See EBITDA margins sustain around 18-20%: Essel Propack

Essel Propack's Q1 topline was subdued due to lacklustre demand but margins on back of lower commodity prices and divested business help boost bottomline. Ashok Goel, VC & MD of the company told CNB-TV18 that hit on the topline was due currency volatility and pressure to pass trough raw material prices.However, he is confident of EBITDA margins sustaining at current levels of 18 percent or could even track 20 percent, said Goel.On the revenue front, going forward he is hopeful of them being in the range of over Rs 500 crore because despite Q1 being a seasonally weak quarter the company managed to clock revenues of around Rs 500 crore.Below is the transcript of Ashok Goel’s interview with Reema Tendulkar and Nigel D’Souza on CNBC-TV18.Reema: If I just look at your consolidated topline it was 5 percent last quarter, this quarter it is at 4.7 percent. The sense that you get is that things are not picking up. How is the demand situation right now, when can we expect a recovery and what was the reason for just a sub 5 percent topline growth? A: If you look at Essel Propack, we divide the operations in four geographies – America, Europe, Africa, Middle East South Asia and East Asia Pacific. If you look at Europe, it grew by 38 percent but the reported numbers came in only 19 percent because euro got devalued; that is only a translation impact. However, the fact is that Europe grew 38 percent. If you look at China, it grew 9 percent in the previous quarter and America also grew about 7-8 percent. India showed a muted growth because it did not grow by 4 percent because we had raw material prices pass through. Effectively if you see, the overall business did grow about 12 percent but the divested business and the currency impact did make it look like that the revenue has not grown so much.Nigel: You have been doing around Rs 570-600 crore on revenues and now you have divested some part of your business in July itself, so in Q2 what is the kind of revenue number are you looking at? A: The first quarter normally for us is quite muted, that means the subsequent quarters revenues are better. So, we are looking north of Rs 500 crore. So, if we take the impact of the raw material then I would say the growth would come to about 4 percent only, ofcourse that factors in the raw material impact and also the divested business.Reema: This raw material pressure which is hurting your topline is definitely benefiting your margin as well as bottomline level. Margins have come to 18 percent, sustainable at this rate? A: Absolutely sustainable because the divested business itself, if you take that out, that itself is helping my margins to grow by 1.1 percent at EBITDA level. Similarly, the other efficiencies and everything else coming in, we expect that our EBITDA margins to be tracking in the range of 20 percent.more to come