Tilaknagar Industries was down in trade Monday after fourth quarter losses widened significantly to about Rs 70 crore. The topline, too, was subdued at just Rs 150 crore. Speaking to CNBC-TV18, CMD Amit Dahanukar said the bottling problems in Tamil Nadu hurt FY15 revenue.
The liquor manufacturer is expecting strong demand in FY16 on the back of good underlying business. The company is taking initiatives to pare debt which currently stands at Rs 800 crore.
Tamil Nadu contributes 30 percent to Tilaknagar's total volumes and the operations of the company are expected to normalise in Q2FY16, added Dahanukar. Below is verbatim transcript of the interview:
Q: What was the reason for such a weak performance in this quarter? Either you look at it on a year-on-year basis, but even on a quarter-on-quarter basis, it is looking extremely weak. Would it be for the first time you have reported earnings before interest, taxes depreciation and amortisation (EBITDA) loss?
A: This was a weak operational year due to several factors; the entire financial year 2014-2015. Primarily on account of business in Tamil Nadu which we did not or rather were not able to subscribe to right from April of last year due to some problems, local problems which our bottler was suffering in the state of Tamil Nadu.
Tamil Nadu has been the main market for the company contributing nearly about 30 percent of the volumes in revenues. This impact clearly was very evidently visible in this year. And that coupled with the Andhra Pradesh bifurcation which happened in June, July of last year which is again our main market. That created some operational disturbances for us and then in August, September, you had the news of the Kerala prohibition which again created some operational disturbances for us.
On the whole, it was a weak operational year and this fourth quarter looks a little bit sharper particularly due to some year ending provisions which we have made. So, there was some year ending provisions which we made on account of Tamil Nadu which is why the quarter looks commonly off from the same corresponding period from last year.
Going forward, our underlying business remains strong with strong demand coming in from all our markets. Our focus is going to be towards containing the balance sheet; we do recognise that the debt is on the heavier side.
All the initiatives we are currently taking are towards paring down debt and at the same time focusing on our key markets that are showing operationally they are strong in terms of consumer demand. It is just that the balance sheet side is heavier than what we would like it to be.
Q: Out of the three issues that you listed, Tamil Nadu, Andhra Pradesh as well as Kerala, it is only Tamil Nadu where to some extent the issue is in your hands. By when can we expect these bottling problems to be resolved over there? And, ‘B’, you mentioned that your debt is on the higher side, what is the exact number?
A: The first question, in terms of Tamil Nadu operations, I would look at, we are already towards the end of Q1, so I would say sometime in Q2 and maybe the second half year, H2, we fully normalise. But, as far as the debt, the debt currently stands on a consolidated level, so that goes to about Rs 800 crore.
Q: You expect the problems in Tamil Nadu to only get alleviated in the second half of FY16. But, you indicated that there was additional pressure because of some year end provisions that you had to do for Tamil Nadu, can you quantify that?
A: It will be in the range of Rs 35-40 crore. This is because operations have not been on for 12 months, so there was some audit provision which we had to make and that has had a more noticeable impact in quarter four.
Q: About Rs 35-40 crore?
A: Yes and that affected the full year’s numbers.
Q: Also, for FY15, your EBITDA margins are now in low double digits, 12.7 percent. You are expecting that at least the Tamil Nadu issues would be resolved in the second half. Where do you think margins could normalise? What is the number that you would be working with internally?
A: We are operating in the high teens and so, we should get back there fairly quickly. Those are the typical numbers where we have been operating at the high teens. So, it is just a matter of time where we get back there.
Q: Considering that the debt is so high and your profitability is weak, will the company consider raising some equity or restructure your debt?
A: We are working on a number of strategic initiatives towards meeting those objectives. At this point of time, I would not be able to share specifics due to regulatory norms. I would not be able to share specifics as to what is being done. But as and when the things are finalised and there is concrete development, I would certainly be in a position to let you know.
Q: At least over the last few quarters, we have seen the promoters’ pledge share rising. As of Q3, it was around 85 percent. What does it currently stand at? Has there been any further increase?
A: No. As on date, it may be around 75 percent.
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