Arvind says FY12 sales to be around Rs 5000cr

World's largest denim producer, Arvind's consolidated net profit jumped more than three times to Rs 63.07 crore for the fourth quarter of FY11 compared Rs 19.81 crore posted to the same period previous fiscal.

In an interview with Sanjay Lalbhai, CMD of Arvind speaking about the company's quarterly performance said that company is confident of maintaining margins ahead. The cotton prices has declined and the company wants to pass on this benefit to the customers and in return hopes for a very strong kind of demand push. Talking about the company's sales target he said, "We aim to grow by 20-25% in FY12. We should become a billion dollar company this year. We should be definitely crossing Rs 4,800 crore and if everything goes well we will be crossing Rs 5,000 crore this year." Below is the verbatim transcript of Lalbhai's interview with Mitali Mukherjee and Sonia Shenoy of CNBC-TV18. Also watch the accompanying video. Q: Can you talk about the kind of profitability you have been able to deliver this time around? is this 15% EBITDA margin is sustainable given the raw material costs you are facing? A: We believe that we will be able to maintain our margin. This is because we have been able to pass on all the cost increases to our customers. Now the prices of our raw material cotton is on decline so we are very happy. Going forward we should be able to pass on this benefit to our customers and in return hope for a very strong kind of demand push. Q: You have decided to merge this Arvind Products with Arvind Limited. Can you tell us what is in it for shareholders and what kind of cost saving will that initiate for Arvind in FY12? A: Arvind Products has a complete portfolio of textiles. It has khaki and voiles business and also has two spinning plants. So the logical thing would be to merge these two entities so that we have all the textile business of Arvind as a consolidated company in merged into Arvind. By doing this, we would be saving around Rs 10 crore, which we are otherwise paying as number of taxes and by merging these two companies we won't have to pay that. Arvind Products which has not shown very strong kind of performance, by merging it with Arvind we will be able to change the product mix . We will be able to improve the kind of return on the same assets which we own in Arvind Products. So, these are the advantages the merger would provide to both the companies, and of course Arvind in particular. Q: The last time you had said that you have begun the process of monetizing your big chunk of land that you have. When will that really accrue into your numbers? Do you expect to see any kind of gains in FY12 on account of that? A: The first proposal has already happened as we have been talking last year with Safal as our partners. We have announced joint-venture of a large township project with Tatas in which we have taken our land parcel of 134 acres into a SPV. Tata's would be paying us Rs 125 crore for 50% of the value of the land. So that monetization has already happened. That will accrue in this financial year. This project is likely to have a topline of around Rs 2000-2500 crore in the next six - seven years. We hope that  every year it should be generating a topline of Rs 300 crore for the SPV and our shares would be Rs 150 crore in it. So, the monetization is going on. Two parcels out of the number of parcels that we hold have been monetized as we have been talking. Also Read: Arvind-Tata Housing project to make profits from FY12-end Q: What's driving growth between the branded apparel business and textile business at this point? And given what have you finished FY11 with, sales of more than Rs 4,000 crore what looks like an achievable target in terms of sales for FY12? A: We aim to grow by 20-25% in FY12. We should become a billion dollar company this year. We should be definitely  crossing Rs 4,800 crore and if everything goes right we will be crossing Rs 5,000 crore this year. So our topline growth will continue because the number of projects are getting commissioned this year. And as far as brand and retail is concerned we grew by 45% last year. From Rs 550 crore we went up to Rs 813 crore. Our next year target is to grow by 50% and have Rs 1200 crore topline as far as brand and retail are concerned. Of course this is without our joint venture of VF which is Lee and Wrangler and also Tommy Hilfiger. That's adds something like Rs 200 crore more topline to our consolidated numbers. So, this year we have almost touched Rs 1,000 crore mark in our brand and retail business out of Rs 4,000 crore of consolidated numbers. _PAGEBREAK_ Q: Arvind has been through a rough patch in the last couple of years. You are confident that now the revenue part at least is on track and there will be less lumpiness in terms of performance. It's a more steady quarterly run rate you expect to see both on revenues and on profits? A: Yes. As I have been saying that one of the reasons why this entire textile industry has remained cyclical is because China has been a major threat to the entire global textile business. And now that China is becoming more expensive, the kind of cost cutting which China was ahering to may not take place. As a result we may be able to hold on to our pricing power. Secondly, the domestic Indian market is booming and we are trying to take more market share. We are trying to become a more domestic company than exports which eliminates the exchange risk which our business has. It also gives us a much higher pricing power because we are taking our business more from B2B to B2C by starting Arvind Retail shops and selling our fabrics, our branded garments and tailoring solutions through Arvind Retail outlets. Q: Is it safe to say that the export market for you or the contribution will not grow as much or it may be a muted export growth in FY12? And also how would you really be functioning in terms of passing on the cause? Are you expecting to hike the prices in the next couple of months or so? A: In the fourth quarter, we have passed on the prices and because of this our fourth quarter results have been very strong. Our operating margins have grown by 200 basis-point. Now on the contrary going forward, we will be reducing the prices because the cotton has softened and cotton prices have come down by 15-20%. We hope that we will be able to pass on this advantage to our customers. We have already increased our prices. We have already absorbed the kind of higher cost of cotton and going forward in the next two quarters the prices will start moderating or coming down. We do not see this as an issue. On the contrary because of lower prices we believe that the kind of demand for apparel category would become strong in the domestic market and also in exports. Q: With 25% sales growth, how much of that will accrue into in terms of a net profit growth you can deliver and a growth on your earnings as well, earnings performance share? A: If we continue with 14.8-15% operating margin then you can see that on Rs 5,000 crore our EBITDA margin should go up by Rs 200 crore. As a result our EPS should improve from which is currently at 6.5 to almost 10, if everything was to go right.