REI Agro expects to clock 25-30% CAGR growth ahead

REI Agro, world's largest basmati rice processing and marketing company, registered 68 percent jump in net sales at Rs 1056 crore. The company’s top-line also increased year-on-year.

In an interview to CNBC-TV18, Sundip Jhunjhunwala, Chairman of the company spoke about the performance of the company in the second quarter and how they will continue to perform better in the quarters ahead as well. "We should be in line with what we have been performing over the last two quarters. Over the last two quarters the top-line has stabilised on the manufacturing front," Jhunjhunwala told the channel. Below is an edited transcript of Sundip Jhunjhunwala’s interview on CNBC-TV18. Q: What is the future of REI Agro on two key points - one is on the sales front, because this quarter there has been a sharp increase in your sales performance and second where would the margins stabilize because you all have taken a hit on your EBITDA margins this quarter?
A: As far as our top-line is concerned, we are in line with what we have been talking in the past. Our new facilities have gone on-stream and are giving results. We should be in line with what we have been performing over the last two quarters. Over the last two quarters the top-line has stabilized on the manufacturing front. As far as the margin is concerned, it is a little misleading what you are showing.  This is because our margins have improved over the period.
On a year-on-year basis our top-line has increased and thereby looks a little dip in the total percentage. Additional revenue in this quarter has come from trading where we have traded in various other commodities which give lower margin as compared to our branded sales. Q: What is your debt position and debt-equity ratio?
A: Our debt-equity is very much comfortable at the moment. For this quarter end we are at about 1.7 of debt-equity. We have been in the range of about Rs 5,000 crore of total debt over the last few quarters and will continue to remain in that region. Q: Are there any further plans to cut down your debt?
A: This is an ongoing process, a change in debt. It is related to the business and our business has been growing much faster. We have not done any major additional borrowings. So this really depends on how we take the business forward. We are quite positive on the business side where we intend to grow it at a speed of about 25-30 percent CAGR. Q: Do you expect the trading to contribute more to your total revenues which will not give you the same kind of margins as your branded products will? Is that a strategy of the company?
A: The strategy of the company is basically that trading should be an additional contribution to the business. We continue to focus on our manufacturing business which gives us an EBITDA of about 21 percent. Trading should give us additional. So there is not a defocus on the manufacturing side. Trading will give us additional margin which will be lower than the manufacturing margin.