Varroc Engineering Limited - Bombay Stock Exchange
Varroc Engineering LimitedRegd. & Corp. Officel-4, MIDC, Industrial AreaWaluj, Aurangabad 431 131IMaharashtra, IndiaTel 91 240 6653600Fax 91 240 2564540emall: varroc.info@varroc.comwww.varrocgroup.coml IN: L28920MH1988PLC047335iIVdrroc:l!XCELL.l!NCI!July 19, 2019VARROC/SE/INT/2019-20/31To,1)The Listing Depart ent,National Stock ch nge of India LimitedExchangeza, Plot o. C/1, G Block,Bandrurla Complex,Ba ra (East), Mumbai-400051. he Manager - ListingNSE Symbol: VARROCThe Corporate Relation Department,BSE Limited,Phiroze Jeejeebhoy Towers,Dalal Street, Fort,Mumbai-400001.BSE Security Code: 541578Security ID: VARRROCDear Sir/Madam,Sub.: Errata to the Annual Report for FY 2018-19 ("Errata")Ref.: Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations,2015 ('SEBI Listing Regulations")Pursuant to Regulation 30 of the SEBI Listing Regulations, we wish to notify following correctionir. the Annual Report of the Company for the FY 2018-19: ·On Page No.43 of the Annual Report, the present long term credit rating of the Company shouldbe read as AA-( Positive) instead of AA-( Negative). The words used in bracket suggest the outlookof the Company for the given rating.The above correction is being simultaneously intimated to the shareholders by email andnewspaper advertisement and also incorporated in the Annual. Report made available on thewebsite of the Company at weblink http://www.varrocgroup.com/financial results#tabl.We regret the inconver.ience caused and request you to kindly take the above on record.Thanking you,Yours Faithfully,For Varroc Engineering LimitedQ \/L ( [G\l'tE]l-!f,, 1· '· "'7Rakesh Darji"--- .Company Secretary & Compliance OfficerJo'»
Varroc Engineering LimitedRegd. & Corp. Office1-4. Mini. lnrl11 tri;il ArPilWaluj, Aurangabad 431 136Maharashtra, IndiaITel 1 01 40 665J600Fax 91 240 2564540 CIN: L28920MH1988PLC04733sVARROC/SE/INT/2019-20/28To,1) The Manager- L t ingThe Listing De aent,National Stoc Exch nge of India LimitedExchange P za, Plot o. C/1, G Block,Sandra- rla Complex,Baa (East), Mumbai-400051.varrocJuly 15, 2019/2)/The Manager - Listing\ / The Corporate Relation Department,BSE Limited,Phiroze Jeejeebhoy Towers,Dalal Street, Fort,Mumbai-400001.BSE Security Code: 541578Security ID: VARRROCDear Sir/Madam,Sub.: Annual General Meeting, Annual Report 2018-19The 31 51 Annual General Meeting of the Company is scheduled to be held on Friday, August 09, 2019 at10:00 a.m. at the Auditorium located at the Registered Office of the Company at Plot No. L-4, MIDCIndustrial 'Area, Waluj, .Aurangabad-431136, Maharashtra.·We would like to inform that the Company has completed dispatch of the Notice of AGM (i.e. includingattendance slip, proxy form and route map for reaching the AGM venue) and the Annual Report for thefinancial year 2018-19, to all its Members on July 15, 2019.Further, pursuant to Regulation 34(1} of Securities Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations, 2015 ('SEBI Listing Regulations"), we are submitting herewith theAnnual Report of the Company along with the Notice of AGM for the financial year 2018-19.The Notice of AGM and the ·Annual Report for the financial year 2018-19, are also available on theCompany's website at www .varrocgroup.com.Kindly take the above on your record and disseminate to all concerned .Thanking you .Yours faithfully,For Varroc E ·neering LimitedRakesh DarjiCompany Secretary & Compliance OfficerEncl.: Notice of 31st Annual General Meeting of the Company.CC: -Link lntime India Private Limited, Registrar & Share Transfer Agent.CDSL & NSDL
WE AREFUTURE READYANNUAL REPORT2018-19
FORWARD-LOOKING STATEMENTForward-Looking StatementIn this Annual Report, we have disclosed forward-lookinginformation to enable investors to comprehend our prospectsand take investment decisions.This report and other statements-written and oral-that weperiodically make contain forward-looking statements thatset out anticipated results based on the management’splans and assumptions. We have tried, wherever possible, toidentify such statements by using words such as ‘anticipate’,‘estimate’, ‘expects’, ‘projects’, ‘intends’, ‘plans’, ‘believes’, andwords of similar substance in connection with any discussionof future performance.We cannot guarantee that these forward-looking statementswill be realized, although we believe we have been prudentin our assumptions. The achievements of results are subjectto risks, uncertainties and even inaccurate assumptions.Should, known or unknown risks or uncertainties materialize,or should underlying assumptions prove inaccurate, actualresults could vary materially from those anticipated, estimatedor projected. Readers should keep this in mind.We undertake no obligation to publicly update any forwardlooking statement, whether as a result of new information,future events or otherwise.
CONTENTSContentsIntroduction02Mission, Vision & Values04Financial Performance05Future is Discovery07 New Product Offerings: VLS Business07New Product Offerings: India Business08Future is Customer13Future is Capability14Future is Digitalization19Future is People20MD’s Message22Corporate Information24Group Structure28Board of Directors30Key Management32Exterior Lighting-Headlamp AssemblyPolymers-Seat AssemblyStatutory Reports Management Discussions & Analysis33 Board’s Report42 Corporate Governance Report68Financial Statements Financial Statements-Standalone Financial Statements-Consolidated148Notice of Annual General -Automotive GearsAnnual Report 2018-1901
INTRODUCTIONFuture Is Created By Paving TheWay For A Better TomorrowDiverse trends impact the world we live in and present complexand uncertain outcomes. These disruptive factors withrespect to the automotive industry include innovationspertaining to autonomous driving, connected vehicles,government pursuing environment-friendly publicmandates, emission-related regulations and changingconsumer preferences of ownership—all challenging ourability to make decisions today.Varroc, however, sees the future being filled withopportunity, discovery and expansion that will take Varrocto the next level.Lighting 60.4%Polymer 15.7%Electrical 12.0%Metallic 6.9%Others 5.0%Revenue Split by Product*Hence at Varroc, we believe We are Future ReadyEurope 45.6% Comprehensive global footprint across 5 continents, 14countries, 41 operating and 2 upcoming manufacturingfacilities, 16 Research & Development centresIndia 34.6% Over 13800 employees across the globeOthers 1.1% Broad-based client base including major global PVOEMs and leading Indian 2W OEMs Manufacturing base in low-cost countries like CzechRepublic, India, Mexico, Morocco, China, Polandand Turkey Technology-focused products aligned to the upcomingtrends in the automotive sector such as Electric vehicles,connected vehicles and advanced lighting applicationsfor a greener, connected and autonomous world An empowering culture to enable every employee witha sense of purpose. We nurture talent and have createdfuture-ready programs to drive sustainable expansion Strong Competitive Position in a GrowingMarket Segments* as per MIS Grouping02Varroc Engineering LimitedNorth America 17.9%Asia Pacific 0.8%Revenue Split by RegionOperatingManufacturing FacilitiesResearch &Development Centres
INTRODUCTIONAbout UsGroup OverviewOur BusinessesVarroc is a global tier-1 automotive component group. Wedesign, manufacture and supply exterior lighting systems,plastic and polymer components, electrical-electronicscomponents, and precision metallic components topassenger car, commercial vehicle, 2-wheeler, 3-wheelerand off-highway vehicle (“OHV”) OEMs directly worldwide.We are the second largest Indian auto component group(by consolidated revenue for FY2017) (Source: CRISILResearch) and a leading tier-1 manufacturer and supplierto Indian 2-wheeler and 3-wheeler OEMs (by consolidatedrevenue for FY2017) (Source: CRISIL Research). Weare the sixth-largest global exterior automotive lightingmanufacturer and one of the top three independentexterior lighting players (by market share in 2016)(Source: Yole).We have end-to-end capabilities across design, R&D,engineering, testing, manufacturing and supply of variousproducts across our business. We have two primarybusiness lines, namely (i) the design, manufacture andsupply of exterior lighting systems to passenger cars OEMsworldwide (our “Global Lighting Business” or VLS) whichwe undertake through our subsidiaries forming part of theVLS group and (ii) the design, manufacture and supplyof a wide range of auto components in India (our “IndiaBusiness”), primarily to 2-wheeler and 3-wheeler OEMs,including exports. Our India Business offers a diversified setof products across three product lines, namely Polymers/Plastics, Electrical/Electronic and Metallic components. Inaddition, we have other smaller businesses, which includethe design, manufacture and supply of 2-wheeler lightingto global OEMs, and undercarriage forged machinecomponents for OHVs and drill bits for the oil and gas sector(our “Other Businesses”).In FY19, we clocked in revenue in excess of 120 billion.Between FY2016 and FY2019, we had a compound annualgrowth rate (“CAGR”) of 13.6% in our revenue.HistoryWe commenced operations in India with our Polymerbusiness in 1990. We initially grew organically in India byadding new business lines, such as our Electrical divisionand Metallic division. Subsequently, we diversified ourproduct offerings and expanded our production capacitythrough various investments, joint ventures and acquisitions.The acquisitions most notably included our 2012 acquisitionof Visteon’s global lighting business, now known asVarroc Lighting Systems. In 2007 we acquired I.M.E.S (amanufacturer of hot steel forged parts for the constructionand oil and gas industries) in Italy and in 2011 we acquiredTRI.O.M. (now known as VLS Italy, a manufacturer of highend lighting systems for global motorcycle OEMs) withoperations in Italy, Romania and Vietnam. On February 13,2018, we entered into a joint venture with Dell’Orto S.p.A.,Italy, for the development of electronic fuel injection controlsystems for 2-wheelers and 3-wheelers. In 2018 we acquireda Turkey-based lighting products manufacturer.By locating its manufacturing facilities in comparatively lowercost countries, VLS is able to provide customers with lightingsystems in a cost-efficient manner. VLS has a diversifiedcustomer base across nearly all major automotive marketsin the world, except Japan and Korea. VLS has long-termrelationships with leading auto manufacturers across thepremium, mid-range and mass-market pricing spectrum,including Ford, Jaguar Land Rover, the Volkswagen Group,Renault-Nissan-Mitsubishi, Groupe PSA, FCA, a Europeanmultinational car manufacturer and an American electric carmanufacturer. VLS has a broad portfolio of lighting harge,light-emitting diode (“LED”), Matrix LED, high definitionMicro-Electro-Mechanical Systems (“MEMS”) and digitalmicromirror device (“DMD”), surface LED, organic lightemitting diode (“OLED”) module, Flex LED, LED pixel and LEDpixel headlamp, catering to the five product segments withinexternal automotive lighting. VLS has sales offices in France,Germany and the United Kingdom and is headquartered inPlymouth, Michigan (United States of America).Annual Report 2018-1903
VISION, MISSION & VALUESVisionTo be a 200 Billion supplier of innovative solutions fortransportation and allied industry in 2020.Core business sectors will be exterior lighting and 2wheelers mobilityBe a partner of choice for vision, mobility and emissiontechnologiesBe the fastest growing player in our core sectorsMissionBring leading edge technologies to the mainstream marketswith high quality, cost competitive solutions.By delivering customized solutions with superior serviceIncorporating speed, agility and creativityFostering an environment that empowers employees andencourages the pursuit of excellenceValuesOur core values SHIPS serve as a common identity forevery employee in the organization. These values have beeningrained in Varroc since inception and have stood the testof time. Our principles have helped us thrive in the globalcompetitive market.SHIPS:SincerityHumilityPassionSelf Discipline04IntegrityVarroc Engineering Limited
FINANCIAL PERFORMANCEConsolidated Financial PerformanceEBITDA ( million)Revenue ( 0FY19FY15FY166680FY17FY18FY19Net Debt/EquityPAT ( 0.30Mar18Annual Report 2018-19Mar1905
FINANCIAL PERFORMANCEConsolidated Financial PerformanceNet Debt/EBITDAROCE 7FY1820.9%17.0%11.8%12.7%FY16FY1710.00%0FY19ROE .00%101.2%06FY18Earnings Per Share ( )30.00%014.2%FY15FY16FY17FY18Varroc Engineering 7
PRODUCT OFFERINGS/R&D CAPABILITIESFuture is DiscoveryWe have taken concrete steps to inculcate future readinessin all our new endeavours. One such step is that we areinvesting in new technology for the mass market application.As a move to enhance the cost-effectiveness and to increaseour reach, we have developed technology that is expected tobe used on a broader scale.New Product Offerings: VLS Business Adaptive Driving Beam (ADB)VLS has developed ADB Headlamps, which communicatewith onboard cameras and sensors to allow the customerto drive with high beams on permanently without creatingglaring issue for upcoming vehicles. VLS alreadysupplies ADB to various customers in Europe and is nowwaiting for positive regulatory changes in the US to startsupplying ADB Headlamps in this critical market. Surface-LED TechnologyVLS patented Surface-LED technology uses thin layersof micro-optic filters and conventional LED light sourcesto achieve the homogeneous appearance generallyassociated with OLED. Each homogeneously lit elementis only 3.5mm thick, with a luminous intensity that canbe scaled from 2,000-13,000 cd/m2. Unlike the currentautomotive-qualified OLED in the market, Surface-LEDelements can be designed and produced in curved and3-D shapes, as well as with multiple colours that enablethem to achieve various functions.With this new product, Varroc Lighting Systemscombines the benefits of the still-emerging OLEDtechnology, including it’s ultra-thin and homogeneouslighting profile, with the proven reliability, low costand the flexibility of the LED. Surface-LED presentsOEM designers with a new, cost-effective and highimpact avenue to create innovative lighting signatureson vehicles.Annual Report 2018-1907
PRODUCT OFFERINGS/R&D CAPABILITIESNew Product Offerings: India BusinessThe 2-wheeler segment of the auto industry in India isexpected to see major changes in the near term. Some ofthose relate to emission norms like BS-VI and some are led bytechnology upgradations, particularly the transition to EV’s.CloudBasedPlatformVarroc has developed futuristic technology-driven productsthat relate to these trends. Some examples are: Telematics ProductsThe future trends indicate the need for an interdisciplinaryfield that encompasses telecommunications, vehiculartechnologies, and computer science. We havedeveloped products such as turn-by-turn dashboardsand connected 2-wheeler/car devices, which enable ahost of analytical capabilities for multiple stakeholdersapart from the drivers.Varroc has developed the Varroc Telematics Controlunit. It gathers vehicle data from ECU and transmits toa cloud-based platform (fig.1) and then the informationis used for various use cases (fig.2) depending on thefunctionality of the location, fuel consumption or speed.VehicleDataGSMFigure 1 Varroc Standalone Telematics UnitThe telematics help not only keep up with the latestgovernment legislation in telematics, but also helps copewith climate change.The OEMs and fleet operators are strongly emphasizingenergy saving and vehicle safety measures. At the sametime, they want to ensure business models which canreduce total operational cost.The primary use case for telematics is to measure drivingdata to offer services like driver behaviour analysis,predictive analysis and connected vehicle frameworks.Data collected from the vehicle is converted into astructured form to make accurate business decisions.For instance, helping an insurance company know thedriver performance data to offer better products.JourneyTimeLatitude/LongitudeNo. dMax.SpeedAvg.SpeedCorneringRoad TypeAccelerationFigure 2 Various Data That Is AssimilatedFrom The Telematics Control Unit08Varroc Engineering Limited
PRODUCT OFFERINGS/R&D CAPABILITIES Connected Vehicles Increase in the purchasing power of customers hasled to a shift in preference for vehicles equipped withadvanced functions which are driven by Connectivityand Telematics, rather than simple commuting machines.Electronic Fuel Injection (EFI)As per the stricter BS-VI norms, the use of EFI is expectedto become widespread in 2-wheelers from April 2020.The EFI system presents electronics hardware that canbe used to integrate multiple product lines. We havedeveloped an EFI technology with our joint venture withDell’Orto and have received initial orders for the same.Varroc’s engineering team has also developed aconnected instrument cluster with mobile phoneconnectivity and turn-by-turn functionality (fig.3). Thisoptionally can also be offered with cloud connectivity.CloudBasedPlatform GSMVehicleDataData:OBDEngineDTCAdvance Driver Assistance System (ADAS)An autonomous car is a vehicle that can guide itselfwithout human intervention. This kind of vehicle hasbecome a concrete reality and may pave the way for futuresystems where computers take over the art of driving.We are advancing our technology to aid autonomouscars, that are going to be the future.Varroc is laying the foundation for an era wherevehicles drive themselves (ADAS) offering services tovehicle OEMs.Figure 3 Varroc Instrument Clusterintegrated with TelematicsAnnual Report 2018-1909
PRODUCT OFFERINGS/R&D CAPABILITIES BS-VI Catalytic Converters Regulatory emission norms have been the mostsignificant factor driving the dynamics of the industry.We have taken steps to enable our technology to equipthe best of the mechanics to all the vehicle components,which reduces the emission rate compared to the normalvehicles. As newer alternatives are being considered, itwill aid us to create a more sustainable environment forall. We have developed the BS-VI compliant catalyticconverters with technological support from Heraeus,Germany and already secured orders for the same.Varroc is the first tier-1 supplier/ancillary to produce LEDlamps for a leading 2-wheeler OEM in India. Since thenLED lamps have become a trend in the new launches.Our technological capabilities in Indian markets haveenabled us to offer a variety of innovative solutions in thisproduct category and Varroc is the only company in Indiato own technology in LED lamps. We now look forwardto increasing our presence in 4 wheeler LED lampsin India. Paintless Polymer ProductsTraction Motors for EV’sA traction motor is an electric motor used for propulsion ofa vehicle, such as locomotives or electric roadway vehicle.With the impending transition to electric vehicle happeningover the coming years, traction motors are expectedto replace the traditional internal combustion engines.Varroc has completed development of Traction Motor andController with prototypes ready for 2-wheelers and workis in the development stage for 3-wheelers.10LED LampsVarroc Engineering LimitedWe have introduced an alt
Annual Report of the Company along with the Notice of AGM for the financial year 2018-19. The Notice of AGM and the ·Annual Report for the financial year 2018-19, are also available on the Company's website at www.varrocgroup.com. Kindly take the above on your record and disseminate to all concerned. Thanking you. Yours faithfully,
Varroc Engineering Limited is a global tier-1 automotive component group. The company designs, manufactures and supplies exterior lighting systems, plastic and polymer components, electricals-electronics components, and precision metallic components to various automobile companies worldwide. It is the second largest Indian auto component
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