ET Now In a chat with ET Now, Anil Whabi, Finolex Industries talks about its results. Edited excerpts.
ET Now: If I look at your numbers the margins have shown an expansion and I think it has shown an expansion once again, now you know two quarter ago when we spoke you mentioned that top line will be a question of volumes but operationally you will continue to do well, is this the peak that we have seen for the year or do you reckon that there is possibilities of margins expanding further?
Anil Whabi: No, in fact the last quarter where we have closed volumes were marginally lower because second quarter is normally a lean quarter for us being the monsoon season. The best quarter was the first quarter, the June quarter which ended earlier and margins are better basically because of the PVC segment where we have a good spread at present and hope to see this continuing. In pipes and fittings segment, now since monsoon is over we saw a slight pickup but then a temporary setback because of the demonetisation which we see as a temporary aberration but good for the long term, this coupled with GST should do well for the organised sector because this will weed away the unorganised sector. So hopefully, pipes and fittings segment should do well in the coming quarters and PVC segment doing well so margins at this level are quite good.
ET Now: And what is that you hope to achieve in the next quarter or the entire fiscal year as well considering you must have had a bit of an impact because of the currency ban as well and given that you are now focussing on the retail side of the business as well, what is the growth trajectory that you hope to maintain for the fiscal year and the next quarter?
Anil Whabi: See right now it is difficult to say. When we started the year we were hoping to see volume growth of about 12-15%. Now the current steps certainly have seen some setback but as I said these are temporary so may affect a quarter or two but in the longer term will help us a lot.
ET Now: Can you quantify and specify what has been the impact of demonetisation, are you getting a sense that demand has gone down at farmer level, is demand down at stockist level, are you sitting on a lot of inventory?
Anil Whabi: True, the demand has gone down. See in this past one month as we see demand has gone down in both the segments that we operate in that is agri as well as non-agri. So it is lower at the moment but we see a slight pickup in past few days and hope it will do better in the coming months.
ET Now: When you say that you are confident things would look up, why are you confident?
Anil Whabi: Because of the imminent need of these products. I do not think these can be delayed for a very extensive longer periods.
ET Now: One favourable aspect for commodity consumers has been that commodity prices have come down or they were down substantially about a year ago but now most the basic raw material prices have gone up from timber to lumber, from plastic to HDPE granules which you consume so the margin expansion what we have seen because of drop in commodity prices do you think that buffer, that tailwind is that behind Finolex now?
Anil Whabi: No, see the margin expansion as I said is mainly in the PVC segment so though the PVC prices have gone up the raw material prices have not caught up and that is basically because of the demand and supply in the international markets. So better supplies of EDC and ethylene in the international markets have kept the prices subdued and hopefully this should continue for some time. Pipes and fitting segment the margins are normally standard because it is just a value add.
ET Now: Leave us what you believe you can do for FY17, since you mentioned that volumes were a bit patchy but what you can do in FY17 in volume growth, would it be 10-12% or more and what could the bottom line number look like for FY17?
Anil Whabi: See difficult to say but it has to be double digit growth. We were aiming for 15% volume growth so by the time the year ends it may not be so much because of the current situation but grow we will and what augurs well is for the future years we should do very well. Now if you consider government’s initiatives in the irrigation and housing sectors so for years to come we should continue to do well and do better.
ET Now: If I look at your numbers the margins have shown an expansion and I think it has shown an expansion once again, now you know two quarter ago when we spoke you mentioned that top line will be a question of volumes but operationally you will continue to do well, is this the peak that we have seen for the year or do you reckon that there is possibilities of margins expanding further?
Anil Whabi: No, in fact the last quarter where we have closed volumes were marginally lower because second quarter is normally a lean quarter for us being the monsoon season. The best quarter was the first quarter, the June quarter which ended earlier and margins are better basically because of the PVC segment where we have a good spread at present and hope to see this continuing. In pipes and fittings segment, now since monsoon is over we saw a slight pickup but then a temporary setback because of the demonetisation which we see as a temporary aberration but good for the long term, this coupled with GST should do well for the organised sector because this will weed away the unorganised sector. So hopefully, pipes and fittings segment should do well in the coming quarters and PVC segment doing well so margins at this level are quite good.
ET Now: And what is that you hope to achieve in the next quarter or the entire fiscal year as well considering you must have had a bit of an impact because of the currency ban as well and given that you are now focussing on the retail side of the business as well, what is the growth trajectory that you hope to maintain for the fiscal year and the next quarter?
Anil Whabi: See right now it is difficult to say. When we started the year we were hoping to see volume growth of about 12-15%. Now the current steps certainly have seen some setback but as I said these are temporary so may affect a quarter or two but in the longer term will help us a lot.
ET Now: Can you quantify and specify what has been the impact of demonetisation, are you getting a sense that demand has gone down at farmer level, is demand down at stockist level, are you sitting on a lot of inventory?
Anil Whabi: True, the demand has gone down. See in this past one month as we see demand has gone down in both the segments that we operate in that is agri as well as non-agri. So it is lower at the moment but we see a slight pickup in past few days and hope it will do better in the coming months.
ET Now: When you say that you are confident things would look up, why are you confident?
Anil Whabi: Because of the imminent need of these products. I do not think these can be delayed for a very extensive longer periods.
ET Now: One favourable aspect for commodity consumers has been that commodity prices have come down or they were down substantially about a year ago but now most the basic raw material prices have gone up from timber to lumber, from plastic to HDPE granules which you consume so the margin expansion what we have seen because of drop in commodity prices do you think that buffer, that tailwind is that behind Finolex now?
Anil Whabi: No, see the margin expansion as I said is mainly in the PVC segment so though the PVC prices have gone up the raw material prices have not caught up and that is basically because of the demand and supply in the international markets. So better supplies of EDC and ethylene in the international markets have kept the prices subdued and hopefully this should continue for some time. Pipes and fitting segment the margins are normally standard because it is just a value add.
ET Now: Leave us what you believe you can do for FY17, since you mentioned that volumes were a bit patchy but what you can do in FY17 in volume growth, would it be 10-12% or more and what could the bottom line number look like for FY17?
Anil Whabi: See difficult to say but it has to be double digit growth. We were aiming for 15% volume growth so by the time the year ends it may not be so much because of the current situation but grow we will and what augurs well is for the future years we should do very well. Now if you consider government’s initiatives in the irrigation and housing sectors so for years to come we should continue to do well and do better.
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