Expect sales to grow by 8-10% in FY16: Sona Koyo

Anuj: It looks like you had a difficult quarter. Can you explain what went wrong because your sales are also down and your profit is down quite a bit?

A: We have had a difficult Q3 in comparison to last year. On a consolidated basis we actually declined almost 5.5 percent and that has really been because of the domestic sales.

Overall Maruti, Honda has done alright, however the rest of the companies have pretty much had a flat or a decline in sales. If you look at our EBITDA margins on a year-to-date (YTD) basis they are definitely a lot higher than what they were last year. So, it is higher by almost 16 percent.

We have been able to curtail some amount of cost and continue to keep our EBITDA margins high. Our PAT margins are lower mostly because of our depreciation. The new depreciation laws that we have sort of put in and therefore the PAT margins look a lot lower than what they should be. 

Anuj: Going forward then at what point do you think the margins should settle. Can you give us any kind of trajectory for the next 3 or 4 quarters?

A: I would say our EBITDA margins are pretty good, they are healthy. They are about 13.5 percent which on a consolidated basis is a good EBITDA margin. Of course it could go up higher if sales were to go higher. So, we are expecting better sales, we hope to have seen the worst then bottom out etc. January has been better than we had expected, February of course is short month. We are hoping March will be definitely a lot better than what we had last year. Then the next year seems to be good, Maruti is pushing sales into the rural markets which is definitely positive. Honda is coming out with new models. So, again we are expecting good sales. We are expecting good sales in our off highway vehicle market which we have just entered in terms of commercial sales for tractors as well as the off highway vehicles.

Anuj: In terms of sales what kind of growth do you expect in next fiscal? As you said this last quarter was tough but going forward things look good especially from both Maruti and Honda point of view. So, FY16 what kind of sales growth do you think your shareholders can expect? Today the stock is down because there has been quite a bit of pressure on your topline?

A: At the rate we are going we will probably see about 3-4 percent sales increase this year. Next year I am hoping this will of course grow more than 4 percent. We are hoping at about 10 percent increase in sales or may be little less. So, around that level, around 8-10 percent.

Anuj: If you could also tell us apart from Honda and Maruti which are your other big clients and what kind of growth do you expect from those areas?

A: Other big client of course is Mahindra, Toyota, these are other big clients for us. Tata is also a customer for us. We are pretty much supplying to most of the passenger car manufacturers in India other than Hyundai. So, we hope to see some revival of sales in Mahindra. They are coming out hopefully with new platforms and we hope to see revival there. With Tata of course they have had new platform launches, we are not on the new platforms currently but they are also going to launch new platforms, so we hope to see revival in sales there as well.

Anuj: In terms of performance of your subsidiary how has that been?

A: Subsidiary has performed well. They are mostly supplying to Nissan as well as to Suzuki, as well as Honda. All the companies are doing well. Nissan is also picking up in sales. So, they are also doing pretty well.

Anuj: Do you get impacted by currency fluctuations? If yes what are you doing to safeguard that?

A: We are pretty much hedged in terms of all our imports. So, we do not see any impact at all in terms of currency fluctuations. We have hedged our imports.