We have investment plans of Rs 300-350 crore in the next 3 years: Sunil Chordia; Rajratan Global Wire Ltd

Sunil Chordia, Chairman & Managing Director (CMD), Rajratan Global Wire Ltd, talks about March quarter numbers, margins, demand recovery, CapEx plans and expansion of the Thailand subsidiary among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts: 

Q: Numbers have been excellent on all fronts, especially in terms of revenue and margins. What led to this kind of performance and will this momentum is sustainable going ahead?

A: Results are good because last year, we did our capacity expansion and after the COVID, when the markets opened, we could see a pent-up demand and we could utilize our capacity in the best manner and our operating margin also improved. So, the sum total of all these factors is that our results were good. Going forward, yes, we are confident that we will be able to maintain such a margin because this margin is also not huge. And this business will not be viable without a 17-18% EBITDA margin for any new expansion. So, with the kind of demand and the growth in the automobile and tyre industry, we are confident that the margin will be maintained.

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Q: Is there any scope to improve the margins from these levels, if yes, what you as a company are doing from the product point of view to improve the margin? Also, demand recovery is going on across the automotive segment. So, where do you see more demand if we will talk vertical wise?

A: If you are following the tyre companies then you would have seen that the results of tyre companies are quite good, their volume is also good. The government has imposed restrictions on tyre import to India, so the cheap Chinese tyres are not coming to the market. So, the tyre industry is also growing and when the tyre industry is growing then they will require bead wire and Rajratan is preparing for it. Last year, we doubled our capacity in the Indian plant and we can manufacture 60,000 tonnes of bead wire and 12,000 tonnes of other wires. This year, we are doubling our capacity in the Thailand plant and increasing the capacity from 35,000 tonnes to 60,000 tonnes. So, it seems that the company can post good results in the future because we will get operating leverage and our cost is also going down and we have installed the world’s largest coating line. So, our conversion cost is quite competitive.

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Q: What kind of CapEx has been lined up and have you utilized it and by when the capacity will increase and have a contribution to the results? Also, what are your plans related to the expansion plans beyond this over the next few months maybe by the end of this year? Are there any product diversification plans for FY22?

A: Currently, the company does not have any plans related to product diversification. We are working as focused player. This is a niche product and there are very few suppliers in India. The as the capacity will increase and the more, we work on product quality by staying focused, the more we will get the market. So, an expansion is going on in Thailand and it has been completed in India. And, in our last meeting, the Board of Directors has decided to set up a Greenfield project in South India at an investment of around Rs 250 crore. In Thailand, we have an investment plan of Rs 75 crore, which will happen this year. So, overall, in the next three years, we have an investment plan of around Rs 300-350 crore. This is quite good, and I am seeing annual growth of around 25-20% in our sales or top line.

Q: On your Thailand subsidiary business, are you looking at any tariff or trade restrictions possible by the US? What is your view on the Chinese tyre manufacturers who are present in Thailand?

A: Many tyre companies have entered Thailand in the last 2-3 years. About five Chinese tyre companies have invested, which is huge, and all this investment has been made because the whole world has imposed anti-dumping tariffs against China and Chinese tyres. So, those Chinese companies have created Thailand as one of their bases. Apart from this, multinational companies are also present there and rubber is available in Thailand. So, based on the data that is available with us, the growth of the Thailand tyre industry is very good, and we are the only Bead wire manufacturer in the country. O other company in the country is engaged in manufacturing bead wires.

And in the last one year, since COVID came in occurrence, we saw that the customers are quite interested in buying products with us. Because logistics has turned into a big issue globally in terms of availability in the country and shipment availability, all these factors have turned quite difficult. So, our Thailand capacity so running at its full capacity, and we also have a commitment from the customers for the expansion that we are doing there.