As an opportunity-ready company, Visaka is attractively placed to grow ev in faster as
it 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 the
financial year but thereafter faltered to report one of the most sluggish subsequent
quarters in recent memory. This divergence was the result of a crisis in a large
non-banking finance company that translated into a national liquidity paralysis which, in
turn, induced caution in consumer sentiment across regions and product categories.
The performance of Visaka Industries must be appraised against the backdrop of this
national 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 creditable
achievement during a challenging economic phase.
At Visaka, we continued to strengthen our business during this period. We are convinced
that, based on our previous experience, every sluggish period in a consumption-driven
economy like India will be followed by an extended period of robust growth. In line with
our commitment to be opportunity-ready, the Company invested in its business during the
course of this slowdown.
The principal message that I intend to communicate is that the Company is adequately
invested in terms of capacities and capabilities and is attractively placed to capitalise
on the imminent demand rebound whenever that transpires.
I am pleased to report that when it may have been convenient for Visaka to be cautious
about its investments in 2018-19, the Company reaffirmed its commitment to the business
instead 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 combined
the need for durable roofing on the one hand and renewable energycentric solution on the
other.
Three, Visaka retained its position as the largest twin-airjet spinner and
second-largest cement asbestos sheet manufacturer in the country.
Four, Visaka commissioned a manufacturing facility for boards and panels(V-Next) in
North India, strengthening our pan-India leadersip positioning.
We believe that by the virtue of these investments and market- visible positions, we
reinforced the sustainability of our business during the year under review. While the
quarter-on-quarter performance of our company may be influenced by economic and sectoral
developments, we are attractively placed to resist downtrends better because of our
potential to strengthen offtake higher than the sectoral average in the past.
By broadbasing of our organisational pyramid has placed us in a better position to
maintain the sustainability of our business.
At Visaka, we have consistently focused on opportunity-readiness. Over the years, we
have selected to invest ahead of the curve, seed our presence in under-penetrated
locations, enter adjacent business segments and introduce new products within the areas of
our presence. The result of this approach is that we have generally tended to capitalise
attractively 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, the
growth in rural India outpaced urban growth. The upside of this was reflected in the
performance 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 government
schemes that translated into increased rural purchasing power and an increase in steel
prices that enhanced the competitiveness of cement asbestos sheets. By an informed
estimate, 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 in
revenues derived from its cement asbestos sheet business in FY2018-19 (even as volumes
grew 4.5%). This improvement was achieved in the face of unforeseen currency fluctuations
that 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-next
business. During the year under review, this business (comprising V-Boards, V-Panels and
V-Planks) generated a 17% growth in revenues when compared with the corresponding
estimated 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 year
under review. I am pleased to report that this increased throughput was not achieved at
the cost of realisations. The Company reported a 8% increase in the average realisation
per kg of the end product, validating our premium positioning and value-addition.
The bottomline is that the Company reported a creditable performance under challenging
economic circumstances. We believe that our business today is more sustainable than ever,
which should translate into relative sectoral outperformance across market cycles.
Our optimism is based on the fact that India continuous to be the most exciting major
economic story in the world.
India is the world's fastest growing economy. The country took 60 years to achieve its
first trillion dollars in economic size; it replicated this in the space of just seven
years thereafter; it expects to emerge as a $10 trn economy in a decade-and-a-half from
now.
Income growth is expected to transform India from a bottom-of-the-pyramid economy into
a middle-class-led one with consumer spending growing from US$1.5 trillion to ~US$6
trillion by 2030. This would be driven by an expansion of the middle-class and the
emergence of a sizeable high-income segment. By 2030, India could add ~140 million
middle-income households that could lift ~25 million households out of poverty. Likewise,
only ~5% of India's households are expected to be below the poverty line by 2030, down
from 15% today. Economists estimate that rural per capita consumption could grow 4.3x by
2030, compared to a growth of 3.5x in urban India. These realities augur well for our
products that will ride the average Indian's growing need for secure housing, interiors
pride, 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 the
minimum support price across a number of crops, strengthened the direct benefit transfer
scheme, increased investments and incentives in its affordable Housing for All programme
and reduced the GST rate on affordable housing from 8% to 1%.
As an opportunity-ready company, Visaka is attractively placed to grow even faster as
it gets larger.
One, the Company's 8 cement asbestos sheet manufacturing facilities are present across
the country to capture demand upturns; the focus in this business would be to enhance
capacity utilisation and strengthen the business' RoCE.
Two, the Company enjoys enduring relationships with marquee fabric brands as a supplier
of specialised yarns. The Company will continue to focus on enhanced operating efficiency,
strengthened product mix and new productised varieties to stay ahead of the sectoral curve
and report one of the highest margins in India's yarn sector.
Three, the Company believes that a large space lies under-explored in the building
products segment. We expect to grow our presence in this space with a manufacturing
presence in underpenetrated geographies (like we did in North India in 2018-19), reinforce
presence 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-led
company that invests consistently in the future and reports a Balance Sheet that is as
solid as it is credible.
We believe that in doing so, we will continue to reinforce our fundamentals that
enhance our sustainability and value in the hands of all those who own shares in our
company.
Sincerely,
G. Vamsi Krishna
Joint Managing Director