See no major pressure on pricing ahead: Hyderabad Ind

Commenting on the results, Abhaya Shankar, Managing Director of Hyderabad Industries said higher excise duty impacted margins. "The peak season is yet to show up in FY11."

Going forward Shankar does not see any major pressure coming in on pricing. "We expect FY11 sales growth at 6%," he said.

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

Q: You have seen some kind of contraction in your EBITDA margins in the current quarter can you take us through why?

A: Yes. Typically in our industry as you probably you know there is seasonality. The first quarter we call it peak season when the farmers have harvested their crops and then they rebuild their housing but this year the peak season has not really show up and we probably attribute this primarily to the poor monsoons last year so that is one of the reasons.

The other reason is that the excise duty on this product if you compare it to the last year of the same quarter has gone up from 4% to 10%. So that has put some pressure on our margins and then some increases in the freight as well. So all these things have played in terms of lowering our margins although the pricing has been pretty okay in the first quarter.

Q: In that case how much do you see pure demand itself scaling up to in the next quarter or recovering to?

A: On a yearly scale I think this industry should show growth rates of about 6%. We should be in line with that in terms of sheeting. Whereas our building products, our green building products such as insulation products and panels, these are green building products, customer acceptance of these are rising by the day. They are getting more and more popular and these products will probably show a double digit growth rate in terms of revenue.

Q: You have set up a new plant as well and the benefits of that should show up in the second quarter itself - how might that augment volume growth for you?

A: Yes. We have got a plant near Surat for our AAC blocks which is a green building product and that is going to certainly add to our revenues. We have just started commercial production in July. I think we are going to ramp up sales and production cost of this year. So certainly in the area of blocks we feel that we will get more than 50% growth this year.

Q: What would blended revenue growth be taking into account what you are doing in sheeting and the other segments that you spoke about?

A: The blended growth should be in excess of about 10%, again a double digit growth this year.

Q: Who are your key clients in the other segments that you spoke about - can you list out 4-5 of them so that we get a sense of the demand?

A: These typically go into commercial buildings, residential buildings hence residential is widespread but in commercial space our clients are L&T, Raheja's, Hiranandani-you  name it and any big builder would be our client. All the architects, structural consultants are aware of our products .We keep meeting them and also hold seminars. Green is big in the country and we are right there on the spot.

Q: You got a capex plan of almost Rs 100 crore lined up for that would you need to raise any money look to dilute equity etc or are you sufficiently funded?

A: We are sufficiently funded. We have got a strong balance sheet. Our debts have actually lowered as compared to last year at the same time. The Rs 100 crore capex would be funded from internal resources and if we have to go for some bank loans we will. But we do not foresee going to the market for fund raising at the current moment.