We expect that pharma and agro-business segments will grow at about 15% CAGR: Tarak Patel, GMM Pfaudler

Tarak Patel, Managing Director, GMM Pfaudler Limited, talks about Q3FY21 numbers, order book, budget expectations and incremental revenue after integration of DDPSI's facility among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts: 

Q: The company has posted a stable set of numbers in terms of margin and profit. Run us through the key highlights of the quarter and is it sustainable?

A: The backlog that we had, from Q1 to the present day, remains very strong. We have two industry segments, chemical and pharmaceuticals, and both are going into a lot of investment and are also doing it. In pharmaceuticals, we have seen a very sharp recovery, which was quite may be for two-three years, but we are seeing a lot of activities in that space, as well. So, having said that, our Q3 performance was expected as the backlog was there, the only issue there was to execute. Some of the highlights of this quarter, I would also like to mention is that our new facility in Hyderabad - that was acquired from our competitor a few months ago - is now up and running, so there is an additional output coming from there. The new gas furnaces that we brought in place in October have been commissioned and are up and running in the Gujarat facility, as well. So, all in all, the increase in capacity has happened at a right time and when the market is growing, we are finding that we are ahead of time in terms of being able to supply to our customers and increase our market share.

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Q: What kind of orders did you win in this quarter and what kind of order book growth do you expect in the coming years?

A: The growth rate guidance that we provide, we expect both pharma and agro to grow at about 15% CAGR, hopefully, a little bit more than that. But we have outperformed the market and had a 20%+ growth in the last few years, so we are hoping that we will maintain that level of growth. I am quite confident that we can. I think, the Indian companies are also changing now, the need for high-quality equipment has improved and has increased also. Indian companies are now setting up a world-class facility, they are catering to international markets because of that the need for good quality equipment is increasing. Besides, the backlog that we have is well spread between all our three product lines. In our Glass Lined business around 70% of the revenue comes from the Glass Lined, it is our most profitable business line and it has a very large backlog. We have also seen good traction in our new products line of heavy engineering, we have made significant breakthroughs in new industry segments, like oil & gas, petrochemicals, so that is something also, we are very excited about. Lastly, our propriety products, which is complementary to glass-lined, we have seen a good amount of traction.  

Q: Budget is round the corner, what are your expectations from the government this time that can give a boost to your company as well as your sector?

A: For us, the end-user is the pharmaceutical industry and the PLI scheme has started in it. There is definitely more traction because of some of the specific schemes that those industry segments have got. I would also look at something similar for our industry segments as we look to manufacture in India, make India self-reliant, under the Atmanirbhar Program. So, we are looking to move manufacturing out of other geographies and move them to India, so, if there are some benefits that we could get because of this that would be definitely helpful because India is a low cost and quality levels in India is as good as people manufacture in Europe and the US. So, there is no reason, why we should not take advantage of the situation.

Q: What kind of incremental revenue is expected as you have completed the integration of DDPSI's facility? Will we see its impact on your books in this or next quarter?

A: In Q3FY21, our output was in the region of Rs 4-4.50 crores about 30 equipment were shipped out, which is incredible because we only got the factory in October and we lost some time because of the heavy rains and floods in Hyderabad. Our plan for Hyderabad for the next quarter is about Rs 15-20 crores. So, on a full-year basis, we can easily have revenues close to Rs 60-80 crores from that facility, which is a big change from what that facility used to manufacture in the past at our competitors time and it used to Rs 25-30 crores of revenue. So maybe twice or little more than twice is the output that we are planning and we are quite confident that we can achieve that.