After posting good second quarter earnings, the stock price of Sumeet Industries was up 4 percent and was faring at Rs 37.15 per share on intraday on Tuesday.
The company's revenue went up 20.4 percent to Rs 347.17 crore year-on-year (YoY) and profit was up 228 percent to Rs 15.62 crore.
In an interview with CNBC-TV18, Shankar Lal Somani, Chairman of Sumeet Industries said that the company's profits can go up to Rs 100 crore over the next two years.
He also said that promoters who had sold around 5 percent stake earlier this year are expected to buy that back before December.
Below is the transcript of Shankar Lal Somani’s interview to Nigel D’souza and Reema Tendulkar on CNBC-TV18.
Nigel: Topline growth of around 20 percent, explain that to us. Volume spiking up or is it pricing?
A: Results are good and as per our expectations because we are working daily on it. So, the profit is increasing.
Nigel: We were trying to understand your revenue. That has come up by 20 percent. It has grown by 20 percent. So, is pricing stable? Have volumes gone higher? You are operating at a 120 percent. So, have volumes spiked up? Could you explain that to us?
A: Volume is not increasing very fast because we have not added any new capacity. We are improving our production capacity as it is. Our plant is running at 120 percent. We are increasing our first quality, we are increasing our production, we are increasing value added products. So, the profit is increasing.
Reema: The promoters have been selling in the open market. In March, the promoter stake was 45 percent. As of June, 2016 it has come down to 40.2 percent. Could you tell us some more on that?
A: In April month, our some group members sold stake, but now they sold stake at Rs 16 and Rs 17. They are feeling we had done wrong. So, any time they can buy back. Again they will buy back because prospective is very good. So, I feel they will buy back again 5 percent reverse.
Nigel: In this fiscal year itself?
A: Yes, before December, they will buy back.
Reema: Could you tell us a little bit more about the prospects. What would be your FY17 revenue outlook as well as on the profitability?
A: Standalone profit last year was Rs 28 crore and in this half year, this is Rs 30 crore. So, story is very clear that in half year we earned profit equal to last year. So, this year, profit must be Rs 70 crore minimum against Rs 28 crore last year and I will expect that in the next one or two years, this can touch up to Rs 100 crore because we are continuously working on improvement of the quality and quantity.
Nigel: Are you planning on adding capacity? Now you are working at around 120 percent.
A: Yes, we are planning to add some capacity, but for that, we have to plan for funds also.
Nigel: How will you fund that because your debt is already close to Rs 150 crore or more than that? Will you take more debt?
A: Rs 150 crore debt is very less. In the same size company, debt is approximately Rs 250-300 crore. Our debts are very less because we had not expanded big capacity in the last 3-4 years.
Nigel: What is your total debt currently?
A: Total debt is only Rs 150 crore and same size company’s debt is Rs 250-300 crore. So, our debt is very less because we had not expanded in the last 3-4 years. After 2012, we had not expanded capacity. So, it is due now. So, we will manage funds and in the next 1-2 years, we will expand the capacity by double.