers, suppliers and our joint-venture partner Johnson Control Inc.