WORLD ECONOMIC OVERVIEW:
After two years of disruptions, uncertainty and volatility, FY23
appeared a rather normal year. Both the markets and the economy regained a semblance of
normalcy in terms of the level of activity, trajectory of growth, direction, and future
outlook. Central bankers began the process of normalizing monetary policies by withdrawing
liquidity and hiking rates. The broken supply chains have started showing some amount of
relief. Inflated asset and commodity prices are returning to more reasonable levels.
There are signs of nascent optimism, and the growth outlook has picked
up across all regions. However, policy-makers, businesses and households continue to face
headwinds, including persistent inflationary pressures and tighter financial conditions.
According to recent turbulence in the financial sector is not a sign of systemic
vulnerability, asignificant but further disruption is considered likely this year. Growth
over the rest of 2023 is set to slow substantially as it is weighed down by the lagged and
ongoing effectsof monetary tightening, and more restrictive credit conditions. These
factors are envisaged to continue to affect activity heading into next year.
[Source: IMF, World Bank,]
INDIAN ECONOMIC OVERVIEW AND OUTLOOK:
The Indian economy exhibited robust resilience in the previous fiscal,
emerging among the fastest-growing economies among major nations. However, weakening
consumption in the second half of FY23, subdued rural demand and sustained cost pressures
remained a drag. The real GDP grew by 7.2% year on year for FY23, whereas on the supply
side, annual Gross Value Added (GVA) growth was
7% in FY23. On the other hand, the industrial sector decelerated
sharply as compared to the previous year, amidst intensification of input cost pressures,
supply chain disruptions and moderating of global demand conditions. Nevertheless, the
governments continued thrust on capital expenditure, gains in the services sector
and the release of pent-up demand bolstered domestic activity through FY23. In terms of
macroeconomic indicators, Consumer Price Index (CPI) inflation recorded broad-based
decline across from its peak in April 2022, because of softening in food, fuel and core
inflation. Moderation in input prices resulted in a decrease in Wholesale Price Index
(WPI) for the tenth consecutive month in April 2023. The continued cooling in
inflationoffers encouragement to the RBI, which decided to pause rate hikes.
The Index of Industrial Production (IIP) has grown by 5.1% in FY23.
Healthy prospects for the kharif season, higher Minimum Support
Prices (MSP) for crops and increased budgetary spending by the
government will likely enhance the farmers income and boost the rural economy. Current
indicators of demand for the rural economy are gaining momentum. Rural income and, thus,
rural demand are also expected to increase from a likely uptick in construction activity.
GST collection is one of the barometers which measures economic
buoyancy. The total gross collection for FY23 stood at Rs 18.10 lakh crore, 22 per cent
higher than the previous year. As per RBIs latest consumer confidence survey, the
Current Situation Index
(CSI) remained on an upward trajectory on account of improved
perception on general economic situation, employment and household income. Households
overall outlook for the year ahead remained positive, despite marginally lower optimism.
[Source: Industry Reports]
ROOFING INDUSTRY AND OPPORTUNITIES
The India roofing market is anticipated to grow at a CAGR of 6 % in the
forecast period of 2023-2028. Indias roofing industry is gearing up for the next
wave of big projects. Healthy prospects for the kharif season, increased budgetary
spending by the government will likely enhance the farmers income and boost the
rural economy. The roofing business has benefited from growth in the infrastructure and
industrial segments. The residential sector is expected to account for a large portion of
the market based on end users. This can be attributed to Indias rapidly urbanizing
population, increased disposable income, and rapid urbanization activities. These factors
are expected to boost residential complexes or apartment buildings, hence raising demand
for roofs, which is an essential component of any residential project. [Source:
mordorintelligence ]
THREATS, RISK AND CONCERN.
Dependence on governments rural spending, and exposure to intense
competition from peers and substitute products:
Demand for asbestos cement sheets (AC) roofing is derived from rural
spending on household construction, as well as investment in industrial construction. This
exposes to fluctuations in rural purchasing power, and change in economic cycles.
Moreover, the industry is intensely competitive, marked by presence of other strong
players. AC roofing players also face stiff competition from manufacturers of galvanised
iron (GI) roofing sheets. Any sharp decline in the price of GI sheets will significantly
impact demand for AC sheets. Environmental and social risks : While some forms of
asbestos fibre pose health risks to individuals who are exposed, asbestos cement
manufactured using white chrysotile asbestos is considered to be of relatively low risk.
All the manufacturers are required to follow strict environmental norms to operate. Given
the safety and environmental health-related concerns associated with asbestos, the
industry may be exposed to the risk of tightening regulatory norms. Any ban on the mining
of asbestos across countries may expose the company to risk of non-availability of raw
material. However, with companys plans of increasing diversification towards
non-asbestos products, the risk is expected to moderate over the medium to long term.
The major raw material is prone to seasonal variations: one of the
raw materials is cement prone to seasonal price variations.
However excess cement manufacturing capacity vis a vis demand partly
protects from possible losses.
Demand for the Roofing industry: It mostly depends on monsoons in
India, especially in rural areas. Better performance of monsoon boosts the demand and vice
versa.
Raw Materials cost has gone up: Raw Materials are imported from
Kazakhstan and Brazil. Kazakhstan ships through Russian ports but due to geopolitical
issues the shipments have to come from other ports due to which raw materials cost has
gone up. In addition to this Rupee/USD fluctuation impacted the overall impact cost.
APPROACH TO OVERCOME THE THREATS:
Increase in awareness, providing high quality right products, identify
credit risk well in advance, study of competitors and pricing strategy based on what the
target market is willing to pay for comparable quality provided over competitors,
innovative alternate solution, gathering market intelligence, timely response to changes
in policies.
EXPANSION PLAN:
Currently, the company has a strong market share in the Western side of
India (Maharashtra, Gujarat,) and Southern side of India
(Kerala, Karnataka, Tamilnadu, Andhra Pradesh, Telangana,partly
Chattisgarh and partly Orissa). With that, the company is planning to expand its footprint
by establishing new manufacturing facilities to cater mainly the Eastern states namely
Orissa, West Bengal, Chattisgarh, Jharkhand. The Company is also expanding its existing
market in Western India with a new manufacturing facility at Palghar, Dist. Maharashtra.
The Company is also expanding its Exports and entering the other unrepresented markets.
OPERATIONAL PERFORMANCE
Operational performance of the Company for FY23 is explained in detail
in Boards report of the Company.
FINANCIAL OVERVIEW:
KEY FINANCIAL RATIOS APPLICABLE TO THE COMPANY
| Sr. No. Financial Ratios |
2022-23 |
2021-22 |
% Change |
Reason for Significant changes i.e. change of 25% or more
as compared to FY21-22 |
| 1 Debtors Turnover Ratio |
15.29 times |
13.11 times |
16.69% |
NA* |
| 2 Inventory Turnover Ratio |
1.59 times |
1.92 times |
(17.52%) |
NA* |
| 3 Debt Service Coverage Ratio |
0.94 times |
1.72 times |
(45.47%) |
Drop in Operating Margins |
| 4 Current Ratio |
1.89 times |
2.04 times |
(7.34%) |
NA* |
| 5 Operating Profit Margin |
46.3% |
48.9% |
(5.32%) |
NA* |
| 6 Net Profit Margin |
6.25% |
11.40% |
(45.16 %) |
Drop in Margins |
| 7 Debt Equity |
0.37 times |
0.26 times |
40.63% |
Due to expansion in FY23 |
*Not being significant change.
RESEARCH AND DEVELOPMENT (R&D):
Your company has well equipped R & D department with skilled man
power and tools. The main role of R & D department is to ensure continuous product
development to remain competitive amidst changing market scenario and maintain cost
competitiveness through proper raw material identification and induct process incompliance
to the quality standards set by company.
R & D plays an important role in enhancing the capability of the
company because they stimulate innovative methods of production, reduce the costs and
improve product quality.
Objective of R & D :
1) Identify new ideas or knowledge.
2) Apply it to the process.
3) Increase companys sales and profit.
CORPORATE SOCIAL RESPONSIBILITY (CSR):
Sahyadri Industies Limited is committed to improving the lives of
people by empowering communities and creating sustainable impact in the areas in which it
operates. It undertakes its CSR initiatives either directly or in association with
external NGOs, Trusts, etc. to bring expertise and strength to ensure a larger and
sustainable impact.
During the year board has undertaken various activities under the
constructive framework of its CSR Policy designed as per Schedule VII of the
Companies Act, 2013. Key highlights of activities under taken during the year are as
follows.
1. UNDER GRADUATE SCHOLARSHIP AND SKILL BUILDING PROGRAM (WOMEN
EMPOWERMENT THROUGH EDUCATION AND SKILL BUILDING).
Your company in association with The Lila Poonawalla Foundation (LPF)
has undertaken Undergraduate Scholarship and Skill Building Program (Women
Empowerment Through Education and Skill Building). Project period is 4 years and objective
of programme is to provide scholarshipstoacademicallybrightbutfinanciallychallenged LILA
Girls who wish to pursue a Bachelor of Engineering 4 years course.
2. EMPOWERMENT OF ADOLESCENT GIRLS IN GOVERNMENT RESIDENTIAL
SCHOOLS OF TELANGANA.
Your company in association with Voice 4 Girls NGO has undertaken this
project. The ‘Her VOICE Camp was conducted for 1500 girls from 30 Schools to
introduce them about their rights, future planning and how they can be a support system to
the other girls in their communities.
10-days activity-based program that provided critical information to
the girls through fun-filled energizers and activities. Module not only increased their
knowledge levels but also had a positive perception shift on the professions they can
choose, red flags in a relationship, financial planning and future planning. The girls
understood the consequences of early marriage on their futures and built their skills to
negotiate with their families and communities to pursue their higher education.
3. DIGITAL CALSSROOM PROJECT.
Your company in association with Rotary Club have under taken this
project. Under this project E learning kits were provided which helped the students to
learn more interestingly and understand the topics with animated graphics.
4. LAKSHYA INSTITUTE SCHOLARSHIP PROGRAMS.
Sahyadri is a proud supporter of Lakshya, a Rastriya Khel Puraskar
awardee sports NGO. The NGO supports and identifies young and budding talented sports
persons and nurture them to enhance their performance in National and International Games.
5. DEVELOPMENT OF YOGA AND NATUROPATHY TREATMENT CENTRE
Your company in association with Shree Narayandham Yog Nisarga upchar
and Ayurved Sanshodhan Kendra has developed Yoga and Naturopathy Treatment centre in Pune
District to the needy / weaker sections of the society.
HUMAN RESOURCES:
The Company believes that its dedicated and motivated employees are its
greatest asset. The Company till now has offered competitive compensations, healthy work
environment and the employee performances are recognized through a planned reward and
recognition programme. The Company intends to develop a workplace where every employee can
recognize and attain his or her true power. The Company motivates individuals to undertake
voluntary projects apart from their scope of work that help them to learn and nurture
creative thinking.The Company enjoys cordial relationship with its staff and workers.
As on March 31, 2023, there were 711 permanent employees on the payroll
of the Company.
INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY :
Your Company has a robust internal control system in place, adequate
for the size and complexity of the organization. A comprehensive review of all internal
control systems have been carried out to monitor Companys expanding size and
resulting needs and compliance with the legal obligations and the Companys policies
& procedures. This ensures high degree of system-based checks and control and
continuous monitoring of the effectiveness of the controls.
An independent agency has been appointed for auditing internal control
system in consultation with statutory auditors. Suggestions, improvements, concern points
of internal auditors are considered by audit committee and get implemented according to
instructions of committee. The audit findings and managements resolution plans are
reported on quarterly basis to the Audit Committee of the Board, headed by a Non-executive
Independent Director. Based on its evaluation, the Audit Committee has concluded that the
internal financial controls were adequate and operating effectively as ofMarch 31, 2023.
CHANGE IN RETURN OR NETWORTH AS COMPARED TO THE IMMEDIATELY PREVIOUS
FINANCIAL YEAR ALONG WITH DETAIL EXPLANATION THEREOF :
As at March 31, 2023, Net worth of Sahyadri Industries Limited is INR
335.33 Crores as compared to INR 304.09 Crores in the previous year. Change in Networth is
due to profit earned during the year net of dividend paid.
CAUTIONARY STATEMENT :
Certain Statements in Management Discussion and Analysis Report
describing the Companys views about Industry, objectives, projections,
estimates and expectation etc. may be considered as ‘forward looking statements
within the meaning of applicable laws and regulations. Actual results may differ
materially from those expressed or implied in the statement. The Companys operations
may be affected with supply and demand situation, input prices and their availability,
changes in Government regulations, tax laws and other factors such as Industrial relations
and economic developments etc. These statements are not expected to be updated or revised
to take care of any changes in the underlying presumptions.
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