Time Cap buy earnings positive, to expand US biz: Marksans

Latha: Can you tell us the financials? How much did you purchase it for? We understand the company’s sales are USD 30 million a year. Does some debt come with it?

A: It is a zero debt company.

Latha: So, it is profit making.

A: Yes, it is profit making and has got earnings before interest, taxes, depreciation and amortization (EBITDA) of over USD four million. We have paid about USD 28 million for the acquisition.

Reema: Will this be paid upfront? Are there any milestones or milestone payments or any earn-outs that you have to pay?

A: No, this is an upfront payment.

Latha: What can it bring to the table? Does it bring just USD 30 million or do you see synergies in terms of sales or manufacturing?

A: It actually offers Marksans an ideal platform to expand its operations in the US and it is pretty much a strategic acquisition, which helps the company to expand its manufacturing capabilities and product portfolio and penetration into the US on all fronts. It is a timely acquisition. It does help us on multi-folds and helps us to strengthen our presence into the US. With this, we will be able to integrate and penetrate the market better.

Reema: What is the past rate of growth of Time-Cap and going forward from USD 30 million in revenues and USD four million in EBITDA, what can be the growth that you expect from Time-Cap?

A: Our expectation is big, because obviously of its capabilities both in terms of distribution, manufacturing and brand equity that it enjoys in the market. Our expectation is great. In terms of actual numbers, I would try to avoid giving any forward looking statements, but there is a great synergy between Time-Cap and Marksans. We are looking at some aggressive forward looking growth out there.

Latha: Actually, it is aggressive because in FY15, you did about Rs 400 crore in revenues. You are speaking about USD 30 million, which is another Rs 190 crore or Rs 180 crore.

A: Last year, our total consolidated revenue was about Rs 800 crore with an EBITDA of Rs 188 crore. We clocked a profit after tax (PAT) of Rs 108 crore. Our US revenue contributed nearly 65 percent means that US revenue grew by 65 percen. This helps us to penetrate the US market in a much more stronger presence.

Reema: How are you funding this acquisition?

A: It is through equity.

Reema: One more question about the EBITDA. You told us that your last year’s revenues were Rs 800 crore and EBITDA was Rs 188 crore. That turns out to be margins of about 23 percent. The acquired company has margins of only 13-13 and a half percent going by the numbers?

A: The EBITDA is about 13 percent, but they do not have any debt. It translates directly into profit, but that said and done, obviously this is where value addition will come into play, the product mix that we are working on, the required minimum distribution (RMD) and synergy is what we can add value on.

Reema: So, how much will your earnings per share (EPS) go up by?

A: I have not done that calculation, but we have to work that calculation out and probably disclose it at the right time.

Latha: I agree with you. I guess what we are trying to find out is since you are speaking of synergies, will it be that the Time-Cap products will be outsourced and made in India where it may be cheaper and you will use that sales force over there to perhaps sell more of your products? We are just trying to get an idea of what is this synergistic gain that might come at the revenue and at the EBITDA level. How much does it add incrementally?

A: We would like to maintain products being made at Time-Cap itself. What we are going to leverage on is the manufacturing capabilities to do niche products as well as their market penetration and their brand equity that they already have so, distribution also. It helps us in our packaging capabilities, which we would like to integrate. Our products being exported into the US could be packed over there. So, all these integration will help us to add value.

Latha: So, give us some idea of what you might do in terms of revenue and profit growth. Would it be high double digits? Would it be 20 percent plus? Give us some idea.

A: I think we will maintain our growth path in terms of what we did last year. Last year, we did about Rs 800 crore and that was 26 percent growth on a year-top-year. We plan to maintain those statistics.

Reema: Very quickly, two-part question. One, you said the funding will be via equity. Will that result in dilution?

A: This is the funds that were already raised through qualified institutional placements (QIP) and we are using them into this.

Reema: Can you give us an update on your foreign currency convertible bonds (FCCB)?

A: The FCCB Bond has been settled and there is pretty much no outstanding from 60 bonds which are there. Beyond that, 99 percent of the bonds have been already retired and there is no FCCB. W are pretty much deleveraged where that is concerned.

Latha: Any other inorganic expansions? Along with Time-Cap, has something else swum into your cairn?

A: We are always very active in that forefront and we are always exploring this possibility. It is part of the business strategy that we have in place but right now obviously, our focus is into integrating Time-Caps and basically growing from there.