The global economy set a cheerful pace and grew by 3.8% in 2017 due to increase in private consumption and investments*. Favourable financing costs, rising profits and improved business sentiment also contributed to growth across advanced economies and emerging markets.
India too did well on the economic front as the GDP growth rate was 6.6% for FY 2017-18, which helped it remain one of the world’s fastest growing major economies. There were some headwinds at the start of the fiscal with the introduction of the Goods and Services Tax (GST), which caused temporary disruption in manufacturing and industrial growth. The GST is helping improve trucks’ delivery lead time, simplify tax compliance, deepen economic linkages between states, broaden the tax base and improve revenue collection. Eventually, this will strengthen the broader business environment and drive investment and employment in the country. Consequently, it was a year in which both the Indian auto industry and your Company posted promising growth.
There was some more good news in FY 2017-18 with India gaining a spot among the top 5 as a global investment economy, which reflects in the country’s sovereign rating being upgraded from Baa3 to Baa2 by Moody’s Investors Service.
Auto industry drives forward
The Indian auto industry has been able to create a strong domestic and international market, with strong policy support from the Government. The Government aim to develop India as a global manufacturing centre, build an innovative R&D hub and its Automotive Mission Plan: 201626 are a boost for our industry. We also expect demand growth from favourable demographics, rising disposable incomes, thrust on the Make in India initiative, abundance of skilled labour and improved access to finance.
A series of reforms, including demonetisation, implementation of Bharat Stage-IV (BS-IV) emission norms, implementation of the GST, and enforcement of overloading norms, have resulted in significant volatility in the purchase considerations of fleet operators, influencing the demand for Commercial Vehicles (CVs). Nevertheless, in FY 2017-18, the domestic CV sales have grown by 20% in volume terms over FY 2016-17. Medium and Heavy Commercial Vehicles (M&HCV) Trucks and Light Commercial Vehicles (LCV) Trucks grew by 19.4% and 28%, respectively, in unit terms in the same period.
We are already witnessing progress with new products and advanced technologies entering India through joint ventures, partnerships and acquisitions, due to which the quality and cost competitiveness of Indian auto components is improving steadily.
Automobile exports from India are also on the rise. Low production costs and significant cost advantages are making India an attractive outsourcing hub, leading to domestic companies significantly increasing production capacities.
Strong financial performance
FY 2017-18 was a strong operational year for Automotive Axles Limited (AAL). Our constant focus on new product development, forward integration with the customers, adherence to stringent quality standards including Built-in Quality (BIQ), improved input-output mix and strict adherence and continuous focus to meet the customers delivery performance were the key drivers for our continuous growth. We reported a 29% revenue growth from sale of products (net of excise duty) of Rs.14,788 million in FY 2017-18, compared to Rs.11,453 million in FY 2016-17. Simultaneously, our EBIDTA increased 48% to Rs.1,71 6 million in FY 2017-18 against Rs.1,156 million in FY 2016-17. Our net profit grew by 70% to Rs.839 million in FY 2017-18 against Rs.494 million in the previous year and our Earnings Per Share (EPS) stood at Rs.55.54 in FY 201718, compared to Rs.32.70 in FY 2016-17, a growth of 70%.
We upgraded our state-of-the-art manufacturing facilities with modern equipment and technologies such as Face-Hob Gear Cutting and Robotic Gear Quenching for enhanced productivity and energy conservation. We have implemented forward integration by incorporating Brake Setting and Oil Filling operations into our production, assembly and testing facilities.
We have also planned to increase our axle capacity and brakes capacity to cater to the increasing demand of our customers.
We are geared up to provide electrical solutions through electric drivetrains for the electrical CVs, which are poised for higher production in India over the next few years. As part of the Make in India programme and to meet the stricter emission norms, our endeavour is to provide indigenous electrical solutions.
We have further reinforced our sustainability efforts by adopting the best business practices on conservation of energy, water, controlling heat treatment processes and creating a peaceful ecosystem.
For our continuous drive towards on-time delivery, I am very proud to announce that your Company has been recognised with a Gold Award for our outstanding performance in meeting our delivery commitments to our key customer Ashok Leyland.
Moreover, your Company has been certified by the Union of Japanese Scientists & Engineers (JUSE) through Quality Circle Forum of India (QCFI) in the month of December 2017 for implementing the best 5S practices across the Company.
People at AAL
Our people give us the strength to deliver on our commitments. They help us realise our ambition through their determination and perseverance. We believe in building an inclusive culture for our people to align their personal and professional goals with the Company’s strategic objectives. This way, we attract and retain the industry’s best talent.
We are confident of a sustainable future for the organisation owing to our strong team and robust processes. We are treading the path of innovation through digital transformations and constantly improvising to meet the dynamic needs of customers, efficiently. We are constantly calibrating our growth strategies with the objective of delivering value to all our stakeholders. We look forward to strengthening our technical expertise and we are increasing our focus on innovation to leverage our existing expertise and meet our organisational vision and goals.
I take this opportunity to thank our Board, Senior Management team and our staff across the organisation for their contribution to our Company. Together, we make a formidable and sustainable enterprise. Finally, I pay respect to all our stakeholders for their ongoing support and trust in us.
Dr. B N Kalyani