Chairman & Managing Director's insight
We aim to build a robust organization thereby fortifying our topline and bottomline andensuring a higher return to our stakeholders and remain aloof from any of the industrycycles.
At Kamdhenu Limited we have always focused with a single operative mindset - growth ofthe Company investors customers employees and the people in our surroundings. We havealways focused towards strengthening our resources which motivated us to continue growthinitiatives underpinned by a robust demand anticipated from the infrastructure sector;reduce the debt burden and enjoy the benefits of the unique franchisee-based businessmodel. We aim to build a robust organization thereby fortifying our topline and bottomlineand ensuring a higher return to our stakeholders and remain aloof from any of the industrycycles.
The biggest initiative taken by us during the current fiscal year was theimplementation of the proposal to de-merge the Company across two verticals-steel divisionincluding TMT Bars Structural Steel products Colour Coated Sheets Pre-engineeredbuilding material and decorative paint business which includes interior exterioremulsions textures designer paints and all varieties of paints.
Once the scheme is implemented the new business entity would emerge as Kamdhenu Colourand Coatings Limited (however the shares will be issued by its immediate holding companyi.e. Kamdhenu Ventures Limited which in turn is the WoS of Kamdhenu Limited) and the mainCompany Kamdhenu Limited would continue to cater to the steel segment.
The overall objective of this demerger is to reorganize the organizational focusreinforce fundraising capabilities emerge stronger across both businesses and enhancerespective values in a way which would not have been possible in our merged manifestation.One more potential viewpoint that emerges from this demerger is both of the Companiescater to the infrastructure and real estate sector their mode of branding capitalrequirements nature of risk competition human skill set requirements etc differ.Through the proposed demerger investors would get a chance to back the business theywould be interested in. This would instil transparency amongst the investors and wouldthus redefine the potential of the two entities separately through their respective marketcapitalization growth plans individual competencies growth prospects in-line with theirsectoral potential.
Following the initial rebound in mid- 2020 the global economic recovery has slowedwhereas activity and trade in the goods sector have improved the services sector remainsweak. Most commodity prices have rebounded from their Q1 and Q2 2020 lows as strictlockdowns have started being lifted and demand firmed.
Global GDP growth is projected to be 6% in 2021 and 4.4% in 2022 with global outputrising above the pre-pandemic level by mid-2021. Advanced economies are projected to growat a pace of 5.1% and emerging & developing economies by 6.7% through proper pandemicmanagement effective vaccination rollouts and continued monetary policy accommodation.
India's GDP (Gross Domestic Product) growth is expected to be in the range of 7.5% to12.55% during FY 2021-22 (FY 22). For the fiscal year 2020-21 GDP contraction isestimated at 8% as against growth of 4% during FY 2019-20. Over the next 2 years thecountry is expected to steer growth backed by the fact that India vaccinates a significantproportion of the population by mid FY - 2022 thereby bending the infection curve.
STEEL INDUSTRY REVIEW
Over the last decade India made steady progress as a steel producer expanding itsoutput from 58 MT in 2008 to 110 MT growing at double the pace of the world. In thisprocess it has overtaken Russia US and Japan to become the world's second largest steelproducer after China. The country has the lowest per capita of steel consumption at just74.3 kg compared to other nations with similar demographics population count etc.Keeping this in mind the Government of India has set an ambitious target of achieving 300MT of capacity by 2030-31 more than double the current at 142 MT. The country is expectedto move ahead with its V-shaped recovery achieved after Q1 of FY 2020-21 on the back ofits ambitious target of becoming a 5-trillion dollar economy by 2030. The country isexpected to generate a non-linear demand which will eventually outstrip supply from thedomestic manufacturers.
To meet the vision of National Steel Policy an additional capacity of 30 MT would beneeded by 2024-25. As one of the most attractive emerging markets with lowest per capitaconsumption segments the country is making accelerated investments primarily driven byGovernment spending.
PAINT INDUSTRY REVIEW
The domestic paint industry is estimated to be of Rs.500 billion industry with thedecorative paint category constituting almost 75% of the market. India's per capitaconsumption of paints stood at 4.1 kgs whereas compared to the global average of 13-15 kgsper capita consumption. Added India's young population represents a huge opportunity witha rapidly increasing middle class and overall population. By 2030 Indian middle class isexpected to have the second largest share in global consumption at 17% which could drivedemand for the paint industry. For the past few years demand in smaller cities and townshas been growing at a faster pace than metro and tier I cities. Going forward a rise indisposable income incremental consumption expenditure and development of the ruralmarkets will fuel the paint industry's growth in these areas.
ENHANCING SHAREHOLDERS VALUE THROUGH FINANCIAL AND OPERATIONAL EFFICIENCY
At Kamdhenu Limited we strongly believe in enhancing shareholder's value and strive toachieve the same through continuous evolution and upgradation of our efficiencies. Duringthe year under review our Company reported a Net Turnover of Rs.625.22 Crores and ProfitBefore Tax (excluding Exceptional Items) of Rs.31 Crores Earnings Per Share (EPS) of theCompany also stood at Rs.5.62 per share. Cash flow from operations is Rs.50.20 Crores
In these challenging and tough times the world was grappling due to Covid-19 pandemicwhich led to lockdown during March 2020 which resulted in the disruption of the businessoperations.
However as the unlocking and easing of restrictions began business activities startedshowing healthy sign of growth. With the same our capacity utilisation at both Bhiwadiand Chopanki units started improving. Our steel segment reported 80933 MT of productionduring the current fiscal thereby clocking a revenue of Rs.337.80 Crores to the Company.Our franchisee based brand sales attained a turnover of Rs.12000 Crores This all came inthe backdrop of a challenging Q1 of FY 2020-21 due to Covid-19 pandemic.
Our special focus on the paint business has started paying rich dividends. Our paintsegment reported 30318 KL of production contributing Rs.202.10 Crores to the over salesof the Company during the current fiscal. This was achieved due to a strong demand fromTier 1 metros and urban areas. An improved wedding season also led to a surge for thedemand of paints in both urban and rural areas. Although our operational capabilities atthe Chopanki unit have still not been able to achieve full-fledged production due to thefire which struck 2 years back. We have received Rs.5 Crores part amount of the insuranceclaim and we are expecting to receive the full settlement soon. The restoration work ofthe remaining part of the various plants & machinery is in full swing and we hope toresume 100% operations by mid of FY2022.
BUiLDiNG A ROBUST ORGANiZATiON
Today we command a dominant market share in the organized retail segment of the steeland paint industry. Going ahead we are quite optimistic of sustaining our growth for someinteresting reasons.
New categories: We were traditionally a steel manufacturing Company but our gradualshift from single product dependence to multi-layer offerings; introduction offranchisee-based business model has not only made us asset light but has also created aniche for the Company across the markets.
Brand leverage: Today our flagship brands - Kamdhenu TMT Kamdhenu PAS10000Kamdhenu NXT & Kamdhenu Colour Max in the steel segment and Colour Dreamz the paintsegment command a leading pie in the market and contributes significantly to our topline.These brands are endorsed by leading Bollywood celebrities. Recently leading Bollywoodactress and entrepreneur Ms. Preity G Zinta has been roped in as the Brand ambassador ofthe decorative paint division. This collaboration will help enhance the brand's pan-Indiareach and recall helping catapult the brand as the preferred consumer choice. Her rolealso represents a modern woman who performs every role seamlessly.
Organic route: In the steel industry we are pioneers in the franchisee business.Under this mode we provide the brand name of Kamdhenu alongwith assistance in technologyquality consistency and marketing of products. This mode of concept serves dual purpose-the franchisee units benefit a lot by availing Kamdhenu's brand premium and strongmarketing network while Kamdhenu Limited benefits from the royalty that it gets fromthese franchisees for using its brand name. The model also gives a unique identity to thefranchisee units and helps them in leveraging their level of operations and quality tosustain well amidst rising competition in the steel sector.
Deeper sales penetration:
We continued to manufacture steel through a network of 75+ franchisees and sell themproximate to markets of consumption. Thus we were able to sell 2310000 MT of steelmanufactured by our franchisee's generating a total royalty of Rs.85.30 Crores during thecurrent fiscal.
"KAMDHENU" TODAY AND TOMORROW
Today the brand "Kamdhenu" with an accomplished milestone of 25+ years inthe steel and decorative paint business has been able to sustain business cycles throughthe interplay of its passion and maturity. Highest ethical standards in corporategovernance wide gamut of products extended reach and customer convenience are thehallmarks of our journey to success. We aspire to align our brands as brands of people'schoice and increase our revenue basket to Rs.22000 Crores by FY 2023-24.
The future for our Company looks bright even as it passes through competitive times. Weare poised to grow much faster in the coming decades based on our product excellencehuman resources brand equity and market growth. As we gear up for another important phaseof growth in these uncertain Covid times we have no doubt that the Company will continueto enjoy the same dedication and faith from all its stakeholders and associates that willinspire it to reach greater heights and create multi-decades of a solid and steadyexperience.
Satish Kumar Agarwal
Chairman & Managing Director.