Dear Shareholders,
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.
We are "Driven by Determination" and remain confident of our strategy and
approach to deliver profitable growth.
Economy overview
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.
Yours sincerely,
L Ganesh
Chairman