India’s economy is showing signs of recovery on the back of strong support from all sectoral engines. India has inched up its position to become the 6th largest economy in the world, overtaking France.
FY 2017-18 has been a challenging year for India’s economy, with some transitionary disruptions during the implementation of structural reforms by the government. However, the year ended on a strong note, reflective in the 6.6% Gross Domestic Product (GDP) growth of the country.
The implementation of the Goods and Services Tax (GST) has radically transformed India’s business landscape by facilitating increased accessibility. There is also a renewed emphasis by the Government on investment in infrastructure and employment generation. This has opened up a plethora of opportunities for businesses to grow and contribute towards national progress.
Today, India is the 4th largest automobile market in the world. The industry is keeping pace with the country’s economic growth and is witnessing a never-seen-before transformation led by electrification and stringent emission norms. This augurs well for the tyre industry, which grew by 7% in volume during the year. Moreover, the government’s imposition of the anti-dumping duty on cheap Chinese truck and bus radial tyres also came as a relief to the India’s tyre industry.
During the last decade, the use of radial tyres in the truck and bus segment has gained significant popularity over bias tyres. As pioneers of India’s radialisation movement, we, at JK Tyre, are leveraging this opportunity as we continue to maintain our leadership in this growing segment.
During the year, the Truck/Bus Bias (TBB) segment declined marginally at less than 2%, while the Truck/Bus Radial (TBR) segment grew by 7%. Overall, the level of radialisation in the truck/bus segment increased to 47% during year and is expected to cross 50% in the year ahead.
The shortage of domestically produced natural rubber and high import duty on the same adversely impacted the tyre industry, which had to resort to imports to the extent of 58% of its requirement. Furthermore, the raw materials overall witnessed a price increase by 13% during the year, partly also due to anti dumping duties imposed on a number of them, which have insignificant or insufficient domestic supply.
Building a future-ready business
At JK Tyre, we have always pursued a strategy with a futuristic outlook. By adopting differentiated strategies, we could increase and further strengthen our market presence across categories. Reinventing ourselves on a consistent basis is ingrained in our business process, and we revisited our internal efficiencies and delivery systems across the business, to become Future Ready.
The outcome is that your Company outgrew the industry in FY 2017-18 in volumes, with a growth of 10%. We increased our market presence across the range, including trucks, LCV, SCV, Passenger Car Radial (PCR) and Farm and OTR tyres. Our net sales were up by 9% and exports by 34%.
Leveraging on our future-focussed thinking, we launched new products, initiated digitalisation of our processes across the value chain and reinforced our focus on premiumisation of our portfolio. During the year, your Company launched 180+new products.
Technology and R&D
Our state-of-the-art Research and Development (R&D) centre at Mysuru – ‘RPS Centre of Excellence’ (RPSCOE) – is a step towards creating a global hub for R&D. We have crafted strategic development plans for every category of tyre, keeping in mind the emerging technologies and global regulations.
Full year of Operations at Cavendish Industries Ltd. (CIL)
After our acquisition, Cavendish Industries Ltd. (CIL) saw the first full year of operations in FY 2017-18, and has been performing well.The acquisition marked our entry into the fast growing two & three wheeler segment. I am happy to share that during the year, several two wheeler makers expressed interest in our tyres and we are confident to expand our reach in this segment in the coming year.
Moreover, the takeover of CIL has further strengthened our market leadership in the growing TBR segment. We are expanding our TBR capacity at CIL to meet the rising demand for our ‘JK Tyre’ brand.
Restructuring at JK Tornel
JK Tornel in Mexico has been performing well and we undertook a labour restructuring during the year. It is a path breaking event wherein we streamlined our workforce and performance parameters, which helped reduce our manpower cost by a third (35%). This step itself will bring in rich dividends in the coming period and will add to our overall margins.
With JK Tornel, your Company has greater access to the North American and emerging Latin American markets. Through JK Tornel, we have enhanced our Original Equipment Manufacturer (OEM) presence with Chrysler, Nissan (Car/Light Truck Radial), John Deere (Farm) and Case New Holland.
Strengthening customer engagement
At JK Tyre, we carve our product strategies to suit our customers’ diverse needs. We are committed to be an end-to-end tyre solutions provider for them. Today, JK Tyre has a strong pan-India distribution network of over 4,000 channel partners. We have set up, 40 -‘JK Tyre Truck Wheels’ outlets, which are fully equipped truck tyre service centres, offering ‘Total Tyre Solutions’. We also have, 300+ ‘JK Tyre Steel Wheels’ centres exclusively for our PCR tyre retailing, and, for Tier-II and Tier-III towns, 60+ ‘JK Tyre Xpress Wheels’ centres which offer a full range of PCR, SUV, LCV, Farm and 2-3 Wheeler tyres.
Our Fleet Management (FM) programme is aimed at providing a comprehensive mobility solution to our customers. Under this programme, we have over 1,500 fleet operators associated with us. To reach out to customers in the interiors of India, we have tied up with over 450 fuel retail outlets to display and sell JK Tyre products.
In the overseas market, we have webbed a distribution network of 250 dealers, including 100 exclusive dealers for our brands. We have engaged 200 distributors in the international market for an extensive coverage, in addition to our marketing hubs at Mexico, Colombia, the US, Indonesia, Dubai and Moscow. We have also established mass merchandise tie-ups with Walmart, Chedraui and Coppel in Mexico for marketing and retailing our tyres through their outlets.
Making the ‘JK Tyre’ brand omnipresent
JK Tyre is the only Indian tyre manufacturer to be included in the list of Superbrands, India in 2017, for the 6th consecutive year. Through our various campaigns on diverse media such as digital, radio and mass media, we have been reinforcing our brand commitment among the target customers. ‘Ab se tyres mein sirf JK is OK’ is one of our high-visibility campaigns for the two wheeler category, which has been well received by the trader community and customers.
20 Years of the JK Tyre National Racing Championship
Motorsports has been an integral part of JK Tyre. We have been championing the role of promoting motorsports in India since the last three decades. During FY 2017-18, the JK Tyre National Racing Championship completed 20 years of its eventful journey. We also collaborated with the global two wheeler giant, Suzuki, to include the two wheeler racing series for the first time,in the National Racing Championship. The association has helped us connect with our potential customers in the two wheeler segment and carve a niche for our brand in the segment.
At JK Tyre, we invest in people strategies and have adopted several of them, to develop our employees’ capabilities through our learning programmes across levels. These initiatives comprise, competency-based assessment and coaching programmes for managers, and skill-based training programmes for the operator personnel, at our plants. We also have a structured approach for employee engagement.Our talent management processes and systems are aligned to directly support our business requirements as also to help create a sustainable and inclusive culture within the Company. We have been recognised as a ‘Great Place to Work’ by the Great Place to Work institute.
Our inherent value systems drive our commitment towards the society. We have touched the lives of over 10,00,000 (10 Lac) people in myriad ways through our CSR initiatives focussed on healthcare, education, livelihood enhancement, water management and environment, during a decade. The beneficiaries of our initiatives are largely women and people from the underprivileged communities. JK Tyre received the UCCI CSR Award 2018 for its exemplary contribution to society.
Since availability of credit is the biggest challenge faced by the poor and marginalised people, we formed self-help groups (SHGs) to promote inter-loaning and bank linkages. There are around 40 functional SHGs today, with more than 600 women members.
Our ‘Parivartan’ project, which focuses on reproductive and child healthcare, has significantly reduced the Infant Mortality Rate (IMR) and Maternity Mortality Rate (MMR) prevalent in the tribal-dominated Rajsamand district of Rajasthan. It has also inculcated health-seeking behaviour among the marginal and disadvantaged communities. During the year, more than 9,000 patients have been provided medical support and free medicines under this programme.
We have also partnered with the Government of India in its ambitious ‘Swachh Bharat Mission’ and built more than 1,200 toilets in rural areas during the year as part of our efforts towards a cleaner and greener India, taking our tally to 3,000+ toilets.Through such social investment initiatives, your Company is constantly working towards the betterment of the society.
At JK Tyre, we have been making conscious efforts towards ensuring inclusive growth for stakeholders, communities and the environment at large. We have published a comprehensive Sustainability Report, highlighting some of our key contributions in this direction.
We are proud to share that your Company is today among the top four energy-efficient tyre manufacturers in the world. Our water consumption has reduced to world benchmark levels and we have increased our dependency on renewable energy, such as wind and solar, to 37% during the FY 2017-18.
The year ahead looks promising, with the Government of India committed to strengthening infrastructure. It is planning to spend Rs. 1 lakh crore between FY 2018-19 and FY 2019-20 to build roads under its Pradhan Mantri Gram Sadak Yojana (PMGSY). This initiative will bolster economic progress and facilitate the rising demand for automobiles in the country. India’s GDP growth is expected to touch 7.3% in FY 2018-19. I would like to point out that the GST on tyres at the highest slab of 28%, is a dampener on the overall cost of transportation, moreso, as it moves goods and essential supplies for the common man and nation at large. I would, therefore, urge the Government to rationalise the GST on tyres to no more than 18%.
I would like to take this opportunity to thank each one of you dear shareholders, our valued customers, dealers, suppliers, banks, governments and other stakeholders, who have been our partners in this eventful journey, for their continued support. I would also like to convey my appreciation for the valuable guidance provided by my fellow Directors on the Board. I would particularly like to applaud and acknowledge the dedication and commitment shown by Team JK Tyre towards building a robust brand and company. It is through all your support and unstinted faith in our business endeavours that your Company is today among India’s leading tyre manufacturers.
Note: These excerpts do not purport to be a report of the proceedings of the 65thAnnual General Meeting of the Company held on 22ndAugust, 2018.