In an interview to CNBC-TV18, CL Rathi, MD of Advanced Enzyme Technologies spoke about the results and his outlook for the company.
Below is the verbatim transcript of CL Rathi’s interview to Sumaira Abidi & Prashant Nair.
Sumaira: I want to begin by asking you to make us understand what has gone so wrong this quarter. Was there any extraordinary this time around, any cancellation of contracts, recalls? What is the reason for this poor showing?
A: In our business there is no cancellation of any contract, but one of our major customer who accounted for almost 24 percent of our total sale last year, they wanted to jump the territory in many ways and they were expecting to grow almost 80 percent in the current financial year. However, they misjudged their whole cancellation and they overbought the goods in the first six months. So in first six months, our results were extraordinarily high which we never experienced earlier in our entire history.
Hence, they realised after buying. In the first six months they bought Rs 65 crore worth of goods against last whole year they bought Rs 72 crore worth of goods and thereafter, they realised that they have surplus inventory and their sales are not growing as planned. So, last quarter they readjusted the inventory and placed order in December again for shipment from January. So, now we are back supplying them. But they readjusted their inventory.
However, that was the only change that happened with them rather than with us. So, that being the case, the results look a little weaker, that is all. But if you compare nine month to nine month, results are very positive, very wonderful results.
Prashant: Would that explain the very sharp fall in margins as well?
A: Our technology company, as you know, our material cost is very insignificant and that too the product line, even if you look at even nine month basis, our earnings before interest, taxes, depreciation and amortisation (EBITDA) margins are 48.1 percent and that alone communicates. Our profit after tax (PAT) margins are now 28.9 percent, so that alone communicates the way our cost structure is. So, if we do not get sale in one particular quarter because we are a business to business (B2B) company then you will see the numbers because you do only calculations based on topline and you determine it by all the expenses based on topline. So the number will look a little lopsided, but when you look at nine month wise, then they will give you a proper projection, proper understanding of the business.
Prashant: You are saying that it is a B2B business, any delay in contract might lead to a postponement of revenues - that is essentially what you are saying. You are fairly newly listed company, what would you like to tell your investors?
A: If you recall, if you look at from the first interview which I gave you, I communicated that we are very cost conscious company, research driven company and a consistent performer. That means, when you look at on year-on-year basis, our growth rate of profit will be between 25 and 30 percent which itself is very significant in the current scenario. The way we are growing in the international markets; it is not an easy business. It is a technology driven business.
So, the growth rate is very steady and that is what even you look at when you compare the nine-month period. Our growth in profit is 35.1 percent which is what we promised, above 25 percent. So, this is where you will be heading at and that alone, when you look at, you try and do a compounded annual growth rate (CAGR) of 30 percent or 25 percent, you will see a substantial growth in terms of valuation in the company.
So, people should look at more from long-term perspective because we are a technology company with a huge growth potential and we are now organising ourselves to take the advantage. We are now entering the largest enzyme section called detergent enzyme, we are going to other global markets and animal feed enzyme and human nutrition has been our forte since inception. So, we are also growing that very well now. Our growth is already more than 16 percent in the last nine months.