Falcon Tyres Ltd Management Discussions.
Automobile industry has gained momentum after it has seen long down turn since 2008-09. Further it is expected that after structural change in socio economic environment and support extended by government by extending excise benefit till Dec-14, auto industry would also get booster in emerging market like India. Majority of 1.16 Billion Population of India is middle class and lives in rural India. This indicates a huge potential, sustainable growth and prosperity for both 2-3 wheel manufacturers and its component makers, especially to products like tyres etc.
The current stable raw material prices are likely to be continued & likely to assist operating margins of tyre manufacturer. However, any further correction in raw material prices may affect the operating margin due to pressure on tyre pricing. The company will continue to focus on profitable product categories.
The bottom line is expected to come out of woods with ease in raw material prices, volume growth and change in socio economic environment.
INDUSTRY STRUCTURE AND DEVELOPMENTS
The Indian economy outlook for growth and price stability at this juncture looks more promising and in turn the prospects for the growth in the tyre industry look bright.
On the other hand, domestic and international natural rubber prices are currently hovering around 140/kg and $1.8/kg (duty free) respectively as of April 2014 and are expected to remain subdued in the near future.
BUSINESS OUTLOOK AND OVERVIEW
The growth of he automotive industries in general was not impressive during the period 2012-14. It resulted in weak growth in OEM segment in 2 wheeler & 3 wheeler sector. However, the strong replacement demand helped the tyre industry to grow revenue.
The Company strategically enhanced its export volume which significantly contributed to its growth. The depreciation in domestic currency is also likely to further boost up the operating margins.
COMPANY PERFORMANCE DOMESTIC SEGMENT
Your Company has kept a balance between its major supplies in OEM, Replacement market and Export Market & there is increased supplies in Replacement Market keeping pace with demand. Although the demand has gone up but due to huge capacity additions, a demand supply gap has been created and it will take some time to absorb additional capacities.
During the period, the Company has executed the export order for Rs.119.27 Crores value of tyres in export market as compared to Rs. 71.59 Crores sold during the last year. Your Company keeps continuous focus on the segment and expects to grow further.
OPPORTUNITY AND THREATS
Automobile is one of the largest industries in global market. Being the leader in product and process technologies in the manufacturing sector, it has been recognized as one of the drivers of economic growth. Two-wheeler segment is one of the most important components of the automobile sector that has undergone significant changes. There is a large untapped market in semi-urban and rural areas of the country.
The Company continued production of Tubeless Tyres and Radial Tyres also during the period and the response to the same are positive.
The Company achieved gross tumover of Rs.1,30,439.29 lacs for the period ended 31st March2014 as against previous year gross turnover of Rs.98,219.50 lacs. Despite severe competition & sluggish vehicle demand, your company achieved the targeted sales.
The Companys sales in various market segments are given below:
|Rs.||(18 Months)||(12 Months)|
RISKS & CONCERN
The overall economic condition of the country may affect the business of the Company. High interest rate, inflation, petrol prices, availability of the credit facilities are few of the factors which may adversely affect the Indian economy. Moreover the high fluctuation in the major Raw Materials including Crude and Forex can also spoil the growth / momentum in the industry. However, India is fast emerging as the global hub of automobiles, strong fundamentals including favourable demographic, rapid urbanization, rising per capita disposable income and spending coupled with the increase in demand of vehicles, the Company does not expect to be significantly affected by this risk-in the long term.
INTERNAL CONTROLS AND THEIR ADEQUACY
The Company has proper and adequate internal control system to ensure that all the assets of the Company are safeguarded and protected against any loss and that all the transactions are properly authorized recorded and reported. The Company has effective internal control systems across the Manufacturing location, marketing locations and other offices to maintain the Operational efficiencies and to comply with all financial policies and applicable laws and regulations, The Company has full-fledged Internal Audit system, which covers all the areas of the Organization to ensure conformance to internal checks and controls. Internal Audit is carried out throughout the year and their reports, along with the action taken are reviewed by Senior Management and placed before Audit Committee of the Board of Directors.
HUMAN RESOURCE DEVELOPMENT
Human Resource Development is focused and aligned to business needs towards improved performance and business results through the HR road map evolved over the years. The key components of the roadmap are -Employee engagement, Resourcing, Performance & compensation management, Competency based development, Career & succession planning and Organization building. The Company continues to be an employees choice in the region.
The Company continued to have cordial and harmonious relations with its employees. In line with the changing business environment, your Company is imparting training aimed at nurturing the Human Resources.
Career planning and succession plans are in place for all critical roles. Towards Leadership development key competencies have been identified and executive assessment and development programs are in run.
Some of the key activities carried out to make the success story happen are summarized below:
Involving the Field Marketing Personnel on the Strategic Decision Making and planning the route map for the Future
Recognizing the Outstanding Performers in the Annual Business Meet etc. to ensure the motivation of the Personnel.
Identifying the Right people with the right attitude for the key jobs.
ENVIRONMENT, HEALTH & SAFETY (EHS)
Several training programs, structured to the needs of individual employees and also to meet the requirements of lSO/TS 16949: 2009, EMS & OHSAS systems, were conducted during the year. Competent professionals do regular audits on safety and environment and the recommendations are implemented to provide a safe and healthy work environment. Regular training programs on safety are conducted to increase awareness and commitment for safety. Effective training to all new recruits has further improved the safety standards in the Company.
Statements in the management discussion and analysis report describing the Companys objectives, projections, estimates and expectations may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or Implied. Important factors that could make a difference to the Companys operations include, among others, economic conditions affecting demand/supply and price conditions in the domestic and overseas market in which Company operates, changes In the government regulations, tax laws and other statutes and incidental factors.