Auto sales for the month of June see strong improvement which led to all the auto ancillary stocks buzzing in trade on Tuesday. NK Minda, CMD, Minda Industries spoke to CNBC-TV18 to discuss the trends in the auto ancillary sector.
Below is the verbatim transcript of NK Minda's interview with Reema Tendulkar and Nigel D Souza on CNBC-TV18
Reema: Maruti Suzuki and Mahindra and Mahindra (M&M), which have reported the June sales numbers have shown a significant improvement. Did your company also see improvement in June and what are the trends?
A: We are an ancillary and major supplier to Maruti and so along with Maruti our growth is definitely there. The two wheeler industry is also growing and so, we are growing this year along with Maruti, particularly in this month.
Reema: What is the contribution from Maruti to you revenues on a consolidated basis?
A: We will be giving quarterly results next week and it should show a good result.
Reema: On an average, how much has Maruti been contributing to your revenues?
A: It depends upon the different product lines. So, in switches we enjoy almost 70 percent market share of Maruti and in terms of filters it is around 35 percent, lighting is around 40 percent and so, it's different for different product line.
Nigel: The auto ancillary space is quite excited and so you are seeing a lot of optimism. Last year you did Rs 1700 crore and so, how much do you expect to see this year because on year-on-year basis you are up close to around 27 percent? Can we see another 27-30 percent growth on the topline or will it be much better?
A: We have added few product lines in our group and the results will come this year. We have also invested in the capacities. In our Bangalore capacity for Honda, for their Narsapur plant we have added for die casting and we have added the capacity for switches.
Nigel: What does that result into in terms of revenue? You have done capacity expansion, you have got new clients.
A: We are expecting 25-30 percent growth, if the industry is expected to grow by around 5-7 percent. If the industry grow more then maybe we will grow more.
Reema: Around 25-30 percent revenue growth in FY15?
A: Yes, FY15.
Reema: Last year your margins were under pressure. I am seeing it on a consolidated basis, so from nearly 7 percent you came down to 4.5 percent. Now that we have seen an improvement in demand, will the company consider increasing the prices? Can your margins improve? What can you guide in FY15?
A: There was pressure on the margins last year and by this quarter we have come out of this crisis. There have been increase, we have curtailed the cost, tried to increase a bit of prices, adjust the prices with the original equipment manufacturers (OEM) customers wherever the increase was required in material basis or the other general increase.
Reema: Will margins go back to 7 percent in FY15?
A: It should go back.
Nigel: You are looking at newer opportunities including domestic as well as international opportunities organically and inorganically so anything in the pipeline?
A: We have done an acquisition of Clarton Horn in Spain last year and we are going to stabilize as far as international opportunities are concerned.
Nigel: Last year you increased the promoter holding from around 66 to 71 percent, it indicates that maybe you are undervaluing your shares and so, you see more potential. Do you think the promoters will up their stake gradually even in this year?
A: We are not playing with the promoters, the promoters have not much of interest in the shareholding in manner and so, depending upon the customer, the shareholder should not lose money.
Nigel: Will you look to up the stake of promoter holding? Given that last year itself you increased it by 4-5 percent?
A: We don't want to increase it intentionally; we have no plans as such.
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