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Eicher Motors Ltd.

BSE: 505200 Sector: Auto
BSE 00:00 | 24 Apr Eicher Motors Ltd
NSE 05:30 | 01 Jan Eicher Motors Ltd
OPEN 13702.00
52-Week high 23427.75
52-Week low 12460.00
P/E 18.20
Mkt Cap.(Rs cr) 37,100
Buy Price 13501.00
Buy Qty 1.00
Sell Price 13584.75
Sell Qty 1.00
OPEN 13702.00
CLOSE 14064.50
52-Week high 23427.75
52-Week low 12460.00
P/E 18.20
Mkt Cap.(Rs cr) 37,100
Buy Price 13501.00
Buy Qty 1.00
Sell Price 13584.75
Sell Qty 1.00

Eicher Motors Ltd. (EICHERMOT) - Chairman Speech

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Company chairman speech

dear Shareholders

i am delighted to present the

Annual Report 2017-18 of

Eicher Motors Limited (EML). once again we've had a spectacularyear with the company achieving record volumes and profit and making significantprogress on the several initiatives and projects that we had set out to accomplish thisyear.

We remain dedicated to providing pure motorcycling experience to ourcommunity globally while consistently enhancing value for stakeholders.

Financial year 2017-18 was another strong year for deliveringprofitable growth and further strengthened the robustness of our business model. In2017-18 Royal Enfield's sales volume grew by

23% to 820121 motorcycles. Our market share in above 125cc categoryof motorcycles in India increased from 24% to 27%. We have indeed come a long way from 3.8% market share in above 125cc category of motorcycles category in 2011-12.

Last year the Indian automobile industry faced several challengesincluding the changeover to BS-IV emission norms and the implementation of GST. I ampleased to share neither of these events disrupted business at Eicher Motors Ltd. and wepowered through as we were extremely well prepared.

EML's consolidated net revenue from operations (reflecting thebusiness of Royal Enfield motorcycles) for the year 2017-18 was Rs. 8965 crores a growthof 27% over 2016-17. In 2017-18 EML's consolidated EBITDA grew 29% to Rs. 2808crores and PAT grew 18% to Rs. 1960 crores. EML set a new industry benchmark with anEBITDA margin of 31.3% in 2017-18.

Royal Enfield

Royal Enfield has emerged as the strongest premium motorcycle brand inIndia and the Classic 350 was the best selling model in the above 125cc category* in2017-18. We recently debuted on Economic Times Brand Equity's Top 100 Most Trustedbrands list perhaps the only brand to have done so without any major advertising spend.

Today we enjoy the distinction of being a brand that's bothaspirational and accessible. Our reason for being is to allow commuters to upgrade to theworld of leisure motorcycling reviving the simple pleasures of motorcycling at its purestin an otherwise fast-paced performance-crazed world where motorcycling has reachedintimidating extremes or is downright boring!

A Royal Enfield motorcycle is something many riders aspire to own andour legions of fans love our motorcycles and what our brand stands for. Still we'reaccessible both in terms of price and with our sales and service network which makes usunique. With our simple timeless motorcycles we stand for purposeful longevity and shunforced obsolescence. That's why Royal

Enfield motorcycles have one of the highest resale value in thecountry.

We continue to experiment with new retail formats and destinations toengage with our customers and those who love our brand. In November 2017 we opened theGarage Cafe in Goa. Reflecting the ‘motorcycling way of life' the 120-seater

Garage Cafe on the banks of the Baga River in Baga Goa offers arelaxed unhurried experience and is conceptualised to be an inclusive engaging space.The Garage Cafe is a one-of-its-kind format that is an amalgamation of the variousdimensions of Royal Enfield. The cafe houses a motorcycle museum-and-exhibition area anexclusive gear store a motorcycle customisation area and a service bay.

In an effort to allow easier discovery and access to pre-owned RoyalEnfield motorcycles we introduced our first pre-owned motorcycle store - Vintage - inChennai. A pioneering initiative in the two-wheeler industry Royal Enfield

Vintage will deal exclusively in pre-owned refurbished and restoredmotorcycles offering hassle-free sale and purchase experience to consumers. We will beexpanding this unique retail format to 10 different locations across the country.

And we continue to strengthen our core retail network. Last year weadded 150 new dealerships in India taking our total retail outlet strength to 825exclusive stores in the country making us the strongest premium motorcycle distributionin the country by a large margin.

Our dealers are thrilled with us and are making solid progress too;this was reflected in our recent #1 ranking for dealer satisfaction by J.D. Power amongtwo-wheeler manufacturers. Deeply engaged dealers are the key to our ambition of beingnumber one in Customer Satisfaction - as an enormous part of the customer experience is inthe dealership's purview.

After a very focussed effort over the last many years we have beenranked #2 among two-wheeler manufacturers in customer service in India by J.D. Power. Thisis significant progress for Royal Enfield as we are now ahead of the largest motorcyclemanufacturer in the country as well as all the

Japanese brands. I firmly believe that we're on the path tobecoming number one and to set the standard for an exemplary ownership experience for ourcustomers.

While Royal Enfield has grown from strength to strength in the last fewyears we still believe that there's enormous potential to grow further. As incomesrise and the aspiration for leisure motorcycling grows in developing markets especiallyIndia I believe that customers from the commuter segment will continue to upgrade to themiddle-weight segment (250cc-

750cc) that is dominated by Royal Enfield. More so from our ownsurveys we see that there is an increasing number of people that are directly buying aRoyal Enfield as their first motorcycle purchase.

While in some of the more developed states of India we have an overallmotorcycle market share of as much as 20-33% in the lower income states it is as low as2-4%. As incomes rise and distribution penetration increases in these populous states wesee a tremendous potential for growth in these regions.

While we continue to remain focussed on India we've also beenexpanding beyond our shores with motorcycles that stay true to our ethos of PureMotorcycling appealing to an increasingly higher number of riders across the world.Beyond

India Royal Enfield is now present across 50 countries through anetwork of over 500 multi brand outlets and 36 exclusive stores 11 of which were openedin 2017-18.

Subsequent to opening our subsidiary in Brazil in 2016-17 we openedour first flagship store in the country in 2017-18. We also opened our first stores inArgentina and Vietnam and added new exclusive stores in the UK France Austria MexicoThailand New Zealand Colombia and Indonesia. To further strengthen the brand and toaccelerate market development activities we have decided to set up wholly-ownedsubsidiaries in Indonesia and Thailand in 2018-19.

To cater to the continued demand Royal Enfield began production at ourplant in Vallam Vadagal near Chennai in August 2017. Spread over 50 acres the VallamVadagal plant is Royal Enfield's third manufacturing facility. I'm extremelypleased to inform you that Vallam Phase-1 was completed in record time and is now runningat full capacity and we have commenced work on building out Vallam Phase-2 which willfurther augment our capacity.

With a view to enhance our design engineering and product developmentcapabilities we are also completing construction of our Technical Center in Chennai thisyear. The Chennai Technical Center will complement our new and bespoke technical Centerlocated in Leicestershire UK which we moved into in May 2017. Spread over 36000 squarefeet the UK facility houses more than 120 employees and state-of-the-art equipment andworkshop facilities enabling engineers to develop best-in-class motorcycles and futureconcepts.

We unveiled our Interceptor 650 and Continental GT 650 twin cylindermotorcycles in November 2017 in Milan to great acclaim at the EICMA show and thereafterat Rider Mania in Goa. I am confident that the Interceptor 650 and the

Continental GT 650 will be an important catalyst and flagship in ourhome market where I expect many of our over 2.5 million riders who have been asking forsomething more from

Royal Enfield to upgrade to the 650 Twins. The Continental GT andInterceptor are likely to become the mainstream volume drivers in our key internationalmarkets.

Continuing to strengthen our motorcycle offerings we also introduced anumber of new variants to our best-selling Classic range of motorcycles including theGunmetal Grey and Stealth Black versions that added a rear disc brake. These new variantshave received an excellent response as has the new Himalayan Sleet + Explorer Kit editionand the brand new Thunderbird X tailormade for urban explorers.

VE Commerical Vehicles

A strict implementation of a ban on overloading of trucks areconfiguration of regional warehouses due to the roll out of

GST and the need for long-haul trucks are driving a transition tohigher gross vehicle weight (GVW) trucks. Coupled with increased investment ininfrastructure these measures have helped revive growth in the commercial vehicleindustry. Medium duty and heavy duty truck sales led this growth while the bus segment isstill to recover from the pre-buying by State Transport Undertakings and other privateplayers prior to the implementation of BS-IV.

In the high-performance trucks segment where Volvo Trucks

India is the market leader sluggish demand in the first quarter wasattributed to pre-buying ahead of BS-IV deadline. Subsequently the market gained somemomentum in the second quarter but overall industry volumes were 36% lower than theprevious financial year.

VE Commercial Vehicles had an extremely successful year with itshighest ever sales of 65932 vehicles growing 12.5% over 2016-17 volumes. In the domesticmarket VECV sold 56931 vehicles a growth of 12.6% on the previous year. We achieved ourhighest ever volumes of 13427 in heavy duty trucks. In exports VECV recorded its highestever volumes of 9001 vehicles and has been supported by 134% growth in the Middle Eastand 24% in Africa along with a 9% growth in South Asia.

VECV is focussed on a few key segments like construction mininge-commerce fruits & vegetables among others and continue to invest significantly indeveloping the market for these segments to drive future growth. We continue to retain an88% market share in the high performance trucks segment (400+ horsepower) and are focussedon targeting mining segments besides quarrying road construction and irrigation tocontinue to drive growth.

We are preparing to introduce the next-generation BS-VI range of trucksand buses and are confident that we will have them in the market ahead of the April 12020 deadline.

With the commencement of operations of our brand new Skyline ProElectric buses in Kolkata VECV has reinforced its commitment to greener and cleanermobility and joined the league of zero-emission vehicle manufacturers. We plan to have acomplete range of electric-mobility solutions for public transportation offeringworld-class quality and comfort. We're also developing an affordable air-conditionedrange of buses aimed at bringing superior comfort to public transportation.

We believe there is a high growth potential in the Middle East andAfrica and we are developing light and heavy-duty buses for these markets. We have enteredthe ASEAN market with sales starting in the first quarter of 2018-19 and began settingup assembly operations in Bangladesh following the Completely Knocked-Down (CKD)operations in Kenya and Nigeria.

VECV aims to create a differentiated customer experience throughaftermarket excellence and we have also been focussed on various means to improve productquality including deploying the Volvo Production System (VPS) as a basic operating toolin our plants. We are also deploying new technology and automation to boost quality.

To meet market demand we have increased our plant capacity to 84000vehicles per annum and we will continue working on improving productivity in line withutilisation to further increase capacity.

Eicher Polaris Private Limited

In March 2018 the Board of Eicher Polaris Private Ltd. (EPPL. ourequal joint venture with Polaris Industries decided to close the operations of theventure with immediate effect after multiple attempts at turning around the business wereunsuccessful.

EPPL which was incorporated in October 2012 introduced

Multix India's first personal utility vehicle in June 2015. Givenits unique positioning and differentiated product features Multix initially generatedsignificant interest from customers.

However the initial interest could not be sustained and the subsequentsales performance was significantly slower than the expectations.

Despite several initiatives the Company's performance could notbe revived. Hence the Board of EPPL concluded that it was in the best interest of allstakeholders to close the operations of the Company. EPPL is deep in the process ofengaging with all its stakeholders including customers suppliers employees and channelpartners to implement the closure and will continue to provide spares and service supportfor the fleet of Multix vehicles on the road.

Consequent to closing down the operations of EPPL your Company hasrecorded a loss of Rs 220 crores of exceptional nature representing the Company's share.

Looking ahead

At EML we have created a business model that has enabled us to achievea strong and sustained growth over the years. While we have been on a solid growthtrajectory we are not taking things for granted. We have been focussed on ensuring thatall our motorcycles and commercial vehicles will keep our customers delighted.

As we move into the new financial year we are faced with a number ofchallenges including meeting the BS-VI emission norms by March 2020 four years ahead ofthe originally planned deadline and introducing ABS on all our motorcycles before theregulation deadline of March 2019.

Royal Enfield has earmarked an investment of Rs. 800 crores in 2018-19in all areas of its business. The investment would be towards setting up additionalproduction capacity at Vallam Phase-2 completing construction of the Technology Center inChennai this year investing towards the development of new motorcycles to meet theupcoming regulations and to expand

Royal Enfield's portfolio for its global markets.

We are committed to being a Company that provides amazing PureMotorcycling experiences to riders and travellers and we are looking for new ways toengage with people outside of just selling them a motorcycle. We are going to step up ourefforts in rides events and community building - so that these act as catalysts for morepeople to enter the amazing world of motorcycle adventures and journeys in India andaround the world.

In 2018-19 we plan to invest Rs. 500 crores in VECV towards newproduct development and capacity enhancement. We are continuing our journey to become aworld-class CV manufacturer in India and continue to invest in new products andtechnologies to truly lead the segment.

I would like to thank all our stakeholders for their resolute faith inus. I would like to assure you that we are working tirelessly to make the most of theopportunities coming our way and to create new ones to take EML to a new orbit of growthand success.

Siddhartha Lal

Managing Director & CEO Eicher Motors Limited

*Based on Society of Indian Automobile Manufacturers' data for B4category and above