Order pipeline strong for FY15; adequately funded: Welspun

Welspun India  today reported over 83 per cent jump in its net profit at Rs 98.66 crore for the quarter ended March 31 on the back of rising income.

The company had reported a net profit of Rs 53.83 crore in the same period of last financial year (2012-13), Welspun India said in a regulatory filing to the stock exchanges.

The company's total income from operations rose to Rs 934.02 crore from Rs 732.59 crore in the corresponding period.

In an interview to CNBC-TV18's Nigel D'Souza and Sumaira Abidi, Rajesh Mandawewala, Group MD, Welspun India spoke about the company's Q4 performance and the road ahead.

Below is a verbatim transcript of the interview on CNBC-TV18

Sumaira: The earnings look okay on a year-on-year (YoY) basis. While your topline has now grown closer to the Rs 12 crore odd mark, in terms of margins you have come in at 19 percent. Is that the run-rate you hope to be at in FY15 as well? Also, what according to you is a steady run-rate?

A: Our Business is 18 to 20 percent earnings before interest, taxes, depreciation and amortization (EBITA) margin kind of a business. If you look at our results, in the last three-four quarters, we have been in around the range of 18 to 20 percent EBITA and are considering a very solid order book for the next year as well.
Hence, we feel pretty optimistic about going forward.

Nigel: Most of your international exposure is exported. Could you tell us what's the impact of the rupee appreciation on it as of now?

A: The industry has now matured. There is a fair degree of balance between global demand and global supply. So, any major cost push-- whether upwards or downwards, gets translated into a change in prices with our clients.
Subsequently, we are not too concerned about the foreign exchange (Forex) fluctuation and even in the current year we have actually averaged about Rs 58/USD.

There is a hedging policy in the company which acts as a cushion for a time period of a few quarters--- enough time for us to renegotiate our contracts with our clients. It does impact the long-term competitiveness of the country but as a company, we are well positioned to deal with that, should it happen.

Sumaira: Can you tell us what your debt currently stands at? And how much of it is long-term?

A: We are currently at about a net debt of Rs 2650 crore and our long-term debt is of about Rs 1550 crore.

Nigel: Could you tell us about your guidance for the coming year?

A: We don't provide guidance as a company but we do have a very healthy order book. Our key markets are-- the US: which has almost 1/3rd of the global consumption and is looking quite robust and Europe: this again has almost 1/3rd of the global consumption and is emerging from the slowdown leading to renewed activity.

Our order book continues to remain strong and we continue to grow with our clients.
So, on an overall basis, we feel pretty good about the next year.

Sumaira: Rs 2650 crore as a debt is quite a bit. Are there any plans to bring it down?

A: Certainly. We are currently undertaking a large capital expenditure in the company and are almost 40 percent through it. We have also committed to invest about Rs 2400 crore to grow our capacities and vertically integrate. Almost Rs 1000 crore out of that has already been spent in the year FY14 and the rest of it is going to be spent in the next couple of years.

This would be our last big bang capital investment cycle and thereafter, our goal is to reduce our debt and improve the distribution to our shareholders.

Nigel: On YoY basis, promoter holding has gone from around 68 percent to 73 percent. Can we see more promoter participation coming in?

A: We are almost at the edge now. Currently, we are witnessing a structural change in the industry and as promoters, we have never been as optimistic about the business as we are at present. The regulation permits us but unfortunately, it doesn't permit us to go way beyond what we are at the current levels.

Nigel: Can we go ahead with another 5 percent jump in this new fiscal year?

A: 75 percent is the ceiling; we can't go beyond that.

Nigel: What about some fresh issuance or anything on that front?

A: No, we are not planning anything. The company has got robust cash flows and together with some more borrowings, they are enough to fund all the capital expenditure plans that we have in the company.

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