The plans are certainly very big. From 75 million cables in FY10, they are already talking of 150 mn cables coming soon, once 110 mn cables capacity is onstream by Sep 2011.
This company has talked big before. This time round the visibility with Marquee client base is much improved. Is it gunning fro too much? doesn’t seem so looking at its debt management.
ET Now,Mar 25, 2011, 02.26pm IST
You have a relatively dominant share in the automotive cable business and looking at the sort of growth that we are seeing in that sector would it be fair to assume that growth for you as a company would be extremely strong going ahead the next couple of years on a CAGR basis?
Yes, we had an excellent growth this year against the industry growth of about 26%-28% Suprajit has grown at about 45%-46%. Going forward with the Indian GDP growth expected to be in excess of 8% I think automotive industry will continue to clock strong and robust performance.
Our growth is not only linked with automotive growth but also with some of the new niche segments that we are looking at and in view of that we expect to grow even faster than the automotive industry as we go forward for the next couple of years.
So what is the growth rate that you are pegging for yourself because you also have capacity expansion plans, put all of this into perspective over the next 3 years what is the quantum of growth that you are expecting?
We had announced last year that we are growing our capacity of cable manufacturing from 75 million to 110 million which will be completed by September this year. Right now we are working our roadmap for the next couple of years and based on the initial projections that we have, we expect a strong growth and to meet this strong growth.
We are talking about expanding our capacity from the current 110 million to about 150 million cables that means from last year’s capacity of 75 million in another about 15 to 18 months time we are talking about doubling our capacity that would give an idea as to how we expect the growth to pan out. This is not only from the automotive space but we are talking about the new spaces that we are likely to focus on in the next couple of years.
So a 50% CAGR growth for the next 3 years is in the offing you think?
Well that is an ambitious target but as I said we grow at about 45% this year and if we assume that the next year automotive is growing at about 15% to 20% I do not see why Suprajit cannot grow at let say 25% to 30% and that will get again in the same phase for the following year. But that all depends up on how the industry grows but we are confident that we will beat the industry growth by about 10%.
A couple of updates Mr. Rai, one is that if I look at your list of vendors, you have almost all the leading automakers in the country aside of Maruti Suzuki, would we seeMaruti Suzukigetting added to the list of clients soon or you are not pursuing that?
Let me clarify, Maruti Suzuki is a customer of ours. We directly do not supply to them but as tier 1 and tier 2 we supply quite a significant quantity of cables to Maruti Suzuki. Let me also put a larger perspective, Suzuki Europe,BMW, Volkswagen,General Motorstwo-fold not only to India but also in the global markets.
So our customer list is fairly exhaustive and all encompassing, yes directly to Maruti we do not supply but there is a significant supply to Maruti through tier 1 vendor and we expect that Maruti will also be a direct customer at some time in the future.
From Maruti Suzuki toTata Motorsyou were looking at setting a unit in Sanand but the lacklustre volumes of Nano have resulted in some dilemma, volumes of Nano are now stabilising would you see putting up that facility?
We already have land in Sanand if I get your question right and this Tata Nano volumes have picked up quite nicely in the last couple of months. Although it went through some amount of hiccups as you all know. But I think Tata Nano will be a great success and that is why we are very clear that we will go to Sanand.
Right now we are supplying from our Vapi plant which is just about 250 km from the Tata Nano plant but once volumes stabilise we are starting our new plant there. At the moment we have got 2-3 other plants which are under advance stage of completion ands Sanand plant will be the next on the list of our priorities.
Last year you did a profit after tax of 22 odd crores, you were expanding capacity, you are also venturing into newer areas of work. Keeping all of this in mind you think that you would do may be a PAT of what around 35-40 crore in the next year by which I am assuming that you will probably touch around the PAT growth of 28 to 30 crore in the current financial year, is this a realistic possibility?
We do not really make a forward looking statement. It will suffice to say that our margins in the industry is one of the best. For example our EBITDA margin at about 20% on our net sales is best in the industry. Our profit before tax at about 13%-14% is again one of the best in the industry.
We continue to be one of the top performing auto components in terms of financial parameters. Our ROC is about 35%. Very few auto component industries have achieved this kind of number. Projecting the number for the next few years it is like crystal ball gazing. It is difficult to say. It depends how the automotive industry grows so I still stick to the point that we will out beat the industry growth and continue to perform in the top lets say 5% percentile auto component companies in this country.
For all of these expansion plans or the other avenues that you have would you need to raise any equity funds, sure you will need debt from time to time but would you have any equity fundraising plans over the next 3 to 6 months?
We have very strong cash flows, we have excellent bankers. In terms of equity dilution for our capex for domestic growth we do not see any requirement of additional equity capital. We have strong bankers, we got strong cash flows and we would be able to manage it. If on the other hand if some any interesting acquisition plans comes up that is a different story but otherwise for our domestic growth plans that I mentioned we have absolutely no plans of equity dilution.
Are you actively looking for acquisitions?
Well we have been looking for a while but we have not got the right fit. We continue to look at the opportunities both domestically and overseas which will fit our plans, which will fit our vision to emerge as one of the largest cable manufacturers or one of these products that we are in discussion. So if you get the right fit, yes. Did we look at opportunities, yes. Do we have anything right fit on the table, no but we will continue to look.