Investing in Hosur Plant will help grow exports: Jamna Auto

Manufacturer of parabolic springs for commercial vehicles (CV), Jamna Auto, reported a 28 percent growth in its March quarter net profit.In an interview with CNBC-TV18, Randeep Singh Jauhar, CEO & Executive Director of Jamna Auto, says that the company is working at 70 percent of its capacity.The company’s current debt stands at Rs 60 crore which has reduced substantially in the past two years from Rs 180 crore. Factors like reducing finance cost and replacing products with lower contribution with high value products from the order books will help keeping the debt and inventories lean, he said.In his view, adding a new plant, diversifying its products and even markets from being just a cyclical commercial vehicle centric company, will boost margins.With an investment of Rs 100 crore in Hosur plant, the company will be able to build up its exports business and contribute 30 percent from a mere 10 percent, Jauhar says.

Below is the edited transcript of Randeep Singh Jauhar’s interview with Reema Tendulkar and Sumaira Abidi on CNBC-TV18.Reema: Q4 has been strong. Even FY16 has been exceedingly strong. Can you tell us whether this 35-30 percent revenue growth is sustainable in FY16 and ’17?A: We have grown at 28 percent in the last quarter and if you look at the last five years, we are still about 35-40 percent below the peak. We are also below the ‘12-‘13 levels. I just still feel the ‘Ache Din’ are yet to come and our company is still about 70 percent of our capacity, we are working on 70 percent of our capacity. So we are ready and if the market grows as it should with all the infrastructure projects, the commercial vehicle (CV) market grows, we expect better results next year.Sumaira: It is 8.7 percent for this quarter, your margins look very good as well but for FY16 it is just tad above the 6 percent mark. So what is the kind of upside you have, what were the kinds of margins you were doing at your peak and how much higher do you think they could be scaled up in FY16?A: We are still being conservative going forward. We are taking a growth of about 10 percent. We feel the market should grow about 10-12 percent.Our topline will grow more than 12 percent because we expect to increase market share and add new products. The bottom-line should be more than the topline.We expect a good year going forward because besides leaf springs, we are also adding new products. The content per vehicle is going up from like Rs 20,000 by about 30-40 percent higher and these new products are very exciting, they are new technology products so we expect good set of numbers next year. I want to add couple of other things what we have done. Our team has done excellent job on cost reduction. We have reduced our cost making and balance sheet very lean. We have reduced our current assets, our debtors, our inventories have gone down.

We also have new high value added products and all the low contribution products are something which we have kind of taken off our order books.So going forward with the lean, company is expecting a better growth with mining starting and all the infrastructure product starting. We expect next 2-3 years to be exciting.Reema: Give us a sense what kind of margins at the operating level is the company targeting.A: We should be happy with double digit profit before tax (PBT) numbers, which is what we are focusing going forward.Reema: What was it in FY15 just to get a comparison. A: Our PBT in FY15 should about six to seven percent and with the finance costs going down, we expect much better numbers.Sumaira: Your interest costs has also come down this quarter to about that Rs four crore mark. Can you tell us what are the kind of steps that you have been taking to reduce your debt and what does your debt stand at right now?A: The debt figure today is Rs 60 crore. Of you look at last two years, from Rs 180 crore we went down to Rs 120 crore and now it is Rs 60 crore. So there has been a substantial reduction of debt and like I told you. We have done a couple of things. We have not expanded, we have not done much capital expenditure, in fact last two years, our capital expenditure has been less than our depreciation.

So, that has been good, added to the balance sheet. Number two, we have become like I said, earlier, very lean, our current assets have dropped substantially, even though our top line grew at 28 percent, we have reduced our current assets.