As an opportunity-ready company Visaka is attractively placed to grow ev in faster asit gets larger
The year 2018-19 was the worst of years and the best of years.
The Indian economy reported attractive growth in the first two quarters of thefinancial year but thereafter faltered to report one of the most sluggish subsequentquarters in recent memory. This divergence was the result of a crisis in a largenon-banking finance company that translated into a national liquidity paralysis which inturn induced caution in consumer sentiment across regions and product categories.
The performance of Visaka Industries must be appraised against the backdrop of thisnational economic landscape.
The Company reported a 13% growth in revenues and a 1.3% increase in profit after tax(before comprehensive income) during the year under review which is a creditableachievement during a challenging economic phase.
At Visaka we continued to strengthen our business during this period. We are convincedthat based on our previous experience every sluggish period in a consumption-driveneconomy like India will be followed by an extended period of robust growth. In line withour commitment to be opportunity-ready the Company invested in its business during thecourse of this slowdown.
The principal message that I intend to communicate is that the Company is adequatelyinvested in terms of capacities and capabilities and is attractively placed to capitaliseon the imminent demand rebound whenever that transpires.
I am pleased to report that when it may have been convenient for Visaka to be cautiousabout its investments in 2018-19 the Company reaffirmed its commitment to the businessinstead through timely investments.
One Visaka emerged as the largest producer of fibre cement boards and panels in India.
Two Visaka introduced a revolutionary solar roofing solution called ATUM that combinedthe need for durable roofing on the one hand and renewable energycentric solution on theother.
Three Visaka retained its position as the largest twin-airjet spinner andsecond-largest cement asbestos sheet manufacturer in the country.
Four Visaka commissioned a manufacturing facility for boards and panels(V-Next) inNorth India strengthening our pan-India leadersip positioning.
We believe that by the virtue of these investments and market- visible positions wereinforced the sustainability of our business during the year under review. While thequarter-on-quarter performance of our company may be influenced by economic and sectoraldevelopments we are attractively placed to resist downtrends better because of ourpotential to strengthen offtake higher than the sectoral average in the past.
By broadbasing of our organisational pyramid has placed us in a better position tomaintain the sustainability of our business.
At Visaka we have consistently focused on opportunity-readiness. Over the years wehave selected to invest ahead of the curve seed our presence in under-penetratedlocations enter adjacent business segments and introduce new products within the areas ofour presence. The result of this approach is that we have generally tended to capitaliseattractively on prevailing sectoral realities.
This characteristic was evident once again during the year under review.
Even as India retained its position as the world's fastest-growing major economy thegrowth in rural India outpaced urban growth. The upside of this was reflected in theperformance of the cement asbestos roofing sector in 2018-19.
The country's cement asbestos sector grew for the second consecutive year in 2018-19.This growth was achieved on the back of increased rural incomes the benefit of governmentschemes that translated into increased rural purchasing power and an increase in steelprices that enhanced the competitiveness of cement asbestos sheets. By an informedestimate India's cement asbestos sheet sector grew >4% in 2018-19.
I am pleased to report that Visaka outperformed this growth with a 7.6% increase inrevenues derived from its cement asbestos sheet business in FY2018-19 (even as volumesgrew 4.5%). This improvement was achieved in the face of unforeseen currency fluctuationsthat increased raw material costs and put pressure on the Company's margins.
The other attractive feature of our performance was the improvement in our v-nextbusiness. During the year under review this business (comprising V-Boards V-Panels andV-Planks) generated a 17% growth in revenues when compared with the correspondingestimated sectoral growth of 10%.
The third business to have performed creditably in 2018-19 was textiles.
This business reported 29.7% revenue growth and 19.6% volume growth during the yearunder review. I am pleased to report that this increased throughput was not achieved atthe cost of realisations. The Company reported a 8% increase in the average realisationper kg of the end product validating our premium positioning and value-addition.
The bottomline is that the Company reported a creditable performance under challengingeconomic circumstances. We believe that our business today is more sustainable than everwhich should translate into relative sectoral outperformance across market cycles.
Our optimism is based on the fact that India continuous to be the most exciting majoreconomic story in the world.
India is the world's fastest growing economy. The country took 60 years to achieve itsfirst trillion dollars in economic size; it replicated this in the space of just sevenyears thereafter; it expects to emerge as a $10 trn economy in a decade-and-a-half fromnow.
Income growth is expected to transform India from a bottom-of-the-pyramid economy intoa middle-class-led one with consumer spending growing from US$1.5 trillion to ~US$6trillion by 2030. This would be driven by an expansion of the middle-class and theemergence of a sizeable high-income segment. By 2030 India could add ~140 millionmiddle-income households that could lift ~25 million households out of poverty. Likewiseonly ~5% of India's households are expected to be below the poverty line by 2030 downfrom 15% today. Economists estimate that rural per capita consumption could grow 4.3x by2030 compared to a growth of 3.5x in urban India. These realities augur well for ourproducts that will ride the average Indian's growing need for secure housing interiorspride enhanced lifestyle and superior price- value proposition.
We believe that the Indian government is helping catalyse rural investments.
The government announced a plan to double farmer incomes by 2022. It increased theminimum support price across a number of crops strengthened the direct benefit transferscheme increased investments and incentives in its affordable Housing for All programmeand reduced the GST rate on affordable housing from 8% to 1%.
As an opportunity-ready company Visaka is attractively placed to grow even faster asit gets larger.
One the Company's 8 cement asbestos sheet manufacturing facilities are present acrossthe country to capture demand upturns; the focus in this business would be to enhancecapacity utilisation and strengthen the business' RoCE.
Two the Company enjoys enduring relationships with marquee fabric brands as a supplierof specialised yarns. The Company will continue to focus on enhanced operating efficiencystrengthened product mix and new productised varieties to stay ahead of the sectoral curveand report one of the highest margins in India's yarn sector.
Three the Company believes that a large space lies under-explored in the buildingproducts segment. We expect to grow our presence in this space with a manufacturingpresence in underpenetrated geographies (like we did in North India in 2018-19) reinforcepresence in existing spaces (boards and panels) and launch innovative products (like ATUM)that deepens respect for us as an opportunity-responsive company.
At Visaka we are building a company that endures and enhances value.
We will continue to deepen our governance to strengthen our position as a systems-ledcompany that invests consistently in the future and reports a Balance Sheet that is assolid as it is credible.
We believe that in doing so we will continue to reinforce our fundamentals thatenhance our sustainability and value in the hands of all those who own shares in ourcompany.
G. Vamsi Krishna
Joint Managing Director