In an interview to CNBC-TV18, Sukumar Srinivas, MD of Shankara Building Products spoke about company's new listing and latest happenings in the sector.
Shankara Building Products has given a partial exit to its private equity partner Fairwinds. Post listing, Fairwinds will hold about 7 percent and the promoters will be monetising about 3 percent in IPO.
Talking about the financials of the company, Sukumar Srinivas, MD of Shankara Building Products said, "The company should close the year, FY17, with a topline of around Rs 2,300 crore, up about 15 percent from last year’s Rs 2,000 crore".
"We have done pretty well on the EBITDA margins and profit after tax (PAT) is as per our target", he said.
Below is the verbatim transcript of the interview.
Q: How will you use the proceeds from IPO?
A: We have about Rs 45 crore primary that comes into the company. We have given a partial exit to our private equity partner, Fairwinds. So post listing they will have about 7 percent and about 3 percent the promoter is monetising.
Q: Talking about the financials of the company, can you give us an idea about how the company has ended FY17? What are the kind of numbers which the company has seen?
A: FY17, we should close the year with a topline of about Rs 2,300 crore. That is up about 15 percent from last year's Rs 2,000 crore. Retail business should be around Rs 1,000 crore approximately, anywhere between Rs 980 and Rs 1,000 crore. I think we have done pretty well on the earnings before interest, taxes, depreciation and amortisation (EBITDA) margins, it should be at about 6.5 percent. And profit after tax (PAT) is as per our targets, we are achieving the figures.
Q: Also, talking about the topline for Shankara Building Products, the last three financial years, if you remove FY17, the growth has been in single digits. What is the kind of improvement that we can see on this particular, on the topline front?
A: You have to understand there is a rationale behind why we did not push for rapid growth in the last three years because there was a considerable reallocation of the kind of businesses that we are doing. We have a legacy business of the channel and the enterprise, particularly the channel which we have slowed down, which came down from around 40 odd percent three years ago down to about 20 odd percent now.
So, there was a definite slowdown in that part, but our retail business continued to grow at 30 percent in the same period. So that is what I would look at a more relevant figure. So, we have been rejigging the business and the various verticals that we have.
Q: If I am not wrong, you have about 100 retail outlets by the name Shankara Buildpro which are spread across 10 states. What is the kind of retail contribution to the topline today and what is the expansion on the retail fund and the investment earmarked for the same for the next two years?
A: Retail is a focus of the company. We are looking at a substantial growth as we have been growing in the last few years in the retail business. We hope to double the store-count over the next four years. By 2021 today, we will probably close the year at around 110 stores. We hope that we will be adding about 15-20 stores every year.
Q: Talking about one of the major investors, Fairwinds, in 2011, if I am not wrong, they had invested about Rs 80 crore in the company and they had an option to invest another Rs 20 crore in the next two years, something which was not exercised by the company and in fact, they are diluting their stake through this particular IPO. Any particular reason why a major investor is exiting the company?
A: They are a private equity player. Every fund, their fund has a life which is coming out. So, I think it is part of their business exigencies that they we need to give them an exit and they need to give a dividend and a reward to their investors and their fund people. So, I think it is part of a natural process.
Q: The company received a Securities and Exchange Board of India (SEBI) approval for this particular IPO in December, but the IPO is getting introduced again in April. Any specific reason for the delay?
A: No, the SEBI approval came in mid-December no doubt and it is just preparatory time and the draft herring was filed. We have been pretty much on track.
Q: If you can tell us something about your third party partnerships. Which are the partners which Shakara Building Products has at the moment today and which are the future partnerships which you are exploring?
A: We have got partnerships as a number of companies across various areas of building materials. If you look at steel, we have partnered with JSW Steel, we have got Essar Steel. Tubes, we have got APL Apollo Tubes, we are with Jindal Tubes. If you look at plastic tanks, we are with Sintex Tank. Tiles, we are with Johnson Tiles, Somany Tiles, with Parryware. We have partnerships with Century Plyboards India for plywood, Berger Paints India for paints.
So there are a number of companies across the spectrum. As we go forward and deepen the product offering, I guess there will be more and more partnerships that will come in.
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