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Last Updated : Jun 13, 2016 04:01 PM IST | Source: CNBC-TV18

After 75% growth in FY16, Sakuma eyes $1bn revenues by 2018

The company's growth in profit and turnover has been over 70 percent in the current year and if its is able to maintain it, Sakuma should be able to break in to billion-dollar club by early 2018, says Managing Director Saurabh Malhotra.

Sakuma Exports, which deals in export of commodities like sugar, corn, spices, aims to enter the billion-dollar club by 2018. During the March 2016 quarter, Sakuma's margins grew marginally to 2.1 percent from 1.1 percent. Similarly, on a YoY basis for FY16, Sakuma's EBITDA margins grew to 1.3 percent from 0.9 percent.

In an interview to CNBC-TV18, Saurabh Malhotra, Managing Director of Sakuma Exports, said that the company has been working on improving margins for which it has made a few investments towards diversification and expansion. These investments will bear fruit in FY17 he said.

The company's growth in profit and turnover has been over 70 percent in the current year and if its is able to maintain it, Sakuma should be able to break in to billion-dollar club by early 2018, he said. Subsequently, margins should improve, he said.

Below is the verbatim transcript of Saurabh Malhotra's interview with Reema Tendulkar and Mangalam Maloo on CNBC-TV18.

Mangalam: Can you tell us what are the commodities you export and in what proportion and at the same time, what kind of benefits do you get with higher corn and cotton prices?

A: Predominantly we happened to be the largest exporter of sugar out of India. Apart from sugar, we are doing various other products like spices.

So as such on the export side, there was no parity of corn because the production has come down from around 3.5 million tonne to 1.5 million tonne. In fact, the government has allowed the duty free import of half a million tonne this year of corn. Coming back to our company, we have diversified a lot into various products. So we are not only exporting, we are also importing various products like edible oil and pulses.

As far as cotton is concerned, because of release of the local supplies by Chinese government, the cotton exports from India have also come down.

Reema: Just to clarify on the point of corn, corn is 10-15 percent of your revenues and you are saying that on account of the sharp increase in corn prices, production has taken a hit and therefore we haven’t seen exports, which means it hurts the business of Sakuma Exports, right?

A: No, corn doesn’t constitute 10 percent of our revenue, it would be minimal 1-2 percent of our revenue.

Reema: But the rest of the analysis is right.

A: Yes.

Reema: What about cotton? How much does it contribute to your revenues and therefore what impact will it have on the company's revenues?

A: Basically, we are not at all focused on single origination that is India as an originator for exports and a single country. So we are also exporting cotton out of various parts of Africa. So as such our company doesn’t get affected because we have a set market and set plan. So if India doesn’t originate and doesn’t be viable, we are currently doing a much larger share for our exports from our subsidiaries in Africa.

Mangalam: If we look at your business model, your margins are 1.1 percent, which has increased a bit to two percent. When can we see that improving, when can turnover be a lesser contributor to your bottomline and margins will be a bigger contributor, when can we see that and how can that happen?

A: The business model, which we follow is typically not a very generic model where most of the traders are following. Most of the trading companies in commodities which we see are doing a paper trading. Therefore you see a very varied fluctuating profit after tax (PAT) to sales figure but that is not in our case. If you see our PAT to sales ratio has been maintained over the last so many years and there is much more stability. The reason for that is in the supply chain management, right from the origin to the destination, we are involved on the physical side. So we are not trading only paper or only a third country trade, we are physically trading goods.

Reema: While your point about your profit margins being stable is right, what we are trying to say is that your profit margins itself are very low. It is only one percent at the net profit level, is there scope for you to improve your margins?

A: We have been working a lot on improving our margin but what is happening is in the last two-three years, company has been growing and expanding into various products and various markets as well as origination. So there is a lot of investment, which goes into development of these products and market. So, I feel that the source of that has already coming up and if you see the growth in the turnover as well as the profit has more than 70 percent in the current year and as we are targeting and if we maintain the same growth percentage, we are looking to get into the billion dollar club by maybe beginning of 2018.

Mangalam: Any view on what the margins could be at that point of time?

A: Margins should be certainly improving, the percentage should grow by 15-20 percent as compared to the current ratio.

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First Published on Jun 13, 2016 02:20 pm
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