In an interaction with Mamta Maity, indiainfoline.com, Mr Tuljaram Maheshwari, Chief Executive Officer, Chief Financial Officer and Whole-time Director at Sahyadri Industries Limited said "our product line contains creative, specialised, futuristic products that are capable of meeting all of contemporary challenges. SIL serves both domestic and foreign markets."
Sahyadri Industries Limited has been in operation for more than seven decades, how has it evolved since its inception?
Sahyadri Industries Limited (SIL) founded in 1947. SIL is in a building solution pioneer that offers a broad line of products for interior and exterior building systems, as well as roofing solutions. SIL began as a roof sheet manufacturer under the "Swastik brand" and has progressed significantly since then.
In 1991, SIL established its first asbestos corrugated sheet production facility in Chinchwad, Maharashtra. SIL has also expanded its operations to Kadegaon in Maharashtra, Perundurai in Tamil Nadu, Mahuvej in Gujarat, and Vijaywada in Andhra Pradesh. At our Chichwad factory, we have also started producing Non Asbestos Flat Sheet.
Our product line contains creative, specialised, futuristic products that are capable of meeting all of contemporary challenges. SIL serves both domestic and foreign markets. We have expanded our network throughout the country to include states such as Maharashtra, Tamil Nadu, Andhra Pradesh, and Gujarat. We have effectively built our foothold in the international market, catering to the needs of South Asia, the Middle East, and Africa. We presently have a 45-product branded product portfolio, with the 'Swastik' brand catering to the roofing industry, the 'Eco Pro' brand serving the Cement Fibre market, and the 'Cemply' brand catering to the cement fibre flat sheet market
What is the nature of our manufacturing process? Does it have any technological know-how? Do we have in-house R&D capabilities as well?
Our products completely eliminate the usage of bricks, thereby assisting in the conservation of cultivable topsoil. Our products contain 30% fly ash, which is a waste product from thermal power plants. Products are environment friendly and free of heat island effects created by slabs, assisting the country in meeting United Nations Framework Convention on Climate Change (UNFCCC) guidelines on global warming.
We have a technological advantage because our machinery, which are utilised to create our products, are built in-house and sourced from outside based on the technical inputs provided by our team of experts keeping in mind the quality and future requirements. We at SIL are abrest with latest technological developments, which is reflected in our product line. Our products are water resistant, termite resistant, fire resistant, strong, and long lasting, to name a few.
We have a qualified R&D team of 10 people and our annual R&D Spend is Rs 50 to 75 lacs, which is likely to increase going forward as we modernize R&D center with latest equipment required for producing innovative products
Is your target market is B2B or B2C? What is the proportion of value-added products?
We operate on a B2C model, which means we cater to end users through our 3,000+ dealer network across multiple areas. Since its founding, SIL has served over a million consumers through its B2C model. On the distribution front, the Company has launched a new drive to showcase its value-added products by opening Swastik Studio and Eco pro Studio locations around the market. This campaign will help us improve our brand image and raise awareness of the uses of our products.
Our branded product portfolio is well-established, with a growing share of value-added products. The company has a product portfolio of 45+ products, with 20+ of them being value-added. The overall share of value-added products ranges from 4% to 5%.
Overall, how much capacity we do have at our plants and where are our plants located? What is the current capacity utilization at our plants?
The plants of SIL are strategically located across Western and Southern India. We currently operate five factories, two of which are in Maharashtra and one each in Tamil Nadu, Gujarat, and Andhra Pradesh. We have a monthly capacity of 50,000 MT of roofing material, 4,500 MT of Cemply sheets, and 4,500 NAFS Ecopro (Non-Asbestos Flat Sheet). In H1FY22, capacity utilisation stood at 83%.
SIL has planned a factory expansion in Tamil Nadu and a new facility in Odisha? What is the cost of capital, how much capacity will be added after the expansion, and what items will be manufactured? How are we funding the capex?
The company is in its growth phase, and SIL believes that capacity expansion is one of the growth levers we must focus on. SIL is building an asbestos flat sheet and non-asbestos flat sheet manufacturing facility in Perundurai, Tamil Nadu. The plant's capacity will grow by 72,000 MTPA as a result of this. Internal accrual has cost SIL Rs 60 crore in capital expenditure. This expansion will serve to address the requirements of the southern market, and production will begin by Q4FY22.
In addition, SIL has announced a greenfield expansion in Odisha to manufacture asbestos corrugated sheet products. The capacity of this plant will be 1,20,000 MTPA. Sahyadri will be able to expand its footprint in the unrepresented markets of Odisha, Jharkhand, West Bengal, and Bihar as a result of this expansion. Plant product commissioning by Q3 FY23. For the expansion, SIL has budgeted Rs 95 crore in capital expenditure.
As we are demerging Industrial Business of Poonam roofing products into Sahyadri Industries. what is the rationale behind amalgamation and what kind of synergies are we expecting? Also, when will this transaction get completed?
The demerger is in the process. The shareholders of the Poonam Roofing Products Pvt. Ltd. on the Record Date will get 577 fully paid-up equity share of the face value of Rs. 10/- each, of the Sahyadri Industries Ltd. for every 10 Equity Shares of the face value Rs 100/- each held by the shareholders in the Poonam Roofing Products Pvt. Ltd. The final hearing of amalgamation is scheduled before the Honourable NCLT Mumbai.
Following this merger, SIL will receive the existing "Swastik Brand," along with a land parcel and plant and machinery. In addition, skilled labour will provide the business with more capabilities.
What are the steps taken to increase the share of revenue from exports? How is profitability different from sale of domestic products?
On the export front, we have senior managerial person situated at Dubai and takes care for export market. The Company exports its products mainly to Srilanka, Dubai and Africa. The export sales value for H1FY22 is ~8% of total sales and profitability is comparable to the domestic sales.
What is the key raw material required for our products? There is inflationary pressure on the commodity prices. SIL can pass on the cost of RM to its customers? Also, are we facing any kind of supply constraints?
Cement, fibre, and pulp, among other materials, are important raw materials for our goods. Cement is sourced locally whereas Fibre is imported from Kazakastan and Uzbekistan. We don't have a problem passing on an increase in input costs because we cater to the end consumer directly through our B2C approach. Furthermore, there are no supply constraints for our raw materials.
How is Sahyadri Industries positioned in the industry as compared to its peers? What is the underlying opportunity size available in the building materials space?
SIL is one of the top four companies in the industry. In Western India, we are the market leaders, and our products command a premium than those of our competitors. We're expanding our footprint in East India in order to tap into a largely untapped market. With this expansion, we will move one step closer in achieving our desire to become a Pan India player
We believe that there are plenty of opportunities in the market. The Indian Roofing Industry is estimated to be worth Rs 42,000 crore and is expected to develop at a rate of 6% to 8% yearly. SIL is well-positioned to grow its reach in newer geographies while capturing market share in existing geographies.
At last, what are the key focus areas for the company over next couple of years?
Our goal is to become a pan-India player by targeting a robust sales growth with a focus on margin-rich value added products, which is one of our four pillars. Customer acquisition in the newer geographies through dealer network model coupled with studio approach will lead to brand recall and increase in the client base. Expanding capacity and focusing on optimum usage levels will increase operational efficiencies.
The next phase of expansion will be driven by capital expenditure.