In an interview to CNBC-TV18 SDM Rao, chairman and MD, Samkrg Pistons & Rings spoke about the latest developments in the company. The company makes engineered pistons, rings and circlips for automobiles. Its major customers are Honda, TVS, Bajaj Auto and Royal Enfield.
Rao is bullish on the auto industry and expects the second quarter to be as strong as Q1FY15. Also, he expects the company to witness 20 percent compounded annual growth (CAGR) in the next three years.
He further adds that Samkrg Pistons & Rings is a cash rich company and has no long-term debt on its books.
Below is the transcript of SDM Rao's interview with CNBC-TV18's Latha Venkatesh & Sonia Shenoy.
Sonia: Could you tell us who are the key customers that you supply to and are things actually picking up on the ground?
A: Our main customers are Honda Motorcycles and Scooters Limited, Honda Power Products, TVS, Bajaj, Royal Enfield, Piaggio and Kirlosker.
Latha: You practically have the entire market or all the market leaders with you. The point is - are they demanding more. What is the percentage rate of growth of demand?
A: In their supplier meet they have declared that there will be a growth between 15-20 percent and on first quarter our results have jumped around 50 percent and whatever they have committed they have given that and mostly with all these growing companies which I narrated.
In Q2, already two months are over; I think we will have growth on the same line as that of first quarter.
Latha: You will be able to generate 45-50 percent for the full year as well?
A: That may not be possible because we are also linked up with exports as well as this is especially in Q3, there will be a fall in the growth because for exports products there is Christmas and things like that. As regard the domestic market, seasonal effect will be there and also our superstitious thinking of buying the product especially in south. However, we are likely to end up around 20 percent, the overall growth.
Sonia: Can you quantify that in terms of number for the revenues by the end of FY15, do you think you could do Rs 200 crore or will it be more than that?
A: Yes, it will be more than that. Our gross will be ending up at around Rs 260 crore that’s around 22 percent over the pervious year. Last year we have grown around 23 percent and the CAGR will be around 20 percent in these three years which we are anticipating.
Latha: In the next three years you expect to continue with that 20 percent plus growth?
A: Yes, we are planning for it.
Latha: What is the cash on your books? How much of capex will you do?
A: We are a cash rich company. Right now we have no long-term debt on our balance sheet and also our credit rating is quite favourable compared to lot of auto component manufacturers. Crisil has rated us. Our liquidity right now is quite high.
Sonia: Can you tell us what is the contribution of the exports to the overall business and how much do you think that contribution could go up to by the end of the year?
A: Our exports steadily increasing. Last year we had growth in exports around 18 percent. In our last year’s Rs 200 crore business; 28 percent is export and this year we are likely to improve.