Hope to maintain margins around 17% in FY16: Amara Raja

Amara Raja Batteries in second quarter ended September 2015, posted 23 percent rise in consolidated net profit at Rs 123 crore versus Rs 100 crore during the same period of previous fiscal.SV Raghavendra, CFO, Amara Raja Batteries in an interview to CNBC-TV18 spoke about the numbers in detail and the outlook going forward.Below is the verbatim transcript of SV Raghavendra’s interview with Sonia Shenoy on CNBC-TV18.Q: I would like to start off by asking you what is the segment wise volume growth that you have seen in the the four-wheeler and the two-wheeler segment? A: We have had a good double digit growth in both the four-wheeler as well as two-wheeler. Especially in the aftermarket the growth has been quite significant. Q: Going ahead given that you have said that the industrial battery segment has registered a very moderate volume growth what kind of growth do you expect to see in the second half of the year? A: With the new regulations from Telecom Regulatory Authority of India (TRAI), we expect that there could be an increase in the telecom towers so that call drops can be addressed. So, that could really help us in increasing the volumes of industrial battery especially telecom batteries. So, we expect that it should be a fair amount of growth in the second half. Q: Can you quantify that for us, we don’t know exactly what is the UPS and telecom segment growth this quarter so what has the volume growth been and what will it look like in the second half of the year? A: Telecom growth we have had about 10 percent over last year and the UPS side it was very moderate growth of about 5 percent. Q: 5 percent in the UPS batteries? A: In this quarter, yes.Q: Where are you facing pressure because your revenue growth of 9.2 percent is much lower than what you have seen in the past quarters. Which is the pockets where you are seeing the most amount of pressure now?A: One is you should look at the revenue in conjunction with the raw material prices. So, when the raw material lead prices come down this has to be passed on to the original equipment manufacturer (OEM) customers. So, therefore topline also will come down. However the realisations being better the EBITDA and the other margins will improve but it will have an impact on the topline.Q: We have seen not just you but your peers like Exide as well seeing pressure in some of the segments like industrials batteries. Given that you have new capacity in hand do you think the industrial segment can perhaps grow in double digits in the second half of the year or is that a tall ask?A: There are two parts to it. One is the telecom – the large valve-regulated lead-acid battery (VRLA) which we are hopeful going in double digits and the second one is the UPS. UPS is where the pressure is coming from where imports are also competing with domestic products and there are lot of price measures also there. So, this is an area where we are finding some pressure.Q: The street was very enthused last quarter when you saw margins of 18 percent plus and this quarter the margins have fallen to 17 percent odd. For the second half of the year, what are your targeted margins, where do you think Amara Raja could be by the end of FY16?A: As I have been maintaining in the last quarter as well as prior quarter also that we will always aim to maintain the existing margins. There can be a range of 0.5 percent plus or minus. When the new capacities are coming on stream there can be certain under capacity utilisations and fixed cost will not be absorbed completely but over a period of time when the costs are getting completely absorbed this will get evened out. So, I have been maintaining that we will try to always maintain the margins in a range of plus or minus 0.5 percent at around 17 percent.