Aim to beat industry growth by 5-7% in FY17: Suprajit Engg

In FY18 they expect their domestic business to be around 55 percent and international around 45 percent, said Rai.

Suprajit Engineering is world’s largest 2-wheeler cable maker and India’s largest automotive cable market with 50 percent market share in OEM segment.

Some of its domestic auto maker clients are Maruti, Tata Motors, Mahindra and Mahindra, TVS Motor, Hero Motocorp etc

They also export cables to global players like BMW, Renault-Nissan etc.Below is the transcript of Ajith Rai’s interview to Sonia Shenoy and Latha Venkatesh on CNBC-TV18.Sonia: You have had a great calendar year, you have done some acquisitions, you have reported good numbers, but tell us what the growth in 2017 could look like. You do have some acquisitions that you have done, not just Phoenix Lamps, but recently Wescon Controls in USA as well, what would that bring to the table for your company over the next 1-2 years.A: Yes, 2016 as well as 2015 has been landmark years for us at Suprajit. As you know, in 2015, we had acquired Phoenix Lamps and in 2016, a couple of months ago, we have acquired Wescon Controls. Basically, these two acquisitions have been very strategic for us. One from a product diversification point of view as well as Wescon has been more from the point of view of finding a new niche, new sector within the automotive cables space. Both have been very good fit for us and we feel that 2016 has been a challenging year from the point of view of business particularly in the last couple of months. Going forward in 2017, we believe that with the three brand strategy that we are now adopting, Suprajit for automotive control cables, Wescon for non-automotive control cables and phoenix for the automotive lamps business, we believe that we are perfectly set to grow our business, not only in the Indian atmosphere, but also beyond India in the global scene.Latha: What is your domestic export split?A: If you roll forward, Wescon will have a full impact on our business next year as a full year of operations. So when we look at FY17 and FY18, we think that 55 percent of our business will be India-centric whereas 45 percent will be outside India, global business, which is a very good strategy to have. About 10 years ago, we just had 1 percent of our business as our global business. The whole way we do business today has transformed into more a global company than a domestic focused business.Sonia: I was going to come to that because you recently secured some new business from the likes of BMW, Volkswagen even Renault. I wanted to ask you what exactly is the quantum of those orders and when will they get executed in which financial year?A: Currently, amongst the three, between BMW, Volkswagen and Renault-Nissan, BMW is our largest account. We do about USD 4 odd million. Volkswagen and Renault-Nissan is about a USD 1-2 million business.But what is important is that each one of these companies’ cable buys, that is the main product that we are selling to them, is anywhere from USD 30 million to USD 50 million. So, the point is that having entered these customers in the last 2-3 years time, how much we can do to convince them to give us more business. So, we are a small player within their buy list, but we can easily grow that business and in the next 2-3 years’ time, we have significant new businesses both from Volkswagen, Reanult-Nissan as well as BMW, which will grow our automotive cable exports to the next level.Latha: I wanted to ask you since you have a substantial amount of domestic business, how has business been in the last eight weeks? Are you seeing any pain in other auto ancillaries? Your original equipment manufacturers (OEMs) are a very sturdy people, but if you can give us a feel of the industry itself, the smaller units, the micro, small and medium enterprises (MSME)?A: There are two sides to the question. One is the automotive OEM business and the second one is the spares or the aftermarket business. The medium and industries like us, we cater to both the sides of the business. The OEMs have reduced their offtake. Particularly December probably will be the worst month for a while to come. Most of them have blocked holidays, they have got maintenance off. From now onwards till end of the month, there is hardly any business being done at the OEM.Similarly in the aftermarket, in the spares business as well, which has significantly been a cash market, that has had its own effect since the demonetisation has been announced. So, this pain will continue for some more time. My own view is that both for the aftermarket as well as OEMs to recovery it will probably take another three months to the get back to normalcy.Latha: My fear about this latter segment, which is strapped for cash and which has always been a cash business, is it possible that people may go out of business for good?A: There will always be this famous historic theory that the weakest will go. So yes, we do expect some of the distributors who are not strong fundamentally, who have been doing only cash business will have difficulty to survive. What is happening in the supply chain is that the stocking levels are coming down. Let us say in an aftermarket business where we do our business, the typical holding cycle from us till the service station, there is at least 3-4 levels, is about 16 weeks. Now it will crunch to something like eight weeks. So, the people who are getting affected are the manufacturers right now. Right now, all the dealers, distributors, service stations are crunching their stocks to bring the new cash in to place new orders. So, we will now pick up the business hopefully from January onwards going forward. But as I said, it will take another three months before the normalcy comes into this business.Sonia: So, by the end of FY17, what kind of growth are we looking at in the topline? In FY16, you had a pretty healthy growth. You had a 55 percent growth to Rs 950 crore. Are we looking at something around Rs 1,400-1,500 crore in FY17 as well?A: You are talking about the current year?Sonia: The current year, the revenues.A: We do not talk about the futuristic number. All I would say is that we will grow -- of course with the Wescon that is in our bag now, on a fully consolidated basis -- pretty nicely. The growth will always outbid our own stated philosophy that we will outbid the India industry growth by at least 5-10 percent on a consolidated basis, which will easily be able to achieve. Beyond that, our margin should be very well protected. So, despite this current turmoil in Indian market, we will have a good year on an overall consolidated basis. Although on a standalone basis, some of the numbers would look slightly weaker.