V-Guard Ind hopes EBITDA margin will stay at 9% for FY12

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V-Guard Ind hopes EBITDA margin will stay at 9% for FY12

In an interview to CNBC-TV18, Mithun Chittilappilly, executive director of V Guard Industries spoke about the latest happenings in his company and the road ahead.

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In an interview to CNBC-TV18, Mithun Chittilappilly, executive director of V-Guard Industries spoke about the latest happenings in his company and the road ahead.

Below is an edited transcript of the interview. Also watch the accompanying video.

Q: Off late we are hearing a lot of talks about slowdown; many people have cut their GDP estimates for India. Do you still hold on to that 35% sales guidance for your company that you had earlier given us?

A: We will be achieving 35% sales growth. We have now completed almost two and half months of Q3 and when we see Y-o-Y comparison we are still achieving that run rate of 35% growth as far as sales is concerned.

Q: Give us a sense of the EBITDA and the bottomline because despite your topline increasing 38% on a Y-o-Y basis in the previous quarter, there was quite a lot of pressure in terms of expenditure which was up around 44%. Are you taking some price cuts in order to increase sales? Would that compromise on your margins going forward? What strategy are you adopting at this point?

A: On the contrary of price cuts we have effectively had price hikes on many product verticals. We have had a very bad Q2 mainly because of increased interest costs and increased expenditure in advertisement. So we expect our Q3 performance to be much better and we are still hoping to reach 9% EBITDA for the whole year.

Q: With respect to the second half of the fiscal year what's the plan on the ad spends? Are you all still going to be at the same run-rate that you had in Q2 which affected your performance? Throw some light on the interest cost?

A: Yes. In Q3 we will have some ad expenditure but it won't be as high as Q2. There will be some margin improvement due to that factor. Going forward in Q4, the ad expenditure will considerably come down because we have cut down some amount of below-the-line activity budget for various states. So that should again improve our performance in Q4.

As far as interest cost is concerned yes the percentage of interest, the rate we pay, the working capital loan has increased considerably. With the increase we have now managed to operate with same or even less amount of working capital because we are now able to negotiate better terms with our suppliers. We are availing better credit and also we have streamlined our collections from the market and we have also improved our inventory position compared to the sales numbers.

Q: Currently what is your market share in South India?

A: We are into various product segments so if you look at the stabilisers we are definitely the market leaders in South India. If you look at the wires we are probably among the top three players in the South. If you look at the electric water heaters we are probably at number two or three in South. So I can't give an exact percentage of market share but if you look at our four core products we are probably among the top three or four players in South India.