Targetting topline growth of 10% in FY16: Sangam India

Bhilwara-based textile manufacturer Sangam India is targeting a topline growth of 10 percent in FY16 driven by its denim business, says LL Soni, Joint President of Finance & Corporate Relations of the company.In an interview to CNBC-TV18, Soni says exports are likely to contribute 30 percent to the company's revenue this year. Sangam's long-term debt is at Rs 250 crore and he expects the debt-equity ratio to improve to improve to less than one. The promoters have been increasingt their stake in the company gradually and intend to eventually take it up to 51 percent. On the outlook for the business, Soni expects the company's margins to expand by 200 basis points over next two-three years aided by its consolidation efforts.Below is the verbatim transcript of LL Soni’s interview with Reema Tendulkar & Nigel D'Souza on CNBC-TV18.Nigel: The first part of this year has been fairly good and in fact the year on the whole for the stock has been splendid for your investors - 290 percent higher this year itself. How was quarter III shaping out and also earlier you had told us that in fact Rs 2,000 crore is in the offing in terms of top-line are you sticking with that guidance and from where exactly will this growth come, from the exports or domestic?A: For the current year, we are targeting a growth of around 10 percent from last year's turnover of Rs 1,470 crore. For the next two or three years we are planning to grow by 20-25 percent. So, growth of this business is coming largely from the denim business where we have expanded four fold in the last three years. Recently, we launched our new ventures of business-to-consumer (B2C) business called seamless garment. We are targeting a good amount of revenue from the seamless garment itself.Reema: Could you tell us the growth that you are seeing in exports because the recent growth seems to be fueled by your exports market? It currently contributes about 22 percent how much are you focusing that exports contribution will beat your overall revenue, the export growth rate that you foresee? A: Around 23 percent revenue have come from the exports market till the last year. This year it is likely to reach 30 percent because we had seen an exponential growth in the denim business. It is a 12 fold growth which has happened in the denim export business. Also, in the PV fabric business our export is grown by close to 30 percent. Yarn export has grown by around 20 percent. So, overall export growth is there for the company.Nigel: The big positive definitely has been the margin expansion. Last time around we had a margin of around 15.5 percent. You compare it on a year-on-year basis that is a good 300 basis point to 250 basis points jump. Given that you are going to be shifting towards export focus may be around 30 percent approximately you are saying things are looking good over there as well. What kind of an impact can it have on your margins, going ahead do you see it expanding from around this 15-15.50 percent? A: We expect in next two-three years our margins should expand by 200 basis points from the current levels. Looking to the export growth we are consolidating our position in the company itself. We are converting one of the yarn into fabric and value added products so more of the consolidation of the business is happening in the company itself that is again given expansion to our margins. Reema: The promoters have been steadily increasing stake in the company. As of September it stands at 47.35 percent and in the two quarters prior to that you have already increased it by about three-four percentage point. How much do the promoters want to increase their stake to? Would they be only okay with an increase up to 5 percent as it is allowed under the creeping acquisition route?A: We are increasing our stake through creeping only and in the last three years we increased our stake by 9 percent. So, basically we wanted to reach in 51 percent zone which is a comfortable from the promoter's angle. So, we are seeing a further opportunity, if opportunity is available we can go by the creeping acquisition only.Reema: So you will stop at 51 percent, you want to increase it to 51 percent?A: As of now we are targeting 51 percent. Whole thing is in the future scenario so we cannot make comment as of now for that. However, 51 percent is our target. Nigel: This year you will not be able to do that. Of course you have already done roughly around 4.5 percent so you will only be doing it post March 2016?A: It should be.Nigel: What is your current debt in your books? I remember you had exited one of your other businesses that wasn’t fairing too well and in fact that was road toll collection business – you existed that. What is your current debt that you have on your books?A: Current debt on our books is around Rs 250 crore is our long-term debt and Rs 270 is our working capital debt. This long-term debt is going to retire in next three years. So, basically whatever capex we are doing we are maintaining our debt at the same ratio. Last four years we consolidated our balance sheet and we have reached debt equity level of 3.91 which was there in 2011 to equity level of 1.45 levels in the current financial year. Next two-three years we are targeting our debt-equity should further improve to below 1.