>HYDERABAD INDUSTRIES LIMITED (HDFC SECURITIES)

Company Background: Hyderabad Industries Limited (HIL) is a flagship company of the C.K.Birla group of companies, incorporated on 17 June 1946. HIL's key product range include Fibre Cement Roofing Sheets sold under the brand name CHARMINAR, Autoclaved Aerated Concrete Blocks
and Panels called AEROCON, and Calcium Silicate Insulation Product (thermal insulation) called HYSIL. The company is one of the leading manufacturers of Fibre Cement Sheets in India with a market share of about 20.5%. After starting out as a roofing manufacturing company, HIL has evolved into a multi product, green building products organization. HIL owns a 15% stake in a
property at New Delhi, which cost the company Rs. 8.46 cr and this property, is currently given on lease.

Building products division:

This segment consists of Fibre Cement Corrugated Sheets, Flat Products, Autoclaved Aerated Concrete Blocks (Light Weight Bricks)
and Aerocon Panels.

(1) Fiber Cement Roofing Sheets
Fibre Cement Sheet is the main product accounting for about 85% of company's sales. In FY10, HIL set up a new production line at Vijayawada with a capacity of 90,000 MT per annum taking the total capacity to 8,54,500 MT per annum. This capacity came on stream in July 2009. HIL has a 20.5% market share in this segment, followed by players like Visaka Industries (15% market share), Ramco Industries (13%) and Everest Industries (13%). Other players also include Swastik (9%), Utkal (9%) and Sahyadri Industries (5%). Key raw material is Chrysotile (Asbestos Fibre), which constitutes 45% to 50% of the total raw material costs and is 100% imported, followed by OPC (Ordinary Portland Cement), flyash and wood pulp. Overall, to make 100 kgs of fiber cement roofing sheet, 80 kgs of input are required (43 kg of cement, 8 kg of asbestos fibre, 28 kg of flyash and the balance is dry waste, pulp etc). The remaining is water weight gained during the manufacturing process.

The roofing industry is largely a commoditized business. While this product started out as an industrial product, the rapid spread of players, increase in production and increase in the number of access points has made this into a retail product. There is limited brand value or premium in the roofing business. HIL is a leader in this segment and thus its brand Charminar commands a band premium of between 2-4%. 80% of the sales come from rural markets with the balance 20% coming from the industrial and other segments (warehouses, poultry, urban slums etc).

(2) Aerocon Panels (Green product)
HIL also manufactures various boards and panels that find application in housing, partitioning, interiors etc. HIL also supplies these panels to the army. HIL is one the largest players in this segment and has developed a patented process to manufacture the same. The boards and panels contribute about 3% to HIL’s topline. Any product that replaces wood (in this case plywood) or saves on the consumption of energy (energy efficient) is termed as a ‘Green product.’ Thus, Aerocon panels fall into this category. HIL has a capacity to produce 4,60,000 numbers of these panels. The company is currently running at about 70% capacity utilization. The plants are
located at Thimmapur (AP) and Faridabad (Haryana). The raw materials for this product includes flat cement sheets, fillers etc. In terms of competitors, Everest Industries Ltd is also present in the boards and panels segment. However, HIL is a market leader.

While panels contribute a negligible amount to topline, HIL is quite excited about the prospects of the use of panels in the low cost housing market. HIL is working on project with the AP Government to make a house out of these panels that could cost less than Rs. 1 lakh. HIL is currently working on a 40-house project and any breakthrough on this front could be beneficial for the company. Currently, HIL is running 2 shifts and thus can increase capacity from the current 4,60,000 numbers by 33% by running a third shift, if need be.

To read the full report: HIL