Bajaj Auto Limited 12th ANNUAL REPORT 2018-19 Since 1945 CONTENTS Board of Directors 02 Management Team 04 Chairman’s Letter 07 Management Discussion and Analysis 09 Corporate Governance 35 General Shareholder Information 57 Directors’ Report 67 (including Annual Report on CSR activities) Standalone Financial Statements 113 Consolidated Financial Statements 187 Board of Directors Duplicate Share Certificate Company Secretary Issuance Committee Rahul Bajaj, Chairman Dr. J Sridhar Madhur Bajaj, Vice Chairman Rahul Bajaj, Chairman Rajiv Bajaj, Managing Director Rajiv Bajaj Auditors Sanjiv Bajaj Sanjiv Bajaj D S Mehta (upto 31.03.2019) S R B C & CO LLP Shekhar Bajaj Management Chartered Accountants D J Balaji Rao Nanoo Pamnani Rahul Bajaj Secretarial Auditor Manish Kejriwal (upto 31.12.2018) Chairman P Murari (upto 31.03.2019) Shyamprasad D Limaye Niraj Bajaj Rajiv Bajaj Practising Company Secretary Dr. Gita Piramal Managing Director Pradeep Shrivastava, Executive Director Bankers Dr. Naushad Forbes Pradeep Shrivastava Dr. Omkar Goswami Executive Director State Bank of India Anami N. Roy Citibank N A Rakesh Sharma, Executive Director Rakesh Sharma Standard Chartered Bank (from 01.01.2019) Executive Director ICICI Bank Lila Poonawalla (from 01.04.2019) HDFC Bank Pradip Shah (from 01.04.2019) Abraham Joseph HSBC Bank Chief Technology Officer Audit Committee Registered under the R C Maheshwari Companies Act, 1956 Nanoo Pamnani, Chairman President (Intra-City Business) D J Balaji Rao Registered Office Dr. Naushad Forbes Eric Vas Dr. Gita Piramal President (Urbanite Business) Mumbai-Pune Road, Akurdi, Pune 411 035. Stakeholders Relationship Kevin D’sa Committee President (Retail Finance) CIN: L65993PN2007PLC130076 D J Balaji Rao, Chairman S Ravikumar Works Dr. Gita Piramal President (Business Development Dr. Omkar Goswami and Assurance) • Mumbai-Pune Road, Akurdi, Pune 411 035. Nomination and Remuneration Ravi Kyran Ramasamy Committee President (Human Resources) • Bajaj Nagar, Waluj, Aurangabad 431 136. D J Balaji Rao, Chairman Subash Rao Rahul Bajaj President (New Projects) • Chakan Industrial Area, Dr. Gita Piramal Chakan, Pune 410 501. Dr. Naushad Forbes Soumen Ray President (Finance), CFO • Plot No.2, Sector 10, Corporate Social IIE Pantnagar, Responsibility Committee Sarang Kanade Udhamsinghnagar, President (Motorcycle Business) Uttarakhand 263 531. Rahul Bajaj, Chairman Rajiv Bajaj K S Grihapathy Nanoo Pamnani Senior Vice President (Export Business) Pradeep Shrivastava Sumeet Narang Risk Management Committee Vice President (Probiking Business) Nanoo Pamnani, Chairman C P Tripathi D J Balaji Rao Advisor (CSR) Soumen Ray, CFO Rahul Bajaj Chairman MANAGEMENT TEAM Front Row: (L to R) Eric Vas, Rakesh Sharma, Pradeep Shrivastava, Rajiv Bajaj, Abraham Joseph, R C Maheshwari, S Ravikumar, Kevin D’sa Back Row: (L to R) Ravi Kyran Ramasamy, Soumen Ray, Sarang Kanade, K S Grihapathy, Sumeet Narang, Subash Rao, C P Tripathi CHAIRMAN’S LETTER Dear Shareholder, Let me start by clearly saying that I am delighted with your Company’s results for FY2019 and proud of the excellent work carried out by your Managing Director and his team. FY2019 has not been a particularly brilliant year from an economic point of view. The second advance estimate of the Central Statistical Organisation (CSO) has pegged real GDP growth at 7.0%, and real growth of gross value added (GVA) at 6.8%. Both these estimates are lower than what occurred a year earlier. Moreover, growth has slowed down on a quarterly basis. After posting an impressive 7.8% growth in April-June 2018, GVA growth reduced to 6.8% for July-September 2018, and then even further to 6.3% for October-December 2018. And the CSO’s muted advance estimate of 6.8% GVA growth for the full year suggests that the fourth quarter may also post modest growth. Despite such a milieu, your Company has performed admirably. Allow me to outline the key results. l Total turnover increased by 18.5% to H 31,899 crore. This is your Company’s highest ever top-line. l Total operating income (net sales plus other operating income) grew by 20.1% to H 30,540 crore — also Bajaj Auto’s highest. l Operating EBITDA increased by 4.7% to H 5,387 crore. l Profit before tax (PBT) after exceptional items grew by 15.9% to H 6,703 crore, which was also the best for Bajaj Auto. l Profit after tax (PAT) increased by 14.9% to H 4,675 crore — this, too, being the highest ever. l Surplus cash and cash equivalents as on 31 March 2019 was up by 5.3% to H 16,368 crore. There are several positive aspects of your Company’s performance. Let me share three. First, and this pleases me no end, with a combination of well styled, appealing products and astute pricing, Bajaj Auto has begun to grow its domestic market share in motorcycles. In the course of a single year, FY2019, your Company succeeded in increasing its domestic sale of motorcycles by almost 29% — and, in the process, grew its market share by 3 percentage points to 18.7%. In fact, for March 2019, the market share exceeded 20.0%. I hope that we are seeing the beginning of a trend that will continue to increase your Company’s share of motorcycles in the domestic market and, in doing so, take Bajaj Auto to a place that behoves its presence. Second, I am delighted that in FY2019 your Company exported over 2 million motorcycles, three-wheelers plus its new quadricycle, the QUTE, to no less than 79 countries. This is a landmark achievement, and represents a growth of 25% over the previous year — one that truly lends itself to the theme of this year’s annual report, ‘The World’s Favourite Indian’. 12th ANNUAL REPORT 2018-19 7 Chairman’s Letter Third, I continue to remain impressed with your Company’s performance in the three-wheelers space. In FY2019, Bajaj Auto’s overall three-wheeler sales grew by more than 22% to reach an all-time high. Much of this growth was driven by an impressive 43% growth in exports. Your Company accounted for almost 57% of total three-wheeler sales in India, and two-thirds of total sales to export markets. At my age, I am a bit superstitious about praise. Even so, on your behalf, let me congratulate your Managing Director and his team. While telling them, “This is great. Now take it to yet another level.” Finally, my thanks to our customers, dealers, vendors and employees who, as always, have done their utmost for Bajaj Auto. And to you for your steadfast support. With best regards, Rahul Bajaj Chairman 17 May 2019 8 BAJAJ AUTO LIMITED MANAGEMENT DISCUSSION AND ANALYSIS The World’s Favourite Indian “Do what you think best, design motorcycles that are loved not just in but be the best in what you do.” India but in 79 countries around the world. These words of our founder, Kamalnayan Bajaj Auto has grown to become India’s No.1 Bajaj, have always guided Bajaj Auto. motorcycle exporter — with two out of three bikes carrying a Bajaj badge. In the 1970s and 1980s, being best meant Hamara Bajaj — a clarion cry associated with We have sold 15 million motorcycles in 79 the Chetak, the scooter which symbolised the countries. 40% of our revenues now come country’s aspirations of the times, and from international markets. Our global sales provided the first mass personal mobility have earned over US$ 13 billion of foreign to Indians. exchange in the last decade. And in FY2019, we achieved two prominent milestones — Being best meant launching the iconic Pulsar total sales of 5 million units, of which in 2001. With that, Bajaj Auto transformed 2 million were international sales. from being a domestic scooter manufacturer to a global motorcycle powerhouse. With sales across 79 nations, Bajaj Auto has Pulsar was powered by the spirit of set a gold standard for ‘Make in India’ to entrepreneurship in an age of economic ‘Sell to the World’. freedom. It embodied bold differentiation to By doing so, we are, today, dramatically create new markets instead of The World’s Favourite Indian. unimaginatively serving existing ones. We aren’t resting. We aspire for the day Being best meant having a major global when we become a true Global Motorcycle presence. And we do… Specialist — a day when in any market Building on our credo to provide trusted and around the world, when people think of reliable mobility solutions, we significantly motorcycles, they will think of Bajaj. invested in technology and innovation to Though India, along with China, are the two fastest growing continental sized emerging markets of the world, it is a fact that growth has been slowing down for both nations. The second advance estimate of national income released by the Central Statistical Organisation (CSO) of the Government of India on 28 February 2019 estimated India’s real GDP growth for 2018-19 (or FY2019) at 7.0% — a 20 basis points decline compared to the previous year. Real gross value added (GVA) growth for FY2019 is also lower: 6.8% versus 6.9% in FY2018. Moreover, the quarterly estimates also indicate a growth slowdown: 7.8% GVA growth in Q1 FY2019, followed by 6.8% in Q2 and then 6.3% in Q3. At the time of writing this Management Discussion and Analysis, we do not know what the growth rate will be for the fourth quarter, i.e. January-March 2019. But, in all probability, it will not be high enough to convincingly lift the economy. In the context of developed OECD economies, it seems strange that we get concerned with an annual growth rate of 6.8%. Richer countries would pine for such a performance.