Murugappa Group posts 9% growth in FY 2015-16, Group EBITDA crosses Rs. 3000 Crores

Chennai, 7^thJune 2016: Murugappa Group recorded a growth of 9%, clocking a turnover of Rs.29,470 Crores during 2015-16 (last year Rs.26,926 Crores). Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) posted a growth of 4%, at Rs.3,035 Crores (last year Rs.2,921 Crores). Profit Before Tax and Extra Ordinary Items (PBT excluding EOI) was Rs.1,880 Crores (last year Rs.1,780Crores) registering a growth of 6%.  In addition, the group has earned a one-time income of Rs. 883Crores on account of 14% stake sale in M/s Cholamandalam MS General Insurance Company.

Highlights

1. Tube Investments of India Limited sold 14% shareholding in M/s Cholamandalam MS General Insurance Company to its joint venture partner, M/s Mitsui Sumitomo Insurance Company Limited, Japan (‘MSI’),consequent to which MSI increased its shareholding in the JV from 26% to 40%.

2. Polutech Limited has entered into a 51:49 Joint Venture with Organo Group of Japan, a leading player in water treatment engineering services. The joint venture will target emerging needs of industrial water treatment requirements of the growing manufacturing sector in India.

3. TI Tsubamex Limited, the 75:25 joint venture between Tube Investments of India Limited and Tsubamex of Japan, started commercial production this year. The joint venture is into the designing and manufacturing of sheet metal stamping dies for the automotive industry and white goods sector.

4. Financial services group recorded a stellar performance during the financial year
   1. Cholamandalam Investment and Finance Company Limited: Vehicle finance disbursements grew by 32% and Home Equity disbursements grew by 14%.
   2. Cholamandalam MS General Insurance Company Limited: Gross written premium recorded a strong growth of 30% against an industry growth of 14%.

5. Carborundum Universal Limitedwitnessed a25% growth in EBITDA supported by improved performance of Abrasives and Electromineral divisions.

6. Shanthi Gears Limited, a subsidiary of Tube Investments of India Limited, recorded a strong performance with 34% growth in EBITDA during the year.

7. Aggregate capital expenditure programmes to expand/debottleneck/modernise facilities were Rs.289Crores on a consolidated basis.

Company-wise Performance:

Summary of Gross Sales and EBIDTA are presented below:

Figures in Rs.Crores

Sector highlights for 2015-16

Financial Services Businesses

Cholamandalam Investment and Finance Company Limited (CIFCL)

CIFCL’s Assets under Management (AUM) registered a growth of 17% to Rs.29,813 Crores during FY2015-16. With a favourable revival of commercial vehicle market coupled with the strengthening of dealership networks, CIFCL’s Vehicle Finance disbursements registered a strong growth of 32% in FY2015-16. Home Equity Disbursements grew by 14% in FY2015-16.

CIFCL has accelerated NPA recognition at 4 months overdue and increased standard asset provisioning at 0.40%, a year ahead of the RBI mandate. Further, a one-time provision of Rs.55 Crores was created as Standard Asset Provisioning to cover the revised asset classification norms required to be complied by March 2018. Post accelerated provisioning, profit after tax registered a growth of 29% year-on-year to Rs.575 Crores.

Capital adequacy Ratio was comfortable at 19.68% against the regulatory requirement of 15%.

During the year, CIFCL acquired 63% stake in M/s. White Data Systems India Private Limited, a company engaged in the business of providing freight data solutions.

Cholamandalam MS General Insurance Company Limited

Gross Written Premium witnessed a strong growth of 30% during FY2015-16 to Rs.2452 Crores against an industry growth of 14%.

The growth was supported by premium earned through new partnerships entered into during the year. Profit after tax grew by 8% year-on-year to Rs.148 Crores.

Investment income during the year was Rs.296 Crores; Investment book size as of end March 2016 (including pool funds) was Rs.3861 Crores.

Joint venture partner M/s Mitsui Sumitomo Insurance Company Limitedhas increased its stake from 26% to 40% in FY15-16.

Engineering Businesses

Carborundum Universal Limited (CUMI)

CUMI reported an increase in consolidated gross sales by 2% to Rs.2172 Crores in FY 2015-16 compared to Rs.2131 Crores last year. Abrasives sales registered a growth of 6% compared to last year, Electrominerals segment remained at the same level due to rouble translation and winding down of Thukela Refractories Isithebe and Ceramic sales decreased by 3% from last year.

On a consolidated basis, Profit before Interest and Tax increased to Rs. 267 Crores from Rs.189 Crores, due to improved profitability in Abrasives &Electrominerals, offset by the drop in ceramics division.

Abrasives

At a consolidated level, the abrasives division delivered 6% growth in revenues at Rs.912 Crores compared to Rs.859 Crores last year, driven by Indian operations. Indian operations comprising Wendt, Sterling abrasives and CUMI abrasives delivered Profit before Interest and Tax growth of 44% to Rs.89 Crores from Rs.62 Crores last year.

Electro minerals

At a consolidated level, the electro minerals division registered flat sales of Rs.731 Crores primarily due to rouble translation impact on sales from Russian operations and relocation of South African plants to India. With reduction in the losses from South African entities, the profit before tax and interest has increased by 61% from Rs.79 Crores to Rs.127 Crores.

Ceramics

Consolidated ceramics division sales declined by 3% to Rs.468 Crores from Rs.482 Crores last year. The standalone Industrial Ceramics business had a reasonable growth;however, it was offset by lower sales in Indian refractories business. Profit before interest and tax decreased by 7% from Rs.71 Crores to Rs.66 Crores.

Tube Investments of India Limited

The company’s revenues grew by 3% to Rs. 4,451 Crores and EBITDA grew by 9% during the year.

Tube Products of India (TPI)

TPI, a leading supplier of precision tubes for the auto industry, witnessed a flat volume growth in Tubes and negative growth of 7% in Cold Rolled Steel Strips during the year compared with the previous year. The revenue for the year was lower by 6% at Rs. 1629 Crores as against Rs. 1725 Crores in the previous year. Profit before Interest and Tax for the year was Rs.95 Crores, as against Rs.103 Crores in the previous year. The drop in profits was due to the time taken in stabilization of the large diameter tubing facility, revenue from which is expected to pick up in 2016-17.

TI Cycles (TICI)

TICI registered a growth of 14% in volumes during the year driven by higher volume of institutional sales. The revenue for the year was higher by 13% at Rs.1485 Crores against Rs.1314 Crores last year. Profit before Interest and Tax for the year was Rs.79 Crores as against Rs.58 Crores in the previous year, a growth of 37%.

TI Metal Formed Products

TI Diamond ChainsIndia grew by 7% in the sale of automotive chains segment. The sale of Industrial Chains and Fine Blanked Components recorded a volume growth of 6% and 8% respectively over the previous year.The doorframe segment volume was lower by 5% compared with the previous year due to decline in the sale of select models of major car manufacturers.

The revenue for the year was higher by 3% at Rs. 954 Crores as against Rs. 929 Crores in the previous year. Profit before Interest and Tax for the year was Rs. 86 Crores as against Rs. 81 Crores in the previous year, a growth of 6%.

Shanthi Gears Limited

Shanthi Gears Ltd., a subsidiary company of TII operating in the Industrial Gears Business, registered a growth of 9% in gross sales for the year.  Profit before Interest and Tax for the year was higher at Rs.23 Crores against Rs.13 Crores in the previous year.

Agri-businesses

Coromandel International Limited

Gross sales of Coromandel International grew by 2% during 2015-16 and stood at Rs.11,614 crores.

The year 2015-16 was a challenging one for Agriculture due to deficient monsoons over two consecutive years of 2014-15 and 2015-16. The Southern peninsula, comprising of our major operating markets, had a 15% deficiency during the Kharif season. Howevermonsoon projections by IMD and Skymet for Kharif 2016 forecast a brighter outlook for 2016-17.

With regard to the Crop protection business, Coromandel had a challenging year on the formulation business in the domestic market due to adverse monsoon conditions. However, that has been more than offset by improved performance from the technical business segment. Coromandel will continue to focus on new product development with an R&D facility established at Hyderabad.

Retail businesswith775 stores across Andhra Pradesh, Telangana and Karnataka focused on improvement of operational efficiencies. However, sales got impacted by the adverse monsoon situation in Telangana and in some operating markets of Karnataka and Andhra Pradesh.

E.I.D.Parry (India) Limited

EID Parry achieved a growth of 46% in revenues to Rs. 3,897 Crores on account of full workingof the sugar refinery business. Profit before Interest and Tax was Rs. 26 Crores as against Rs. 189 Crores last year. Profitability was adversely impacted due to historic low sugar prices.

Sugar Division

During the year, the division crushed sugarcane of 56 Lakh MT (Last Year 55 Lakh MT) on a consolidated basis. The company witnessed an increase in cane crushed across its units in Karnataka while the Tamil Nadu&Andhra Pradesh units witnessed a decline due to poor monsoon which also impacted the recovery in the region. Salesrealizations were lowerin the first three quarters of the financial year.

Based on representation from the Industry and with the active intervention of the Central Government, the fortunes of the industry changed, with three policy initiatives; ethanol blending programme increased from 5% to 10%,  removal of Excise Duty on Molasses for Ethanol Blending , and Export of Sugar with the support of the Government.

Prices improved by Q4,though they wereinsufficient to make up for the losses posted in the previous quarters.

Parry Sugars Refinery India Private Limited (earlier ‘Silkroad Sugar’), a standalone refinery at Kakinada (AP), stabilized operations during the year and contributed significantly to the growth of the parent company.

Bio Products Division (Comprising Bio-Pesticides and Nutraceuticals)

Consolidated gross sale for the division was Rs. 401 Crores as against Rs. 393 Crores last year. The division registered a decline in Profit before Interest and Tax of Rs. 48 Crores (corresponding to previous year of Rs.53 Crores).

Coromandel Engineering Company Limited

The company registered a decline in revenues of 47% on account of market conditions.

Other Businesses

Parry Agro Industries Limited registered a growth of 2% in revenues and EBITDA saw an improvement of 19%.

New Ambadi Estates Private Limited (a Company engaged in rubber plantations) increased gross sales for the year by 11% due to higher off-take.

Parry Enterprises India Limited (PEIL) reported a 3% growth in revenues to Rs. 130 Crores.

Ambadi Enterprises Limited reported a decline in revenueby 16% over the previous year. However the EBITDA has improved by 16% during the year.

HR Updates:

The Group’s employee wellness initiatives have found a willing and enthusiastic audience across all levels and companies. In the latest campaign, over 5800 employees participated from across the country, andaround 3000 employees of the Group have lost around 5.30 tonnes of weight (average 1.8kg weight loss per person)! In Employee Engagement, repeat surveys reveal an encouragingly continuous improvement in engagement levels.  Continuing its commitment to Leadership Development, the Group re-designed and re-launched its Young Leaders Programme in partnership with IIM Ahmedabad.  This prepares mid-level managers for transitioning into seasoned leader level by addressing their development needs. The Group continues to strengthen measures to make it a women friendly workplace. Following the 180-day maternity leave policy introduced last year, the Group has rolled out enhanced polices for Work-from-home, Flexi-working hours and safe travel policy for women employees.

Corporate Social Responsibility

• As part of the ongoing corporate social responsibility initiatives, the Group continued its contribution to various projects under the AMM Foundation (AMMF) and Shri AMM Murugappa Chettiar Research Centre (MCRC).
• In this third year of the AMM Murugappa Chettiar Centenary Scholarships (full fee), the Foundation has supported 76 Murugappa scholars, who will be supported for the entire course fees and hostel fees. These scholars are pursuing their Medical, Engineering, Arts and Science (52 in Engineering, 16 in Medicine, and 8 in Arts and Science) from Government Colleges or Government-aided colleges. 55 of these students are first-generation graduates; 50 have a rural background. These students also go through a series of workshop and training programmes to hone their soft skills.
• The Foundation has supported the education of 100 most deservingeconomically backward students through the AMM Murugappa Chettiar Centenary Scholarship.
• The Hospitals run by the AMM Foundation have reached out to over 8 lakh people through its out-patient services, and 12,000 patients through its in-patient facilities.
• The AMM Foundation reached out to 23,000 patients from twelve villages around the EID Parry sugar plant at Haliyal (North Karnataka) through the Mobile Health Van. The AMM Foundation has also launched a second Mobile van in UmargamTaluk of Sarigam, Gujarat.
• The educational institutions (schools and the polytechnic) run by the AMM Foundation have catered to the educational needs of around 10,000 students of which 7000 belong to the marginalized group.
• The Murugappa Youth Football Academy, inaugurated this year to channelise the energies of underprivileged school students below 15 years, currently coaches 100 students in football. This year the Academy has had two coaches from Arsenal – community coaching programmes conduct a five-day training camp for the MUFA boys.
• In addition to the above, during the year, the Group companies also stepped up development initiatives primarily catering to the communities around the plant locations, in the area of education and health. Coromandel International worked on the areas of girl child education, sports, education, clean drinking water and healthcare. EID Parry organised several healthcare-oriented camps and educational activities at and around the towns where the sugar plants are located. TII contributed in the areas of education in the form of infrastructure support to students (hostel building, school amenities etc.) CUMI reinforced its efforts towards skills development in local communities around their factories in Tamilnadu and Kerala. Chola MS took up the causes of education and aid to the needy. CIFCL worked in the area of road safety education, provision of drinking water and sanitation facilities, focussing on amenities near highways. All the companies also made significant contributions to the relief activities after the Chennai floods.

Brand update

The Group launched a new tri-lingual brand campaign continuing their successful format of eight different films featuring major brands of the Group. The ads were created in Hindi, Tamil and Telugu to leverage the increasing preference for the rich idiom of the local languages.The campaign theme is ‘Together, let’s progress’ and in Hindi ‘Jud KarBadhein’, rooted in the prevailing mood of progress.

Safe Harbor

Some of the statements in this news release that are not historical facts are forward looking statements. These forward looking statements include financial and growth projections as well as statements concerning our plans, strategies, intentions and beliefs concerning our businesses and the markets in which we operate. These statements are based on information currently available to us, and we assume no obligation to update these statements as circumstances change. There are risks and uncertainties that could cause actual events to differ materially from these forward looking statements. These risks include, but are not limited to, the level of the market demand for the products, the highly competitive market for the types of the products that we offer, market condition that would cause customers to reduce their spending for the products, our ability to create, acquire and build new businesses and to grow existing businesses, our ability to attract and retain qualified personnel, currency fluctuations and market conditions in India and elsewhere around the world, and otherwise not specifically mentioned herein but those that are common to industry.

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