Relieved to see Manesar plant resuming production: Gabriel

Gabriel India, critical component supplier to auto major Maruti rallied post re-opening of Manesar plant.

"We have a plant and Maruti is our customer in North India. We are happy to hear that things have started yesterday. This is coming at the right time and just before the festive season, so we should be looking at good volumes from the plant all over again," Manoj Kalotkar, joint managing director, Gabriel India told CNBC-TV18. Maruti contributes 7% to Gabriel India’s total turnover. Below is the edited transcript of Kalotkar’s interview with CNBC-TV18. Q: Want to understand the impact of the Manesar plant now being back on track in terms of limited or partial production at this point in time. How would it benefit Gabriel India? What is your production outflow at this point? How much are you supplying to Maruti? A: We have a plant and Maruti is our customer in North India. Like everybody else, we were affected and we are happy to hear that things have started yesterday. This is coming at the right time and just before the festive season, so we should be looking at good volumes from the plant all over again. Q: What is the total share of your capacity that services Maruti? Is it 50%, is it 40%. How much of your output is geared towards Maruti and what was your capacity utilization in part of the quarter that is now over – July-August? A: The capacity of that plant is roughly just about 15% of our total capacity, so in terms of that it’s not a very big exposure. However, the plant being dedicated it is looking at lower volumes over the last few months Q: Lower would be what – was it working it half the capacity? A: No, it would be more like 60% Q: We also understand that you maybe looking to offer shares preferentially to promoters or to private equity companies, anything at all in terms of an equity raising? A: Not really. Q: None at all, no money being raised through share sales? A: No. Q: What sort of finished product inventory levels are you working with at this point in time? A: In this market major customers are original equipment (OE) customers. We operate depending on the customer, from half a day and it goes right up to two-three days. Q: What about this quarter’s numbers because in the previous quarter your sales were down around 2% odd. Give us a sense on what exactly would be the impact with regards to Manesar on your quarterly numbers? A: Manesar plant contributes roughly to the tune of 15-20% of total. So, it’s going to be affected to a small extent. Q: We were given to understand that Tata Capital, ChrysCapital as well as Bearings – PE funds like these were speaking to you. Is that true? A: We have been speaking just to improve investor confidence. There is nothing more than that. _PAGEBREAK_ Q: Even in the next couple of quarter you will not consider if there are interested parties to take their money? A: Not really. We are not thinking on those lines as of now. Q: How much of Gabriel India’s output goes to service OEMs? How much services the replacement market? A: I would say that 10% goes to replacement market and about 5% to exports and 85% OE. Q: In that category of OEMs how has the demand generally been? Maruti had its own problems, but generally is there a lull in demand like other auto ancillaries seemed to be reporting? A: Quite frankly we service all the automotive segments right from two wheelers, three wheelers, four wheelers to commercial vehicles. We have noticed a drop in commercial vehicles to some extent. It’s not to the extent that has quite frankly being reported. It’s gone down a little. Two wheelers have held ground pretty firmly. Even in the passenger car segment, while petrol is down, diesel still commands a huge waiting list. Q: If you have to give us an annual demand picture would you say that YTD 2012 demand how does it compare with 2011 demand in the same time? Is it like 10% lower, 20% lower? A: On the commercial vehicle front it’s a little lower. I would put it at more like 10%. Three wheelers demand is certainly down. Q: Your pro-rata sales would stand at Rs 300 crore or do you think that in the forthcoming quarters it could be lower than that? A: Like everybody else in the industry come festive season which starts next month we are pretty hopeful. Q: Besides the top-line what exactly do you think you can do possibly on the bottom-line as well, because the profitability was the one which was extremely pressured in the previous quarter? Besides aberrations what is the run rate we can expect on the bottom-line? A: In this industry you can’t expect a very significant change. We will be operating pretty much in the range that we have operated in the last year. That has been our target. In the first quarter there has been an aberration where we had a one-time cost. We are focusing big time on cost reductions internally. Q: How would that contribute to margins in terms of a run rate as well? A: We are targeting the same PBT margins like we did last year.