Plan to boost capacity with capex of Rs 17 cr: Asahi Songwon

The promoters has hiked their stake in Asahi Songwon Colors by 3 percent via a block deal to 65.6 percent. The plan is to increase the stake gradually as the growth opportunities are immense, says Gokul Jaykrishna, Joint MD of the company. Speaking to CNBC-TV18, Jaykrishna says that while the company has struggled with topline growth in last two years, it plans to augment production capacity by next year. “We have a capex plan of Rs 17 crore to expand our capacity from 7500 operating to 9500 operating for CPC Blue crude,” he says. That will add to the topline. Plan to improve topline by 15 percent and EBITDA by 20-22 percent in current fiscal. Below is the verbatim transcript of Gokul Jaykrishna’s interview to Anuj Singhal and Latha Venkatesh on CNBC-TV18.Anuj: Before we talk about business I just want to understand if you had any talks with promoters because they have increased stake by a block deal by about 3.2 percent to 65.6 percent. What is the plan of promoters, further hiving of stakes from here on?A: Yes, yesterday we promoters have hiked our stake by three percent in Asahi. So, our stake was at 63 percent and our holding now is at 66 percent.Latha: What is the purpose of this hike? Is this a gradual creeping acquisition that you will do?A: Absolutely, that is the plan. We want to use the route of creeping acquisition which is allowed five percent a year because we feel that the opportunities in the business are going well and also China the way it is going and slowing down is opening up new avenues for our businesses and so we are looking at different avenues of growth in the future.Anuj: Creeping acquisition which is of course five percent for the year. So, do we see this go up to 75 percent over the next 2-2.5 years.A: We don't have any plan such as that. So, I won't like to comment futuristically for going forward like that but yes, we have yesterday increased our stake by three percent. So, I won't rule it out but we have no such plans.Latha: You said that the reason for the higher acquisition is that you think business prospects are very good. For that a revenue growth of 6.5 percent looked very muted for the first quarter. Was that an aberration or how is the rest of the year or next year looking like?A: Over the last 2-3 years we have struggled a bit with top line growth. We are addressing this issue and we are looking to augment our production capacities by next year. So, we have a capital expenditure (capex) plan of Rs 17 crore to expand our capacity from 7,500 operating to 9,500 operating for our main product which is CPC Blue crude and that should add topline going forward.What we have done over the last two years more is on the bottom-line. We have expanded our earnings before interest, taxes, depreciation and amortisation (EBITDA) margins from 14 percent in 2015 to 17 percent last year and now we are looking to improve it to 19 percent. So, the bottom-line has improved significantly and now we look to address topline as well.Anuj: That is interesting because with the kind of numbers that you post two percent increase in margin should lead to significant jump in earnings per share (EPS). What kind of EPS numbers then we could be looking at for FY18 and FY19?A: If you look at our topline, it was about Rs 220 crore last year and we are looking at a 15 percent growth and on the bottom-line the EBITDA number we had about Rs 50 crore last year and we are looking to again improve by about 20-22 percent. So, as you rightly pointed out with the increase in the EBITDA margins from 17 percent to 19 percent the bottom-line growth should be better than the topline growth.Latha: Your capacity utilisation now?A: We had a capacity utilisation of about 60-65 percent in 2015 which we have improved to 75 percent last year and now we are looking to improve it to 90 percent. So, that is what I said that the new capex that we are doing we should add about Rs 60 crore to the topline.