It gives me great pleasure in welcoming you to the 24th Annual General Meeting of yourCompany.
I am happy to report to you that in spite of an uncertain environment and certainchallenges arising from global raw material pressures and natural calamities your Companyremained on track with its vision of being India's first retail chain for buildingproducts.
These challenges notwithstanding our company continues to follow high standards ofcorporate governance and views it as more of an ethical imperative than merely adhering toregulatory requirements. We are proud that our growth and transformation over the last fewyears has come from staying the course for long term sustainability without takingconvenient short term decisions or compromising on our obligations to society at large.
The year gone by
There is no doubt that the business environment has been challenging in the lastfinancial year. Let me share with you the operating environment and the headwinds theCompany faced in a highly competitive market. Thereafter I shall outline the actions theCompany has taken to ensure strong profitable growth.
The year started off on a positive note. The first half of FY 201 8-19 was in factgood. There was a revenue growth of 23% which is commendable. However there were suddenand strong headwinds in the second half. The sharp increases in raw material pricesespecially steel coupled with an inability to increase end user prices was a doublewhammy. This had impact on margins as well as inventory.
Overall we delivered a revenue growth of 4%. We recorded EBITDA margin of 4.7% (vs6.9% last fiscal) and PAT margin of 1.2%.
While the company is increasing its focus on diversifying into building products thereis still a large dependence on steel which hit us last fiscal. Further our business haslegacy elements which impact us in our journey to be a retail building products chain.That resulted in a y-o-y fall of 11.6% in sales vs last year in the second half of theyear.
Focus on cash flow and financial strength
I must stress here that there were a number of important and good things that thecompany did to improve its overall financial position. For one there was a huge focus oncash flow. The thrust on debtors saw a reduction in debtors from '424 cr in Q4 FY 18 to'334 cr in Q4 FY 19. I am happy to inform you that the company had an operating cash flowin fiscal 2019 of '171 crores (versus '40 crores in FY 18).
Our debt is down so finance costs too are decreasing. The debt equity ratio which was0.70 in Q1 FY 19 came down to 0.38 in Q4. We have also reduced our operating costsrestructured some of the operations and the results should be visible in the comingquarters. Our focus on building balance sheet strength and sales on cash as opposed tocredit also impacted margins.
As you can appreciate we moved swiftly to take corrective measures to keep the companyon a sound financial footing for the forthcoming years.
Our retail focus is increasing. From 51% in Q1 it increased to 57% by Q4. You willrecall that retail was just 40% merely 3 years back. As the company steps up its retailoperations and the number of items and complexity increases it is facing some pressureon retail margin which are slightly down in the short term.
In a sense as far as retail is concerned your company in many ways is still astartup. It is an evolutionary process. Since there is no other comparable company inIndia we are charting our own path.
De focus on non-critical areas
We are open to considering divesting certain parts of our business that are not addingvalue to the overall growth strategy of the firm. To that end the management hasidentified assets for sales in Chegunta unit of a subsidiary Taurus which is subject toshareholder approval.
The rationale for this - Taurus does not have substantial capacities to avail scalebenefits nor does it make sense to increase capacity in these market conditions. This saleof assets will help release funds both from fixed assets and working capital and furtherstrengthen the consolidated balance sheet of Shankara. With the residual capacities ourfocus on value added bespoke products will increase.
Growing product portfolio and customer engagement
The company is clear on its focus to be a One Stop Shop Solution for buildingproducts for our customers. To that end it is constantly increasing product offerings andcreating depth in the existing product categories to create an engaging shoppingexperience for customers. It is also expanding its retail presence through organic andinorganic routes.
The India growth story
The uncertainty in the environment has continued in the current financial year as well.The conclusion of the ongoing general elections and the installation of a new governmentshould hopefully provide political stability. There have been certain path-breakingpolicies such as GST RERA and ambitious programmes such as affordable housing that holdsignificant promise for healthy growth of the building products industry over the mediumterm.
Going forward I am confident of your Company's abilities and competence to scout foropportunities amidst this volatility and drive the business forward with focus anddetermination.
The core and evolving consumer needs continue to be at the core of all our actions andinitiatives. Last fiscal your company's focus was on strengthening itself financially inthe midst of strong headwinds. The focus was clearly on consolidation and financialprudence.
We believe that your company is in a reorientation phase before capitalizing on thegrowth opportunities. We are in it for the long term.
The last year was tough and truly tested us. We believe that we have taken the rightmeasures to set the business back on the growth path. Our credit ratings are healthy andthe focus on balance sheet strength will continue. As your Company enters its 25th year ofoperations I look forward to very strong years of growth ahead of us.
I take confidence from the continued support provided by all our stakeholders as weforge ahead.
I convey my deepest appreciation for the effort of all our employees. My sincere thanksand appreciation to our fellow Directors on the Board for their guidance. My gratitude toour bankers customers and suppliers. On behalf of the Shankara board I also thank youall our valued shareholders for your continued support.