Fall in crude will mostly help B2C business: Sintex

Anuj: You are one of the key beneficiaries of the kind of fall that we have seen crude prices. If you could quantify that for us and if you can tell us which segments will you benefit because of this? A: This is a downstream project of the crude oil so the prices softens up but it does not happen immediately. There is separate supply demand equation for polymers. Many a times it has happened that the oil prices have gone up but still the polymer prices remain soft. So, we have seen that prices are softening.However, the competition will drive the prices down and custom molding also you will see that customers will call you and try negotiating with you for the prices on the downward trend. So, I can only say that we do get some advantage especially in the segment which is B2C where you do not have to reflect immediately the reduction in prices to an extent that you get benefit of reduction in the raw material prices. So, we have gained and when the prices go up we don’t lose. We are in a position whereby we can manage our margins in the positive direction.

Ekta: Within the plastics division will prefab segment be the biggest beneficiary and also has the company already started witnessing gross margin benefits? A: This has been happening. As I said in many cases the customer especially in custom molding, is very knowledgeable. So, when he realises that your raw material prices are going down he will call you for negotiation. The only thing is that how much time you have and how much you gain in terms of negotiating and to what extent it goes down in terms of your prices. However, I have also seen that whenever the raw material prices are going down we have gained largely on this front. I should say that the entire plastic segment will be a gainer out of this.

Anuj: Sintex has been touted as one of the companies, key beneficiary rather of the recently announced Swacch Bharat mission. Have you started to see any kind of ordering in that front? A: As of now we have seen the plan has come out where they want to spend about Rs 62000 crore on clean India campaign where they are talking about toilets as well as sold waste management. However, they haven’t started rolling out in terms issuing orders. However, the major traction as of now which we have seen coming especially for the prefab segments and that too for toilets, classrooms, etc is coming from the CSR activities because the large corproates have to spend 2 percent of their profit under CSR and we have been seeing lots of enquiries coming; we have been finalising lot of orders. So, I can see that towards orders as well as classroom and primary health centers the prefab segment is going to be a good segment in terms of very high growth and possibly maybe 35-40 percent growth in this financial year. However, once government business rolls out then it is going to be a different ball game altogether.

Ekta: You have guided for around 20-25 percent consolidated revenue growth target for FY15. Given the strong outperformance seen in the first half itself how confident is the company possibly even beating this guidance? A: When we started the year we did talk about 12-15 percent. However, then we revised around the end of first half to 25 percent. It all depends on when the government orders start pouring in. Hopefully if that happens in the Q4, let us say order activity happens in the Q3 and insulations happen in the Q4 then we are definitely there to revise it to maybe 30-35 percent. However, as of now I will still hold it till about 25 percent or so as the topline growth and may be we will have better advantage on the bottomline that should be about 35-40 percent for the simple reason that we are going to have a better cost absorption because of better capacity utilisation.

Anuj: You started the year with a debt of Rs 4200 crore, has there been an escalation in this number and what is the update on the Foreign currency convertible bonds (FCCB) if you could give us some details? A: I may not have the exact number but Rs 4200 crore was the gross debt. So, at net level it was about Rs 4000 crore. However, at the same time you should look at Rs 850 crore of FCCB, about 40 percent of that has already been converted; about 5.5 crore shares have already been converted. Everyday we have been receiving request for the conversion. However, at the same time the FCCB is now at a coupon rate of 3.75 percent which was earlier at 7.5 percent. It has already reached second anniversary and now the debt is available at 3.75 percent. However, we have been in the process of churning our debts to ensure that we have a low cost of debt. In my opinion we had spent about Rs 700 crore or so in the first half, so, another Rs 600-700 crore more may be spent. So, we had given a kind of estimate of Rs 1300-1400 crore in this financial year which will be there more because of the spinning project.