Gujarat Alkalies eyes 25% turnover increase in FY12

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Gujarat Alkalies eyes 25% turnover increase in FY12

Guruprasad Mohapatra, managing director of India's largest caustic soda producer, in an exclusive interview with CNBC-TV18's Latha Venkatesh and Anuj Singhal, gave his perspective on the company’s strong fourth quarter numbers and the road ahead.

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Gujarat Alkalies & Chemicals announced its fourth quarter results. The company's profit after tax (PAT) declined 34% (YoY) at Rs 57 crore for the fourth quarter ended March 31, as against Rs 86 crore in the previous year. During the same period, the net sales rose 30% (YoY) at Rs 401 crore versus Rs 54 crore.

Guruprasad Mohapatra, managing director of India's largest caustic soda producer, in an exclusive interview with CNBC-TV18's Latha Venkatesh and Anuj Singhal, gave his perspective on the company's strong fourth quarter numbers and the road ahead.

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

Q: Can you take us through the highlights of the previous quarter? What helped you to report strong numbers and whether it can be repeated in the current and the next quarters as well?

A: In the first three quarters of the previous year, there was a lot of dumping of caustic soda into the Indian market. This led to a fall in prices beyond sustainable levels. So the first nine months for the chlor alkali sector was bad. Nonetheless, from the last quarter of the previous financial year, the market started improving, the demand started picking up and caustic soda prices were more stable. This explains the fourth quarter profit margins and this trend is expected to continue despite a slight slump in demand from May onwards.  Meanwhile, for FY11-12, the demand will be good.

Q: You did earnings per share (EPS) of Rs 15 in full year, half of that came in the fourth quarter itself. What is the likely trajectory in FY12, what kind of EPS numbers you may report?

A: I would not like to go into specific numbers. The caustic soda market, which is the main stay of our company, looks good. At the same time, we have also added four new products into our portfolio and for which the full results will be in this financial year. We went for a calcium chloride expansion which has already been commissioned, bleaching power new project and also chlorotoluene hydrogen peroxide expansion. In this year, four new products' turnover would be adding to our top-line apart from the steady caustic soda market.

Q: What are the chances that this dumping problem will not remerge in the current year, how come the situation changed and do you expect it to remain to your advantage?

A: Partly, some anti-dumping activities, the success achieved on that count and majorly the US and European economies have started improving. So there is no need for them to dump in the Indian market.

Q: The margins looked quite handsome in fourth quarter, 25% versus 17%. Are they sustainable at these levels?

A: Probably, not as high as electro chemical unit (ECU) in the last quarter, this ranged between 27,000 and 28,000 levels. Currently, there is a slight slump in demand so the ECU is around 25,000, but what is heartening is the unrealistic ECUs which were there in the last first three quarters of the last financial year at around 18,000 to 19,000 is no more possible. Now the ECU is around 24,000-25,000-26,000. It always remains at that level.

Q: What kind of revenue growth can we therefore assume, provided market conditions are where they are now?

A: In the current financial year we are projecting turnover increase of around 25% minimum from our last reported turnover.

Q: A small niggling doubt, I assume the Gujarat government is dominant shareholder in your company, there are number of pledged shares?

A: No, I don't know how you got this information. Gujarat government doesn't have any equity in our company. It is some of the state in the PSUs which have around 36% of the total equity in our company and this is how we have statutory auditors.

Q: How come you have number of pledged shares, about 71 lakh shares are pledged?

A: I won't be able to answer that at the moment, but to clarify that the Gujarat government doesn't have any major shares in the company. These are companies promoted by government of Gujarat but they are listed companies and they are joint sector companies.