WAS THE MANAGEMENT PLEASED WITH THE WORKING OF THE COMPANY DURING THE YEAR UNDERREVIEW?
There were two ways of looking at our performance for 2015-16.
I was disappointed because we had targeted a minimum of H350 crs in topline for 2015-16and ended a little lower. As a result our topline grew 8.5% which was lower than whatone would have wanted.
I was pleased that despite this reality profit after tax grew 28% indicating that ourgrowth during the year under review was profitable the third successive year ofprofitable growth for our company. Besides our EBITDA margin grew 100 bps to 9%.
WHAT WERE THE REASONS FOR THE PROFITABLE GROWTH?
The profitable growth was the result of a convergence of some realities: crude priceswere weak as a result of which our raw material prices remained soft and we enjoyed theflexibility of passing on some of the benefits to customers (lower sticker prices) andretaining some (higher sticker prices); our Power Brands increased their revenue share; weincreased exports by 11.3% strengthening their share in revenues from 27.5% to 28.2%.
SHAREHOLDERS HAVE NOTED THAT THE COMPANY DID REMARKABLY WELL IN THE LAST QUARTER OF2015-16?
Even as the company reported 8.5% topline growth through the course of the yeartopline growth in the last quarter was 13.4%. Even as export growth was 11.3% through theyear it was 29.6% in the last quarter. While some of the improvement can be attributed toa bunching of orders that transpired in the last three months of the financial year apart of the rebound was definitely the result of a stronger corporate resolve.
WHAT COULD THE COMPANY HAVE DONE BETTER IN 2015-16?
The one area where we could have performed better was in increasing the proportion ofrevenues derived from products priced at H10 or above. Over the last few years there wasa conscious movement towards value-addition which was responsible for improved marginsand revenues. However during the last financial year the proportion of revenues fromsuch products declined by 3%. This decline was attributed to one of our innovativeproducts (Linc Twinn) not performing as well as we had anticipated. Even as itstrengthened our corporate brand around innovation we were disappointed that the offtakecould not scale to the levels that we had expected. We are addressing this reality throughaccelerated launches - 12 this year
80% priced H10 or higher as against eight that we launched in the last financial year.One of these is going to be a unique pen combined with a highlighter which students willfind convenient to use priced affordably around H10.
WHAT IS THE COMPANYS REVENUE TARGET FOR 2016-17?
The company believes that a H400 crs turnover is achievable which would correspond toa 16% growth in revenues over the previous financial year. A number of shareholders areliable to ask whether this is feasible considering that the company grew only 8.5% in2015-16. We believe that the last quarter was a watershed when we grew revenues 13.4% overthe previous corresponding quarter and a healthy double-digit after a long gap. Therebound in the fourth quarter enhanced the self-belief that attractive outperformance isindeed possible. We believe that this revenue growth would be accompanied by improvedmargins on account of a superior product mix which should enhance value for shareholders.
WHAT ARE THE VARIOUS STRATEGIES LIKELY TO GENERATE 16% TOPLINE GROWTH IN THE CURRENTFINANCIAL YEAR?
The low hanging fruit that I perceive is a correction of our regional skew. Nearly 72%of our revenues are being derived from North and East India. Our immediate objective is toraise the proportion of revenues from South and West India to 35% of our turnover. Webelieve that the Linc brand is far stronger pan-India than what this skew indicates andour objective is to correct this anomaly with speed.
Some of the challenges remain: the industry is fragmented entry barriers are low andnew entrants generally tend to temporarily disturb market pricing in exchange for enhancedtrade visibility. The company continued to invest in its brand innovative launches andstronger teams in West and South India which should translate into a correction in theregional skew.
WHAT INITIATIVES DID THE COMPANY TAKE TO STRENGTHEN ITS BRAND?
Linc invested H11.50 crs in brand building and promotion in 2015-16 which was around3.4% of revenues. When compared with 2014-15 it was 22% higher. During last five yearsthe Company has spent about H50 crs in such activities.
HOW WOULD YOU ASSESS THE COMPANYS GLOBAL PROSPECTS?
The company is globally competitive validated by the fact that we export to 50countries 95% of our exports being made to 30 countries. We believe that the globalmarkets provide an attractive opportunity considering that the global market for writinginstruments is estimated at H62000 crs and we are but a drop in that ocean. Lincpossesses attractive credentials to carve out a large global share: we possess anattractive complement of brand scale quality and service; our serviceability willincrease once we commission our new facility in Umbergaon Gujarat. Ideally our revenuesfrom exports should increase from 28.2% of our turnover today to 50% of our topline acrossthe foreseeable future.