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Visaka Industries Ltd.

BSE: 509055 Sector: Industrials
NSE: VISAKAIND ISIN Code: INE392A01013
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NSE 00:00 | 20 Jul 511.55 5.95
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OPEN 503.00
PREVIOUS CLOSE 505.60
VOLUME 1599
52-Week high 839.90
52-Week low 405.00
P/E 12.28
Mkt Cap.(Rs cr) 812
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 503.00
CLOSE 505.60
VOLUME 1599
52-Week high 839.90
52-Week low 405.00
P/E 12.28
Mkt Cap.(Rs cr) 812
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Visaka Industries Ltd. (VISAKAIND) - Director Report

Company director report

Your Directors are pleased to present the 36th Annual Report of the Company withAudited Financial Statement for the year ended March 31 2018. The financial highlightsare as follows:

(Rs. in Lakhs)
Particulars 2017-18 2016-17
Total Revenues 104781 106127
Profit before depreciation and Taxes 13647 10330
Profit before taxes 10164 6922
Provision for taxes (Including deferred tax) 3508 2644
Total Comprehensive Income 6456 4115
Dividend (including corporate dividend tax)* 1147 382
Balance brought forward from previous year 5761 2029
Profit available for appropriation 11071 5761

*Dividend paid during the respective years.

Performance review and the state of company's affairs

The year under review was marked by various structural reforms. The turbulence ofsudden note ban coupled with indirect tax overhaul resulted to a three-year low growthrate of 5.7% in the first quarter however towards end the year it had shown signs ofpicking up though lower than that of last financial year.

Initial teething problems associated with the adoption of new indirect tax regime inthe form of GST other structural reforms like initiating significant of NPA problemsintroduction of RERA etc. together with increase in crude oil prices world over haveslowed down the growth. However growth is picking up and the rural sector is showingsigns of recovery. Your company's significant exposure focussing on value addedapplications coupled with cost control measures have helped it to register a decent growthin the profits of the company during the financial year under review. The Company's keyperformance indicators are as under: Revenue from operations decreased marginally by 1% toRS.1048 Crores from RS.1061 Crores of previous year.

Cash Profit increased by 32% to RS.136 Crores from RS.103 Crores of previous year.

Net Profit increased by 56% to RS.67 crores from RS.43 steps towards resolution croresof previous year.

The capital expenditure for 2017-18 was RS.106.00 Crores which was principally onaccount of setting up new V-Boards plant at Jhajjar in Haryana and new ATUM plant atMiryalguda in Telangana state. There is scale broad no change of business during the yearunder review. geographical

Your Company's shares are listed on the National Stock

Exchange (NSE) and BSE Limited. Variations in the market capitalisation and priceearnings ratio are provided hereunder:

(Rs. in Crores except for ratio)

Parameter As at March 31 2018 As at March 31 2017
Market Capitalisation 1031.39* 430.05**
P/E ratio 15.50 10.05

*based on closing price at BSE Limited being the higher of two exchanges **based onclosing price at National Stock Exchange of India Limited being the higher of twoexchanges

Your Company made its initial public offer of equity shares in 1984-85. The closingprice (quoted on stock exchanges) of your Company's share of RS.10/- each fully paid-up asat March 31 2018 and March 31 2017 are 3247% and 1354% respectively over the price oflast public offer made in the year 1991-92.

No material changes and commitments occurred after the close of the year till the dateof this Report which affect the financial position of the Company.

Dividend

Your Directors recommend payment of Final Dividend of RS.7 (i.e. 70%) per share ofRS.10/- each for the current Financial Year (previous year RS.6/- per share (i.e. 60%)).The Company is absorbing Corporate Dividend Tax of RS.228.51 Lakhs on the said Dividend.

Management Discussion and Analysis Global economic overview

In 2017 a decade after the global economy spiraled into a meltdown a revival in theglobal economy became visible. Consider the realities: Every major economy expanded and agrowth wave created jobs. This reality was marked by ongoing Euro-zone growth modestgrowth in Japan late revival in China and improving realities in Russia and Brazilleading to an estimated 3.7% growth in the global economy in 2017 a good 60 bps higherthan the previous year.

Crude oil prices increased in 2017 the prices at the beginning of the year bring$54.13 per barrel declining to a low of $46.78 per barrel in June 2017 and closing theyear at $61.02 per barrel the highest since 2013.

Global economic growth for 6 years

Year 2014 2015 2016 2017 (e) 2018 (f) 2019 (f)
Real GDP Growth (%) 3.5 3.2 3.1 3.7 3.9 3.0

[Source: World Economic Outlook January 2018] e: estimated f: forecasted

A review of the growth rates of various national economies is provided below:

The US: The world's largest economy entered its ninth straight year of growth in2017 (2.3% compared to 1.6% in 2016) catalysed by the spillover arising out of governmentspending by the previous administration coupled with US$1.5 trillion worth of tax cutsstimulating investments.

Euro zone: This region experienced the upside arising out of cheap money providedby the central bank. In 2017

Euro zone is estimated to grow 2.4% compared with 1.8% in 2016 the broad-based growthvisible in all Euro-zone economies and sectors. (Source: WEO January 2018 focuseconomics).

China: The Chinese economy grew faster than expected in the fourth quarter (Octoberto December) of 2017 at 6.8% aided by a recovery in exports. For the full year China'sgrowth is estimated at 6.9% which is its highest economic growth since 2010 and thisgrowth easily beat the the nation's slowest growth of 6.7% in 2016 (weakest pace in 26years). In 2018 China's growth is projected at 6.6%. (Source: WEO NBS data) EmergingAsia: Emerging Asia GDP is estimated at 6.5% in 2017. The region is being transformed bytechnologies and Internet strengthening the digital economy. The region is being drivenby infrastructure spending and stable economies. (Source: World Bank Global EconomicsProspects)

GCC: Being highly oil dependent economies GCC countries were affected by the oilprice decline (60% since 2013) resulting in macro-economic instability that affected jobcreation and growth. The GDP growth across the region remained subdued at 1.8% in 2017.(Source: World Bank)

Russia: The economy appeared to have exited a two-year recession that thanks tothe authorities' effective policy response and existence of robust buffers provedshallower than past downturns. In 2017 Russia was estimated to grow 1.9% followingnegative growth of 0.6% in 2016 (WEO) and a projected GDP growth of 1.8% in 2018. (Source:MOMR)

Brazil: In 2017 Brazil grew at 1.1% following a deceleration of 3.5% in 2016boosted mainly by the agricultural sector which grew by 13%. According to IMF predictionsthe nation is expected to clock a growth of 1.9% in 2018. (Source: Focus Economics RioTimes)

Outlook

The outlook for advanced economies improved notably for the Euro area but in manycountries inflation remained weak indicating that slack was yet to be eliminated andprospects for growth in GDP per capita were held back by weak productivity growth andrising old-age dependency ratios. Global growth forecasts for 2018 and 2019 were revisedupward by 20 bps to 3.9% reflecting improved momentum and impact of tax policy changes inthe US. (Source: WEO IMF)

Indian economic overview

After registering GDP growth of over 7% for the third year in succession in 2016-17the Indian economy is headed for somewhat slower growth estimated to be 6.6% in 2017-18.Even with this lower growth for 2017-18 GDP growth averaged 7.3% for the period from2014-15 to 2017-18 the highest among the major economies and achieved through lowerinflation improved current account balance and reduction in fiscal deficit to GDP.

The year under review was marked by various structural reforms by the Government andafter remaining in negative territory for a couple of years export growth reboundedduring 2016-17 and strengthened in 2017-18; foreign exchange reserves rose to US$ 414billion as on January 2018. (Source: CSO economic survey 2017-18)

Key government initiatives

Bank recapitalisation scheme: The Central Government announced capital infusion ofRS.2.1 lac crore in public sector banks. The measure entailed a budgetary allocation ofRS.76000 crore by the Central Government while the remaining amount is to be raised bythe sale of recapitalisation bonds. (Source: KPMG)

Expanding road network: The Government of India announced a RS.6.9 lac croreinvestment outlay to construct 83677 kilometres of road network over a period of fiveyears. The ambitious programme is expected to generate 14.2 crore man-day jobs for thecountry and boost road infrastructure. (Source: KPMG)

Improving business ecosystem: The country was ranked at the hundredth position animprovement of 30 places in the World Bank's Ease of Doing Business 2017 report a resultof the Central Government's pro-reform agenda. In addition Aadhaar-based identificationapproach could streamline the regulatory regime. (Source: KPMG)

Goods and Services Tax: The Government of India carried out a significant overhaulof the launched the GST in July 2017 with the vision of creating a unified market. Underthis regime various goods and services would be taxed as per five slabs (28% 18% 12%5% and zero tax). Post-GST implementation a 50% increase was recorded in unique indirecttaxpayers. (Source: KPMG)

Foreign Direct Investment: The ability to attract large scale Foreign DirectInvestment (FDI) into India has been a key driver for policy making by the Government.Foreign direct investment into India steadily increased from approximately USD 24 billionin FY2012 to approximately USD 60 billion in FY2017 which was an all-time high.

Coal mining opened for private sector: Ending state monopoly the government hasopened coal mining to the private sector firms for commercial use. The move for energysecurity through assured coal supply is expected to attract major players enhancesectoral efficiency competition increase competitiveness and induct the besttechnologies. (Source: The Hindu Business Today)

Doubling farm incomes: To improve the living conditions of farmers the governmentinitiated a seven-point action plan to double incomes by 2022. (Source: PIB).

Outlook

World Bank projected India's economic growth to accelerate to 7.3% in 2018-19 and 7.5%in 2019-20. Strong private consumption and services are expected to continue to supporteconomic activity. Over the medium-term GST introduction is expected to catalyse economicactivity and fiscal sustainability. The recapitalisation package for public sector banksannounced by the Government of India is expected to resolve banking sector Balance Sheetsenhance credit to the private sector and spur investment. (Source: IMF World Bank)

Global construction and building products industry overview

Global construction industry has been witnessing change reflected in the growingdemand for green construction products lower carbon footprint and bridge lockup devicesystems to enhance the life of structures building information systems for efficientbuilding management and using fiber-reinforced composites for the rehabilitation of agingstructures. andThe market is primarily constituted by brick stone concrete and cement(including cement asbestos sheets used for roofing) in addition to wood lumber woodpaneling and mill work products; the latest addition has been Fibre Cement Boards whichcan be used both in the interiors and exteriors of buildings. In the global constructionindustry the residential segment is expected to remain the largest. Financing forresidential construction projects is increasingly available with lower interest rates.(Sources: lucintel.com IIFL)

Outlook

The global construction industry is forecast to grow at a CAGR of 4.2% from 2018 to2023 and expected to reach an estimated $10.5 trillion by 2023. The future of the globalconstruction industry appears favorable (opportunities in residential non-residential andinfrastructure). The residential segment is expected to report above-average widen growthduring the forecast period. The Asia-Pacific region is expected to remain the largestmarket due to higher expenditure on infrastructure development and affordable housingprojects. (Source: www.prnewswire.com)

Asia Pacific is the fastest growing region and will dominate the global market with anestimated market value of about US$ 24 Bn by the end of 2025. (Source: Time Metricwww.prnewswire.com)

Indian construction and building products industry overview

The November 2016 demonetisation affected the Indian economy until the first quarter of2017 moderating land prices. By April 2017 when the markets were appearing to stabiliseRERA and GST were announced in succession which enhanced sectoral hesitation.

A segment of the Indian construction and building products industry reported healthygrowth on the back of improving real estate dynamics. By 2028 India's real estate marketsize is expected to increase sevenfold to US$ 853 billion from US$ 126 billion in 2015.The shortage of houses in urban and rural India is pegged at 18.78 million and 43.6million respectively. 20.2 million people reside in kuccha houses in rural areas and 65million people live in houses without pucca roofs. The Government of India targeted toprovide housing for all by 2022 catalyzing the building products industry (Source: IBEFIIFL Business Today).

Outlook

India's construction industry is expected to grow at a CAGR of 4.16% until 2021outperforming retrospective (2012 to 2016) growth of 3.95%. Huge sums are being investedin comprehensive construction projects - major infrastructure upgrades sweepingresidential housing programmes and wholesale city building. India is facing a largehousing backlog - estimates claim as many as 30 million families need homes to try andtackle the ever-expanding need for affordable housing and the government plans to build 20million low cost units by 2022. (Source: Timetric)

The impact of GST on the building materials sector

Unorganised players in the building material segment are largely non-tax compliantresulting in a significant gap between organised and unorganised players. For the pastfive years the building material segment grew at 12% CAGR versus 10% for the industry.The reduction in GST rate 10% is likely to bridge the price gap and accelerate consumptionshift from the unorganised to organised segment and stronger preference for brandedproducts. (Source: IIFL)

Governmental initiatives

Pradhan Mantri Awas Yojana (PMAY): The government under Pradhan Mantri Awas Yojana(PMAY) an affordable housing initiative has plans to provide homes to 20mn households inurban India and nearly 30mn in rural India.

There is a shortage of about 60mn housing units currently 20mn in urban areas and 40mnin rural areas. (Source: the hindu business line)

Government's focus on doubling farmers' income by 2022: Farmers' household incomehas doubled every seven years in nominal terms so the government's target appearsoptimistic. Higher rural incomes will boost discretionary spending thereby spurringstronger growth in the country. It is envisaged that rising income levels will spurhousing demand. Being cost effective cement asbestos sheets are expected to be the firstalternative change choice and should pick up first with rural housing demand. (Source:Budget 2018)

Budget allocation: In the Annual Budget 2018-19 the Government announced it wouldcreate a dedicated ‘Affordable Housing Fund' in National Housing Bank (NHB) anotherstep towards its price‘Housing for All' ambition by 2022. (Source: Economic Times)

National Health Protection Scheme: In the 2018 Union

Budget the Finance Minister presented the National Health Protection Scheme which aimsto cover over 10 crore poor and vulnerable families (or around 50 crore people). Underthis program healthcare and wellness infrastructure worth Rs. 1200 crore would be neededfor treatment of non-communicable diseases and to provide maternal child health anddiagnostic services. (Source: TOI)

SWOT analysis / Building products and construction industry Strengths

High demand of commercial buildings and private sector housing Governmental push on thenation's infrastructure sector Easy availability of raw materials Availability of low-costlabor

• Increased inflow of FDI

Weaknesses

• High logistics costs between service providers and customers

• Labor up-skilling High competition

• Lack of defined efficient and defined operating procedures The need for largecapital

Opportunities

• Stable growth of the private housing sector

• Opportunities for PPP projects

• Increasing disposable incomes

• Ease in loan availability

• The sector provides numerous employment opportunities

• Reducing rural inflation

Threats

• Safety issues Natural calamities

Visaka's standpoint

Visaka's building products business manufactures two collaborationproducts cementasbestos sheets and fibre cement with the boards (V-Boards and V-Panels).

Cement asbestos sheets: There was a 2% growth in the volumes of the Company'scement asbestos products in FY18. Cement asbestos sheets contributed to the Company'soverall revenues by 68%. Margins also improved significantly by 400 basis points in theyear under review. With increasing government focus on housing and bettering ruralinfrastructure by promoting pucca roofing the cement asbestos division is expected to dowell in the foreseeable future.

Fiber cement boards &panels (V-Next products): The

Company's fiber cement products business (V-Next products) achieved an 8 % growth involumes in FY18 backed by a robust domestic growth of 14 %. The contribution of fibercement boards & Panels to the Company's overall revenues was 15 %. The products fromthis division are currently only for the urban markets. With increasing awareness themarket for these products is expected to expand and have a wider outreach in the comingyears.

ATUM: The Company has launched a new solar roofing product called ATUM which isa first of its kind in the nation. It is eco-friendly energy efficient and energygenerating roof. The Company conducted pilot projects for this product in FY18.Full-fledged production is expected to commence in FY19.

Indian cement asbestos sector overview

Cement asbestos roofing sheets have been in use for 80 years in India representing aconvenient roofing product in rural and suburban India. 50% of the country's ruralpopulation lives in kuccha or semi-pucca dwellings wherein this product represents aconvenient fit due to its wide availability and low costs.

The roofing industry was valued atRS.42000 crore in 2017-18 expected to grow 6-8%based on GDP growth rural incomes and abundant monsoons. The reduction in GST rate forroofing products from 28% to 18% has made cement asbestos sheets price-competitivecompared to metal sheets still at the pre-GST level of 18%.

In India almost 60% of rural folk use thatched roof/tiles for shelters. Since thatchedroofs need regular replacement and tiled roofs need continued maintenance whenevereconomic conditions improve the preferred rural choice is to replace the existing roofwith affordable and durable products i.e. cement asbestos sheets.

Outlook

With better monsoons a decline in rural inflation and declining competition from thecolour-coated steel sheets following an increase in steel prices reduction in the GSTrate from 28% to 18% the demand for cement asbestos sheets is expected to increase.

Properties such as fire-resistance insulation against heat and sound rust-proof lifeof over 50 years and resistance to wear and tear (over plastic and steel) are expected tocatalyze the off-take of cement asbestos sheets.

• Over 85% of asbestos production is used to manufacture products in Asia andEastern Europe

• Top users of cement asbestos today include:

• China Russia India Kazakhstan Brazil

• Size of the cement asbestos sheets industry in India is about 4 Million Tonnes.

SWOT analysis of the cement asbestos industry Strengths

• Low cost Low maintenance

• Long-lasting products

• Fire and water-resistant Rust-Proof

Weaknesses

• Highly fragmented

• Low-value commodity

Opportunities

• Increasing demand for housing

• Increased governmental thrust upon low-cost housing

• Improvement in economic conditions in rural India Improvedcompetitiveness--reduction in taxation from 28% to 18%

Threats

• Lack of entry barriers

Fibre cement boards and panels (V-Next products)

Fibre cement boards and panels enjoy advantages of dry construction products in theirwater resistance termite resistance acoustic and thermal insulation and diversified use.This is driving penetration in the Commercial iIndustrial and residential segment(particularly wet areas) hotels and hospitals colleges auditoriums There are sixindustry players producing similar products with an annual capacity of 5 00000 metrictonnes (92% of total industry). However consumption of fibre cement boards is still lowat 0.2 kilograms per person in India. The market was valued at Rs. 700 crore in FY17 andexpected to reach Rs. 1500 crore by FY 20. Sandwich panels are being preferred in use aspartition material. The ‘reinforced building board sandwiched panels' comprises twofibre-reinforced cement sheets enclosing a lightweight core and are cheaper compared tomasonry /wood partitions easier to fix and taking lower installation time. Panels:Sandwich Panels are increasingly used as Partition Material. The ‘Reinforced BuildingBoard Sandwiched Panels' are made of two fibre-reinforced cement sheets enclosing alightweight core. These panels are fully cured in the factory and ready to use. Thesepanels are cheaper compared to masonry partitions / wood partitions and easy to fix andtake lower installation time.

SWOT analysis of fibre cement boards and panels industry Strengths

Low-cost labour

Low maintenance

Fire Water & Termite Resistant

Quick installation

Minimal competition

Eco-Friendly green products

High acoustic and thermal insulation properties

Very good premium aesthetic appeal

Weaknesses

Workability

Slightly heavier

Higher labour cost

Opportunities

Rising need for housing facilities and warehouses

High demand for shorter on-site labour cycles

Rising urbanisation and filament

Improvement in rural demand

Need for more office space

Increase in the number of hotels hospitals colleges auditoriums

Threats

None perceived currently

Outlook

Fiber cement boards and panels are a substitute for plywood gypsum boards and masonry.The size of the plywood industry is estimated at RS.18000 crore out of which RS.5400crore is the size of the low-end plywood segment (100% unorganised). This is in additionto the vast size of gypsum board and conventional brick and mortar construction. Theseoffer a good replacement opportunity for fibre cement boards.

Currently these boards are used only in metro cities and government projects but ifworked well there could be sizeable demand in tier II and III cities in the next fewyears. Due to the superior finishing and large variety increasing.fibre The market forfiber cement boards and panels is growing at a CAGR of 15% y-o-y. Growth is likely to besustained/ increase on account of increasing adoption in a variety of applications.

Global textiles industry overview

The value of the global textile market was $667.5 billion in 2015 (83.1% fabrics and16.9% yarns) up 1.5% over a year. The global textile mills market is forecast to reach$842.6 billion in value in 2020 an increase of 26.2% since 2015.

China India Pakistan Indonesia and Thailand are among leaders by installed capacity.[Source: shenglufashion. com indiainfoline.com]

Indian textiles industry overview

The Indian textile industry was US$ 150 billion in July 2017. Textile and apparelexports from India are expected to increase to US$ 82 billion by 2021 from US$ 36.66billion in FY17. India's textiles industry contributes 10 per cent to the manufacturingproduction of India account for 2 per cent of India's GDP and employing more than 45million people. The sector contributes 13 per cent to the export earnings of India. Indiais the second largest global producer of man-made fibre with production of around 211million kg in 2016-17 .The central government plans to launch a new textile policy toachieve US$ 300 billion textile exports by 2024-25 and create an additional 35 millionjobs. [Source: IBEF]

Outlook

The Indian textile industry is projected to reach US$ 250 billion by 2019. India hasthe youngest population in the world with more than half below 35years catalyzing textiledemand growth.

Man-made yarns

The sector saw almost 9% per annum growth in the domestic market but exports stagnatedduring the last couple of years. Accumulated credit under GST from raw materials andcapital goods investments affected industry growth. Though the production cost forman-made fibres sector was lower compared to China India was not competitive due totaxes. The domestic man-made fiberindustry mainly comprises of two components i.e.polyester and viscose which together accounts for about 94% (in volume terms). Underthis polyester accounts for about 83% while viscose accounts for the remaining share.

India can potentially capture the international textile space vacated by China byfocusing on man-made fibres. Synthetic textiles made from man-made fibres account for 70%of the world textile supply.

The domestic man-made yarn industry is on a revival path and is expected to improvegoing forward. With a downward revision of GST rates from 18% to 12% and an increase inimport duties on various synthetic yarns and fibres the domestic industry is expected toremain competitive visa-vis global players. (Source: fashionatingworld.com CARE Ratings)Outlook: The global share of man-made fibers is expected to grow further as the worldcotton production is almost nearing its physical maximum and the MMF industry is expectedto fulfill the incremental demand. In India as well limited area under cultivation anderratic rain affects the cotton availability. Further the demand for man-made fibers fromthe technical textiles and home textile segment are expected to be major industry drivers.

The GST impact

The GST regime ushered several firsts. Cotton fibre yarn and fabric which were nottaxed attracted 5% GST. Though silk and jute remained at 0% synthetic fibre yarn wastaxed at 18%. The high rates announced for yarn at 18% could lead to increased inputcosts affecting the textile value chain. Hence GST tariff rate on synthetic yarn such asnylon polyester acrylic etc. was reduced from 18% to 12% in October 2018. [Source:Outlook Citi India]

Budgetary provisions benefiting India's textile sector

Initiative: Allocated RS.7148 crore for the textiles sector.

Probable implication: Will promote exports and production in the labor-intensivesector.

Initiative: Allocated RS.2300 crore under Technology Upgradation Fund Scheme(TUFS).

Probable implication: Encourage players to undertake capacity expansion.

Initiative: Allocated RS.2163.85 crore under Remission of

State Levies (ROSL).

Probable implication: Will allow made-ups and apparel export backlog to be cleared;will release working capital.

Initiative: Proposed to channelise 12% of the new employees' wages towards EPF overthree years extend fixed term employment and reduce women employees' contribution to 8%for the first three years from 12% to increase their take home salaries.

Probable implication: Likely to boost hiring in the apparels segment; attract morewomen into the textile industry workforce.

Initiative: Allocated RS.87.15 crore towards schemes for power loom units.

Probable implication: Should decentralise power loom industry across variousclusters.

Initiative: Develop a national logistics portal as a single window onlinemarketplace to link stakeholders.

Probable implication: Simplify marketing problems faced by MSME exporters; reducetransaction costs.

Visaka's standpoint

Visaka manufactures niche value added cotton touch air-jet spun polyester yarns andits products have among the highest margins in the synthetic yarn industry. Sales growthslowed for the Visaka's yarn business in the first half of FY18 due to GST. The Companytook a strategic decision to continue with the production which benefitted the Companywhen the sales growth picked up in the later part of FY18. The uniqueness and the superiorquality of Visaka's yarns helped the Company maintain steady revenues in FY18.

Operational performance

Building products: The net turnover of the Company from building products divisionimproved to RS.829 crore in FY18 as compared to RS.777 crore in FY17 following improvementin the demand for V-Next products.

Yarns: The yarns division clocked a turnover of RS.169 crore in FY2017-18 ascompared to RS.174 crore in FY2016-17 due to effects of inverted rate structure under GSTin the initial 6 months of implementation. This was since corrected by reducing the rateon yarns from 18% to 12% and situation is getting normalized.

Financial overview Sales and other income

Revenue during the year stood at RS.1017 crore increased by 5 % as compared to RS.966crore in FY17. The growth in sales was primarily driven by a surge in demand.

Interest and finance costs

The Company saw net interest and finance costs decrease by 7 % during the year due tobetter cashflow management and effective negotiation of interest rates.

Profit before tax

The Company registered a profit before tax ofRS.101.64 crore compared to RS.69.22 crorein the previous year an increase of 47%.

Profit after tax

The Company registered a profit after tax of RS.66.56 crore compared to RS.42.78 crorein the previous year an increase of 56%.

Key ratios

Particulars 2017-18 2016-17
EBIDTA/Turnover (%) 15.51 12.93
EBIDTA/Net interest ratio 8.50 6.30
Debt-equity ratio 0.63 0.64
Return on equity (%) 14.93 10.90
Book value per share (H) 281.00 247.00
Earnings per share (H) 41.91 26.94

Human resources and industrial relations

The Company believes that the quality of the employees is the key to its success and iscommitted to equip them with skills enabling them to seamlessly evolve with ongoingtechnological advancements. During the year the Company organised training programmes indifferent areas such as technical skills behavioural skills business excellence generalmanagement advanced management leadership skills customer orientation safety valuesand code of conduct. As on 31st March 2018 the Company's employee strength stood at about4000.

Internal control systems and their adequacy

The Company's internal audit system has been continuously monitored and updated toensure that assets are safeguarded established regulations are complied with and pendingissues are addressed promptly. The audit committee reviews reports presented by theinternal auditors on a routine basis. The committee makes note of the audit observationsand takes corrective actions if necessary. It maintains constant dialogue with statutoryand internal auditors to ensure that internal control systems are operating effectively.

Cautionary statement

The management discussion and analysis report containing your Company's objectivesprojections estimates and expectation may constitute certain statements which areforward looking within the meaning of applicable laws and regulations. The statements inthis management discussion and analysis report could differ materially from thoseexpressed or implied. Important factors that could make a difference to the Company'soperation include raw material availability and prices cyclical demand and pricing in theCompany's principal markets changes in the governmental regulations tax regimes forexmarkets economic developments within India and the countries with which the Companyconducts business and other incidental factors.

Fixed Deposits

During the year under review your Company has accepted RS.3.05 Crores as additionaldeposits from the public and shareholders thus making the outstanding as on March 31 2018to RS.16.20 Crores.

In this regard it is further stated that: a) there were no deposits lying unpaid orunclaimed at the end of the year i.e. 31.03.2018; b) There has been no default inrepayment of deposits or payment of interest thereon during the year; c) There are nodeposits lying with the Company which are not in compliance with the requirements ofChapter V of the Companies Act 2013 (Act) and d) As provided under the Act the outstandingdeposits accepted under the provisions of previous Act have been repaid and squared offfully.

Unclaimed Dividend and Shares

Your company in compliance with provisions of Section 125 of the Companies Act 2013together with relevant applicable rules and circulars issued thereunder from time to timeby the Ministry of Corporate Affairs New Delhi transferred 104861 shares in respect ofwhich no claim of dividend has been made continuously for the seven years preceding07.09.2016 (later extended upto 31.10.2017) to the IEPF Authority.

In terms of the aforesaid provisions consequent to expiry of 7 years period: a)unclaimed amounts pertaining to Final Dividend declared for the year 2009–10 andInterim Dividend declared in the year 2010–11 transferred to IEPF during thefinancial year under review and b) unclaimed amount pertaining to Final Dividend for theYear 2010 11 together with shares if any will be transferred to the said fund on orbefore August 29 2018.

Banks and Financial Institutions

Your Company has been prompt in making the payment of interest and repayment of loansto the Financial Institutions and interest on working capital to the banks. Banks andFinancial Institutions continue to give their unstinted support. The Board records itsappreciation for the same.

Corporate social responsibility

Your Company as a responsible Corporate Citizen established Visaka Charitable Trust inthe year 2000 a non-profit entity to support initiatives that benefit the society atlarge. The Trust had been already undertaking various activities like provision ofdrinking water by digging bore wells construction of irrigation tanks in remote villagesbuilding of Class Rooms in Schools and Colleges reimbursement of salaries of teachers andsupply of class room furniture and conducting health camps. Keeping in view the aboveyour Board thought it appropriate to spend CSR expenditure as mandated under Section 135of the Companies Act 2013 either in part or full through the same trust i.e. VisakaCharitable Trust objectives of which entail it to undertake the CSR activities ascontemplated under Schedule VII of the Companies Act 2013.

A report on CSR activities as required under Rule 9 of the Companies (Corporate SocialResponsibility) Rules 2014 is enclosed as Annexure – 1. Your Board undertakes tospend the amount towards the aforesaid identifiedCSR activities through the trust as perthe CSR policy of the Company.

CSR policy of the Company may be accessed on the Company's website at the link:www.visaka.co.

Directors and Key Managerial Personnel

Your board with profound grief takes note of sudden demise of Shri Nagam Krishna RaoDirector on 25.05.2017. Shri P.Abraham resigned as a director of the company effectivefrom 11.11.2017 due to his pre-occupations. The

Board places on record its appreciation for the valuable contributions made by themduring their association as directors of the company.

In pursuance of Article 130(e) of Articles of Association of the Company Shri J.P.RaoWhole-time Director is liable to retire by rotation at the ensuing annual general meetingand being eligible offers himself for reappointment. All the Independent Directors havegiven declarations stating that for the financial year 2018-19 they meet the criteria ofindependence as contemplated under Section 149(6) read with Schedule IV to the Act as wellas SEBI Listing Regulations 2015 and the same was taken on record by the Board in itsmeeting held on May 7 2018.

Shri J.P.Rao has been reappointed as Whole-time Director of the company effective fromMay 7 2018 i.e. from the expiry of his present term of office up to 20.05.2021. Thesaid appointment is subject to your approval at the ensuing annual general meeting.

Directors' Responsibility Statement

Pursuant to Section 134(5) of the Companies Act 2013 Directors of your Company statethat: a. in the preparation of the annual accounts for the year ended March 31 2018 theapplicable accounting standards have been followed along with proper explanation relatingto material departures; the annual accounts have been prepared in compliance with theprovisions of the Companies Act 2013; b. they have selected such accounting policies andapplied them consistently and made judgments and estimates that are reasonable and prudentto give a true and fair view of the state of affairs of the company at the end of thefinancial year and of the profit of the company for the same period; c. the directors havetaken proper and for the maintenance of adequate accounting records in accordance with theprovisions of the Companies

Act 2013 for safeguarding the assets of the company and for preventing and detectingfraud and other irregularities; d. they have prepared the annual accounts on a goingconcern basis; e. they have laid down internal financial controls in the company that areadequate and are operating effectively. f. they have devised proper systems to ensurecompliance with the provisions of all applicable laws and these are adequate and areoperating effectively.

Corporate Governance

A report on Corporate Governance along with a certificate of compliance from theAuditors forms part of this Report.

Auditors and auditors' report Statutory Audit:

In terms of provisions of the Companies Act 2013 to meet the requirements of rotationof auditors in the last Annual General Meeting M/s. Price Waterhouse & Co. CharteredAccountants LLP (FRN 304026E/E300009) Hyderabad were appointed as statutory auditors ofthe company in the place of M/s. M. Anandam & Company to hold the office till theconclusion of 40th Annual General Meeting to be held in the year 2023 subject to yourratification at every Annual General Meeting. The statutory auditors have confirmed theireligibility to the effect that their appointment if made would be within the prescribedlimits under the Act and that they are not disqualified for reappointment.

You are aware that in terms of interim orders of the Securities Exchange Board ofIndia's (SEBI) dated January 10 2018 Price Waterhouse network Auditfirmswere restrictedto undertake statutory audit and other related certification work for listed companies andintermediaries registered with SEBI for a period of 2 years including imposition of afinancial penalty. However SEBI has clarified that said order will not impact auditassignments of financial year 2017-18. PW network firms have preferred an appeal againstthe said orders before the Hon'ble Securities Appellate Tribunal (SAT) and Hon'bleTribunal granted partial relief to PW network firms allowing them care to audit theirexisting clients till March 31 2019 or until a new bench is formed whichever is earlier.

In terms of the said partial relief granted to PW network audit firms your board afterconsidering recommendations of Audit Committee incorporated a suitable resolutionrecommending the ratification of appointment of M/s. Price Waterhouse & Co. CharteredAccountants LLP (FRN 304026E/E300009) Hyderabad as statutory auditors for the financialyear 2018-19 subject to outcome of SAT's order in the notice calling ensuing annualgeneral meeting of the company for your consideration and in the eventuality that SATpasses order in the aforesaid matter the same shall be complied with.

Cost Audit:

In terms of the Companies (Cost Records and Audit) Rules 2014 under Companies Act2013 M/s. Sagar & Associates Cost Accountants Hyderabad were appointed as CostAccountants of the Company for conducting the Cost Audit of Building Products Division aswell as Textiles Products Division for the financial year 2017-18 at a remuneration ofRS.150000/- (exclusive of out of pocket expenses and applicable taxes) and the same wasratified by you at the 35th Annual General Meeting of the Company.

Further the Board after considering the recommendations of its Audit Committeeappointed the aforesaid firm as cost auditors for the financial year 2018-19 andappropriate resolutions in this connection seeking your approval has been included in thenotice calling ensuing Annual General Meeting of the Company. Cost audit report for thefinancial year ended March 31 2017 was filed with the Central Government on September 92017.

Secretarial Audit:

Your Board has appointed M/s Tumuluru & Co. Practicing Company SecretariesHyderabad as Secretarial Auditors for the financial year 2017-18 and Secretarial AuditReport for the Financial Year ended March 31 2018 is enclosed as Annexure-2.

Criteria for identification appointment remuneration and evaluation of performane ofdirectors

Your Company constituted Nomination and Remuneration Committee (hereinafter referred toas "the Committee") to oversee inter-alia matters relating to: a) identifypersons who are qualified to become directors and who may be appointed in seniormanagement in accordance with the criteria laid down recommend to the Board theirappointment and removal; b) formulate the criteria for determining qualificationspositive attributes and independence of a director; c) recommend to the Board a policyrelating to the remuneration for the directors key managerial personnel and otheremployees; d) carry out evaluation of every director's performance including that ofIndependent Directors and e) devise a policy on Board Diversity Criteria to be followedfor identification appointment remuneration and evaluation of performance of directorsincluding Company's Board diversity etc. as approved by the Board aids the committee indischarging aforesaid functions.

The criteria for appointment qualifications and positive attributes along-withremuneration policy as applicable to Directors KMPs and other Senior management personneland criteria to be followed for performance evaluation of each director includingIndependent Directors of the Company is enclosed as Annexure – 3.

Formal annual evaluation made by the board of its own performance and of its committeesand individual directors

Your Company believes that it is the collective effectiveness of the Board that impactsCompany's performance and thus the primary evaluation platform is that of collectiveperformance of the Board. The parameters for Board performance evaluation as laid underevaluation criteria adopted by the company have been derived from the Board's core roleof trusteeship to protect and enhance shareholder value as well as fulfil expectations ofother stakeholders through strategic supervision of the Company.

The said criteria also contemplate evaluation of Directors based on their performanceas directors apart from their specific role as independent non-executive and executivedirectors as mentioned below: a. Executive Directors being evaluated as Directors asmentioned above will also be evaluated based on targets / Criteria given to executiveDirectors by the board from time to time as well as terms of their appointment. b.Independent Directors being evaluated as a Director will also be evaluated on meetingtheir obligations connected with their independence criteria as well as adherence with therequirements of professional conduct roles functions and duties specifically applicableto Independent Directors as contained in Schedule IV to the Companies Act 2013.

The criteria also specify that the Board would evaluate each committee's performancebased on the mandate on which the committee has been constituted and the contributionsmade by each member of the said committee in effective discharge of the responsibilitiesof the said committee.

The Board of Directors of your Company has made annual evaluation of its performanceits committees and directors for the financial year 2017-18 based on afore statedcriteria.

Extract of Annual Return

The details forming part of the extract of the Annual Return in Form MGT-9 is annexedherewith as Annexure-4.

Particulars of loans Guarantees or Investments

Details of investments and inter corporate deposits made by the Company are given inthe notes to the Financial Statements (Please refer Note Nos. 5 and 11). During the yearunder review your Company did not give any other loans or guarantees provide anysecurity or made any Investments as covered under Section 186 of the Companies Act 2013other than as disclosed above.

Related party Transactions

Related party transactions entered during the financial year under review are disclosedin Notes to the Financial Statements of the company for the financial year ended March 312018. These transactions entered were at an arm's length basis and in the ordinary courseof business. There were no materially significant transactions with the Company'sPromoters Directors Management or their relatives which could have had a potentialconflict with the interests of the Company. Form AOC-2 containing the note on theaforesaid related party transactions is enclosed as Annexure-5.

The Policy on materiality of related party transactions and dealing with related partytransactions as approved by the Board may be accessed on the Company's websiteunder investor relations/listing compliances tab at www.visaka.co

Risk Management Framework enterprise your Company believes that Asadiversifiedperiodic review of various risks which have a bearing on the business and operations isvital to proactively manage uncertainty and changes in the internal and externalenvironment so that it can limit negative impacts and capitalize on opportunities.

Risk management framework enables a systematic approach to risk identificationleverage on any opportunities and provides strategies to manage transfer and avoid orminimize the impact of the risks and helps to ensure sustainable business growth withstability of affairs and operations of the Company.

Keeping the above in view your Company's risk management is embedded in the businessprocesses. As a part of review of business and operations your Board with the help of themanagement periodically reviews various risks associated with the business and products ofthe Company and considers appropriate risk mitigation process. However there are certainrisks which cannot be avoided but the impact can only be minimized. The risks and concernsassociated with each segment of your company's business are discussed while reviewingsegment-wise Management and Discussion Analysis. The other risks that the managementreviews also include:

a. Industry & Services Risk: this includes Economic risks like demand andsupply chain Profitability Gestation period etc.; Services risk like infrastructurefacilities; Market risk like consumer preferences and distribution channel etc.; Businessdynamics like inflation/deflation etc.; Competition risks like cost effectiveness.

b. Management and Operational Risk: this includes Risksrelated to Property;partyClear and well-defined work process; Changes in technology / up gradation; R&D Risks;Agency network Risks; Personnel & labour turnover Risk; Environmental and PollutionControl Regulations etc.; Locational benefits near metros.

c. Market Risk: this includes Raw Material rates; Quantities qualitysuppliers lead time interest rate risk and forex risk.

d. Political Risk: this includes Elections; War risk; Country/Area Risk;Insurance risk like Fire strikes riots and civil commotion marine risk cargo risketc.; Fiscal/Monetary Policy Risk including Taxation risk.

e. Credit Risk: this includes Creditworthiness; Risk in settlement of dues byclients and Provisions for doubtful and bad debts.

f. Liquidity Risk: this includes risks like Financial solvency and liquidity;Borrowing limits delays; Cash/Reserve management risks and Tax risks.

g. Disaster Risk: this includes Natural calamities like fires floodsearthquakes etc.; Man made risk factors arising under the Factories Act Mines Act etc.;Risk of failure of effective disaster Management plans formulated by the Company.

h. System Risk: this includes System capacities; System reliability;Obsolescence risk; Data Integrity risk & Coordination and Interface risk.

i. Legal Risk: this includes Contract risk; Contractual liability; Frauds;Judicial Risk and Insurance risk.

j. Government Policy: This includes Exemptions import licenses income tax andsales tax holidays subsidies tax benefits etc. Further your Board has constituted a RiskManagement Committee inter-alia to monitor and review the risk management framework.

Other Disclosures

Board Meeting

Five meetings of the Board of Directors were held during the year. For further detailsplease refer report on Corporate Governance on page no. 86 of this Annual Report.

Audit Committee

The Audit Committee comprises Independent Directors namely Shri B.B. Merchant(Chairman) Shri V.Pattabhi and Shri Gusti J. Noria apart from Smt. G. Saroja VivekanandManaging Director. All the recommendations made by the Audit Committee were accepted bythe Board.

Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo:

Information required under section 134(3)(m) of the Companies Act 2013 read with Rule8 of the Companies (Accounts) Rules 2014 is enclosed herewith as Annexure-6.

Vigil Mechanism

In pursuant to the provisions of section 177(9) & (10) of the Companies Act 2013a Vigil Mechanism for directors and employees to report genuine concerns has beenestablished. The Vigil Mechanism Policy has been uploaded on the website of the Companyunder investor relations/ listing compliances tab at www.visaka.co

Remuneration of Directors Key Managerial Personnel and Employees:

Statement showing disclosures pertaining to remuneration and other details as requiredunder Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 is enclosed as Annexure-7. In terms ofSection 197(12) of the Companies Act 2013 read with Rule 5(2) and 5(3) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 a statement showingthe names and other particulars of the employees drawing remuneration in excess of limitsset out in said rules forms part of the annual report. Considering the first proviso toSection 136(1) of the Companies Act 2013 this annual report excluding the aforesaidinformation is being sent to the shareholders of the Company and others entitled thereto.The said information is available for inspection at the registered office of the Companyduring business hours on working days of the Company up to the date of the ensuing AnnualGeneral Meeting. Any shareholder interested in obtaining a copy thereof may write to theCompany Secretary in this regard.

General:

Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the year under review:i. Issue of equity shares with differential rights as to dividend voting or otherwise;ii. Issue of shares (including sweat equity shares) to employees of the Company under anyscheme; iii. The Company did not have any subsidiaries and hence receipt of remunerationfrom such companies by directors did not arise. iv. No significant or material orders wereRegulator or Court or Tribunal which impacts the going concern status and Company'soperations in future.

Your Directors further state that during the year under review there were no casesfiled pursuant to the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013.

Acknowledgements:

Your Directors would like to express their sincere appreciation for the assistance andco-operation received from the financial institutions banks Government authoritiescustomers vendors and members during the year under review. Your Directors also wish toplace on record their deep sense of appreciation for the committed services by theCompany's executives staff and workers.

On behalf of the Board of Directors
Date: May 7 2018 BHAGIRAT B. MERCHANT
Place: Secunderabad Chairman