In an interview to CNBC-TV18 Rajesh Aggarwal, chief managing director, Insecticides India hinted at an average 5% price hike.
"Internationally, there is an acute tightness of raw materials and the currency situation is not improving a lot. So, there is pressure over the prices of some of our intermediates," he added.
According to him, the price hike is unlikely to impact demand. Meanwhile, the company aims to grow at 30% in FY14.
Below is the edited transcript of Aggarwal's interview to CNBC-TV18.
Q: You said you may be able to increase product prices soon. Can you take us through how you see the demand panning out?
A: Internationally, there is an acute tightness of raw materials and the currency situation is not improving a lot. So, there is pressure over the prices of some of our intermediates, hence we will be forced to increase the prices of our products.
So, I see an increase of roughly about 5 percent in the beginning of the season. If it goes well and the monsoon is good, then I believe there is a further chance of the prices going up during the season.
Q: Do you think you will not be met with demand resistance?
A: I see a good increase in the demand because since the last 18 months, the season is very tricky because rainfall was not quite good. And this year, the expectation is good, so we are bullish about this year.
Q: You don't see a fall in volume because of price rises?
A: No, not at all because I believe the cost of the agrochemicals to the farmer has not gone up because the domestic industry has worked very well. We are successful in keeping the cost of insecticides almost at the same level as it was 10 years back.
Q: What about the money that you were planning to raise? You wanted to raise about Rs 100 crore through share sales. Exactly what are your capex plans and how would you plan to raise the money?
A: The company is doing fine and is in a healthy mode. At the moment, we have postponed our expansion plans to FY15 so we don't see an immediate requirement of funds. However, we are open to ideas because I see the Insecticides brand growing in a big way in the market. We would like to take the top slot in the agro-chemical segments.
Yes, we are looking for potential partners who can join us strategically or who can help us in achieving this goal faster. We are open for ideas, but I believe FY14 is going to be very crucial for us because we are planning a 30 percent plus type of growth during this year.
Since we have built up the facilities we need to exploit during this season, I am confident that the first two quarters this year are going to show a big jump. That would be the right time for us to plan for this type of investments. We would still like to wait for sometime for this.
Q: In the last numbers you posted, your total income was up 12 percent and profit was actually down a little bit from the year ago level. Are you confident that Q4 will be different?
A: I won’t say that Q4 will be substantially different because this year there has been a lot of pressure as we have invested a lot on the expansion. So, at one place, there is an increase in the debt which has increased the interest cost, then there’s also the depreciation cost that has gone up because of the new plant setting up. However, I believe that these new plants will be showing results from the next quarter itself. We have grown in terms of EBITDA margin in Q3 also. And we should post a similar growth in Q4 also. In FY14, by the second quarter itself, we will see a major difference because the revenues of the company will go up. We are introducing some new products and doing more backward integration and we feel it will show by the end of Q2 itself.
Q: You have guided for a Rs 650 crore revenue in the current year from Rs 520 crore last year. Do you stick by it and what do you expect will be the FY14 growth when your capex will be fully in place?
A: Yes, we stick by the numbers. There maybe 2-3 percent plus or minus gap. It depends on how we are able to place the material in the end of the year. For next year FY14, we are hoping a growth of about 30 percent plus. So, the numbers would be roughly between Rs 800-850 crore.