Expect margins to improve ahead: Force Motors

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In an interview with CNBC-TV18, Abhay Firodia, Chairman, Force Motors , spoke about the latest happenings in his company and sector.

Here is the verbatim transcript of his interview with CNBC-TV18's Reema Tendulkar and Latha Venkatesh. Also watch the accompanying video.

Q: When do you expect your Daimler engine powered sport utility vehicle (SUV) to hit the markets?

A: We expect our SUV to be out early next year. This is completely new platform that has been developed. Chassis and Driveline is completely new, it is world class. We expect the vehicle should be on the road early, in first quarter of 2011.

Q: What kind of a price tag will it sport? In which category you would see its main competition?

A: It is 10 lakh plus. It's going to be a vehicle, which is high performance vehicle and high quality vehicle. So, we are not aiming at the bottom of the pile, but we are trying to aim at the top of the pile.

Q: For this vehicle, in particular, what is it your production is currently at and what are you hoping to achieve in terms of sales?

A: Let us look at this way. We have as a company been very focused on the multi utility vehicles, which are much more functional. They were aimed at the rural utility market mainly as taxis or low income people carrier. With this new product, we shift our focus and we also introduce vehicles which will be in the premium sector. That is the whole logic behind this move.

Q: Give us a sense how sales has been? First quarter sales revenues were about Rs 315 crore, now that is better than any quarterly number we remember from Force Motors. Is this the kind of rate at which your revenues will grow or do you expect that you are going to churn out much better revenues, since you are going to come up with an altogether different segment?

A: In our existing product categories like small commercial vehicles, van category like the traveler, they are doing very well at the moment. I expect this year to grow over last year by a factor of nearly 80%. As a group, we hope to grow by 100% over last year including your truck joint venture and our component company.

The SUV is going to be an additional vertical for us. Our organic growth in the existing segment is strong at the moment.

Q: In FY11, you are expecting sales of around Rs 1,800 crore? Once your SUV is introduced in FY12, what is it that you are hoping to achieve?

A: We would like to gun for Rs 5,000 crore in 2011-2012 for the whole group including Force Motors, including MAN FORCE TRUCKS and our component company, that is what we are gunning for.

Q: You did have a bit of trouble on bottomline last year I guess a whole host of automobile companies. How is this year shaping up on the bottomline front? Will you do much better than what the Rs 60 crore you did last year that is FY10? What is the trajectory in terms of cash generation?

A: I think this current year is quite good. We should have good profitability this year. We had a couple of lean years even before last year, which was a bad year, but right now we are in good shape. I expect growth we are able to sweat our assets would leverage our presence in the market. We have excellent technologies, we have good products in every vertical that we are operating in and we are trying to leverage those.

I expect that as we go forward during the current year and we shall be able to generate considerable cash. I do not want to put a number to it.

Q: Give us an idea of the margin. When you look at the Rs 1,000 crore company generating Rs 60 crore profit like it was in FY10, the margins would be a bit of a concern for investors. That at a net level works out to 6% in terms of margins and at the operating level it is still in single digit. Would you move into double digits in terms of margins? If so, how much?

A: I would hope so. Certainly with the growth in the topline, the impact on the bottomline would be very favourable. We expect our margins should improve. I do not want to put a precise numbers to it, but a double digit is possible.

Q: For all your plans, any fund raising that the company needs?

A: We will have to invest over the next three years or so about a Rs 1000 crore. Quite a bit should come from internal accruals, but we shall be looking for funds. The details have to be worked out still because our growth plans are still under development. At the moment, we are focused on bringing SUV, we have other products up our sleeve which will come in the next year.