Sahyadri Industries Ltd Management Discussions

WORLD ECONOMIC OVERVIEW:

Global economy continues to present a mixed picture. Multiple factors like the on-going geopolitical conflicts, wide-spread elevation of debt, extreme weather conditions and elections in many parts of the world continue to contribute to the uncertainty of the Global Economic Outlook. Encouragingly, inflation has softened over the highs of the previous year and is expected to continue to moderate. Global GDP growth is expected to remain low at 3% for 2024¹. Country variations will continue, with different parts of the world growing at varied pace. CPI inflation has gravitated to 4.9 per cent in March 2024 after averaging 5.1 per cent in the preceding two months.

Amidst concerns about inflation and potential adjustments in interest rates, economies worldwide have maintained growth momentum. Advanced economies have upwardly revised their GDP forecasts, driven in part by strategic immigration policies that are expanding workforces and helping to mitigate inflationary pressures. Previously viewed as vulnerable, emerging economies have emerged as pillars of strength, attracting substantial capital inflows and bolstering global economic resilience. Although there has been some moderation in commodity prices, geopolitical tensions and supply disruptions in the oil market have supported crude oil prices, contributing to concerns about potential tightening of monetary policies. These factors have created a moderate outlook for global economic prospects going forward, balancing optimism with cautious monitoring of inflationary pressures and geopolitical developments.

Source: RBI Bulletin

1 International Moneytary Fund

INDIAN ECONOMIC OVERVIEW AND OUT LOOK:

Despite facing external challenges such as emerging supply chain pressures, the Indian economy has shown some reliefs. On the back of consumer confidence businesses maintain positive assessments and expectations for the future. Economic activity, as measured by the Economic Activity Index (EAI), remained healthy in Q4:2023-24, despite some moderation in March. Indias merchandise exports reached their highest level in March 2024, though with a slight decline year-on-year. Fiscal indicators for both the Union government and states exhibited positive trends. Looking ahead to FY25, agricultural prospects are promising with an expected above-normal monsoon, and various sectors such as manufacturing and services are showing strong expansion. Inflation moderated in March 2024, and overall, the outlook for FY25 appears optimistic with continued momentum in domestic demand and improvements across sectors.

Indias economic landscape continues to show robust growth momentum, following a trend of strong average real GDP growth rates exceeding 8% from 2021 to 2024. This growth has been propelled by both public and private investments, with sustained public spending and a resurgence in private sector investments playing pivotal roles. The credit quality of Indian corporates has improved, bolstered by healthier balance sheets, sustained domestic demand, and ongoing public capital expenditure. Looking forward, India aims to sustain its growth trajectory over the next decade, leveraging its demographic dividend by enhancing employability and formalizing employment opportunities, particularly for youth and women. Overall, Indias economic outlook appears balanced, benefiting from favorable domestic conditions and a resilient global economic backdrop.While continuing to navigate challenges such as inflation dynamics and global economic uncertainties, India remains poised for sustained growth, supported by prudent policy measures and strategic economic reforms.

Source: RBI Bulletin

ROOFING INDUSTRY AND OPPORTUNITIES

The construction industry in India has been expanding significantly, supported by favorable government programs such as "Housing for All," commercial and residential construction projects, and infrastructure improvement. The demand for building supplies, including fiber cement board, is also driven by such programs. The India Roofing Market size is estimated at USD 7.59 billion in 2024, and is expected to reach USD 10.41 billion by 2029, growing at a CAGR of 6.5% during the forecast period (2024-2029). With the market size projected to grow substantially, driven by infrastructure and industrial developments, there is a growing focus on sophisticated and eco-friendly solutions.

Source: Construction times

THREATS, RISK AND CONCERN.

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 from monsoons boosts demand and vice versa.

Raw Materials cost has gone up: One of the major raw Materials is 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 had gone up since Q3 FY 2023. However, from Q4 FY 2024, the same has been stabilised, and inflated raw material cost has become new normal.

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, Rajasthan) and Southern side of India (Kerala, Karnataka, Tamilnadu, Andhra Pradesh, Telangana) 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, Company is also expanding its existing market in western India with a new manufacturing facility in Palghar, Maharashtra.The Company is also expanding its export and entering newer markets.

OPERATIONAL PERFORMANCE

Operational performance of the Company for the Year 2023-24 is explained in detail in Board of Directors report of the Company. FINANCIAL OVERVIEW:

KEY FINANCIAL RATIOS APPLICABLE TO THE COMPANY

*Not being significant change.

RESEARCH AND DEVELOPMENT (R&D):

Your company continuously strives to add value to its existing products while developing new products for the market. The Company believes in strengthening its R & D capabilities and utilises advanced technology to improve its manufacturing capacities.

Your company has well equipped R & D department with skilled man power and tools. The Objective of R & D Department is to identify new ideas or knowledge, apply it to the process and increase companys sales and profit.

The R & D Department is in the pursuit for continuous improvement and delivering more value to our customers. As a result, we have successfully developed and patented our products and processes in India. Our dedicated team constantly work on product upgradation, optimum utilisation of raw materials, development of environment friendly products and applications.

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 undertaken during the year are as follows.

1. UNDER GRADUATE SCHOLARSHIP AND SKILL BUILDING PROGRAM (WOMEN EMPOWERMENT THROUGH EDUCATION AND SKILL BUILDING).

Your company in collaboration with The Lila Poonawalla Foundation (LPF) has undertaken Undergraduate Scholarship and Skill Building Program (Women Empowerment Through Education and Skill Building) for period of 4 years to provide scholarships to academically bright but socially deprived and financially disadvantaged LILA Girls who wish to pursue a Bachelor of Engineering/ Technology - 4 years course.

2. EMPOWERMENT OF ADOLESCENT GIRLS IN GOVERNMENT RESIDENTIAL SCHOOLS OF TELANGANA.

Your Company in association with VOICE 4 Girls, an NGO working with marginalised adolescent girls across India. VOICE conducts activity-based camps in government and low-cost private schools for students to acquire critical knowledge, life skills and spoken English knowledge pieces. Total of 505 girls from two schools successfully completed 10 days of Her VOICE Parichay Camp. Her VOICE Parichay Camp is the first part of the Her VOICE series for adolescent girls to gain the skills and knowledge necessary to take charge of their future. Parichay is an introductory module to help our campers understand the idea of critical knowledge pieces and life skills they must imbibe into their daily routine to make a better future for themselves.

3. DIGITAL CLASSROOM PROJECT.

Your company in association with Rotary Club have undertaken 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.These E-learning kits were installed in around 70 Schools in Maharashtra and around 18000 Students are benefited by such E-learning kits.

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. CONSTRUCTION OF NEW CLASSROOM, AUDITORIUM HALL

Your company in association with Rugna Seva Mandal, a charitable trust in Dhule District, Maharashtra have undertaken the project of construction of new classroom, auditorium hall to provide better study facilities to the students from weaker economic background.

6. CONSTRUCTION OF SPORTS FACILITY

Your Company has contributed to project, Shree Poona Gujarati Bandhu Samaj for creating a mammoth Sports & Recreational complex. The project will provide facilities to pursue a number of games such as badminton, squash, tennis, pickle ball, table tennis and billiards. The aim of this project is to inculcate the love for fitness & games in the youth by providing better infrastructure to players, thus enabling to bring a sporting culture amongst communities.

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, 2024, there were 748 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 of the Company. 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 Nonexecutive Independent Director. Based on its evaluation, the Audit Committee has concluded that the internal financial controls were adequate and operating effectively as of March 31, 2024.

CHANGE IN RETURN OR NETWORTH AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR ALONG WITH DETAIL EXPLANATION THEREOF:

As at March 31, 2024, Net Worth of Sahyadri Industries Limited is INR 360.02 Crores as compared to INR 335.33 Crores in the previous year. Change in Net Worth is due to reduction in 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.