We are engaged in expansion, new capacity creation and acquisition to accelerate ourgrowth
Q: How would you review the performance of the Company in 2010-11Rs.
A: The year 2010-11 was satisfying as our business segments registered growth despite achallenging economic scenario and a sharp rise in average raw material prices. YourCompany's revenues grew 15.82% to Rs. 13,149.29 lacs in 2010-11 with an EBITDA of Rs.1,298.34 lacs and profit after tax of Rs. 401.76 lacs. More importantly, we reduced ourleverage and strengthened our balance sheet in a challenging year.
Q: What were the primary reasons for this growthRs.
A: During the year, all the Company's businesses - hand tools, automotiveforgings and springs - reported a higher capacity utilisation. Our production increasedfrom 12,009.77 tonnes in 2009-10 to 14,488.53 tonnes in 201011, boosted by a 53% growth inour forgings business. The average capacity utilisation across all our units was 59%compared with 55% in 2009-10. The Company also focused on supplies to original equipmentmanufacturers (OEMs) and large retailers, attracting higher volumes on the one hand andsuperior margins through the sale of value-added products on the other.
Q: Do you expect this momentum to sustain Rs.
A: We expect it to accelerate for some good reasons. The Company recorded a compoundedgrowth of 23% in its revenues in the last five years. But this just appears to be thebeginning as the Company is poised for organic and inorganic growth.
Expansion: In line with our business plan, we initiated capacity expansion at ourcommercial forging and machining shop.
New plants: We plan to set up manufacturing units in Pune and commission new linesfor machining and assembling parts for various automakers. This will enable the Company towiden its product and customer base.
Acquisition: We intend to acquire a US forging unit to tap local demand and acquireclientele and technology of the target. The Company also plans to acquire a company inWest India for its forging business.
International presence: We commissioned a US office during the year under review toenhance our understanding of that geography, leading to customer acquisition and otheropportunities.
Q: What is the net impact of these initiativesRs.
A: We plan to raise funds to a maximum of Rs. 1,650 lacs through a rights issue to meetour automobile forging expansion plans and additional working capital needs. Since theCompany has a debt-equity ratio of less than 1.0 there is adequate room to source externalfunds. Following capacity expansion and acquisition, we expect a topline growth of 40-50%in two years.
Q: How does the Company expect to enhance shareholder valueRs.
A: The Company expects to enhance shareholder value through a number ofinitiatives: The captive and cost-efficient sourcing of alloy steel from its groupcompany. The Company had an order book of Rs. 2,731 lacs as on 31st August 2011 which willsustain production for two-and-half months. It intends to commercialise capacity expansionand acquisition programmes on schedule coupled with high capacity utilisation. It aims toreduce overheads by reducing its leverage. The cumulative result will be a projectedtopline of Rs. 15,000 lacs in 2011-12 accompanied by ' higher margins.