Topline to grow 10% in H2FY14, net may slip 5%: TTK Health

TTK Healthcare reported a 5 percent topline growth in the September quarter, but its profit before tax took an 8 percent hit. Chairman TT Jagannathan told CNBC-TV18 that this was on account of one-time expenditures to the tune of Rs 5 crore.

Also Read: Dabur promoter Burmans enter healthcare, partner UK firm In the second half of the year, he expects sales to grow by 10 percent but bottomline may drop again by about 5 percent. He expects profit before tax to be about Rs 15 crore after spending around Rs 11 crore on initiatives. Below is the verbatim transcript of TT Jagannathan's interview on CNBC-TV18 Q: If you could first tell us your net profit and the total income figure? A: The top-line has grown from Rs 95 crore to Rs 106 crore, about 5 percent. The profit before tax has dropped from Rs 6 crore to Rs 5.55 crore a drop of about 8 percent Q: What has lead to that drop in net profit despite increase in sales? A: Lot of one time expenditure in this quarter. We went to Bain & Company to give us advice on how to restructure the company. We spend about Rs 2 crore one time expenditure on those initiatives. We also lost about Rs 2 crore on the condom business, loss of distribution of Kohinoor and Durex. We have launched retail where we spent about Rs 1 crore in this quarter. So, about Rs 5 crore is one time expenditure in this quarter. Q: In H2 what is the kind of growth that you are expecting on the revenue front and even on the margin front if Rs 5 crore is one time where do you expect margins to stabilize in the next two quarters? A: The gross margins have stabilized. We have not lost any gross margin. These are expenditures that come of the gross margin. For H2 also we expect the top-line growth of about 10 percent but bottom-line drop again of about 5 percent because we have initiatives and these initiatives will go on for the full year. Q: Could you give us what the total expenditure will be on these one time things for the next one year if you could quantify it in rupee crore roughly? A: For FY13-14 the total initiative will be about Rs 11 crore. However, it will lead to a aggressive topline growth. We are estimating a topline growth over three years of 30 percent plus CAGR. Q: For the full year what kind of margin guidance would you have for us and what would be the final numbers in terms of EPS if you could give us any? A: Last year we did PBT of about Rs 21 crore. We estimate this year the PBT to be about Rs 15 crore after spending about Rs 11 crore on the initiatives. Q: Will your spending on initiatives extend into the next fiscal year? You spoke about Rs 11 crore for FY14. For FY15 is it nil or will it continue? A: It will not be nil but it will reduce. Over the next three years it will reduce. At the end of three years it should be over and we expect topline to be about Rs 1,000 crore for FY17 and bottomline to exceed Rs 100 crore. Q: Could you tell us in your key verticals pharma, medical devices, consumer products and foods how is each one faring and where do you see traction going into the next fiscal year? A: Foods have done extremely well. It has almost doubled in topline and four times in bottomline and so has the heart valves and prosthetics, they have also grown extremely well. Pharma is a bit sluggish. Growth is only about 5 percent in pharma. As far as consumer products are concerned again because we lost distribution of Durex and Kohinoor there is a drop but we have made up for that drop largely by our own products. Q: You said that it is Rs 11 crore of initiatives in this year and then it will taper in the next 3 years. Could you tell us how much will it be in the next three years roughly? A: The estimate is about Rs 5 crore for FY15 and about Rs 3 crore for FY16.