FY14 sales to grow more than 20%; debt not a worry: Arvind

Textile player, Arvind who is looking to monetise nearly Rs 30 crore from real estate in first quarter (Q1), says debt is not a major issue for the company now. "Our main focus now is on the total debt to EBITDA, which is likely to remain below 3 percent in FY14," CMD Sanjay Lalbhai told CNBC-TV18.

Arvind’s fourth quarter consolidated net profit increased 13 percent to Rs 76 crore against Rs 67 crore, a year ago. Its consolidated total income was up 10 percent at Rs 1,406 crore as against Rs 1,278 crore, year-on-year. Further, the company aims to boost sales by more than 20 percent in FY14. Also, its margins are likely to improve from 13 percent currently, to more than 14 percent in Q1FY14. Also read: Arvind Q4 cons net profit up 13% at Rs 76cr Below is the verbatim transcript of his interview to CNBC-TV18 Q: Before talking about the core business a word on whether or not there have been any developments with regards to your real estate monetisation plans and whether any of that is going to bear fruit through the course of FY14 especially the first half? A: Yes, it is going on. We should be able to monetise another Rs 30 crore so that will come in Q1. The process is on. A little slow because some of the permissions which we were expecting are getting delayed, but our annual target for ’13-14 should stay as we have planned. Q: What would that be, where would you plan to scale down your debt levels to by the end of this calendar year? A: We are now not focusing on debt. We are focusing on total debt to EBITDA and that will remain by and large below 3. So, that is what we are planning because we are also growing rapidly. We are planning to grow by more than 20 percent. We have a reasonable capex and because our topline will be growing by more than 20 percent we also require more debt on working capital. Therefore, we are not focusing on reducing debt, it is not anymore an issue and we are growing the topline and we are growing the bottomline. Our EBITDA is on rise, Q4 has been a good quarter. Compared to the previous year our EBITDA has grown to Rs 203 crore, which is all time high. Last year Q4 was Rs 131 crore. So, compared to Rs 131 crore we have had a reasonably good jump in our EBITDA which has gone up to Rs 203 crore. Therefore, the whole focus is on growing the topline and the bottomline and keeping the total debt to EBITDA below 3. Q: You have seen an improvement in Q4 as well as in FY13 as you mentioned. In FY14 how much can you grow the margins from 13 percent level currently and is it solely a function of lower raw material prices or are you guys indulging in some cost control as well? A: Everything is being done. Our prices are going up so we are improving our margins in textiles. Our textiles EBITDA margins are up to 18.1 percent now, up from 13.4 percent. So, there is a very healthy kind of growth in our EBITDA margins. That is because of our higher prices, better product mix and growing the topline. As far as brands and retail is concerned, brands have grown up by 37 percent; Megamart is showing good growth now. The growth in Q1 of this year is likely to be more than 20 percent. Therefore, all our major growth engines are doing well. The EBITDA improvement would be more than 1-1.5 percent on an overall basis. So, if one looks at Q4, our EBITDA was 13.6 percent on the total turnover. We believe that it would be up to 14.4 percent or more in Q1. So, overall the business is doing well. Q: How would that 20 percent growth on the topline break up between textile and branded retail in terms of how much sales growth you hope to generate from both categories? A: Textile should grow by 12 percent and brands and retail should grow by more than 30-35 percent. So, the overall growth would be around 20 percent. In Q1 we will see a modest growth. The Q1 is the weakest kind of quarter for brands and retail, but going forward in Q2-Q3 and Q4, we will see a substantial growth in our topline. That is how the year has been planned.