MANAGEMENT DISCUSSION AND ANALYSIS GLOBAL BATTERY MARKET According to estimates, the global battery market is projected to grow at a CAGR of 4.15% to reach a market size of 17.26 Billion by 2021. For the same period, market in Asia-Oceania is estimated to reach USD 9.51 Billion, in value terms, due to increasing vehicle production. (marketsandmarkets.com). The global battery market is driven by growing integration of electronics, demand for transportation, fuel saving, government incentives for cleaner transportation, new hybrid and electric automotive models from OEMs. The Indian Battery market is projected to grow at a CAGR of 16.5% by 2020 (marketsearchstore. com). The Lead-acid battery industry caters to two broad market categories: automotive and industrial and finds wide application in transportation, communications, power and railway industries. The automotive and communications sector account for 90% of total lead-acid battery consumption. automotive battery Industry - an Overview The automotive space comprises the OE market and the replacement market. Driven by the increasing vehicle density in the country, the Automotive Battery industry is witnessing an exponential growth. According to estimates, in a few years, the demand for the automotive start-stop battery and energy storage battery is expected to brsent a CAGR of 30%-40%, and the battery for low-speed electric vehicle reach a CAGR of around 25%-30%. The Indian auto industry, the feeder industry for automotive batteries, is one of the top ten in the world and according to the Automotive Mission Plan 2016-2026 is estimated to generate up to US$ 300 billion in annual revenue and contribute over 12 per cent to India's Gross Domestic Product. Greater affordability, an upwardly mobile rural population, shifting demographics, have all combined to the burgeoning growth of the sector. In addition, the Central Government's 'Make in India' drive with a 100% FDI opportunity, has attracted large investments from global auto majors. The auto industry produced a total 19.84 million vehicles in April 2015-January 2016, including passenger vehicles, commercial vehicles, three wheelers and two wheelers, while domestic sales of Passenger Vehicles grew by 8.13 per cent in April 2015 -January 2016 over the same period last year. Exports of Commercial Vehicles registered a growth of 18.36% for the same period. Other applications like electric and hybrid vehicle are likely to be driven by initiatives like FAME India Scheme (Faster Adoption and Manufacturing of Hybrid and Electric vehicles in India). Under this scheme incentives are being rolled out for electric and hybrid vehicles with a target of 6-7 million electric vehicles on road by 2020. Major international companies are evincing interest in emerging markets like India and for strategic partnering with Indian companies to participate in this promising market. Industnal Battery Industry - An Overview Industrial battery products find extensive application in Télécommunications, Infra, IT & ITeS and UPS sector, (OEM & Replacement), Indian Railways, Power, Solar, Oil & Gas, among other industry segments. With India riding the wave of business growth and industrial development, the industrial battery industry is poised for a quantum leap. Telecommunications India stands as the second-largest telecommunications market in the world. One of the fastest-growing industries in the country with year on year increase in FDI inflows, the sector is expected to generate about 4.1 million additional jobs by 2020, as per Groupe Speciale Mobile Association (GSMA). The country has the world's second-largest Internet user base with over 300 million as of June 2015 and the largest rural mobile user density. Data traffic powered by third generation (3G) services has grown higher than the global average. The Central Government's 'Digital India' drive is further expected to spur the growth of the industry, There has been a demand disruption in the telecommunications space with the increase in the landscape of multiple connected devices or IoT (Internet of Things) with wearables, 'smart homes', 'bring-your-own-device' (BYOD) and 'connected offices', massive data consumption, mobile advertising and video streaming of content, sponsored data services., etc. There has been a fourfold increase in just one year of cashless m Payment transactions, using mobile devices, transforming the traditional banking system. The advent of the fifth generation mobile networks (5G), though still in a nascent stage, is expected to catapult the industry to its next level, with greater speed, efficiency and less latency. Telecommunication Equipment Manufacturers and service providers are gearing themselves for the next generation of wireless network technologies. Inverters and UPS Market India's Inverters and UPS Market is expected to reach Rs. 43,200.7 million by 2019 driven by low availability of high quality power, expansion of industries and increasing affordability of consumers. (Source: India Inverters &UPS Market Outlook). The increasing shift of consumers in rural and semi-urban areas to an uninterrupted power supply and a growing awareness among people for protecting electronic equipments from voltage fluctuations has played an important role in further expansion of the UPS market in the country. The market for inverters and UPS in India is largely fragmented with a plethora of small unorganized players manufacturing sub-standard and local inverters. However, the market offers great opportunities for leading manufacturers with a gradual rise in awareness among customers on the benefits of good quality inverters. The demand for Inverters in India is expected to surge in the future and the market is projected to grow at an apbrciable CAGR of 9.4% by FY'2019. With the growing interest in solar and renewable energy among customers, power back-up systems is opening up huge opportunities. Power The Government of India's ambitious targets of adding 175 GW of renewable energy and heavy investment promise in expansion and upgradation of transmission and distribution network are leading to a robust electricity market, According to projected estimates from the Ministry of Power, the transmission and distribution (T&D) sector is expected to attract private and government sector investments of nearly USD 50 billion over the next four years. The launch of the National Smart Grid Mission (NSGM) with allocation of Rs. 980 crore in 12"1 Plan by the Government of India is further expected to act as a growth stimulus. The Power sector in India is in a period of great transformation with the launch of the grid scale advanced storage projects, PGCIL pilot projects and MW scale projects in the pipeline for applications such as diesel replacement, renewable integration and microgrids. The 'Make in India' Campaign will also provide a boost to global companies which are looking to establish their base and extend business in India. Railways The Indian Railways, ranked among the world's largest railway network, is slated for a major transformation with the Government of India initiating several large projects for up gradation, modernization and expansion of the sector, To increase last-mile connectivity, enhance safety and passenger comfort, the Railway Ministry has planned a huge outlay to develop the railway infrastructure. Enabling foreign direct investment through the 'Make in India' programme, is supposed to accelerate the growth of the sector. High speed passenger and freight corridors, large scale gauge conversions, network connectivity, electronic transactions, advanced signalling systems, renewable energy power back-up systems, are just a few of the areas that the Railway industry has drawn up plans to develop. For Indian businesses, there is a huge potential to explore in this critical sector. Automotive Battery Division Amara Raja is one of the leading manufacturers of automotive batteries under the brands Amaron® and Powerzone.™ The business caters to the replacement market with a wide range of products distributed through a large pan-India retail network and to Original Equipment Manufacturers (OEM) directly. Amara Raja also exports its products to various countries in the Indian Ocean RIM through its overseas distributors. During the year, the Company expanded its global footprints with a robust growth in export sales . Keeping pace with the changing market dynamics, Amara Raja has continued to consolidate its market leadership with its customer-centric focus and a wide portfolio of superior quality roducts. Amara Raja has emerged as a dominant player in the OEM space. Competitive pricing and just-in-time deliveries, coupled with custom designed products, and solutions has contributed to a double digit growth of the business and earned it a 'brferred vendor' ranking from multinational manufacturers and auto majors operating in India. At Amara Raja, the Automotive Battery division rolled out its strategic roadmap for market leadership with sectoral specific, differentiated strategies. New product development, intensive brand building initiatives, enlarging the retailer base in semi urban areas and penetrating the domain of the unorganised sector, helped the business to grow volumes in the secondary market. The business re-defined the distribution network, by leveraging on its pan India présence, forging long term channel partnerships and strengthening the supply chain. To increase brand visibility and enhance the buying experience in the retail space, aesthetically designed customer touch points and versatile, technical-efficient pit shops were opened across cities and semi urban areas.. In the OEM segment, the division leveraged on the large capacity of its world class, two-wheeler and four wheeler battery plants,. to mine the potential of a burgeoning market demand. The Company adopted de-risking strategies by expanding capacities across sectors and focusing on value added products to drive growth. With the phased capacity augmentation of the new two wheeler and four wheeler battery plants to 11 million and 8.25 million units per annum and plans to further expand, Amara Raja is well positioned to cater to the demand, both in the domestic and overseas markets. At Amara Raja's Automotive Battery Division, the plans for the future is clearly outlined- to continue the relentless pursuit for undisputed market leadership. INDUSTRIAL BATTERY DIVISION Amara Raja is the dominant player in the industrial battery space in India, The Company holds brmier position for industrial batteries in India. The business has continued to expand its brsence in a challenging and competitive market environment, registering a double digit growth over the brvious financial year. The business enhanced its performance by virtue of its "brferred supplier status" with all major customers, efficient after sales service, customer relationship management and consistent product performance of its flagship brands PowerStack®, Quanta® and QRS Series batteries. Keeping pace with the changing market dynamics, Amara Raja has continued to consolidate its market leadership with its customer-centric focus and a wide portfolio of superior quality products. A dominant player in the OEM space. business has earned a 'brferred vendor' ranking from a wide spectrum of industries such as Telecommunications, Infra, Power, Railways, IT & ITeS, etc In its drive for market leadership, the Industrial Batteries division, continued to increase its brsence in the Telecommunications, Infra, Railways, and Power sector with custom designed, innovation-led products and solutions. The power industry is on the cusp of a major transformation. With grid scale advanced storage projects started in India, renewable integration and microgrids is a promising segment that Amara Raja's industrial battery division is exploring for future growth. As tier 1 supplier of critical power backup products. to the Railways, the business leveraged its sectoral dominance to enhance its brsence in the expansion, modernisation and consolidating manufacturing capabilities to be Level Energy Storage Systems to small hand held metro-rail development projects initiated by the on par with global standards are part of the long power devices, the Industrial Battery Division at Government. term strategies to sustain market leadership and Amara Raja is ready to mark its brsence as the growth both in the domestic and global market. industry leader. Foraying into white spaces with new breakthrough products for new applications, automation and Straddling the entire spectrum from Large Grid The Amara Raja Way™ Amara Raja continued its journey of institutionalising 'The Amara Raja Way™'. For Operative grade employees and Trainees two days culture building workshop was organized with the methodology of 'Large Scale Interactive Process - LSIP'. The program enabled them demonstrate The Amara Raja Way™ through Attitudes and Leader Behaviours in their professional and personal life. A total of 5064 people of ARBL were covered in the training in batches of 650 employees and trainees, across the group companies. Top and Middle level leadership team with the support of the Line Managers and human resources team, anchored all the 13 batches of this flagship program. Workforce strategy A combrhensive study of the socioe-conomic environment, sartorial peers and other integral aspects have helped in analysing and initiating various programmes that raised the bar in terms of the day-to-day performance of the frontline workforce. Though these were actuated in the early years, the initiatives that were taken up combrhensively in the last year to augment the frontline workforce had started to bring in the desired results. The initiatives enabled the organization to take proactive measures in engaging its workforce in the face of competition. The Company benchmarking studies also reiterated that the organisation's practices are comparable with the best in the region. Talent Acquisition Online Recruiting Management (RCM) system has been introduced across the company for the Staff & management grades. Recruiting Management is a combrhensive, collaborative tool that extends the process of recruiting so as to help the organisation hire the right talent and drive real business value. RCM provides process consistency & automation, Improve quality of hire and Reduces cycle time for recruitment. Following are the key features of the Recruiting Management: 1. Requisition Management - to create and approve requisitions that track job openings and the candidates that apply for them 2. Career Portal - help candidates to apply to open/posted jobs or for employees to refer it to their friends 3. Candidate Management - tracks the progress of each applicant through a series of defined steps of the selection process, supporting compliance and communication with the candidate and the hiring team 4. Candidate/Resume Search - to search for candidates that have either brviously applied or submitted a profile into the Success Factors recruiting system Learning and development Through its internal trainers and external experts, the Company provided 17,825 man-days (1, 24,766 man-hours) of training to employees. "First-Time Managers" is a combrhensive training program designed and rolled out with an objective to develop talent who have become first time managers in their career. This was conducted in partnership with a brmier B-School which had residential classes at the B-School campus, project work and other sessions. This program aimed at improving knowledge on Business Strategy, Personal Effectiveness, Marketing Management, Finance Management and Operations Management. All the behavioural training programs were re-engineered, during the year 2015-16, so that a cluster of related competencies can be addressed in a training program rather than one competency. The competencies and the program content were linked to the Amara Raja Leader Behaviours and focus on demonstrating The Amara Raja Way and achieve business results. Amara Raja in-house diploma course A Unique in-house diploma course that was developed in 14-15, was effectively implemented in 15-16 to hone the skills of the shop floor workforce. This provided an opportunity to the operators who did not have formal technical qualification, however with a technical bent of mind, good interpersonal skills and an inclination to become a supervisor to progress in the career. This program motivated and inspired existing talent to work towards acquiring qualification and enhance the possibilities of growth. On successful completion of the course these employees will be promoted to technician roles. Leadership development Amara Raja, in partnership with a leading strategic consulting organisation, developed a combrhensive process for identifying high-performing talent and potential leaders - The "Leader Grooming Program" (LGP). The program, identifies high performance talent from all levels on an annual basis. A rigorous potential assessment comprising of psychometric tools, Simulation Tools and Panel interviews is conducted for talents in the 'talent pool'. A mentor from the senior management is identified who will enable the talent to be successful in the assignments and projects that are taken part of their Individual Development Plans based on the potential assessment. The progress is monitored every six months, by the Leadership Team. These leaders are thus groomed to take up pivotal roles in the future. Total 14 participants from the General Manager Grade participated in the program in 15-16. This process will be deployed to all levels of Management from 16-17 onwards. Technology in HR To stay abreast of the changes taking place in the market and to take advantage of technology to provide efficient services, the latest cloud-based human capital management suite has been implemented. This will allow the processes related to employee life cycle management, recruitment, onboarding and succession management to be automated. This technological upgradation brings in new levels of efficiency and effectiveness without losing the human touch. • Employee central module - maintains an employee database and automates workflows for faster approval • Succession module - ensures structured succession management, career progression and employee development • Recruiting module - provides procedural consistency and automates the entire recruitment process • Onboarding module - enables new recruits to complete formalities online EXIM Company got approval to operate in all the major deep water ports across the country. In order to reduce the cost in EXIM clearance operations Company got certified by customs for Self Clearance process to handle Imports & Exports by our own internal team, resulting in elimination of external agencies (CHA). Higher efficiencies brought in to reduce the CFS charges by implementing internal processes. Apart from avoiding duplication in process reasonable savings on landed cost also achieved. EXIM striving towards identifying better opportunities to source materials from countries signed FTA to reduce cost of imported materials. Strategies being made to balance the domestic & import procurements ratio resulting in optimal landed cost. Logistics The strategy to introduce fleet owner contract resulted in on time delivery with minimum truck turnaround time as well as safe transportation mode. Introduction of RFID helped to improve internal efficiencies and GPS supports to monitor the lead time to deliver to customers as committed. Through "Continuous Improvements Programs" Loading factor improved and resulted in logistics cost control across primary and secondary deliveries. Team explored "Rail Mode" an alternative mode of transport to North region - helped to reduce the transit time and safe transportation with minimum transit loss. Company strived for common pricing mechanism to being pan India uniformity in basic cost calculation Distribution Focused more towards Reach to Customer approach resulted in gaining more confidence across the Sales, Marketing & Finance teams. Adopting more technology towards DC operations like Barcode, Auto Shipment note, e POD etc. helped to reach customer with efficacy Focus on Secondary freight cost reduction resulted to explore the possibilities and entered into 'FleetOwner" contracts and appointing the PAN India Presence Service Providers with 'three years' validity to ensure the safety and on time movement of material across Distribution centers. Exploring possibilities by keeping GST in view for Hub n Spoke and revisiting the Space requirements and establishment of Distribution centers to meet the business growth plans are in cards. As part of strengthening the systems & process, participated & Challenged CII WAREX awards and won GOLD award. Procurement On the total procurement value, majority contributed to Raw Materials like Lead, Lead Alloys, Separators and other commodities. Supply chain maintains the optimal business share of both Imports and Domestic Sources. Our major strength is keeping the cost under control as well as monitor inventory to balance DOH and market demand constantly. Key focus in procurement function is vendor management and through annual contracts we are able to secure the raw material supplies to the uninterrupted production. Company's new procurement strategy by having 2 year annual contracts with few of vendors resulted in seamless supplies. Continuous monitoring mechanism on commodity market behavior, resulted in competitive brmium fixation with Lead & Alloys vendors, which is one of major achievement and supported to bottom-line. Effective strategies applied towards procurement of commodities and achieved savings through SPOT booking & Hedging's with calculative risk. quality systems Quality Systems & Continuous Improvements. Building a quality culture across all levels and at all functions is the key for our success. Amara Raja believes that quality is a journey towards excellence and continues to effectively practice concepts like FMEA, SPC/SQC, Visual Management, 5S, QC, Industrial Engineering (IE), TPM and Lean Six Sigma through Quality & Continuous Improvement programs. There are about 467 quality circles, 609 projects were implemented bringing value to the operational performance. Front line employees take pride in doing such improvement tasks, and actively participate in regional, national & international competitions bringing accolades to the company. The Company continued to improve resource utilization and minimize in-process rejections by leveraging quality techniques (QC, Six Sigma and Kaizen) across all facilities. Projects of non-manufacturing nature were also implemented bringing efficiencies and effectiveness to the business processes across the supply chain Customer Recognitions Awarded as "Valued Partner - Service Excellence" for the year 2015 from Bharti Infratel Limited (BIL) - 2015. • Received 'SHIELD' award on OVERALL EXCELLENCE from Maruti Suzuki Limited - Recognition for our excellence in Quality/ Engineering/ Delivery, relationship and handling all the divisions in the MSIL-2015. • Received Best infra equipment supplier with Gold award - 2015-16 from Indus Towers Ltd. QC & SIX SIGMA Awards • Received 02 'GOLD' awards at International convention on Quality Circles - ICQCC 2015, Seoul, South Korea. • Received 29 'PAR EXCELLENCE' awards and 33 'EXCELLENCE' awards one 'DISTINGUISHED' award at National Convention on Quality Circle- NCQC 2015, Chennai. • Received 64 'GOLD' awards and 7 'SILVER' awards at Chapter Convention Quality Circles - CCQC 2015 at Hyderabad, Vishakhapatnam and Tirupati. Received "1st Prize in Six Sigma" in CII National Level Competition at Bengaluru. • Mr. G. Jagan Mohan, Head-Operations and his team, received QCFI-Quality Leadership Award (Private sector) - 2015 held during the National Convention at Chennai, for his contributions in building Quality culture in Amara Raja. Other Recognitions / Rewards: • Received outstanding performance in Manufacturing Segment brsented by the Honorable Chief Minister of Andhra Pradesh - 2015. • Achieved Self certification from VYOM. • Caterpillar nominated ARBL under Gold category supplier with consistent Quality and delivery-2015. • Received TS 16949:2009 LOC for ABD plant-2 operations at Chittoor enabling supplies to OEMS from this location as well. • Received 5'S' Sustenance Award by ABK-AOTS for Small Battery Division -2015. • Received 5'S' Platinum Level Award by ABK - AOTS under Large Scale Category for Modular Valve Regulated Lead Acid Batteries Plant-2015. INFORMATION TECHNOLOGY 2015-16 IN RETROSPECT • Rolled out ERP to support Tubular Batteries project • IT Team has provided required support and completed Phase II Implementation of Human Capital Management Solutions • IT Security is the key for IT Assets, at Amara Raja, we realized the need for Information Security and Management Systems (ISMS) and Implementation of systems are under way with defined road maps. • IT Team has made required study to implement Manufacturing Execution Systems (MES) to further enhancing operations efficiency and effectiveness • IT Support is underway for effective Implementation of Ind AS Implementation • 362 management users are trained on ISMS and ISMS procedures - policy portal has been developed and made available to all the users for ready reckoner. • 220 users are trained on MS office skills to enhance the office executive's productivity. • End point protection solution is deployed to protect the end points from growing cyber threats. Roadmap for 2016-17 • IND AS Standards Implementation To comply to the statutory norms necessary configurations are being carried out in SAP Required reports are developed for usage by Business • MES Implementation Implementation of Partner Selection and Broad Road map for Implementation will be carried out • Cloud solutions Cloud enabled application help in harnessing the technology improvements of security and availability, which improves the business continuity plan. Roll out time is reduced. • New DC Building new Tier 3 Green Data center at HO Tirupati to accommodate all the future data needs for business. • Internal IT Network To support growing needs of Business, IT facilitates in establishing internal IT Network for seamless access to IT Systems at Corporate Office, Green & Brown field plants • Securing End points End point protection enables the security of the clients from current trends of threats which are evolving continuously as technology evolving. • ISMS awareness To enhance the user awareness on Information Security Management systems training schedules are planned. Surveillance solution is deployed • Collaboration solution To improve the team collaboration with tools to improve productivity of the teams sbrad across the country |