Havells ups full-year growth guidance to 12% from 9-10%

Havells India beat second quarter estimates and reported 44.5% increase in PAT at Rs 125.7 crore. Though Sylvania, a company acquired by Havells in 2007, continued to remain a concern with net loss coming in at around 1.6 million euro, Anil Rai Gupta, Joint MD, Havells India, is quite positive and hopeful because the operating margins are still at about 3.9 percent. He says overall net loss is due to forex volatility.

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He expects to achieve around 12 percent overall growth for the entire year, higher than 9-10 percent guided earlier. He is hopeful that for the entire year overall margins would be at about 13.5-14 percent. Below is the verbatim transcript of Anil Rai Gupta's interview on CNBC-TV18 Q: It has been a good performance for the domestic business, but it seems as though Sylvania has been quite a concern this quarter where the net loss has come in at around 1.6 million euro and sales have been quite flattish this quarter as well. Can you just take us through the performance of Sylvania and what took place this quarter in particular?
A: As far as the Sylvania is concerned we are still quite positive and hopeful, because the operating margins are still at about 3.9 percent. The overall net loss is due to the foreign exchange currency volatility and even in sales, while it looks flat, Europe has been flat. There has been a growth in local currency in the Latin American business, but due to the foreign exchange volatility there is a degrowth in Latin America in dollar terms and hence that is why it is showing a flattish sales trend. We are quite hopeful. We have committed 5 to 5.5 percent operating margins for Sylvania on the overall year basis. Even on last 12 months trailing basis Sylvania is operating at more than 5 percent. So we are quite hopeful of maintaining our guidance in this. Q: Given the strong performance that you have delivered in the domestic side where revenues have grown by about 28 percent, are you looking to revise your guidance of 9-10 percent for the full year higher or do you see enough strength in the second half of the year that the company is likely to beat its own guidance?
A: The second quarter performance definitely has come out much better and it again goes down to the fact that we have been expanding our distribution channel and brand, so this 22 percent growth was definitely because of all these factors, but also because of lower base in the second quarter last year. We feel that we will be able to achieve around 12 percent overall growth for the entire year, which will be higher than 9-10 percent earlier that we have talked about. Q: What about the electrical consumer durables business? Do you expect this run rate to maintain for the second half of the fiscal? The reason I ask is that can you sustain such a performance for the next two quarters?
A: We have a couple of new product categories in this segment as well, basically water heaters and appliances which is fairly in the nascent stage. Hence the growth rate in these two businesses will continue to remain very strong this year as well as next year. So we are quite hopeful that electrical consumer durables will be able to generate similar kinds of growth in the entire year. Q: What about the industrials segment?
A: In industrial segment if we take out new product, switchgears that has also grown by almost 15 percent in this quarter. Overall including the new products we hope to maintain this kind of growth rate. Q: Given the fact that now revenue growth seems slightly higher than what you had earlier estimated. You said that you are now expecting 12 percent versus your earlier guidance of 9-10 percent. Could you possibly increase your margins on the domestic side of the business? What would you expect in the second half of the year on margins?
A: This particular quarter the margins were higher mainly because of increased revenues, a little bit of timing effect on the advertising also. We are quite hopeful that for the entire year our overall margins would be at about 13.5-14 percent. This is despite the fact that we had cost push as well this year due to foreign currency movements, but still we will be able to maintain margins of 13.5 percent.