Targeting 18-20% growth in the pre-fab business: Sintex Ind

Reema: What is the sense on the ground? Have we seen a revival in capital expenditures (Capex), the tendering of orders picked up for the sectors which are related to you and has FY16 started on a positive note?

A: Things are definitely happening on the ground. The sectors that we are in, they are the ones which are working at three levels of the government. That means the municipal government, state government as well as the central government.

There are many of the old programmes that are continuing as you can very well see, the current government has changed the pattern of the financial allocations which are meant to be now every quarter rather than being annual, which means that the money is coming in to the hands of the government department and since they are having the requisite programmes where we are linked, we definitely are seeing traction in that.

As you must be knowing prefabricated structures, buildings and solutions is one of our major components and that is going to definitely grow in a healthy manner. We talk about health centres, we talk about school, we talk about Anganwadis, we talk about the toilet solutions. Everywhere we are seeing a reasonable amount of and definitely a healthy growth.

Sumaira: Prefab has actually been one of your most consistent performers. So, FY12 to FY15 it has seen a 20 percent compounded annual growth rate (CAGR) growth. Are things going to pick up now? For FY16 what is the kind of growth that you can see from here? And also are you seeing a big uptake in terms of volumes?

A: Well, we are definitely seeing a healthy growth. A steady, healthy growth of around 18-20 percent is definitely going to be there for us. We are also going to see an improvement in the earnings before interest, taxes, depreciation and amortization (EBITDA) level by at least another 50 basis points.

But, there are many other goof things that have been happening like the Swachh Bharat Abhiyan which was launched a year back has had some kind of you may say operational issues, but the thing is that now, everybody is gearing up for really synchronising their actions. So, the entire sanitisation programme, the toilet programme which was slow is likely to pick up now, which is going to mean a positive dividend and positive inflow of business for us.

Likewise we have got packaged type sewage treatment plant as well as biogas plants for waste water as well as the organic waste management. Now, these things are integral to the Swachh Bharat Abhiyan and they will also pick up. We are also going to have an unveiling of three or four major programmes of this government, housing for all, Amrut Yojana, Smart city programme, all these things are also going to come up.

There is a programme that is going to mean four crore houses will have to be done over a period of next seven years in the rural areas and two crore in the urban areas through our prefabricated as well as monolithic concrete construction, we will be able to get a reasonable amount of proportion in time to come. So, we are quite optimistic about the prospect of the businesses that we are in. Custom moulding which is our again, another big vertical is going to have a very good run.

Within the country, the segments that we are in will give us at least around 18-20 percent growth and our foreign subsidiaries which are catering to number of companies will definitely have around 15 percent growth. So, collectively we will be having an improvement in the top-line to that portion, the proportional like 18-20 percent and we will have an improvement in the bottom line and if there is an acceleration of some of these programmes that I talked about, we will have a better result on the paper.

Reema: In prefab you are expecting a revenue growth of 18-20 percent and a margin improvement of 50 basis points. What about on a consolidated basis, how are the other segments doing?

A: On a consolidated basis, I am talking about the consolidated basis, we will have an improvement in the margin. I am talking about the consolidated and I am also talking about the consolidated business growth of around 18-20 percent.

Reema: Can you give us a sense of currently what the prefab order book would be like as well as on the custom moulding because that is where the company seems most bullish and also.

A: For prefab we do not have an order book. These are in small orders coming from a number of customers from all over the country. They are dispersed; we are operating literally all over the country in the prefab. These are orders which are school room or health centers and things like that. They could be getting consolidated, but we have naturally reasonable optimism that we will be growing very well in that.

And coming back to the custom holding, these are the orders which are aligned with the production plans of Light commercial vehicles (LCV), Heavy commercial vehicles (HCV), auto motive, electrical and these are all tuned up well ahead of the beginning of the year and we thing that we will be having the kind of growth projections that I have given you.

Reema: In your previous interaction, post your Q4 earnings, you had indicated that all these government initiatives like smart city as well as clean India mission, while they do portent good tidings for the company in the medium term, but as of now, there has not been any pick up, there has not been any tendering of orders from these government initiative at least as of now and may not even happen in FY16. In the last two months have you seen any increased progress, can we expect any orders because of these government initiatives to flow through to your company?

A: Government initiatives are operating at many levels. For example, the corporate social responsibility (CSR) initiative, that has been taken by the government is going to mean a reasonable amount of order inflow for us. As I said, for almost maybe one year, people were planning out as to what they should do on the CSR.

But the things are coming out very clearly about their programme and that means we talk about school toilets or we talk about biogas plants, these orders have started now coming in. And as people see the implementation on the ground and the positivity and positive reaction from the people, the communities that they are serving, there will be definitely a much better inflow.

Coming to the other prefabs or coming to the other settings as I said, there are already decided, pre-determined programmes for which the implementation has to take place. The current government has to start pushing different state governments to go for implementation, because there is a higher allocation of money from the central kitty to them. So, they designing, they are not just ahead with that.

Coming to the smart city project, this is a long-term project. We do not think much will flow from that. But there another project that the government is going to take. We will have to look at the contours which is Amrut City Yojana and that particular thing, we will have to see the contours. That they may give us.

Coming to the housing, the monolithic concrete construction, we think that it is going to take a little time, because now the scheme will be announced. The programmes will be concretised, plans will be concretised and after that industry will come. So, in one or two segments we may have to wait for some time, but in one or two initiatives like the CSR, we will see the results coming in, in a decent manner now.