Gearing up to produce more for auto sector: LG Balakrishnan

However, high raw material costs and staff costs dented the operating profit margin (OPM) by 150 bps, limiting the growth in operating profit to marginal 6% to Rs. 20.35 crore. On consolidated basis, the topline stood at Rs. 188.64 crore in March 2011 quarter. With OPM of 10.9%, the operating profit stood at Rs. 20.63 crore. The consolidated net profit was Rs. 15.37 crore.

B Vijayakumar the managing director of LG Balakrishnan & Bros in an interview on CNBC-TV18 spoke about the latest results declared and how the auto industry was faring.

Below is a verbatim transcript of his interview with CNBC-TV18’s Gautam Broker and Sonia Shenoy. For the complete interview watch the accompanying video.

Q: You cater to the two wheeler industry where we have seen some kind of a slowdown. Do you think this could impact your revenues going forward?

A: We don’t foresee any impact. We have grown 30% last year and we are sure we will grow 25% this year.

Q: There has been a big slowdown in terms of your margin performance. This quarter as well your margins have dipped to almost 10% versus 13% that you saw last time. What could the raw material cost pressures do in terms of bringing your margins down lower?

A: The raw material reimbursement normally takes sometime with all the OEMs. It’s always an ongoing process. There will be some raw material increases and there will be some raw material decreases.

We have come to some kind of an understanding that there will be some time before each change is affected. Accordingly, we have been receiving the price increases but not to the full extent. Volumes have been increasing, so there have been some adjustments due to that.

Q: In your interactions with the automakers, have you gotten any sense of whether demand is abating because of commodity price pressures and also because now interest rates would also go up. Do you think demand could become a bit of a problem for the auto industry going forward?

A: I am quite surprised that you say so because I have not got any indications. Indications I have been getting are all positive and they have been asking me to gear up for more production.