28
Leadership Team
32
72
Statutory Reports
Financial Statements Annual Report 2011-12
Management Discussion & Analysis
C
ustomers rated the Company the best in customer satisfaction in India for the twelfth consecutive year in the J.D. Power survey. The Company launched refined versions of its Swift and DZire models, even while they were at the prime of sales and customer demand. The Company entered the utility vehicle space with the showcasing of a new model, the Ertiga. The new models were received well and sales have increased further.
The global economic environment was also uncertain following a natural calamity in Japan, a downgrade of credit rating of the U.S.A. and a sovereign debt crisis in the Eurozone. The latter continues to be a dominant global factor and a source of volatility in the financial and currency markets. While export sales of the Company’s products to the European markets plummeted, the fall in volumes was made up to some extent by increase in sales to nonEuropean markets. On the cost side, a steep appreciation of the Yen increased the Rupee cost of direct and indirect imports and royalty. Although there was some benefit on export realisations, the quantum was limited. The Company suffered an unfortunate labour unrest situation at its Manesar facility. Since then, the management has taken measures to promote cordial industrial relations. The unrest impacted the production of vehicles, including in the diesel segment, which were in high demand. The competitive intensity also increased with new model launches including in small and compact segment and aggressive price cuts. Since the Company is present predominantly in the small car segment and in petrol cars, and did not have a sizeable presence in utility vehicle segment, it was impacted more than industry as a whole and domestic sales fell by 11.2 per cent to 1,006,316 units. Net Sales, including exports, stood at ` 347,059 million, a decline of 3.2 per cent over the previous year. Efforts to revive the market by higher discounts and sales promotion activities, together with higher commodity prices and adverse foreign exchange rates, put pressure on profit. Net Profit after tax declined by 28.6 per cent to ` 16,351 million. Movement of USD-Yen
FY’08
FY’09
FY’10
FY’11
78.9
92.9
90.0 75.0 60.0 45.0 30.0 15.0 0.0
85.7
Average Annual Rate
135.0 120.0 105.0 100.5
The financial year 2011-12 was full of challenges and turbulence for the Indian passenger vehicle industry. With a background of two good years of 8.4 per cent economic growth, the financial year 2011-12 began on an optimistic note. However, during the course of the year it became evident that the Indian economy would fall short of these expectations and the GDP growth in 2011-12 is now estimated to be around 6.5 per cent. It was the second year in succession with a double digit inflation rate and the central bank raised interest rates to curb inflation. Prices of crude oil also shot up in the international market. With petrol prices deregulated the previous year, and diesel prices under government control, there was a high difference in the prices of the two fuels. This led to a severe demand distortion between petrol and diesel cars. High inflation, high interest rates and high petrol prices impacted affordability of cars, particularly in the smaller cost-sensitive segment. The Indian passenger vehicle market grew by a meagre 4.7 per cent. Sales of petrol cars declined by 13.7 per cent in the domestic market while diesel car sales grew by 37.4 per cent with an additional wait list of customer bookings owing to capacity constraints. If the market is segmented on size, the sales of bigger cars (A3 segment and above) grew by 17.5 per cent and of utility vehicles by 16.5 per cent, while those of small and compact cars declined by 1.4 per cent.
114.3
OVERVIEW
FY’12
Source: Reuters
61