New products to add to bottomline in 2-3 yrs: Prabhat Dairy

Prabhat Dairy, which saw a 30 percent rise in the stock this week, is sailing high on newly launched products and inclusion of its branded products in modern trade including leading chains, says the company’s Joint MD, Vivek Nirmal.Speaking to CNBC-TV18, Nirmal says while the volume pick-up has been small in newly-launched Shrikhand, the product has huge scope and will contribute substantially to the bottomline in next two to three years. The company is focusing on indigenous products like paneer and shrikhand, he adds. Nirmal expects margins to remain steady in the current quarter. The company’s long-term debt was Rs 200-220 crore, which has now come down by Rs 185 crore with current IPO proceedings, he adds. Below is the verbatim transcript of Vivek Nirmal’s interview with Nigel D'Souza on CNBC-TV18.Q: Could you give us a few details? If you compare yourself to the quarter three numbers, has there been some increase in pricing, are you seeing a bit if an uptake in terms of volumes and also could you tell us are you likely to continue with that growth of around 20 percent on the topline that we have been seeing?A: This quarter has definitely seen some of new product launches including Shrikhand. We have also started branded products in modern trade including lot of leading chains. That has definitely seen some small volume pick up but I think our volumes are pretty much stable. Normally, Q3 post rainy season is when the volumes become normal in the dairy industry. We believe that it is just going on the regular growth track as we have planned.Q: You were talking about your new product Shrikhand that will be your value added products? What part of the revenues will it constitute or is it very small?A: It is very small right now. It is a dessert but there is huge scope. We basically focus on the indigenous products including dahi, paneer and Shrikhand. This is all manufactured in our new fermented product plant. Paneer has been launched it is also our value added product. Right now they are quite small but in coming two to three years we expect them to contribute largely to our bottom line. Q: What about margins they have been hovering around 9.50-10 percent. You expect to hold on to those margins or second half of the year is better so can be see it move towards may be around 10.50-11 percent mark?A: We expect it to be steady; there are couple of mixed factors including some of our value added products sales have increased. At the same time there is some pressure on milk prices as well because we are experiencing a drought situation in Maharashtra. So, there are mix factors but we expect the margins to be stable. Q: One of the reasons you did the IPO is to reduce the finance cost. What exactly was your debt? How much did it come down by and what is your debt currently? I think in the last quarter if we take a look at it; it has come down your interest cost per quarter to around Rs 8 crore. Do you see it move down further from there?A: Our finance total long-term borrowing was in the range of around Rs 210-220 crore. We have brought it down Rs 185 crore with the current IPO proceeds. That has definitely helped us substantially to reduce our finance cost. So, you will see H2 was pretty high and Q3 we see a pretty less finance cost. I think that finance cost will be maintained in coming quarters as well.