See strong Re, better kharif improve Q4 margins: Rallis

Today Rallis India , a Tata group firm's stock was down nearly 4.5 percent in intraday. The results yesterday upset the market a bit, although the total income from operation was up 5.5 percent, at Rs 342 crore, earnings before interest, tax, depreciation, and amortisation (EBITDA) was down 15.5 percent and margins came in at about 3.5 percent.

In an interview to CNBC-TV18, Veeramani Shankar, MD & CEO, Rallis said that depreciation in rupee and cost pressures were responsible for the shrinkage in the margins. "Increase in the cost of utilities and power and given the turbulent environment we had in terms of the agronomy situation and monsoons, coupled with market situation on inventories and other factors were responsible for low margins."

Further Shankar believes that since now rupee is appreciating and if in Q4 the inventory positions ease towards Kharif, things are likely to improve.

Below is an edited transcript of Veeramani Shankar's interview on CNBC-TV18

Q: What went wrong and why the margins were such a shocker?

A: Cumulatively for the 9 months, we have grossed a turnover of over Rs 1200 crore, which in some ways is high for us and registered a 12 percent growth and the net profit now stands at Rs 108 crore which in some ways is higher than the full net profit of last year.

Last year, we had an exceptional item on cessation of operations; our performance this year so far despite those operations not being there is higher. Talking about shrinkage in margins there are two or three factors one is the depreciation of the rupee and whichever products we get from overseas had that additional impact of the forex.

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There have also been some cost pressures, particularly increase in the cost of utilities and power and given the turbulent environment we had in terms of the agronomy situation and monsoons, coupled with market situation on inventories and other factors.

It has not been possible for the industry to pass on all the cost into pricing. So, we are passing through a phase and going into the future some of these things should ease out and we should see the margins again calling back to where we were.

Q: How soon will the industry be able to pass on some of the cost pressures? Can it happen in the next three months or so?

A: One is of course is the foreign exchange impact, from the earlier lows rupee has appreciated somewhat. The other factor is picking up of consumption at the ground level and we had the Nilam cyclone impact and some loss of sprays, which happened in Q3. If Q4 unfolds and the inventory positions ease towards kharif, this year things should improve.