Dear Shareholders,

The Financial Year 2016-17 has been a year of consolidation and bringing back the economy and businesses on growth track. India's GDP grew at 7.1% in FY17, witnessing a marginally lower growth as compared to 7.6% in FY16 due to demonetization of higher currency in the month of November by Indian government. However, India continues to be one of the fastest growing economies overtaking China.

To strengthen the economy and augment the ease of doing business, the various initiatives such as bankruptcy law and implementation of GST have been taken by the Government of India. The central government's major focus on the development of infrastructure and rural economy has also been an added advantage. This has led to a tremendous growth in demand for construction equipments and tractors. Better monsoon in 2016 has also added fuel, due to which the tractors sales has increased by 18% as compared to the previous year.

Sharing few highlights of the FY17 business, the turnover of the company grew marginally during FY17 mainly due to higher offtake from domestic OEMs but was partially offset by the impact of demonetization on Automotive Components segment. The major revenue contributor i.e. gears business grew by 8% in FY17. EBITDA in FY17 decreased by 6.8% due to incremental VRS of Rs. 1.34 Crores and exchange gain of Rs. 1.61 Crores in FY16. The company has incurred a net loss of Rs. 1.26 Crores for the year ended 31 March 2017 vis-a-vis net profit of Rs. 0.24 Crores in the corresponding previous year.

This year, efficiency improvement was our main focus area for improving the production quality. Thus, we have initiated many de-bottlenecking processes at all its plants which has released additional capacity. To further strengthen our market position in this high margin Bevel Segment, we are further strengthening our capabilities with addition of some state-of-the-art machinery such as C30 Dry Cutting Machine, Viper 500 Grinding Machine and P40 Gear Measuring Machine. These high-end machines will help us in manufacturing new-age products while also reducing the delivery time and variance. We have also relocated some critical machinery from our Mumbra unit to Faridabad and Lonand units. This will help the Company in quality enhancement, better turnaround, reduce the manpower cost and serve the customers in a better way.

We have been able to increase the benchmark in terms of efficiency and quality in the plants due to the implementation of LEAN manufacturing approach. Various initiatives such as total quality management, safety audit, Kaizen, periodical machine health check up, machine risk assessment audit has increased efficiency and enhanced savings at plant level. The result can be seen through the increase in number of accident free days in the plant.

Our Customer base has been continuously increasing and we have been able to strengthen our market positions. Our thrust on developing next generation products having a competitive edge to our customers. We have developed several products for our domestic and global clients which have received good acceptance with more orders coming in the near future.

At Bharat Gears, we also value the contribution of Human Capital in the growth trajectory of the Company. We follow a structured approach for the career progression with an adequate blend of on-job training and mindfulness on work-life balance. This helps us to access, attract, train and retain best of talent across locations and functions.

We are committed to continue with our operational excellence journey in the coming financial year. We will take various initiatives at strategic and ground level to continue with the same.

I would like to take this opportunity to thank to our shareholders, partners, employees, customers and other stakeholders for their firm belief in the Company.

Surinder P. Kanwar
Chairman & Managing Director