See 5-7% growth in FY16; postive on exports: MM Forgings

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MM Forgings expects a 5-7 percent growth this fiscal. With bulk production, increased sales and full capacity utilisation, the company will do well in both domestic and international markets, says Vidyashankar Krishnan, Managing Directorof MM Forgings Speaking to CNBC-TV18, Krishnan says the company’s export revenues fell 2-3 percent.  However, with good demand in the US heavy truck industry and in the European market, he expects an improved performance in exports for the rest of the year.“The only issue is that the euro business when converted into rupees, will fall and that will have some impact on our growth,” he adds.Below is the transcript of Vidyashankar Krishnan’s interview with CNBC-TV18's Ekta Batra and Mangalam MalooMangalam: 75 percent of your sales come from overseas market and you do have a large presence in the commercial vehicles sector as well. So you did indicate a positive outlook for FY16 but it is not reflective in the first quarter numbers. Any particular reason for that?A: We have over the last few months been saying that FY16 will be an year of consolidation for us. Last year we grew by about 17 percent and this year would be something in the region up to about 5-7 percent. So, this year will be a year of consolidation and we have been holding that for the last few months.Ekta: Why is it a year of consolidation?A: What happens is that when you go ahead and develop parts with customers your development lines and your tooling abilities they reach their capacities. So, once these parts vacate out and go into bulk productions then you have your development facilities freer, that is one.Second is getting to customers and finalising deals with customers is second. So you can say the second reason is market capture. A combination of these two leads to increase in sales.The third factor which is important as well this year will be capacity. So, we have reached kind of peak capacity last year with 38,000 tonnes of almost what was 40,000-42,000 tonnes throughout the year. So, as a result of that three factors combining together we predicted that this year will be a year of consolidation.Ekta: Just taking that point forward then right now even though it might be an year of consolidation how are your export markets performing vis-à-vis India?A: Export sales are pretty decent. In number terms and in foreign currency terms they have held against the previous year's numbers. The euro alone has depreciated vis-à-vis the Indian rupee, with the dollar and therefore the Indian rupee. That has lead to a slight fall.Ekta: You were apprising us about how the export business is doing. If you could just tell us what the outlook for the export as well as the domestic market would be in FY16 in terms of even incremental growth?A: The export markets are doing pretty well for now and US heavy truck industry particularly is on an all time high. That is very positive, that is expected to continue well into 12 months which is positive for us and for many suppliers from the Indian region. European markets are also holding their ground and we expect that also to be the same going forward. The only issue is that euro business when converted into rupees will have a fall and that will have some impact which we will counter with a little bit of growth. We have seen a 2-3 percent fall net in terms of our export revenues but overall we have been able to hold our ground as far as net margins are concerned.