See revenues shooting up by 15% in FY17: TPL Plastech

TPL Plastech had seen a meagre 2 percent rise in its revenues in FY16 to Rs 187 crore. This was primarily due to falling crude prices which had also dragged down polymer prices. But talking to CNBC-TV18, Sanjaya Kulkarni, Chairman, TPL Plastech, expects revenues to shoot up by 15 percent in FY17.There is a rise in demand which is coming from government's water supply schemes is going to be the main reason for the rise in sales, he says. Talking about polymer prices, Kulkarni says there have not been many significant price changes in the recent past. But he expects the price of polymer to go up by around 5 percent.Below is the verbatim transcript of Sanjaya Kulkarni's interview with Reema Tendulkar and Mangalam Maloo on CNBC-TV18.Reema: Last three months, the stock price seems to be telling us the story, could you tell us if the company has witnessed any improvement in demand, how will the FY17 financials look like in revenues as well as in margins, is there going to be an uptick that we should expect?A: The performance of the company in FY16 unlike many others has been pretty good primarily because the sales have gone up, the EBITDA grew by 16 percent and the profit after tax (PAT) grew by 13 percent. In FY17, we are looking at sales growth of about 15 percent but at the same time, we look at EBITDA growing much more than that and the PAT growing significantly higher as compared to what it has been in the past. More importantly, the return on capital employed has also increased last year and we see that again increasing in FY17.Mangalam: Can you tell us the revenue breakup of the company in terms of the pipes as well as drums and also if you can tell us, how much do you export, what are the key markets, who are your key clients?A: The total sales last year in FY16 was Rs 187 crore and out of this the drums and the medium packaging constituted nearly 85 percent of the total and pipes is just about 15 percent of the sales. There is no export because all these are bulky products and export is not feasible and what we are doing is essentially selling to customers in a location of about 200 kilometers around the five locations where we have factories.Reema: Could you explain why you are expecting such a robust growth in FY17? As you said, FY16 revenue growth was only 2 percent. In FY17, you are targeting 15 percent, what has changed in the last one year, which makes you so confident about this year?A: The FY16 volume growth was about 11 percent, the revenue growth was only 2 percent primarily because the prices of the oil products went down, so all the polymer prices went down and therefore, volume growth was 11 percent but sales growth as only 2 percent.We are now doing an expansion for HDPE pipes primarily led by significant demand based on what government projects have undertaken on water supply schemes. So, we are expecting our capacity to increase by about 20 percent and plans are already on for that and therefore we think that the sales will grow by 15 percent.Mangalam: You will increase your P/E capacity by 20 percent but as of now it contributes just about 15 percent to your revenues, so how much could that move the needle?A: The total processing capacity will increase from what is presently about 18,500 tonne of polymers that we process to about 23,000 tonne. So expansion will be in pipes as well as in drums and also in medium packaging.Reema: What is your forecast of how polymer prices are likely to trend, how they have been in the first three months of the new financial year?A: Polymer prices are hardening up a bit but over the last so many years we have seen they move up and down, but they don’t change very significantly. So over the years, we think that they will probably harden by about 5 percent.Mangalam: The promoter of the company is Time Technoplast holding 75 percent stake in the company. Both of you are in absolutely similar businesses, is there any plans of merger or demerger, perhaps some value unlocking by Time Technoplast?A: No. In any company, they always like to have two suppliers. So while Time maybe one supplier to a particular company, we tend to be the second supplier to that company.So at the moment, I don’t think the equity structure is going to change.