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Chairman's Message

Dear Shareholders,

Doing the right things is management i.e. implementing the vision. We have successfully built reputation in the business by focusing on a customer-centric approach with no compromise on quality, building strong brands, vast distribution channels, fostering an inclusive environment, supporting and nurturing our community and society at large and playing the role of a good corporate citizen. At HSIL, these guiding principles have helped us achieve sustainable growth and stakeholder respect.

Doing things right

Businesses today operate in an environment which is evolving with an increased level of governance and compliance in line with the new regulations, which have come in force over last few years. The changes in laws and regulations also provide new opportunities for the organisation to grow in terms of efficiency, improved controls, increased customer satisfaction and market penetration. At HSIL, we have focused on building a robust governance and compliance system that focuses on ensuring that the Company satisfies the ever-changing needs of the operational and regulatory environment in which it operates. The Board of Directors and the senior management work in tandem to ensure that the company stays abreast of evolving laws and remains compliant. We believe that good governance helps us perform efficiently, which in turn helps us in winning the stakeholder's confidence. We believe that governance and compliance are not restricted merely to the adherence of rules and regulations, but is about the larger objective of creating value. Governance is not merely structure and process but a complete system with purpose, inputs and output that involves people with value-creation at its heart.

Doing the right things

"Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before the defeat" - Sun Tzu
The key to success for any organisation is to merge strategy (creating the vision) with tactics (implementing the vision).

The consumer of today does not need yesterday's products designed a little differently and passed off as 'innovation'. Consumers are demanding new product features, need better designs and a superior price-value proposition. We are continuously investing in new product introductions that promise an entirely new experience to users. We are expanding product permutations as well, addressing a wide range of preferences. Our consumers do not only need to buy sanitaryware, but also seek to buy a number of lifestyleenhancing domestic products. Based on market feedback, we launched a number of products and businesses to carve out a larger share of wallet spending.

Our consumer is also being influenced by convenience as regard to where to buy the largest quantity of complementary building products from a single location. Given this reality, we invested in retail gallerias, showrooms and shop-in-shops that stock all our products under one roof in addition to an online presence. In order to meet the consumer's requirement of buying the best quality of products, we have invested in number of pan-India experiential retail centres that are in sync with the quality products that we market and our overall positioning of being a lifestyle-enriching company. The consumer of our products seeks to buy at a point in time but be assured of first-rate support and service at any time thereafter. Given this reality, our company is extending and continuously investing from what was once a manufacturing-centric focus to what is now a fusion of manufacturing, distribution, service and support competencies.

Investing in the future

For the last five-and-a-half decades, we have worked towards creating value for our stakeholders. We have realised that the source of value has shifted from the tangible to the intangible. Apart from the financial capital and tangible assets that optically represent the main value drivers, intangible assets such as human capital, relationships with business partners, brand loyalty and company's innovation continue to create much stronger value in the eyes of the consumer. We have created intangible assets in the form of relationships with the people or organisations a company sells its products to, relationship with organisations or individuals through which a company sells or is doing business with in general, an innovation pipeline of new leadingedge products that will increase the company's market share and will generate new profitable revenues in the future, a highly skilled and talented work force committed to the company, ever-progressing business processes and a corporate culture that helps to convert individual knowledge and skills into relationship value and innovation capital. Business today is characterised by relentless change. To stay competitive, companies must continually grow and evolve. The aim of any organisation should be to renounce old habits, which act as hindrances to growth and find new paths of progress. This approach has led us to maintain our leadership position in our core businesses and at the same time break fresh ground in our pursuit for finding new avenues of growth. With an aim to invest in the future we forayed into the consumer products business in 2015. Our move has paid rich dividends as we have been able to generate good volumes and reach out to a newer target audience. We had also invested in two greenfield plants to produce plastic plumbing pipes and fittings as well as security caps and closures (required in packaging) as an extension of our existing portfolio. These new plants are expected to commence commercial production during FY2017-18.

Building a better world

To be socially relevant, one needs to be socially responsible. At HSIL, this has been one of our guiding principles since inception. We recognise that in order to achieve sustainable growth an organisation needs to contribute to the development of the nation, improve quality of life of its workforce and immediate families, address the needs of the community and enrich the sector of its presence. Over the years, HSIL focused on women's empowerment, primary education support, providing access to clean drinking water, sanitation and healthcare for the poor, among other grassroots interventions. We have earnestly supported girl child education and we intend to sustain this across the foreseeable future. During the year under review, we commissioned four primary healthcare centres called 'Swastha Sampada' with the objective to provide healthcare facilities to the marginalised, contributing in a small way towards building a better future for all.

A large part of our corporate philanthropic intent has extended beyond statutory requirement. Your company has been spending a majority of its CSR outgo in the areas of its manufacturing presence; during the year under review, it spent more than what was mandated. Much of this culture has been drawn from the enduring family culture of the promoters. From my childhood, I inculcated the habit of giving and gifting, which continues till today. Over time, the company's philanthropic engagement has extended towards sectoral benefit as well. As simple sanitaryware pieces became progressively sophisticated with respect to design, electronic feature integration and improved tank fittings, there emerged a growing need for these to be installed and serviced by technically qualified and trained plumbers. The gap between need and availability inspired the Company's engagement in the area of plumber training, coinciding with the government's Skilling India priority. Following the creation of the Ministry of Skill Development, I was asked to head one of the Skill Councils with the objective to train and certify 1.2 million plumbers by 2022. It is a huge responsibility and a separate not-for-profit company was formed independently to carry out this task. I have been attached to the field of plumbing. This initiative will benefit the sector at large, providing manufacturers the confidence to create more sophisticated products, service customers better and provide a sustainable livelihood for millions – a win-win for all.

I am optimistic that we have created enough strength within the organisation that can withstand downtrends better, rebound faster and capitalise on the evolving strong opportunities emerging in the Indian and global markets with greater dynamism than ever. This is the optimism that I wish to extend to all our stakeholders.

Warm regards,
Dr. Rajendra Kumar Somany
Chairman and Managing Director