Rico Auto expects to cross Rs 1000cr sales mark this year

Excerpts from Bazaar on CNBC-TV18 Watch the full show »

Rico Auto reported consolidated net profit of Rs 6.67 crore in Q3 December 2010 compared with a net loss of Rs 7.10 crore in Q3 December 2009. Its net sales soared 53.1% to Rs. 345.58 crore in Q3 December 2010 over Q3 December 2009.

Speaking to CNBC-TV18, Udayan Mukherjee and Mitali Mukherjee, Arvind Kapur, managing director of Rico Auto said the company is on course to cross the Rs 1000 crore-mark this year. "We are targeting a bottom-line of about 4-5% in coming quarters," he informed.

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

Q: The revenue growth was extremely strong for you this quarter. What do you think you can finish this year with in terms of sale or revenues?

A: There has been very strong growth as far as the cars and motorcycles are concerned and hence the auto component industry has also shown good results. This year, we were targeting about Rs 950 crore, but I think we will cross Rs 1,000 crore this year.

Q: Your margins have also gone up quite a bit in the current quarter. Can you take us through the bottomline performance and where margins could stabilize once some of your other power issues etc, get sorted out?

A: You will see a lot of changes in the margins in the next two quarters. There are lots of things that we are trying to sort out as far as power is concerned and also there are some price corrections that are being done. Next quarter onwards you will see much better results because we are targeting a bottomline of about 4-5% that is what our internal target.

Q: So, 4-5% at the PAT level would mean a quarterly run rate of nearly Rs 15 crore PAT. Are you aiming for that kind of number starting next quarter?

A: Yes. The effect will come from the next quarter onwards.

Q: That Rs 1,000 crore target is not a big departure from your FY10 performance where you did around Rs 960 crore. If the environment is as strong as you say, is this a conservative guidance that you a have set out?

A: Last year, the total revenue was Rs 793 crore. You were looking at consolidated figure and consolidated this year we should be around Rs 1,600 crore that includes our JV partners etc. Last year we were at about Rs 1,100-1,200 crore as far as consolidation is concerned. But if you look at standalone the growth is pretty good. We are growing at almost 24-25%-if not 28%.

Q: How much leeway do you have in terms of pricing particularly because of what is happening with input costs pressures?

A: The input costs are normally passed through. The commodity price is going up, there is always a lag that by the time we get the money, but it is a pass through. If it goes up or goes down, it is to the customers account.

Q: Can you break up this revenue performance between your key clients and key verticals and also take us through how fast the domestic business is growing versus the export side?

A: Export this time, despite the fact we lost some business after the strike we had last year-we lost almost Rs 40 crore as far as our Ford business is concerned-but we have recovered that and we should overall grow by almost 35-37% as far as exports are concerned.

The exports have been very strong and we are very happy about it. We should be crossing Rs 200 crore this year. Last year, we were in the region of about Rs 135-140 crore.

As far as domestic is concerned, domestic our biggest customer today is Hero Honda and the Honda Group-that includes HMSI and Honda CL and then its Maruti Suzuki, which is almost 20% of our revenues and then it's various other customers who are all in the region of 5% each and that includes the export as well as the domestic market

Q: You have commenced production from the new Sanand unit. How much could that add to your top-line by the end of FY12?

A: We have just started the production couple of days back. Two years from now, it should be in the region of Rs 350-400 crore. This year the total addition would be around Rs 70-80 crore because we will be supporting the Sanand plant also from Gurgoan because the production at Sanand in the Tata plant is on and the volumes are picking up there and so we are supporting from Gurgaon as well as the new facility at Sanand.

Q: Would Rico Auto require raising any money in order to fund this capex or are you sufficiently capitalised?

A: This has already been funded but in future we are looking at various possibilities and we are discussing that and I think we should make a decision very soon on that.

Q: It would involve an equity offering though?

A: Possible. We are looking at all the options that are available to us.