See better time, huge ad spend ahead: Raymond

Sonia: Take us through what went through this quarter because your textile segment and your tools and hardware segment has seen a drop in operational performance?

A: The textile segment while it has actually grown, it has grown mainly through export segment. We have higher exports and the domestic side there has been lot of stores renovation that we are carrying out as part of our long-term strategy. There has been product mix change as a result EBITDA has dropped but this is a temporary phenomena and over a period of time through our brand building exercise this will actually grow up – this is in the textile segment. We have not taken any price increase as input cost increases in terms of power, fuel and certain amount of payroll cost. Apparels space has been actually growing and growing very healthily and consistently in the four-five quarter we have been growing 15 percent and our like to like sales growth has been growing at 16 percent. We see better time going forward.

In engineering space, mainly in tools and hardware, the margins are down partly on account of the fact that overseas markets are having some problems including Africa, there is Ebola issue so the offtake has been low, Latin America business has gone down a bit.

Latha: Revenues are not that bad. It is just that you are not making more profit with that kind of revenues. Which elements of the pressure will ease?

A: The drop in EBITDA has been mainly in textiles and in tools and hardware and to some extent in auto components. Quarter three is expected to be definitely better and at this point of time Q4 is too early for me to say but the branded apparel segment and the garmenting doing reasonably well and we are also penetrating our shirting fabric into all the stores. So expect to do well over a period of time.

Latha: What is the percentage of export earnings and are you planning any build up there?

A: The range is between 20-22 percent on an annualised basis and turnover we generally have about USD 95-100 million of net foreign exchange earnings into our system.

Sonia: When you say that Q3 will be better than Q2, on a revenue base of Rs 1,460 crore how much do you think you could do in the next couple of quarters?

A: I never compared Q3 with Q2. I am saying Q3 is expected to be better in certain segments of our businesses and it also depends on the demand uptick etc. While Diwali demand has been very soft but as we see going forward based on the booking position, the trends appears to be good at this point of time and margins over the next six months time we will definitely be better than the first half of margins that we have achieved both first and second quarter put together.

Sonia: A comment from you on interest costs – those continue to be higher. So is there any plan to bring down the debt. What does it stand at now and can we expect a reduction in interest cost?

A: Our interest cost is about 9.9 percent on our earnings today considering where we are today from the kind of borrowings that we have, mix of short-term and long-term and also in the bond market we are reasonably okay in this. We expect some amount of interest cost reduction over a period of time. It all depends on how the interest rate pans out in India maybe 0.25 percent rate may come down. Gross net borrowing for us is about Rs 1,597 crore and working capital is very efficient. Efficiency is now coming into the system. We hope to bring down the debt at least by about Rs 50 crore odd in the next one year time.