See revenue growth of 20-25% ahead: Hanung Toys

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Hanung Toys and Textiles has declared its third quarter results. The company's profit is down 32%. Ashok Kumar Bansal, chairman and managing director of Hanung Toys and Textiles says, profit was primarily hit owing to high interest costs. He expects interest costs to cool off in the coming two-three quarters.

He further says, the company is targeting a revenue growth of 20-25%. According to him, the margins are sustainable.

Below is the edited transcript of his interview with CNBC-TV18's Latha Venkatesh and Ekta Batra . Also watch the accompanying video.

Q: We understand that your sales were up 25% this time around. Can you just take us through the textiles division which actually saw the maximum surge on a year-on-year basis? What led to this 41% growth there?

A: During this period, there was a lot of market uncertainty. But in the textile business, we are expanding our capacity. There we are doing much better compared to our toys division.

In toys, the capex is not that important. We need to have very-very skilled manpower. That's why the growth in toys is slightly less, but in textile market, it's very much. If you see quarter-to-quarter, the growth is close to 22-23% and for nine month growth was 16%.

Q: But your profit is down 32%, what caused that?

A: That's mainly because of high interest costs. Most of the companies are affected by that. I think going forward the interest rates will come down. By next year, I think we will come back to the same position.

Q: How are you expecting the fourth quarter in terms of sales as well as in terms of costs like interest?

A: There will be a similar growth in the sales in the fourth quarter. But in case of profits there will be definitely pressure because of the interest costs. It will take three to four quarters for interest rates to come down. I think by the end of next financial year the interest rates should be close to normal.

Q: What exactly is happening on the margin front then? Do you think that these margins can be maintained between this 17-19% levels? What's happening on the raw material front as well? What pressures are you facing?

A: Those margins are sustainable. We are confident that we will be able to sustain our margins.

Q: We understand that a goodish bit of your supplies are to retailers like Bloomingdales and Wal-Mart, is that true?

A: We generally don't do much with Wal-Mart. But definitely Bloomingdales or Macy's or Bed Bath & Beyond, which are more mid segment, we are getting more as compared to the discount stores.

Q: Do you expect the order flow to be good in FY13 as well? Can we expect a 25% revenue growth rate?

A: Definitely 20-25% growth will be there. Again we are going to tap that same high-mid segment and not the low segment.

Q: While your textiles division has done well, your toys division has pretty much been flat on a year-on-year basis. Even last quarter it's shown a marginal amount of growth on a sequential basis. What is happening on the toys front? What is the growth trajectory that we could see there?

A: We need a skilled manpower. Right now, we are facing a shortage of manpower. Because of NREGA, many workers have gone back to their hometowns. So that's why we are not able to sustain similar growth in toys.

In case of textiles, its machine driven, include the capex we will get the production capacity and there we can have the growth. That's the difference between the two segments.

Q: What's your total debt?

A: Total long-term debt is close to about Rs 650-700 crore on a net worth of close to Rs 600 crore.