The company had raised prices in April and August. It might undertake yet another price hike in October after assessing the current situation, he adds.
The company hasn't witnessed a fall in demand post the price hike, but that might just be because of the end-of-season sale during the period, he highlights.
Additionally, Piramal says margins will be affected adversely as the rupee has depreciated very sharply and the entire increase cannot be passed on to consumers.
Below is the verbatim transcript of Dilip Piramal's interview on CNBC-TV18
Q: Let's address currency depreciation because you would be sourcing quite a bit of raw material from China and couple of other countries as well which haven't depreciated as much against dollar as we have. Has that put some strain on your margins, is there any kind of price hike that you are looking at?
A: That is very apparent that we import a lot of our material and the rupee depreciation has affected us quite adversely but we cannot take any knee jerk reaction because we did have price increases in April and August and we are assessing the situation now and if required, we might take another price increase in October.
Q: If you could elaborate what the impact has been on consumers post the price hike. How much has demand been affected particularly by the price hikes taken and what are the trends that you are spotting now?
A: It is too early to say what the consumer impact has been because July and August were good months because we have our end of season sale. So, they have been quite alright but let's see going forward how things pan out. I think there will be some impact because consumers do react to increased prices but then it is happening across the board. So, it is difficult to say right now.
Q: How is the demand scenario, is it purely end of season factor and from September onwards will these discounts go and how much of an impact will that have on demand?
A: July-August is the end of season sales so that has become an annual feature now. We have two such sales; one is in July-August and the other in January-February and a lot of consumers do wait for this period. However, for September I cannot forecast right now, but also normally there is a slight lull in September because of the end of season sale and that also is budgeted just as there is a lull in June when people wait for July-August sales.
Q: What will your margin impact be or will you be able to maintain margins because of the price hikes that you have undertaken and we do understand that there is some amount of supply chain and inventory management that the company is currently undertaking. Will that also help in maintaining your margins?
A: Not really, because we cannot maintain our margins at these increased prices. The rupee has depreciated very sharply and we cannot pass on the entire increase, but margins will be affected adversely and it is too early to say now what sort of margins because everyday the rupee price is changing, it's very volatile. Let us see when it settles down and at what level it settles down. We can only take decisions after that. It's of no use taking any knee jerk reaction.
Q: In Q1 you did a profit of Rs 23 crore and sales of close to Rs 320 crore. Is that likely to be the trajectory going forward?
A: Our Q1 is our largest quarter in the year. That is not an indication that whether we will do the same as Q1. Second quarter is our smallest quarter in the entire year. This business is quite seasonal. The Q2 will be much lower than Q1, which has always been the case. We have to compare ourselves to what we did in the same quarter in the previous year. We had a relatively good quarter one because in spite of the high price input cost we could maintain our profits.
Q: You have diversified into handbags and you do have a brand called Caprese. How is that doing and any more strategies on diversification which you are considering?
A: Caprese is doing extremely well; in fact it is doing slightly better than our plan. It is too early for further diversification. I think it's better to wait for a couple of years before Caprese is well launched and then we can certainly take forward that brand for other accessories. I think there are a lot of opportunities for us there but we have to do one thing at a time.
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