DEPB withdrawal won't impact us: Gokaldas Exports

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Gautam Chakravarti, new CEO of Gokaldas Exports , in an interview with CNBC-TV18's Latha Venkatesh and Anuj Singhal, gave his perspective of the fourth quarter performance and their divulged future plans.

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

Q: You have had another disappointing set of numbers. Your losses have expanded and sales have remained more or less flat. Can you take us through what happened and the highlights of the quarter and the year?

A: The apparel industry has been going through a very difficult phase because of the major increases in the raw material costs of cotton. The wage inflation continues, propelled by the food price inflation in the country.

Our major markets are US and Europe, where economies have been weak. So, we saw the initial spurt post recession in the later part of last calendar year and this year, which has not been enough to drive the entire topline up and is caught between the margin pressures because of recessionary mindset on prices and the wage cost increases.

We have been gone through a very difficult phase. The export incentives have also been reduced either interest subvention or direct duty drawback as a part of the reduction in the overall stimuli package agenda, which the government has been pushing over the last six-eight months.

Q: Even the Duty Entitlement Pass Book (DEPB) benefits may not be extended beyond June 30. If that is the case, how much more of an impact would that have on your bottomline? Do we assume that we will still see big losses in FY12 as well?

A: The DEPB withdrawal will not have much of an impact, because we do not use that facility much. Bulk of the fabrics or the inputs which we use is bought locally. As far as the future is concerned, we have to wait and watch.

The first half of this year, the order book is good, but it is not great. We are working very closely and intensively on cost optimisation to make sure that we can tighten the belt and bring it in alignment with the realities of the market today.

Q: What is your sense in terms of revenue growth or a loss reduction in FY12? Do you have enough orders or strategy in terms of cost reduction to come back into the black at least in FY12? You are concentrating on the domestic markets since the export markets are not reviving?

A: We have clear cost reduction program in place which we will implement in terms of our manufacturing strategies either in terms of relocation of factories or improvement in productivity through lean manufacturing program in the factories.

Apart from that, our focus on the export market continues and the domestic market is growing. With the sort of come back into topline growth for the India retail, we are seeing good business prospects in terms of servicing the India retail market.

We are working with some of the best brands in India and servicing their requirements. You will see increase in share of the domestic business in FY12 compared to the earlier year.

Q: How much is it already? How much are you hoping to increase it to?

A: As far as this year is concerned, we are close to about Rs 100-110 crore compared to about Rs 60 crore last year. It should increase by at least another 40-50% this year.

Q: Could you share a word on the shareholding pattern? Black Stone holds about 68%, Hinduja holds about 20% and there is a public free float of just about 12%. Have you heard any discussions from the Black Stone Group in terms of whether there is a possibility of them hiking the stake, buying more Indian promoters and going for delisting of the companies? Is that something from the cart?

A: Not really. While there has been speculation in the market in the past, there aren't any concrete steps in place to move in that direction.

Q: In future, will Black Stone continue to have 68% and Hinduja's 20% or there would be a move in terms of even this 20% being divested by the Hindujas? Have you heard any discussion with the promoter entity?

A: No. In the foreseeable future, the present pattern will continue. Right now, the focus is more on getting the operations back on track and getting the company into black rather than focusing on trying to chase the shareholding pattern.

Q: Do you expect FY12 to be the year when you may come back into black?

A: Absolutely, that is our intention. In terms of the cost management program as well as business development, our specific strategy is to make changes in the customer mix improvement in the value added products share of business.

These strategies have been thought through and are currently in the process of being implemented to make sure that the company comes back into the black.