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The Enabler Of Sustainable Growth
Malik took Eicher Motors on a steady path of growth by focusing on strong cash flows, negative working capital & maximising operating leverage
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For Lalit Malik, the role of CFO in Eicher Motors (EML) has been enriching. Not only did he get to partner with manufacturing and supply-chain parts of the business and work on measures of productivity, efficiency, capacity expansion, improving cost structures, etc, he also got to work with the commercial teams in developing the company’s brand, marketing and product strategies. EML is the parent company of Royal Enfield, the global leader in middle-weight motorcycles. In addition to motorcycles, Eicher has a joint venture with Sweden’s AB Volvo, Volvo Eicher Commercial Vehicles (VECV), which is driving modernisation in India’s commercial vehicle space, and in other developing countries.
“Sustainable growth comes from thinking and deploying long-term strategies. Pretty much everything that is being executed in the company today was thought and planned years ago. So while there are everyday jobs to manage during the day and the week, the mission over the next many years is to grow in India, which is quite a large market for us and grow strongly in select white space international markets,” reveals Malik.
Since taking over as the finance head of Eicher, he has had the dual role of strengthening processes and enhancing control and also understanding digital technologies that generate deeply insightful data on both the product and the consumer. And the company figures are testament to his hard and efficient work. In 2010, the BSE and NSE-listed firm recorded a sales volume of around 52,000 units during the year with revenues of approximately Rs 450 crore and profits after tax of Rs 75 crore. In comparison, by the end of FY16-17, the company witnessed a sales volume of 6,66,000 units and revenues of Rs 7,033 crore and profits after tax of Rs 1,665 crore. Sales volume for 2017-18 was 8,20,000 units, while the capacity planned for 2018-19 is 9,50,000. In 2016-17 Eicher Motors’ EBIDTA was 31 per cent of revenues and it is now the world’s most profitable automotive company.
“Through this period the key strategic financial pillars were strong operating cash flow, negative working capital and razor-sharp focus on maximising operating leverage. The company’s stellar performance on all these metrics has resulted in best-in-class returns on capital employed,” says Malik.
Malik holds a PG diploma in management from IIM, Bangalore and is also a qualified Chartered Accountant from the Institute of Chartered Accounts of India. He has an overall experience of 24 years across firms such as GE Money, Ernst & Young, Max India and Eicher Motors. Prior to joining EML, he worked at Max India as vice-president of Corporate Development, where his primary responsibility included managing investments of Max India in the insurance space.
“With unmet demand that existed and that continues to exist, the big job is balancing investment and profitability. Overall, as a company, we have done a pretty good job in investing in market development, capacity and talent and also ensured growing profitability. Sustained financial outcomes are a function of businesses building brands that create strong desire, and design and develop products that customers will aspire to purchase,” points out Malik.