Dear Shareholders,
I would like to present to you the Annual Report for FY 2021-22 in the golden jubilee
year of your Company with a quiet sense of pride and deep gratitude. In this report and
the message, we intend to share with you the key highlights of your Company's excellent
performance during the reported year, some important moments and milestones from our
illustrious journey, and our strategic growth levers that will take us to newer heights in
the coming years. your Company has always pursued excellence in technology, product
innovation and quality, manufacturing productivity and customer satisfaction in all these
years. And this focus will continue to remain the key value for the continued expansion
and market leadership of the Company.
Macro-Economic Scenario
The year 2021 was a rebound year for the global economy after the havoc COVID-19
pandemic played on it during 2020. Notwithstanding the second and third wave seen in some
of the major world economies, the economic activity across the globe expanded by 6.1% over
2020 due to the pent-up demand, government initiatives to mitigate the economic impact of
the pandemic, and increasing vaccination rates. However, the supply chain bottlenecks due
to the pandemic-related disruptions and the Russian-Ukrainian war have cast a pall on the
economic resurgence. Inflation has become a major cause of concern across the world and
most central banks are responding by increasing policy rates to drain excess liquidity
from the market. These are likely to have a significant impact on the global GDp growth in
2022 and 2023.
Indian economy tracked the global economy during the FY 2021-22 period when it once
again became the fastest growing major economy in the world with a YOY GDp increase of
8.9%. With the pandemic related restrictions being gradually removed, the reform measures
and stimulus support given by the central and state governments, and the growth in
consumer demand, the macro environment was supportive of growth across the sectors. The
manufacturing sector recovered from a 0.6% decline in FY 2020-21 to a 10.5% leap during FY
2021-22. The domestic market was not the only one bubbling with optimism, as the country's
overall and merchandise exports touched record highs during the financial year. However,
the global factors such as geopolitical tensions, inflation, and tight monetary policies
have affected the near-term prospects of Indian economic growth too. The growth
projections of FY 2022-23 for India have been revised downward by most agencies and with a
negative bias due to continuing downside risks. The estimates for FY 2022-23 growth range
from 7% to 8%.
Industry Review
The Indian Automotive and Auto-Components industry is the bellwether for the prospects
of the Indian Manufacturing sector. During the reported year, the production of
automobiles (excluding two-wheelers) surged more than 21% despite facing issues such as
chip shortage, increasing raw material costs, lockdown restrictions etc. This year has
been a turnaround year for the industry, barring the two-wheeler segment, after a
consistent downtrend that started after the peak achieved in FY 2018-19. The export market
for the industry is driven by the two-wheeler segment. Indian automotive exports
registered their lifetime high by crossing the 5 million units mark in FY 2021-22. India
is also the leader in the Agricultural Machinery and Construction Equipments industries.
Both the industries saw a single digit percentage dip in sales in FY 2021-22 from the
record sales achieved during the previous financial year when record sales were achieved
due to a shortage of labor resulting from the pandemic. However, the long-term prospects
continue to be upbeat as farm mechanization levels, infrastructure spending, and
government assistance go up. Global Automotive Components, Agricultural Machinery and
Construction Equipments industries are also expected to grow in the near future creating
an expanding market opportunity for your Company's exports.
Performance
Despite facing challenges due to the second and third waves of the pandemic, the
Company outperformed as compared to the previous financial year because of the supportive
external demand environment, its ability to be a trusted partner and its experience in
working in compliance with the pandemic related restrictions. It did not lose even a
single day of production due to the pandemic during the reported year. Our gross revenue
jumped from Rs. 503.03 crores to Rs. 729.44 crores, an increase of 45%, as compared to FY
2020-21, first quarter of which was a washout because of nationwide lockdown to curb the
spread of COVID-19 largely supported by healthy growth in exports. As a result, the net
loss of Rs. 7.70 crores in FY2020-21 turned to a net profit of Rs. 25.84 crores in FY
2021-22. At the operating level as well, the profitability went up significantly with
EBITDA seeing an 86% increase. The cash profits also leapt by more than 251% because of
higher operating profits and lower interest costs.
Operational Initiaitves
We have worked very diligently to maintain our position as one of the industry leaders
and a preferred supplier of automotive gears to a wide range of industries and leading
OEMs across the world. Cost leadership is a key element of our strategy and in this
respect, our efforts to continuously improve productivity across all our manufacturing
plants are relentless. We have achieved success in raising the productivity levels over
the years through the use of new technology or upgrading our machines, re-design of parts,
process innovation, energy conservation initiatives, and ongoing training of our workers.
Zero Defect and Safety cultures are also critical in maintaining high productivity and
customer and employee satisfaction. We have maintained our track record in these respects
at our plants. Our use of production partners to strategically enhance capacities to cater
to market needs is an art that we have mastered over the years. Regular investment in the
development of vendors is a critical component of this strategy. The manufacturing
excellence, our product portfolio, technology leadership, and a motivated team are our
pillars of strength.
Outlook
While there are challenges in the external environment, we are cautiously optimistic
that the Indian markets for Automotive Components, Agricultural Machinery and Construction
Equipments will remain reasonably attractive in terms of growth. We have also expanded our
international presence over the years, which will help us in dealing with stresses in
specific economies and pivot to high growth countries.
The emerging growth segments such as Electric Vehicles (EV), small utility machines for
small-holding agricultural lands, and heavy construction machinery for mega infrastructure
projects will be in our sight for product innovation and portfolio expansion.
Closing Remarks
Our fifty-year long journey to become one of the leading gear manufacturers in the
country with a significant global presence would not have been possible without the trust
reposed by our clients in us. I would like to thank them for their generous support. It
has also been a privilege to chart this journey with my colleagues on the Board, the
Company's management team, and dedicated employees, both current and past, whose
contributions to our success I acknowledge with humility. Last but not the least, I would
also like to thank our business associates, bankers and all the stakeholders for their
continued support to Bharat Gears in times, good or bad.
We hope to be honored with your continued support to take our voyage to many more
shores of success and growth.
Warm Regards,
Surinder Paul Kanwar
Chairman and Managing Director