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Dear Valued Shareholders,
I begin this letter with a sense of pride on how our Company has evolved and grown stronger over the past two decades. Our dream of becoming one of the world’s largest most admired network of Kendras is not an easy one to achieve. It will take time, perseverance and fortitude to get there. On this journey, we are bound to learn some valuable lessons along the way, and also face challenges once in a while that one could never foresee. With a goal that are built for a longer time horizon, I view periodic short-term challenges as just some speed bumps along the way. We remain unfazed towards our objectives, and are determined to keep taking concrete steps towards enhancing our existing franchisee network, producing sustainable performance and focusing on long-term shareholder value creation.
Taking Vakrangee Kendras to a New Level
The highly successful Vakrangee Kendra model has been evolving gradually over the years in terms of its format, configurations and capabilities. There are now at least 8-10 different formats of Vakrangee Kendra stores on a Pan India basis, ranging from a Kirana store model or room in a gram Gram Panchayat office, to an exclusive independent outlet. We feel that the time is now ripe to upgrade or churn these existing stores to a new standard format, so that they each become branded stores for delivering a unified consumer experience and consistent service levels. Our vast network will benefit immensely from greater standardisation and consistency in terms of the quality of its facilities and service levels. We reviewed this through highly reputed global consultants, and arrived at a plan to recalibrate and upscale our Kendras that spells better convenience, greater comfort and superior service excellence to our customers. In FY2018, we began the task of upgrading our network to make it more productive and perform at a much better level. With this, we are strengthening ourselves to evolve into an even stronger and more successful company.
FY2018 in Brief
During the year under review, our Company faced a few challenges which I must discuss.
One of them was the unexpected resignation of our auditor, Price Waterhouse Coopers (PWC). Fortunately, at the time of their resignation, they had successfully and satisfactorily completed their limited review of our business till December, 2017. Since then, our newly appointed auditor, M/s. A. P. Sanzgiri & Co., Chartered Accountants, has satisfactorily completed your Company’s full-year audit of the financial year ending March 31, 2018, which I am pleased to present in this report.
Another key challenge of the year were a series of unfounded and malicious rumours about the organisation being involved in price and volume manipulation in the stock market. I would like to state that till now, our Company has not received even a single show-cause notice from any regulatory authority, that could give any credence to such gossip. This is not surprising as these rumours have been totally baseless. In the meantime, I would like to add with pride that in spite of all these short-term challenges, your Company remained steadfast and focused on conducting its business with full efforts. During these times, we added more partners, more franchisees and more employees. We did not get sidetracked from our larger business objectives.
I urge all our stakeholders to stay focused on the facts, the fulfilment of our strategic plans and the proven performance record of the Company. We remain solidly determined to deliver long-term and sustained value to our stakeholders.
The Next Gen Vakrangee Kendras
Considering the rapid pace at which we have grown, we have reached a point where consolidation and up-gradation is necessary to set the stage for the next phase of growth.
Our objective is to become the world’s most top-notch, distinctly identifiable “assisted digital convenience stores”, with standardised, unified and one-look branding for our infrastructure.
This will entail the transformation of more than 45,000 of our existing Kendras as the Next Gen Vakrangee Kendras, categorised as Gold or Silver model formats.
‘Next Gen’ does not only stand for a new standardised look and feel, but also includes several unique features to make our Kendras ‘future-ready’ in terms of service offering, technology and branding. The Next Gen Kendras will have a modern format with uniform infrastructure and consumer experience.
They will also include key technological advancements, such as biometric and pin pad devices to enable all kind of payments mechanisms at the outlet; ATMs that enable the ease of financial transactions; centralised CCTV monitoring systems for enhanced store security on a pan India basis; and digital advertising features through a centrally controlled digital signage system for advertisement campaigns of our brand partners. These enhancements will greatly enhance the interaction between our customers and our partners.
By 2019, we aim to transform all the existing 45,000 outlets as per the new Next Gen model. We are working at breakneck speed towards creating the best network ever created globally. Our new format kendras are already receiving an enthusiastic response from the existing franchisees, of which a high percentage have opted to upgrade without any hesitation. For those few that have not, we are replacing them with new franchisees willing to adopt the new format.
I am happy to share that we have recently completed and launched 50 Next Gen Vakrangee Kendra outlets in the Mumbai Metropolitan Region (MMR). I am also pleased to inform you that an additional 4,000 outlets are already in advanced stage of completion, and will be completed by Diwali this year. These outlets are spread across 380 districts and 2,548 postal codes of the country. Out of this group of outlets, more than 3,000 are based in Tier 5 and Tier 6 cities.
Our Performance Scorecard
I am pleased to inform you that your Company continues unabated in delivering consistent growth performance. During the year, our Total Income grew by 63.18% and stood at Rs.6,53,648.15 Lakhs, compared to Rs.4,00,574.71 Lakhs in the previous year. Our Net Profit After Tax also grew by 28.20% to reach Rs.68,045.64 Lakhs, compared to Rs.53,079.52 Lakhs in the previous year. This commendable performance is the result of our strong business model represented by our Vakrangee Kendras, and our rigorous execution skills.
As we focus even more on strengthening our balance sheet, we have realised that our legacy business of e-Governance is too capex and working capital intensive for our liking, which was limiting the generation of free cash flows. Thus, as part of our business strategy, we have decided to concentrate on the key business of Vakrangee Kendras, through which we have already created an enviable market presence.
For the running financial year FY2019, our key objective will be to upgrade all the remaining 41,000 outlets simultaneously into Next Gen Vakrangee Kendras. However, as all the outlets undergo refurbishment or get churned, our Company’s financials, including total revenue and profitability, will naturally get affected.
By FY2020, as we complete this large scale re-hauling exercise, I expect Vakrangee to continuously demonstrate strong resilience in delivering value to our stakeholders through strong financial and operational performance, and the more than 45,000 completed Next Gen Kendras bearing fruit.
As for the future, we maintain our long-term target of setting up 75,000 Next Gen Kendras by 2020. With a unique franchisee-driven business model developed over a period of time, we are extremely confident of having the right ingredients to achieve our vision. We continue to build our business by investing in technologies and by clearly defining our strategic priorities - that of driving growth, increasing agility and funding growth. We have only just begun to realise our full potential and purpose of building a network of convenience stores that are in close proximity to every last excluded person within India.
On behalf of the Management and Board of Directors, I would like to take this opportunity to thank our shareholders and our employees for their contribution and support. We also thank our franchisees and business partners for their continuous trust and confidence in the Vakrangee dream.
Managing Director & CEO