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From the Chairman’s desk
The global automotive industry landscape continues to transform, and along with it the auto components industry. With India already cementing its place as a global component sourcing hub, we are well positioned to navigate through the emerging challenges and capitalise on the upcoming opportunities. Our tradition of pursuing excellence and keeping ‘customer at the core’ remained intact this year as well, backed by determination, prudent foresight and strong business fundamentals.
The synchronised upswing in the global economy that began around mid-2016 suddenly changed course in the second half of 2018 as the continued momentum in manufacturing and trade dissipated. Sentiments were further dampened by the hardening of US interest rates, volatile crude prices, along with uncertainty over Brexit and heightened rhetoric around protectionism.
The Indian GDP growth dipped below 7% for full financial year 2018-19, after growing at 7.5% in the first half, due to weak industrial output, and overall subdued demand. However, with the election overhang now behind us, the economy should grow at over 7% going forward, driven by the Government’s resolve towards achieving fiscal consolidation and continued push for structural reforms.
The Indian automobile industry too had started FY 2018-19 on a positive note, supported by normal monsoon, rising rural demand, the Government’s infrastructure push and rise in industrial activity. However, most vehicle segments witnessed a considerable slowdown in the second half due to higher fuel prices, lower financing availability, steep price increase on account of insurance regulation changes in September 2018.
Driven by determination
Our growth was supported by performance of steering and linkage division. Our plants responded well to the market fluctuations and maintained optimal capacity utilisation. Hydraulic products experienced a strong traction with customers.
We engaged various lean measures to improve operational performance which helped to partially mitigate the inflationary pressures on material costs. We upgraded our R&D facilities in both Puducherry and Chennai.
The operational performance of die casting business in India continued to improve and further cost reduction initiatives are planned in the upcoming year as well. The order book of die casting business in India is still not healthy and capacity utilisation is under stress.
The performance of our overseas subsidiary, Rane Precision Die Casting Inc. (RPDC) continues to remain a concern for us. We envisaged losses for three years when we acquired this business in 2016. There were few setbacks as the subsidiary could not secure adequate new business and achieve planned operational improvements. RPDC secured new businesses which will help in sales growth. We still see a lot of scope for operational improvements and are undertaking several initiatives including deputing some senior managers from our Group.
We are ‘Driven by Determination’ and remain confident of our strategy and approach to deliver profitable growth.
Progressing with optimism
The first half of FY 2019-20 appears challenging with slowing demand in most of the vehicle segments.
The anticipated pre-buy on account of transition to BS VI, normal monsoon, the Government’s continued reforms and infrastructure push are likely to propel growth. We remain optimistic about the evolving opportunities in the auto component industry and the structural trends remain positive in the long term.
We will continue to invest in R&D and drive innovations to build value-add products. We will introduce new technologies in India and tap into opportunities to supply in export markets.
Our steering and linkage division is expected to continue its growth at a stable pace, aided by market growth and new business launches. We succeeded in securing orders from new customers for the Indian die casting division, which will likely get reflected in fiscal 2020-21.
RPDC’s pursuit to become profitable looks possible over the next two years and is dependent on securing profitable new orders and achieving sustainable improvements in operation over the next 3-4 quarters.
We are progressing with optimism on long term market opportunities and determined to drive efficiencies to create value for all our stakeholders.
On behalf of the Board of Rane (Madras) Limited, I would like to thank all our stakeholders - customers, employees, partners, vendors, bankers, government, communities and most importantly you - our shareholders, who have been part of this exciting journey.