Maintain 20% FY16 PAT growth guidance: Essel Propack

Essel Propack net profit has risen 54 percent at Rs 59.3 crore versus Rs 38.5 crore. The company undertook a strategic divestment during the quarter under review and the proceeds from the sale were used for debt repayment, which in turn helped in reducing financing cost, says Ashok Goel of Essel Propack.

He continues to maintain a profit after tax growth (PAT) guidance at 20 percent.Below is the verbatim transcript of Ashok Goel’s interview with Anuj Singhal and Ekta Batra on CNBC-TV18.   Anuj: Your revenue is down but your profit is up because of divestment of one of your businesses which I assume was loss making. So, from here on what kind of topline and bottomline growth can you expect?A: We divested this business which was not hugely profitable but not loss making. The proceed of the sales we have used to repay some of the loans. So that is helped us to reduce our finance cost. However, without considering that exceptional income on sales, our profit after tax has grown by 24.3 percent. We expect the same trend to continue for the rest of the year. Ekta: Is there more strategic divestments that you might look at? A: No there is nothing else that we to divest at the moment. Ekta: In terms of your margins that is what improved significantly so what might your guidance be beyond this 21 percent? A: We grew 24.3 percent for this quarter and our guidance has been that our profit after tax on a consolidated basis will grow at 20 percent. So, we continue to maintain that we will grow our profit after tax on 20 percent but also we will improve our other balance sheet ratios like return on capital employed and return on equity including EBITDA margin growth. Anuj: Your Europe and the East Asia business looks good but America, Africa, South Asia, India business there is clear decline in revenues.A: Europe we have actually grown on a constant currency basis at 24.7 percent. China has grown at about 10 percent with the currency effect but on a constant basis it has grown 4 percent. However, we have to keep in mind that we passed on the raw material price reduction to our customers. That has impacted the revenue by 5 percent. So, therefore underlying business growth on a global consolidated basis is 6.1 percent. Ekta: You spoke about that 20 percent consolidated revenue growth for the entire fiscal. If I look at your Q1 consolidated profits, it is up 45 percent and this quarter was very good in terms of profits. Is there a chance that you might beat your own guidance?A: On profit after tax basis, yes possibly we could beat the margins but I can’t commit that.Ekta: You don’t know by how much?A: We would rather not commit anything; we would still maintain that we will grow at 20 percent.