It gives me immense pleasure to welcome you to our 26th Annual General Meeting. Theyear 2020-21 has been the most challenging year for the company in its history. We are inthe midst of an unprecedented pandemic the end of which is far from certain. The pandemichas changed the way we do business interact professionally socialize and our way ofLife. This pandemic accentuated the fault Lines in our public health delivery systemsresulting in increased attention and resources to the sector. Needless to add it hasimplications for our business. We need to build in increased resilience contingencyplanning in our operations and be prepared to be nimble and flexible in meeting marketconditions.
The first quarter of 2020-21 started with the lockdown impacting our businesssignificantly. In the second and third quarter there was a quantum improvement in businessactivity. The Indian economy was beginning to see normalcy in the fourth quarter quarterJanuary-March 2021.
The Company took substantial measures to mitigate the fallout of lockdowns which meantlower revenues profits and increased working capital. We primarily focused on reducingthe working capital cycle which meant reduction of inventory and debtors - thisincidentally was in sync with our Long term goal of balance sheet improvement. Furtherthe Company also worked to optimize expenses. We further consolidated our operations andclosed non remunerative stores bringing down the retail outlets to 95 (from 120). Therewas further rationalization on the number of products and SKUs handled by the retailstores. These measures resulted in the foLLowing:-
|Particulars ||FY March 21 ||FY March 20 |
| || |
| ||Amount ('Cr) ||Amount ('Cr) |
|Inventory ||316.08 ||400.45 |
|Debtors ||295.09 ||428.48 |
|Borrowings ||276.12 ||338.11 |
|Finance cost ||33.08 ||43.35 |
|Expenses ||82.74 ||124.40 |
As can be seen in the table there was a reduction of about '84 Cr in inventory '133 Crin debtors '62 Cr in borrowings '10 Cr in finance cost and about '42 Cr in otherexpenses. As you are aware your Company operates in three distinct segments of retaiLchanneL and enterprise and the consoLidated resuLts encompass aLL of them.
Your Company has continued to focus on its retail business. Due to the lockdowns andsocial distancing measures Large retaiL formats and maLLs were shut down for a substantiaLperiod of the past year. Shankara has a distinct advantage as our stores are standalone..This meant that we were able to open and continue operations for a larger part of theyear. We took many measures to reach out to our customer segments. There was a substantiaLincrease from our side on teLephonic canvasing maiL order and promotion of our digitaLcataLogue and saLes.
The pandemic affected the larger cities to a greater extent. Your Company benefited bythe fact that we have a substantiaL presence in Tier II and III Locations. The channeLbusiness was sustained and even saw some growth during FY21. This segment helped inimproving cash flows during the year and was strategically important in generatingrevenues during full lockdowns.
The enterprise segment was probably the slowest to recover in the year. We saw anuptake from the end of the second quarter and a semblance of normalcy from the fourthquarter. The processing activities of your Company was at a reduced level as compared toFY20. This activity was of strategic importance to contribute to a range of products andprofitability.
Financial Performance in FY 20-21
The Company's performance was impacted in Q1 of the year but we were able to recoverstrongly and closed the year with a satisfactory performance.
The revenue stood at T2038 Cr for FY21. Retail revenue contributed to 58% ofthe overall sales which is 3% more in percentage terms as compared to the previous year FY20.
EBIDTA was at T77 Cr for FY21. It may be noted that in Q1 of FY21 the EBIDTA was(T9 Cr). There was a substantial recovery over the next 3 quarters to close the year on apositive note.
PAT stood at T~14 Cr for FY21. The year started with a loss of T25 Cr for Q1.The strong recovery by the year end validates the strategic actions taken by your Company.However it needs to be noted that in absolute terms there has been a significant drop inPAT of T26 crores in FY21 over FY20.
(Rs in Crores)
|Particulars ||FY March 21 ||FY March 20 |
| || |
|Revenue ||2038 ||2640 |
|RetaiL (%) ||58% ||55% |
|EBITDA ||77 ||122 |
|Margin ||3.8% ||4.6% |
|PBT ||20 ||53 |
|PAT ||14 ||40 |
|Margin ||0.7% ||1.6% |
Key performance highlights
The overall performance for the financial year was understandably subdued as comparedto the previous year FY20. This was primarily due to the pandemic and the lockdowns whichsubstantially affected sales in Q1 and to a lesser extent in Q2 of the year. It reflectswell on the management that when the economy opened up they were geared to improve thefinancial situation.
Sales in Q1 was T346 Cr and there was a net loss of T25 Cr. There was an immediateturnaround in Q2 where sales was at T488 Cr and a net profit of T6 Cr. This improvementwas continuous and the sales of Q3 and Q4 were T562 Cr and T642 Cr respectively. Netprofits continued to improve and your Company ended the year on a positive note with a PATof T14 Cr. And in these trying times Shankara gave utmost importance to cash flows and Iam happy to teLL you that your Company was able to generate net operating cash flow ofT133 Cr.
The way forward
We had thought that the worst of the pandemic was behind us at the end of FY21.Unfortunately the second wave commenced in April 21 and there have been lockdowns imposedin various parts of the country. Fortunately your Company was on alert and did believethat India and the World would have to Live with Covid 19 for a few more years. Theprudent and conservative measures that the Company implemented over the course of Lastyear will hold in good stead for the coming financial year.
The construction industry is a corner stone for the success of any economy. Buildingmaterials play a key role in this industry. We have observed that despite lockdownsconstruction and the building material segment are amongst the first businesses to openfor commercial activity.
Shankara will be back on a growth path in the coming year once the current lockdown isremoved. We will be continuing our focus on the retail segment while strongly believingthat all our business verticals contribute strategically to the continuing growth of ourCompany.
I am happy to note that your Company took utmost care to maintain Covid protocolsthroughout the year. I would like to convey my deepest appreciation to all our employees.They have stood by the Company in these trying times. My sincere thanks and appreciationto my fellow Directors on the Board for their guidance and constant encouragement. Mygratitude to our bankers customers and suppliers. On behalf of the Shankara Board I alsothank you all our valued shareholders for your continued support.
|Warm Regards |
|V. Ravichandar |