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Last Updated : May 04, 2016 12:20 PM IST | Source: CNBC-TV18

Long-term debt up due to expansion: Arihant Superstructures

Aman Verma, the Chief Financial Officer of Arihant Superstructures says the key to sustainable growth is the identification of right products at right price and for right location that have higher EBITDA margins

Arihant Superstructures' year-on-year revenue for FY16 has risen by 13 percent and EBITDA margins grew by 43 percent.

Aman Verma, the Chief Financial Officer of Arihant Superstructures says the key to sustainable growth is the identification of right products at right price and for right location that have higher EBITDA margins.

FY16 saw a huge jump of 85 percent in profit after tax, and Verma expects a stable cash-flow coming in, in the next few years.

The long-term debt for the company has gone up to Rs 200 crore as it plans to channel more projects to stir growth in the coming years, Verma adds.

Below is the verbatim transcript of Aman Verma’s interview with CNBC-TV18's Nigel D'Souza and Reema Tendulkar.

Nigel: Numbers looking quite good this time around. What did you do so differently and also could you give us a sense about whether this is because of revenue recognition, what exactly are your cash flows?

A: I wish to highlight on the results which is a year-on-year (Y-o-Y) on the standalone basis the revenue grew by 13 percent up. Profit after tax (PAT) grew by 85 percent as compared to last year. Earnings before interest, taxes, depreciation and amortisation (EBITDA) on absolute terms grew by 34 percent and the earnings per share (EPS) which comes out to be is 4.87 which was also around 85 percent as compared to last year.

It is about our strategy of management. We believe that there is never a bad market. You have to identify the right product at right price for the right location. This comes out close from the strategy and thanks god to our senior management and specially Mr Ashok Chhajer who has that vision.

Reema: All that is well taken and it reflects in the company's financial improvement as well but could you tell us how despite a 13 percent increase in your standalone revenues your profits went up by 85 percent. Is that the trend that will sustain what would be the sustainable revenue growth in the coming year as well as the profit growth in FY17?

A: There are two pointers for this very specific differentials. One is we have realised the projects which has higher EBITDA margins. Now all of our projects doesn't give the same EBITDA margins. Some of them give maybe 30 percent and some of them more than 35 percent as well. So, this year as far as our revenue recognition method we have recognised the projects which has higher EBITDA margins and going with the sales figures this year that we have cracked approximately less than Rs 400 crore value sales which is around 1,150 units we see a stable cash flow coming in the next following years.

Nigel: Give us your numbers, what could you cash flow look like for the coming year?

A: I could talk of compound annual growth rate (CAGR) only and I can say that it could be more than 25 percent CAGR henceforth going from here.

Nigel: Just wanted to ask you about your balance sheet, what is it looking like? I believe your long term borrowings have gone up this year. And also what is happening with regards to interest. Are you capitalising any of that?

A: Yes, borrowings have increased this year. This is specially for the reason that if the company is going unit money, unit money to fuel the growth, to execute the projects there are two pointers. The debt has two components (interrupted..)

Nigel: You were telling us about your balance sheet, what is it looking like and could you give us some numbers, how much is your long term borrowing, what cost are you borrowing at and could you tell us why exactly are you capitalising it?

A: The borrowing which has gone up to around Rs 200 crore long term, it has two components. So, it is around Rs 93 crore from banks and financial institutions and around Rs 110 crore from promoters and promoter groups. So, my weighted average cost of capital (WACC) could be around 13.5 and the interest that we acquire for the promoters borrowing that we don't pay them. It is fuelled back in the company for future growth.

Reema: You had approved the divestment of 30 percent in Arihant Technoinfra Private Limited. How much will you realise from this divestment?

A: This is a strategic divestment that we are taking. This particular company Arihant Technoinfra Private Limited has an associate status so far with ASL and now it has been proposed to further diversify it.

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First Published on May 2, 2016 12:57 pm
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