WAS THE MANAGEMENT PLEASED WITH THE WORKING OF THE COMPANY DURING THE YEAR UNDER
REVIEW?
There were two ways of looking at our performance for 2015-16.
I was disappointed because we had targeted a minimum of H350 crs in topline for 2015-16
and ended a little lower. As a result, our topline grew 8.5%, which was lower than what
one would have wanted.
I was pleased that despite this reality, profit after tax grew 28%, indicating that our
growth during the year under review was profitable – the third successive year of
profitable growth for our company. Besides, our EBITDA margin grew 100 bps to 9%.
WHAT WERE THE REASONS FOR THE PROFITABLE GROWTH?
The profitable growth was the result of a convergence of some realities: crude prices
were weak as a result of which our raw material prices remained soft and we enjoyed the
flexibility of passing on some of the benefits to customers (lower sticker prices) and
retaining some (higher sticker prices); our Power Brands increased their revenue share; we
increased exports by 11.3%, strengthening their share in revenues from 27.5% to 28.2%.
SHAREHOLDERS HAVE NOTED THAT THE COMPANY DID REMARKABLY WELL IN THE LAST QUARTER OF
2015-16?
Even as the company reported 8.5% topline growth through the course of the year,
topline growth in the last quarter was 13.4%. Even as export growth was 11.3% through the
year, it was 29.6% in the last quarter. While some of the improvement can be attributed to
a bunching of orders that transpired in the last three months of the financial year, a
part of the rebound was definitely the result of a stronger corporate resolve.
WHAT COULD THE COMPANY HAVE DONE BETTER IN 2015-16?
The one area where we could have performed better was in increasing the proportion of
revenues derived from products priced at H10 or above. Over the last few years, there was
a conscious movement towards value-addition, which was responsible for improved margins
and revenues. However, during the last financial year, the proportion of revenues from
such products declined by 3%. This decline was attributed to one of our innovative
products (Linc Twinn) not performing as well as we had anticipated. Even as it
strengthened our corporate brand around innovation, we were disappointed that the offtake
could not scale to the levels that we had expected. We are addressing this reality through
accelerated launches - 12 this year,
80% priced H10 or higher, as against eight that we launched in the last financial year.
One of these is going to be a unique pen combined with a highlighter, which students will
find convenient to use, priced affordably around H10.
WHAT IS THE COMPANY’S REVENUE TARGET FOR 2016-17?
The company believes that a H400 crs turnover is achievable, which would correspond to
a 16% growth in revenues over the previous financial year. A number of shareholders are
liable to ask whether this is feasible considering that the company grew only 8.5% in
2015-16. We believe that the last quarter was a watershed when we grew revenues 13.4% over
the previous corresponding quarter, and a healthy double-digit after a long gap. The
rebound in the fourth quarter enhanced the self-belief that attractive outperformance is
indeed possible. We believe that this revenue growth would be accompanied by improved
margins on account of a superior product mix, which should enhance value for shareholders.
WHAT ARE THE VARIOUS STRATEGIES LIKELY TO GENERATE 16% TOPLINE GROWTH IN THE CURRENT
FINANCIAL YEAR?
The low hanging fruit that I perceive is a correction of our regional skew. Nearly 72%
of our revenues are being derived from North and East India. Our immediate objective is to
raise the proportion of revenues from South and West India to 35% of our turnover. We
believe that the Linc brand is far stronger pan-India than what this skew indicates and
our objective is to correct this anomaly with speed.
Some of the challenges remain: the industry is fragmented, entry barriers are low and
new entrants generally tend to temporarily disturb market pricing in exchange for enhanced
trade visibility. The company continued to invest in its brand, innovative launches and
stronger teams in West and South India, which should translate into a correction in the
regional skew.
WHAT INITIATIVES DID THE COMPANY TAKE TO STRENGTHEN ITS BRAND?
Linc invested H11.50 crs in brand building and promotion in 2015-16, which was around
3.4% of revenues. When compared with 2014-15, it was 22% higher. During last five years
the Company has spent about H50 crs in such activities.
HOW WOULD YOU ASSESS THE COMPANY’S GLOBAL PROSPECTS?
The company is globally competitive, validated by the fact that we export to 50
countries – 95% of our exports being made to 30 countries. We believe that the global
markets provide an attractive opportunity, considering that the global market for writing
instruments is estimated at H62,000 crs and we are but a drop in that ocean. Linc
possesses attractive credentials to carve out a large global share: we possess an
attractive complement of brand, scale, quality and service; our serviceability will
increase once we commission our new facility in Umbergaon, Gujarat. Ideally our revenues
from exports should increase from 28.2% of our turnover today to 50% of our topline across
the foreseeable future.