Currently looking for acquisition only in India or Asian countries: RB Kabra
14th June 2012 02:18 PM
RB Kabra, President, HSIL said "We have given guidelines for sales growth of 25% and profit growth of 20% for HSIL for the financial year 2012-13. So, that is the aim and we do see opportunities by which we will be able to fulfill our targets."
HSIL has shown healthy sales 18.8% in Q4 FY"12. Do you expect such growth would be maintained in next few quarters?
We have given guidelines for sales growth of 25% and profit growth of 20% for HSIL for the financial year 2012-13. So, that is the aim and we do see opportunities by which we will be able to fulfill our targets.PAT witnessed a marginal growth of 1.3% in Q4 FY12 as the companyâ™s margins hit by rise in power and fuel prices and dollar appreciation. Going forward, do you think earnings performance will remain sluggish?
There is pressure on margins because of fuel prices going up and rupee depreciation. We have increased prices for building product division by 4% from June. 01,2012 which will take care of the increased cost. If the rupee comes to normal level and the benefit of international crude prices coming down is passed on to industries by public sector oil companies, margins would be sustained.
Last year HSIL has completed various brownfield expansion projects to expand capacities under Building Products and Container glass divisions. How do you see contribution of incremental capacity expansion to overall financials of HSIL in FY"13? Could you elaborate on current and future expansion plans, if any?
HSIL has completed the following expansion in the last 12 months:
>At Bhiwadi Faucet plant capacity was increased from 3 lacs pcs p.a. to 5 lacs pcs p.a. in August, 2011.
>At Bibinagar, (A.P) sanitaryware plant capacity was increased by 7 lacs pieces p.a. taking its total capacity to 20 lacs pcs p.a. from 13 lacs pcs p.a.
>Glass furnace of 475 ton per day has been commissioned at Bhongir in A.P. with effect from 29.5.2012 taking capacity of glass from 1,125 ton a day to 1,600 ton a day.
HSIL is working on the following expansion plans:
>Putting up a green field faucet plant in Bhiwadi extension area having capacity 25 lacs pcs p.a. This will be operational in Q2 of financial year 2013-14.
>Green field sanitaryware plant in Gujarat having capacity 12 lacs pcs p.a. which should be operational by March, 2014.
>With all these expansion plans the company should be able to sustain revenue growth of 25-30% per year over next 3 years.
In 2011, HSIL acquired 100% equity stake in Garden Polymers, a manufacturer of PET Bottles. How do you see outlook for this product segment?
HSIL is the second largest manufacturer of glass bottles in the country (AGI Glaspac). Some of our customers were asking us to supply PET bottles also along with glass bottles. We were exploring the possibility of diversifying in this business and when the right moment an opportunity came in, we acquired GPPL which was the fourth largest manufacturer of PET bottles in India. This business is not very capital intensive. This has synergy with our glass business as the customer base to a great extent is same. We see the revenue of around 2.5-3 billion coming from this segment in next 3-4 years.
Are you looking for any acquisitions this fiscal? If yes, what product line and geographies that you are targeting?
We keep on looking for acquisition in our business segments which are building products and packaging. If the right opportunity and right price comes by then we go for it. Looking to the world scenario, we are currently looking for acquisition only in India or Asian countries. However, if we are also open to buying some good brands from Europe, we are also looking at it as well.
How do you see overall industry outlook for Sanitaryware and Container glass segments?
Overall industry outlook for sanitaryware and container glass seems very good as there is tremendous shortage of housing in India and therefore we will continue to excel as a company. Similarly, the glass is a packaging medium and consumption of packaged goods in India is also growing at fast pace since current per capita consumption levels are very low.
Building products revenue jumped 33% in Q4 FY"12. Do you think, the company will continue to report such strong revenue growth going forward?
The 33% growth in building product division in Q4 was because of additional capacity coming on stream. However going forward our guidelines for annual revenue growth is 25% for company.
On the other hand, container glass revenue witnessed a moderate pace of 6.9% in Q4 FY12. Are you facing any slowdown in this business segment? Do you have any plan to accelerate demand for container glass? What kind of performance should we expect for FY13?
The moderate growth in container glass in Q4 was because of lack of capacity. For the last one year our glass capacity has been running 100% and therefore there was no additional capacity available and the growth percentage shown is also largely because of product mix change and price increase.
As mentioned above, now we have commissioned a 475 TPD furnace w.e.f. 29.5.2012, which is around 40% expansion on our existing capacity and therefore the glass business should also see revenue growth of 25-30% going forward.
What is your message to the shareholders and investors of the company?
HSIL is on a very strong footing in both the businesses segments it operates in. In India, we are the largest in sanitaryware and 2nd largest in container glass. Both businesses have substantial growth potentials looking to the shortage of housing, very low level of sanitation, higher income bringing down the average age for home buying, easy availability of housing loan and increasing consumption of all packaged commodities. With the expansion plans in hand, the company is poised for revenue and margin growths and since there is no immediate plan for dilution, all this will be EPS accretive.
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