Forecast for good monsoon augurs well for co: Shakti Pumps

Shakti Pumps stands to gain from the Indian Meterological Department's forecast for an above-normal rainfall this season as the water table will increase, says Akhilesh Maru, CFO of the company.Speaking to CNBC-TV8, Maru said he expects improved growth for pumps in the domestic market in FY17. "We will see a good revenue growth in the domestic market with simultaneous positives like good monsoon and Piyush Goyal's aggressive agriculture policy," he adds.The agriculture sector contributes 30-35 percent to Shakti's topline and the company is worth Rs 100 crore in the organised market, Maru adds. Below is the verbatim transcript of Akhilesh Maru’s interview with Mangalam Maloo and Reema Tendulkar on CNBC-TV18.Mangalam: First up, you guys are a pump company, so every time there are low monsoons people are supposed to buy more pumps to irrigate their fields. Now with the monsoon announcement coming as to normal will that be negative for you all.A: No, this is not negative for us because we have to understand one thing this is a second consecutive monsoon failure last year and once the first failure is there then people tend to go for more boring and they go for buying big power motors and the pumps, but in the second consecutive failure they don’t try to go and explore more and more possibilities to get the waters because one boring failure is there in a village, so entire village will be on hold they will just see that till the time water table goes up unless and until they will not go for the boring. So this time, if we have a positive monsoon and water table goes up definitely villagers and the farmers, the household they will definitely try for a new borewell, so higher pumps which will have positive impact on the industry.Reema: So you are saying that you are positively correlated to the monsoon. Your sales got impacted in the last two years because of lower monsoon now when monsoon hopefully is normal your sales would improve.A: Yes, definitely it will improve as I said monsoon good or bad both are positive, but it depends on the context whether it is a second consecutive failure or a very good monsoon for a continuous few years, so their decision would not be hold or their decision would not be continue for a year or hold for another year. As I said, this is a second consecutive failure then now a good monsoon expectations so it is a positive on a industry.Mangalam: So agriculture roughly accounts for about 30-35 percent to your total revenues. How much of this can we see go up on the back of the monsoon.A: It depends again on a few projects which is announced by the government and the new energy conservative policy announced by the government. See in agriculture side almost 30-35 percent contribution we get it in our entire topline, but now as Mr Piyush Goyal has announced one agriculture revolutionary policy under which energy conservative pumps are compulsory, in few of the states where they are giving free of costs against the replacement of their old pumps, which itself a very, very revolutionary scheme for the organised players if it goes in execution in a big way, they are talking about 15-16 lakhs pumps, which one, two or three companies cannot do the job. So it has to be 6-7 companies and it is really good for the organised pump players.Mangalam: What’s your market share in the organised market.A: We are hardly 100 crore nearby in organised market, but again the organised players will get a pie of the unorganised player which is going to be lose by these players because of this new policy announcements, so this will go to the organised players.Reema: FY16 looks like a no growth year for you. In fact, in the last 9-months it’s been a de-growth itself. Early signs of FY17 revenue growth.A: We will see a good revenue growth in the domestic market, simultaneous exchanges are going on and few positive things like monsoon is good, back-to-back Piyush Goyal’s aggressive agriculture policy, which is promoting organised player which has 5-star rating pumps and after that solar is also looking really good. Solar pumping segment this time, the MNRE budgetary allocation has gone up from 250 or 500 odd crore to 5000 crore which itself give a boost that solar pumping projects would really pick up. This is few positive things in the agriculture domestic market. Otherside in exports market countries are started giving good hopes with converting number into sales, so we are getting good response from US market, we are getting good response from Latin America and Africa.Reema: So domestic growth would be in FY17.A: At this point of time we are still in the process of budgeting because we have simultaneously 3-4 positive impacts, so we are calculating on a conservative basis what could be the minimum impact of those events, so it would be difficult to say at this point of time because still some announcements are pending of those projects.Mangalam: Now backing to your export markets. You supply about 20 percent of your total revenue, in fact to the Middle East region. We saw decline in oil prices and because of which that business also saw some pressure. We have seen a bit of a rally in oil prices after that. Has the revenue increased from them.A: The good thing for us is there was a time when we had overall 30-35 percent contribution from the Gulf market which has now come down to 20 percent. It may be because we exited from the good prominent countries, which were oil prone countries. Again the oil prices also going down and again the oil prices going up, so we have already seen a bottom in the Gulf market, so now if oil prices goes up and down it doesn’t affect us because bottom is already done so from here we have to go up only, so that’s a positive for us.