Building Up!

CW traces the journey of Bengaluru-based Shankara Building Products from size zero to becoming a Rs 2,300-crore-plus company. Meet Shankara Building Products, a retailer of home improvement and building products that recently made headlines on launching an initial public offering (IPO) of Rs 345 crore. The company is led by Sukumar Srinivas, Managing Director, who has had an incredible journey of his own. Based in Ahmedabad, Srinivas recalls his father's dream of having his own venture - 'He wanted to start a small manufacturing business.' Having joined the business in the mid-1980s, Srinivas says, 'Those days, the environment was highly regulated; steel was a controlled item and we had to run to Delhi for licenses.' The business was sold in 1991, but this did not put an end to the vision of an aspiring entrepreneur. With his experience in trade and well-informed about steel tubes, Srinivas formed Shankara Building Products in 1995. Since then, there has been no looking back. A journey from zero! When Shankara Building Products was first established in 1995 as a steel tube company, the business was largely dominated by the traditional business community. The way of doing business was such that one had to go to the consumer directly. Srinivas developed a number of products with close associations with tube investments in Chennai. It offered a variety of steel tubes in the structural and automotive segments, which customers could engineer according to their requirement. Fondly recalling the first leap for the company, Srinivas says, 'With this, the company grew from zero to Rs 100 crore in 2001.' Further, in 2001, Shankara Building Products associated with Tata Steel for the Pipe business. Tata Steel was launching a product for structural tubes and wanted to take it up to a mass level. 'We appointed a lot of channel partners and developed our channel business, which went quite deep into the districts,' says Srinivas. With this, the Rs 100-crore business grew to around Rs 500 crore in 2006. In the next phase of the company's evolution, a decision was made to expand into retail, catering to fabricators. This included steel tubes, welding electrodes, paints, goggles, and all materials that fabricators would require. So, between 2006 and 2010, around 12 retail counters were established and the company grew to Rs 900-odd crore, and in FY2011, realising the need for some backward integration, Shankara Building Products acquired a steel tube mill and a cold roll factory in Bengaluru. Meanwhile, prior to this in 2011, the company also had a private equity investment of Rs 80 crore from Reliance Alternate Equity for a 35 per cent share. With the proceeds, another greenfield plan for steel tubes and value-added products was set up in Hyderabad. What's more, in 2013, the company acquired a roofing manufacturing company. And by 2014, having developed about 40 retail counters, the company started looking at other prospects in retail. 'We started looking at the entire building product portfolio how a building would look like if we deconstructed it,' shares Srinivas. With smart moves like these, the company has witnessed an almost 100 per cent plus growth between 2014 and the present day in its retail business, which comprises 40-44 per cent of the overall business. So, having established the legacy business between 1995 and 2001, the channel business and retail were initiated in 2006, which in the true sense took off after 2012. Srinivas reveals the business worth of each: 'The channel business in currently about 25 per cent of our topline; the enterprise business about 35 per cent; and the retail business is about 43 per cent.' Challenges overcome With 1,400 employees at present, the company is expecting a 15 per cent growth this year, closing at near Rs 2,300 crore in FY16-17. But the journey of building a first-generation business to its current stature has involved its share of challenges. The initial challenge was always that of money,' recalls Srinivas. I literally started with zero. Whatever profits made were ploughed back into the business. We started building up the business phase by phase. Further, in India, the regulatory environment has always been challenging. And when it comes to competition, this is a fiercely competitive business line. Another key issue was the unorganised market, which has been easing off a little over the years.' Amid all the challenges, the first significant development for the company happened around the year 2000 when several check-posts were computerised. And now, with recent announcements of demonetisation and 'hopefully' the GST, the organised sector has been gaining ground, which Srinivas perceives as beneficial for his company in the long run. However, whatever the challenge, for the company, it's all about moving forward. As Srinivas says, 'The building products industry is close to a potential of about Rs 1.8 lakh crore. My clear principle has been that, with this huge potential, when we are at Rs 2,000-crore odd, and assuming that the organised sector is 50 per cent of the whole, the growth opportunity is huge.' This policy has driven not just the leader but his entire team: Let's not look at the unorganised sector and get defeated! Manufacturing and reach For steel tubes and steel-related products, Shankara Building Products has manufacturing units in Bengaluru and Hyderabad. For roofing, it has units in Coimbatore and Chennai in Tamil Nadu, Bengaluru and Hubli in Karnataka, Vijayawada in Andhra Pradesh, and Pune in Maharashtra. And as for retail, it is largely present in Southern India, with a presence also in Maharashtra, Gujarat, Odisha and Madhya Pradesh. Going forward, the company plans to add about 15 to 20 retail stores every year and better its presence in the south further, adding more product categories in its stores. Also, next in the line of focus is the western region. The big IPO achievement The recent IPO has been a milestone and certainly a big high for the company. As Srinivas informs us, 'We raised about Rs 345 crore through the IPO, of which Rs 45 crore has come into the company and the bulk of the balance is to give an exit to our private equity partner, Fairwinds Trustees Services earlier known as Reliance Alternative Investment Services, who entered in 2011. We have given them a large exit, after which, they will be holding about 7 per cent in the company and the promoters about 60 per cent; the balance will be with the market.' When it comes to the reception received from the market and the quality investors that have come in, Srinivas feels truly rewarded. Indeed, this is one more significant milestone in the company's journey to success. 'Our aim is to be a complete home building materials and improvement supplier,' says Srinivas. That's pan India, of course! - SHRIYAL SETHUMADHAVAN Share your views at feedback@ConstructionWorld.in