Opto Circuits recovers; co to solve working capital issues

Global Medtech conglomerate Opto Circuits received one of its worst poundings on Friday after it reported 95 percent fall in net profit for the quarter ended March 2013. Shares of Opto Circuits plunged more than 30 percent to touch its 52-week low last week.

Speaking about its fourth quarter numbers, Vinod Ramnani of Opto Circuits  said it was below expectations and the company is taking steps to address working capital issues. "We are trying to unlock valuations of all subsidiaries," he told CNBC-TV18. The stock has partially recovered on Monday. At 10. 25 AM, it was trading at Rs 33.40, up 6.03 percent. Meanwhile, Ramnani said the company’s order book continues to be healthy and India contributes a significant 25 percent to its overall business. Below is the verbatim transcript of his interview on CNBC-TV18 Q: Fairly disastrous quarter for you guys, what happened on the sales side, what led to that big slippage and what you witnessed both on invasive and non-invasive segments in terms of sales performance? A: We have been performing for last 12 years and quarter on quarter we have done good although this was a bad quarter. There are lots of reasons behind it; we put the credit policy in place, we have working capital issues which we are addressing right now, and also European market saw a little bit of slowdown. So one can see that this one quarter was bad and we are taking all the steps to see how we can fix all burning issues like debtors, debt. In next three-four quarters we are working on the credit policy, we are looking into all our world assets and trying to unlock the valuation for all our subsidiaries. We have a fantastic business model but this quarter was bad. I am sure that is going to get better as we go along. Q: First on the working capital issues what is it that you guys target to do through the course of FY14 both in terms of cutting down the cycle and alleviating the pressure? A: Since majority of our business is coming from outside India that is US and Germany, so firstly, we have done lot of cost cutting in last three-four months and you can see the results going forward. We are now trying to convert short-term into long-term and trying to deploy the working capital wherever it is required. The subsidiaries should have their own working capital, so that they can do the business in a normal way. We are taking all the measures to see that all the subsidiaries particularly, outside India, are very well funded as far as the working capital is concerned. That is the first step we have taken so that the business goes as usual because we have lot of back orders and order booking is very healthy. Unfortunately, we could not execute it in last quarter but we have taken all the steps to see how we can fix this issue going forward. Every company has a growing pain and we are going through it but it is just a matter of time. It will take us three-four quarters to get over the whole thing and come back on track. Q: You guys have discontinued giving guidance as well, how many more quarters do you think where you will have to see this kind of pain before you start showing any consistent sales growth and even start breaking into the black? A: Last quarter we did not really give any guidance because we were in the process of restructuring our debt at various locations and we did not know how long it would take us to do that. However, we are working on it. So, this was a bad quarter but I am sure that going forward it should get better in terms bottom-line and business overall. Q: Why so many management changes - you are churning your management around so fast one wonders whether the team in place has either the time or gets a handle of the business in order to turn it around? A: The management teams are at various locations, India has only 20-25 percent of overall business. Now as and when the time demands when we see that we have to do cost cutting, and since we have acquired quite a few companies outside India, so we have to take those calls from time to time and bring in more efficiency into the system. And the business at times overgrows the management, so we have to take those corrective measures as we go along. We have already started doing that; we have the audit committee in place, we are looking into various aspects of taxation issues, various aspects of worldwide asset base that we have. So we are just getting our things together one by one. This was a bad quarter particularly in terms of sales but as we go forward, things are going to fall in place; the business model is very good so I am not really worried from that angle. If the business would have been not good then I would have told you it is not going to be possible but business is really bullish, we have lot of orders. Yes we have a situation; the management is working on it to see how we can fix the issues. Q: Have you identified any property of assets that you want to unlock value with and have you set aside a target in terms of what you want to raise from this unlocking process even through the course of this financial year? A: Let me give you an example, on Friday we signed a deal with Biosensors our Eurocor which is a subsidiary of Opto Circuits in Germany, they signed a deal with Biosensors. There are other companies we are talking to. So we have lot of value there and we are working on it how fast we can just unlock those values and bring cash in the company. So, we will resolve this working capital issue but it is not really going to happen overnight. It will take some time and you can see that things are back on track.