The fibre sheet cement industry is growing at 18-20% per annum on strong demand from industrial capacity expansion and the government’s thrust on rural housing. Taking into consideration the present economic scenario, the fibre cement sheet industry is likely to continue to grow for the next few years at a satisfactory double-digit rate. Against this backdrop, market leader Hyderabad Industries (HIL) continues to offer attractive investment opportunity.HIL operated in two segments: building products and heavy engineering. However, the company sold and transferred its heavy engineering (HE) division to Titagarh Wagons on 8 July 2005, and disposed of fixed assets at a loss of Rs 0.11 crore, which has already been provided. In the half year ended September 2005, net sales increased by 9% to Rs 219.33 crore driven by a 12% increase to Rs 204.18 crore in the revenue of the building products division. The operating profit increased by 80%, while the operating profit margin increased by 790 basis points to 20% on sale of the heavy engineering division. The other income was down 2% to Rs 1.75 crore and interest cost reduced by 61% to Rs 2.19 crore. After providing for depreciation (down 3% to Rs 4.11 crore), the profit before tax (PBT) before extraordinary items (EO) increased by 141% to Rs 39.21 crore. The entire amount on VRS (Rs 2.61 crore) was charged in the first quarter ended June 2005. Even then, PBT after EO was up 125% to Rs 36.60 crore. Total tax grew by a whopping 144% to Rs 15.15 crore. The profit after tax increased by 122% to Rs 22.33 crore.Thus, due to the impressive performance by the building products segment, HIL was able to raise its overall revenue and profit even after selling its heavy engineering division. According to the Union budget 2005-06, the government proposes to build 14,54,428 lakh rural houses in addition to a credit-cum-subsidiary scheme under the Indira Awas Yojana (IAY), for which the allocation has been increased from Rs 2500 crore in FY2005 to Rs 2750 crore in FY2006. This will result in an additional 15 lakh units. In addition to this, the budget also provides for setting up rural building centres and higher equity support to agencies like Hudco to improve the outreach of housing finance in rural areas. Higher spend for rural housing boosts demand for fibre cement products.In the industrial segment (which forms about 30% of the total demand), asbestos sheets are preferred over galvanised steel sheets due to better heat resistance, anti-rust qualities and lower prices. Corrugated roofing sheet are extensively used for roofing of industrial sheds, warehouses, poultry farms, shops. The expansion of industrial capacities and the overall buoyant economic scenario are boosting demand from this segment.HIL is the market leader in the Rs 1400-crore asbestos-based roofing industry, with a market share of 27% and the highest capacity of 4,72,000 tonnes. It has a strong marketing network across the country. Charminar, the company's well-known brand since the past 50 years in the building products market, particularly in fibre cement sheets, has established a credible record. HIL is introducing value- added products under Charminar to leverage the brand value. To be able to participate in the projected market growth and maintain its market share, HIL is now putting up new greenfield capacities. The first phase of this new plant will have a capacity of 1,20,000 tonnes per annum and will be operational in January 2006. Thus, the fourth quarter of the current year and the whole of FY 2007 will see the benefit from this capacity expansion. Moreover, as part of the inorganic growth, it recently acquired Malabar Building Products, which will be merged with the company.The benefits of the expanded capacities and acquisition of MBPL in a positive industry scenario augur well for future growth. The company’s book value will cross Rs 160 by end of FY2006, making it ripe for a bonus