Garware Technical Fibres has a capex plan of Rs 40-50 crore for FY22: Shujaul Rehman, CEO

Shujaul Rehman, Chief Executive Officer (CEO), Garware Technical Fibres Ltd, talks about the domestic and international businesses, the impact of the new COVID variant, expected performance by the end of the current financial year, government targets to increase technical textile export by 5 times, diversification, proposed GST rate hike on fabrics and garments, raw material prices and capex, among others, during a candid chat with Zee Business' Swati Khandelwal. Edited Excerpts:

Q: Let's talk about the quarter and tell us about the domestic business numbers as well as the international business and how it is being impacted especially on account of this new variant of CORONA?

A: We cannot tell much about this new variant as nothing is clear about it. But our business is related to food and 70% of our business is related to food whether it is agriculture or aquaculture or fisheries, we have not seen any impact in demand in that. Our order position from the international market is also quite good. The situation is looking better and the outlook is also good, going forward.

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Q: With respect to your numbers what are your targets to achieve by the end of the year in terms of revenue, both top line and bottom line and margins? What kind of prospects are visible for this year and how are you gearing for the coming years? 

A: Our margin profile will be sustained. We have also internal targets and are trying to achieve them. Currently, we are being benefitted from the raw material side. There was an issue in exports in terms of the supply chain, logistics and availability of the containers but there is some improvement in it, which will also benefit us. The freight trades have also softened a bit and will benefit us to some extent. As far as growth opportunity is concerned, good growth is coming in Norway and Chile. Agriculture is growing in many markets. Our sports segment is also doing good. Overall, the outlook for international business is quite good. Domestic order is also looking good and we are not being able to see any impact of the current variant of the CORONA virus in the market and demand is very strong.

Q: Recently the government has come up with big targets of a five-time increase in technical textile export in five years. How do we see this huge target and how will it benefit your business?

A: 60-65% of our business comes from the international markets. We have many segments where we are planning growth and our new technology in agriculture has been hit in many markets. we will be benefitted from it. We will support the Government of India's aggressive targets and will also try to grow five times. We are working on the plans for this purpose.

Q: The government has a special focus on the infra sector and the central government has also launched the National Infrastructure Pipeline Initiative. What kind of impact these developments will have on your business and what prospects are visible from them?

A: We have two segments and they are safety business and Geosynthetics business and order position is good in both the verticals. The revival in the infrastructure is benefitting us. The order position is good and we are ramping our capacity in these segments and have also diversified into a few new segments in safety and Geo. Overall, the outlook is quite positive.

Q: The company is diversifying into new segments. Can you please provide some details on the kind of growth opportunities that is visible in new segments? Also, tell us about the segment where you are quite bullish and they will provide good growth and high margins?

A: There is a huge growth opportunity in the agriculture business and our margin remains best in the segment. In addition, sports that are going in the international market is reviving well as schools and universities are reopening in the US and Europe. Even home consumption has also increased a lot in sports segments, which is adding to our growth. As far as domestic is concerned, our order position is good in the safety business and overall growth opportunity is quite good in this business.

Q: The GST council has proposed plans to implement the increase in GST rates on fabrics and garments from 5-12% from January 1, 2022. How do you think will this affect the sector? Will it affect your business?

A: We are talking with our customers. Those who are institutions and deal with the government has the facility to provide GST and we will discuss this with them to take the input credit. However, the farmers and the fishers will not get this duty and we are discussing the same with them. Few people are also representing it with the government to relook into it. Discussions are going on and it will be implemented from January 1, 2022. Initially, it will have some impact but will stabilise.

Q: What kind of impact the raw material prices will have on your business? Going forward, what is your outlook and how will you hedge the concerns especially the raw material price hike and do you think that you will have to pass it on to the consumers to protect margin?

A: Raw material prices have started to soften and we will be benefitted from it. As far as our position on raw material related prices is concerned, the price that we offer to the customer is provided after building an outlook and we see what could be the situation after next one to two months. If the situation is quite abnormal, we go to the customer and talk about the price increase. So, we try to keep the margin intact even if the raw material is quite volatile.

Q: Tell us about the kind of product pipeline that you have? Also, update us about the current capacity of the company as well as expansion plans, if any, and the kind of investment that will be made on it?

A: Our capacity utilisation normally stands around 80-90%. Our capacity is modular, so, if the demand is less somewhere then its capacity is utilised in some other segment. Normally, we do a CapEx of around Rs 40-50 crore every year and this year too we will have the same plan. As far as the segment is concerned, there are a few segments in aquaculture in which there are some countries where we want to grow in some other segments like in Norway, we are trying to grow a lot in the HDPE as nylon market is available there. It is the biggest market in the world and initially, we got a lot of success there and we will try to continue with it.

Q: What amount has been lined-up in form of CapEx for the next 2-3 years and how and in which verticals they will be invested?

A: Generally, we have a CapEx plan of Rs 40-50 crore every year. We have a ramp-up opportunity in our plant due to which we do not have any plan of setting up a new plant. We have a modular capacity, and if there is more demand in any segment we ramp up the capacity. So, we have an outlook for 40-50 crore for this year.

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Q: You are diversifying, so, do you see any M&A opportunity in your business in India or the international market?

A: We are on the lookout and if we get an opportunity then we evaluate it. However, we do not have anything in our hands at present. We have good cash on our balance sheet and for growth, we are evaluating things and discussions are happening at both international and Indian levels but yet there is nothing concrete to talk about.