Minda Industries always try to do better than the industry growth: Sunil Bohra, Group CFO

Sunil Bohra, Group CFO, Minda Industries, talks about the March quarter number and board approval for raising Rs 700 crore among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

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Q: Congrats on posting good results in the March quarter. What led to this performance and will you be able to sustain this number? Margins have also shown resilience by almost 4 per cent. What is your guidance on margin and the numbers?

A: As we have seen that in the previous quarter there was good growth in demand and we saw an improvement in the demand after the lockdown that was present amid the COVID pandemic. Initially, there was a pent-up demand but gradually that pent-up demand converted into a personal mobility preference because everyone wants that have their own vehicle if they can afford it and try to avoid public transport as there is always the danger of getting infected there. This is why we saw an improvement in demand and it has sustained to a great extent. As far as the last quarter is concerned, two to three new products have also had its contribution in it, for instance, our sensor business or the two-wheeler alloy wheels. So, our new products have also contributed a lot to it. As everyone is aware that the lockdown was implemented on March 22, 2020, due to which there was no production or revenue for 8-10 days. So, there is a low base impact. But as far as growth is concerned, we always compare ourselves with industry growth and vehicle growth. If you will have a look at the vehicle growth in comparison with the last fourth quarter with this fourth quarter, then it has increased by around 31%. In front of that, if you will have a look at our volume because our 89-90% revenue is directly co-linked with the industry vehicle owner because our major 90% production goes directly to the manufacturing. So, in front of the 31% quarter-on-quarter growth, we have grown by 49%, which is depicting the outperformance. If you will have a look at last few years then our trend is continuing. So, we always try to do better than the industry growth, that is why we launch new products or improve the features in the existing products or go for new business expansion. These factors combined give us confidence that we will be able to maintain the outperformance. The second important factor is that our revenue growth of 49% has a big share of the outperformance of the aftermarket, which is related to the replacement market, which is primarily termed as B2C segment although 90% of our business is B2B that goes directly to the line fitment. The remaining 10-11% is B2C (direct business to customer) in which a growth of around 73-74% QoQ growth has been seen. It is a segment that is growing good and we continuously try in the segment – where the margins remain slightly better and in it, the industry OEM new vehicle sales do not have a direct co-relation because it goes to the aftermarket or the replacement market. So, there is revenue stability in it. If we will have a look at the absolute amount then in the last quarter its revenue stood at Rs 235 crore, which if annualised then it stands around Rs 900 crore. But we can’t make a simple analysis on it because the growth has an impact on the pent-up demand as well. But Rs 800-900 crore aftermarket sale or revenue is quite stable.

Q: The board has given approval to the fundraising plan of Rs 700 crore. What instrument will be used for the purpose and by when it will be done? Also, update us about the order book?

A: As of now, the Rs 700 crore that you are seeing was taken in the last year. We always keep an enabling approval but currently, we don’t have any equity raising plan. It is just an enabling resolution and if we get any opportunity in the future or there is a business need then we will not have to go to the shareholders and take time in the process. So, we always try to keep a small enabling resolution. It is not very very significant about it is just an enabling resolution. As of now, the board has not approved any plan neither we have presented us any plan. If you will have a look at our balance sheet then it is very very strong and debt-equity stands around 0.30 to 0.35. So from that perspective, there is no immediate need for funds today. In terms of growth, as you asked and also I mentioned it before that our sale is in the direct line fitment, so our growth is directly linked to vehicle sales. So, we expect that as the unlock phase will start gradually then as we saw in the past that there was a personal mobility driven demand was there and I expect that this time the personally driven demand will be more this time because the COVID-II impact was more severe. This is why I feel the demand will be quite good in the automobile sector in the next nine months.