Diamond Power has posted a strong set of numbers in Q2, with sales up 35 percent to Rs 896 crore and EBITDA at 10.5 percent. The company’s profits rose 30 percent to Rs 40.3 crore.
In an interview to CNBC-TV18, Amit Bhatnagar, MD, Diamond Power Infrastructure, said the flood in the plant and capacity constraints have impacted the conductor business during the quarter. He expects EBIT margins to stay in the range of 10-11 percent for the next two quarters.
The company expects a revenue growth of 35-40 percent in FY15, while it sees the tower business revenue at Rs 550 cr (in FY15).
Below is the transcript of Amit Bhatnagar's interview with Reema Tendulkar & Nigel D'Souza on CNBC-TV18.Reema: This time your growth has been powered by your power as well as your tower segment. Your conductor business seems quite lackluster; it is a growth of less than 5 percent that you have clocked in on year-on-year basis. Was there an issue that you faced in the conductor business in this quarter?A: We faced two issues – one was the capacity constraint and second, we had a flood in the plant on September 10. So last 20 days our production was impacted in the conductor division. Reema: Floods and capacity constraint impacted conductor business?A: Yes.Nigel: Focusing on power cables business, in fact that is where the bulk of your revenue comes in so close to around 50 percent of your revenue comes in from there and over there at the earnings before interest & tax (EBIT) level, at your EBIT margin we have seen a bit of compression. So, what it is looking like going ahead. Is this the one-off that we are seeing EBIT margins around 10 percent?A: EBIT margins will remain in the range of 10-11 percent for the next two quarters because we are adding huge capacity in the manufacturing side almost doubling our capacity so we have a pressure to push the product into the market.
Reema: Despite impact in your conduction business you have still clocked in a growth of 35 percent in your revenues. What are you hoping to achieve by the end of FY15 in terms of revenues given the strong run rate that we have seen in the first half?A: Usually quarter two is not good for our type of industry because rains are expected and when rain happens our equipments are usually in the open. So you always see that the Q1 and Q2 is the conservative quarter and Q3 and Q4 are the aggressive quarters. So, we are expecting to maintain overall growth of between 35 percent and 40 percent on an annualised basis this year. Reema: So 35-40 percent revenue growth for FY15?A: Yes.Nigel: That would clock close to Rs 4,500 crore on the revenue front?A: Optimistically we want that unless there is some external which is not in our control but we are targeting that. Nigel: In your tower business the sales have doubled on a year to year basis and your margins have shown a big expansion. Can we expect the EBIT margins to be around 15-16 percent going ahead and also what cause this big upsurge in this particular business?A: We had two windfall orders which got executed during this quarter so the margins are high. We expect EBITDA between 10 percent and 12 percent in this business. We have also got approved with Power Grid recently, so we are seeing good order flow coming from Power Grid side and we are almost using 100 percent capacity, in fact we are now getting large quantity of towers outsourced and we feel that the margin will be anywhere between 11 and 12 percent at the end of this year.
Nigel: In this quarter you have done Rs 177 crore while last full year for your tower business you did only Rs 370 crore. So for your tower business what will be your revenue approximately because that is going to be the kicker for your margins?A: We should do around Rs 550 crore. Reema: You spoke about an expansion plan, in fact when we had spoken to you last time you spoke about an expansion plan of Rs 770 crore. Can you tell us what the debt will be, have you undertaken any debt and what the debt on the books stand at?A: Whatever debt we had planned only that much we have taken, in fact on H1 to H1 basis last year, we have added Rs 220 crore in fixed asset but our debt has not increased and in spite of growth in our topline the working capital debt has not increased which I believe is the biggest achievement in the company in the last one year. Whatever working capital I had in March 2013, I am still maintaining the same level. However, the topline if you compare with March 2013 would have doubled.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
