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Last Updated : | Source: CNBC-TV18

Target FY16 revenue growth at 15%: V-Guard

V-Guard targets a revenue growth of about 15 percent where average realizations for copper division is down by 10 percent year on year basis.


V-Guard targets a revenue growth of about 15 percent despite a challenging macro environment. The average realization for copper division is down by 10 percent year on year basis.

Mithun Chittilappilly, managing director, V-Guard Industries expects to sustain margins at current level with no further dip in operating margins for FY16.


With the increase in average tax rates from 25 percent to 30 percent, V-Guard industries see this higher effective tax outgo to be hampering company’s profitability.

Last 6 months have been very challenging for overall business with major segments of loss being cables and pumps. 


Also, the dip in real estate activities has lowered construction possibilities, he explained.

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Below is the transcript of Mithun Chittilappilly's interview with Ekta Batra & Anuj Singhal on CNBC-TV18.

Anuj: Your income was down and profit was down as well. What lead to that and what can we expect in the next financial year?

A: In Q4 we reported flat set of numbers both in terms of sales as well as bottom-line. We are having continued challenges in some segments, product portfolio that we have for example our pumps business; wire business etc performed poorly.


One of the reasons for wire business to perform poorly has been that the reduction of copper prices and consequent reduction in average realization. Our average realization on YoY basis is down by about 10 percent, so that business is a loss business for us, posted nearly flat number.

The pump business is mainly due to unseasonal rains and all that happening and there has been some slowdown in the market. The other product portfolio like the consumer businesses like the stabilizer business and water heater business has done well. So this has been a mix bag quarter for us.

Ekta: For FY15 you did miss your guidance which you had provided earlier at 20 percent, you came in with a growth of 15 percent. What can we expect in FY16, any guidance that you would like to provide?

A: Definitely if you look at the first six months of FY15 we had almost 20-25 percent growth here. Really the last six months of this financial year has been extremely challenging.


The euphoria associated with the new government coming to power and some consumer spending has been faded away and we hope that this year we will do slightly better but to be on a conservative side we are still hoping that this year also we will do 15 percent growth with similar kind of EBITDA margin as last year.

Although the new government has come to power nothing really has changed in the ground level. The channel health is quite weak, consumer footfalls are low and also real estate and related activities are very low. So we have some part of our business which is linked to construction activity which is not doing too well.

So, looking at all these we hope that this year we will probably post similar kind of numbers of 15 percent growth. We will have to wait and see if there is a change in the mood of consumers.

Anuj: That is an interesting point. You said that you hope that you will still grow at 15 percent on income level but in the last financial year your margins also took a bit of hit and that is why the net profit growth didn’t match up to the sales growth. What about the current financial year in that case, what kind of margins would you sustain and what kind of profitability you think you will enjoy?

A: As far as EBITDA is concerned, we have had a slight dip in EBITDA margins. Our EBITDA growth is only seven percent vis-à-vis 7-8 percent whereas our operating income has grown by 15 percent.


As far as Profit after Tax (PAT) numbers are concerned, they are not strictly comparable because some of the tax free plants that we were operating for five years have now come partly the under tax. Our average tax rate has gone up from 25-35 percent. So, PAT numbers are showing flat.

If you look at both Profit before Tax (PBT) and EBITDA has grown by about 7-8 percent. However this year we are hoping that we should be able to hold on to our margins.
So, we are not expecting any further reduction in margins this year.


We had some challenges in the previous year because we had spent some money in hope of growth but which has not come through. This year we are going to temper and taper down our expectations and go in a cautious mood. So, we are not expecting any hit in margins this year.

Ekta: Do you have any inventory build up or did you have any inventory build up?

A: Actually no, on the contrary we had a very healthy cash flow from operations of about Rs 85 crore over the last financial year and much of that generation has happened in the last six months. When the markets have not turned very favourable for us we had turned extremely cautious.


So we worked on our working capital, both in terms of inventory management as well as better quality and in both these parameters we have significantly improved. In this kind of environment we have actually made an improvement of six to seven days of improvement in our cash and business cycle and almost Rs 85 crore of cash flow from operation that we have generated and we have paid most of it to reduce our working capital debt. So, contrary to build up of inventory we have actually had a reduction in inventories.

Anuj: In pricing what kind of pricing power do you enjoy and in terms of market share what kind of market share do you have and what would you target in the next financial year?

A: If you look at pricing power if you look at the last year and the previous year and if you look at the gross margins our gross margins have actually gone up by almost one percent.


So we have actually made an improvement in pricing and product mix but where we have got hit is the overheads which has grown faster than the sales growth. So definitely this year we will taking some action to manage this kind of cost so that we are able to maintain this margin.

As far as the market share is concerned we are fairly large player in the stabiliser business. In the electrical and solar water heater segment we are large player.


We have different market shares across categories and stabiliser could be in the region of 25-30 percent market share, in the case of electrical water heaters close to 12-13 percent market share, in the case of single phase pumps about 10 percent market share. In the case of wires we probably have about 8-9 percent market share.


So, these are the kind of shares of the larger categories that we operate in.



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First Published on May 5, 2015 12:30 pm
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