Tree House eyes 50% bottomline growth next year

In an interview to CNBC-TV18, Rajesh Bhatia, managing director, Tree House Education and Accessories gives the details of the stakes held by Aditya Birla Private Equity Fund and ON Mauritius after the preferential allotment. He says both the investors will have 3.5 percent equity stake in the company and about 81.5 crore has been raised post the issuance. Bhatia expects the company to grow by 25 percent on the topline and 50 percent on the bottomline.

Below is the edited transcript of Bhatia’s interview to CNBC-TV18. Q: What will be the stake of the Aditya Birla Private Equity Fund after this allotment?
A: The stake in the company post this equity issuance is going to be around 3.5 percent. Q: What about the other fund, ON Mauritius?
A: ON Mauritius is already an existing investor in the company and ON Mauritius has about 3.5 percent equity stake in the company, so by adding and investing 4.5 lakh shares they would be approximately at the same equity issuance levels. Q: Totally how much money are you raising now with the current warrant issue because warrants have been allotted to you as well as the promoter? What is the total amount of money that you are raising?
A: Post all the money coming into the company, the issuance is roughly around 81.5 crore. That is the kind of money that is going to come into the company. Q: What is your stake to go up to?
A: The promoter stake in a company will go up approximately by 2.5 percent, which is roughly from 29.7 percent it will go up to around 32 percent. Q: What are you other funding plans? Are you looking for more funds or equity infusions through any other preferential allotments?
A: No, we are not. Q: What about the capital that’s come through. Is it growth capital? By how much do you expect to expand in this year and in FY14?
A: The growth trajectory continues to be very robust and the kind of money that we are raising is more like dry gunpowder. Tree House continues to have robust cash flows and the business continues to grow pretty well. In terms of our pre-schools, every single year we add 72-75 self operated pre-schools and this year too we would be on track to add the same. Yes, it’s always better to have some dry gunpowder in the balance sheet just to see if we have anything that comes up for us. Q: How should we forecast your revenue trajectories? You have been doing about 25-30 crore a quarter. Should we expect that you will be able to scale this up in the second half of the year? What is the trajectory in FY14?
A: The company sees a big bump-up in growth every single year. The growth comes in the first quarter itself because we are a pre-schooling company and we get kids coming to us in the Q1. Throughout the year its more or less flat and then again the bump up comes in the first quarter of next year. So that is the nature of the business and that will continue. We are seeing fantastic traction for next year, since admission in all our pre-schools, in all centres across the country are already on. Q: How should we estimate the revenue growth for the next year Q1?
A: We think the growth on the topline would be more than 25 percent and the growth on the bottomline will be at 50 percent.