Speaking to CNBC-TV18 Dinesh Nolkha Managing Director of Nitin Spinners says the total revenue generated is from its cotton yarn and the knitted products 70 percent of which are exported. Seeing a value addition in domestic market the company is looking to increase its presence to 45 percent from the current 30 percent.
Nitin Spinners has increased its total capacity by 80 percent leading to doubling of knitting capacity in this fiscal. Speaking to CNBC-TV18 Dinesh Nolkha Managing Director of Nitin Spinners says the incremental capacity will contribute to its annual revenue to the tune of Rs 820 crore. The company expects its margins to sustain at 18 percent, he said.
Nitin Spinners generates 70 percent of its revenue by exporting cotton yarn and knitted products. Now, the company wants to reduce its dependence on exports and increase its domestic contribution of revenue to 45 percent.
Below is the edited transcript of Dinesh Nolkhais interview with Mangalam Maloo and Reema Tendulkar on CNBC-TV18.
Mangalam: Could you give us a sense of what exactly is the company does? We understand it is into manufacture of cotton yarn, but we do have a lot of other cotton yarn manufacturers as well. So, what differentiates Nitin Spinners from other cotton yarn?
A: Basically, we are manufacturers of cotton yarn as well as knitted fabrics. We make nearly 20 percent of our product in knitted fabrics and balance is cotton yarn. And we make all kind of specialty yarn which is suitable for all the sectors such as Denim, terry towels, furnishing fabric, mate apparel, woven apparel. So, we have a bouquet of products which can satisfy various needs of the industry as such. That is basically makes a slightly difference from our peers.
Reema: As far as our understanding was that the knit factory was operating at a 70-80 percent capacity. That is the last available information that we have. Going forward in FY16, is there scope to improve the capacity utilisation for knits and can you maintain your yarn capacity utilisation at 97-98 percent?
A: Yes, of course, we have the scope to improve our capacity in the knitting segment. So, there are very big demands in the domestic market s which we never used to cater to earlier. Now, we have started catering to the domestic manufacturer in the under garments industry as well as in the knit care industry. So, we expect our utilisation to improve slightly from last year. We are trying also to improve upon exports. So, that will help us.
As far as yarn is concerned, we are operating at pretty good levels and we have been achieving this capacity utilisation from last two to three years. So, I do not see any reason why we should not be doing that.
Mangalam: We also understand that the company that the company has a lot of Capex plan going forward. So, what would be the total capacity? By how much will it increase and when do we see the effects of that coming on the company?
A: Already our last Capex which we had completed in FY15 itself, February we had completed the Capex and full effect of the same will come into this financial year. Our capacity has gone up 80 percent. Now, we have a capacity of 1,50,000 spindles 72,000 spindles of which have been added last year. And we also added in our knitting capacity, we have doubled our knitting capacity last year as well.
Reema: So, your spindle capacity has gone up 72,000 and knitting capacity has doubled recently. In terms of incremental revenues because of this, how much would it be?
A: Part of that Incremental revenue has come in last year. Our FY14 has nearly Rs 475-480 crore. From that we have added nearly 75 percent capacity. So, our total revenue this year should be in the range of Rs 800-820 crore. If you see from 2014, it is an increase of nearly 80 percent and last year it will be nearly 30 percent.
Mangalam: So, while the revenues have been increasing, it is the margins which have fallen in the last one year. In fact year-on-year and quarter-on-quarter as well. Any particular reason for that and where do you see them sustaining, going forward?
A: Last year since our new capacity was underway, we were stabilising our capacity and hence, the utilisation was slightly lower. Since we were stabilising our capacity, that resulted in lower utilisation and lesser margins as well, last year the cotton prices came down from Rs 40,000 to nearly Rs 33,000 a candy, so a fall of nearly 18-20 percent. So, that also resulted in margins coming down.
In last four-five years our margins have been in the range of 18 percent levels. So, we expect that to be maintained going forward as well.
Reema: Now, your capacity is comfortable for how many more fiscal years?
A: Basically, at least for this fiscal year we do not have any new additional plans but, going forward we have very good demand in domestic market we are catering to very good brands in the domestic market as well as in the international market. Plus we have very large demand coming in yarn in China as well. So, in future we plan to increase our capacity going forward, maybe in another one or two years.
Mangalam: As far as our information goes, about 85 percent of your capacity is exported. Now, that you see incremental demand coming in from the domestic industry, how do see this proportion going forward? How much of your revenues will come in from domestic industries and how much will it come in from exports?
A: Last year it was not 85 percent, it was nearly 70 percent exports. And 30 percent was domestic market. But, consciously we are now moving towards more domestic markets because we see more valuation here. So, we are targeting for an export of nearly 55 percent and domestic market share of 45 percent.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.