Vikram Mohan, Managing Director of Pricol, told CNBC-TV18 that the company is targeting a 20-25 percent revenue growth in the next few years.
Auto components manufacturer Pricol, which turned profitable in FY16 on the back robust revenue growth led by strong order book, expects to better its momentum in FY17 and the years to come.
Vikram Mohan, Managing Director of Pricol, told CNBC-TV18 that the company is targeting a 20-25 percent revenue growth in the next few years and hit the Rs 3,000-crore revenue mark by 2020.
He said that he hopes for a normalised EBIDTA margins at 15-16 percent and sustaining its profit before tax numbers at 10 percent going ahead.
In FY16, the company’s revenue grew 27% to Rs 1,448 crore from Rs 1,143.3 crore the year ago. Its EBIDTA stood at Rs 93 crore against a loss of Rs 13 crore in FY15. In line with EBIDTA growth in FY16, Pricol’s profit after tax, too, grew to Rs 1.27 crore from Rs 36 crore in FY15.
In March quarter, the company’s revenue grew to Rs 342.8 crore from Rs 229.2 crore in the year-ago period. Its EBIDTA stood at Rs 47 crore against a loss of Rs 8 crore in Q4FY15. Pricol’s profit after tax grew to Rs 22 crore from a loss of Rs 2.4 crore in the year-ago period.
Pricol’s domestic customers include Hero MotoCorp, Maruti Suzuki, Mahindra & Mahindra and Bajaj Auto, while it’s global clients include Harley Davidson, Honda, Yamaha and Triumph.
Pricol has bagged orders for instrument clusters for newly-launched two-wheelers like Royal Enfield Himalayan, Yamaha Fascino, Bajaj Avenger, beside for Ashok Leyland's new school buses & Mahindra Jeeto.
Below is the transcript of Vikram Mohan’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Sonia: In FY16, your company turned profitable. You have made a profit of about Rs 1.5 crore versus a loss earlier on. Tell us what how did you get to that profitability and what is the expectation on FY17? How much do you think your revenues could grow?
A: This profit has been a result of the restructuring in the company over the last 3-5 years. We have focused on certain product groups, exited non-core products, we have taken a look at our cost structure, our manufacturing footprint and we have rationalised a lot of our work force to prune our costs and also looked at our manufacturing footprint, both within India and overseas. And that resulted in this much higher growth than what the market grew at.
We expect to maintain or in fact, exceed the momentum that we set last year. So, growth this year should be conservatively at 20 percent or higher. Our goal is to get to about Rs 3,000 crore by the year 2020 of which about Rs 800-1,000 crore would come through the inorganic route and the rest through the organic route.
And one of the other significant things is that we have an extremely low leverage on our balance sheet right now with the debt equity ratio of about 0.2 and that would also help us in leveraging our balance sheet for these acquisitions.
We are hoping to have a normalised earnings before interest, depreciation and amortisation (EBITDA) of higher than 15 percent and a sustainable profit before tax (PBT) of about 10 percent going forward in the next couple of years.
Latha: If you can just repeat those numbers. Should I understand that revenue is what you expect to grow at 20 percent? What is the EBITDA level growth and margin level growth?
A: We are at about 13-14 percent EBITDA and we are expecting to kind of plateau off between 15 percent and 16 percent. Our PBT levels for the last quarter were almost at 10 percent and we are looking at sustaining that over the next couple of quarters or couple of years.
We are expecting to grow revenues between 20 percent to 25 percent year-on-year (Y-o-Y) over the next four years to take us to about Rs 3,000 crore of sales by FY20.
Sonia: Can you tell us where does this optimism come from in terms of individual segments because you supply to two-wheelers, four-wheelers, commercial vehicles? Where are you seeing the most amount of demand right now?
A: We have started seeing the wheels turn in the two-wheeler segment, which has been a little slow for the past two years. We are also spreading geographically in the two-wheeler space. We were primarily restricted to manufacturing in India and the Association of South East Asian Nations (ASEAN) region and we are now looking at expanding our geographies.
For your information, Pricol is the world’s second largest manufacturer of two-wheeler instrument clusters. We are looking at strengthening our customer relationships to grow a little faster than the markets.
Globally, we see a lot of traction in the commercial vehicle tractor and the off-road vehicle industry, though tractor industry is growing a little slower in India. That is a segment that we are looking at growing in both organically and inorganically through an acquisition in Europe and in the United States.
Sonia: So, by when can we expect this acquisition to get completed? Is there something in this calendar year itself and how much is your war chest? How much have you earmarked to acquire over the next 1-2 years?
A: We are looking at one acquisition this year and one acquisition next year. One of which is going to be in the sensors and instruments space primarily catering to the commercial vehicle segment and one in the oil and water pump catering to the replacement market in the commercial and the four-wheeler segment in Europe.
We expect to complete one acquisition this year and as I had mentioned earlier, we have an extremely low leverage on our balance sheet on account of all the restructuring we have done. We are expecting to spend between Rs 350 crore and Rs 400 crore over the next three years as a combination of debt and cash generated through our operations to acquire between two and three companies globally and one more Greenfield facility in India.
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