Dear Shareholders,
The year under review has been marked as a transformative year for Responsive, led by a
shift from our focus to the launch and promotion of IMPACT, Luxury Vinyl Tile in both
Indian and Global market. This has been accomplished by strong research and development
along-with prudent and professional financial management.
Macro Environment
The Global economy viz a viz is on the path to stabilize but its momentum is uncertain
and is exposed to substantial risks of trade protectionist measures. Global liquidity
conditions have tightened and some large emerging markets and developing economies have
experienced financial stress. Further, Global growth is now projected to soften from 3.6%
in 2018 to 3.3% in 2019, before bouncing back to 3.6% in 2020.
India is projected to remain one of the fastest growing economies in the world as
consumption remains robust and investment growth continues. The economy has achieved
significant growth, due to on-going structural reforms and progressive policy measures
such as GST implementation, "Make in India", Digital India, Skill India,
simplified bankruptcy framework etc. Consequently, India's GDP growth is estimated to have
grown 6.8% in FY 2019 as compared to 6.7% in the previous year.
The Government's unwavering push for infrastructure projects in its second term, viz.,
railways, airports, metros, affordable housing, Housing for all, urbanization and smart
city mission are excellent stimulators for the economy's growth in the medium-term, which
will further give a lift to your company.
The recovery of the economy at a global scale has boosted the overall construction
industry. Specifically, the need to upgrade poor infrastructure, particularly in the
developing regions like Africa, Asia, Eastern Europe and Latin America has propelled the
growth of the overall flooring market. The global flooring market is anticipated to grow
at a CAGR of 7.8% from USD 275 billion in 2018 to USD 430 billion in 2024.
Among the flooring products, Luxury Vinyl Tiles (LVT) is gaining prominence across the
globe, due to its superior qualities such as click system which requires no adhesive to
stick it to the floor, easy and quick installation, low cost, enhanced durability,
excellent sound & water resistance and has potential to withstand heavy foot tra_c. As
per a study, Globally, LVT market contributes 53.0% of total vinyl flooring market by
sales volume.
In 2018, LVT represented second most popular type of vinyl flooring.
India, however, observed only a meager 11.2% market-share of LVT in 2018, and that
reflects the humongous growth opportunity in this segment. In India also, LVT products are
gaining popularity among several segments viz a viz. sports organizations, retail stores,
restaurants, hospitals, schools, airports, pharma to name a few.
We have launched a new and innovative product ‘IMPACT' under LVT category in FY
2019, giving us the first-mover advantage. The product is designed to provide an exact
look & feel of natural wood and stone flooring. It would not only replace the vinyl
flooring market but also disrupt traditional flooring market such as carpet tiles,
vitrified tiles, wooden flooring, and ceramic tiles on account of its superior qualities,
affordability and convenience. This product will pave our way directly to the end
consumers, as we are targeting to tap retail markets along with our established channels.
At present around 90% of our business is from Business to Business (B2B) segment via
distributors, with this new product gaining traction, the mix would also change in favour
of B2C segment. B2C business will help us to establish direct and strong linkage with
customers in addition to higher margins as compared to B2B business.
To foray into international markets in high growth LVT business, we have initiated the
set-up of a dedicated LVT manufacturing unit in UAE with the capacity of 86 million square
feet per annum. This would entail an investment of around USD 30 million, which is funded
by internal accruals. We expect the plant installation to be completed by Q3FY 2020 and
the cash inflows to be started from Q4FY 2020. The UAE's strategic location provides
competitive market advantage along with low-cost of production.
To expand our geographical distribution reach, we are setting up a global sales team
and have signed up with new international distributors to ramp up the volume of sales of
high-value margin product. We have built up a highly experienced and professional
management team, which plays a key role in helping build a robust leadership and
succession pipeline.
I am delighted to inform you that we have achieved significant growth in our profits in
FY 2019 as compared to previous year. During the year under review, we have been
successful in our strategy of transiting into high value-added margin products viz a viz
contract and semi-contract vinyl sheets from the low margin printed flooring business. In
line with our strategic move, the consolidated revenue for FY 2019 declined by 38.7% to
Rs. 7,750.38 million, the EBITDA grew by 7.5% to Rs. 1,398.64 million, with margin
expansion by around 775 bps to reach at 18.1% in FY 2019. The profit after tax increased
by threefold times to reach Rs. 294.59 million in FY 2019.
We take pride in informing you that, during the year under review, we continued our
policy of remaining long term debt free.
With a strong cash flow position, we have invested around USD 25 million in our UAE
subsidiary and duly repaid External Commercial Borrowings during the year, subsequent to
which the debt-to-equity ratio improved to 0.12 times in FY 2019.
Our Company is gearing up for strategic transformation. We are among the top four
producers of vinyl flooring globally. Our aggressive plan to foray into LVT flooring will
help us with first mover advantage in India. With a strong balance sheet position, zero
long term debt, a well-diversified value added product portfolio, international expansion,
and a high energy young and dynamic team, our Company is well positioned to achieve much
higher scale and profitability at the global level. Though continuous and united efforts,
it has set strong foundation which will shape the future, in years to come.
We are strongly committed to improve our products and services to meet the changing
environment, work with innovative zeal, enhance stakeholder value, and enrich our bonds
with employees and business partners.
I would like to take this opportunity to thank all our stakeholders, including our
vendors, customers, bankers, financial institutions, Central and State government bodies,
dealers, business associates and employees for their firm support and involvement.
We look forward to your continued support in our effort to achieve new milestone.
Sincerely,
Mr. Rishabh Agarwal
Non-Executive Chairman