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Last Updated : Jul 26, 2016 06:11 PM IST | Source: CNBC-TV18

See mid-teen sales growth, 22-23% margins ahead: Welspun India

Welspun India reported a 10.3 percent jump in its net profit to Rs 201.9 crore and 14.3 percent rise in its total income to Rs 1,592.6 crore in the first quarter of FY17. The company‘s margins expanded to 26.5 percent.

Welspun India reported a 10.3 percent jump in its net profit to Rs 201.9 crore and 14.3 percent rise in its total income to Rs 1,592.6 crore in the first quarter of FY17. The company’s margins expanded to 26.5 percent.

As forecast earlier, the company will continue to maintain revenue growth at the mid-teens level and earnings before interest, tax, depreciation and amortization (EBITDA) margins in the 22-23 percent range, says Dipali Goenka, CEO & Joint MD of Welspun India.

Goenka expects the company’s net debt to equity ratio to fall to below one, which currently stands at 1.2. This will be done through paring the debt of Rs 150 crore in current fiscal, she says.

Below is the transcript of Dipali Goenka’s interview to Reema Tendulkar and Mangalam Maloo on CNBC-TV18.

Reema: We have the basic numbers, but from the current 14 percent on your revenues, do you think you can accelerate growth? How is demand shaping up for you for the rest of the year?

A: The demand is as we have forecasted the numbers for this year will remain the way we have in the mid teens, so the revenue growth will maintain at that and same as the earnings before interest, taxes, depreciation and amortisation (EBITDA) margin as well. It will be around 22-23 percent that we will see as kind of an annual maintained margin target as well.

Mangalam: But the EBITDA margins have come in at 26.5 percent which, for as long as I can see, are at least 3-4 quarter high, so is that the kind of trajectory we can expect going forward?

A: We are taking a little conservative approach because of any kind of incentive, any kind of an impact, but definitely, we have continued to outdo what we commit.

Reema: But what about your finance cost? That has come down significantly, Rs 60 crore last year, it has now come down to Rs 35 crore of an interest payment quarterly. What led to that and do you think it can come down further?

A: It is basically because of our low, if you talk about availing a Gujarat textile policy and our Vapi plant has just got in the groove for that and hence that is what we have seen, that impact.

Mangalam: How do cotton prices impact you? Just wanted to know because we have been talking to a lot of people and they are saying that 35 percent growth in cotton prices over the last couple of quarters. So, how does that impact your margins?

A: If you look at the cotton and if you can relate it directly to the monsoons, yes, we have seen the acreage going low, the drop around 12.8 percent. But, the monsoons have been good and we will see softening of the prices by October as the cotton starts coming in.

Mangalam: So, you will not see any impact of it on your margins?

A: No, it will be very low compared to what it is looking like at the moment.

Reema: You have lined up an Rs 800 crore capital expenditure (Capex) for FY17 on account of which your towels as well as bed linen capacity will go up by the end of the year. How much will that add in terms of incremental revenues, purely the higher capacity?

A: It definitely will, if I talk about Anjar and Vapi put together, they will actually add on an incremental revenue of around 7-10 percent.

Reema: So, that should kick in from FY18?

A: Yes.

Mangalam: And what will that do to your balance sheet, your capital structure?

A: If I look at where we are today, we are pretty well covered and if we are leveraging ourselves far better than everything else, if we look at our net-debt to operating EBITDA, it is 1.5x and net-debt to equity is 1.2 which will go below 1 this year. So, definitely we are looking at ourselves pretty well covered on that bit as well.

Reema: You are saying that net-debt to equity stands at 1.2 and that will drop to sub-1 by the end of the year?

A: Yes.

Reema: That will be on account of you raising equity or will it be on account of you paring down your debt because your net-debt sits at Rs 2,573 crore right now. How much can it come down to?

A: This year, if I talk about ourselves and the loans that we have to pay, it is going to be around Rs 150 crore and we definitely, the way we are looking at ourselves and the cash reserves, we are pretty well there.
First Published on Jul 26, 2016 03:27 pm
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