Hope to log over 20% growth for H2FY16: Minda Ind

Minda Industries on Tuesday reported a staggering rally of 20 percent at Rs 696, also the stock's 52-week high on BSE. The total income during the quarter grew by 19 percent, at Rs 651.7 crore against Rs 545.6 crore the same quarter of the previous fiscal.

In an interview with CNBC-TV18, Sudhir Jain, Group CFO, Minda Industries said that the company has a 20 percent compounded annual growth rate (CAGR) for the last 10 years which he hopes to improve further for H2.

The company recently acquired multiple new orders, namely Wabco, Renault and Suzuki and expects a revenue gain of around Rs 55 crore from the former two companies.

The company's margins too have improved substantially by 300 bps and the management hopes for further improvement in light of the new orders.Below is the transcript of Sudhir Jain’s interview with Sonia Shenoy and Latha Venkatesh on CNBC-TV18. Sonia: It has been a stellar 19 percent growth that you have seen on your topline and margins have improved a lot as well. Just give us a sense of what are the fresh orders that you have won this quarter and what kind of growth do you see in the second half? A: Firstly, let me tell you the background. Consistently, we have been sharing information with you. In the last two years, we have added a lot of capacity in our existing products and better the capacity utilisation, better operating efficiency has resulted into the numbers and also we are consolidating our operation under Minda Industries Limited (MIL). As a result of our Vietnam and Indonesian operations becoming 51 percent subsidiary of MIL, now switches, lamps, horns, globally is part of MIL. All these operations have become part of MIL. As far as new orders are concerned, we have got a very strong research and development (R&D) and engineering bay. So, whenever there is a new model launched by various original equipment manufacturers (OEM), we become part of that at the stage conceptualisation and development. We are into all signals of auto, two-wheeler, three-wheeler, four-wheeler as well as commercial vehicles. As you know the main customers are Maruti, Bajaj, TVS, Honda, so, most of the new orders we are participating which is resulting into about 19 percent topline growth. Just to remind, in the last 10 years our topline is growing consistently at 20 percent compounded annual growth rate (CAGR) which we hope to continue in times to come. Latha: Actually, that was going to be my next question. Will you do 20 or will you do even better in the current year? A: Of course we are targeting better and historically, H2 is always better than H1. And as you aware, the industry is also improving. In passenger vehicles, there is a 7 percent volume growth. In H1, year-on-year (Y-o-Y). Two-wheeler of course is flat, but in case we see the October number, we hope that with this festival season, two-wheeler will also pick-up and the industry should grow and may touch a double digit growth in H2. Sonia: In your presentation, you have mentioned that you have received new business from Wapco as well and the supplies will begin in Q4, FY16. What is the quantum of the order that you have won from Wapco? A: Firstly, this is an aluminium die casting. Aluminium die casting pasts we would be supplying from our aluminium die casting units. And the annual turnover expected in the first year would be about Rs 25-30 crore which will increase later on. Latha: Your margins have improved fairly substantially, 300 basis points. Is there scope for more? A: Yes, there is scope for more and the whole management team is highly focused on improving the internal efficiency. This will come from better capacity utilisation and internal operating efficiency. Just to recollect, w set up and we expanded our capacity of switch and aluminium die casting about a year ago and set up two plants in Hosur. Lighting was also expanded both in Manesar as well as in Pune. Low moulding parts paint shop was set up in Bawal. So, all this is resulting into better topline and by improving of efficiency the bottomline is expected to improve even further. Sonia: You mentioned that your new order from Wapco, you will get Rs 25-30 crore of revenue in the first year. You also said that the Minda Acoustics division has received one export order from Renault in Brazil. What is the quantum of that order? A: This order has come from Brazil. As you are aware, we acquired Clarton in 2014. The unit is Spain and further it has been expanded into Mexico also. So, this Brazil order will again add similar amount to our turnover in the first year which is likely to expand further. Sonia: I am sorry, I did not get the amount. A: About Rs 25 crore. Latha: What will be the contribution of your international division in FY17 because you are telling us in your presentation that the horn operations that the Mexican operations which will start in April, 2016 will actually give you money only in FY17 likewise as Sonia was telling you the Brazilian operations if you put all these together, what is the FY17 international contribution? A: Actually, we are targeting that of the total turnover, 20 percent should come from international operations which means our plants outside India as well as exports from India. Today, I think we are touching about 12 percent of our group turnover. So, we hope to take it 20 percent overall in FY17. Latha: And are margins higher for export and international orders? A: Yes, margins are better in global orders. Sonia: Just wanted one clarification, you have received a new order for automotive lighting components from Suzuki. This is different from what you supply to Maruti in India right? A: Yes, it is different. This Suzuki order is from the Asian countries such as Indonesia for headlamp, tail lamp for four wheeler. So, from our Indonesian plant, we would be supplying this components lighting to Suzuki there. Sonia: And to service all of these orders, will you be increasing your Capex plans? What is the Capex currently for FY16 end and for FY17 as well? A: In our existing products, we do not see much Capex in the current year as well as in the next year because already the capacity has been created. Mostly the Capex will be for replacing and to make over the existing equipments and upgrading that. This is generally of the order of Rs 50-60 crore annually. Yes, in the new products this year, we are making capital investment on making alloy wheels. As I shared last time that we are setting up alloy wheel plant in Bawal under the name of Minda Kosei. This is a Kosei joint venture, this would be the second plant, earlier plant is in South. In this plant the total Capex in two phases we are incurring about Rs 200 crore, and Rs 60,000 per month is the Capex. So, this is over and above Rs 50-60 crore which we incur every year in various units. Latha: Your interest outgo is practically nothing. Some Rs two crore per quarter, are you debt free and will you remain that way even after this Capex? A: Some debt would be added with this Minda Kosei investment. But even after this, the debt-equity ratio would be within 0.7 to equity. So, debt is maintaining quite a strict discipline as well as debt-equity from front and expanding value from our internal fresh accrual.