A sluggish automotive market will lead to stagnant or very little growth in the first two quarters of this year, Ajith Rai, CMD, Suprajit Engineering told CNBC-TV18.
However, he expected a 5-10 percent growth in the last couple of quarters if monsoons were good and rural demand picked up. The company's March quarter revenues grew 12 percent year-on-year.
The company is expecting an increase in capacity from its new plants. Utilisation of Pathredi plant in Rajasthan has already begun and the other two plants, in Gujarat and Chennai, are expected to become functional by second half of this year, Rai said.
“We are hoping to increase capacity to 225 million from the current 150 million in automotive control cables business this year,” he said.
Rai is expecting revenues from the company’s recent acquisition of Phoenix Lamps as well this year.
Below is the transcript of Ajith Rai’s interview with Mangalam Maloo & Reema Tendulkar on CNBC-TV18.
Reema: You wrapped up FY15 with a revenue growth of close to about 12 percent odd. How is the outlook looking for FY16? Will growth be better in FY16 considering the currency headwinds as well as the business situation in the automotive replacement market?
A: The outlook for the current year is quite hazy. The first half of this year doesn’t appear to be all that exciting; the growth in the first 2 months of this year in the automotive sector has been in low single digits in 2-3 percent. The two-wheeler sector has been pretty badly hit. Most of the two-wheeler majors are having significant headwind in their sales.
In the automotive sector, except Maruti Suzuki rest of them are doing okay. Maruti has been doing well. From an overall perspective, the growth so far has been about 2-3 percent in the overall industry. For the next couple of months or probably this quarter as well as next quarter is going to be lot more challenging than that we originally thought. Hopefully, the second half, if the monsoon is fine then I think the rural demand will pick up, is when we will see some decent double digit growth.
Mangalam: What is the outlook as far as your exports are concerned because recently the company opened an office in North America to cater to that geography as well. What is your outlook for your export growth going forward?
A: Suprajit’s exports to Europe would be more or less same with some growth in the European Market because European Market has not been growing. Our after market has been steady and we hope that there will be decent growth going forward. Whereas the non-automotive exports has also been having some headwinds in terms of what is happening with some of our main agri-based non-automotive customers in US.
From an overall perspective, we have always been saying that we will outgrow over all Indian automotive industry by 5-10 percent. We are still hopeful that during the second half of the year, if the traction for all these sectors, exports as well as domestic if it improves, we are still confident that we will out beat the industry growth by 5-10 percent.
Reema: What percentage of your revenues comes in from the non-automotive segment and which segment is going to grow faster because in automotive you sound a bit cautious? You are saying that the industry is growing in single digits. Is the non-automotive business for you doing better and what would be the growth rate?
A: Our non-automotive business is small part of our overall business. If you split our business of let say 100 percent into the sectors - 52-53 percent of the business is in two-wheelers, about 32 percent is in automotive, 10 percent in after market and about 6 percent in the non-automotive sector. Where are the growth drivers? I would expect in some select pockets in two-wheelers because we are getting significantly higher share of businesses in one of the Indian major.
We see a traction increasing in the Indian automotive industry where we are winning some of the new contracts for some new launches of the vehicles. Where we see traction is in some parts in the second half of the year from the non-automotive sector where we expect the agri implement manufacturer, one of our big customer is given us a hope for significant improvement, that is where the tractions will come.
In the multiple business part, there are pockets where there are growth within an area where there is no growth. So, that point of view we still are confident that we would on an overall perspective, continue to grow the way we have always projected in the past.
Mangalam: A word on your capacity utilisation because company has planned major capacity expansion going forward. What’s the status of construction of plants as well?
A: The plant in Pathredi - the building activities are all complete. We are starting to utilise some capacities there. The two new plants which are under construction - one is in Sanand in Gujarat and one is near Chennai near Vallam Vadagal. Both these plants will go in to production during the second half of this year. We expect that by end of this financial year, our entire plan of capex of increasing our capacity from 150 million to 225 million will be in place which will be utilised by us over the next 2-3 years.
We are gearing up that from the second half of this year onwards for the next 2-3 years time Indian automotive industry as well as our export as well as our after market business is likely to earn much higher trajectory of growth that is what we are hoping and that is what we are planning for at this moment.
Our recent acquisition of Phoenix Lamps which ones is fructified; we expect that together there will be a significant growth opportunities for us to work on.
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