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The Hi-Tech Gears Ltd.


Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE127B01011 | SECTOR: Auto Ancillaries

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Mar 05, 16:00
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Annual Report

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Chairman's Speech

I am pleased to write in is com medication to you in the 30th year of the Company. In this journey of three decades, the Company has faced ninny challenges, each bigger than the other Ills through our journey of challenges and our pursuit of excellence that we have grown into a larger and stronger organization year on year. Our ongoing pursuit of excellence has been accompanied with learning and continuous improvement, both critical to Quality becoming a way Of life. The three pi liars which guide us In our journey towards quality excellence are continuous improvement in technology, training and sustainability.

Global and Domestic Economic Affairs.

Today''s era of globalization is characterized by an increasing dependence of domestic economies on international factors, With EU facing unabated headwinds and US docking in tower than expected economic recovery, the year under review started on a cautious note. Stumbling global economies amid weak aggregate demand, falling commodity prices and increasing financial market volatility in major economies were among the main cause for concern. A serious crisis in the Middle Eastern countries and an economic slowdown in China further added to I he woes of the global economy.

Unfortunately, global uncertainty and volatility continued through (his year. The global economy which grew at less than 3.1 per cent in £01S is expected to grow al 3,2 percent in 2016. This flat or downward international trend is a result of several factors. Gobat recovery is expected to remain moderate to uneven over the next few years, While developed economies, mudding the US, are expected to strengthen aided by tower oil & input costs and tow interest rates, must emerging economies are expected to stow down moderately. due to country specific reasons, however India seems to be an exception.

Britain''s exit from the European Union (Brexit) is projected to make an impact on the global economy. Going forward, if it undermines The confidence of The European Union. Brexit is likely to have a strong spilt over effect. Together with a fall in the Euro, this is likely to add to The pressures on private and public finances, especially in countries where debt remains high This risk would compound The ongoing political tensions of The European Union that are a result of the large refugee inflows and ongoing financial efforts to stabilize Greece. I believe that in The short run Brexit will not have a significant negative impact on the Indian Economy. However, over the medium term India''s exports volumes will be determined by the severity of The slowdown in Europe, UK and its impact on the exchange rate.

Nevertheless, conditions relating to finance availability, an increasingly neutral fiscal policy in The Euro a read. Slower fuel prices globally, improved labour and input markets will together push growth over The next few years. In view of this environment which is expected is be further supper led by generally less restrictive fiscal and accommodative monetary stances worldwide, global growth is expected to strengthen to 3.7 per cent in 2017.

The Indian economy that has successfully faced many challenges in the past. Is currently on a growth trajectory on the back of committed policies, a stable government and a new found optimism Consumer and investor sentiments are showing signs of improvement. In The previous years, the economy laced tough times with issues such as tow growth rates, high levels of inflation, high fuel & capital costs and a widening current account deficit: escalated by an unsupportive external environment. Growth seems it be on track, accompanied with the desirable mild inflation, a manageable current account balance on the back of a Stable rupee and rising: foreign exchange reserves, signaling the much awaited improvements in the macro-economy.

Today India is The seventh-largest economy in The world measured by nominal GDP and the third-largest by purchasing power parity (PPP). Classified as a newly industrialized country, India is amongst the major G-20 economies. A member of BRIGS India replaced Peepie''s Republic of China as The world''s fastest growing major economy in the last quarter of 2014 India is a fast developing economy having clocked in an average growth rate of over7 percent over the last few years.

India’s long-term growth prospects remain positive given its young population, corresponding to dependency ratio, healthy savings and investment rates, and. an increasing integral Ion Into the global economy. India has The potential to become the world''s 3rd-largest economy by the next decade. The International Monetary Fund has termed India as the bright spot'' in the global landscape, reiterating the country''s short term growth outlook. With the economy having grown at 7-6 per cent in £015-16 and expected to grow at B.O per cent /-0.25 per cent in 2016-17, India for the first time topped the World Bank''s growth outlook for 2015*16.

It was for the first time that the two major contributors to the GDP i.e. the Manufacturing and Services sector grow almost al the same rate i.e. approx. 9 per cent Due to less than normal rainfall, the agriculture sector grew by a mere 1,2 per cent. On a cumulative basis, the IIP growth during 2015-16 was 2. J percent as compared to 2.8 per cent during 2014-15 The country''s Foreign Exchange Reserves stood at USD 360.20 billion at end of March 2016.

The IMF has retained India’s growth potential at 7.0 per cent and maintains that (his growth trend will continue to be driven by private consume p I ton tower energy and fuel prices and higher real incomes. The IMF also states that With the revival of sentiment and pickup In industrial activity, a recovery of private investment is expected to further strengthen growth.

A comfortable level of Current Account Deficit (CAD) has also brought cheer to the economy. After high and near unsustainable CAD levels between 2011-12 to 2013-14, India''s balance of payments situation since has improved considerably The recent weakness m external demand has marginally affected exports. Nevertheless, CAD as a proportion of GDP has remained al comfortable level is in 2014-15 & 2015-16.

With the Parliament passing The relevant Constitution Amendment Bill, India moved a major step closer towards a unified goods and services tax regime across the country. This move is seen as the most radical indirect lax reform since India''s independence. I have always maintained that GST will help faster and cheaper movement of goods across The country with a uniform taxation structure. This is a critical step towards creating a single market and wilt also make a positive impact of about t [of .S percent on The GDP-

GST''s successful implementation would give a strong signal to foreign investors about our ability to support business. It will also enable wide ranging changes in the tax structure leading to tong term positive effects on the economy.

Numerous Indian and foreign companies are setting up I heir facilities in India on account of various government initiatives like ''Make In India'' and ''Digital India''. These fixatives are expected to boost the contribution of The manufacturing sector to The GDP from the current 15 percent to 25 per cent. These initiatives are also expected to increase The purchasing power of an average Indian consumer, which would further boost demand, lead to creation of digital infrastructure and hence Spur development, in addition to benefiting investors.

Indian Automobile Market and our Future Outlook

It is very heartening that The Indian automobile industry, notching domestic sales of over 20 million vehicles for The first time ever, crossed an important milestone this year. Export sales also recorded an increase to 3.64 million vehicles. Automotive industry is truly an engine of growth for the Indian economy. The aula motive industry accounts (both auto and auto companies ) for 45% of the country''s manual during gross domestic product (GDP), of the country''s GDP and employs about 20 Million people both directly and indirectly.

The industry has recorded satisfactory volume growth. based On a strong base from previous years. The rise in demand is fed by various underlying factors including India''s rising per capita income, increasing rural demand, growing urbanization, increase of replacement demand amongst others

The Industry includes passenger vehicles, light and heavy commercial vehicles and two wheelers, as well as productivity machinery such as tractors. India manufactured and assembled about 23 96 million vehicles m comparison to 23 36 million vehicles In The previous year, recording a marginal but steady growth of 2.66 per cent Similarly, at 3.42 million the production of total passenger vehicles (PV) recorded a growth of 5,97 per cent Total PV sales {inducing exports! stood at 3.44 million vehicles with a growth of 6.66 percent.

The sales al Two Wheelers stood at 18.94 million against 10.46 million units in previous year. thereby registering a growth of 3.73 percent. Commercial vehicles, said to be The back bone of [he economy, were the highlight of the sector, Total sales at 0,78 million grew by 12.18 percent . Of total production. tractors accounted for a considerable percentage. India, accounting for 29 percent of the world''s largest production. is The world''s largest producer of and the largest market for tractors .

The Indian automobile market made its mark in The world by manufacturing quality products at competitive prices. The Automobile & Auto Component sectors go hand in hand- The Indian auto component industry is amongst the country’s rising industries, with tremendous growth prospects From a tow-key suppler providing components exclusively to the domestic market. the industry has emerged as one o! the key auto component centers in Asia. Seen as a significant player in the global automotive supply chain, India is a supplier of a range of high-value and critical automobile components to most global automobile manufacturers. The high quality, law priced engine parts, transmission parts, brake systems and other components made in India are amongst the worlds'' favorite. A major contributor to achieving this status is also [he technology support extended by India''s auto component companies to The automotive manufacturers.

Globally The auto component industry IS evolving vary fast. The component industry is thus faced with new challenges - dealing with regulatory pressures, increasing the automation requisite to delving quality products, the need to manage costs and raise productivity maintaining quality and supplying components in a just-in-time (JIT) mode on the production line, ensuring compliance to environmental issues only some of these. While the challenges are many they bring with them numerous opportunities as well. The industry would stand to gain from the learning and innovation experiences.

GST is expected to make a positive Impact on all Sectors, including the automotive sector . Currently the effective tax rate for the sector ranges between 30- J7 percent. On implementation of GST, the lax rate is expected to oscillate between 20 22 percent. It is expected to drive overall demand and reduce end user''s cost by about to par cant. With reduction time at Octroi and other check points, the transportation time and overall costs are expected to reduce. In addition, the logistics and supply chain inventory costs will be curtailed by almost 30-40 percent Another positive change can be brought about by introducing an effective vehicle scrap page policy. The Automotive Mission Plan 3026 has alluded to The repair, and recycling of automotive vehicles, components and services. A policy that encourages scrapping of old vehicle through compensation to owners will ensure that the old vehicles do not find their way to other cities. Recommendations o! the Ministry of Road Transport including discounts by automobile manufacturers and a possible cut in excise tax on the purchase of a new car and payment of a fair value for the scrap could be welcome steps. Inna could benefit from examining The strategies adopted by the European Union as well as Canada.

Industry body ACM A has projected that The industry is expected to grow in the range of 1 CM 2 per cent in the current fiscal on hopes of above-normal monsoon, availability of easy finance. How of money after implementation of 7th Pay Commission and recovery in The domestic: automobile market.

Company Performance and Strategy

Your company is amongst the few to supply products such as gears, engine and transmission components to OEMs Of different categories such as two wheelers, commercial vehicles, passenger vehicles, tractors and off road equipments.

The financial y ear 2015-16 was lull of challenges, but proved to be an encouraging year The Total Revenue r of the Company was Rs. 452.2 crores compared to Rs.434.5 crones in The previous year, The PBT was Rs. 33.6 crores and PAT stood at Rs. 21.1 Crores compared to Rs 26.3 crores and Fs. 18.4 crores respectively in The previous year. I am happy to inform you that with a view to sharing The gains, your Board of Directors had declared an interim dividend Of 15 percent and further recommends a final dividend of 15 per cent for your approval In terms of business development, the company is negotiating with several new customers. Some new products are also under development in line with the Company''s expertise in gear & transmission manufacturing. These new developments are expected to add to the company''s revenues in the years to come Furl her, the Company continues to focus on cost t education efforts and make improvements in operational efficiencies as well as value engineering activities to improve the margins. Additionally, your company has made its mark as a leader Of sustainable manufacturing. Our slate-of the-art Plan! In ''Bhiwadi is operating to its capacity now while minimum wasteland pollutants.

The Board is competent with both executive and non executive Directors possessing a wide range of expense The Board continued to perform its role of monitoring the Company''s performance, including its operational & Financial performance, and progress in delivering new growth. In terms of strategy your Company is following a consistent end tong term strategy. |o grow cash flow across the cycle and delver competitive returns through focus on quality and timely delivery.

We are exploring organic and inorganic growth options in the NAFTA Region for new manufacturing locations and to create a delivery hub without affecting The existing business. We also propose to have our footprint in South India to efficiently meet the requirements of our customers.

l. on my behalf and on behalf of my colleagues on the Board would like to thank and record our sincere gratitude to alt our stakeholders for the confidence £ trust reposed upon us and our deep appreciation to all employees of the Company for their hard world. commitment and whole hearted support for achieving the Company''s goals and targets I further thank all our customers, our supply chain partners and our bankers for reposing their confidence in us. As we step into a new phase, there are many reasons to be excited about The future of our business. We look forward to your continued support in The years ahead.

Deep Kapurla