Havells eyes 12-13% EBITDA; 18% consumer biz growth in FY14

Anil Gupta, joint managing director of Havells India said that the company is looking at 12-13 percent earnings before interest, taxes, depreciation, and amortisation (EBITDA) for the current year.

Havells India registered 20 percent jump in its fourth quarter (Q4) profit to Rs 109.8 crore against Rs 91.52 crore in the corresponding quarter last year. Its interest costs also came down to Rs 2.7 crore from Rs 20 crore a year ago. The consumer business is likely to see 18 percent growth if India maintains gross domestic product (GDP) growth at 6 percent for FY14. However, given the economic situation in the capex sector, the industrial side may report flat growth, he said in an interview to CNBC-TV18. Further, its cable segment may not see any growth in FY14. Commenting on Havells Sylvania, he said that the company's operating margins are expected to be at 6 percent going ahead.  Also read: Havells India Q4 net up 20% at Rs 109.7 cr; sales up 12% Below is the edited transcript of his interview to CNBC-TV18. Q: You have pointed to about 15 percent growth in your domestic business for FY14 and flat margins. But given how good Q4 has been, are you looking to up those targets either in terms of margins or what you think the domestic business could do in revenues? A: There are two parts of our business-- almost 75 percent of our consumer business; we are expecting about 18 percent growth. We are anticipating flat growth in the industrial side because of the tough economic situation especially in the capex sector. Hence with the product mix, we are looking at 14 to 16 percent overall increase which does help the margin as the industrial business is not very high in margins. The consumer business will continue to grow and hence we are looking at about 12.5-13 percent earnings before interest, taxes, depreciation, and amortization (EBITDA) margins for the current year. Q: It is the cable segment, the industrial side which is a bit of a problem area for you as that is dragging down overall growth as you said. Do you see any improvement in FY14 or that continues to be a drag? A: I would not say it is a drag, I would say this is a period where we are not anticipating a lot of growth. As I said, we are expecting flat growth this year. Given that there is no major improvement in the capital cycle of the country or if it happens in the next half of the year that might slightly improve the situation but at this moment we are anticipating no growth in the cable business. Q: Can you give us an update on Sylvania because things seem to have plateaued there in terms of the decline. When can you see some meaningful upsides from that business? A: We still believe that Europe has structural issues for another year and a half. I am talking about the macro-economic situation. Also, in the last one year the US has also faced a lot of currency crisis. Given these market conditions our focus is on entirely on profitability at the moment. We are continuing to maintain about 6 percent operating margins there. We have brought down our interest cost and depreciation considerably so given the fact that we will be operating about 6 percent margins, we will be fairly profitable and the company will be throwing out cash because the investing cycle is not there at all. _PAGEBREAK_ Q: You are holding your two-three percent growth guidance for Sylvania. Do you think that too could be revised upwards depending on how the situation develops over the next few quarters? A: Given the present market situation we are still maintaining the two-three percent guideline. You are right, if the situation improves because it is really at the bottom, the situation especially in Europe, it could be further improved (revised). Q: On the domestic business and the guidance of 18 percent on the consumer side; a lot of people make comparisons with your business and Crompton Greaves or some legs off it. You are confident that growth remains intact and you are not facing any problems in terms of sluggishness or sales dipping suddenly? A: The domestic business is not as bad as people paint the picture. It is not growing at the same pace. For example, our consumer business grew at about 27 percent last year and we have already revised it down to about 18 percent. If the country maintains gross domestic product (GDP) growth of about 6 percent, we will be able to achieve this 18 percent growth. Q: Are there a lot of new product lines which are up for launch this year from the consumer side which may actually take your overall contribution from the consumer segment to much more proportion of revenues than what it is currently? A: That is true. It has happened in the last couple of years. We have introduced a new line of switches which takes us deeper into the rural markets as well. We have launched domestic appliances. That is definitely changing the profile of the company towards more consumer in nature. Hence, the industrial business is down to about 25 percent which this contribution will come down.