OVERVIEW OF THE GLOBAL ECONOMY
FY 22-23 has been yet another challenging year for the global economy. As a result of
rate hikes and persistent inflation along with continued tension between Russia and
Ukraine, IMF has estimated global growth at 2.7% in CY 2023 vs 3.2% in CY 2022. This is
the weakest growth rate since 2001, excluding the global monetary crisis and the acute
phase of the COVID-19 pandemic.
OVERVIEW OF THE INDIAN ECONOMY
According to the Economic Survey of India, the Indian economy expanded at a rate of 7%
in FY 22-23, compared with the previous years growth rate of 8.7%. However, the lower
growth rate was primarily due to the low base effect in FY 21-22 and does not indicate a
slowdown in the Indian economy.
Private consumption and capital formation have played a significant role in driving
Indias economic growth in FY 22-23. This led to employment generation, evidenced by the
improvement in urban employment rate as indicated by faster net registration in the
Employee Provident Fund.
Despite these positive developments, India also faced the challenge of controlling
inflation which was further aggravated by the Russia-Ukraine war. The government and RBI
took measures to address this issue. With the easing of global commodity prices, retail
inflation was brought below the RBIs upper tolerance target of 6% by November 2022.
Despite the global economic slowdown, India has managed to maintain a relatively high
growth rate and stable inflation, thus making it an island of hope for the global economy.
RURAL INDIA GROWTH
Schemes like PM Kisan Yojana and PM Garib Kalyan Anna Yojana along with Mahatma Gandhi
National Rural Employment Guarantee System (MGNREGS) have ensured food security. The
results of the National Family Health Survey (NFHS) also show improvement in rural welfare
indicators from FY 15-16 to FY 19-20. The survey covered aspects like gender, fertility
rate, household amenities and women empowerment. This clearly indicates the growth of the
rural economy.
Tractor sales which are generally considered a bellwether of the rural economy grew by
12% annually. Sales reached an all-time high of 9.44 lakh tractors in the domestic market
during FY 22-23.
URBAN INDIA GROWTH
Indias population stood at 121 crores in 2011 with an urbanization level of 31.1%
based on the 2011 census. Urban unemployment rate declined from 9.8% in FY 21-22 to 7.2 %
in FY 22-23. This has brought the urban unemployment rate to a four-year low. The private
capex cycle is expected to fuel the next phase of growth, which until now was on account
of servicing of pent-up demand and export growth.
INDUSTRIAL SECTOR IN INDIA
The industrial sector contributes to about 30% of the total gross value (GVA) added in
the country. In FY 22-23, the Indian industry faced some extraordinary challenges,
especially after the start of the Russia-Ukraine conflict. There were significant supply
chain disruptions, but they were not as severe as feared. Nonetheless, both the price and
the availability of essential commodities were a challenge. However, they did not dent the
industrys optimism. The Indian industry performed well under trying circumstances.
Overall GVA by the industrial sector, rose by 9.8% over FY 19-20.
REAL ESTATE SECTOR AND HOUSING GROWTH
In India, the real estate sector is the second largest employer after agriculture. As
per the latest sales figures, home sales across major cities in India surged 7% YoY. The
demand is expected to stay robust. The key demand drivers will be rapid urbanization,
growth in population, rise in the number of nuclear families, easy availability of
finance, repatriation of money by NRIs and HNIs and the rise in disposable income. The
demand is also fuelled by other sub-sectors of the economy such as hospitality,
healthcare, warehousing and data centres. According to India Ratings and Research
(Ind-Ra), the Indian real estate sector staged a sharp K-shaped recovery in FY 22-23. Therefore,
we are optimistic about real estate and housing sector growth in India.
OUTLOOK
Geopolitical uncertainties continue, as in the previous year. There is a wide consensus
among economists that the global economy is on the verge of entering a phase of severe
slowdown. We, in India however, can remain optimistic about our growth. The private sector
balance sheet has improved over the past couple of years. This implies that the private
sector is poised to increase spending. This can boost capex as and when the investment
cycle picks up. Furthermore, high Goods and Services Tax (GST) and direct tax collections
have provided the government ammunition to spend and cushion the impact of the impending
global slowdown. Therefore, high private capex along with a demand surge is expected to
offset the effects of global recession and help fuel the growth of the Indian economy.
BUSINESS SEGMENT OVERVIEW
Roofing
Industry Overview
The roofing industry encompasses a range of materials and sectors, including
residential, commercial and industrial construction. These materials include Asbestos
Cement Sheets (ACS), non-ACS options, tiles, metal panels and shingles. The cement
roofingsheet industry is expected to grow at a CAGR of 1.5% to 2% in volume terms over the
next 5 years. This is on account of increasing demand for affordable housing. Cement
roofing sheets are long-lasting, easy to install and provide value for money to customers.
This makes them a popular choice for homes and buildings, especially in the rural sector
in India. As rural India continues to grow, the demand for cement roofing sheets is also
expected to grow. Additionally, urban growth is expected to create demand for non-asbestos
cement roofing
The cement roofing sheet industry is expected to grow at a CAGR of 1.5% to 2% in volume
terms over the next 5 years.
sheets in commercial and industrial segments. However, the industry may face challenges
from alternate roofing materials, fluctuating regulations.
Cost
The business faced a significant challenge in the current fiscal year as the cost of
imported asbestos fibre increased significantly. This was which had an adverse impact on
the cost of crucial inputs thereby affecting profitability. To mitigate the cost pressure,
the business focused on operational efficiency improvements and cost reduction efforts.
These measures were aimed at reducing overall costs while maintaining the quality of
products. Despite the challenges posed by the cost increase, the business remained
resilient and committed to delivering value to its customers.
Performance Overview
In the initial half of the year, low demand in rural areas caused weak secondary
movement and it adversely impacted the business. However, there was a recovery in the
second half of the year. The Company proactively worked towards connecting with end
consumers through advertising campaigns, expanding distribution networks and strengthening
relationships with channel partners and influencers. These efforts helped drive business
growth.
Boards and Panels Division
Industry Overview
The fibre cement board market in India is experiencing significant growth, driven by
its ability to fast track a project due to dry construction technology and environment
friendly properties. The market is projected to grow at a CAGR of 13.5% for the next five
years. The modular construction market is also expected to grow at a CAGR of 13% and reach
Rs 27500 crores by 2023.This will provide an additional growth opportunity for the fibre
of the Pradhan Mantri Awas Yojana (PMAY) scheme until 2024 and the growing demand for
faster residential construction are expected to fuel the demand for Boards and Panels.
Drywalls emerged as the leading solution for partitions in the office segment, which
saw a 36% YoY increase. Meanwhile, the residential sector is experiencing a strong
recovery in demand and in-home sales recorded a ten-year high in CY 2022. Rapid
urbanization and rising per-capita income have resulted in a growing preference for dry
construction technology and smarter materials like drywalls and false ceilings.
The warehousing and logistics supply sector in India is also set to expand rapidly in
2023, with an addition of 30 million square feet. Everests drywall solutions designed for
better thermal insulation, fire protection and acoustics are expected to be a game-changer
in the warehouse segment. Everest has also added superior fire-rated system and clean room
solutions to capitalize on the expected doubling of data center capacity pricesand changes
in government by 2025.
Overall, the Indian construction industry is poised for significant on these
opportunities.
The is experiencing significant growth and is projected to grow at a CAGR of 13.5%
Cost Overview
FY 22-23 was marked by a decline in COVID-19 cases and a cement board business.
Furthermore, the extension return to normalcy of business operations. However, escalation
of the Russia Ukraine War resulted in global supply chain challenges. The cost of diesel
and raw materials surged. The organization had to implement price increases along with
process and productivity improvements to maximize growth in revenue and profit.
Performance Overview
Everest Boards and Panels business achieved impressive growth by diversification of its
product range, value engineering and choice of geographic mix. It has created an
aspirational category in wall linings and ceilings through a sustained connection with
specifiers and installers. The Company continues to expand its export capabilities and has
made steady inroads into the European and MEA markets.
Everest has developed an innovative product for ceiling solutions in the healthcare
sector. By creating engaging digital content, strengthening relationships with architects,
designers and builders and expanding its premium retail presence,
Everest has achieved significant growth in sales of value-added products. The Company
opened its first-ever experience center in Delhi growthandEverestiswell-positionedtocapitalize
and Mumbai, to engage with key stakeholders.
ESBS Division
Industry Overview
The Pre-Engineered Building (PEB) industry witnessed a growth of 12% during the
post-Covid period. At present, various states are implementing investor-friendly policies
to attract investments. The Central Government is focusing on developing Multi-Modal
Logistics Hubs and Industrial corridors and MNCs are expected to invest heavily in India.
The shift of consumer behaviour towards online delivery models is also expected to further
increase demand. Data Centres, Multi-storey steel structures, Manufacturing, Logistics and
Warehousing sectors
The Pre-Engineered Buildings division was able to maintain a strong bottom antgrowthwiththebooking
line and improve operational efficiency, ensuring continued success in the future.
will continue to grow at a healthy rate. Therefore, going forward the industry outlook
is extremely positive.
Cost Overview
The Russia-Ukraine War created an erratic demand for steel. This resulted in volatility
of steel prices that affected our raw material sourcing strategy. However, we were able to
mitigate the impact by pursuing need-based instead of forecast-based strategy for sourcing
of steel. Increasingly, customers are becoming more price sensitive and margins are under
pressure. Therefore, we are focusing on reducing our fixed and conversion costs to
maintain profitability and sustainable growth.
Performance Overview
In FY 22-23, the Pre-Engineered Buildings division of the of some of Companysaw its
largest orders to date. The successful completion of these projects within the proposed
timeline was a testament to the companys dedication to high-quality work and efficient
project management. As a result, the division was able to maintain a strong bottom line
and improve operational efficiency, ensuring continued success in the future.
FINANCIAL PERFORMANCE
In FY 22-23 Everest achieved good growth in both Boards & Panels and Pre-Engineered
Buildings businesses. The growth was impressive on account of higher volumes and price
increases. However, in the roofing business volume growth was muted. But there was value
growth due to price increases which partly offset the high raw material inflation.
The profitability for the Roofing business was significantly prices. This impacted due
to steep inflation was due to the Russia-Ukraine war which had adversely impacted the
supply chain and logistics. It impacted all the players in the industry and reduced their
profits.That, coupled with high rupee depreciation increased the material cost
significantly. In addition, there was inflation for other raw materials. This created
serious headwinds for the business.
Boards & Panels and Pre-Engineered Buildings business, responded by price increases
and cost reduction which enabled them to improve margins. Pre-Engineered Buildings
business was able to deliver a good turnaround by delivering profits for the year. This
was accomplished by an all-round improvement in operations and better pricing from MNCs
and renowned companies.
During the year, the Company had to invest heavily in inventory, especially of asbestos
fibre on account of uncertainty in the supplies due to disruptions in the supply chain.
The working capital further increased on account of higher revenue in the PEB business.
However, this is expected to come down due to normalization of supplies and various
optimization initiatives.
The Company has opted to shift to the lower tax regime in FY 22-23 which reduced the
tax expense for the year. Apart from that pursuant to the various Income tax orders
received during the year, the Company evaluated numerous alternatives and released a tax
provision amounting to Rs 1,692 lakhs (included under Adjustment of tax relating to
earlier periods), accounted for Interest Income on Tax Refund of Rs 1,610 lakhs (included
under "Other Income" ) and made a provision for Interest Expense of Rs 2,371
lakhs on account of probable tax matters (included under Finance Cost)
Key Financial Ratios:
Particulars |
2022-23 |
2021-22 |
2020-21 |
2019-20 |
| Return on Net Worth |
7.7% |
8.4% |
11.5% |
3.1% |
| Return on Capital Employed |
7.1% |
12.3% |
17.9% |
5.3% |
| Basic EPS |
27.5 |
28.2 |
36.8 |
9.0 |
| Debtors Turnover Ratio |
19.9 |
23.9 |
19.3 |
15.8 |
| Inventory Turnover Ratio |
2.3 |
2.5 |
2.3 |
2.3 |
| Interest Coverage Ratio |
6.6 |
22.1 |
24.8 |
4.0 |
| Current Ratio |
1.5 |
1.4 |
1.4 |
1.4 |
| Debt Equity Ratio |
0.1 |
0 |
0.1 |
0.2 |
| Operating Profit Margin |
2.1% |
3.0% |
7.2% |
1.5% |
| PBT Margin |
2.6% |
4.9% |
7.7% |
1.6% |
| Net Profit Margin |
2.6% |
3.2% |
4.7% |
1.1% |
RISKS AND OPPORTUNITIES Opportunities
The Indian economy is expected to grow at 7% on account of government interventions
like PM Gati Shakti Yojana, PLI schemes and a renewed focus on creating jobs. on the back
of increased exports and revival of the private capex cycle.
Though the roofing category faces competition from steel, aluminium and thatched roofs,
it is still expected to grow at 1.5% to 2%. The current industry capacity is sufficient to
service the demand for the next 5 years. Increased purchasing power in rural India bodes
well for the industry. Everest will continue to be a dominant player in the market.
Everest has been a pioneer of FCB products in India. With the real estate industry
poised to reach USD 1 trillion by 2030 and the increased adoption of dry construction
techniques, the total market for FCBs is expected to grow exponentially. Everest is adding
capacity to address this demand.
Everest has been one of the major PEB players in India. With the revival of the capex
cycle and global companies opting for a China + 1 strategy, the PEB industry is expected
to grow signific from ataCAGRof12%till2030.Thereis defence, data centers and warehousing
industry in addition to traditional sectors such as automotive, chemicals and
manufacturing. Everest is adding capacity to address this demand.
Risks
Risk management is integral to Everests strategy. Efforts are being made to ensure
that risks are minimized or eliminated. Everest has an integrated risk management
approach. It includes policies, processes and periodic reviews with the boards Risk
Management Committee. Some of the important risks and mitigation strategies include:
Raw Material Price Volatility
Chrysotile fibre, cement and steel are the primary raw materials used by the Company.
Any fluctuation is bound to have an impact on the Companys profitability if it is not
able to pass it on to the customers. The Company ensures that price increases are passed
on to the customers and cost reduction actions are taken to contain the impact. The
Company has also implemented procedures and processes in its procurement function to
reduce the impact of raw material price volatility.
Availability of Chrysotile Fibre and Pulp
Chrysotile fibre and pulp are only available from a few vendors around the world. Some
of them are based out of Russia. The ongoing war between Russia and Ukraine poses a risk
for sourcing these Raw Materials. However, Everest is deploying various de-risking
initiatives to ensure a regular supply of these raw materials.
Increased Competition in Fibre Cement Board (FCB) Business
There is a threat of more experienced international FCB manufacturers entering the
Indian market and setting up manufacturing facilities. Domestic players have added
capacity and may resort to aggressive pricing and credit terms. The Company is proactively
working to improve awareness amongst influencers (Architects, Builders and Contractors)
and customers by conducting various conferences, tradeshows and seminars to mitigate this
threat.
Dependence on Roofing Business
The Companys revenue and profits have traditionally been dependent on the roofing
business. Any impact on the business is a huge risk to the company. The Company has hedged
this risk by diversifying its product portfolio. Share of non-roofing revenue has been on
an increasing trend and the company is active across multiple sectors of the Indian
economy.
The roofing business mainly caters to rural customers, while the Boards and Panels
business mainly caters to the needs of urban customers. The Steel Buildings business
caters to all sectors of the industry. This has enabled the Company to broaden its
customer base and de-risk the business.
The fibre cement board market in India is experiencing significant growth and is
projected to grow at a CAGR of 13.5%
Uncertainty Over Future of Asbestos
There is uncertainty over the future of asbestos usage in
India. The asbestos fibres are bound to the cement during the manufacturing process and
the fibre emission in the air is controlled as per regulatory standards in the factories.
Audit structures are in place as per regulatory requirements to ensure workplace safety
and employee well-being. The Company has appropriate systems and processes to ensure
compliance with all statutory and regulatory norms.
Internal Control Systems and their Adequacy
Everest has deployed an internal control system that is fully aligned with its scope of
operations to ensure that assets are protected, transactions are authorized, documented
and reported accurately. The internal control system is audited regularly by an internal
auditor and reputed external agencies which assess the effectiveness and quality of
internal controls and certify their adequacy. The scope of internal audit includes a wide
range of operational processes. It ensures compliance with specified standards and
policies. Audit reports presented to the Audit Committee of the Board of Directors include
the extent of adherence, management information system reliability, authorization
procedures and steps for safeguarding assets. The Audit Committee examines audit findings
as well as the effectiveness of internal control systems. The Companys statutory auditor
and Internal Auditor also meet with the Audit
Committee to discuss findings and corrective actions.
OVERVIEW OF HUMAN RESOURCES
The HR function at Everest Industries places high value on its employees and aims to
create a respectful and engaged workplace. The Company has a workforce of 1,386 employees.
The Company has implemented various initiatives such as townhalls, REI Awards and
induction programs to reinforce its core values.
Talent Pipeline
The talent pipeline is a crucial part of the companys talent strategy and it recruits
management and engineering trainees from leading business schools and campuses. The
Company also hires summer interns from top-tier business schools for internship projects
in various functions. The Companys rigorous internship program ensures a ready feeder
pool of the management trainees.
Employee Engagement
Employeeengagementisa and it has implemented measures such as the Everest Vidya
Puraskar, Umang Night, sports and team-building activities. The Company also maintains
cordial industrial relations across its manufacturing locations through various
communication channels and localized events such as Family Day, Founders Day and various
regional festivals.
Talent Development
Talent development is a significant area of focus. The Company has introduced
comprehensive capability-building systems that integrate training needs across all
functions and levels. The Company offers multi-nodal learning interventions which include
workshops, skill-based training and knowledge-based learning programs. The Company has
launched Everest Edvantage, an LMS platform for all employees.
OVERVIEW OF RESEARCH AND DEVELOPMENT (R&D)
The R&D aims to bring new and improved products to the market that offer greater
value to stakeholders. Its major thrust areas are new product development, quality
improvement, cost control and sustainability. The Company will continue to invest
.
It has an R&D center in Mumbai which attracts the best talent and facilitates
creation of new products using sustainable materials and processes.
OVERVIEW OF INFORMATION TECHNOLOGY (IT)
Everest recognizes the importance of technology as an enabler for business growth. It
has invested in several initiatives and programs to improve operations and customer
service. These include a consolidated CRM platform with Zoho to streamline sales
processes, digitizing the last mile of the supply chain with a TMS solution to improve
logistics processes and simplification of HR processes with One Everest HRMS solution.
Additionally, Everest has updated its infrastructure to address bandwidth requirements and
security risks associated with increased exposure to the internet.
The Company launched a new website featuring three business microsites that offer
detailed information about its products, applications and projects. The new website is
designed to provide customers with improved user experience and easy access to
information. It also serves as a platform for highlighting the brand identity and
personality with engaging visuals and interactive elements.
OVERVIEW OF EHS
The Company is on a mission to achieve zero harm and environmental conservation. The
organization values human life and safety and adheres to the best practices and statutory
requirements. The Company identifiesand controls hazards and risks. It investigates the
incident and addresses the problem.
These learnings are across all the plants. Some of the activities that were conducted
include:
• Safety improvement drives to upgrade equipment and processes.
• Emergency drills to test preparedness and response capabilities.
• Inspections to ensure compliance and improvement.
Toolbox talks including daily briefings to discuss hazards and their control.
• Review meetings to monitor safety performance and plan for future actions.
OVERVIEW OF CSR- EVEREST FOUNDATION
The Everest Foundation which is the CSR wing of Everest Industries Limited was
established with the aim to improve peoples lives by creating a sustainable impact. This
is done through long-term partnerships, community relationships and employee engagement in
the areas where the Company operates. The foundation has implemented community development
interventions in four key areas: Livelihood, Education and Sports, Health and Environment.
In the Livelihood category, the foundation has undertaken various projects to enhance
vocational skills for career development. The projects include training youth to take up
jobs as Assistant Electrician, Fitter-Fabrication, RACW-Field Engineer, Data Entry
Operator, Accountant and as skilled worker for Fabrication, Drywall Construction and Roof
Sheet
Installation. These initiatives have benefited 891 youth across
12 districts in 7 different states.
Under the Education and Sports category, the Foundation has launched vocational skill
development training programs to foster career aspirations among adolescents studying in
government schools. The training courses include Mobile Repair, Beauty and Wellness, Home
Appliances Repair, Jewellery Design, Bakery, Confectionary and Robotics. 644 adolescents
across 13 government schools have been trained through these programs which have helped to
increase regular attendance in schools. Additionally, to promote sports and life skills
among children and youth, Everest Foundation has established the Everest Football Academy.
It provides training throughout the year for students aged 6-16.
The Health and Environment category focuses on creating awareness about the harmful
effects of tobacco consumption and sensitizes people to quit tobacco. The Foundations
Everest Healthy Child Program hasbenefited 71,208 people.
Additionally, the Foundation has made over 600 schools tobacco-free by implementing the
activities outlined in the Cigarette and Other Tobacco Products Act 2003.
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