annual investor conference 2017 - rpggroup.com...mar-16 mar-17 revenue order book 93 160 39 464...
TRANSCRIPT
9th June 2017, Mumbai
ANNUAL INVESTOR CONFERENCE 2017
Seeking Happiness | Finding Growth
World Economy – Slow Pace of Revival
33
3.4
3.1
3.5
3.6
2015 2016 2017 2018
Source: IMF World Economic Outlook, April 2017
% Change
Projections
However, Uncertainties Loom
44
• Inward orientation of countries – “Reverse
Globalization”
• Globalization of terrorism
• Risks to cyber-security
India – Continued Growth Momentum
55
7.9
6.8
7.2
7.7
2015 2016 2017 2018
Source: IMF World Economic Outlook, April 2017
% ChangeProjections
FY
2017 – 2018 : Year of Disruptions
66
• Implementation of GST
• Reform push by government especially in
Infrastructure, Railways and Urban Development
• Impact of technology transformation
Re-imagining Businesses
77
• CEAT – from commodity to consumer
• KEC – resurgence through focused diversification
• Zensar – being digital and selling digital
• RPG Life Science – improvement trajectory continues
Why RPG?
88
- Best in class governance and disclosure standards
- People-centric ethos; thrust on innovation and diversity
- Learning Environment & Operational Excellence
- Robust Strategy
Shareholder Wealth Creation
99
Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17
CEAT KEC Zensar RPG LS SENSEXCEAT: 17.3x
RPG LS: 6.8x
Zensar: 5.3xKEC: 3.3x
SENSEX: 1.7x
Market Caps and SENSEX indexed to 1 on 2nd April 2012
Combined Market CapUS$ 3.0 bn
10
reimagine
RPG
Smart Products
Connected Customers
Future Factories
Intelligent Workplaces
RPG @ the forefront of Digital
KEC INTERNATIONAL LIMITED
Power T & D Cables Railways Water WaterPower T & D Cables Railways Civil Solar
Overview: FY 2016-17
12
MULTI-LOCATIONAL
MANUFACTURING
8 Manufacturing facilities across India, Brazil and
Mexico
Manufactures Towers, Cables, Poles and Hardware
PAT for FY17 grows 106% YoY
EBIDTA Margins increase by 130 bps to 9.3% in FY 17
PBT for Q4 FY 17 crosses Rs 200 crs for the first time
EBITDA Margin for Q4 FY 17 at 10.4%
Significant improvement in profitability.
Order Intake for FY 17 grew by 42% over FY 16.
Order Book for FY 17 shows 35% increase YoY.
Robust L1 pipeline.
Foray into civil business
Resurgence of International
Business
Remarkable Uptick in Railways and Solar Business
Successful Broadening of
Customer Base in India
Significant improvement in working capital
Key Growth Drivers
13
GLOBAL SOURCING
Material
Working capital funding
Equipment
Manpower
Resurgence of
international business
Successful broadening of customer base in India
International Order book grows 27% YoY
Entered/ re-entered 8 new countries in FY 17
Added East Asia Pacific as a new focus region
De-risked concentration exposure in Saudi
SAE continues on growth trajectory
Secured large sub-station orders in Africa.
Balanced order book
Increasing presence with existing SEB clientele
Evaluating business potential with new SEBs
Working with major private developers
Actively engaging with new entrants
Key Growth Drivers
14
GLOBAL SOURCING
Material
Working capital funding
Equipment
Manpower
Remarkable uptick in the railways and
solar business
Solar
Installed 65 MW of projects with trackers
Commissioned 100 MW of projects till date
140 MW of projects currently under execution
Entered the ‘Big League’ in Solar EPC
Established strategic partnerships
Railways
Revenue doubles, order book triples
Margins of railways moving closer to T&D
Increase in budgetary allocation for railways
Overhead electrification targets doubled
210446518
1,522
Mar-16 Mar-17
Revenue Order Book
93
160
39
464
Mar-16 Mar-17
Revenue Order Book
Rs crs
Rs crs
Key Growth Drivers
15
MULTI-LOCATIONAL
MANUFACTURING
8 Manufacturing facilities across India, Brazil and
Mexico
Manufactures Towers, Cables, Poles and Hardware
ParticularsMar 2017
Mar 2016 Incr/(Decr)
Net Debt (Rs cr)* 1,767 3,098 (1,331)
Acceptances (Rs cr) 969 794 175
Total (Rs cr): 2,736 3,892 (1,156)
ParticularsMar2017
Mar 2016 Incr/(Decr)
Receivables (Rs cr)* 5,355 5,902 (547)Receivable (days) 231 247 (16)Working capital (days) 108 139 (31)
* Receivables and net debt exclude amounts related to the company’s BOT Project
Improvement in FCFE:
• Reduction in interest costs
• Improvement in working capital cycle
• Reduction of debt
Improvement in ROCE:
• Significant improvement in EBIT
• Reduction in capital employed across SBUs
6.3% 6.4%7%
5.9%5.6%
5.1%
7.3% 7.3% 7.3%8%
8.9% 8.4% 8.7%9.3%
10.4%
Q2 FY2014
Q3 FY2014
Q4 FY2014
Q1 FY2015
Q2 FY2015
Q3 FY2015
Q4 FY2015
Q1 FY2016
Q2 FY2016
Q3 FY2016
Q4 FY2016
Q1 FY2017
Q2 FY2017
Q3 FY2017
Q4 FY2017
EBITDA Margins % trend
Future Growth Drivers
16
Solar - International T&D EPC- Brazil Substation- International Improving financials
Additional capacity of 30 GW expected in addressable geographies.
Exploring global markets like UAE, Jordan, Thailand, South Africa.
To leverage T&D infra and capabilities, use PQs from India.
Built/ building around 70 sub stations in the AIS & GIS Space.
Completed/ ongoing 20 projects across 19 countries in past 2 years.
Replicate success story of domestic substation business in international market.
Continuing reduction in finance costs through better working capital management and borrowing profile.
Improving operating leverage in railways and solar business.
Better margin profiles through participation in high value tenders.
Close to 30,000 kms of lines to be built till 2019.
Estimated investment of close to Rs 60,000 crsin transmission lines.
Shift from manufacturing to EPC by leveraging KEC’s expertise.
EPC- BrazilSolar park- India Substation- Afghanistan
Strategy: FY 2017-18 and beyond
17
MULTI-LOCATIONAL
MANUFACTURING
8 Manufacturing facilities across India, Brazil and
Mexico
Manufactures Towers, Cables, Poles and Hardware
Progressive & Evolving Cultural Ethos
Prudent Financial Management &
Control
Augmented Operational & Execution Excellence; Focus
on Delivering Projects Ahead of Schedule
Valuing People; Investment in Human
Capital; Focus on Diversity & Inclusion
Enhanced Client Focus to meet the evolving aspirations of KEC’s
Global Customer Base.
Digital Transformations&
Inspiring Innovation
Committed to Ensuring
Safety@Workplace
Focused Social Endeavors
CEAT LIMITEDMAKING MOBILITY SAFER AND SMARTER. EVERYDAY.
Overview
19
* Under commissioning
One of India’s leading tyre company with over 50 yrs of presence
Distribution Network : 4,500+ dealers, 450+ exclusive CEAT franchisees
6 Manufacturing facilities - Bhandup, Nasik, Halol, Nagpur, Ambernath* & Sri Lanka
100+ countries where products are sold with strong brand recall
#No 1 player in Sri Lanka in terms of market share
FY 17 Revenue Breakup by Product FY 17 Revenue Breakup by Market
Truck and Buses, 33%
(38%)
2/3 wheelers, 29% (27%)
LCV, 13% (13%)
Passenger Cars / UV,13% (11%)
Farm, 7% (6%)
Speciality, 5% (5%)
Exports, 14%(14%)
OEM,23% (23%)Replacement,
63% (63%)
Note : Figures in parenthesis denote FY16
20
Key Updates
Financial Update
FY17 Sales at Rs 5,722 Crs; 5% growth PAT at Rs 361 Crs; margin at 6.3%
Debt / equity ratio at 0.4 times
Long term credit rating upgrade to AA by CARE and India Ratings & Research
Accolades
Ranked highest in India for OE Tyre customer satisfaction as per J.D.Power 2017 India Original Equipment Tyre Customer SatisfactionIndex (TCSI)
Halol plant conferred with “Sword of Honour Award” by BritishSafety Council
Strategy
Two wheelers
Passenger cars & Utility vehicles
Profitable growth
Differentiated Products1
Strong Brand2
Extensive Distribution3
Deep OEM Partnerships4
World Class R&D 5
Expanding Global Reach6
21
Off Highway Tyres
Emerging markets
Domestic Market
International Market
Differentiated Products 1
22
“Puncture Safe” tyres for 2 Wheelers -
India’s 1st Self Sealing tyre
“Win Series” tyres for Truck & Bus
High-strength rubber & steel
High load carrying capability
Endurance & overheating prevention
“Milaze” tyres for SUV Taxi segment
Improved life & load carrying capacity
Higher mileage up to 1,00,000 kilometers
“Buland” tyres for Small Commercial Vehicles
Stiffer shoulder & sidewall gives higher loadability
Higher tread radius delivers longer life
“Fuelsmarrt” tyres for Passenger Cars
Reduced rolling resistance
Less fuel consumption, more savings
Strong Brand2
23
Drive Safe Dad
TVCs/ CampaignsIn the Game of Roads,
CEAT Helps Be Monsoon Smart Tubeless Bike Tyres
Extensive Distribution 3
Distribution Network
4,500+ dealers
450+ CEAT Franchisees (Shoppes + Hubs)
250+ two-wheeler distributors
350+ Multi Brand Outlet / Shop in Shops
Launched CEAT Bike Shoppes
24
212
464
601
FY12 FY15 FY17
102
176
290
FY12 FY15 FY17
Shoppe Shop in Shop (SIS)
Multi Brand Outlet (MBO) Bike Shoppe District Coverage No. of CEAT Shoppes
25
Deep OEM Partnerships 4
26
World Class R&D 5
State of the art R&D facility at Halol plant
R&D focussed on development of breakthrough products, alternate materials,
green tyres, smart tyres
Partnerships with global institutes and technology partners
Increased allocation towards R&D
27
Expanding Global Reach 6
Sri Lanka:Leadership position with 50+% market share
Focused product and distribution strategy for select clusters
ASEAN
ClusterEast Africa
ClusterLATAM
Cluster
West Africa
Cluster
Middle East
Cluster
Europe Cluster
US Cluster
Emerging markets
Key Export Clusters
284
376
476
561 619
743
FY 12 FY13 FY 14 FY 15 FY 16 FY 17
PC / UV (Rs Cr)
525 639
899
1,246
1,483
1,648
FY 12 FY13 FY 14 FY 15 FY 16 FY 17
2/3 wheelers (Rs Cr)
Passenger Segment TrendsR
eve
nu
e
2 Wheeler plant at Nagpur (Phase I) commissioned in March 2016;Capacity of 120 MT/day by Q2 FY18
Passenger Car Radial plant at Halol (Phase II) commissioned in September2015; Capacity of 120 MT/day by Q2 FY18
FY17/ FY16 volume growth: 2/3 wheelers (+20% ), PC/UV (+15%)
Expanding
Capacities
28
29
Off Highway Tyres
Status Update
Greenfield OHT (Off Highway Tyres) radial plant in Ambernath
Investing Rs 330 Crs for a Phase 1 capacity of 40 MT/day which will be further
ramped up to 100 MT/day
Plant is now live and tyres are being tested across multiple global markets
30
Strategic Expansion Plans
On-going expansions - Investment of Rs. 1,400 Crs:
Passenger Car & Utility Vehicle tyres plant at Halol (Phase II)
2/3 Wheeler tyres plant at Nagpur (Phase I)
OHT tyres plant at Ambernath
Up-coming expansions - Investment of Rs. 2,800 Crs:
Truck & Bus Radial tyres plant at Halol (Phase III)
2/3 Wheeler tyres plant at Nagpur (Phase II)
Passenger Car & Utility Vehicle tyres plant at a new location (Greenfield)
Strategic Focus Areas – Continued Momentum
Strategic Focus Areas(2 Wheelers, Passenger Cars,
Utility Vehicles, Specialty Exports & Emerging Markets)
CAGR of 25%
Substantial contribution towards increasing profitability
Market share growing
31
% of Sales value
Strategic Focus Areas
Others
20%
32%39%
43% 46%
80%
68%61%
57% 54%
FY 10 FY14 FY15 FY16 FY17
ZENSAR TECHNOLOGIES LIMITEDRETURN ON DIGITAL
Power T & D Cables Railways Water Water
33
Major disruption in IT market as Digital substitutes traditional IT spending
80% of incremental Tech spend to be on Digital Stack
CX/UX, Automation, RPA, DevOps are opening new avenues
Greater efficiency by automation, Cloud etc.
Maturing industry, competition & in-sourcing
Protectionism policies adds uncertainty
Tail
Win
ds
Hea
d W
ind
s
Majority of new enterprise tech spend to come from Digital Stack –Analytics, Cloud, Mobile, Automation, Security, IoT, CX/UX, BPM, Commerce
2,750 - 450 to 650
+ 950 to 1,1003,500 to 3,600
FY15 FY20
Fall in traditional IT
New spend, 80% digital
stack
Global Enterprise IT spend ($B)
Source: NASSCOM McKinsey study
Decline in spend on traditional IT services, among other factors, has largely reduced the growth of Indian IT sector
Traditional IT Apps/Infra services facing pressure
34
12.6%
27.0%29.8%
FY15 FY16 FY17
Digital Revenue in Zensar has grown at a 58.9% CAGR over the last 2 years
Zensar has made multiple investments – both organic and inorganic - over the course of last
year to boost its Digital capabilities
Digital is expected to be ~35% of Zensar’s revenues in the next 4 quarters
Zensar’s Intelligent Managed Services Platform for Maximum Agility and Efficiencies
ZenAnalytica Predictive Analytics –Extract Valuable Insights Faster
Blockchain –Digital Transactions get Secure and Transparent
Robotic Process Automation –Transforming Business through Automation
Gear up for the Office of the Future with Digital Workplace Services
RPA
Digital @ Zensar
35
Engaging Digital
Employee Engagement
10-15%Employee Satisfaction
Employee engagement solutions to enhance employee
innovation, efficiency and engagement.
Operating Digital
Operating & Productivity
Partnering Digital
Customer Engagement
Managing Digital
Reporting & Dash Boarding
15-20%Operating Productivity
15-20%Customer Satisfaction
10-20%Sales Acceleration
Operating and productivity solutions to improve core
business processes.
Reporting and dash boarding solutions for the leadership to
assist in informed decision making.
Customer engagement solutions that help improve
customer outreach, engagement and satisfaction.
Zensar's Platform Based | Mobile First | Cloud First | 100% Digital | Pre packaged & Customized Development
Zensar’s Unique Living Digital Offering for clients
36
At Zensar, we are LIVING DIGITAL
Investing in innovationsfor transformations in future technology
Zensar’s Intelligent Command Centre
37
Total large deals worth $ 300+ Million closed through the year
Digital Services Wins
Digital Xformation for Europe Auto Asso. / Insur.
App Cloud Migration & Management for leadingUS Hi tech manufacturing company
Omni channel implementation for leading US Clothing and accessories retailer
RPA for South Africa’s leading Financial Services company
Digital Testing services for leading online / mobile gaming company
Traditional Services Wins
Mobile Solutions for American Multinational financial services corporation
Application Management deal with top UK departmental store
Application Dev and support for leading industrial manufacturing company in US
Oracle deal with Japanese multinational information tech equipment & services company
IMS Cloud deal with leading Airlines in the US
Multiple Digital and Traditional Wins over last 12 months
38
Zensar retained 100% its top clients in FY 17Digital conversations with more than 70% of our top 50 clients
36% 37% 38%
45% 45% 46%
51% 54% 56%
FY15 FY16 FY17
Top 5 Clients Top 10 Clients Top 20 Clients
1 Million $ + Clients
64
72
FY16 FY17
5 Million $ + Clients
5
7
FY16 FY17
Digital Conversations with Top Clients
39
Legacy Revenue ↓ by 7.3 % CAGR over last 3 years
FY 17 profitability impacted by:
Exchange rate fluctuation
Projects delays leading to lower utilization
Clean-up of the MVS business
Clean-up of Debtors in India
Other one-time expenses of ~$0.5M
376 331322
54122 137
FY 15 FY 16 FY 17
Legacy Revenue ($M)
Digital Revenue ($M)
Digital Revenue ↑ by 58.9% CAGR over last 3 years
64 6759
43 47
37
FY 15 FY 16 FY 17
EBITDA ($M) PAT ($M)
Revenue and Profitability Trend
40
^ Manufacturing – 0.4 %
^ BFSI – 1.9 %
^ Retail – 21.8 %
Growth across Verticals
^ Africa – 11.6 %
^ Europe – 35.7 %
Growth in Key Markets
Key highlights of FY17
Successful completion of 2 acquisitions
Both acquisitions augment Zensar’s Digital capability
Leading UK based Experience Design agency
Zensar + Foolproof = End-to-End Digital services for the CMO and CDO organizations
Leading Omni-channel and Digital Supply chain company
Zensar + Keystone = End to End provider of Omni Channel Customer experience from Commerce to Fulfilment
Addition of several new Fortune 500 clients
Digital at ~35% of Zensar’s revenues on a run-rate basis
RPG LIFE SCIENCES LIMITED
42
Overview
EUGMP approved unit in Ankleshwar
Immuno-suppressant focus Europe, Canada, ROW as main
markets Revenue: Rs 65 crs
Mostly APIs for captive use
TGA approved unit in Thane
Revenue: Rs 43 crs
Field force of 500 people Strong brand in Nephrology Strong presence in anti-diarrhoeal, antacid, iron-
vitamin segments Acquired 7 brands from Sun Pharma last year Revenue: Rs 184 crs
International Formulations
API
APIDomestic
Formulations
2 Production Units~1150 Employees
Revenue : Rs 298 crsPBT : Rs 15.3 crs
Exports : 33%
Business portfolio streamlining
Biotech business divested
7 brands acquired from Sun Pharma to strengthen Domestic Formulation business
Urology division launched; brands from Sun and additional products
Strong focus on International formulations; growth of 39%
Improving Financial Performance
Second consecutive year of good results
Revenue growth of 16% on a like-to-like basis*
PBT of 13.77 crs vs 8.39 crs last year; growth of 64%
Very strong H1-Weaker H2; bunching of export orders in H1 and portfolio restructuring in H2
* without biotech business
43
Key Updates – FY17 (1/2)
Further strengthening of India Formulations business
Continue to perform above industry growth
PCPM improvement to 3.88 lakhs vs 3.59 lakhs last year
EBIDTA improvement to 15.8 crs vs 12.4 crs last year
Romilast & Sildura (brands acquired from Sun) gaining momentum
Results showing in International Formulations business
39% growth over last year; large contribution by ROW
56 new product registrations filed in ROW market (39 to be filed in FY 18)
Significant progress on building product portfolio for regulated markets
2nd product (Nicorandil) added; UKMHRA approval received; commercialisation from H2 2018
Intense efforts to get Ankleshwar production unit ready for USFDA audit in 2018
44
Key Updates – FY17 (2/2)
FY 16 FY 17
292
Revenue* (Rs Crs) 251
27
EBIDTA* (Rs Crs) 19 9.5%
EBIDTA (%) 7.6%
13.8
PBT* (Rs Crs) 8.4 4.7%
PBT (%) 3.3%
12.0
EPS 7.0
45
FY 17 : Improvement trajectory continues
(+2.1%)
(+1.4%)
* Excludes revenue from Biotech business
46
India Formulations : Fundamentals getting stronger
143
168183
-
50
100
150
200
FY15 FY16 FY17
2.8
3.63.9
0.0
1.0
2.0
3.0
4.0
FY15 FY16 FY17
4%
9%
16%
0%
10%
20%
FY15 FY16 FY17
24% 25%
34%
0%
10%
20%
30%
40%
FY15 FY16 FY17
₹ cr ₹ lakhsSales PCPM
New Product % DPCO sales %
0
10
20
30
40
50
60
70
FY 12 FY 13 FY 14 FY 15 FY 16 FY 17
39%growth
Revenue (Rs cr)
47
Int’l Formulations : Growth starting to materialize
Customer Approvals
Apotex (Canada)
Teva (Europe)
Tillomed (UK)
Aqvida (Europe)
Medac (Germany)
Regulatory Approvals
EUGMP (Formulation)
TGA (API)
Nigeria FDA
Product Lines
Tablets
Hard Gel Capsules
Low RH tablet
ROW sales grew by almost 100 % in FY 17
Strategy: No change; continue to be on same path
DomesticFormulations
Focus : Captive molecules for Global Formulation
Approach : Own the technology; outsource manufacturing to USFDA approved sites
Focus : Few therapy areas/ product segments
Approach : New products & extensions, field-force productivity enhancement
Focus : Immediate term-ROW; Medium term –Regulated markets
Approach : Niche products own-NPD; USFDA approval of production unit
48
International Formulations
API
API
Domestic Formulations
Overview on Group Financials
50
Economic Outlook : Momentum for growth in discretionary spending
5.56.5 7.2
7.96.8
3.33.3
4.13.4 5.0
2012 2013 2014 2015 2016
GDP & IIP Growth Rate
GDP growth IIP growth
Stable growth in GDP & IIP in recent years
Government boost to infrastructure and Energy Sector Govt spending on infrastructure to be Rs.4 Trillion Solar capacity addition of 20,000 MW in Budget 2017 Rural electrification outlay increased by 25% to INR 48.14 Billion.
Key Policy changes spurring growth Direct Transfer of Subsidy led to savings of Rs 140 Billion. In LPG alone IBC along with Central Bank intervention for resolution of stressed loans to banks
51
RPG Group: Key Differentiators
Diversified Group Presence across key Growth sectors
Established Business Governance Structure Empowers decision making with timely execution
Sound Corporate Governance Practice Ensures practices and processes create long term value
Robust Financials Orientation towards low gearing with sufficient liquidity
RPG Group: Improving Financials
52
Note:Net Revenue = Net Sales + Other Operating Income; EBITDA does not include non-operating income; EBITDA % is taken on Net RevenueFY17 financials as per IND AS; FY12 as per IGAAP; CEAT FY17 EBITDA includes profit from Sri Lanka JV (after tax)
4,653
5,767
18361
5.9%
11.9%
FY12 FY17
5,815
8,784
209 305
8.1%9.3%
FY12 FY17
1,794
3,060
159 238
13.9% 12.6%
FY12 FY17
194
304
120
9.4%9.6%
FY12 FY17
CEAT KEC International
Zensar Technologies RPG Life Sciences
Revenue Growth – 24%PAT Growth – 1,906%
Revenue Growth – 51%PAT Growth – 46%
Revenue Growth – 71%PAT Growth – 51%
Revenue Growth – 57%PAT Growth – 2,307%
RPG Group: Improving Financials
53
Note:FY16 & FY17 financials as per IND AS; Others as per IGAAP ROCE is calculated by taking EBIT multiplied by (1 minus tax rate @ 33%) divided by Average Capital Employed; ROE on Average EquityGross Block and Net Block does not include Goodwill
3,250 3,818
4,806 5,225
6,026
11%14% 14% 14% 12%
12%
19%17% 17%
17%
FY13 FY14 FY15 FY16 FY17
Net Worth (Rs Cr) ROCE ROE
2,756 3,103
2,486
3,715
2,544
0.8 0.8 0.5
0.7 0.4
2.3 1.9
1.5
1.8
1.2
FY13 FY14 FY15 FY16 FY17Net Debt Net D/E (x) Net Debt / EBITDA
3,432 3,489 3,566
4,263 4,435 4,823
5,038 5,317 5,590 5,688
FY13 FY14 FY15 FY16 FY17
Net Block (Rs Cr) Gross Block (Rs Cr)
Returns Ratios Leverage Ratios
Assets
Delivering Value to Stakeholders
54
Shifting gears based on Business opportunities
Focus on Deleveraging
Innovation led product differentiation
Expanding customer & market reach
Consolidating existing business lines
Improved product portfolio
Driving Digital Initiatives Building capability through
inorganic growth
Business Transformation Led Growth
Y O UT H A N K