Target 15% topline growth in FY16: Apar Industries

Below is the verbatim transcript of Kushal Desai's interview with CNBC-TV18's Nigel D'Souza and Sumaira Abidi

Sumaira: The new government and to an extent the old one as well has spoken extensively on their focus on the transmission and distribution (T&D) segment so how will this evolve in terms of business opportunities for a company like yours, what will be different over the next five years to come?

A: My take on this is that the T&D side is going to grow very substantially. Clearly, there is a deficit in terms of power and in addition to that the transmission networks which are in place right now are clearly overworked. In addition to that there are no alternates. If there is any problem with a line that is running in one part of the country, there is no capacity to wheel the power through an alternate network. You got these two dimensions of growth that need to take place. I believe multiple governments have recognised that fact and steps have been taken to expand the T&D network but the sustainability of that capex spending has not happened in the past.

What we feel will be a little different in the next five years to come is that the present government seems to be quite determined in terms of sustaining that spending. If you look at what has happened in the state of Gujarat, the infrastructure spending there has been very sustained including the power infrastructure side, which is what enabled so much of power availability across the length and breadth of the state as such.

So given that, we can easily see business is doubling in the next five year timeframe both on the transmission side and even more than that on the distribution side because the distribution side is still the real Achilles\\' heel in the entire power chain at this stage. There is a lot of work to be done not only in adding capacity, but also improving the quality of power line losses etc that need to come in on the distribution side.

Nigel: On the business front though, I wanted to ask you about your conductor division, that is your high margin business, what is the order book and also what is your order pipeline in this segment and what are your internal growth targets that you are working with for this particular division?

A: The order book that we have is around -- it is Rs 2,265 crore at the end of last quarter and this covers approximately 15 months worth of order booking that the company has. At the moment, it is skewed towards exports, about 55 percent of that order book is physical exports out of India. The Indian side has been a little soft at the moment.

Unless that gets sorted out, you are not going to see tremendous amount of investment taking place even on the transmission side. We expect that it will take a few more months for that to fall in place and so as a hedge we have gone in and booked a lot of business overseas which will allow this 15 months period for the company before which we start having to depend much more on the Indian market.

So from a timing perspective, that seems to be reasonably good because in the next few months, we would expect decisions to come from the present government, which should help start the capex cycle in more earnest as far as the T&D side is concerned.

Sumaira: In the cable space, what is the growth that you are seeing in the optic fibre segment and you recently doubled your capacity to meet the demand in the domestic as well as the exports market so what is the demand outlook looking like in this vertical?

A: In our cable business, one of the segments that we have is optical fibre. So if you see FY15 as far as optical fibre is concerned compared to FY14, we will probably double the size of the business. The total capacity, which we have increased from two years ago is three-fold, it is 200 percent higher than what it was at the end of FY13.

In addition to that, we also have growth in other sub-segments in cable, which is basically cables that are going into windmills, cables that are going into ship building, the railways etc. The cable segment is essentially to focus on the speciality cables and optical fibres and reduce our spending or dependence on the traditional power cable side of the business. We plan to continue to invest in the optical fibre side because the data revolution in this country is just about to take off.

Nigel: What are you guiding by way of topline, bottomline growth for FY15, will you be able to see some incremental growth with regard to your margins from these levels?

A: In FY16, we expect at least 15 percent growth over FY15. We see a lot of the projects and initiatives that the government is starting to take would bear fruit in the next financial year. Some of the new products, which we have developed, they would also see a better acceptance and larger addressable markets in the next financial year. So 15 percent growth in terms of topline and bottomline is something that is quite easily possible in FY16.