Sintex not worried by growing competition in monolithic biz

Sintex Industries is not worried by the increasing competition in the monolithic segment. In an interview with CNBC-TV18, Sunil Kanojia, Group President, Sintex Industries said competition is always good for any business, especially if the competition comes from organised sector because it helps to expand the entire pie.

He further said the margins of monolithic segment remain fixed.

Below is the transcript of his interview with Reema Tendulkar and Gautam Broker Also watch the accompanying video.

Q: What's the outlook is for the monolithic segment? What are the current margins? How are they likely to pan out?

A: Competition is always good for any business, especially if the competition comes from organised sector because it helps to expand the entire pie. Sintex will be more than happy to have larger competitors coming in, helping the market to grow. Everyone has already talked about in the government that slums have to be rehabilitated. They are talking about 26 square meters kind of housing to be provided to each person who is living in a slum. I think cabinet nod is needed over there.

I think we need to make little differentiation here that if projects, which are dealt by the government, are getting delayed, the business in monolithic will also get delayed. We are talking about two different segments; we are not talking about large infrastructure projects. We are talking about something that deals with the masses, the lives of the masses.

Year after year the budget allocations on social sectors have been increasing. The spending in social sectors has been increasing. There may have been delays in the larger projects, but it should not happen monolithic and pre-facts projects. I think most important here is to see how the numbers have been delivered in last four quarters, though this concern of competition as well as delays in the government has been coming for quite some time. You look at the numbers that were delivered in the last four quarters.

Q: In monolithic segment, you have been posting decent margins of about 18-20%. Do you expect to maintain these margins? Have raw material costs actually dented any of your margins in the past two or three months?

A: The raw material costs of larger projects are always having a pass through clause. The margins remain fixed there.

Q: With increase in competition, would you expect that margins would naturally come down? There have been reports indicating the margins you are enjoying in monolithic segment or actually quite high as compared to the industry average. Is there a possibility that over the medium-term margins could come down in this segment?

A: There are two things. One is what is happening practically on the ground. Other is what is likely to happen theoretically. Any business which has high growth, high margins is likely to attract competition, I buy that argument.