I am glad to have this opportunity to address you in the Annual Report for PennarEngineered Building Systems Limited (PEBS). PEBS was commenced operations in 2010 for thepurpose of providing custom designed building solutions for the industrial agriculturaland commercial sectors. PEBS has over the last few years diversified into providingsolutions for the high rise building sector solar module mounting systems and engineeringservices for the metal buildings and structural fabrication sectors.
The last financial year saw PEBS achieve its highest ever gross sales of `570.46crores. The EBIDTA for the year was `56.35 crores and the profit after tax was `24.40crores. The EBIDTA and PAT were substantially lower than the previous years numbersinspite of a substantially larger revenue base. The reason for the underperformance on theEBIDTA and PAT were largely due to the increased volatility in steel prices. During thefinancial year the company was exposed to raw material price increases specificallyin the price of hot rolled and pre-galvanized steel of over 30%. The company isworking and has achieved substantial progress in addressing continuing steel pricevolatility and we believe that we will be able to address any future risks to our marginsfrom procurement price volatility.
PEBS has the following business verticals
High rise buildings
Solar Module Mounting Systems
The pre-engineered buildings vertical provides turn-key solutions to our customers in adiverse range of sectors including manufacturing warehousing process industriescommercial and agriculture. The value proposition consists of designing manufacturing thebuilding components and erecting these buildings at site. Since inception PEBS hasdelivered some of the most iconic projects in India such as one of the largest buildingsin India in terms of square footage (14 million square feet) a 100 metre clear spanbuilding buildings with 120MT of load bearing capacity and India's first Gold Rated GreenFactory. The business division comprises the majority of PEBS' revenue and will continueto be an important part of the company's growth strategy. The company currently has aproduction capacity of 120000MT for pre-engineered buildings.
High-rise buildings represent a large untapped market opportunity for PEBS. Thesebuildings were traditionally constructed in concrete in India but our solutions offerseveral distinct advantages which will help us gain market share. In the last financialyear around 15% of our revenue was sourced from the high-rise vertical. We have over thelast year built a strong design capability in this sector and the addition of an effectiveproject management team has ensured that we are well placed for growth in this vertical.
PEBS also provides custom designed module mounting systems to developers of large gridconnected solar power plants in India. The solar sector in India has been booming in thepast three years and this has resulted in a strong market opportunity for the company. Inthe last financial year we recorded sales of around 55Cr in this vertical and I have everyexpectation that we will strongly grow in this vertical over the next few financial years.The company has also added solar single axis tracker solutions to our product portfolio inthe past year which will serve to further increase our addressable market size.
Engineering services represents a compelling opportunity for PEBS. Over the past twoyears we have grounded the capability to provide design detailing and drafting servicesto metal buildings and fabrication companies. We currently provide these services tocompanies in the US and it remains one of our most profitable business verticals. With thegrowth in our Vizag and Hyderabad engineering offices and the set up of dedicated directlylink MPLS capabilities we are confident of growing this vertical further. In the lastfinancial year 15% of our EBIDTA was contributed by this business vertical and I am surethat the share of EBIDTA for this business vertical will continue to grow in the next fewyears.
Complex Structural fabrication seeks to monetize the strong manufacturing capabilitiesthat PEBS possesses. The structural fabrication industry is vast but we intend to build anorder book consisting of high margin fabrication work to bring about revenue and profitscalability. In the current financial year we expect to have over 10% of our revenue comefrom this division.
In addition to these verticals there are several capabilities that PEBS is adding thatwill dramatically increase our addressable market size and in turn our revenue andprofitability. Some of these projects are metallizing capabilities metal doors exportmanufacturing retail buildings low-cost housing and solar rooftop structurals. We arefocused on building our export business as well. With the set up of dedicated offices inthe US we are very confident we can begin to tap those markets for some of our productsand services specifically engineering services and solar MMS systems.
PEBS possesses a strong management and operating team. The company has very lowleverage a strong balance sheet and substantial reserve funds to be deployed in expandingcapacities and capabilities. The company can service customers across India and adjacentcountries cost effectively. One of our strongest capabilities I believe is our engineeringteam one of the largest structural design and detailing teams in the country. Witha strong order book and an addressable market that is in the thousands of crores we standto benefit from infrastructure investments process industry growth warehousing sectoropportunities and any gross fixed capital investment growth.
I am thankful to have enjoyed the support of all you as we continue to craft PEBSgrowth strategy. I look forward to working with all of you as we continue to evolve PEBSinto one of the premier engineering companies in India.
|Thank you |
|Nrupender Rao |
|Chairman Pennar Engineered Building |