Shree Ganesh expects robust growth; 25% top-line gains: MD

Umesh Parekh, MD, Shree Ganesh Jewellery, says that sales in the current year has been flat compared to last year. However, he expects robust growth going forward and increase in both top line and bottom line by the end of the year.

Also read: Expect loan book to improve going ahead; net up: Muthoot

Below is the edited transcript of his interview to CNBC-TV18.

Q: Currently, how does the demand scenario looks like considering that company had flat sales. What is the guidance for the remaining part of the fiscal?

A: Compared to last year this year has been flat. But, year to date the sales have been very robust at Rs 9263 crore compared to last year's full year performance of Rs10,000 crore.   

Going forward, the company has an order book of Rs 3,500 crore more for the last quarter. We are looking at a very robust growth compared to last year. We expect to end the year with around 25 percent gain in top-line and 20 percent in bottom-line.

Q: What is the reason for increase in interest expense?

A: We had sought limits with various banks for expansion program. In March, due to some reason we got our limits in second quarter. The interest rate has been a burden in this quarter. Going forward, we will discount our bills -- which we do in six months, and it will lower our interest burden in next quarter.     

Q: Even in the September quarter you can see the signs of your finance cost increasing. For the whole year you will end up with a substantially higher finance cost – what kind of expansion is this? Is it translating into any higher growth at all- if sales is flat but finance cost go on expanding how are we suppose to understand this? Will we see some increase in later date?

A: This quarter the company opened few stores which will turn profitable by another two quarters. So, there is some interest burden on the company currently which will eventually flatten out.

Q: Positively, in your earnings the EBITDA is up around 27 percent and the margins expanded a tad bit, possibly because of your jewellery segment. What measures contributed to better EBITDA despite flat sales? Did you undertake any cost cutting measures?

A: We did not undertake any cost cutting measures. On the other hand, we have tied up with SALP of Italy to produce various fine jewellery which has yielded better returns in this quarter; the product mix, has more Italian light weight jewellery which gave us bit more profits than the Indian handcrafted jewellery.

Q: Do you lease gold? The maximum lease period has been cut to 90 days – does that affect you. Does it increase your working capital requirements?

A: Yes. Unfortunately, the time taken for a trade cycle in gems and jewellery sector is approximately 120-180 days. Leasing of gold which has been cut to 90 days has been a problem which we are trying to overcome by getting our buyers to decrease the days.

Q: The government is likely to hike import duty on gold possibly pre-Budget or by the Budget in order to reduce current account deficit etc. Would there be any impact on business operations for Shree Ganesh in jewellery? What would be the impact which we could see in general?

A: Shree Ganesh will not be affected. We are export-oriented business house because there is no import duty on exports of gold jewellery. Retail operations contribute around 10-15 percent to the top-line revenue. Retail will be affected but when we see overall scenario for gems and jewellery sector by duty going up 1 percent will not affect the buying pattern of consumers.