Ajith Rai of Suprajit Engineering says the company has seen 65 percent market share in the two-wheeler segment and expects better times for the company in the days to come.
Speaking to CNBC-TV18, Rai says while Q3 hasn’t been as good as H1, he expects the company to outperform industry by atleast 5-10 percent in FY15.Below is the verbatim transcript of Ajith Rai's interview with Ekta Batra and Reema Tendulkar on CNBC-TV18.
Reema: In your midyear review you indicated your cable expansion plans. What is the kind of investment that the company will require to do that and also if you could tell us in FY16 how much capacity would come on board and thereafter in FY16?
A: The plan is to increase our capacity from current 150 million to 225 million. The overall outlay will be about Rs 75 crore, some of which we have already incurred because first plant of ours in Pathredi is in the advance stage of implementation. It will go into production by March 2015. The other two major plant, one is in Oragadam in Chennai and the other one is in Sanand in Gujarat for our Gujarat based customers. These two will get into production in the middle of next year, by December latest. We have planned in such a way that some capacity will be in place by March 2015 and the rest will be by March 2016. So the capacity by end of this year would be around 170-180 million and it will slowly ramp up to 225 million by end of Mach 2016.
Ekta: Can you give us a sense for the benefit of our viewers, how much market share do you currently have in the domestic business, how much of your business or total sales do you export at this point in time and what is the growth rate that you are expecting in both of them. Do you expect the domestic market to outperform the industry significantly and if so by how much and what is happening on the export side as well?
A: As far as the two-wheeler market in India, we have about 65 percent share of market whereas in the other segments, automotive that includes light commercial vehicles (LCV), heavy commercial vehicles (HCV) and the automotive car segment. Our market share is about 25-30 percent because there are about seven-eight other players in the market as well.
In terms of exports, our global business in the first half was about 20 percent and 80 percent is domestic. In terms of growth prospective, as a consolidated basis, we expect our business to outperform domestic automotive by about 5-10 percent – that means if industry grows at about 15 percent, we expect to grow 20 percent plus.
Reema: What is the industry likely to grow at in FY15 as well as in FY16? You are an industry veteran. Tell us what is your expectation?
A: H1 has been good but Q3 has not been as good as we expected. There seems to be some slowness in the industry; October and November has not been great, if you look at the overall perspective there has been pockets where some customers have done well but some who have not done well as well. I would say Q3 is going to be muted performance but I expect that maybe in Q4 and at least from first quarter of next year we do see opportunities and optimism that things would change.
Ekta: You have any inorganic growth plans?
A: That has been a stated intent of ours for the last two years but we have not been able to identity and freeze anything that is of interest. We did have a small acquisition of a cable division some time ago, it’s a small business but the larger ones have not yet been crystalised and we do not have a timeline on it.
Ekta: What is your cash in debt of books?
A: We have about 100 crore in cash in the books. Our long-term debt, I do not have the exact figure, probably about 60-70 crore and working capital debt of another 75 crore.
Reema: What is cash generation per quarter?
A: I do not have the exact number with me but we are having an EBITDA of 15 percent on the standalone company and probably about 14-14.5 percent on the consolidated business. We would think that 6-8 percent is the net cash after taking out the interest and depreciation and with the depreciation probably about 7-8 percent of the sale.
Reema: What is the outlook on pricing? Q3 was muted so would you or the industry would look to cut prices in order to spur demand next year. Give us a sense?
A: Q3 muted in the sense that the customer is muted. We will still outperform the automotive sector but how it is going to pan out, is there going to be cuts by the customer, is difficult for me to say but I feel that Q3 is probably something which will change for better from Q4 onwards.
Ekta: Can you give us a sense on how much you are generating in terms of volumes in Q3 as oppose to Q2 or have you generated?
A: You must also realise last year Q3 has been one of our outstanding quarter in the history of the company.
Ekta: Sequentially what is the difference?
A: Sequentially there would be some growth but I do not have the numbers. We do not give a total number or a futuristic number but last year’s Q3 has been one of the best quarters we had in our history.
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