Expecting only 35% revenue growth in FY12: V Guard Ind

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Expecting only 35% revenue growth in FY12: V Guard Ind

Mithun Chittilappilly, ED, V Guard Industries, in an interview on CNBC-TV18 spoke about the latest happenings in his company and sector.

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Mithun Chittilappilly, ED, V Guard Industries , in an interview on CNBC-TV18 spoke about the latest happenings in his company and sector.

Below is a verbatim transcript of his interview with CNBC-TV18's Ekta Batra and Reema Tendulkar. For complete details watch the accompanying video.

Q: In the first quarter, your margins could be a little subdued because you have increased your advertising spend. Is that true and will the increase in advertising spends hurt your margins for the entire year?

A: Yes. Typically we spend about 5% of our revenues on advertisement but these spends do come as a lump-sum depending upon something like an IPL etc. So in the first quarter we had tied up with IPL and committed a huge amount for that spend. However, we won't see this spend happening every quarter.

So in the first quarter we are seeing a bit of a margin deduction due to an increase in advertisement spend. But on a full year basis, our ad spend will be limited to Rs 35 crore.

Q: You are venturing into the north Indian market aggressively because the south Indian market is saturated. Are you introducing new products in south India to basically counter act that saturation?

A: In many products we are experiencing near saturation levels. There are three new products we launched in the last two years. These three products have been doing extremely well in the south.

Although our growth for already matured products in south may be limited we will be getting some good growth from these products. We have started this about two years back to counter this effect.

Q: Last year your revenues grew to about 60%. Will you all manage to see similar growth in FY12?

A: No, we won't be seeing such a high growth this year. We are expecting about 35% growth in revenues in the current year. We are also expecting there could be some sort of slowdown happening because we are seeing automobiles sales slowing down slowly. We are expecting some sort of affect from that as well.

Last year we grew from a lower base of about Rs 450 crore to about Rs 720 crore where most of our new branches started gaining critical mass. In the current year our expectation is only about 35% revenue growth.

Q: You are also setting up a new plant in Perundarai for solar water heaters. What is the total capacity for this and what you are planning to do with the 35 acres of land that you are sitting on?

A: We have taken 35 acres of land last year from the Tamil Nadu government and we have taken it on a 100 year lease. Out of the 35 acres, we already have permission to build warehouses and other commercial activities on 5 acres. So 5 acres will be dedicated for own warehousing activities to the south Indian market.

On the balance 30 acres, we are going to start the solar water heater plant on a stretch of about 3-4 acres of land. The capex there will be there about Rs 10 crore. The initial capacity which will be putting in the first place will be for about 1,200 systems per month.

Our current installed capacity is about 1,500 so we are almost doubling our current installed capacity with the new plant. Any expansion of our existing plant, or wires or LT cables or pumps located in south India, any new expansion activities will be happening on this acquired land in Perundarai.