Weak local auto market drag on overall business: Suprajit

Below is the transcript of Ajith Rai’s interview with CNBC-TV18's Mangalam Maloo and Reema Tendulkar.

Mangalam: European car sales have grown about 15 percent in June and we understand you have a large exposure to Germany as well. So what does your order book position look like?

A: European market has been pretty strong but one month is not really a trend change. The year has been fairly lukewarm. June numbers from what I understand has included Europe. Our business with BMW and VW as well as Renault, Nissan has been pretty strong. These businesses are handled by our European subsidiary Suprajit Europe and from what I understand the last month's sales and this month\\'s sales also has been fairly robust.

Mangalam: Last time you spoke to us you said that the first half of FY16 will not be exciting. With robust sales this quarter would you like to change your guidance?

A: Not really, we must realise Indian market has been pretty weak. If you see the first quarter automotive industry number the overall growth of the industry is only two percent as against that we probably have grown at about five or six percent. The core of our business is still Indian automotive. Two wheeler which is another core of our core operation actually had no growth at all in the first quarter. In fact motorcycle growth has been negative. So, you have to look from the overall picture. Our international business is only 20 percent of our total pie of our business. So, however much robust growth you have ultimately it will get pulled down by Indian automotive growth. But having said that the trend as we see, the July number seems to be slightly better. We hope that the trend will pick up and that in the coming quarter i.e. Q3 and Q4 will probably do much better and overall for the year we hope we will have very decent growth.

Reema: Let me come to the acquisition of Phoenix Lamps. Now you already have management control, you have got a 51 percent stake, but the open offer was not successful at all. In fact you managed to just get about half a percent stake in the open offer. You have an option to acquire an additional 10.88 percent stake at a price of Rs 89 per share. Will you exercise this option? If yes, when?

A: We have completed the first tranche of 51 percent and taken the management control. The open offer has not elicited any response for the simple reason that the current market price has been higher than the open offer price of Rs 100. We have option to buy 10.88 percent additionally at Rs 89 per share. We will exercise that right in the near future. There are certain conditions, precedents which have to be completed. Once it is done we expect to purchase it within the next couple of months.

Mangalam: As far as currency is concerned the euro-dollar is at a six week low. With the depreciation of the Euro do we see any margin benefit coming in?

A: Yes, we have an euro exposure which is going to affect us to a certain extent. A significant part of our European part of the business is in Euro whereas our North American part is in Dollar. So, to that extent the weakening of Euro will have an effect on us but there are always some positives and negatives and we expect to continue to maintain the margins that we have had in the last year.