Why is Mirc Electronics contemplating price hike?

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » ALSO READ See latest News about Mirc Electronic See previous management interviews See what other Experts & Brokerages are saying about Mirc Electronic Mirc Electronic BSE | NSE 30/05/12 Are Mutual Funds betting on Mirc Electronic?

In an interview with CNBC-TV18, Gulu L Mirchandani, CMD of Mirc Electronics said, "We have been under pressure for all our products including plastics because, prices of everything related to oil is going up and inflation has been there. There is no choice but to raise the price by nearly 5%."

Below is the verbatim transcript of Mirchandani's interview with Gautam Broker and Ekta Batra of CNBC-TV18. Also watch the accompanying video.

Q: The quantum of the price hikes are to a tune of about 5% to 7%. What's the outlook going forward? Does this cover the entire cost hike that you might have seen because the raw material price is moving up?

A: The increase is basically coming in for products like ACs, where the metal prices have gone up. There is no increase in price of LCD, in fact, it may be coming down. Copper prices has shot through the roof, its almost 100%.

Q: Does this mean you might have to take another hike if prices don't cool down? What's the outlook going forward? Are you able to maintain your margins set around 4.25 MIrc that each in Q2?

A: I don't think we will increase more than 5%. We don't know, so many things are happening in the world. We don't know where oil prices will go and what will happen later after two or three months. But, for the time being if we get 5% then we are okay, our margins are intact.

Q: For FY11 in particular, can you describe the total quantum or percentage increase in price hikes this year?

A: We haven't had price hikes previously. It's only now when the price of metals have gone up that we are looking at hiking prices. We have been under pressure for all our products including plastics because, prices of everything related to oil is going up. The general pressure on everything and inflation has been there. There is no choice but to raise the price by nearly 5%.

Q: How are you doing in the volume front in terms of your products and where do you expect to close?

A: Volumes should be growing around 25% to 27%.

Q: What are you expecting in FY12 in terms of volumes?

A: It all depends on how component prices shape up. So, we don't have any visibility at the moment but after two months we will be more clear on FY12.

Q: Earlier this month you had announced tie up with Reliance Digital, for some of the products, how is that progressing? What kind of revenues can we expect from that joint-venture (JV)?

A: We are doing business with Reliance with a lot of change. So that's pretty much regular. But, there is no figure that we have fixed. We are going forward with them and as the product starts selling I think they will increase volumes. But, generally, their sales are pretty good over there.

Q: There is a lot of increasing competition within the consumer durable space, how are you currently differentiating yourself? What would your strategy be in terms of new product launches possibly diversifying into new categories because you did diversify into LED Lighting spaces where any particular plants we could see fructify in FY12 as well?

A: All our products are very innovative. Our AC for example, we are the world's first AC which starts by sending an SMS. If you are travelling home from office you could put on your AC from your car. Just send an SMS from your mobile phone.

Coming to mobile phones, we have FM transmitter mobile phones. If you are travelling in China you can have your own radio stations, through FM transmission. You can transmit the music into your audio system in the car and listen to music. So, that's another big innovation that we are doing there.

As far as LED and LCD TVs go, we are probably the finest LED TVs in the market. If you see the picture quality its better than Sony. We also have this AR Glass, the anti reflective toughened glass. It doesn't impact your eyes at all and it's anti-reflective. This is the only company having anti-reflective glass in front of the TV and the picture quality, the LED picture quality is outstanding.

Q: How much do you exactly spend on R&D in terms of a percentage of sales and has it been increasing?

A: Yes, we are spending about 1-1.5% of our sales on R&D.