Everest Kanto expects biz to recover in Q2, Q3 of FY13

Everest Kanto have been reporting losses over the past few quarters and Prem Khurana, CMD of the company blames OEMs for its low growth in the Indian market. According to him, OEMs are manufacturing diesel cars instead of CNG cars and therefore, the CNG cylinder business is seeing a significant setback. Moreover, the prices of CNG are very high in places like Gujarat where there is demand for the product but, higher cost is leading to a pressure on margins.

However, the company has seen significant order inflow from China and Nigeria. Looking at the pick up in orders, Khurana is hopeful of recovery in the next two quarters.
Besides, to tackle its huge stocks, the Everest Kanto has taken price cuts, informed the CMD. But, the company is not making cash losses rather they are investing in the US business, Khurana told CNBC-TV18. Here is the edited transcript of the interview on CNBC-TV18. Q: What's going so drastically wrong, you had one quarter of profit in March but otherwise in the past four quarters three of them have been reporting losses, what's fundamentally difficult for the business?
A: In India the growth is low and the reason being OEMs are not manufacturing CNG fitted cars. They are more interested in manufacturing diesel cars. So, the CNG cylinder business has a reasonable setback.
There are of course industrial standards and other cylinders are moving but, locally it is rather harsh because the CNG prices in some states are very high. For example, Gujarat is a major consumer of our cylinders and there CNG price is far more than diesel price now. These are having pressure on our margins in India.
In the Middle-East, even though we are recovering from market losses we are getting the other markets. But, there will always be a small gestation period. Maybe in one or two quarters we will recover here.
USA is definitely recovering and possibly the figures will be better quarter on quarter. We are able to manage all the interest and there is hardly any loans on the company.
We have got good orders from China now, locally as well as from far off places like Nigeria. But, when you are going to new markets there is going to be a little gestation period and I feel in the next one or two quarters, we will be able to recover from it.
_PAGEBREAK_ Q: With regards to the sluggish business environment that you are working with, how exactly are inventory days doing for you at this point in time? What is your working capital requirements, hence how exactly do you expect to service your debt because your interest costs have increased on YoY basis or at least for the company?
A: The interest rates are quite high and as on today, we are able to run our operations without any problems. We are very good at paying our debts on time but, there is definitely a pressure on debts because the realization has gone lower. We are trying our best to make more sales and even banks are helping us. But, there are some difficulties which we are sure we will be able to recover in a very short time. Q: How exactly are you trying to compensate in terms of increasing sales because India is down 45%, Dubai is down 66%, are you taking major price cuts at this point in time in order to increase volumes or are you sustaining margins? What is the contingency plan?
A: Since we have huge stocks, we have taken a decision to reduce some prices so that our sales are maintained or increased. This is because it is the only way we can reduce our debt and availability of cash. However, the company is still not in cash loss at all. Q: You have now reduced your domestic dependence considerably. When do you get into the black?
A: Maybe another two quarters. Things are moving but, they are not moving as fast as we wanted. We have such a huge capacity and in India we are utilizing only 60% while internationally, we are using hardly 46-47%. Now, in USA because of Shale gas we are sure our sales will increase and we are investing in US subsidy to make the business profitable.