Expect 20% bottomline growth in FY17: SH Kelkar

SH Kelkar has seen its margins rise in the fourth quarter of FY16 despite a 21 percent rise in raw material prices. Apart from keeping a tight leash on expenses, company Chief Executive Officer, Kedar Vaze, says it is also due to its venturing into ready to use, diluted fragrance business.Vaze expects the company's bottomline to grow by 20 percent in FY17 with a 15 percent topline growth. The growth would primarily come from the domestic fragrance and flavour business. Below is the verbatim transcript of Kedar Vaze's interview with Ekta Batra & Anuj Singhal on CNBC-TV18.Ekta: A topline growth of around 12 percent odd. Can you breakup what the volume as well as the value growth was?A: The overall growth has been driven by about 10 percent like-for-like sales and the remaining 2 percent is new products.Ekta: Can you break it up between flavours as well as fragrances segment, which one saw more growth?A: We had a mixed bag; both fragrances and flavours in domestic had a strong growth year and exports in particular, more in the Middle East and North Africa (MENA) region had difficulties arising out of the geographic supply chain and the oil price being low, the overall demand environment was lower.In terms of flavours, we had 25 percent growth in flavour in domestic and fragrances were at 12 percent growth in domestic revenue. However, overseas were much lower but we were focusing on the profitable business, so profit growth has been sustained although the revenue numbers overseas were much lower than what we expected.Anuj: What stands out in your numbers is that your revenue went up only 12 percent, your raw material cost went up 21 percent and still you manage to improve margins quite significantly. What lead to that margin improvement and what is the trajectory for margins going forward?A: We have been able to control our expenses and get the maximum operating leverage from the last quarter onwards. The second part in terms of margin is that in domestic fragrances, we have adopted slight different business model where certain customers would require having ready to use or diluted fragrances. We have tied up with an external party to supply us and we do the service at a very low margin, around 5 percent and the revenue in Q4 was around Rs 12 crore, which is a service business for us. So our underlying fragrance concentrate business margins remain the same and therefore the overall profitability remains the same. Anuj: A word on forward guidance. You did earnings per share (EPS) of Rs 5.5 for the last financial year. What is the outlook for this year?A: We do not have a policy of giving any specific EPS guidance, so I do not have an exact number but we are on track for the normal trajectory in terms of revenue and profitability. We do not see any hiccups on our trajectory. Ekta: Normal trajectory would be?A: Around 15 percent growth.Ekta: On topline and bottomline?A: On topline and typically there would be an operating leverage in the bottomline and should grow around 20 percent.Ekta: A word on your balance sheet as well. What does it stand at in terms of debt as well as cash on books?A: There is zero net debt as we speak.Ekta: How much would your cash be?A: There is no cash in the books.