QUARTERLY MAGAZINE October 2023 Vol 14
QUARTERLY MAGAZINE October 2023 Vol 14
Spotlight 
The conference included sector updates from the heads of respective companies and Group Management Board Members; talks by guest speakers KV Kamath, Chairman, Jio Financial Services; Nilesh Shah, Managing Director, Kotak Mahindra Asset Management; Vivek Gambhir, Chairman, Boat Lifestyle; and Avinash Goyal, Senior Partner, McKinsey & Company. This was followed by a gala Awards night recognising the Outstanding Achievers of the Group.
Pramod kickstarted the Annual Conference by sharing updates on the Group’s Financial Performance, along with targets for the current year. In FY23, the group crossed the milestone of ₹ 35,000 crore in revenue and is today a USD 4.4-billion conglomerate, recording an overall growth of over 21% from the previous year. The EBITDA margin however was muted with a growth of 7.5%.
Pramod shared key areas where the group continues to perform well; the total capital employed stands at ~2 billion USD, which the group has continued to invest in cycles both through organic and inorganic routes. Three group companies — Zensar, RPG Life Sciences, and Raychem RPG — are completely debt free. Sustainability continues to be a core focus with group companies setting out well laid-out targets. For example: Zensar is targeting to become net-zero by 2040 and CEAT has aimed to reduce its carbon footprint by 50% by 2030. To achieve this, companies have put in place stringent institutional measures with major initiatives being driven from the top.
On Digital, RPG Group continues to drive the adoption of technology. Nearly 95% of all banking transactions are on digital platforms. Additionally, upskilling continues to be a focus area with a dedicated task force helping curate courses on finance on the digital academy.
Pramod shared that the group has significantly outperformed the index in terms of value creation over the last 18 months, not only in terms of market but also in comparison to larger organisations. In the last four years, the group has given a 2X return in terms of value creation, the outperformer being RPGLS which has delivered a 5X return in the last five years.
Lastly, to drive the growth agenda of the group forward, he shared that CFOs across group companies have been collaborating with the teams to identify financing opportunities for further investments, and drive cost reduction and margin improvement programmes.
Arnab took the audience through some of the key milestones the company achieved during the year including becoming the first tyre company globally to win the Deming Grand prize and winning the Lighthouse designation for its Halol plant by the World Economic Forum. Arnab shared how the brand power of CEAT continues to rise. It has consistently ranked as the most trusted brand among the auto ancillary companies in India for the last four years. Digital engagement has increased over 12X with the customers, and the company has onboarded two new cricketers this year — Harmanpreet Kaur and Shafali Verma, both rising stars of the game.
CEAT continues to invest in R&D, and as a result, some of its key products provide more shelf-life and fuel efficiency than the market leader, Michelin. The company is now focusing on premiumisation. In electrification, the company has a 14% share of car original equipment manufacturer (OEM) market in India, a 40% share in 2-wheeler OE market, and had the distinction of being the first-ever EV tyre to be accepted in India.
The company continues to make good inroads in Brazil, EU, and the USA. CEAT is now the No.1 imported brand in specialty in Brazil; the company sells 1 Million+ PCR tyres in Europe, and is no. 2 in Bangladesh. In line with its expansion plans, the company plans to launch PCR and TBR in the US in the coming months.
Shedding light on the financial aspect, Arnab shared how CEAT has seen the highest CAGR growth in the industry in five years, closing the gap significantly vis-à-vis the market leader.
Going ahead, the company is working to develop tyres for green vehicles, including biofuel and hydrogen; make premium tyres for SUVs; and focus on green and sustainable manufacturing. Arnab shared a few key areas that will fuel the company’s growth to the next level — increasing its export turnover, especially in EU, Bangladesh, and Sri Lanka markets, increasing dominance in 2-W leadership in India; improving leadership position in passenger radials; and improving quality in truck bus radials.
Vimal took the audience through the ~2.2 Billion USD EPC company’s growth journey. From operating in five segments a few years ago, the company today operates in 30 segments spread across key infrastructure sectors of the government while looking to expand into newer segments such as green hydrogen, wind, hydrocarbons, ropeways, and ports.
Vimal spoke about the growth of the civil and urban infrastructure business which continues to demonstrate exponential growth. The business is executing 70 projects today across industrial plants and factories, residential buildings, urban infra, water pipelines, defence and data centres, airports, high-rise buildings, industrial EPC, hospitals, and commercial buildings. He highlighted some of the key nation-building projects the company is executing, including the supply of potable drinking water to nearly 8 lakh households in rural Odisha and Madhya Pradesh.
The Power T&D business has witnessed a bounce back owing to the government’s focus on green energy and the growth in the Middle East. In India, the company is building two large digital substations, the first of its kind in the country, and a converter station for HVDC — another first being executed by an EPC player globally. The company continues to play a very large role in the government’s green energy corridor, across Rajasthan and Maharashtra. The Dubai factory has helped establish the MENA region as a profit centre for the company’s T&D business. The company has also started focusing on tower supply as a business and has built a considerable order book in the domain.
In Railways, the business has secured its first international order, and continues to maintain its leadership position in the conventional railways segment. KEC has expanded its presence into technologically advanced areas and is executing ~10 projects for Mission Raftar, the government’s speed upgradation initiative. It is also executing several projects such as ballast-less tracks, system integration, and power supply for metros across Delhi, Kochi, Chennai, Kolkata, and Mumbai.
The company has reentered the solar business and is executing a 600 MW solar project, which is the largest tracker-based project to be executed in India.
Vimal shared that KEC is striving to become a well-diversified EPC company with multiple engines of growth transforming towards a digital and tech-enabled company, embedding digital leading ESG practices, and a market leader with a sustained value creation for all stakeholders.
Manish shared some of the key market trends in the IT industry and how they’re evolving. He spoke about the advancement in areas such as Artificial Intelligence, focus on experience, cybersecurity, process innovation and automation. In light of this, he shared the focus areas for Zensar:
Structured into three business verticals: Hi-tech; Banking & Financial Services; Manufacturing & Consumer Services, Manish took the audience through a few case studies showcasing the depth of the work executed by the IT company. From improving customer experience through design thinking for a bank in South Africa, creating videos for top global firms such as Microsoft and Sony, and managing the entire technology infrastructure of the city of San Diego as a smart city project, Manish shared how the company has evolved to serve growing consumer needs in the past few years.
The company’s EBITDA margin has improved from 8.5% to 18.5% over the last three quarters, and the market cap has increased from 600 million to 1.5 billion. While the performance in the past has been muted, going forward the company is confident about delivering successful financial results for its shareholders.
FY24 and beyond the company is striving to focus on client centricity, data-based governance, creating the power of One-Zensar, operational excellence, and improving the talent supply-chain of the business.
Rajat shared some exciting Digital updates from the RPG Group. The group has deployed high-impact digital tools in areas such as engineering, which has helped reduce design time and save costs on construction; industry 4.0 implementation at CEAT’s factories in Halol and Chennai, which has helped reduce cycle time, scrap generation and energy consumption; Shoot development at HML which has helped yield improvement; engineering buddy at Zensar which has resulted in improved efficiency and faster time to market; service app at Raychem RPG which has helped improve productivity and track equipment maintenance and assets; RPG Serv at RPG Life Sciences which has helped with market growth and onboard doctors easily.
Rajat stressed that the group was leveraging all the latest technologies such as Gen AI, AI & ML, blockchain, IoT, Metaverse, VR, Image Analytics, I4.0, and RPA. However, he shared that there was further scope to improve the use cases and cross-collaborate across the group. Citing examples with the audience, he shared how CEAT’s Project Lighthouse was being extended from CEAT to KEC through internal interventions, and that fuel and vehicle monitoring solutions by Taabi were now being deployed across KEC and HML.
Digital capability building across the group also continues to remain a core focus. Currently with three digitally enabled businesses in its fold (Taabi, TyresNMore, and Asvata), the Group envisages to add 1-2 new businesses every year, going forward. He shared how it was important to build a culture of data-driven innovation, harness the full potential of Gen AI, enhance digital capabilities of the group, and strengthen the tech-architecture in order to build a culture of responsible growth.
Yugal shared the story of how RPG Life Sciences has grown from ₹ 300 crore to ~₹ 500 crore business in just a few years. The company has changed the look of its product portfolio and has launched 25 new products. Its portfolio today consists of the world’s most successful product, the most technically sound product, and a product that will improve the life expectancy of advanced breast cancer by 22 months.
RPGLS’ journey to growth has been a result of the following: fixing the fundamentals, improving excellence in people, products, and business; striving for sustainable profitable growth, and scaling up for further growth. He shared how the company has consistently been growing double the market rate for the last five years. The company is also modernising and increasing the capacities of both its plants.
RPGLS' growth has been a result of:
Going forward, the company has identified seven pillars to further its growth: develop state-of-the-art plants, build a targeted R&D pipeline, leverage innovation and technology further, lead therapy adjacent spaces, and build a robust talent pipeline.
Vivek highlighted how Raychem RPG is in the business of providing reliable connections and its products are largely used in the energy segment to solve some of the pressing challenges. He took the audience through some of the critical projects the company has executed in the recent past.
On average in India, over 3,000 wild animals are electrocuted every year. Raychem RPG is only one of the two companies in the country that manufactures covered conductors, enabling a safe solution to this problem. The company has sold over 5,000 km of these cables thereby ensuring wildlife conservation. In areas where the product is used, the electrocution rate has come down to zero.
The company manufactures transformers which are used in solar power plants. To date, the company has supplied over 2,000 solar transformers in the Indian industry, aggregating to, over 15 GW of power transmission supplied into the sector.
Another example he shared was about how Raychem RPG has helped provide power to a remote island which was cut off from power even 70 years after Independence. This was achieved through the company’s subsea cabling solution.
Vivek shared that on an average, the company ships two products every second. The company’s revenue has grown by over 5% over the previous year, slightly impacted due to the Ukraine war. Its profitability has improved by 28% and today, every business within the company is profitable.
Over the next few years, Raychem RPG is working towards creating newer last-mile distribution centres to service more geographies. The company is ramping up manufacturing for EVs and green power, and is looking to partner India in its growth journey over the next few years.
Cherian shared HML’s growth journey with the audience. Over the last 4-5 years, the company has recorded a stable performance and maintained its topline despite increasing commodity prices, and a wage revision. The company has been able to reduce debt, which has helped improve ROCE and market capitalisation.
He shared that this has been a result of internal efficiencies which has led to better yield and labour productivity gains. The company has continued to focus on quality, which has led to better exports while its strategy to enter into alternate crops has also helped contribute to this growth.
Over the last few quarters, HML has identified over 20 initiatives such as digitalisation (colour-based sorting, drip irrigation, UAV spraying of pesticides, Shoot development model, IoT-based weather stations and vehicle monitoring), alternate crops, focus on tourism — all of which are expected to be the growth drivers of the plantations company. By leveraging technology and innovation, Cherian shared that HML should be able to grow faster.
He also shared that people have been the centre of his business. HML’s happiness quotient is the highest at RPG, and the company has consistently ranked among the best workplaces in India by the Great Place to Work, including innovative workplace, best place for women, and best place for millennials.
Rajat shared an update on the carbon offset business, the newest RPG company to be launched. The company is focused on voluntary carbon reduction and is the newest entrant in a global market that is expected to grow at 20-25% CAGR for the next 20 years.
He shared some of the reasons why the business is attractive for RPG to venture into. Climate change and mitigating it is one of the most important priorities today, and the action for this is expected to scale up further. This will also present several business opportunities for companies from India to leverage. He believed that credible organisations such as RPG group have an edge over the others owing to the legacy and integrity they bring to the table. He also believes that the new business can build synergies with the group companies and leverage its relationship with pre-existing global clients to build opportunities in the carbon offset market.
Rajat shared some of the areas where he believes RPG has a distinctive edge. He believes that RPG can use this opportunity to maximise sustainable development benefits. However he stressed that it was important to be cognisant of technology, and we must not over-leverage it to get ahead in the business.
He shared that through the new business, RPG group aims to create a highly profitable and value-creating business, which will help the group make a positive difference to the climate.
KV Kamath in a conversation with Anant Goenka, Vice Chairman, RPG Group, shared insights into the current global economic scenario which presents several opportunities for India, and new technologies, which present opportunities for companies to grow. He shared that the new adage is, “Change is at an accelerated pace, and you need to change your playing conditions to survive in this scenario.” He stressed that India has a long investment runway for the next 25 years, and some of the changes happening in the digital field are working to India’s advantage, aided by India’s young and agile talent.
He shared that India still had some work to be done to create an environment for ease of doing business. While stressing that the government is continuing to work on removing barriers to enable smoother operation of business.
He also shared the journey of how he built ICICI from a development bank to the large private bank it is today. He said it was a story of constraints and using them to their advantage. To reiterate this, he spoke about how ICICI used technology to grow the bank, especially in terms of size. He shared that at the time their largest competitor SBI had 10,000 branches, while ICICI had 50-100. So they used technology to their advantage. They installed ATMs to circumvent the lack of branches. The bank rolled out 1000 ATMs in the first year and within 12-18 months, 95% of the transactions happening in the bank, had been reduced to 35%. The company then went a step ahead and created call centres to start phone banking, which further brought down in-bank traffic by 15-20%, thus circumventing their problem of lack of physical branches.
He stressed that one of the keys to growth is having the right people who can build the organisation at the right time. Mr Kamath also shared that it was important to be reactive and proactive to change, reinvent and leverage situations to your advantage, and important to get the three capitals right — human, technology and financial.
Nilesh shared his insights on why he is bullish about India’s growth story, in a scenario where the US is slated to go into recession, and China is faced with a slowdown in real estate and exports.
He shared some of the reasons why he thinks India’s long term growth story looks bright:
Vivek shared the crux of Responsible Growth with the audience. He spoke about how not only was it about enduring profitable sustainable growth and making sure the world we leave behind is better than we received it, but also about high standards of governance and building a stronger legacy.
He had a few recommendations to scale up organisations:
As you look at new businesses as growth engines, he shared a few key factors to look out for:
The Annual Awards 2023 were also held to celebrate the winners and Outperformers across businesses. These are individuals and companies who have continued to innovate, scale barriers, and build a culture of execution excellence.
