The year 2008-09 marks an inflection point for Escorts Limited, from
which we are embarking on a well-charted journey of sustained and
profitable growth. It also marks the year in which we have redefined
ourselves in an important way: from being an agricultural equipment,
auto and rail component manufacturing company, we are now poised to
become a significant participant in the earth moving equipment arena.
As a result, we are now playing a meaningful role within a wider canvas
of economic activity by becoming a function of Indias road
transportation and real estate infrastructure growth story.
Most importantly, this year we proved that we are a resilient lot.
During the year, we strengthened the foundation of the Company by
serving our customers well and by increasing our operational
efficiencies across the board. Operating in a business climate,
beleaguered by tough economic conditions, we have proved that by being
astute managers of our business and by focusing on fundamentals, one
can both, expand market share and generate improved profits in a flat
and depressed economic environment. Despite one of the most challenging
times, our efforts at strengthening ourselves have reaped rich
dividends for your- Company. We registered an 8% increase in our
turnover to Rs. 2,158 crores and our EBIDTA increased by 36% to Rs. 207
crores. Today, the Company continues to be identified by our
engineering capabilities and innovative ideas. Our research division is
churning out more farmer friendly and fuel efficient products. From
just being a tractor manufacturer, we are evolving into a complete farm
solutions provider by looking at innovative ways of helping farmers
unlock economic value.
ENRICHING INDIAN FARMERS
Since our inception, we have cherished our relationship with Indian
farmers. Through our Jai Kisan Swantantra Utasv1 and Jai Kisan Utsav
we have saluted the efforts of our farmer friends in their contribution
to the nation. Through our initiatives, we have endeavoured to make
the Indian farmers Sampoom, Sampann and Swatantra. Our
initiatives are in sync with our founding and underlying philosophy of
making the farmers more aware, prosperous, secure and satisfied. Our
focus is to assist in making a difference in the life of farmers by
nurturing them and leveraging on our engineering capabilities to
manufacture innovative products, enabling the farmers to generate more
returns with less investment. We have a rich heritage of partnering
with Indian farmers and have established ourselves as a trusted brand
with efficient products. I feel a personal sense of pride and get
satisfaction whenever I hear that our farmer friends are satisfied with
our products and that our creation has made a positive difference in
FOCUS ON SUSTAINABLE GROWTH
Asa part of our transformation exercise we took a decision to focus on
sustainable growth. The collective endeavour of the entire organisation
has helped to construct a robust performance management system, which
resulted in better economic management and reduction in expenditure.
This, in turn, has enabled us to trim down our costs, the result being
revealed in our increased margins.
The focus on quality through our Quality Push Mission was aimed at
manufacturing products that were preferred by the customers. This
mission drove us to improve our manufacturing efficiencies by
eliminating defects and enhancing processes. This exercise resulted in
us delivering superior quality innovative products which were aimed at
satisfying market demands. I believe that the combined effect of better
economic management and desirable products will enable Escorts to reap
the benefits of good times and tide over bad times.
Our people have been our biggest strength: they have successfully risen
to the challenge of revitalising our profitability and growth story. We
are already treading on the path to make Escorts a lean and proficient
organisation by empowering our people to take the initiative to
implement the transition. To achieve best-in- class practices in our
operations, we have created systems for collaboration across all the
functions. We have allowed our employees to come out with innovative,
swifter and improved solutions for our customers. They are also
empowered to continuously monitor our systems and processes, creating a
proactive work environment where they can challenge and improve
themselves on a regular basis. I applaud their passion, commitment and
drive to make the Company bigger, betterand stronger.
We are also focusing on a pan India presence by increasing our market
reach, followed by market share. This initiative will be driven by our
price competitive models of global quality norms in terms of
technology, performance and durability. The key pillars of our growth
strategy will be improved marketing, strong financial systems and
controls, innovative engineered products, increased dealer penetration
and greater importance on export markets.
AGRI MACHINERY BUSINESS
During 2008-09, the agriculture and allied activitys growth in GDP
declined to 1.6% compared to 4.9% growth in the previous year and 4% in
2006-07. However, this years performance needs to be viewed
favourably, considering the high base of the previous years. The share
of agriculture and allied activities in nations GDP fell to 1 7.1 % as
compared to 1 7.8% in 2007-08.
In this scenario, your Company has done commendable business. During
the year, the turnover from Agri Machinery Business grew by 7%. The
Agri Machinery Business remains the largest contributor to our balance
sheet, contributing 87% of the turnover.
This year, the Agri Machinery Business scaled new heights by entering
new markets and reaching new customers. Your Company leveraged its
Knowledge Management Centre by -constantly innovating and creating new
products of global quality standards at competitive prices. Escorts is
transforming itself from being a tractor manufacture to becoming a
complete farm solutions provider.
Your Company is reinforcing its commitment to provide technologically
innovative products for customer benefit. Our Farmtrac Europe received
the best new model award at Polands XVIII National Agricultural
Exhibition, the only tractor company to receive this award while our
Farmtrac and Powertrac models received first prize at NANE NANE
Agricultural show in Tanzania. The Agri Machinery Division recently
signed a memorandum of understanding with Haryali Kissan Bazaar, which
can aenerate sale opportunities for our products and enable us to
facilitate farm mechanisation solutions to 100 rural areas.
We launched Humrakshak We Care initiative, a unique insurance
policy for farmers to provide them with personal accident cover.
CONSTRUCTION EQUIPMENT BUSINESS
Amidst the global meltdown that started in 2008 and grew worse through
2009, the answer to sustain Indias growth rate lies in developing the
nations infrastructure. Keeping this in mind, the government is
targeting major fund allocation over the next two years in the
infrastructure sector. Infrastructure Investment Finance Company Ltd
(IIFCL) disbursed US$ 640.8 million for various projects during
2008-09. This is in addition to the US$ 320 billion that the government
plans to investforthe up gradation of ports, railroads, highways and
airports over the next 1 5 years.
India is proving to be a huge market for construction equipment
business. Escorts is the current global leader in pick-n-carry cranes
and 60% of our construction equipment business comes from this. We also
enjoy a 25% market share in compactors. During the year, your Company
tied up with Hunan Zoomlion International Trade Co. Ltd., China, to
bring world-class Truck Cranes and All Terrain Cranes to India.
The construction division business is consolidating and strengthening
its current leadership position by focusing on technological
advancements, introducing new and improved products, and tying up with
international manufacturers. The aim of this business is to become a
one-stop-shop for providing end-to-end solutions for the construction
industry. Although this business is nascent today, it has the potential
to grow manifold in the coming years, propelling the growth of your
The Companys Railway Equipment Division grew by 39% over the last year
to Rs. 195 crores, contributing 9% to the turnover as compared to 7%
last year. The Divisions rubber processing unit is playing a key role
in producing the divisions future portfolio of products. By offering
high- tech components to satisfy the modernisation initiatives of the
Indian Railways, the division is equipped to emerge as the
The Auto industry in India has been hit hard by ongoing global
financial recession. Sales figures of the Indian automobile industry
have shown upsetting after-effects of global financial slowdown. The
recent encouraging economic growth numbers and strong passenger
automotive sales indicators are already indicating that the sector is
already turning around the corner. Working in its favor, India is
blessed with a large emerging middle class population, which is getting
economically stronger with every passing day. This class is being
touted as potential consumers for Indias auto industry for years to
Our Auto Suspension Business has been only slightly affected by the
drop in auto sales. The revenues of this segment fell down by only 2.7%
to Rs. 86.63 crores as compared to Rs. 89.04 crores last year. Your
Company has taken adequate measures to get this business back on track
and we are confident of robust performance in the near future.
Building on the various tenets of transformation we have undergone, I
expect the growth momentum of your Company to continue into the next
decade. The Agri Machinery Groups aspiration is to heighten the much
needed agricultural productivity by providing complete farm solutions.
The Construction Equipment Division is prepared to continue its
escalation story by enhancing its earth moving equipment manufacturing
capabilities and product portfolio. The Engineering Division comprising
of railway equipments and auto components business is prepared to
contribute to the Companys growth momentum by seeking to double its
current revenues by 2012.
I am indeed fortunate to be at the helm of a talented and motivated
management team, each of whom has contributed considerably to bring
Escorts to its current position of strength. This young, vibrant and
confident team has allowed the Company to look at the future with
resolve and purpose as we embark on a journey of Walk the Talk.
Today, Escorts is rightfully considered to be an engineering driven
organisation, focusing on innovative products to suit customers needs.
While we have achieved significant milestones, there is much yet to do.
Given our resolve, I am confident of seeing a fully transformed Escorts
in the nearfuture, that has mastered the core drivers of long term
sustainable growth, standing the test of time in any economy, anywhere
in the world.
I would like to take this opportunity to thank all the stakeholders for
their belief and trust in us. They have encouraged and supported us at
every step that we have taken in our journey to create value forall.
Chairman and Managing Director