Alok Sharda, CFO of Ramkrishna Forgings, discusses company's fourth quarter earnings and its future outlook.
Ramkrishna Forgings reported a net profit of Rs 34.60 crore in Q4FY15 as against Rs 4.70 crore on year-on-year (YoY) basis and is now looking to achieve an overall growth of about 60-70 percent for FY16.
In an interview to CNBC-TV18, Alok Sharda, chief financial officer, Ramkrishna Forgings, says the fact that forging is majorly an export business, the company is likely to see decent growth.
With its capacity doubling and a change in its product mix, the company is expected to reach the overall estimated growth in business, he added.
Below is the edited transcript of Alok Sharda’s interview with Ekta Batra & Anuj Singhal on CNBC-TV18.
Ekta: What is the kind of growth rate that you are possibly expecting in the next 1-2 years?
A: If you see the current quarter if you compare on full year basis we have grown by almost 70 percent and what we are looking at this number to grow under same number.
Next two year we are looking a growth rate of more than 60 percent both in the topline and bottomline you will see those improvements.
Anuj: Where do you see this growth coming from?
A: Growth if you see, we have done certain capex in last three years. Some part of which has started last year and major part of which is getting completed in this financial year. With a completion of this capex my capacity is almost getting more than doubled which is helping us in bringing the growth.
Another part of growth is coming from the change in the product mix and change in the market scenario. Earlier we were primarily a domestic company, if you see last year numbers we have exports which are more than 50 percent of my topline and going forward this will grow to 60-70 percent which is driving the growth.
Being in the export market in a forging business if you are in export market you are in the higher end of the segments. So your margin also improves, your topline also improves which helps you in showing a decent growth and bottom-line.
Ekta: Give us some colour on the capex? How much have you done in the last three years and is there any capex which is pending going forward?
A: If you see last three years we have gone for a capex of around Rs 700 crore, out of which major portion has completed. As on financial year 2014-2015 we have almost done Rs 600-640 crore of capex. Balance capex left is only Rs 40-50 crore which will be completed in the first half of this financial year.
Going forward we are not looking at any major capex, what we are looking at is utilising these capacities which we have added up. This will significantly change our product mix from a lower end of forging business to a higher end of forging business where we will be making front axle beam, crankshaft, stub axles, knuckles.
We will be one of the companies in India which is having a press line which we are putting up a 12,500 tonne which nobody posses as technically if you ask me. This is one of the best facilities in the world which we have put and for that we have already started our hot runs in the month of May itself. We are hoping that from the second half it will start producing. This will give us a major development and growth in the business.
Anuj: What happens to growth in capacity going ahead as the major chunk of capex is already in place?
A: Major chunk has already happened so as I was telling you the hot trial has already started so it is a very small chunk of capex is pending. What we are looking at next 2 years optimising on these capex because you see it tomorrow we have a capacity available to do Rs 2,000 crore topline. If you see my last year performance I have done only Rs 740 crore topline.
So we have a capacity available with the markets also growing. Globally the markets are very hot. If you see export market last year we have grown more than 300 percent, this year we again looking at growing more than 100 percent in export market.
So what we need to do is to see that how fast we can move closer to that Rs 2,000 which we are hoping to achieve those in 2-3 years time. We don’t look immediately any major capex because we have already enough things in the plate to complete those things before going for a next round of capex.
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