Management Discussion and Analysis

Economic Review

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2015 saw the continued dominance of the emerging markets and developing economies as the global growth engines, which accounted for a lion’s share of the global growth. According to International Monetary Fund (IMF) estimates, the global economy grew by 3.1% in 2015, lower than the growth of 3.4% in 2014. Even as developed economies saw a modest growth, emerging markets and developing economies that account for over 70% of global growth, continued to decline for the fifth consecutive year.
India remained the ‘bright spot’ in an otherwise muted global growth story. Estimates from the Central Statistics Office (CSO) suggest that the Indian economy would grow by 7.6% in FY16 as compared to 7.2% in FY15. The growth engines in India have been led by the sharp rise in manufacturing at 9.5% for FY16. Lower oil prices helped the government to prune its subsidy bill, further bolstering the India story.

Indian Automobile Industry

Even as the Indian economy grew at a stellar 7.6%, the Indian auto industry could not replicate it. In volume terms, it has grown by 2.3% in FY16 as compared to 7.9% in FY15. The key segments in terms of value - Passenger Vehicles (PV) and Commercial Vehicles (CV) - posted positive growth. During FY16, passenger vehicle and commercial vehicle production grew by 6% and 12% respectively. M&HCV segment recorded an impressive growth of 27% in production volumes, primarily led by replacement demand and growth in mining & infrastructure sector. Production volume of two-wheelers recorded muted growth of 2%, while three-wheelers declined by 2% during the year.
Domestic Sales: The passenger vehicles segment continued its 2nd year of sustained growth, posting a 7.2% in the fiscal up from 3.9% in FY15. However, it was the commercial vehicle segment which finally cleared the dark clouds with a positive growth rate of 11.5% in FY16 as against negative growth rates in the previous years. However, in Exports, there has been a steep fall with the segment growing at a meagre 2% on the back of the weakened global story, in sharp contrast to FY15 which witnessed Exports surging at 15%.

Industry Segment (Production figures) Growth in % (YoY change)
Rane (Madras) Ltd. (56.3%)
2015 - 16 2014 - 15
Passengers Cars
4%    4%
Utility Vehicles
14% 10%
Vans
6% -12%
Passenger Vehicles
6%    4%
Medium & Heavy Commercial Vehicles
27% 21%
Light Commercial Vehicles
10% -4%
Small Commercial Vehicles
-10% -20%
Commercial Vehicles
12%    -
3-Wheelers
-2% 14%
2-Wheelers
2% 10%
Farm Tractors
-7% -13%
Total
2%    8%

Indian Auto Component Industry

After improved showing by vehicle industry, auto component industry has been witnessing growth for now two consecutive years. The industry had reported 11% growth in FY15 and estimated to have grown at 8% in FY16. According to the rating agency, ICRA, the sector could continue this momentum and register a growth of 8-10% in the coming financial year.

Rane Holdings Limited (RHL)

The Company is the holding company of the group. It has strategic investments in four subsidiary companies, three joint venture companies and one associate company. RHL earns its revenues in the form of dividend, license fees against use of the Rane trademark and service fees for offering management services to the group companies.


  • The group companies recalibrated their respective plans in line with Vision 2020.
  • Across the Companies, initiatives focussed on achieving business excellence commenced.
  • The group companies were honoured with multiple awards from top OEMs including Maruti Suzuki, Renault Nissan, Tata Motors, etc.
  • Various steps were taken for cost rationalization, such as localization, value engineering, yield improvement projects and other strategic saving initiatives
  • Created a new milestone with the acquisition of an aluminum die casting production facility in North America. It is the maiden acquisition for the group outside of the country.
  • Revenue increased by 26.5% to ₹ 75.85 crore in FY16 from ₹ 59.94 crore in FY15
  • EBITDA increased by 36.2% to ₹ 46.29 crore in FY16 from ₹ 33.99 crore in FY15
  • PAT increased by 37.5% to ₹ 35.65 crore in FY16 from ₹ 25.92 crore in FY15
  • Revenue increased by 8.9% to ₹ 2,431.30 crore in FY16 from ₹ 2,233.30 crore in FY15
  • EBITDA increased by 4.6% to ₹ 254.71 crore in FY16 from ₹ 243.41 crore in FY15
  • PAT declined by 7.6% to ₹ 65.54 crore in FY16 from ₹ 70.94 crore in FY15
The Company stated its 2020 objectives to deliver profitable growth by all group companies. Under the theme of “Dream, Desire and Deliver”, our efforts are focused on two broad themes – First, Accelerate Growth through new product introductions, ‘Going Global’ to drive overseas share of business to 25% from the current level of 16%, expand non-auto share of business to 10% from the current level of 3%. Second, Efficient capital management by improving operational efficiency, prioritizing products with higher ROCE and optimising Capex.

Rane (Madras) Limited (RML)

RML manufactures steering & suspension linkage products (SSLP), steering gear products (SGP) and high precision aluminium die casting products. With best in class manufacturing facilities across India, RML is a key Original Equipment (OE) supplier to Indian and International Auto majors, including Tata Motors, Ashok Leyland, Mahindra & Mahindra, Renault Nissan, Maruti Suzuki, TAFE, ZFTRW, John Deere, Polaris, etc.


Location Products Customer Segments
Varanavasi(Chennai) SSLP, SGP Passenger car, utility vehicle mainly caters to exports market and commercial vehicle for domestic market
Mysore SSLP, SGP & Hydraulic Products Tractor, Passenger car segments, and hydraulic products
Puducherry SSLP, SGP Passenger car segment
Pantnagar(Uttarakhand) SSLP, SGP Tractors and small commercial vehicles catering to customers in North India
Bollaram(Hyderabad), Sadashivpet(Hyderabad) Die casting Products Passenger car segment, medium and heavy commercial vehicle mainly caters to exports market
  • To expand its global presence, RML acquired the US-based Precision Die Casting Inc., a high pressure aluminium die casting company.
  • Given the softening oil prices, there has been a trend in the US for SUVs over passenger cars. RML is in the process of recalibrating its business and product mix for the US market.
  • RML has continued to win significant steering gear business, both in domestic as well as in overseas markets. It has also increased its linkages business to Europe.
  • RML successfully commissioned its second die casting plant in Hyderabad. Products earmarked for customers in the US and European region have started.
  • RML has secured its first Die Casting program from Europe.
  • There is a growing acceptance for RML’s Die Cast products as it bagged orders from several Tier 1 customers.
  • While the year was challenging in the After Market segment, RML’s decision to introduce several new products helped it grow at a healthy clip.
  • To improve process efficiencies, RML continued to engage in various lean productivity, productivity improvement and cost reduction projects.
  • RML’s continuing pursuit of business excellence helped it win prestigious awards from its customers, including the R&D award from Maruti Suzuki, ‘Design to Cost’ award from Renault Nissan and ‘Quality Achievement’ award from Polaris.
Standalone Financial Highlights
  • Net Sales increased by 9.8% to ₹ 829.37 crore in FY16 from ₹ 755.32 crore in FY15
  • EBITDA increased by 14.4% to ₹ 79.69 crore in FY16 from ₹ 69.67 crore in FY15
  • PAT increased by 13.2% to ₹ 14.09 crore in FY16 from ₹ 12.44 crore in FY15
Consolidated Financial Highlights
  • Net Sales was ₹ 856.79 crore in FY16.
  • EBITDA was ₹ 80.08 crore in FY16.
  • PAT was ₹ 12.67 crore in FY16.

Key factors like a normal monsoon forecast, the government’s focus on building infrastructure and continued softening of oil prices are expected to help India post top line growth numbers, as compared to the rest of the global economies. An expected boost in CV and passenger car segment will benefit RML. RML continues to focus on new business from the Passenger car and Hydraulics segments. RML will continue its journey of globalization as it expands its die casting, steering gears and ball joints products portfolio in the European and American markets. The spotlight on the Indian replacement market will continue to offset the uncertainty of the domestic OEM business.

Rane Engine Valve Limited (REVL)

REVL manufactures engine valves, guides and tappets for automotive and non-automotive applications and is a key supplier for passenger vehicles, commercial vehicles, two/three wheelers, farm tractors, stationary engines and locomotive/marine engines. A clear market leader in India, REVL supplies its world class products to leading brands including BMW, Renault Nissan, Audi, Skoda, Volkswagen, Deutz, Yamaha, Volvo, Daimler, Ashok Leyland, Hyundai, Mahindra, John Deere, Tata Motors, TVS Motors, Electromotive Diesel, Cummins etc. across the globe.

Location Products
Ponneri (Chennai) Engine Valves, Guides & Tappets
Medchal (Hyderabad) Engine Valves
Aziz Nagar (Hyderabad) Engine Valves
Trichy Engine Valves
Hirehalli (Tumakuru) Medium & Large Engine Valves
  • To achieve higher cost efficiencies, REVL consolidated the Peenya plant (Bengaluru) with the Hirehalli plant (Tumakuru).
  • REVL continued its cost reduction initiatives with a focus on long term productivity improvements.
  • With a sharp focus on R&D, REVL continues to be on the cutting edge of power train R&D. REVL has developed valves for Euro 6 and CNG application requirements for European and Indian customers.
  • REVL ramped up supplies of engine valves to major European OEM during the year.
  • Customer line rejection levels were 4 parts per million.
  • REVL continues its philosophy of building world class quality and environment management systems. It received accreditations / awards including-
    • All Plants have undergone surveillance audit for ISO/TS 16949: 2009.
    • All the Plants have undergone surveillance audit for ISO 14001:2004.
    • Customer award from Renault Nissan
  • Net Sales dropped by 11.6% to ₹ 342.44 crore in FY16 from ₹ 387.57 crore in FY15 due to decline in domestic sales by 8.5% and exports by 18.9%
  • EBITDA declined by 80.4% to ₹ 6.61 crore in FY16 from ₹ 33.72 crore in FY15
  • Loss for the year was ₹ 12.54 crore as compared to profit of ₹ 23.48 crore in the previous year

FY16 saw a lower off-take from key served customers / market segments. REVL is hopeful that the current fiscal will see improvement in demand from its Indian and overseas customers. Further, the newer emission norms and regulatory requirements will require design and development of new valve technologies combined high performance materials and special surface coating. REVL is well positioned to provide pro-active solutions to customers. It has plans to enhance its manufacturing capabilities to provide new generation engine valves and also increase the range of its large engine valve portfolio.

Rane Brake Lining Limited (RBL)

RBL is a leading player in the auto components business. It manufactures several safety critical friction material products such as brake linings, disc pads, clutch facings, clutch buttons, brake shoes and railway brake blocks for passenger cars, utility vehicles, commercial vehicles, two wheelers and railways. RBL has a technical collaboration with Nisshinbo Brakes Inc., Japan, to manufacture brake linings and disc pads.

Location Products
Chennai Brake linings, disc pads & clutch facings, Composite brake blocks, Organic pads for trainer aircraft
Hyderabad Brake linings, sintered clutch buttons, Composite brake blocks
Puducherry Disc pads, CV brake pads, Composite brake blocks
Trichy Disc pads & brake linings
  • The weakening of the Japanese yen supported RBL in keeping control on the overall material cost.
  • Multiple initiatives including product launches for OE and Aftermarket, strategic saving efforts, building higher efficiencies in the manufacturing process and better product mix helped RBL post a higher growth rate despite a single digit growth in Net Sales.
  • The continued focus on sustainability saw an increase in the use of green energy.
  • With an acute focus on customers and the adoption of best practices across all locations, RBL won accolades including –
    • Awards for ‘Consistent Quality’ and ‘New Parts Development’ from key OEMs.
    • Gold awards for Quality and Innovation by ACMA
    • Gold certificate from India Manufacturing Excellence Award conducted by the Economic Times in partnership with Frost & Sullivan (F&S)
    • Award for Energy Excellence from CII for best energy efficient unit
    • Various Gold and Excellence awards on Quality and Productivity related matters from QCFI, ACMA and other reputed organisations.
  • Net Sales increased by 7.7% to ₹ 447.91 crore in FY16 from ₹ 415.89 crore in FY15
  • EBITDA increased by 21.2% to ₹ 57.65 crore in FY16 from ₹ 47.57 crore in FY15
  • PAT increased by 59.9% to ₹ 25.76 crore in FY16 from ₹ 16.11 crore in FY15

In the year ahead, RBL will continue to focus on initiative product development cost optimization, higher value product mix and maintaining category market leadership. RBL will continue to improve its relationship with the collaborator and leverage the latter’s strength to ensure state-of-the-art and world class technology for applications in new generation vehicles. Further, it plans to increase its geographical spread covering wide varieties with the support of its partner in the low steel technology. RBL will continue its pursuit of excellence to achieve the objective of profitable growth.

Rane TRW Steering Systems Private Limited (RTSS)

A joint venture between Rane Group and TRW Automotive J.V., LLC, USA (TRW), RTSS is a leading player in the auto segment in the manufacturer of fully integrated hydraulic steering gears, hydraulic pumps, power-rack and pinion, power steering fluid, safety seat belts, airbags and plastic reservoirs. RTSS‘s high focus on quality has made it a preferred supplier for OEMs across segments including commercial vehicles, passenger cars, etc.

Location Products
Viralimalai (Trichy) Hydraulic Power Steering Gears & Valves
Guduvanchery (Chennai) Hydraulic Pumps
Guduvanchery (Chennai) Hydraulic Power Steering Gears
Singaperumal Kovil (Chennai) Air Bags, Seat Belts & Reservoir
Uttarakhand Hydraulic Steering Gears & Pumps
  • Increasing safety concerns and regulations saw good growth for Occupant Safety components (Airbags and seatbelts).
  • Given the growing demand for Airbags, RTSS constructed a new manufacturing facility during FY16.
  • As the market shifts towards EPS technology, the Power Rack & Pinion (PR&P) business saw de-growth and consequently, capacity under-utilization. The market is further expected to decline.
  • RTSS also secured Tractor OEM business during this year. A focus on material cost reduction initiatives like localization of rubber parts, seals, bar materials, value engineering projects of Weight Reduction in castings & forgings saw RTSS save ₹ 5.41 crore in the Steering Gear division.
  • The Occupant Safety division also saw remarkable savings in costs, due to multiple cost saving initiatives.
  • RTSS continued to increase local sourcing during FY16 to mitigate forex related risk.
  • RTSS commissioned a solar power plant of 1.14 MW at Arupukottai Taluk in Tamilnadu which helped save power cost by 15% in the FIG & Valve Plants of Steering Gear Division.
  • The new product development initiatives undertaken during the year 2015-16 resulted in the development and launch of several new technology products in steering gears, pumps, airbags and seatbelts.
  • RTSS received multiple awards including-
    • Recognition of ‘Long association with Tata Motors for 25 years’ for the Steering Gear Division and OSD division received M&M ‘MSES rank B’ award in recognition of manufacturing system and other processes.
  • Net Sales increased by 12.9% to ₹ 706.83 crore in FY16 from ₹ 625.94 crore in FY15
  • EBITDA increased by 19.3% to ₹ 83.65 crore in FY16 from ₹ 70.13 crore in FY15
  • PAT increased by 26.2% to ₹ 35.89 crore in FY16 from ₹ 28.43 crore in FY15

The Occupant Safety division is expected to continue its robust growth path as concerns for safety and regulation increases in India and across the globe. The positive growth in the commercial vehicle segment will continue to support the growth in the Steering Gear division. However, despite the projected growth in the passenger car segment, there is a clear shift to EPS Steering technology and hence will affect the final growth numbers in the segment. To mitigate the loss of business, the Company is focusing on new business opportunities in UV/LCV, M&HCV, SCV and tractor segments for its HPS gears. RTSS has bagged a major export order to Korea for the Occupant Safety division and is confident that it can increase its revenues from exports in the coming years.

Rane NSK Steering Systems Private Limited (RNSS)

A joint venture with NSK Ltd., Japan, RNSS a key player in the manufacture of electric power steering (EPS) and manual steering column (MSC) for passenger cars and commercial vehicles.




Location Products
Chennai Manual Steering Columns & I Shafts
Bawal Electric Power Steering
Uttarakhand Manual Steering Columns & I Shafts
  • A sharp focus on productivity improvements and capacity additions helped RNSS meet the increased demand in the EPS business.
  • During the year, RNSS completed four new products developments.
  • RNSS made the MSC business profitable, riding on the cost reductions and improvements in operating income.
  • Across RNSS, a focus on value added and value engineering through design to cost approach, has resulted in higher efficiencies and reduced costs.
  • Key customers recognised the excellent work done by RNSS as it received the award for 'Outstanding Contribution to Overall Cost Excellence' from Volvo Eicher Commercial Vehicles Ltd.
  • Net Sales increased by 23.0% to ₹ 766.41 crore in FY16 from ₹ 623.03 crore in FY15
  • EBITDA increased by 24.6% to ₹ 91.30 crore in FY16 from ₹ 73.27 crore in FY15
  • PAT increased by 34.0% to ₹ 39.63 crore in FY16 from ₹ 29.57 crore in FY15

In FY15, RNSS had announced its capex investment of over `150 crore over the next three years to gear up for the growth in the automobile segment. After launching four new products, RNSS continues to strengthen its new product development and quality management processes for new EPS business. It plans to enhance its application engineering capability for EPS columns in line with the customers’ expectations. A strong growth in the commercial vehicle segment will lead to robust growth in the MSC business. RNSS will leverage its R&D to offer the latest technological solutions to the customers. Various initiatives to improve the supply chain efficiency and cost reductions will result in increased competitiveness.

Sasmos Het Technologies Limited (SASMOS)

SasMos HET Technologies Limited (SasMos) is a leading manufacturer of wiring harnesses, electro-mechanical assemblies and unit integration products for aerospace, defence and marine industries. As part of its diversification plans, RHL has invested 45.24% in the equity capital of SasMos.


Location Products
Bengaluru Wiring harnesses, electromechanical assemblies and unit integration products for aerospace, defence and marine industries
  • The JV with Fokker Elmo i.e. Fokker Elmo SASMOS Interconnection Systems Ltd (FESIL) became operational
  • Established new line for producing Boeing F-15 panels
  • Consolidated Sales increased by 40.1% to ₹ 79.31 crore in FY16 from ₹ 56.61 crore in FY15
  • EBITDA increased by 58.2% to ₹ 6.73 crore in FY16 from ₹ 4.26 crore in FY15
  • Net Profit increased by 121.4% to ₹ 2.48 crore in FY16 from ₹ 1.12 crore in FY15

The order book of SASMOS looks good till 2020. Business with IAI and Rafael is growing. SasMos has bright opportunities to work with Boeing, MBDA, L&T and ISRO on many new programs.

JMA Rane Marketing Limited ( JMA Rane)

JMA Rane Marketing Limited (JMA Rane) is a joint venture company between RHL and Jullundur Motor Agency Company Ltd. for dealing with automobile components in the after-market. JMA Rane has wider dealer network all over the country. The financial highlights of JMA Rane for 2015-16 is as follows:

  • Sales increased by 7.0% to ₹ 60.91 crore in FY16 from ₹ 56.92 crore in FY15
  • EBITDA declined by 5.2% to ₹ 2.59 crore in FY16 from ₹ 2.73 crore in FY15
  • PAT declined marginally by 2.3% to ₹ 1.53 crore in FY16 from ₹ 1.57 crore in FY15

Human Resources

The theme of “Dream, Design and Deliver”

The theme of “Dream, Design and Deliver” is the cornerstone of our HR philosophy. Rane believes that it is its people who will power the Company to greater heights, achieve market leadership across segments in the company’s pursuit of accelerated profitable growth. The Company has designed key HR policies in the aspects of talent management strategy, compensation and benefits, etc., to get and give the best of its people as they get better aligned with the Company’s business objectives.
People Processes and Policies
FY16 saw the Company deliver on its commitment to build a high performance culture and accordingly introduced performance pay system for the senior manager and above levels. The Company also broad-based its internal job posting policy to provide employees with exposure and opportunities across the group companies. The Company realizing the importance of social media, designed guidelines on social media presence for employees to ensure that our employees that will enable them in being brand ambassadors for the Company.
Leadership Development
Given the growth plans, it is a high priority area for the Company to have a strong leadership pipeline. The Company has implemented several programs under the refreshed leadership framework which binds individual aspirations and organizational growth together, creating a high potential talent pool across all levels. This will deliver a strong succession pipeline foundation in specific functions and enhance the overall leadership bandwidth to handle the business challenges. The Rane Institute for Employee Development (RIED) plays the role of a nodal agency, ensuring effective design, delivery and overall program management of the interventions.
The Company launched the High Potential Leadership Development initiative last year and subsequently the Leadership Boot Camp and Executive Leadership Development programs have been rolled out.

Rane Institute For Employee Development (RIED)

RIED continues to play a significant role in delivering learning and development initiatives to realize its vision – ‘’build core competencies for individual and business excellence”. One of the focus areas during the year was sustaining the momentum of marketing excellence through post program engagement. Apart from leadership development, programs were delivered in the areas of Manufacturing Systems, Quality Assurance, Total Quality Management, Business Excellence, Soft Skills Development and General Management. During the year, RIED organised 97 programs totalling to 4547 man-days.
Leadership Boot Camp – Graduate Engineer Trainee (GET) Connect
To create Leaders for tomorrow, it is important to focus on the budding talents of today. At Rane, the GET Connect is one such program. The initiative aims to provide the GETs with a holistic view of Rane, build effective skills and provide a platform to connect with peers, recent graduates and experienced professionals across the group. The Company trained 62 as part of the GET Connect.
Executive Leadership Development (ELD)
ELD focuses on fostering functional / operational leadership. ELD is designed to enhance readiness of leaders for larger roles and responsibilities, handling multiple functions, job rotations to other businesses. 22 executives participated in this program. The Industrial Relations were cordial in the Plants.

Corporate Social Responsibility

 Core belief of 'giving back to society’.

CSR is one of the focus areas for the Company in its core belief of ‘giving back to society’. The Company focuses on four thrust areas for its CSR activities – Education, Healthcare, Environment and Community Development.
Education
In this area, the Company endeavours to offer quality technical education to the rural youth at the Rane Polytechnic, Trichy. The Financial Year 2015-16 saw 253 students completing their diploma program.
Community Development
As part of the community development initiatives, the Company continued to support two institutions - Maithree and Worth Trust. While Maithree tries to address the development needs of special children, Worth Trust focuses on mainstreaming the hearing and speech impaired people into society.
The Company launched the High Potential Leadership Development initiative last year and subsequently the Leadership Boot Camp and Executive Leadership Development programs have been rolled out.
Healthcare
In the healthcare space, the Company extended support to the physically challenged people in and around Trichy through the Spastics Society, Trichy. The Company partnered with Freedom Trust, and conducted disability assessment camps and recommended mobility aids to those in need.
Flood Relief
As the rains wreaked havoc on Chennai and its residents, the Company partnered with Ramakrishna Mission and Freedom Trust to offer relief materials in the form of food and daily essentials and giving mobility aids to physically challenged persons who lost their appliances in the flood.
The company also extended support to GanapathyIyer Girls High Secondary School, Chennai to mitigate the infrastructure damages during the Chennai floods.
In addition, the Company offered support to Satyananda yoga Charitable Trust as part of flood relief.

Information Technology

Rane Data Centre

Rane’s centralized IT service (Rane Data Centre) provides IT Infrastructure and application support across group companies. SAP the group’s ERP system has been upgraded with enhancement pack (Ehp 7) along with the hardware infrastructure.
Continuous engagement with the businesses have been set in motion towards identifying and implementing LOB related key projects to improve process efficiencies.
As a part of our digital journey, initiatives such as vendor portal, Auto DX (EDI with Customers) have been implemented to enhance collaboration with our Suppliers and Customers. E-procurement solution has been taken up for improving the procurement efficiency. Important workflow applications have been implemented that aims at improving employee engagement, process efficiency, compliance and transparency.
ISMS operations have been strengthened to address the ever increasing cyber security threats and vulnerabilities.

Internal Control

The Company has put in place robust internal control systems to prevent operational risks through a framework of internal controls and processes. These controls ensure that the business transactions are recorded in a timely and complete manner in the financial records, resources are utilised effectively and the assets are safeguarded.
The internal audit function is outsourced to a professional firm of independent assurance service providers. The Audit Committee and the Board in consultation with the internal auditor, statutory auditor and operating management approve annual internal audit plan. The scope also covers the internal financial controls and internal controls over financial reporting. The internal audit findings are placed before the Audit Committee at each of its quarterly meeting for review.
The management’s responses and counter measures are discussed in the Audit Committee meetings. This process ensures the robustness of internal control systems and compliance with laws and regulations, including resource utilization and system efficiency.

Risk Management

The Company has laid down well-structured procedures for monitoring the risk management plan and implementing the risk mitigation measures. The risks are broadly classified into strategic risks, operational risks, financial risks and statutory compliance risks. These risks are rated based on factors such as past year experience, probability of occurrence, probability of non-detection and its impact on business.
The top management reviews the strategic risks, the risks with high probability and high impact, every quarter and presents its report along with risk mitigation plan to the Board of Directors on half-yearly basis. The strategic risks are taken into consideration in the annual planning process along with their mitigation plan. Other risks are covered as part of internal audit process and presented to the Audit Committee every quarter. The business processes risks and the related controls are subjected to internal audit and reviewed on a quarterly basis. The risk ratings are revalidated with the top management as part of the internal audit process every quarter. The overall re-assessment of risks at company level is carried out and presented to the Board of Directors once in two years for their review.

Outlook

The Company has outlined its Vision 2020 - Dream, Desire and Deliver, in the pursuit of delivering profitable growth by the group. The key pillars to realise Vision 2020 are Accelerating growth, increasing overseas share of business significantly, exploring futuristic opportunities in emerging new auto products and expanding footprint in non-auto space especially Aerospace & Defence.
For the Company, FY17 and beyond will see the next level in its evolution towards becoming a global company – from operational excellence to business excellence. With the Company’s famed Rane Business Excellence Model, each company in the group is going through a detailed audit on business excellence to zero-in on areas needing improvement.
Beyond the Company, it seems that uncertainty and pessimism will continue to be part of the economic and business news in FY17. The IMF has already made a downward revision of the global growth by 0.2% to 3.2% relative to its January 2016 World Economic Outlook update. Beyond India and the slowing and uncertain Chinese juggernaut, the economic outlook of other growth engines namely Brazil and Russia has deteriorated rapidly in the past few months.
Nevertheless, the outlook for India continues to be bullish. A forecast of a normal monsoon may see an improvement in rural demand. Domestic consumption is likely to see a boost from the implementation of the 7th Pay Commission recommendations and One Rank One Pension for the armed forces. The softer interest regime will further fuel consumer sentiments.
Even the outlook for the Auto and auto ancillary industry seems to be on the optimistic side. According to the Automotive Component Manufacturers Association of India (ACMA), the Indian auto-components industry is expected to register a turnover of US$ 100 billion by 2020. Indian auto-component makers are well positioned to benefit from the globalisation of the sector as exports potential could be increased by up to four times to US$ 40 billion by 2020.
The Rane group with various companies under its fold will certainly ride this boom. The Company is making adequate provisions on all fronts – improving process efficiencies, reducing cost, building scale in existing markets, exploring new markets and talent management. The Company continues to work with its various technology partners and OEMs to bring in the best in class products to the country and outside of the country. This is in line with Vision 2020 where the Company aims to have a significant portion of its revenue from exports.

Opportunities and Threats

With India’s ranking improving in the ‘Ease of Doing Business’, and the better socio-economic factors, the country is seeing an interest in manufacturing across all sectors including auto, defence, etc. Given its strong brand equity, built over the years, the Company will certainly benefit from potential demand from its key segments. A stronger legislation and rising awareness about safety in cars will benefit the Company’s prospect in the Occupant Safety segment.
However, the threats of economic downturn or slowdown in the key markets can lead to decreased volumes and capacity utilisation. The Company can be affected by a weak currency which can have a direct bearing on margins. Other factors, which can affect the Company, include any sharp contraction in automobile sales, increased competitive pressure, etc.