New order to rake in $9mn over 5 yrs: Steel Strips Wheels

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New order to rake in $9mn over 5 yrs: Steel Strips Wheels

Steel Strips Wheels has bagged an order for 6 lakh wheels. The order is expected to generate revenues to the tune of USD 9 million over a five year span. The company, however, has scaled down their revenue guidance for this year.

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Steel Strips Wheels has bagged an order for 6 lakh wheels. The order is expected to generate revenues to the tune of USD 9 million over a five year span. The company, however, has scaled down their revenue guidance for this year. "We have scaled it down to Rs 750 crore from Rs 850 crore," says Dheeraj Garg, the MD of the company.

Below is a verbatim transcript of his interview with CNBC-TV18s Reema Tendulkar and Ekta Batra. For complete details watch the accompanying video.

Q: The Rs 6 lakh wheels order that you have bagged, what revenue does it translate into for the company?

A: About USD 9 million in the next five years.

Q: At what margins would this be and when would you start supplying?

A: Supply will start at the end of this calendar year and the margins are going to be substantially better than our domestic margins. This is an ongoing business that we have with Peugeot Citroen (PSA) of France and this is the fourth project that we have got from them. We are also likely to be their vendor in India when they start their operations in India, maybe at the end of 2012.

Q: What would your total order book for the nine months of 2010 stand at and what are you expecting to garner for the full year?

A: We expect to close around 10 million wheels this year and that would translate to a turnaround somewhere around Rs 770 crore. For next year, we are looking at a confirmed order book of 15.5 million wheels and that should be almost be a 55% jump in numbers and almost a similar jump in revenues for the next year.

Q: Going back on your FY11 guidance, you said Rs 770 crore but the last time we spoke it was ranged up to Rs 850 crore. Is there any reason for a change in your estimate?

A: This is because of the late start up of our Jamshedpur plant which got delayed by about 45 days. That has contributed to some extent. These figures of Rs 770 crore are based on a turnover of 10 million wheels. At that time we had estimated on 10.5 million wheels and so there is a little bit of adjustment in the number.

Q: If there is a slight decline in your revenues, what about an EPS and at the margin level, what is your expectation for the entire year?

A: In terms of the EBITDA margins, they remain at the same level as we had estimated earlier which is close to Rs 105 a wheel. As far as the EPS is concerned, they will need slight adjustment because of the new expertise we have issued.

Overall, its absolute profitability. I don't see a major decline because we had underestimated our margins at that point of time. Our margins are better than what we had estimated and projected. So, our profitability will not be affected much by this decline in forecast for the remaining part of the year.

Q: Once your Jamshedpur plant comes on-stream or if it has come on-stream what are your revenue and profit estimates for FY12-13?

A: We estimate revenue of close to Rs 300 crore just from the Jamshedpur plant. We had started supplying to Tata Motors on December 14. Those revenues have started creeping into the topline of the company. I cannot mention specifically on profitability but I can say that it's a very profitable venture, both for the customer as well as for us.