In an interview to CNBC-TV18, Nishant Arya, executive director, JBM Group, shares his views on the company’s Q4 numbers.
The auto component maker reported a 15.23 percent decline in its net profit at Rs 17.58 crore for Q4FY15.Below is the verbatim transcript of Nishant Arya’s interview with Nigel D’Souza and Sumaira Abidi on CNBC-TV18.
Sumaira: What is the reason for the dip in Q4 given that FY15 itself has been quite strong? Was there some sort of seasonality that played out in Q4?
A: Definitely because this particular company has two divisions, one is the component division, one is the tooling division. The tooling division is a cyclical business in which the sales are not realized every quarter, so in this quarter if you see, there is a gap of 15 percent at the PAT level but the gap between the last quarter and this quarter like in Q3 we had about Rs 17 crore of tooling sale whereas this quarter we have Rs 3 crore of tooling sale which is less than 20 percent whereas the profitability has not gone down by that because the efficiency and the profitability of the components business has gone up, so therefore the company has sustained that and in the last quarter and the first quarter of FY15 the company had had quite good tooling sales, so that being a season of business has impacted this particular quarter but as you rightly said the company has about 52 percent increase at a PAT level for FY15 vis-à-vis FY14. That is the reason the company has declared a good dividend compared to the previous years and we really see that the kind of growth which the company would be seeing in the coming years would be in line with industry or more than that.
Nigel: Your point is taken that in fact that seasonality factor as well played out but going ahead, you tool division, it is a small part of your business but what is your run-rate we could see in terms of revenues? This time around it has come in only around Rs 5 crore but going ahead from the next quarter could we see it return back to around that Rs 17-20 crore that you had been reporting in the pas few quarters?
A: Definitely being a seasonal business at the annual level you will see that the tooling division does not contribute significantly in revenue but is a very profitable business, so we see a good growth in the tooling business also at an annual level, that is why we do not calculate the tooling business at a quarterly level but on an annual level we will see a least 15-20 percent growth in the tooling business.
Sumaira: I want to persist with this tooling division just a little bit longer because even Q4 is a seasonally weak quarter. So, even if I compare on a year-on-year basis with the Q4 in FY14, you were seeing an earnings before interest and taxes (EBIT) of nearly Rs seven crore in your tooling division which has this time come down to just about Rs 40 lakh. So, if it is a factor of just simply seasonality, what has gone so wrong on a year-on-year (y-on-y) basis?
A: On a y-on-y basis, if you see the tooling which was done last time was more high end tooling and more intricate tooling which was supplied, whereas in this quarter which was manufactured and supplied to the customers were not so specialised in high-end toolings; that is also difference which was there.
Sumaira: So, is that a change in business strategy?
A: No, because slowly we are moving more and more towards the high-end tooling, high tensile tooling, we are manufacturing for different customers where we are having higher margins. So, that is the strategy and now in the coming quarter, in Q1 of FY16, we also see the bus vertical is coming in place. So therefore the new division will also be added in this particular quarter.
Sumaira: So, in your bus vertical, what is the kind of investment that you have been made and how much is that going to contribute to your top-line?
A: At a group level, we have invested about Rs 500 crore in the bus vertical and this particular vertical we have a capacity of about 2,000 buses per year. And in our case we are manufacturing low floor premium buses which have created a new segment in the country. So, therefore these kind of buses would definitely add significantly to the top-line. So, we are seeing that in the coming financial year at least if not more, about 50-20 percent as a minimum would be coming from the bus vertical.
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