Higher cotton prices, demand-supply gap to favour Indo Rama

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Higher cotton prices, demand-supply gap to favour Indo Rama

Vishal Lohia, ED of the company, in an interview with CNBC-TV18’s Latha Venkatesh and Gautam Broker, gave his perspective of the fourth quarter performance and divulged future plans.

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Indo Rama Synthetics (India) announced its fourth quarter results. The company's Q4 net profit was up at Rs 101 crore versus Rs 5 crore, year-on-year (YoY). The company's net sales were up at Rs 854 crore versus Rs 628 crore, YoY.

Vishal Lohia, ED of the company, in an interview with CNBC-TV18's Latha Venkatesh and Gautam Broker, gave his perspective of the fourth quarter performance and divulged future plans.

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

Q: Is this a benefit of what's happening in the polyester space?

A: Our sales turnover has touched Rs 3000 crore for the first time. It is an increase of 12%. Our real improvement came in our EBITDA revenues. It increased by 86% from Rs 223 crore last year to Rs 417 crore this year. The PAT showed a healthy Rs 139 crore increase from Rs 7 crore last year.

Q: Your bigger peer, Reliance Industries , has been saying that they will continue to remain strong. What's your outlook? Will this continue over the medium-term?

A: The reasons for the increase in EBITDA revenues are mainly the demand-supply gap coming in the polyester sector's favour. The high cotton prices are also allowing us to realise the right price. We believe the spread will be continued in the next year as well. The growth should be continuing.

Q: What seminally changed in FY11? How did you see this big turnaround in Indo Rama?

A: The demand-supply came in our favour because for the last few years, we were running at low capacity utilisation. We witnessed higher utilisation in 2010-2011. We are hopeful that it will be much higher in 2011-2012 than 2010-2011.

Q: What is the utilisation rate? Could you compare FY11 with FY10?

A: Utilisation rate would have gone up by at least 7-10% between those two years. The margins also increased because of demand-supply gap narrowed from what it was and the continuous high cotton prices.

Our efforts were towards exports. Our topline was Rs 3000 crore out of which 25% went to exports compared to sub 20 levels in the last year. We introduced some new products this year for special east markets. All these things combined to increase the EBITDA.

Q: Didn't you have plans to raise money, as you had issued convertible warrants? How much did you raise at that time? You also wanted to do a QIP at that time.

A: The promoters gave themselves 2 crore warrants at the rate of Rs 40, out of which 25%, as per the policy, has been given to the company. The company will get the remaining 75% some time in this financial year.

With this, the company will be also issuing 1 crore and a few odd lakh QIP, which will come to the company. This year, the company should be getting close to Rs 150 crore as equity.

Q: Is this for the power plant?

A: No. It is equity for future expansion. Right now, all the capex are internal accruals. The company is undergoing three capexes worth Rs 130 crore, which are cost cutting and value addition with a payback of two-and-a-half to three years.

Q: Can you mention any schedule or timeline for the QIP or the fund raising?

A: We are on 18 months from the issuance to issue the warrants, which will falls sometime this year.