Aarti Industries & Sandhar Technologies In Focus | Hot Money | NDTV Profit
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00:00 RBI monetary policy.
00:02 So a lot of the volatility has been sucked out and we're clearly seeing a little bit
00:09 of profit taking at least as far as the broader markets are concerned.
00:12 So while the Nifty and the Sensex are flattish at the moment, we are also seeing about profit
00:18 taking and declines coming through in the broader market indices.
00:22 So let's pull up something like a mid-cap index, which is down as well as the small
00:27 cap index, which is also under a tad bit of pressure.
00:30 Well, we have to determine if this is in fact a bout of short covering.
00:36 Are these key indices which have outperformed the benchmarks by a huge mile?
00:41 Well, now starting to see some amount of consolidation.
00:44 These are questions that I reckon will be answered through the course of the next few
00:49 days.
00:50 But I do want to point out a handful of names from here, from the broader markets, which
00:54 are in fact buzzing in trade.
00:56 So let's pull up some of the pharma names.
01:00 And of course, we do have gains in something like in AstraZeneca.
01:06 Let's pull that up and see how that one is doing.
01:08 We also have something like, okay, so AstraZeneca in fact is under pressure at the moment.
01:14 We are looking at a 14% decline there.
01:16 It wasn't actually a bad quarter.
01:19 Let's pull up something like Lupin.
01:21 Lupin is up and about.
01:23 Lupin is in fact advancing by as much as 1.2%.
01:26 We do have advances for something like UBL as well.
01:32 Of course, that's where the earnings came through.
01:33 It was a pretty steady quarter.
01:35 We continue to track some of these names.
01:38 But let's get in a management of a company which has announced earnings, and that is
01:43 Aarti Industries.
01:44 It has been a subdued quarter.
01:47 But let's not forget that the entire industry has been facing with certain challenges.
01:53 We have Rajendra Gogri, CMD of Aarti Industries, who is joining us on the show right now.
01:58 Rajendra, good afternoon.
01:59 Thanks for taking the time out.
02:00 My first question to you is about your own assessment of the quarter.
02:05 I want to go back to the end of the second quarter when in the conference call you had
02:10 suggested that H1 was a challenging one when it came to demand.
02:16 And you were expecting a little bit more normalization to come through in the second half of the
02:20 financial year.
02:22 At least in the third quarter, there are still some challenges.
02:27 And with the China dumping has not really seized, in fact, what is your outlook on this
02:34 one?
02:35 What is the demand as well as several other performance factors playing out or rather
02:39 being a challenge as far as this quarter goes?
02:42 Yes, you rightly mentioned at the end of the second quarter, we had mentioned that we are
02:49 now seeing some demand recovery, especially in the discretionary side.
02:54 But agro demand was still under pressure.
02:57 And the same is actually panning out.
03:00 So the Q3, the demand and discretionary has improved, but agro is under pressure.
03:06 And going forward, we see that discretionary demand stabilizing in the next one or two
03:12 quarters.
03:13 And maybe agro might take a longer time and it will become more specific molecule to molecule.
03:22 As far as we are concerned, we are guided that sequentially we should be able to increase
03:26 the volumes and EBITDA.
03:30 So that's why now from Q2 to Q3, we are around 14-15% increase in EBITDA.
03:39 And we see that this trend continuing over the next two quarters.
03:44 So would it be fair to assume that perhaps quarter four, the challenges may persist,
03:50 but normalization would eventually come down in FY25?
03:55 Yeah, I think basically things are getting better on quarter on quarter, I think overall
04:02 as far as the demands are concerned.
04:06 Okay, right.
04:07 I also want to talk about two of your recent contracts that you had.
04:11 One is a four-year supply of the specialty chemicals and this is the 6000 crore contract
04:18 that you have and this is for supplying chemicals over the five years.
04:22 And the other contract is if I'm not mistaken, it is for metachlor and that is a 3000 contract.
04:30 I wanted to understand if these contracts in fact will add to your margins going forward
04:34 or will that depend from year to year and how the pricing of these products come through?
04:41 The first contract is for four years, not five years.
04:44 It's a 1500 crore per year and the 1500 will start from the current calendar year itself,
04:52 calendar year 24.
04:53 And we have a formula-based contract.
04:58 So we expect a steady margin coming from that contract.
05:04 And the second contract is actually an intermediate, which is going in agrochemicals.
05:12 That also we have a formula-based contract, which kind of gives a good visibility on the
05:16 margins.
05:17 Talk about specifically about the S metallochlor contract.
05:23 We understand that EU of course has stopped the renewal and there will be a diversion
05:29 in that case.
05:30 And you have also mentioned in the past that it will not be a substantial impact to your
05:34 company.
05:35 But can you give us an idea about how things are panning out with respect to this particular
05:40 one?
05:41 Our intermediate, one of the end users is S metallochlor and that got registration issues
05:48 with EU.
05:49 But the market of S metallochlor in Europe is only about 6 to 8% of the global market.
05:55 And our intermediate also is going in other agrochemicals also.
05:59 So as I mentioned earlier also in Cornfalls, the impact for us, for our intermediate is
06:05 only going to be about 3 to 4%.
06:09 On a consolidated basis for Aarti Industries going forward, can you give us an idea about
06:15 the kind of volumes that we can expect, if not for the fourth quarter, then at least
06:20 for FI25 and also an outlook on your operating profits?
06:25 Yeah, for you know, current year we had guided 952,000 crore for FI24 and we should be more
06:33 towards the 1000 crore based on the current visibility.
06:39 And for FI25 earlier we had guided 1450 to 1600 but we see good possibilities that you
06:46 know it can be between 1450 to 1700 crore EBITDA for FI25.
06:56 And based on your current contracts and the way things are going with respect to your
07:01 supply with your clients, is your product mix expected to change over the course of
07:07 the next 2 to 3 quarters?
07:10 No product mix may not have any significant change as such.
07:14 Okay, okay, okay, Rajendra we leave it at that.
07:16 Thank you so much for joining us and taking us through well the quarter as well as the
07:21 outlook.
07:22 Well, there you have it, that's the management of Aarti Industries telling us about, well
07:26 the challenges are behind them and they expect an improvement, quarter on quarter going in
07:32 and perhaps things normalizing back in FI25.
07:38 But on that note we are going to slip into a short break but on the other side we get
07:41 you a lot more in terms of stocks that you want to address.
07:43 Stay tuned in.
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10:48 Welcome back to Hot Money and we talk about stocks which are buzzing in trade but among
10:53 the stocks that we want to address and stocks and themes in fact that we want to address
10:57 is LIC on the back of earnings.
10:59 We also want to talk about the mid-cap pharma space and a lot of these companies have come
11:04 up with very, very strong earnings and well about a profit taking for the oil and gas
11:09 space specifically something like an ONGC and even in terms of your OMCs we are looking
11:15 at a little bit of profit taking but after a staggering up move the question really is
11:19 is there an opportunity at this point in time and of course to take us through all this
11:24 we also have with us Gaurang Shah.
11:26 He is a head of investment strategy at Jiojit Financial Services.
11:30 Gaurang, good morning.
11:32 Thanks so much for joining us.
11:34 Before I come to you let me get in my colleague Harsh to take us through LIC's earnings
11:40 which have been strong.
11:42 Harsh, but can you give us more details here?
11:44 Well, yes, absolutely.
11:45 You know LIC reported a 49% jump in profit after tax but that's rarely the metric one
11:50 sees when it comes to life insurers.
11:53 So let me first talk about the top line number itself which expanded by roughly 5% on a year
11:59 on year basis.
12:00 Not much to show in terms of that top line but nonetheless for LIC they have been able
12:05 to maintain at least their market share which is a positive.
12:10 Very quickly moving on with regard to their VNB margins which is more appropriate in terms
12:15 of the profitability metric when you look at life insurance companies.
12:20 That number has jumped significantly.
12:22 It came in at around 15.5-16% in Q2.
12:25 It's jumped to 20% in Q3.
12:28 Overall for the full year it's coming at 16.5%.
12:32 So very very strong number in terms of that VNB margin.
12:37 The margin has improved, profitability metrics has improved because they've sold more of
12:42 non-PAR products which is the more profitable product for LIC.
12:46 In fact non-PAR as a percentage of premium growth grew by 49% on a year on year basis.
12:52 So very impressive number overall in terms of non-PAR.
12:56 It's been a solid quarter and they had guided for a very solid second half of this financially.
13:03 Of course we'll speak with the management later today to get more insights on that result
13:07 but otherwise overall it was quite a beat with regard to the broad metrics in terms
13:12 of numbers.
13:13 All right, Harsh.
13:14 Thanks for getting us that in-depth analysis on LIC.
13:19 Gaurang, I come to you on this one.
13:21 You know the insurance space has not exactly been an amazing place to put your investments
13:28 in over the last few years.
13:30 LIC notwithstanding, I'm talking about the other private life insurers, they haven't
13:34 given the best of returns.
13:36 How have you placed on LIC specifically and perhaps vis-a-vis the private players?
13:42 Thank you, Agal, for having me on the show and good afternoon to all of you.
13:46 So as a disclosure, during the IPO which was at 900+ levels, we had come out with an IPO
13:52 note to subscribe from a long-term point of view.
13:56 And it's been a pretty long-driven process in terms of patience for all the investors
14:05 of LIC who invested in the IPO to see these kind of levels because this is the first time
14:10 in the last couple of days that the share has managed to come up and float above the
14:14 IPO price.
14:16 It was languishing for a long period of time below the IPO price and it has tested your
14:20 patience.
14:22 We remain positive.
14:23 On the fundamental side, we have a standalone buy report on LIC as well as the other private
14:28 players, SBI Life, HPFC Life, and ICICI Approve Life.
14:33 Things have changed over a period of time, especially now.
14:36 Wisdom has grown to a great extent amongst all those individuals who are seeking to take
14:43 a term policy.
14:45 I don't consider Unit Link Insurance Policy as a policy because it is not a very well
14:51 justified product.
14:53 But term insurance, I think people have not only started to take insurance policy, but
14:57 get a higher sum assured by the virtue of that your outgoes in terms of premiums is
15:02 higher and that translates into new insurance premiums for life insurance companies.
15:07 It will take a while because this is a process.
15:10 Wisdom has just started to wake up on the brighter side for all the individuals.
15:14 Earlier, we used to buy an insurance policy to save tax.
15:19 Now, people are buying insurance policy so that in case if something has to happen to
15:23 them, their dependents or family members would be taken care of.
15:27 Okay.
15:28 All right.
15:29 So, that's your view on the insurance space and specifically in this case, life insurance
15:34 co-op.
15:35 But we shift focus to another management whose earnings have come through and I'm talking
15:40 about Sanda Technologies.
15:42 Well, this company has also posted a very strong set of earnings coming with revenue
15:48 growth of around 23% for the quarter gone by.
15:51 We're also looking at profitability rising by 28% year on year for standing in and of
15:57 course, an improvement in margins too.
15:59 We have Jayant Dawar, the co-chairman and managing director at Sanda Technologies joining
16:05 us on the show.
16:06 Jayant, good morning or pardon me, good afternoon.
16:09 Thanks for joining in.
16:10 It's certainly been a very strong one.
16:13 How do you assess the quarter and can we expect this momentum to come through over the course
16:18 of the next quarter as well as financial year?
16:22 Thank you, Agam, for having me on the show.
16:25 I'm glad that we could post these numbers but I think this is the beginning of the beginning
16:32 in some sense in terms of growth.
16:35 We've done some huge CapEx in the last couple of years and we were waiting for it to start
16:41 monetizing and that's how it is.
16:44 So in the quarter, of course, we've done in terms of numbers, you've already put them
16:50 up 23%.
16:52 EBITDA up 34%, EBITDA up 43%.
16:58 If you look at the nine months, we are up 21%, 34% and 51% in terms of EBITDA.
17:07 We think it's the beginning.
17:09 And so far as the current financial year is concerned, I think traditionally the fourth
17:17 quarter is always the best quarter.
17:20 So we are hopeful that that trend will continue.
17:24 As such, right now, the order books are good.
17:28 We are full up, we are steaming ahead and the capacity utilization of the new projects
17:34 is also getting optimized as we go forward.
17:37 If I look at the next year, we will continue our journey of increasing the wallet share
17:43 with our customers.
17:45 We do have adequate or in fact growth numbers in hand.
17:50 So even at the industry, which is expected to do maybe high single digit growth in financial
17:58 year 25, we believe that Sandaar would be able to do much, much better.
18:04 So that's where Sandaar is for the moment.
18:08 Right Jayanthi, you did mention a good order book coming through.
18:11 Can you tell us and give us more details about where these orders are coming from?
18:16 Also, if I'm not mistaken, Q4 perhaps could be a one where there is seasonally larger
18:23 orders coming through as compared to the previous few quarters.
18:27 What are your expectations here?
18:29 And going ahead, will your products mix perhaps change or is it changing?
18:34 I reckon that a bulk of your revenues come from two wheeler space.
18:38 Is that likely to see further diversification as we move into the next few quarters?
18:44 We don't really force ourselves into wanting to be in two wheelers versus four wheelers.
18:51 We basically go with the customers and clients and the idea is that with each OEM, we increase
18:57 our wallet share with bringing in new technologies, new product lines and so on and so forth.
19:02 That's been the journey, that's been the vision and that's how we've executed it throughout.
19:06 At this point of time, more than 50% of our orders come from two wheelers.
19:11 We are not asking for a change.
19:13 If that happens, that's fine.
19:15 Right now, there is a lot of change happening even in the two wheeler segment.
19:19 You know that we are leaders in the locking space and there again, instead of manual locks,
19:23 we are moving into smart locks. That would probably mean that the multiple in terms of revenue
19:29 from just that segment would go up by 8 to 10 times for the existing customers itself.
19:35 So that's a technology change, a consumer demand, which effectively in the next 3 to 5 years
19:41 will change over completely on the 25 million two wheelers that are going to be built in the country.
19:47 We of course have moved into four wheelers.
19:49 We were very, very strong with Honda, but now we are moving into the others.
19:53 So that change will happen.
19:56 But I think the change or volume growth and value growth from two wheelers
20:03 will still form the bulk of our revenue for times to come.
20:09 Right. Jayanthi, you also mentioned that a large part of your capital expenditure is behind you.
20:14 Still in terms of what we can expect going forward, what areas are you looking to,
20:20 well, perhaps put in the balance of your investments coming through?
20:25 We are not looking for any disruptive kind of CAPEX going forward.
20:31 There will be maintenance CAPEX. There are a couple of plants that are still in the project stage.
20:38 We have two plants, both of them based in Pune, which are likely to get commissioned in the coming year.
20:47 But besides that, I don't see any major CAPEX to be done.
20:51 You would realize that with almost 50 plants, just maintenance budgets,
20:55 maintenance CAPEX itself adds up to a nice number.
21:00 So CAPEX will continue, but we will make sure that the CAPEX is restricted
21:05 to within the depreciation amounts of the company for the next couple of years.
21:10 A final question, Jayanthi. We've seen a moderation in input costs.
21:15 What has your experience been and are you expecting stability over perhaps the next two to three quarters here as well?
21:24 Well, there are macro factors to this, so I would not be the astrologer here saying how the commodities are going to behave.
21:31 In our industry, of course, we have a pass-through.
21:35 And irrespective of commodity prices, our margins typically, while they fall down in terms of percentage,
21:43 the volume of profitability doesn't really have too much of an effect with the change in commodity prices.
21:51 Okay. All right, Jayanthi, we'll leave it at that. Thanks so much for joining us.
21:55 Thank you very much, Agam.
21:57 Well, that's the management of Sandartech telling us about what we can expect from the company going in.
22:04 And, of course, the various mixes in terms of revenues that has, of course, also been discussed.
22:09 But let's take this up with Gaurang as well. Gaurang, do you follow this company?
22:15 Any view on this one? And if not, then the auto ancillary space in general?
22:20 So, Agam, we had an IPO note on this company and the floor price was about 330 for Sandartech,
22:27 one of the promising companies in terms of OEM segment.
22:31 And as we go forward and as more and more technology-driven initiatives are taking place,
22:38 not restricted to only four-wheelers, but also going across to three-wheelers, two-wheelers, commercial vehicles,
22:44 my sense is that all those OEM segment companies like Sandartech technologies, you have Uno Minda,
22:50 you have CI Automotive, which are likely to perform in terms of order books growing strong.
22:56 And not to forget the kind of launches that are lined up not only for this calendar year 2024,
23:02 but also going forward into the future. Government's own statement, Agam, was that from number three place,
23:08 in terms of automobile manufacturing country, the government's initiatives would be in place to take it to number one.
23:15 So, you can imagine the kind of transformation that we are going to see for the auto sector,
23:19 auto ancillary sector, OEM segment, tyre manufacturing companies and battery manufacturing companies.
23:24 Right, right. Well, Gaurang, on that note, we slip into another short break, but don't go anywhere.
23:31 On the other side, we get you a lot more. Stay tuned to Energy with Profit.
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