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Last Updated : May 17, 2016 04:10 PM IST | Source: CNBC-TV18

Co to reduce debt through reinvestment: Majestic Auto

The company's revenues grew by a whopping 94 percent in the last quarter of FY16 year-on-year. This was mainly owing to the increase in sales in its manufacturing segment.

After it recently acquired Emirates Technologies for Rs 73 crore, Majestic Auto's debt in the balance sheet rose to around Rs 150 crore by the end of FY16. But the company plans to reduce debt through reinvestment, Mahesh Chander Munjal, Chairman and Managing Director, Majestic Auto, told CNBC-TV18.

Talking about the acquisition, Munjal said the returns from it would soon overshadow the costs incurred.

The company's revenues grew by a whopping 94 percent in the last quarter of FY16 year-on-year. This was mainly attributed to the increase in sales in its manufacturing segment.

It has added new products like fan motors which led to a sales growth of 76 percent in the fourth quarter of FY16 on year-on-year basis.

Below is the transcript of Mahesh Chander Munjal’s interview with Ekta Batra and Surabhi Upadhyay on CNBC-TV18.

Ekta: Before we talk about your earnings, just wanted to discuss the fact that you do have a certain number of shares of Hero MotoCorp on your books. Can you detail to us how much do you hold of Hero MotoCorp in terms of number of shares, what is it valued at and are there any plans of monetising it at all?

A: One million shares valuing to about Rs 300 crore. We have monetised them in the previous years. If there is a need of further investment, we may monetise that, but not sure at the moment.

Ekta: So currently, you have one million shares worth Rs 300 crore, but right now you do not have plans of monetising it?

A: Yes.

Surabhi: Coming down to the performance now, in the fourth quarter, revenue has seen a substantial jump. There is a near 95 percent growth in revenue. But, if you are looking at the, of course at the earnings before interest, taxes, depreciation and amortisation (EBITDA) level also, the company has turned profitable versus a loss. Can you break down the segmental performance between the electrical business and how your fineblanking components are doing?

A: We have almost dabbled the sales of manufacturing area and we are making motors for refrigerators and we have added few more customers and there is a fineblanking activity, there also we have added few more customers and products. We have added fan motors and the sales have grown about 76 percent in this quarter over the last year. And the other income, we have acquired a company called emirates technologies private limited which is having a 6.5 lakh sqft area rented out to office space. And from there, there is a good return. In this quarter, rent has gone up by about Rs 8 crore and there is a facility management that we are doing in Majestic IT limited where also, we have gained about Rs 6 crore and there is dividend income, there is income from this investment. So, this has almost doubled or more than that in this year.

Ekta: On your balance sheet, we understand you have around Rs 150 crore worth of debt right now. Can you tell us what your plans might be on that front? Would it be stable at this level, are you planning to reduce it or maybe do you have some capital expenditure (Capex) plan which you will be funding via debt?

A: We have plans to reduce this and we are working on that. Maybe it is through the investments, but this debt has gone up from Rs 95 crore. We have invested about Rs 73 crore in this new acquisition. And where the return is higher than the cost of this, we are going to have a revenue of Rs 32 crore this 2017 from rent and another Rs 29 crore of facility management which Majestic IT Services is doing. And over a period of time, we are going to reduce this debt.
First Published on May 17, 2016 04:10 pm