ANNUAL REPORT 2000-2001
ROOFIT INDUSTRIES LIMITED
Your Directors are pleased to present the Nineteenth Annual Report and
Audited Accounts for the year ended 30th June,,2001.
Despite a slowdown in the economy, your Company improved its performance
for 2000-01 The total turnover of the Company increased by 42 per cent to
Rs.45628 lakhs and the operating profit of the Company increased by 30 per
cent to Rs 9041 lakhs The net profit of the Company increased by 12 per
cent, to Rs 4164 lakhs from Rs.3704 lakhs
Your Directors are pleased to recommend a final dividend of Rs 0 50 per
equity share The total dividend, including an interim dividend of Rs 1.50
per equity share, will be Rs 2.00 per equity share (Previous year Rs.3 50
per share) on the increased equity share Capital following the bonus issue
for the year ended 30th June, 2001. The consequent outflow including
preference dividend paid and dividend tax of Rs 81 lakhs will be Rs 538
lakhs (Previous year Rs 415 lakhs).
Pursuant to the provisions,of new Section 292A of the Companies Act, 1956,
your company constituted the following Audit Committee of the Board of
1. Mr. M. D. Gothivrekar- Chairman,
2. Mr. Ramesh Dhall,
3. Mr E V Hariharan
Some 91 deposits, totalling Rs 10.49 lakhs due for repayment on or before
30th June, 2001, were not claimed by the depositors on that date. As on the
date of this report, deposits aggregating Rs.7.59 lakhs thereof were
claimed and paid or renewed.
Directors' Responsibility statement
Pursuant to the-requirement under Section 217(2AA) of the Companies Act,
1956, with respect to Directors' Responsibility Statement, it is hereby
i) That in the preparation of the accounts for the financial year ended
30th June, 2001 the applicable accounting standards have been followed
along with proper explanation relating to material departures;
ii) That the Directors have selected such accounting policies and applied
them consistently and made judgements and estimates that were reasonable
and prudent so as to give a true and fair view of the state of affairs of
the Company at the end of the financial year and of the profit or loss of
the Company for the year under review;
iii) That the Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of the
Company and for preventing and detecting fraud and other irregularities;
iv) That the Directors have prepared the accounts for the financial year
ended 30th June, 2001 on a 'going concern' basis.
Significant developments, during the years
The Company commissioned a,drymix factory at Ratnagiri and at Kurkumbh
near Pune during the year under review. The Chennai factory for drymix is
expected to commence production in October, 2001. After the commissioning
of Chennai factory, the company will possess a total production capacity of
720,000 tpa, the only company to have such a large production facility in
The company's outlook appears to be optimistic.
The Indian government has made housing a priority sector. Various tax
incentives have been announced to encourage the growth of residential units
leading to increased institutional disbursements. India's rural economy is
expected to grow at nine per cent in 2001-02, leading to a higher
consumption of construction and ancillary products.
Your company possesses plants with adequate capacity and relevant
technologies to make cost-effective products. The company's plants are
judiciously spread in regions of demand in south and west India, close to
raw material sources and attractive growth. Your company, with a diverse
product portfolio, is in an ideal position to address the growing demand.
Much of the growth is expected to come from the company's drymix
operations. The to-be commissioned Chennai plant is expected to address
drymix demand from the southern states
The marketing focus will dovetail the manufacturing. The company expects to
raise its profile as a national brand It expects to leverage its quality,
brand and portfolio to deepen its penetration. It is in the process of
establishing its products in the overseas markets These initiatives are
expected to generate higher than average realisations and strengthen the
Mr Kishore Motwani and Mr. Vinod G Motwani retire by rotation at the
ensuing Annual General Meeting and being eligible offer themselves for re-
Energy conservation and technology absorption
The provision under the Companies Act, 1956 in regard to reporting on
energy Conservation are not applicable to the industry in which the company
is engaged. The manufacturing operations for AC sheets are based on
indigenous technology, which is well established.
During the year the company has installed its drymix Plant at Kurkumbh near
Pune and Ratnagiri.
Raute Dry Mix OY, Finland, specialising in drymix plants and product
technology, has supplied complete plant, machinery and equipment for the
production of plasters and mortars, as well as product technology and
development services to manufacture drymix products The product know-how
received from them has helped to improve the market evaluation and
designing of the product range to the marketing of final product
Roofit employees are part of an extended family. The Company strives to
cultivate a spirit of involvement amongst them The Company has not paid any
remuneration attracting the provisions of Companies (Particulars of
Employees) Rules, 1975 read with Section 217 (2A) of the Companies Act,
1956 Hence no information is required to be appended to this report in this
Foreign Exchange Earnings and Outgo
During the year, the company exported products valued at Rs 1141 lacs
(previous year Rs 194 lacs) The outgo of foreign exchange was Rs 2852 lacs
on account of the import of raw materials (previous year Rs 2346 lacs) and
Rs. 31.32 lacs on foreign travel (previous year Rs 22.70 lacs) Rs.1146
lakhs for import of capital goods (previous year nil)
The Auditors, M/s Nitish Nigam & Co. Chartered Accountants, retire at the
conclusion of this Annual General Meeting They have signified their
willingness to accept re-appointment and have further confirmed their
eligibility under Section 224 of the Companies Act, 1956
The Board wishes to place on record its appreciation of the hard work and
dedication of employees at all levels Industrial relations in all the units
of the Company continued to be cordial during the year under review Your
Directors also convey their grateful thanks to the Financial Institutions,
Bankers and Shareholders for their continued co- operation and patronage.
On behalf of the Board of Directors,
Suresh G Motwani
Place: Mumbai Chairman
Date : 7th September. 2001
Business portfolio Risk
Roofit makes and markets a number of products. The mix may not be synergic
and eventually strain the organisation's capacity to manage them
All products manufactured and marketed by the company are used in the
construction of houses and industrial properties. This represents a strong
synergy with an attractive branding and distribution payback. The company
does not intend to enter any unrelated business.
Competition might affect Roofit in the marketplace.
Roofit is one of the lowest cost AC sheet producers in India. The AC sheet
business is capital-intensive. To set up a cost efficient plant, the
minimum capital requirement is Rs. 40 cr. The reach of a single plant is
restricted to a limited geographical area due to the high freight component
in transporting products. To sell higher volumes, multiple plants are
required over a large area. Roofit has four plants spread over the southern
and western markets to service demand across regions. Roofit also possesses
an extensive distribution network - 35 distributors spread over ten states,
the highest number of distributors per state in the industry, which will be
difficult to replicate in a short period. Roofit possesses a strong brand,
which is synonymous with quality.
The company also possesses the financial muscle to sustain a long
receivables cycle in some of its businesses, which new competitors may find
difficult to match.
Much of the company's revenue is sourced from asbestos-based products.
Asbestos is considered environment unfriendly in a number of countries.
Even though asbestos represents a danger to the environment, it is the
company's considered option that its end products are safe and durable.
However, in a prudent, de-risking initiative, Roofit has reduced its
exposure of asbestos-based products - AC sheets and pipes - from 99.45 per
cent in 1998- 99 to 57.02 per cent of its turnover in 2000-01. This is
expected to reduce further over the foreseeable future following an
increased focus on drymix and other non-AC products.
1998-99 99.45 %
1999-00 74.41 %
2000-01 57.02 %
The company's products may be hit by cheap imports.
Since inward freight is prohibitive as a percentage of the selling price,
the company faces no significant import threat. Roofit has also insulated
itself against imports through a strong distribution network in the rural
and urban markets. Roofit's brands represent trust, an effective buffer
against competition in the marketplace.
Raw material risk
In the case of an unfavourable review by the European Union, the mining of
asbestos may be banned, leading to raw material scarcity.
Until 1999-2000, the entire raw material requirement of the company was
sourced from Zimbabwe. In a de-risking initiative, the company also sourced
material from Russia from 2000-01. Since Russia is not expected to toe the
line of the European Union, Roofit does not expect any disruption in the
supply of asbestos. To de-risk itself further, Roofit markets EU-compliant
sheets and PVC sheets as well. The company has also modified its production
process to facilitate the production of sheets using an alternative
Since the company's products address the construction sector, Roofit's
earnings could be affected in an economic recession.
Roofit has countered this threat through a product portfolio that addresses
urban and rural demand (AC sheets are directed at the rural sector, PVC
sheets and drymix at the urban consumer). Within the urban market, the
company caters to institutional and individual buyers. This customer spread
has reduced dependence on any one segment; besides, it has helped the
company capitalise on growth. Roofit has also used the recession to
strengthen its brand, increasing its market share from 16 percent to 23
percent over the last three years.
A major part of the company's income is sourced from sales in the south and
west, a geographic overdependence.
The company's decision to be present in a few markets to start with was
influenced by the need to penetrate vertically and establish a strong
distribution network before expanding horizontally. The company selected
its markets of presence with care.
The southern and western markets of the country represent the most affluent
and fastest growing markets in the country. Roofit is in the process of
spreading itself across more geographies - exports six-folded in 2000-01
and the quantum of shipped material is expected to increase in 2001-02.
Roofit also expects to enter the growing north India over the foreseeable
Roofit's AC pipes revenue is dependent on Government offtake, marked by low
realisations and long receivables.
Roofit has prudently supplied AC pipes to projects, resulting in higher
realisations and a shorter receivables cycle. The company expects revenues
from the sale of AC pipes to increase since the water and sewage system is
a priority thrust area for the Government.
Roofit's gross block increased from Rs. 123.75 cr in 1999-2000 to Rs.
203.04 cr in 2000-01 resulting in negative operating cash flows.
Roofit's aggressive expansion has enabled it to strengthen its business for
the future. As a result, Roofit's plants are equipped to cater to a large
area, a pre- requisite in a business with a large transport cost component.
The company does not expect to incur major capital expenditure in the
coming year. Besides, higher drymix revenues are expected to generate
positive operating cash flows
Interest and financial charges increased from Rs. 22.05 cr in 1999-2000 to
Rs. 35.97 cr in 2000-01. The company's debt-equity ratio stands at 2.12, a
Roofit expects to reduce its interest outgo through a debt swap - high
interest, working capital loans with low interest term loans. Drymix
revenues are expected to generate resources for working capital requirement
while term loans are expected to fund minor capital expenditure. The
company is also in the process of infusing equity into the company, which
will reduce its debt- equity ratio.
MANAGEMENT DISCUSSION & ANALYSIS
Income accounting method
The company followed the accrual system of accounting in 200001. Under this
method, revenue and expenditure were recognised as soon as the transaction
was recorded in the books even though the actual receipt or disbursement
transpired later This format of accounting corresponded to the Generally
Accepted Accounting Practices in India. Wherever the treatment of accounts
required an interpretation, the company preferred to be conservative
2000-01 Vs 1999-00
The total income increased from Rs. 321.02 cr in 199900 to Rs. 456.16 cr in
200001. Profit after tax increased to Rs. 41.64 cr in 200001, a rise of
12.45 per cent.
Income from other products increased from Rs. 1.56 cr in 199900 to Rs.
46.73 cr in 200001. 'Other products' included GRP tanks, PVC tiles, FRP
sheets, dust ventilators and other accessories. The company expects income
from 'other products' to remain at the existing levels in 2001-02.
Other income stood at Rs. 0.43 cr in 2000-01 compared to Rs. 0.34 cr in the
preceding year. Dividend income and income from the sale of scrap
constituted more than 67 per cent of 'other income '. As a percentage of
total income, other income reduced from 0.11 percent in 199900 to 0.09 per
cent in 2000-01.
Surplus management Policy
The surplus generated from the business was used for working capital
requirements, for asset expansion and for distribution as dividend to
shareholders. The Rs 18 cr drymix plant at Ratnagiri was funded entirely
through internal accruals.
The company's equity share capital increased from Rs. 7.80 cr in 1999-2000
to Rs. 15.99 cr in 200001 through an issue of bonus shares in a 1 :1 ratio
in December 2000. The company also issued 2,00,000 equity shares at Rs. 50
per share (face value Rs. 10) as the final installment to Sun Earth
Ceramics Ltd. for the Rs 15.07 cr purchase of its AC pipes plant in 199798.
During the year, the company also approved a rights issue in the ratio of
two fully convertible debentures/equity shares for every five shares held
to be issued at such premium (face value Rs.10) that the Board may approve.
This will increase the company's equity capital to Rs. 22.40 cr.
Roofit's redeemable preference share capital was Rs. 14.53 cr in 200001
Preference shares were issued for funding the company's expansion and
meeting long-term working capital requirement.
Roofit's reserves and surplus increased from Rs. 91.47 cr in 199900 to Rs.
119.72 cr in 200001. Transfers from the Profit and Loss account stood at
Rs. 68.22 cr and constituted around 57 per cent of the company's total
General reserves accounted for Rs. 35.86 cr and debenture redemption
reserves for Rs. 7.17 cr Share premium reserves stood at Rs. 7.10 cr.
Roofit's borrowings increased due to loans taken to commission new plants,
launch new products and for the working capital required to fund their
distribution and offtake. Roofit is in the process of replacing working
capital loans with term loans, resulting in a lower interest.
Roofit's secured loans increased from Rs. 152.80 cr in 199900 to Rs. 237.56
cr in 2000-01, an increase of Rs. 84.76 cr. The company floated commercial
paper of Rs. 40 cr at an interest of 9.5 per cent for funding working
Two loans of Rs. 10 cr each were taken to finance working capital. A
project loan of Rs. 27 cr at an interest of 12.5 per cent per annum funded
the drymix plant near Pune.
Roofit's unsecured loans increased from Rs. 35.11 cr in 1999-00 to Rs.
81.61 cr in 2000-01, an increase of Rs. 46.50 cr. Public deposits increased
from Rs. 14.51 cr to Rs. 39.42 cr. Other unsecured loans increased from Rs.
13.26 cr to Rs. 33.37 cr. The rest represented interest-free loans given by
the Directors. All unsecured loans were used for capital expansion
As a result of the increase in equity, reserves and debt, Roofit's total
capital employed increased from Rs. 301.37 cr in 1999-00 to Rs. 469.41 cr
Roofit's gross block increased from Rs. 123.75 cr in 1999-00 to Rs. 203.04
cr in 2000-01. Productive assets accounted for almost 91 per cent of the
company's gross block. Factory buildings increased by Rs. 16.07 cr and
plant and machinery by Rs. 48.04 cr on account of the company's drymix
plants in Ratnagiri and Pune. Since the plants are relatively new with an
average age of six years, no large-scale asset replacement is expected.
Capital work-in progress
Roofit's capital work-in-progress, representing the drymix plant in
Chennai, stood at Rs. 43.73 cr in 2000-01. The plant, with an installed
capacity of 285,000 tpa, is expected to be completed before the end of
Roofit's investments increased marginally by Rs. 0.36 cr during the year
under review. The company does not have any investments on the stock
market. The company does not expect to invest in the capital market during
the current year.
Roofit's inventories increased from Rs 74.16 cr in 1999-00 to Rs.118.23 cr
in 2000-01. At Rs. 59.33 cr, finished goods constituted more than 50 per
cent of the inventories (Rs. 39.73 cr in 1999-2000, 54 per cent of the
inventories). The increase was on account of the increased drymix inventory
being placed with an increased number of dealers. The closing stock of raw
materials was Rs. 55.72 cr in 2000-01 compared to Rs. 31.56 cr in the
preceding year, primarily due to an increase in raw materials for the
production of drymix.
Sundry debtors increased from Rs. 95.88 cr in 199900 to Rs. 144.61 cr in
2000- 01 on account of higher rural sales.
Debtors' turnover increased from 108 days in 199900 to 114 days in 200001
due to a higher credit given out following the launch of new products. In
2001-02, the company expects to address a larger urban market which is
expected to reduce the debtors' turnover.
Loans and adances
Loans and advances increased from Rs. 27.99 cr in 19992000 to Rs. 28.58 cr
in 200001. A major part of the loans and advances comprised deposits with
suppliers of raw material and finished goods.
Subcontracting expenses increased from Rs. 14.07 cr in 199900 to Rs. 19.26
cr in 200001. These expenses refer to payments made to government approved
contractors for the installation of AC pipes.
Transportation comprised an important cost item across all products
marketed by Roofit. Primary freight comprised the movement of finished
goods from the factory premises to the distributor / warehouse while
secondary freight comprised costs incurred for the transfer of goods to the
retailer or consumer.
Roofit reduced freight by Rs. 530 per tonne on AC sheets due to better
production planning and negotiation. Transportation cost as a percentage of
gross sales reduced from 4.94 per cent in 1999-00 to 3.85 per cent in 2000-
In 2001-02, Roofit expects to use sea vessels to transport sheets from its
Ratnagiri plant to markets in Gujarat and Kerala, reducing costs by
approximately Rs. 75 lacs.
Transportation cost 15.87 17.56
Transportation cost as a % of net sales 4.9 3.85
Roofit's advertisement expenditure increased from Rs. 2.70 cr in 1999-00 to
Rs. 9.32 cr in 200001 due to increased promotional activities for drymix.
The company expects advertisement expenditure as a percentage of net sales
to remain around the same levels during the current year.
Interest outflow increased from Rs. 22.05 cr in 199900 to Rs. 35.98 cr in
2000-01 due to an increase in the secured and unsecured loans for funding
capital expansion and meeting working capital requirements.
Roofit's average rate of interest increased marginally from 14.18 per cent
in 199900 to 14.19 per cent in 2000-01. The company expects to reduce its
average rate of interest in 2001-02 through a debt swap.
Particulars 1999-00 2000-00
Opening borrowing 122.99 187.91
Closing borrowing 187.91 319.17
Average borrowing 155.45 253.54
Interest outflow 22.05 35.98
borrowing % 14.18 14.19
Roofit provided Rs 27.72 cr for depreciation in 2000-01 compared to Rs.
19.67 cr in 199900. The depreciation was provided on a straight line basis
as per the rates specified in Schedule XIV of the Companies Act. 1956.
There was no change in the depreciation policy followed by the company in
2000-01. In 200102, the company expects to capitalise approximately Rs. 36
cr on account of its drymix plant in Chennai, resulting in an
adequate tax shield.
Roofit's tax provision was Rs. 4.75 cr in 2000-01 compared to Rs. 4.60 cr
in 1999-00. The company registered exports of Rs. 11.41 cr during the year
under review compared to Rs. 1.95 cr in the preceding year, bringing down
the company's tax exposure.
In the Union Budget 200102, the Indian government introduced a number of
schemes to accelerate housing growth in the rural sector:
* The government planned to set up 2.5 million dwelling units in rural
* A Plan allocation of Rs 15.01 billion was made for providing 1.2 million
houses for the poor.
* A Plan allocation of Rs 920 million was made to provide 100,000 houses
for families with an income of less than Rs 32,000 a year.
* Under Golden Jubilee Rural Housing Finance Scheme, National Housing Bank
committed to finance companies for the construction of 150,000 houses.
* The Centre for Monitoring Indian Economy (CMIE) has forecast a 6.3 per
cent growth in the real GDP in the current fiscal year against 5.2 per cent
growth in the GDP in the last fiscal. The growth is expected to come
entirely from the agricultural sector. CMIE has forecast agricultural
growth at a high 9 per cent, the highest in the last seven years. This
follows two disappointing drought years in Gujarat, Maharashtra and
As a result, demand for Roofit's goods and services is expected to improve.