He also expects utilisation at Dahej facility to go up to 75 percent in the next fiscal from current 50 percent
"I believe that we are very well equipped for the next two years and we shall show growth and with some newer products margins will be better, which will push our earnings before interest, taxes, depreciation and amortisation (EBITDA) margins upwards and taking our profit after tax (PAT) also northwards," said Aggarwal.
Also read: CRISIL maintains Insecticides` valuation grade at 5/5
Below is the verbatim transcript of his interview on CNBC-TV18
Q: In Q2 you did phenomenally well on topline but bottomline was a bit of problem especially in terms of margins and your net profit? Do we expect that trend to reverse sometime over the next two-three quarters?
A: Yes, you will see reversal. We have made large investments and we have set up new plant particularly our investment in Dahej has been quite big where not only we are facing issues of interest which we has accumulated in the balance sheet but also the manpower has gone up and that plant has just started functioning. So, one has seen results in Q2 and one would see these results in Q3 and Q4 and in this year we will be growing by 35-40 percent, which we have proved in half year and I believe that growth will continue in this year and in the next year, in Q1 and Q2 of 2015, one will see the reversal.
One will see our bottomline going up in a big way because of various reasons; our expansions, our new technicals which shall be coming up now and also our new brands, which will be doing well in the market, which will increase the bottomline of the company as well.
Q: What is your expectation in terms of volume growth?
A: The volume growth will be less than the value growth because there is increase in prices. The volume growth this year will be tune of 25 percent whereas I am targeting the value growth at 40 percent now.
Q: In terms of value growth do mean that you are taking price hikes?
A: We were forced to do that because there was increase in the price of currency which pushed everything up and lot of raw material prices also went higher so we were forced to increase the prices but despite the increase it was not enough to take care of everything because the currency is still moving fast northwards and we were forced to see currency losses particularly prices of all the raw material went up due to this increase. So, I believe that increase was not enough to take care of this.
Q: In terms of price elasticity, are you in a position to pass on some more hike otherwise your margins may still be under pressure going forward?
A: May be in next year we could see some more price hike because we already see shortages in the market. Some of the raw materials too are expensive so this hike may continue in the next year also. However we will also be growing in turnover. We have target of 35 percent increase in two-three consecutive years which we have started showing in this year that is 2014. I believe we will repeat same type of progress in the next two years also; 2015 and 2016 for which the background is already set.
We have already made the investments and we have set up our technical facilities as well as the formulation facilities are revamped at Jammu and also in Rajasthan. So, I believe that we are very well equipped for the next two years and we shall show growth and with some newer products margins will be better, which will push our earnings before interest, taxes, depreciation and amortisation (EBITDA) margins upwards and taking our profit after tax (PAT) also northwards.
Q: What exactly capacity utilisation you expect including your Dahej facility?
A: In this year the utilisation of Dahej facility has been below 50 percent. I believe in the next fiscal we must see the utilisation of 75-85 percent.
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