Dear Shareholders,
This year started on a sad note for us as our Founder and Chairman, Mr.
Bijon Nag, passed away on 28th January, 2024 in hospital in Singapore. He was undergoing
treatment there since July '23.
He founded IFB in 1974 with the introduction of Swiss Fine Blanking
Technology to India. From IFB's first plant in Taratolla, Kolkata, he began supply of fine
blanked components to HMT, Tata, L&T, Indian Telephones and others. In 1987-88, he
expanded operations with IFB's second fine blanking facility in Bangalore.
IFB's Home Appliances Division started operations in 1989, with the
introduction of front-load washing machines in India under a technical license from Bosch,
Germany. In a market accustomed mostly to semi-automatic top-loading washing machines,
IFB, again for the first time, gave India a product based on the best European technology.
The Founder and IFB thus had many firsts to their name including JV
with Autoliv for seat belts, seat tracks & recliners under collaboration with RHW,
Germany. Motors for washing machines under technical license agreement with Siemens,
Germany and so on.
His driving principle was to make the Best Quality Products -
nothing was to be sub-standard! The company was also deeply focused on customer service
and IFB's name became synonymous with quality and customer satisfaction.
However, some expansions especially in non-core business also led to
financial issues, leading to a near collapse of the business and the company got admitted
to BIFR in the year 2001.
Even during that difficult time, he never once lost sight of producing
good quality products and ensuring great customer service. He kept saying "We must
come out of this!" and then"What next?".
That focus on quality and customer service led to the company being
able to settle its dues and come out of BIFR in the year 2009. Today, the company is net
debt- free and stands on a strong platform for exponential growth.
His "What next" drove our expansion into Air- Conditioners
and also IFB's investment in IFB Refrigeration Ltd. He was very happy and pleased with the
Refrigeration Plant when he visited it for the first time on 21st July, 2023. In fact,
while in the factory, he was overcome with emotion and fell ill there. Two days later he
had to be rushed to Singapore for treatment.
While in hospital in Singapore, he was initially recovering well.
However, due to various hospital related infections, his health alternated between
improving and deteriorating, leading to a prolonged stay. He was completely unconscious
from 18th September, 2023 till 18th November, 2023. He was then put on a ventilator but
fought and recovered again. Towards the end of December, doctors said that he had TB;
that, we believe, affected him mentally and maybe he gave up fighting and never recovered
from the same. However, over the next 7 days it was proven that the reports were wrong and
that he did not have TB - but the damage was already done!
Right till he lost consciousness in September, he kept asking
"What next?", "What are our growth plans?"
His words have been the guiding light for the Management as we chart a
course for ambitious and exponential growth whilst keeping a strict vigil on the Balance
Sheet, control on working capital costs in general and ensuring that we have respectable
margins.
Major investments in Appliances have been done. We will now focus on
building market share and customer mind share for exponential growth. The company has
access to all products viz. Washing Machines (Top-
Load & Front-Load), Air Conditioners, Refrigerators that can be
sourced from IFB Refrigeration Ltd., as well as the ability to source top-quality products
from overseas e.g. Dishwashers, etc. We believe the company has the requisite product
firepower for exponential growth. There will be focus on better selling to our own
customer base and ensuring we are known for best product quality and customer service.
We would not like to quantify in percentage terms here but suffice to
say our Founder wanted the Appliance Division to be a significant player in the Indian
market in all the product categories it is in. His dream was that we should be amongst "Top
3 in all product categories" but be known for "Best Quality"! He
used to always say "You don't need to be the Biggest but you need to be the
Best!" and that will be the management's ethos going forward.
Subsequent investments in Appliances will focus on de-bottlenecking
where needed, for capacity expansion, and tooling for new models. No new Plant is
envisaged at this point though the company may need to plan for a land bank for some
future expansion.
The Management will invest for exponential growth of the
auto-components business which will be a mix of growth in existing business i.e. from
existing locations as well as acquisitions in the same or related field i.e.
auto-components, in order to pursue a target of 3x growth in 3 years.
The reason we are stating this for the first time is because this would
really make our Founder happy! He did speak about this whilst in hospital in Singapore.
The company has decided to look into manufacturing components for the
electronic industry and railways. Projects are being evaluated and once approved by the
Board, required investments will be made and these will be the 2 new growth engines
which will be run as independent verticals, in order for it to get focused attention.
The year ended with a standalone income of Rs. 4343.99 cr, PBDIT of Rs.
240.22 cr i.e. 5.53%, PBT of Rs. 90.36 cr and PAT of Rs. 68.88 cr. Consolidated Income was
Rs. 4470.21 cr, PBDIT of Rs. 225.28 cr i.e. 5.04%, PBT of Rs.72.99 cr and PAT of Rs. 50.36
cr.
Results could have been far better had there been adequate control on
costs. Marketing & Sales in both divisions should have done a lot more to increase
revenue, which would have further improved margins due to better overhead absorption.
We have ended the year with a debt of Rs. 61.20 cr as of 31st March,
2024. However, as of 28th May, 2024, it has come down to Rs. 49.22 cr and by 30 th
September, 2024, target is that it should come down further to Rs. 35.13 cr and should be
around Rs. 21.88 cr by the end of FY 2024-25.
The company as of 31st March, 2024 had a cash balance of Rs. 297.59 cr,
and as of 28th May, 2024 (unaudited) has a cash balance of Rs. 334.17 cr.
The Company is Net Debt zero as on 31st March, 2024.
Our Founder was very happy with the fact that the company is in a
position to leverage its balance sheet for growth; however, was not satisfied with the
pace of growth and he further felt that a lot more focus should be put on quality and
service so that IFB is known as "India's Favourite Brand" - known for Best
Quality and Exemplary Service! This must become the Management's motto and a lot of
focused and detailed work is required in order to achieve this.
When we went through our BIFR phase, etc., our Late Vice Chairman, Mr.
K. Srinivasan, guided us through those troubled times. He passed away on 4th February,
2008.
Now both senior people unfortunately are not there and therefore, the
company needs to be very careful on the next steps it takes and must move judiciously yet
boldly in order to achieve desired results.
We still have inefficient working capital that needs to be freed up -
we need to relook at supply chain to reduce costs and improve quality - we need to improve
fill rates and have better relationship with all appliance stores in order to improve
extraction
and thus market share. These actions will improve our Balance Sheet.
Tooling is another area that needs strengthening - our ability must be at par with the
best tooling companies in Japan, Germany, Taiwan, China, Korea, etc. Mr. Nag always called
himself a Toolmaker
- said that was his core - he could spend hours with his colleagues in
the Tool Room! So, as a tribute to him, this department - which he said was IFB's and his
core
- will get the desired focus going forward and will in no way be
inferior to the best globally.
We need to further improve sales and margin in both Engineering and
Appliances. In Engineering, existing business can grow at over 20% with some Capex at
existing locations but for what we want, M&A becomes a strategic imperative. As the
Industrial Washing Machine business has given us a strategic footing in the Industrial
Laundry space - we will look at the best strategic fit for us in the Auto-Component space.
Investments in Motor have not yielded desired results as yet but focused attention on
improving customer connect, right product introduction at the right time and introduction
of new age energy-efficient motors will lead to a well-positioned business. Lines bought
for production of both washing machine BLDC motors and AC BLDC motors remained unutilized
due to delayed product development. Now, we believe, both will start by December, 2024. We
will be tying up volumes with others in order to ensure full capacity utilization leading
to healthy margins and ROCE.
Chairman, as we still call him, was very unhappy with this delay; he
wanted us to focus more on ensuring a future-ready organization for the division. In the
meanwhile, the division is finalizing a 3-year strategy document which will be submitted
to the Board shortly; investors will be informed of the same in our subsequent quarterly
newsletter.
Steel business capacity expansion was completed in February, 2024 at a
cost of approximately Rs.19 crore. Now the division needs to sell capacity on a monthly
basis and ensure budgeted margins are delivered. Chairman was very keen on this acquired
business as he always said that this backward integration would help us with seamless raw
material sourcing and product development.
For the Financial Year 2024-25 our outlook remains strong, our
divisional management's ability to deliver required sales and margin may need further
strengthening - this we will do fast.
Our Founder always deeply valued customers, employees, suppliers and
other stakeholders - we thank them for supporting him since inception.
I express my sincere gratitude to all stakeholders for their unstinted
support over many years and hope for their continued support in our journey to take the
Company to greater heights.
Warm regards,
Bikramjit Nag
Chairman