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DSIJ Interview with Rishabh Agarwal, MD & CFO, Responsive Industries


Rishabh Agarwal 
MD & CFO, Responsive Industries 

"With our enhanced business model, we expect significant improvement in earnings"

As a CFO of Responsive Industries, what are your top three strategic priorities? 

As a CFO, my top three strategic priorities are transparency, optimal use of free cash flow and communicating with shareholders at large. Out of these three, optimal use of free cash flow is the top priority as it is the only matter which can make or break any organisation. We have enhanced our business model recently and are expecting a significant improvement in earnings going ahead. So it's very important for us to effectively use the funds for future growth for delivering return to shareholders. The third priority for me is to communicate with shareholders on how the company is growing and other aspects of the business. We have taken conscious decision of discontinuing printed flooring division which is a low margin business in our portfolio of products. This has really freed up lots of bandwidth and cash flows to concentrate on our company's growth. We are coming out with advanced and high value-added products like Luxury Vinyl Tile and R Leather in synthetic leather products 

Can you tell us about your expansion plan to serve the US and European market? 

How will you fund this expansion? We are setting up a Luxury Vinyl Tile (LVT) plant in UAE. LVT is the fastest growing segment in flooring space. Its market size is about $7 billion globally with USA and Europe being the key end markets. We are exploring UAE to set up our plant which would serve these developed markets. 

What is your view on the domestic market for PVC products that your company offers?

India is an emerging market for vinyl flooring and it constitutes only 2-3% of global demand. However, it is highly fragmented. The main demand drivers for contract sheet vinyl are healthcare, education, and sports infrastructure, which are rapidly adopting this as de-facto solution. In the healthcare space, we are seeing large-scale adoption of vinyl flooring in both private sector and public sector hospitals. In the education sector too, as there is a huge demand for school infrastructure in India, we are seeing this as a big opportunity in public sector schools. We also see a huge demand for vinyl flooring in transportation segment as the Indian railways and large number of bus body builders are in urgent need of expansion and modernisation. Thus, looking at the demand potential from these sectors, we are very positive on the domestic market for PVC products. We are currently present in 35 cities across the country and have the largest network of over 75 active distributors, which would help us to capitalise on this huge opportunity. 

What kind of topline and bottomline growth are you targeting for FY19E? 

We have enhanced our business model by discontinuing low margin segment of economical vinyl flooring post Q1FY18 and increased the share of high margin value-added products. We are expecting good growth rates in our new products like Luxury Vinyl Tiles and R Leather, which is very close to real leather. 

We would see significant improvement in EBIDA from the current 12% to 24% in the next one year. At PAT level also, we are going to report good numbers, as our depreciation is coming down and also our interest cost from long term borrowings would be zero after September 2108. 

Your current debt-to-equity ratio is at a comfortable level. What is your target on the same in foreseeable years? 

We will be long term debt-free company by September 2108 and from there onwards, we will be having small amount of working capital to the tune of Rs.160 crore and the utilisation of these limits would be in the range of Rs.90 to Rs.100 crore at any given point of time. Considering the increase in profitability of the company on account of increased focus on introducing high margin high value-added products, the working capital requirement also would be marginal.

"We will be long term debt-free company by September 2108 and from there onwards, we will be having small amount of working capital to the tune of Rs.160 crore."

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