See operating margins at 18-20%: Exide

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Exide Industries has announced its first quarter results. The company's Q1 standalone net sales were down at Rs 903.1 crore versus Rs 906.5 crore.

AK Mukherjee, Director-Finance and CFO of the company said that he expected the Exide's margins to be in the range of 18-20% going forward. He added that he saw robust volume growth in the inverter market. "Interest costs have bottomed out but could rise higher going forward." Inventory, Mukherjee said was close to an average cost of Rs1400-1500.

Here is a verbatim transcript of the exclusive interview with AK Mukherjee on CNBC-TV18. Also watch the accompanying video.

Q: Lets start out with where lead prices are currently and could you give us a number on the unit price of that lead inventory that you are still holding if there is any?

A: We have lead inventory for consumption for more than the next two months and at present the lead is since last few days, its quite stable being around USD 1,600 of premium, so compared to the volatility it's a bit stable now.

Q: The inventory that you are holding, is it at this USD 1,600 level or 1.35-1.4 lakh that lead prices had gone up by, could you give us the average unit price of the inventory you are sitting with?

A: It is a mix of some low cost and some high cost inventory but largely if close to the average of USD 1,450-1,500.

Q: How about the sales projection, your sales came in flat for Q1, is this largely because the automobile industry is not picking up, how are you looking at the current quarter and more importantly actually, the remaining three quarters of FY10?

A:  On the sales growth fund, I would say the volume is reasonable, what you are saying is basically the value which depends on the ongoing lead price because all the institutional and OEM business are linked to the lead prices, but specially at the replacement segment we have a robust volume growth including the inverter batteries in the first quarter and I would say the replacement market will continue to be in a similar position and OEM hopefully will be better compared to the previous quarter.

Q: Will you be able to maintain your margins at this 23%, that looks fairly good and it's not a level that you normally have been notching up?

A: The first quarter, margins has basically happened because of the robust growth in the replacement segment as well as lower lead price compared to the previous year and appreciation of rupee and also some measures for cost reductions, so these are the combinations and results from which we have got this gross margin, there will be definitely a change or mixed sales and replacements, and OEMs expected to grow a bit and lead price has also gone up compared to the previous quarter, so most likely it will be definitely reasonably good but its difficult to comment whether it will remain at this level.

Q: So you mean basically it will be closer at about 15-20%?

A: Yes it should be around 18-20%, that's what we should expect.

Q: The markets seem to be considerably excited by your company because the stocks seems to have moved up by almost 50%, anything we are missing here, you are buying somebody out, is there a major change in lead prices, major uptick in your sales, new manufacturing facilities, anything that we are missing out here?

A: I would say that it is because of the performance of the company despite the downturn. We consistently projected a good reasonable growth and that is the reason for this.

Q: You have seen a fairly sharp drop in interest costs that you have seen in terms of interest at a time when money was perhaps dear?

A: Interest costs also include the effect of rupee appreciation, that is external factor and I don't want to comment whether that will be there in the coming quarter, but interest rates are right now at the bottom and would likely to go up a bit, but we have reduced our borrowing however it is directly dependent on our capital requirements which is showing a great improvement and the borrowing has come down and will definitely go for cheaper means of the borrowing.