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Chairman's Speech 2017

Thursday, September 7, 2017

Dear Shareholders,

I have great pleasure in welcoming you all to the Sixty Eighth Annual General Meeting of your Company. The Annual Report and the financial statements, you will agree, highlight the continued winning momentum of your Company. Achieving a record performance is commendable especially in a year when the overall industry volume was static. Gaining market share in a flat market of 2016-17 in all regions and product segments which followed a share gain in a growing market in the previous year demonstrates the structural strength of your Company to outperform in any business cycle. On everyone’s behalf, please allow me to extend my sincere compliments to the Ashok Leyland team for the remarkable success story, elements of which I would like to share with you today.

The Economy grew at 7.1% which is lower than the 7.9% posted the year before. While construction and farm sectors grew, manufacturing was subdued. In our business, the market was flat at 302,529 vehicles in our core medium and heavy duty segment. However, a sales volume of 102,313 vehicles was realised registering a growth of 4% and a market share of 33.8%. The truck segment posted an overall share of 33.1% which is a record. In the bus segment, due to deliberate strategy to exit unprofitable segments there is a decline seen in the market share which is temporary and will be overcome.

The Light Commercial Vehicle (LCV) market grew at 7.4% and with a sale of 31,770 vehicles, your Company retained the share in this segment despite fierce competition and having only one product in the line-up. Due to adverse conditions in target markets, our performance in the international markets has been modest. Your Company continues to do well in the defence segment and has won 19 new tenders in the last 12 -18 months. The power solutions business grew 6% along with an increase in market share. The aftermarket revenues which was a key focus area for your Company registered a growth of 31%.

All things considered, your Company has achieved a standalone revenue of Rs. 21,332 Crores. Profit after tax after exceptional items stood at Rs.1,223 Crores a growth of 214% over the last year, an all-time high. The standalone financials include the performance of the amalgamated Hinduja Foundries Limited for the period October 1, 2016 to March 31, 2017.

With products as a key lever in your Company’s corporate strategy, six new products were launched including the India’s first Electric Bus - ‘Circuit series’. I am happy to advise that Sunshine model bus received the “School Bus of the Year” Award. As you may have read in the Press, your Company migrated to BS IV emission conformance through an innovative market relevant i EGR solution. In the quality journey of your Company, there was another high point when the Pant Nagar plant won the prestigious Deming Prize. Concurrent to the efforts on products, your Company lays emphasis on aftermarket support and I am pleased to advise that your Company achieved the highest score on Dealer Satisfaction for M&HCV range by JD Power. During the year a truck plant has been established in Bangladesh to leverage the growing potential for your Company.

In the coming years, your Company will continue to provide thrust to the core business of commercial vehicles and build a portfolio of profitable segments. LCV strategy will get further sharpened and a slew of products is already in the pipeline. In enhancing customer profitability, identifying appropriate transport solutions will rank higher than just positioning products. International business will be a very important lever of growth with new bus plants planned in Africa. The defence business will be an area of great focus in tactical, armoured and tracked vehicles. The aftermarket business will focus on improved market penetration, service delivery and profitability. The power solutions business will be a pillar for growth expanding on the range through small and high horse power engines.

Looking ahead, your Company anticipates many developments in the economic and business environment, some of which are local phenomena and some triggered by global trends. The Indian Economy is on the threshold of the next phase of growth through government sponsored “Make-In-India” programmes and other investment-led strategies. Concurrently, the business environment in India is expected to undergo a radical transformation with the big push to build quality infrastructure in roads, ports, water-ways, airways and railways through the Bharat Mala and Sagar Mala programmes enlarging the logistics landscape. In addition, the GST is expected to make logistics operations simpler and seamless. In the medium term, we can expect acceleration of fleet renewals, road transport becoming more efficient, regulation such as for Fully Built Vehicles and norms in place to stop over loading, all of which should augur well for the domestic commercial vehicle industry. Your Company is well positioned to capture the upsides owing to these developments.

For improving efficiencies, commercial vehicle players are pursuing product modularisation with an emphasis on accelerating time to market with high degree of customisation but lower development costs and improvements through levers such as preventive maintenance and yield maximisation. Furthermore, product led business models are yielding ground to solutions based models anchored on digital platforms and in that process, OEMs are facing unorthodox rivals in the business such as technology start-ups.

I am happy to inform you that your Company has already laid great emphasis on these areas in its quest for excellence and technology leadership. There is growing confidence that we are on track to consolidate our market gains in India sustainably and pioneer market relevant technologies in our field.

Your Company’s CSR initiative “Road to School” is gaining momentum. Started in 2015, today 108 schools are covered with over 15,000 children benefiting from this programme. A further 45 schools with 5,000 children will be added this year, accelerating the coverage. The programme is now extended to include health, hygiene and strengthening the infrastructure requirements of the schools.

All things considered, I believe your Company has delivered another year of record operational and financial performance despite the odds. The bar is now set high but I am confident that with the growth strategies and plans in place and ably supported by a determined and passionate team, your Company will continue to excel in the coming years.

On this occasion, I would like to recall the exemplary service rendered by Mr. R Seshasayee to your Company. A distinguished and versatile personality, Sesh as he is popularly known, served in various capacities for nearly 4 decades in your Company and demitted office as Non-Executive Vice Chairman paving way for a seamless transition to the next generation. Among many things, one of his greatest contribution to your Company was his constant emphasis on self-reliance in technology development which is since proving to be a strong competitive lever for your Company. A familiar presence at the AGMs all these years, he will be sorely missed by all of us. On behalf of all of us, I would like to convey our best wishes and god speed to him in all his future endeavours.

I thank you all for the confidence you have reposed in the Company. I would like to take the opportunity to acknowledge the valuable support and contribution of our extended family of customers, dealers, suppliers, financial institutions and partners.

Thank you !