Buyback taxation made us rethink on our buyback proposal: Achal Bakeri, Symphony Limited

April-June quarter of the financial year 2019-20 has been the best summer quarters till date for Symphony, says Achal Bakeri, Chairman & Managing Director, Symphony Limited. In an interview with Pooja Tripathi, Zee Business, Bakeri said, our channels and distributors are quite excited with a hope that 2020 summers will be good and are placing good orders. Edited Excerpts:  

Q: Symphony has posted good results in June quarter. What led to this performance?
A: This quarter has been good for us. This quarter’s sales have been historically best sales for this quarter and our growth has been more than 100% over the same year of the previous year. However, April-June quarter of 2018, was the worst quarter for us due to the absence of the season but this quarter of 2019 has been the best quarter for us till date because the season has been good. As far as sales are concerned then we have sold out the merchandise that we had in the channel and with the distributors and dealers and have been able to grow by more than 100% in the quarter.

Q: There were reports that inventory at the dealer level was very high at the start of the quarter. How is the position now?
A: Entire inventory that was lying in the market went out in the last quarter. Like I said earlier, the summer season of 2018 was not good as a result of which a lot of inventory was left out in the channel with dealers and distributors but all that went out in this year’s summer. Apart from that, we have received good orders and we registered a growth of more than 100% in this quarter of 2019 when compared to the same quarter of the corresponding year. If I talk about the ongoing quarter, then it usually remains off-season for us and there is no measure consumer off-take in the quarter, but our dealers and distributors are placing good orders for the summer season of 2020.

Q: Do you think that sales would have been better if there was no slowdown situation in the June quarter?
A: The news that we get from the market suggest that there is a slowdown. But our business has more connection with the summer temperatures and its range. It has a slight impact on a market slowdown, but it is less correlated to it. Hopefully, the absence of slowdown would have had given a slightly more boost to sales, but it is hard to say anything about its impact. However, a good summer season of the year has excited our channel partners and dealers - as they consider that 2020 summers will be good as well - and are placing good orders with us.

Q: How were the sales in the rural market and what was your market share in that geography?
A: Available reports suggest that we have a market share of about 50% or more. Our market share has strengthened, last year. Our products do not have a reach to deep rural areas due to a lack of our dealer network in those areas, however, there are mandi and taluka level towns where our products are sent and possibly those products may have slight spread in the rural areas. When it comes to sales breakup then it is more towards big cities, but our sales are also increasing in small towns and thus we can assume that the product is majorly moving towards rural areas.

Q: Symphony is a strong player in India, but I would like to talk about international markets like Mexico. Update us about the demand situation in Mexico?
A: Our total international business that also includes our international subsidiaries has a contribution of around 40%. We have four subsidiaries one each in Mexico, where sales have been good; China, where sales have been so-so; Australia, whose step-down subsidiary is present in the US and its sales have been almost flat till date and they face summers in December. So, we consider that summer will be good in those countries as well. Overall top-line sales contribution from international market stands between 40-42% and we want to increase its contribution in time to come because it has growth potential. Even India has potential, but products exported from India has huge growth potential. Thus, we assume that international business is likely to be at least equal to the domestic contribution, in terms of sales, in the next 5-10 years.

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Q: The company’s cash position is quite comfortable at present. So, do you have plans to reward the shareholders through buyback/bonus?
A: We were considering the proposal to go for a buyback before March 2020 but the additional tax that was slapped on the buyback in this year’s budget has forced us to reconsider our plan. But we keep providing dividends in the normal course. However, we were about to go for buyback that is allowed in accordance to the net worth and the proposal was discussed and considered during our board meeting, but we didn’t make any conclusion on it. However, the amendment in taxation on buyback have made us rethink whether this buyback is going to be beneficial for us as well as our shareholders.