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Oct 20, 2016 10:09 AM IST | Source: CNBC-TV18

Eye better product mix; targeting top 5 clients: Endurance Tech

The company is focusing on improving its domestic market share, Anurag Jain, MD of Endurance Tech said. Despite global slowdown, the company has grown well.

Endurance Technologies listed today at Rs 572 per share, up 22 percent over its issue price of Rs 472 per share.

The company is now focusing on improving its domestic market share, Anurag Jain, MD of Endurance Tech said. Despite global slowdown, the company has grown well.

Speaking to CNBC-TV18, Jain said product mix will boost margins and overall growth for Endurance. The company is upgrading its products and focusing on five main customers in India – Honda, Hero, Bajaj, Yamaha India and Eicher Royal Enfield.

Sentiments have improved in this year especially in two-wheeler and three-wheeler auto components segment, which is the main business in India, Jain said. In first half 2016, two wheeler segment has grown by 17 percent nearly.

Jain is confident that next three-four years for Endurance are likely to be much better than previous years.

Below is the transcript of Anurag Jain’s interview to Latha Venkatesh, Sonia Shenoy and Prakash Diwan on CNBC-TV18.

Latha: What can you tell your investors, what kind of growth?

A: The thing is that I cannot talk about the future, but we are going to continue to focus on our profitable growth strategy and try and take all the opportunities we can for the future. The rest is of course, up to the markets, it is up to God up there. So, we continue to do our work which we have done, especially in the last five years and let us hope for the best.

Sonia: In the last year, FY16, you had a growth of around 8 percent in your revenues. So at a base of about Rs 5,600 crore, do you think you can replicate the growth that you have seen in the last couple of years?

A: In fact, we are hoping to do much better, because if you see, the sentiment which has improved, especially in this financial year, where we are largely a two and three-wheeler auto component company in India because the passenger cars and commercial vehicles, we are mainly doing overseas.

So, if you see the growth of almost 17 percent in two-wheelers the first six months of the year, it is a pretty good sign for our company. We have seen a good growth so far. So, I am sure that the next three years, we hope to do much better.

Latha: But the growth in two and three-wheelers is not really scorching, except perhaps for Eicher. Now, that is not your top client as we were just discussing with the experts. Your top client is Bajaj Auto, not a scorching pace of growth. So, therefore will you be able to deliver high rates?

A: I do not know what is high rate, but I can only say that we will do better than the last 4-5 years, because what we are doing is, we are upgrading our products, so the product mix is also adding higher margins. We are increasing our share of business, we are focusing on five customers in India which, apart from Bajaj, are Honda two-wheelers Hero Motocorp, Yamaha India and Eicher Royal Enfield.

So, these are our five major customers we have in India. We are into four product segments as you know, aluminium castings, braking, transmission and suspension. And what we are hoping to do is add higher wallet share, supply all the four segments to all these five top clients and increase the share of business. So, that is the focus what we are having for the future.

Plus, overseas companies are largely for passenger cars and commercial vehicles. There our top-five customers are Fiat Chrysler Group, Daimler, BMW, General Motors and we are focusing on growth with them there. And if you see overseas, in spite of a downturn in demand in the last 5-6 years in the passenger car space, Endurance has grown very well. And it is grown with higher profit margins.

Sonia: So, if you are upgrading your share of products, will this lead to higher margin performance as well? In the last five years, your margins have been steady at 5 percent. Are we looking at higher margins for the company anytime soon?

A: Yes, that is what we are focusing, but if you see our growth profit after tax (PAT), you will see that the margin growth has been much higher. It is the EBITDA margin which are at 12 percent. So, going forward of course, our focus is on profitable growth.

Latha: Are any of your promoters wanting to sell a little more? It was a very small sale by Actis.

A: Actis sold all their 13.72 percent. I have individually sold 3.78. So, within three years I have to reduce my shareholding, our family shareholding from 82.5 percent to 75 percent which we will do.

Sonia: Just wanted to ask you a little bit about the balance sheet as well. The good part is that your debt has been coming own over the last few years. But it still stands at somewhere around Rs 700 crore if I am not wrong. How much do you plan to reduce debt by over the next one year?

A: If you see the debt, as far as India is concerned, the debt is hardly 0.4:1. So, we will be long-term debt free by June, 2018. So, largely the debt is slightly higher on the overseas balance sheet, but that is because of a large investment cycle we have had last two years because of the big growth opportunities. And what happens in Europe is you start investing at least 24 months earlier.

So, our focus is to reduce debt even in the overseas balance sheet also over the next three years. So it will go down, but at the same time, like I said last time, we will be looking at new opportunities. So, as long as my net debt to equity even goes up from 0.4 from 1:1 and I am able to get good acquisition opportunities, I will do it.

Latha: No taking away credit from your performance at all. 27 percent premium is what you are quoting at. In a whisker, you will be trading at Rs 600, I mean your share, Rs 596, even your best optimist did not expect such a hefty listing. I am not taking away credit from that, but I just wanted to know, in your various road shows, you must have met a lot of deep pocketed investors who are not getting yield in any other market. This stake of yours which you have to offload under the law, do you think there are enough big private equity buyers for it?

A: I hope so, because looking at the response we have had from the anchor investors after meeting about 80 odd investors on the road shows and getting quite a good list or good names of investors in the anchor book.

Now, I am sure they would be interested because what we have brought forward is in spite of turbulent times in the last five years, we have shown steady financials, stable and growing financials and that is what the investors have liked.

And plus, what I believe is we as a promoter, I as a promoter, even if I go down it will be a 75 percent. So, I am the first interested party in the long run to do well. So, the investors in the road shows have liked our story so far.

Prakash: Just wanted to check with you this new theme of metal to plastic conversion that is happening in the auto ancillary side, do you see that as your big paradigm shift for people like you who are purely into aluminium castings?

A: If you see, in India, we are largely in the two and three wheeler auto component space. So, frankly, I do not see much happening in India as far as the two and three wheeler auto component space is concerned from aluminium to plastic. But definitely in the overseas operations, we are finding some parts of the engine like the covers or the oil pans.

They are shifting from aluminium to plastic and that is the reason about three years ago, we acquired a small company in Italy so that we can use this opportunity. So, some of our products which do convert to plastic in the future from aluminium, we can get that business. So, as a part of the strategy, we have got into automobile engineering plastics.
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