Dear Stakeholders,
The world has changed drastically with the coronavirus pandemic. This is an extreme
event – one for which there is no precedence. Rane Engine Valve Limited (REVL)
started experiencing the adverse impact of the pandemic from March 2020 with the
Government announcing lockdown to contain the spread of coronavirus. This came after six
quarters of decline in the automotive market which created an even more challenging
business environment. Even with the lockdown eased in various parts of the country, it
will take considerable time before normalcy returns.
I would like to share details around the Company's performance in FY2020 and the
outlook for the business in these unprecedented times.
The global economy grew at a slower pace in 2019 compared to 2018. There was increased
uncertainty driven by rapid shifts in trade policies and resulted in deteriorating
business confidence and dampened investment growth across most regions. The Indian GDP
growth dipped to 4.2% in FY20 significantly slower than 6.8% in FY19. This slowdown is
attributable to credit squeeze negatively impacting consumption, investments and exports.
The manufacturing sector remained flat in FY20. The Indian automobile industry faced major
headwinds caused by global factors and rapid policy changes which made transition very
difficult. An example was limited time given for transitioning to BS6. During the fiscal
year the demand environment remained severely impacted by slowdown in the economy.
REVL continued to improve productivity and quality during the year despite drop in
capacity utilization. REVL continued the good performance on customer quality, pursued
proactive R&D engagements to align technology development and won new businesses.
Total Quality Management (TQM) principles continued to rule as a basic mantra and enhanced
‘Business Excellence Model' helping the company become a Great Place To Work
Certified Company and win several accolades. REVL's sales declined 15.7% due to drop in
domestic and export volumes. EBITDA declined 33.2% due to steep drop in volume. Engine
Valve business has some high fixed costs due to legacy. While in last few years actions
have been taken to correct this, such a drop in volumes could not be remedied in the short
run. This was partially mitigated by operational performance improvement and favourable
raw material price.
Covid-19 is significantly impacting the performance of FY21 and the Company is working
on various cost savings initiatives to reduce the impact. These measures are targeted at
improving productivity, optimizing manufacturing cost and includes management staff taking
salary reductions ranging from 10% to 35% from Junior to Senior levels.
The Covid-19 pandemic has significantly affected the business and disrupted the
turnaround efforts. An excellent, dedicated and professional team of employees continue to
drive forward the Company's efforts on winning new orders and improving the operational
performance and examining options to expedite the improvement. I appreciate your patience
and faith in us. On behalf of the entire Board of Rane Engine Valve Limited, I would like
to thank all our stakeholders – Customers, Employees, Vendors, Investors, Bankers,
Government, and most importantly our shareholders, who have conferred immense confidence
in us, throughout this long journey.