Have ambitious capex plan: Carborundum Universal

Below is the edited transcript of his interview on CNBC-TV18. Also watch the accompanying videos.

Q: You sold Laserwords stake earlier this month for about Rs 50 crore. How are you planning to use the proceeds?

A: We sold our stake in Laserwords for Rs 50 crore. We would use this to fund our capex. We have ambitious capex plan. We will be using it for our capex.

Q: There has been a substantial improvement in your margins this quarter on a year-on-year basis. What are the sustainable margin levels we can expect for Carborundum?

A: We broadly operate in three verticals. In the abrasive vertical, the earnings before interest and tax (EBIT) margin on year to date basis is about 15.4%. In ceramics, it is about 22.5% and in electro minerals it’s about 25%. There is a significant improvement in the EBIT margin and the electro minerals business largely coming out of the fact that we have contracts in euro. Our costs are in ruble in Russia, which is a largest production area for electro mineral. So, I would say there is a four percentage point higher margin which may not repeat every quarter. That had an advantage for us in this quarter.

Q: You mentioned that you have an ambitious capex plan. Could you take us through what is in the pipeline?

A: We have planned an investment of about Rs 150 crore in expanding capacities, in creating new assets in India, Russia, South Africa in Foskor. All these capex are on stream. We are continuing to invest in all these areas both in terms of improved capacities as well as to bring in new capabilities.

Q: You recently partnered with an Israeli company for manufacture of ceramic foam-based refractories. What is the update on that? By when do you expect to see some sort of revenue recognition coming in from that partnership?

A: It’s a small project to make what is for the first time in the world a fibre refractory material which could take defined shape. This is a pilot plant running in Israel. We have now got it shipped out. We will recommission in India with certain modifications and improvements. It will become a commercial scale plant only after about 12 months. But this plant immediately will produce material which will be used for supplying to this industry.

Q: You also have a significant exposure to Europe and I think close to about 24%. Could you tell us the growth that we saw in Europe in the quarter gone by and any concerns that you have perhaps?

A: Out of our revenue split if you look at it, 55% happens in India, 45% outside India. Out of that the biggest chunk is Europe which is 24%. So far we have not seen a slowdown in Europe. Our European sales remain strong. We have not seen a slowdown; we have commitments up to February next year. Things are not look as bad as they are talked about.