Moneycontrol
Feb 04, 2016 03:41 PM IST | Source: CNBC-TV18

Focus to be on high technology products: Sundram Fasteners

Speaking to CNBC-TV18, Suresh Krishna, CMD of the company says high technology products aided margins growth in Q3.

Sundram Fasteners reported stable earnings with third quarter net profit at Rs 41.7 crore as against Rs 30 crore in the same period a year ago. The company’s total income came in at Rs 614 crore in the quarter ended December 31 and operational efficiency (EBITDA) improved to Rs 94.7 crore.

Speaking to CNBC-TV18, Suresh Krishna, CMD of the company says high technology products aided margins growth in Q3. The main focus was on improving the bottomline than topline, he adds.

In the third quarter, dips were seen in commercial vehicle and tractors segment whereas cars and two-wheelers saw improvement, he says adding that the export business has grown steadily in the last quarter.

New prosucts, transmission will aid exports growth in coming 18-20 months, he says adding that the focus will be on high technology products.

Below is the verbatim transcript of Suresh Krishna’s interview with Reema Tendulkar & Nigel D'Souza on CNBC-TV18.

Reema: It is a strong quarter but first let me just come to your topline. Revenue growth at only 4.3 percent to be precise, could you break that up in terms of volumes and pricing and do you expect revenues to pick up in the coming quarters and if yes, what will be your guidance for FY17?

A: As far as the topline growth is concerned, it depends on the kind of mix that we get from the customers. I would not put too much emphasis on the topline. If you look at the bottomline, our profitability has gone up from Rs 77 crore to Rs 95 crore. As far as net profit is concerned, it has gone up from Rs 30 crore to Rs 41.75 crore.

In Sundram Fasteners, we always pay much more focus on the bottomline rather than on the topline because the mix varies depending on the export content and the domestic content between the cars and the two-wheelers. One of the things that have happened in India in the last year, has been that there has been very large dip in the commercial vehicles market. That has pulled down the topline because they are always high revenue earnings numbers. However, that has no affect on the bottomline.

Nigel: Just going through your numbers, your domestic business, you have indicated in your press release, has grown by close to around 13 percent. That indicates that your export business has come down by close to around 7-8 percent. Are we likely to see the same going ahead?

A: Export business has been fairly steady. It has not grown as much as we thought. The diesel engine market in America has slowed down a little bit and Europe has not performed very well.

Having said that, we have now entered into new lines of business as far as exports are concerned. A lot of the transmission parts have come into stream since two years and that is now going to pull up the numbers quite a bit.

We are also introducing new products for exports, which should take effect from anywhere between 12 months and 18 months. On the ongoing basis, the export figure should look much better.

Reema: Could you guide us for on your margins because your margins have improved? Do you believe it is a sustainable at 15.4 percent that you have seen this quarter or is the best of the margin improvement on account of the decline in the raw material price behind us?

A: Raw material prices have played a small part but the mix of the products that Sundram Fasteners have done, both in India as well as export, has contributed a lot more. The demand for more sophisticated engineering parts, highly engineered parts and high technology parts has increased quite a bit where the profit margins are definitely better. That has contributed quite a bit to the increase in profit margin.

On an ongoing basis, I personally feel that Sundram Fasteners will focus more and more on higher technology products and may be assemblies also. It should be sustainable, I don’t think it is going to dip too much.

(Copy edited by Rishma Kapur, interview transcribed by Vrushali Sawant)

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