Strong sales, weak input costs aided margins: TVS Srichakra

Tyre maker TVS Srichakra's FY15 operating profit margins were boosted by strong topline growth, P Vijayaraghavan, Director, TVS Srichakra told CNBC-TV18.

Good demand in the replacement market, soft raw material prices, and inventory management drove the growth in earnings, he said.

“More than that interest cost reduction with improved cash generation in the company and also cost of power and fuel coming down all these led to improved margins and improved EBITDA”, he added.The company’s exports were about 13 percent of the total turnover last year, Vijayaraghavan said.“In the last few months our exports of two-wheeler tyres have also been growing very well with the two-wheeler industry also exporting lot of vehicles to South America, Africa and other countries”, he said.Below is the edited transcript of P Vijayaraghavan’s interview with Ekta Batra & Anuj Singhal on CNBC-TV18.Ekta: There has been a marginal improvement in your topline this time but it has really been an improvement in the EBITDA. What resulted in a marginal improvement in the topline and what were the raw material cost like which resulted in this operational performance this quarter? A: I would not agree it is a marginal improvement; we have grown by 13 percent in our turnover over 13-14 in the year 14-15 which is much higher than the industry growth. Ekta: I was referring to the quarterly figure. It was a growth of around 2 percent odd in Q4 on your topline?A: Quarterly, I agree with you there has been a marginal improvement because all the quarters we have been sustaining a good growth. Overall I would say the year has shown a 13 percent increase over the previous financial year.Anuj: What led to this sharp increase in EBITDA and EBITDA margins?A: There are five factors, one is, as I said our growing in the topline much more than the industry growth and our doing extremely well in after market. The replacement market our volumes went up substantially one quarter after the other in the year 14-15, softening of raw material prices and judicious inventory management. More than that interest cost reduction with improved cash generation in the company and also cost of power and fuel coming down all these led to improved margins and improved EBITDA.Ekta: We do understand that Honda Motorcycle & Scooter India (HMSI) is one of your key clients. What kind of business do you expect from them in FY16?A: I would say we are number one with all the vehicle manufacturer in the sense we are highest share with have with the vehicle manufacturers. We expect everyone of them to grow and we expect us also to contribute in the growth process. Anuj: What about your exports? How much contribution did they have in the numbers and what kind of growth would you expect in exports?A: Our exports are about 13 percent of the total turnover of the company. We have grown in that segment also in the year 2014-2015. We primarily export our off-road tyres like industrial forklift tyres form, implement, multi purpose, motorgrader, tractor all these tyres to more than 80 countries, branded as a Euro grip that is growing well.

We also introduced tractor radial tyres. In the last few months our exports of two-wheeler tyres have also been growing very well with the two-wheeler industry also exporting lot of vehicles to South America, Africa and other countries. It is showing a pretty good growth year-after-year.Ekta: We do understand that the company has reduced their interest cost this quarter owing to a reduction in debt. How much is your total debt, how much has been reduced in FY15 and what is the plan in FY16 if incase there are any plans to reduce it further?A: I don’t have the figure right in front of me but I can tell you as you could see in the last two year balance sheet we have done extremely well and the debt-equity ratio paired a bit what you have asked. When I said improved cash generation I have said that our collections have been extremely good in the market. Our financial planning and financial restructuring what we have done in the last 1-1.5 year’s back all that is yielding results. We expect continued good performance in the financial front in this year also.