IPO-bound Endurance focusing on margin, says cash flows strong

Capex for the company too has been robust all these years, to the tune of Rs 200-225 per year in India.

Jain said earnings growth for the company has come through a lot of operational efficiencies and R&D. "The company is also now focused on improving its margins," he said.

The company has already raised over Rs 348 crore by allotting shares to anchor investors ahead of its initial public offering.Below is the verbatim transcript of Anurang Jain’s interview to Latha Venkatesh and Reema Tendulkar on CNBC-TV18. Latha: You are looking to raise about Rs 1,162 crore; entirely divestment, none of them comes to the company? A: Actis is selling about 13.72 percent and I am selling 3.78 percent because we did look at whether we need money in the company. However, because of our cash flow and our strong cash flow, that is the reason we are not getting anything into the company. Latha: It may be a little bit of a problem for retail investors when they see the promoter himself selling out? A: I have been in this business for 31 years so after 31 years of the company’s growth that I am selling, I would have liked to take money in the company but the money was not required in the company. Reema: What happens to your debt of more than Rs 700 crore? With no money coming into the company, this debt is likely to stay. What plans and you spoke about cash flow generation, how much cash do you generate in your deleveraging plans? A: Net debt to equity is down to 0.4:1. As far as we are concerned, we are okay by going to debt to equity of 1:1. However, it depends on the opportunities we get in operations in India and Europe. Latha: What are your capex plans? A: I cannot give you forward looking figures but as far as we are concerned, we have been spending about Rs 200-225 crore every year in India and overseas, our European operations have gone through a large capex cycle last year because there you have to invest almost 24 months earlier to the original equipment manufacturers (OEM) clients. However, otherwise, normal requirement overseas is not more than 15 million euro per year. Latha: Your earnings growth is fairly impressive, in the last three years you have gone from Rs 14.5 to almost Rs 18 to now almost Rs 21 in FY16. Broadly can this be the rate of growth over the next three years as well? A: We expect this to be the growth because Endurance Technologies is a company which is focused on profitable growth. We had a tough time during the financial crisis. However, one of our vendor bought out components of 65 percent of our net sales, very strong vendor association, so we have done a lot of work on operations and also R&D has done a lot of value engineering. The profit just don’t come from the prices which we get from clients, ultimately the profits have to be earned by the company. So, if you compare us with our peers, you will find the difference. Reema: Do you have visibility for margin improvement from here on? A: We are focusing on margin improvement like I said because even if you see the last three years, we had a consolidated sales growth of 11.5 percent but if you see our PAT growth, it is more than 19. So, we are focused towards that and I hope that happens.