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Last Updated : May 27, 2016 03:47 PM IST | Source: CNBC-TV18

See 12.75% margins in first quarter of FY17: Salzer Electronics

The wire and cable accounted for 45 percent of revenues in the fourth quarter. But this business has a lower EBITDA margin, leading to a decline in overall margins.

The fourth quarter of FY16 witnessed a drop in EBITDA margins to 10.6 percent from 12.3 percent. This was due to growth in its wire and cable business, says Rajesh Kumar Doraiswamy, Joint Managing Director, Salzer Electronics.

This vertical accounted for 45 percent of revenues in the quarter. But this business has a lower EBITDA margin, leading to a decline in the overall margins.

But Doraiswamy expects the EBITDA margins to rise to around 12.75 percent in the first quarter of FY17.

Salzer reported an 18 percent rise in fourth quarter profit to Rs 4 crore from Rs 3.4 crore.

Below is the verbatim transcript of Rajesh Kumar Doraiswamy's interview with Surabhi Upadhyay and Nigel D'Souza on CNBC-TV18.

Surabhi: For Q4 your topline has grown by about 28 percent, profitability has also increased but there is also other income component whereas margins have come down a bit around 10 percent level. Why the pressure on margin?

A: Yes, the revenues have grown on quarter-on-quarter basis and the reason for the margins coming down is because of the product mix because on Q4 we see the wire and cable business has grown substantially and has contributed 45 percent of the total revenue which has lower EBITDA margins. So that\\'s the reason the margins on blended basis has come down but if you look at the margins on year-on-year basis, they are 50 bps up compared to last year with 28 percent revenue growth.

Nigel: What exactly is your export contribution currently? You were looking to up it from 20-25 percent or thereabouts. Why is that? You get better margins over there, profitability is better?

A: We are still at around 22 percent export contribution. The reason that the export contribution has dropped from the last year\\'s 25 percent is because this year we have taken up a onetime special project for the Tamil Nadu government, which has contributed Rs 40 crore on the topline and because of that the overall export contribution has dropped. Otherwise the exports itself has grown by around 19 percent compared to last year.

Nigel: Do you get better margins at export. On blended basis you are doing around 10.5 percent in the last quarter. So what kind of margin you get in exports and what kind of margins in domestic business?

A: We cannot say that the export business gives us higher margins but it's same as Indian business.

Surabhi: A change in product mix could help you get back to the earlier higher margin levels?

A: Yes, this is a one-off quarter where the wire and cable industry has substantially grown and we have not realised the energy saver margin but otherwise we will be back at 12.75 percent EBITDA level in Q1.

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First Published on May 27, 2016 03:47 pm
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