Akhilesh Maru, CFO, Shakti Pumps, discusses the company‘s performance and his outlook for the upcoming quarters.
Shakti Pumps expects its topline to grow to Rs 400-425 crore and improve its capacity utilization to 60-70 percent from the current 55 percent, told Akhilesh Maru, CFO of Shakti Pumps to CNBC-TV18.
The company was looking to strengthen its business in African, Latin American, European and American markets, he said.
The company’s operating efficiency has improved 18.5 percent for this quarter, while margins fell 25 percent due to export shock from the Gulf regions in FY15, Maru said.
Currently, inventories of Gulf are being consumed in markets of rest of the world, he added.
Below is the edited transcript of Akhilesh Maru's interview with Ekta Batra & Mangalam Maloo on CNBC-TV18.
Ekta: Can you take us through how exactly the company performed this quarter? We do understand that it was just about a revenue growth of 1.2 percent with EBITDA coming in lower as well on a year-on-year (Y-o-Y) basis?
A: On a Y-o-Y basis there is a decline in the EBITDA but at this point of time we have to look on a quarter-on-quarter (Q-o-Q) basis because Q2 was bad for us and we have recalled a lot from those export shocks which we got because of the gulf region.
So what deficit we had because of this gulf reason, we recalled from some other geographies like USA, Latin America and domestic sales has also grown up by 60 percent on Y-o-Y basis.
So overall when we say about the quarterly performance and the yearly performance, we have to consider only quarterly performance at this point of time as we are recovering from Q2 to Q3 and Q3 to Q4 again.
Mangalam: In that case, what will your margins outlook be going forward because the last time you spoke to us, you said that you are looking at increasing your margins using high value products but as we see Y-o-Y your margins have come off by about 150 bps?
A: On Y-o-Y basis, you have to consider only one fact that except Gulf region we have grown across all the territories by 20-40 percent but Gulf region was so big for us and because of that our export degrown by 25 percent.
So we absorbed the fixed cost on a higher proportionate basis and because of that margin has gone down but considering the operating efficiency, it has gone up on a little higher side. Last quarter it was 18.5 percent but this quarter we have grown up to 18.61 percent.
On a Y-o-Y basis, last year our EBITDA margin was 17.95 percent but this year we have achieved 18.72 percent. So on operating side, we are improving. The only impact we got is the Gulf’s impact.
Ekta: What is your outlook going into FY15 considering that your revenues were up around 1.1 percent, do you expect these issues to possibly iron out the Gulf issues that you spoke about going into the next fiscal?
A: Exactly because we have already hived out our Gulf sales or Gulf targets which we used to target earlier. Now we are focusing on other four geographies like Africa, Latin America, Europe and USA. From there we are getting almost 60 percent of sales.
Till last year we were getting 60-65 percent from Gulf but this year onwards it has become 60 percent from the rest of the world and Gulf only 40 percent. So at a margin point of view, at topline point of view both are going to grow at around 30 percent.
Mangalam: Can you give us a sense of about what your capacity utilization was in the last quarter because the last time we spoke to you it was anywhere between 50 percent and 55 percent, you were looking to improve it so have you improved it this quarter and what is the outlook going forward?
A: We improved little more because the first target was to recover -- the recoveries from the new and existing clients so we have to develop and go for a deep penetration. So whatever inventory we already have which we supposed to send to Gulf region so we are consuming those inventories so at this point of time utilization is more or less at 55 percent level.
Mangalam: Next year?
A: Next year it could be around 60-70 percent.
Mangalam: What is the incremental benefit looking at the topline?
A: Topline could be around Rs 400-425 crore.
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