RDB Industries sees significant profit improvement in 2011

Below is a verbatim transcript of the interview. Also watch the video.

Q: The latest directive on pictorial warnings has cleared the uncertainty at least for the next one year. What is the kind of impact that you see for the company?

A: Directives, to be honest, don’t want to affect us much because our roadmap for next one year—revival and reinforcement of our cigarette business in the parts that we have been active in. We being very small players compared with major ones in the country. We have a roadmap which is very regional to be more specific.

Q: What is the roadmap?

A: The roadmap is to reposition our existing brands and to ensure that our revenue levels don’t decline. If at all, they have to improve as we go along because as you might know our cigarette business or tobacco business is about close to 10% of the total turnover so far. We wish to improve it by 15-20% in the next year or so.

Q: There are reports doing the rounds that the pictorial warnings could possibly be reviewed on December 11 or possibly later. If it does get reviewed and it does get changed what sort of capex requirement would you require and how exactly would you invest in the required capex then?

A: We haven’t thought much about it but if it is changed and if requires some capital expenditure for us to be incurred, we should provide for that because we are complaint company. We don’t wish to violate any of the things that are coming from the statute and we shall make sure that we comply with all the requirements of the government as like many of the players will have to do. So that’s not an issue at all.

Q: On the core business, how exactly is the cigarette business panning out right now for you, what sort of volumes are you working with possibly an inventory levels and any sort of price hikes we could possibly see from your side?

A: It’s a very competitive market and the brands survive because of the merit and the acceptance in the regional spheres they are being sold out. I don’t think we have any pricing strategy as such but we do have a strategy to penetrate further into the regions that we are operating in and we are trying to introduce one or two brands in case we can in the next one year or so.

Q: Could you tell us what is the kind of profitability of the cigarette business?

A: I can talk more about the revenue level that we have attained of about close to Rs 10 crore as of last year and as you might be knowing the company has been now separated from the mainstream of realty business. The effort is to increase the business to about Rs 12-15 crore by March 31, 2011.

Q: But is it loss-making?

A: It’s nothing great to write home about, in the sense, that we are not loss making. But at the same time we are not highly profitable. We are more than breakeven.

Q: When do you expect your profitability to increase from the current neutral level?

A: I think because of the focus now that we have created by virtue of a new company that’s been launched which is RDB Industries Ltd, I think the profit should be now visible and as separate accounting also will be made by 31 March, 2011.

Q: Real estate seems to be quite strong point for you in terms of revenues. Have you thought about possibly divesting your cigarette business completely and then just concentrating on the real estate business and any sort of offers you have got from different players for the same?

A: Not really. We are clear about the fact that we are going to stay in this business. We were open to a collaboration in the past but now because of the recent government directives and because of the fact that it’s very tough for anybody else to invest money in—FDI has been more or less banned in the tobacco business—we are just making sure that we continue operating in the area that we have been operating in successfully and we don’t incur losses, we make some profits on the contrary.

Q: Any interest from domestic players at all in terms of collaborations, joint ventures, possibly picking up any sort of stake?

A: No, we are looking after our interest and not their interest. We know what their interest is, if at all it is there.

Q: You have spun off your real estate into RDB Realty and Infra. Any plans of listing it or any such thing?

A: Yes, the listing is very much in the offing, In fact, we are waiting for some approvals and the moment we get those things there will be a formal listing of this company also.

Q: Any timeline, roughly?

A: It has taken some time already. It might take another about few months—the pace at which things are going.