Fineotex Chemical works towards launching unique value-added products which ensures it enjoys strong margins, said Sanjay Tibrewala, the company’s managing director in an interview to CNBC-TV18 on the sidelines of Valorem Advisors analyst conference.
Fineotex is one of the leading manufacturers of chemicals for textiles, construction, water-treatment, fertiliser, leather and paint industry. It also produces adhesives used in several industries like wood, paper, etc.
Tibrewala is confident the company will hold on to the 20-21 percent operating margin seen in the first nine months of FY16 despite rising crude prices. The company has 400+ products and not all of them are crude-dependent, he said, adding although some products will be hit the overall impact will be minimal.
He said Fineotex works with a 30 percent compounded annual growth rate target for revenues and earnings and the company would focus on achieving it even in the coming years.
The capacity utilisation currently is around 60-65 percent and there are plans to put up a new capacity soon, which is likely to be operational by mid-2018, he said.
Below is the verbatim transcript of Sanjay Tibrewala’s interview with Reema Tendulkar & Nigel D'Souza on CNBC-TV18.
Nigel: The best part about your business in the first nine months of this year has to be your margins. You operating profit is up by more than 80 percent in the first nine months. You have told your investors in past that may be value added products is the reason why we have seen that margin expansion. However, now we have crude prices as well that are moving higher. Are you confident of holding margins at around this 20-21 percent approximately?
A: We are almost sure that we will be holding these kinds of margins; it is because of the needs of the textile industry the kinds of products we are launching is something which is quite unique. We are looking at saving energy, saving time, saving temperature, saving water and other things. So, these kinds of products are quite required in industry and more or less we are geared up for keeping that kind of profitability.
Nigel: Crude prices have moved up, what kind of impact it has in your business? Will it hit your margins?
A: Really not because like we have almost 400 product range and we are depending on so many different raw materials. Most of them are not exactly crude related, so that should not affect our profitability. However, to some extent it may affect few of our products but that will not hamper the overall growth expectations and the deliveries.
Reema: What is the cash on the company’s books?
A: It is around Rs 35 crore approximately.
Reema: Could you give us an update on what the company’s revenues will look like, the kind of revenue growth you will enjoy by the end of FY16 as well as for FY17?
A: Generally our thumb rule is to perform at least 30 percent compound annual growth rate (CAGR) bases. So, we will be at least delivering the ones which we are targeting; at least 30 percent should be the targets even in the profitability and even in the topline. So, comfortably we will be touching that numbers.
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