Operating margins to be up in Q1FY13: Everest Industries

Q: You also have some capex. Just give us a sense on whether all of your capex which you have incurred in the past three years has come on stream and what would be the expectation of fueling more investments into that?

A: We are doing a capex in Orissa. In Balasore we are putting up a fiber cement roofing plant.

We expect it to get operationalised sometimes towards the last quarter of the year. In the last three years, there is no other capex which is not bearing fruit. All the other capex is already in capacity, in production. This will be the new capex which will come on stream in the last quarter.

Q: Just give us a sense of what you did in terms of interest costs also because we do understand that there was a change in your debt mix in the previous quarter. So just give us a sense on what the interest costs were this time around and what is the trajectory that we can expect from the company in FY13?

A: We use very little of our working capital. We are funding it mainly from buyers’ credit and internal resources. For the forthcoming capex programs, we are going to take external commercial borrowings. That is going to increase our debt to some extent but, we believe it will be balanced by the higher revenues and the higher income which should accrue.

Q: There was an analyst who was talking about you leasing out your factories to stronger players. Do weaker players lease out to you, have you leased any of your factories to others?

A: No absolutely not. As I said, my sales growth is limited by the amount of material available to me.

Q: Have you leased out other people’s units, maybe smaller units?

A: No, we have outsourced some of our product-line. We have bought it in India and from outside India but, that’s a very small quantity compared to our total quantity.

Q: So would you do better than 25% in FY13?

A: I would stick to a figure of 20%.

Q: Within the building products segment just leave us with some guidance. What can we expect in terms of total realizations as well as the total volume growth or what sort of internal estimates are you currently working with?

A: In the building products segment, there are essentially two large products. One is the roofing business and the other is the boards business.

The dynamics of the two businesses are a little different in the sense that roofing predominantly comes from rural areas, while the boards business is 50% export and 50% domestic in nature, that too mainly urban.

We do not have any capex on the roofing front. We expect a growth on account of more efficiency, something like 15% in terms of volume. In revenue terms it should turn out to be a little higher because the raw material prices are up, so our pricing has gone up this year.

On the boards front, the export market continues to be very strong and we predominantly export to the Middle East, Africa and Europe. The demand there continues to be good.

In fact, the slowdown over there at times helps us because they look for more competitive products and we manage to meet their quality standards. Over there, we should again be averaging a volume growth of somewhere around 20-22%.