In an interview to CNBC-TV18, Anjan Chatterjee gives an insight on how their food business has been performing. He says their discretionary spending has been under pressure.
In an interview to CNBC-TV18, Anjan Chatterjee, managing director, Speciality Restaurants gives an insight on how their food business has been performing. He says their discretionary spending has been under pressure. "The H1 was fortunately good, but it was not as we would have expected, because of the pressure on discretionary spends," he adds.
He is also bullish on the company's performance and is expecting an EBITDA margin of over 19% in Q3.
Below is an edited transcript of Chatterjee's interview to CNBC-TV18.
Q: What is the general mood in terms of the business outlook? Are you seeing any kind of a slowdown in consumer spending? We have had reports about some slowdown in discretionary spending. Have you witnessed any of that?
A: Its all over the place. Discretionary spending is under a bit of pressure. The H1 was fortunately good, but it was not as we would have expected, because of the pressure on discretionary spends. That going forward, H2 or Q3, has been very encouraging and things are moving for the better, thought I completely agree that there is pressure on the discretionary spends.
Q: What about the pressure on margin? You are expecting the second half will be better than the first half. What would you say of margins, other costs?
A: We have not taken a price rise because we have absorbed it, we have cut our costs down, we been talking to our suppliers who are usually on annual contracts. So we have revisited them and said that till April there is no question of a price rise. There have been certain pressures in H1, which we have been able to deal with since we have been able to do certain things within our offering to the customers with Monday to Friday footfalls growing.
We have seen an overall surge in that. As this is a festive period, there is a tailwind and everybody goes out to eat. Anyway, historically we have been doing better during this period, so I am very bullish.
Q: You think you will be able to maintain margins because we have seen a significant slip in last quarter to about 19 percent. Is 19 percent rate maintainable now?
A: Yes. Maybe, we will improve in this quarter.
Q: How much of the money you have got in initial public offering (IPO) have you already spent?
A: I do not have the treasury details at this point of time, but we have added around 11 stores. So per store I can assume around 3-3.5 crore per store. I can approximately say around 40-45 crore.
Q: So what kind of expansion plans do you have? Are your expansion plans slower than you had assumed?
A: No, not at all. We have completed 11 stores. We have promised 16. We will definitely do 16 stores.
We are also in discussions to take on, get somebody for inorganic growth that we have been looking at. Like quick service restaurants (QSR) or a kind of a model which is an all day dining, which is more focused to 18 to 24 audiences, which we do not have at the moment. Ofcourse Mizuna is also an extension in which we are piloting a store in the month of January, but we are definitely looking at this kind of an synergy built and if everything goes well we should be giving the news within a month. So there is a possibility that we will go in for an inorganic.
Q: What is the target range you are looking at in terms of usage of funds?
A: We want to continue to be a company which builds the brand, which we have done historically. So, we are not over ambitious about a very large brand and at a costly structure. We are looking at a pie within a combination of our share dilution subject to permission of the authorities. So, we will be looking at a combination.
Q: What is the cash on the books?
A: This is not the exact figure but free cash on the books would be in and around 145 crore.
Q: What is your FY14 growth in that case?
A: With inorganic growth and the number of stores that we are adding, we are looking at anywhere between 14 to 16 percent. I am only talking with the new stores coming in and that has got respectable EBITDA margin, because the margins are more in that business.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.