Visaka Industries Limited (509055) Earnings Call Transcript & Summary

So good afternoon, everyone, and welcome to knowledge session hosted by Go India Advisors. Over the next couple of minutes, I will leave you with a clear picture of what Visaka does, where the money comes from and where it is headed for 2029. So Visaka is primarily is a building material company with over 40 years of experience. It is India's largest manufacturer of fiber cement boards and it has built the boards for integrated solar refill technology. In FY '26, it did about INR 1,600 crores in revenue. And the 5-year gross margins have been about 47% with ROCE of about 17%. So it has about 14 plants across India, through 7,000 dealers and stockers and reaches 30 countries. Talking about the businesses one by one. So cement, roof and sheets is the first business. So this is a mature cash cow. Visaka is the #2 player in India with about 18% market share. The revenue has been stable at around INR 850 crores, INR 900 crores. The utilization at about 92%. So this -- the revenue share has been falling from about 70% to 53% as the new age of categories scaleup. Next slide, please. Second business is a cement, boards and panel. So this is the primary growth engine. Visaka is #1 in India with about 33% market share and has 5 plants. The revenue has grown at a CAGR of about 16%. The revenue contribution has grown from 20% to 30%. Capacity is about 3.6 lakh tonnes with a utilization of 86%. Some of the customers in this segment are Tatas, Adanis, L&T, JSW, et cetera. As a value-added product, this is where the margin expansion will come from. The third business is the syntactic yarn business. So this business is a stable contributor. The Nagpur plant has been producing since 1992 and has about 80% share into an yarns. The revenue has remained at about INR 250 crores, which is about 15% of the revenue contribution of the total group. And they're serving customers like Raymond, Arvind, Siyaram and Grasim. The next vertical is ATUM, which is the emerging engine. So instead of putting solar panels on a separate group, the roof itself generates power for you. So this is kind of against the conventional roof plus solar system. So this has a wind resistence of about 250 kilometers per hour versus a typical 100-kilometer per hour, has about 30% higher power output. They are notified by DIS, IEC and UL certifications. Some of these projects that are using this roof are Air India ramps, UN Habitat and Citibank Union, et cetera. So as of now, the share is fairly small with about 2% of the revenue, but this is coming out to be an emerging segment. So now I will talk about the FY '29 picture. So from FY '22 to FY '25, the revenue has grown at about 3%. The EBITDA margins had dipped a bit, but then FY '26 came out to be a strong turning point wherein the revenue had grown by 3% and the margins are recovering now at about 8.5%. The FY '29 target is to grow the revenue in the range of 10% to 15% CAGR and maintain EBITDA margins in the range of 10% to 12%, which on our arithmetic comes to about INR 2,200 crores to INR 2,500 crores of revenue. The next scale of growth will come from a higher mix of value-added products, the increased capacity of the businesses and operating leverage that will kick-in into the business. So from the roots funding the -- from the roofing sheets funding the journey, the boards will drive the growth. Yarn will add stability and ATUM is kind of the upside vertical. From the management who will lead this is Dr. Ritika. She's from the from promotor family. She joined in April 2025 as the Chief Business Strategist and Adviser to the Chairman. She's a trained and she's done MBBS and MD. She's also a co-founder of Nava Skin Care Clinic in Hyderabad. And she kind of of adds a strategic and business development dimension to the senior management team. We are also joined by Mr. Ramakrishna Pendyala. He is the CFO since June of 2026. He's a B.com, CA, CMA, USCPA and has over 21 years of experience across finance, treasury, taxation, governance, IQ management, audit, et cetera. He's worked across a couple of industries ranging from kitchen appliances, aerospace, textile, automotive, power and has worked at senior finance roles at PWC et cetera. We are also joined by Mr. S. [indiscernible]. He's a B.com and a CA and has been with Visaka since 1997. He served as a President and CFO, combining the financial oversight with a broad set of responsibilities. He continues as an adviser with Visaka. Welcome to the management team. Thank you, and I hand it over to Rakesh, sir, now for his opening remarks.

Thank you, Garima. Thank you, ma'am. Thank you, Mr. Ramakrishna, Mr. Shafi for giving us time and joining this call.

So ma'am, I just wanted to start with you. Can you take us through -- it's been a 40 years of illustrious journey for the company. Can you take us a little bit about the background, how it started and -- so people have an idea?

Yes. Of course. Hi, Mr. Rakesh and everybody attending the call. So Visaka Industries was established in 1981 under the -- our promoter Dr. G. Vivek Venkatswamy and the guidance of my grandfather, Venkatswamy-ji. And we initially started off with the vision of providing an innovative solution provider for the people. Right now, we have diversified into multiple products, and we have a huge manufacturing edge right now. And we are into ruling sheets, we're into fiber cement boards, synthetic yarn and ATUM sort of currently. The roofing segment is our 53% revenue segment like that 3% of our revenues. And it's a building material, which is very durable, about 40 years, and it's basically we use the fiber and gets reinforced with the cement, providing 40 to 50 years of roofing. We've also ventured into fiber cement boards, which is a fast, quick and very affordable construction material, which adds a lot of scalability to us. And these fiber cement boards have very wide range of applications. We use it in false roofing, we have mezzanine flooring, doors and external and interior partitions. This was established in 2008. And right now, we're trying to scale up the business because it has huge market presence and it's only growing. We also have a synthetic yarn, which is state-of-the-art machines, which is a twin agent spinning machine from Morata, Japan. And this was started in '92 with the -- just to diversify our revenue stream and to add another segment in sort of singlely depending on one fiber roofing sheets. So this simply basically we have polyester and viscous and we are to shirting and suitings, dress material, fabrics. Now -- then coming to ATUM, which is a new-age product. It is basically a roof integrated with solar system and -- so this basically is something which is upcoming right now. We have patents in this in India and America, Europe and South Africa. And it is also BIA certified. We have our plant in Miryalaguda, Telangana, and it has a capacity of 30 megawatts per annum. So right now, the focus is to concentrate a lot more on a fiber cement division and 50% roofing and 50% fiber cement and increasing up revenue in that aspect. We also have focused on expansion, product mix and also increasing our volumes to become more sustainable and get better profits, yes.

Thank you, ma'am, for this good introduction. Before I go to the various business segments, I just wanted to ask about your journey from being a doctor to handling a business. I mean how has this been transitioned and are really liking this role? It's quite different from what you have been trained to do.

So honestly, I have never been involved in any of the conversations of our business at home or at work. But when I started my clinic, Nava, I got to spend a lot more time with my father. I think I've learned a few business strategies from him in how to set up a small clinic compared to, obviously, a bigger company. But when I was giving this opportunity to come here, I think it was more of -- to be a bridge between the company and the promoter and to help strategize and help scalability of our business.

Thank you, ma'am. So let's start with our most largest segment, which is the roofing sheets. So normally, ma'am, we think of roofing sheets -- earlier, it was asbestos, now it is cement and there are a lot of other materials competing with us. There are steel roofing sheets and even aluminum people want to use. So what is the advantage of the roofing sheets that we are manufacturing in terms of cost and who are the key users of these roofing sheets?

So roofing basically is for -- its very durable. The material itself is very durable. Like I said, 40 years to 50 years you have the lifespan of this roof and it is much cheaper than steel and we use a lot in industrial areas, creating sheds, we use it in poultry, and a lot of rural segment -- housing for rural. I think this has been most -- I think the product itself is on these segments. And so initially, when we think, okay, roofing takes a lot of time and easier and faster adaptation like steel you can use, but steel has many disadvantages, which I think roofing can overcome. It rusts really quickly, and it is -- you know the lifespan is so short that even if you think that it takes a couple of days to finish it, but the whole project life is not the right product for such applications.

Okay. Ma'am, so are the users largely rural India is also industrial usage, which is there because they also use a lot of sheets for warehousing and...

Yes, yes, definitely. We use it for warehousing. There is an industrial segment to this also. Poultry that whole segment uses mainly the roofing sheets.

It's largely used in agricultural -- rural housing, agricultural infrastructure and industrial sheds and then even the repetitive, I mean, maintenance projects. So...

Okay. So Mr. Ramakrishna, do we have a break up how much is -- or do we sell it through a dealer network? We don't know exactly where it is going.

Yes, we sell through dealer network. Largely, it is a rural segment. And some of the portions, we also see it in industrial sheds as well.

Okay. Got it. And ma'am was mentioning that it's much cheaper than steel. So do you have a number as to which you can tell us how much it is cheaper by, what is the per square feet or per sheet rate as compared to the steel?

We can't tell the exact numbers, but -- I mean, we don't have the exact differences, but the difference between steel sheets and then our roofing sheets is largely driven by the market price of the steel as well. So since the government has introduced BIS system over 2 years, the demand import from other countries like basically from China had curtailed and then the prices have gone up. And then even now, the steel prices have gone up. So the difference between steel prices and then our cement prices largely -- I mean, the difference has increased, the gap has increased unlike in this past. So the people are affordable to buy our product than the steel roofing sheets now. That's why the demand for the roofing sheets is maintained.

Steel will have branded steel manufacturers also and cheaper imports from China and all. So [indiscernible] gap would be 200x, means it's 50% cheaper. Our roofing is -- our cement roofing sheets are almost 50% cheaper if you compare to a normal steel sheets. That is one we can say.

Okay. So that's a huge number, 50% cheap is really a cheap number.

Yes. Yes.

Okay. So the usage is going to remain in for there because a lot of people think that cement sheets would be old technology and all that, but the pricing is...

It is not like that. It is a pure product. It is a quite affordable. And it is utility wise compared to other alternatives, it is much much better than the other alternative product. That is why the steel that the usage is there till we are working on the demand and everyone is able to sell their capacity.

Got it. So what would be the growth rate for the industry for roofing sheets, especially our category? Are we growing at around 8%, 9% in the industry-wide or is kind of a slow down?

Around 10%...

It is a range-bound, actually. capacity we will talk about 40 lakh tonnes to 44 lakh tonnes. So sometimes based on the demand it increases, sometimes demand is not there, it will be little bit less. Otherwise, this range-bound. We are not expecting much growth, actually. It is range-bound. At least 5% to 10% it may rise. If the demand is there, we will grow by 5% to 10% or otherwise, we will be So the industry there is a capacity is standard. So no one is expanding with and coming with newer capacity. So whatever capacities are there, it is all being utilized in India.

Got it. So in terms of our capacity, what is our capacity, I see that our capacity ratio is also very high. So what are our strategic thoughts about this segment? Are we adding new capacity? And what kind of growth rate should we assume for this segment?

So this segment is basically stable and like how Mr. Shafi has mentioned, it has -- its very range-bound and it's been generating the cash flow and revenues. So right now, absolutely stable. We are not increasing our capacities. We're not planning to expand in this division. And also, we have our concentration and strategy is shifting more towards the 5% and which have a huge growth expectations in that industry.

Okay. And just to understand a little bit about the economics of this business, our key raw material would be cement over here. So how do we do pricing of our product and how do you maintain our margins in the segment?

Cement is the main product. I'm assuming no will be used and fiber will be there fiber, which is totally imported. And the major economics is the price means there is a level of price we can increase. So because it has to go to rural people they cannot go beyond a point. So we will have some leverage definitely because whenever there is a steel price goes up, then our price also will goes up is. This is all volume and price because we have got highest volumes of 8,40,000 tonnes almost we are selling and it is 18% share. So based on our volume and price, we will have that so this is a cash business because the external established broad period of time In year 2000, we have set up our major unit sector. In 2022, we have expanded in Raibareli, but otherwise some wherever demands comes from, we are managing and that is generating good revenue and profitability provability, so that is how we can see this business [indiscernible].

So the price hike happened or the price announcement happened every month for your dealer network or how does it go?

It depends on the market and demand.

It depends on the market. So it can be any time when you feel...

Yes.

And your purchase contract for cement, they are also -- are there monthly contracts or those are also on spot basis or how does it happen?

These are monthly spot. Again, that is also based on the demand and supply. So cement, we can't tell, but the fiber and all, we will have annual contracts.

Okay. Okay. Got it. So yes, that is understandable. Now coming to your second segment, which is the fiber boards, what is that product and where is that used?

For fiber cement boards basically is -- we use a technology, where we use a high presence stream curing program. The technology basically meets the very durable and the stability in the board, we can use it for internal and external applications, we use it for mezzanine flooring, the duct coverings, doors and fall ceiling. So there's a very high range of applications to this particular board and the market is responding very well, and we are increasing our capacities based on how -- when the market is responding. So yes, the product itself is doing extremely well, and there's a huge growth that we foresee.

I will add to Dr. Ritika. So this product, V-Boards, is a substitute for even plywood and then boards. So it can be used as a substitute product these other conventional building materials. And as she said, it can be used in fall ceiling and then roofing, tiles and then wall paneling, et cetera.

We have very good edge over the other alternatives, it's fire resistance and moisture resistant. It also is termite resistant. So it adds a lot of benefits over the plywood, especially.

Okay. So what are the economics and it appears to be more like more B2C product as compared to, say, roofing sheets, -- is that understanding correct or both are sold through the same channels?

Yes, it is dissolves same channels, through dealer and it goes to partners.

Okay. And so what are the unit economics of fiber board and how is it different from the roofing sheet that we make? Is it more sophisticated product? What are the differences in properties for these 2 products?

Fiber cement board is urban in our product. So it is mostly for interiors and exterior applications, like I mentioned. This product is basically completely different from roofing. I think the segment itself is completely different. SEB products have the edge, like I said, we have moisture resistant, they are very flexible also, they are very stable and durable for fast construction. So construction easy, very quick instead of going through the traditional form of construction, this adds a lot of value to the customer and the applicator and construction into construction.

Okay. Mr. Ramakrishna, can you take us through the economics of this unit economics of fiber board and all that? What are the key raw materials apart from cement...

In fiber cement boards, basically, we use cement, flyash and imported fiber, fiber. But in -- that is in roofing sheet, sorry. And then in fiber -- in boards, instead of fiber, we use wood pulp. And then the other raw materials more or less the same like cement and then flyash. So some adhesives and also we use. So the main difference between these 2 raw materials in case of roofing sheets it is crystal fiber and in case of V-Board, it is [indiscernible]

Understood. There are a few questions which are coming up with -- let's take those. So basically, asked about why the cement fiber boards haven't taken off in the West? So is there any difference in regional demand for fiber board?

So in West, there's not a lot of demand there are a lot of players also there are basically that you need a while we have put out is for exports. Actually, that town it is near but a lot of domestic consumption also there we are exporting as well as we are selling in Maharashtra.

Okay. And his question was that are there any challenges which contractors are facing? Is there a special cutting tool, which is required for this or...

See, earlier, there was not much awareness. Now the awareness is going up there if they can fix it easily. Now everyone -- so you can see our volume that itself will speak. It is a good product and compared to plywood, it has got strength. It is cost also less. So people are now going for this product rather than other products. That is the reason why the demand is increasing.

Okay. And so there are more questions on the economics of fiber cement board. So Mr. Ramakrishna, what is the kind of CapEx that we are planning for the new How much is the capacity right now we are looking to expand? What is the CapEx for the new expansion that you are looking at?

In fiber cement boards, the current capacity is about 3.6 lakhs. And we are coming up with new facility, which was also announced recently to the exchanges. So it is in Rajasthan. So that will be about 6,000 tonnes -- metric tonnes of capacity per month.

Sorry, how much in lakhs per year?

Yes, about 72,000 lakh tonnes per annum. It will be higher to the existing capacities.

Okay. And what would be the CapEx for this capacity?

Yes, we were estimating about INR 170 crores.

INR 170 crores. And what kind of revenue can we generate from this capacity when it is fully operational, 70,000, 80,000?

It will be about INR 170 crores to INR 200 crores of revenue.

How much?

INR 170 crores to INR 200 crores of revenue.

Okay. So the asset turn is going to like 1x -- around onetime asset turn. And what would be the margins on this business? Overall, our margins have been expanding in the last 2, 3 years. And our guidance is 10% to 12% EBITDA margin. So would it be the same EBITDA margin that we'll earn probably on this?

Yes. No, generally, it will be more than that. This business is giving more margins than the roofing sheets. So it will be upwards of 15%.

And what would be the working capital requirement for this kind of business to do INR 170 crores top line from this?

About INR 30 crores to INR 40 crores.

How much?

INR 30 crores to INR 40 crores.

Okay. Okay. So basically, total capital employed would be around INR 200 crores, and we are expecting...

capital employed would be around INR 200 crores and we are expecting...

[indiscernible]

No, no, no. When I say the INR 170 crores it includes working capital requirement.

It includes. Okay. So then it's very healthy, 15% return on capital employed that we are looking at, at reasonable margin. Okay. There are a few some questions like what is the -- how is the asbestos price compared to where it was a peak in 2021? Is asbestos price quite fluctuating? And is it currently high, low, where is it?

In 2021, the raw material cost was less and then even the pricing was affordable by the market That's why the revenue was more. Again, in last 2 years, the raw material input costs have gone up and the prices also have gone up. Now last year, '25-'26, the import fiber cost has come down compared to the previous years. Thereby, the prices are also reasonable and the customers can afford. And as we spoke earlier, conversely, the steel prices have gone up. So the demand for our product is also had increased because because of increase in the steel prices, the affordability of that particular segment has come down and our product demand has gone up.

Understood.