Expect margins to improve ahead: Sudar Garments

Below is the edited transcript of his interview with CNBC-TV18's Reema Tendulkar and Ekta Batra. Also watch the accompanying video.

Q: You have a lot of capex that is planned by March 2012 itself. Can you just take us through what these capex plans are? How exactly are you funding it?

A: Sudar Garments has been doing a steady progress over a period of time. This time we have given more thrust on the exports plans which are there as well as more thrust on marketing.

We have our own in-house brand. We are also talking to two-three smaller brands in various regional cities and Tier-II cities. So, this will give an exposure to our brand to have a presence in the market. Let us see how things work out.

Next few months are going to be very exciting, very interesting. On the export front, we feel that currently and in future the uniform orders, which we are executing for UAE and East African markets, should give us a very good leverage in the market and we should come out very well.

Q: There are reports which suggest that the government may go ahead with 100% in single brand retail. If it does go through, is there any benefit for Sudar Garments?

A: Yes, we’ll benefit a lot. One, we have a huge capacity for manufacturing. We are into all three garments, apparels— men, women and children. We are already manufacturing lot of international brands. Talks are on where by we feel that we can gain a lot of exposure because that is the reason we are going in for these showrooms and other things in the regional and Tier-II cities. So, FDI is going to be beneficial for us.

Q: What sort of negotiations are you currently having with these MNCs or these companies that you are talking about? In what form will you like to take that relationship forward?

A: All these MNCs, which are now coming, are looking out for manufacturers who are giving quality garments, manufacturers who have got big capacities. It will definitely help us because we have all the infrastructure in place. That will in turn help them to penetrate into major Indian markets.

Q: Would you be open to selling or divesting some of the stake in the infrastructure in order for that MNC or any other retailer to come in via the single brand format?

A: Not exactly, I feel it's going to be a fusion. As it is, we are already into the market and the penetration is quite high. So, these MNCs will create a value addition to our top-line and we will be able to really execute lot of better and bigger things.

Q: It's your top-line which actually showed a stupendous amount of growth in Q2 as well as for FY11. But the pressure really came on your margins. That have slipped quite considerably even for the previous quarter. What pressures are you facing on the margin front? What is your outlook for the remaining part of fiscal then?

A: If you have seen the overall economy, a lot of things were happening on the past front. They were increasing prices of the raw material. But then we could try to balance everything. In the next quarter, probably you will see better result. Things have been taken care of. That was the only problem in the last fiscal because of the high prices of various fabric and other accessories. So that should not be an issue now.

Q: From the 10.3% operating margins that you did in Q2, if there is an improvement in Q4, that’s in the January to March quarter, how much of an improvement are we looking at?

A: We are looking at an improvement of almost around 10-12%.