Annual Report (2012-2014)
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There’s a new energy here… Escorts Limited | 68th Annual Report 2012-14 Forward-looking statements In this annual report we have disclosed forward-looking information to enable investors to comprehend our prospects and take informed investment decisions. This report and other statements – written and oral –that we periodically make contain forward- looking statements that set out anticipated results based on the management’s plans and assumptions. We have tried wherever possible to identify such statements by using words such as ‘anticipates’, ‘estimates’, ‘expects’, ‘projects’, ‘intends’, ‘plans’, ‘believes’ and words of similar substance in connection with any discussion of future performance. We cannot guarantee that these forward-looking statements will be realised, although we believe we have been prudent in assumptions. The achievement of results is subject to risks, uncertainties and even inaccurate assumptions. Should known or unknown risks or uncertainties materialise, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. Contents New Energy at Escorts 1 – 3 | Corporate identity 4 | From the desk of the Chairman 6 | Managing Director’s message 8 Social responsibility 10 | Managing risks at Escorts 12 | Profile of our Board of Directors 14 | Management team 16 Management Discussion & Analysis 18 | Directors’ Report 27 | Report on Corporate Governance 36 | Financial statements 52 To customise products around national interests. Enduring challenges. To mechanise the manual. To help customers accelerate project delivery. To enrich user New energy… profitability. The last few years were among the most When you focus on the customer’s business, some trying for India’s capital goods industry. remarkable things begin to happen to your own. To this challenging reality, the multi- Escorts outperformed the capital goods sector and business Escorts Limited brought a the national GDP growth with a 6.2% growth in refreshing commitment. revenues and an 81.1% increase in profit after tax in 2012-14 (18 months, year ending 31 March 2014). There’s clearly a new energy here… 2 Escorts Limited 68th Annual Report 2012-14 3 In the last two years, India reported sub-5% GDP growth. Escorts revenues grew 6.2% on a y-o-y basis. But profits rose faster. The result of a new energy at Escorts. 2 Escorts Limited 68th Annual Report 2012-14 3 New energy at Escorts: Quicker sales growth. Lower manufacturing costs. Higher per person productivity. Increasing focus on premium products. Higher margins. Stronger technology alliances. Quicker product launches. Wider market coverage. Higher non-recourse financing. Younger company. One- stop multi-product availability. Debt reduction. Higher cash surplus. Lower debt costs. Declining customer response time. Superior product mix. Stronger brand investments. Focus on customer service. 4 Escorts Limited 68th Annual Report 2012-14 5 Escorts Limited. One of India’s frontline engineering companies. Comprising four businesses. Agri Machinery Construction Equipment Railway Products Auto Products Where the sum of the individual parts is larger than the whole. 4 Escorts Limited 68th Annual Report 2012-14 5 Vision Our vision is to be among the top engineering companies in India by... Being the preferred solutions provider to the needs of our customers Practicing respectful and ethical business practices Being the employer of choice within the engineering industry Providing superior returns to our investors Legacy Our manufacturing Our intellectual Escorts Limited is one of India’s most locations capital respected and trusted engineering Escorts owns and operates seven At Escorts, we count our employees as companies. The journey of Escorts traces integrated manufacturing plants in our most valuable assets. We invest in back to 1949, when, post partition, a Faridabad (Haryana) over an expansive their training and career development deep nationalistic sentiment inspired 183726 sq. m. It also possesses a plant and benchmark their performance H.P. Nanda and Yudi Nanda to take- in Rudrapur (tax-efficient Uttarakhand) with the industry’s best-in-class pay up a franchisee for the distribution of and an international plant in Poland standards. We enjoy harmonious tractors towards helping farmers secure (Europe). industrial relations. Our total workforce their livelihoods. Decades later, the spirit (own and contractual) stood at 10,483 has endured; Escorts continues to live members as on 31 March 2014. this tradition, emerging among India’s three leading tractor players focusing on complementary agriculture products and solutions, construction equipment, auto suspension, ancillary products and railway equipment. Our industry-leading Our listing and Our dividend payout alliances market capitalisation Escorts declared a dividend of 180 At Escorts, we enjoy business- Escorts shares are listed on the NSE, paise per share (18% on face value strengthening alliances with BSE and DSE stock exchanges. The of H10 share) for 2012-14. The industry leaders like Carraro, Porsche Company’s market capitalisation Company’s dividend philosophy Consulting, Porsche Design, Perkins, ZF, stood at H1412.70 cr with a promoter reconciles the need to reward Bosch, Honeywell, Ingeteam and Yujin holding of 41.97%, combined FII shareholders with adequate Machinery. and DII holding of 9.06% and public reinvestment. and others holding and free float of 48.97%, as on 31 March 2014. The Company’s BSE scrip code is 500495. 6 Escorts Limited 68th Annual Report 2012-14 7 From the desk of the Chairman Rajan Nanda, Chairman & Managing Director, Escorts Limited THESE ARE SOME OF THE MOST EXCITING TIMES IN THE HISTORY OF OUR NATION. The new government in India has enunciated its intention to not merely revive the economy, but to ensure that one of the world’s most ancient civilisations catches up with its considerable potential in the shortest time. It is our humble understanding that any country that sets out to do so will need to build on some critical blocks. In the India of today, these building blocks can be narrowed down to food, homes and personal mobility - for all. At Escorts, we are attractively placed to play a responsible role in this transformation. 6 Escorts Limited 68th Annual Report 2012-14 7 Each of our businesses addresses a core national requirement. Our agri-machinery business addresses the need for more food for the country. Our construction equipment business provides the widest complement of construction machines. Our railway business manufactures products that address safety, comfort and reliability. Our auto products business manufactures components used in automobiles. The complement of these businesses is directed towards enhancing the life quality of consumers, communities, countries and the world. What provides me with considerable optimism is that the need for enhanced life quality is now emerging as a fundamental right across societies. As incomes are rising across the world, people are demonstrating a willingness to eat better, live better and travel better. It is our connection with this improving life quality that convinces me that the rationale for our presence in diverse businesses will actually strengthen over the coming years. At Escorts, this business complement – when seen as a holistic composite – resist the severity of the challenging slowdown of the last few years, making it possible to report revenue and profit growth higher than the national – or any of our respective – sectoral averages. Now that the worst appears to be over, we are optimistic that our business model will respond more favourably to national and global priorities. If there is one reason behind my optimism it is that at Escorts, we never lose sight of the fact that we are in business to serve the growing needs of our customers. Over the years, we strengthened our service commitment from a conventional ‘we make, you buy’ approach to customised product manufacture. We extended this service orientation from mere product manufacture to holistic solutions delivery. This widening relevance was manifested through wider product choice, increased customer proximity and a greater focus on the health of the customer’s business. I am happy that we have brought a new energy to the challenges facing us. We are strengthening our position as a company dedicated to frugal engineering excellence. We are engaging in technology collaborations with global majors. We are accelerating innovation to put pioneering, cutting-edge products in the marketplace. We are deepening relationships with our customers. We are responding to a fast-changing marketplace with strategic flexibility. We are bringing to our stakeholders a refreshing new experience. At Escorts, I am convinced that the better we manage these intangibles, the more sustainably we will deliver tangible numbers across the foreseeable future. This is our blueprint for serving mankind and making the world a better place. Rajan Nanda, Chairman & Managing Director 8 Escorts Limited 68th Annual Report 2012-14 9 Managing Director’s message “The performance of Escorts reiterated our focus of staying true to our ethos of customer-centricity, innovation and operational excellence.” am pleased to present Escorts’Annual Report for the year 2012-14 and am I happy to share that the period was an eventful