Category
📺
TVTranscript
00:00 [MUSIC PLAYING]
00:03 Hello, and welcome.
00:10 You're watching the Small and Mid-Cap Show.
00:12 I am Mahima Vachrajani, and with me is Harsh Saita.
00:15 We have another stock in focus today, Rashi Peripherals.
00:18 Among the leading national distributors
00:21 in terms of global tech brands in India for information,
00:27 communication, technology, we have with us Kapal Pansari,
00:31 who's the MD, and Rajesh Goenka, who's the CEO of the company.
00:36 They're with us to speak to us about the quarterly numbers
00:39 which have come out, and they're recently listed as well.
00:42 So we'll try and break down on what we can expect going
00:45 forward on this one.
00:47 Kapal, let me come to you first.
00:50 You know, talk to us about what exactly
00:52 has happened in this quarter, because we've
00:56 seen growth in terms of your top line,
00:59 but your EBITDA on a console level was largely tepid,
01:04 and your profit after tax has actually
01:06 declined on a year-on-year basis.
01:08 So talk us through what has happened here.
01:11 So one thing I would like to mention that in quarter three,
01:14 we've grown by about 21%.
01:17 Largely, this growth has come on account of robust demand
01:23 of the PC industry.
01:25 In year 21, 22, the PC market and the growth rates
01:29 were much higher due to work from home
01:31 and learn from home demand.
01:33 And immediately after post-COVID,
01:34 when the markets opened up, obviously,
01:36 there was some correction in the market.
01:39 In 2022, 23 year, after that correction,
01:42 this year, from the first half of the year,
01:46 the markets have started coming back on track.
01:49 And as a result, in Q3, you see a strong growth
01:53 for the organization, clocked at 21%.
01:55 On the EBITDA and the patent front, it's a little lower.
02:00 But for us, it is business as usual,
02:01 because one of our subsidiaries, which
02:04 is a cloud distribution business,
02:06 we've taken some impairment, which
02:08 is the nature and the cycle of the business, due to which this
02:11 occurs during quarter three of the month.
02:16 Right.
02:16 Mahima, this side, Kapil and Rajesh.
02:19 Well, my question to you, since you mentioned the guidance
02:24 on PC, well, my question to you is
02:26 that we've seen that there is a fall in share of Lenovo
02:30 and there's a rise in share of Samsung in terms of revenue.
02:34 Well, is this maintainable or is this expected to change?
02:38 Yeah, so specifically, the PC demand, as Kapil also
02:42 mentioned, in '22 and '23 went down.
02:45 So therefore, you will see that in Lenovo, mainly,
02:49 we do PC, desktops, laptops, and servers.
02:53 So overall, demand was lower.
02:54 Therefore, the share has gone down.
02:56 Whereas, Samsung, we are predominantly into tablets.
03:00 And tablet demand is very high, not only into enterprise,
03:05 but also in the government.
03:06 So therefore, you see Samsung business a little bit going up.
03:10 But going forward now, as we said,
03:12 that business is as usual.
03:14 All categories now are firing.
03:16 So both these categories also will
03:17 continue to grow the same way.
03:20 Sure.
03:21 Mr. Pansari, let me come back to you.
03:23 So you've spoken about probably a one-off, which is impacting
03:29 this quarter's numbers.
03:30 If I remove the one-off, what's the kind of number?
03:33 Like, would I look at a more normalized kind
03:35 of a growth trajectory, which is,
03:37 if I'm looking at Q3, revenue growth of 21-odd percent.
03:42 Would, therefore, EBITDA also have
03:43 expanded by a similar quantum?
03:46 So to give you a perspective about the business as usual,
03:49 if you look at the standalone numbers that we've reported,
03:52 the revenue has grown by about 17% in quarter three.
03:57 And if you look at EBITDA and PAT numbers,
03:59 they've also grown similarly at 21% and 13.6% respectively.
04:08 Right.
04:08 Also, so your ROE is maintained at 21%.
04:12 I mean, sorry, ROE is maintained at 21%,
04:14 and ROCE is maintained at 15%.
04:17 Where do you see this going in FY25?
04:20 Will this stay in the same range,
04:22 or do you expect to see a rise in this?
04:25 So IT distribution business is a very matured industry
04:29 and distribution business, where the margins are structured,
04:32 and the businesses have a very fine, defined range
04:36 of margins and earning potential.
04:38 This is the range that is expected
04:41 to remain similar in this particular trajectory
04:45 and will continue to perform in similar manner.
04:49 Sure, and with regard to your working capital days,
04:52 working capital cycle, if I'm looking at the last maybe
04:56 four or five years trend, it seems
04:58 that working capital days, inventory cycle
05:02 is getting a little stretched.
05:05 Do you feel that we're coming off a low base?
05:08 Is that what's happening?
05:09 And where should we, therefore, normalize at?
05:12 Yeah, so definitely this is something
05:15 that is not very ideal for us.
05:17 We typically want to maintain an average inventory
05:20 cycle between 50 to 55 days, which takes
05:23 care of our growth potential.
05:26 Ideal range, if you ask us, should be at about 45 to 50
05:31 days, and we are actively working on to maintain that.
05:34 But that also means that we are reducing our inventory
05:37 and growth potential.
05:39 What happens is when we buy the goods,
05:41 the nature of the business is we buy on credit,
05:43 we hold inventory, and we sell on credit.
05:46 So therefore, when we buy the goods,
05:48 the growth factor in the forward-looking projections
05:51 on the sales, we buy the goods in the previous quarter
05:56 and the months.
05:57 Therefore, you will always see a higher cycle of inventory.
06:00 Probably if the growth is not there,
06:01 this will obviously get corrected
06:03 and we'll actively work towards doing the corrections.
06:07 Right, also in Q3, around 63 warehouses were added.
06:11 Can you give us a guidance as to where these warehouses will
06:14 go in terms of FY25?
06:17 And will this-- since warehouses will increase,
06:19 your inventory will also increase.
06:21 So how will this affect your working capital cycle?
06:25 So I want to clarify that 63 warehouses are as on Q3.
06:30 In last two quarters, there has not
06:33 been any addition of warehousing.
06:35 So for us, the inventory and everything remains the same.
06:38 But the good thing is out of these 63 warehouses which
06:42 are present in 50 cities of India,
06:44 we are able to deliver goods to about 8,400 customers
06:48 in 680 towns of India.
06:50 So while progressively there is a need, we may add warehouses.
06:54 But currently, we think that since we
06:56 are able to cater to 680 towns already from the 62 warehouses,
07:01 they look to be good enough at this moment.
07:04 Sure, and Mr. Bansari, with regard to your top line,
07:08 what's the kind of internal targets
07:10 that you have in terms of growth?
07:12 Are you expecting growth to come in a bigger fashion
07:16 going forward?
07:17 Because again, last couple of years
07:20 has been flattish of sorts.
07:23 Yeah, so I'll just give you the perspective.
07:27 So FY21, we grew by about 55%.
07:30 FY22, we grew by about 53%.
07:34 And FY23, which was the post-COVID year
07:37 where normalization, everything happened,
07:40 and the market really grew by about more than 20%,
07:44 but we were flattish.
07:46 So that is the past.
07:47 Now the story of FY24 is that nine months to nine months,
07:51 we have a 12% growth.
07:52 But very importantly, Q3 to Q3, we have a 21% growth.
07:58 So I think that is the trajectory that
08:01 is all for us to see.
08:03 And now the IPO money also has trickled in
08:06 just about 10 days back.
08:07 So we are hopeful for a good, positive, consistent growth.
08:11 Yeah, so before I come on that IPO funds
08:14 that you've come through with,
08:16 now talk to us about where the potential lies.
08:20 You're probably increasing touch points,
08:22 more distributorship that you're increasing.
08:26 So where can I look at your top line now going forward?
08:30 Is it a 20% growth that should reasonably be expected
08:33 over the next three years?
08:35 So our strategies are very simple.
08:39 One is we continue to get deeper into the country.
08:42 So more customers, more coverage of city.
08:45 So that's, we call it as a deep strategy.
08:48 The second is we continue to slowly add more brands
08:54 in our portfolio, which gives us additional business
08:57 opportunity.
08:58 So in last few months, we have added ViewSonic
09:01 and Anydex, two brands that we have added.
09:04 Third is we keep on adding new product portfolios
09:08 from our existing brands.
09:09 So a recent story is we have added
09:12 Samsung gaming monitors.
09:14 We have added Google Pixel watches.
09:16 So these are the new products.
09:18 So deeper penetration within the brands, existing brands,
09:23 we do more products and add some new brands.
09:27 All three put together has enabled
09:30 us to get a consistent growth of almost 20% for last 20 years.
09:34 And we are hopeful to maintain the same.
09:37 And even post this capital infusion,
09:40 would you continue to maintain your 15-odd percent
09:42 ROE that you've done?
09:44 Is that something like now a base of sorts?
09:47 And what's the upside from here, therefore?
09:50 So there are two perspectives on this one.
09:52 The ROE definitely for the short term
09:55 because there's a capital infusion will drop from our
09:57 currently about 19% to 20% that we have,
10:00 will drop because the base of capital is increasing.
10:04 But over time, this business will
10:06 continue to have a range of between 15% to 20% ROE, ROCE.
10:12 The growth that we expect out of this capital infusion,
10:15 the way it works is that we are a working capital driven
10:18 organization.
10:19 I mentioned earlier, we buy goods on credit,
10:22 we hold inventory, and we sell on credit.
10:24 This translates to a networking capital cycle.
10:27 So whatever capital that we've raised,
10:28 the amount of turns that we are able to turn out
10:32 of the capital deployed is the function of the growth
10:36 that we are expecting in the next couple of years.
10:38 So right now, the IPO money has just
10:41 come in about two weeks back.
10:42 So for us, the work really starts now to push the gear
10:45 and take it forward.
10:47 Absolutely.
10:49 Right.
10:50 So Mr. Kapil and Mr. Rajesh, thank you so much
10:52 for speaking with us at NDTV Profit.
10:55 It was a pleasure talking to you.
10:56 Well, Apollo Microsystems is in focus.
10:59 The company recently backed an order of 25 crores.
11:03 And this is from IOCL and multiple orders
11:06 from the Defense Ministry as well.
11:08 In Q3 FY24, the company posted a good set of numbers
11:12 and an investment, R&D investment of approximately 7%
11:15 to 8% of the revenues.
11:17 Well, the company is planning to establish a new subsidiary
11:20 as well and a lot more in focus.
11:22 We have with us Mr. Adepalli Krishnan
11:24 Sai Kumar, the whole-time director, who joins us now.
11:27 Welcome to the show, sir.
11:31 Thank you.
11:32 Good morning.
11:33 Good morning, sir.
11:34 So my first question to you would
11:36 be that a lot on the plate, good set of numbers.
11:39 But where does your order book currently stand at?
11:43 And what is the mix for this order book?
11:48 We have a decent order book as Q4, the closure is going by.
11:55 As we have given the guidance earlier
11:57 that we would exceed the previous year figures,
12:00 both in the top and the bottom line.
12:02 And we also have--
12:04 as the day stands, we have order book
12:05 to meet the similar, I mean, say,
12:08 top-line levels for the next financial year as well.
12:12 Sure, sir.
12:13 So where should it stand in all, net-net?
12:17 Because your order book takes care of next year's numbers.
12:21 But you're definitely looking at growing faster,
12:24 because you're a very small company
12:26 and the scope is very large.
12:27 As the day stands, the total order book
12:32 should stand close to around 400 books.
12:36 OK, and-- OK.
12:38 And execution, sir?
12:39 And execution?
12:41 How quickly will that get executed?
12:42 And what's the order pipeline looking like?
12:46 Next two months, what's the kind of order traction
12:49 that you're looking for?
12:51 We gave a guidance that we would do around 35% to 40%
12:57 in excess of last financial year.
13:00 And the same trend would continue
13:02 for the next financial year.
13:03 Probably we should be closing somewhere close to around 600
13:06 rows in the next financial year.
13:08 And we have sufficient pipeline for the next financial year,
13:12 along with the existing order book.
13:15 Right, sir.
13:16 Also, in terms of your new plant that is coming up,
13:20 what is the capacity levels of that plant, first thing?
13:23 And what will be the revenue contribution
13:25 that you're expecting out of this?
13:29 See, the upcoming plant is not measured by the capacity
13:35 or the capacity utilization.
13:37 The number of programs that are going in for production
13:39 are growing continuously, for which a larger plant is
13:42 required for the programs to be executed much faster.
13:47 So the present facility, what we are having,
13:49 we are having all the design and production facilities
13:52 all in one place.
13:54 So we are bifurcating this to be a dedicated design center.
13:58 And the entire production facility,
14:00 we are going to a new facility.
14:03 There we'll employ another 400 employees there,
14:07 which will cater not only to the subsystems
14:10 that we are presently manufacturing,
14:12 but also the complete weapon manufacturing facility
14:14 we are building up.
14:16 That's all the facilities.
14:18 So it's not about the capacity utilization.
14:19 It's about the vision that we have
14:21 to reach 1,000 crore top line.
14:23 And this facility, the upcoming facility,
14:25 is to actually meet that kind of projections that we have.
14:30 How quickly do you get to 1,000 crore?
14:31 Before corona, we have aimed for 2025 to reach.
14:38 But I think we must live by a year.
14:41 Got it.
14:42 And will that also include some amount of product
14:44 diversification as you go around towards the 1,000 crore mark?
14:48 And how will your product mix therefore evolve?
14:52 There's a lot of product diversification.
14:53 We are transitioning ourselves from a tier 2 supplier
14:57 subsystem and systems supplier to a complete tier 1 OEM
15:00 supplying complete weapon.
15:01 To the extent, in the last couple of years,
15:03 we have developed three different variants
15:06 of weapons and sea mines, and which
15:09 we are doing an extensive marketing internationally.
15:13 We are also likely to be chosen as one of the DCPB partners
15:19 for some of the heavyweight torpedoes, for which we
15:21 are looking forward for both domestic as well
15:23 as international markets, as a complete as a weapon.
15:26 Right.
15:26 So since you mentioned diversification,
15:28 you're establishing a new subsidiary, Apollo Defense
15:30 Industries.
15:31 Well, there you've mentioned that this might signal
15:35 a potential diversification.
15:37 Does this mean that this will only be in terms of defense,
15:40 or do you plan to forward into something else?
15:44 Both defense and space as well.
15:47 The primary aim to float this subsidiary companies
15:50 is to make international tie-ups.
15:53 We want to work in a collaborative mode
15:55 with various international companies who would
15:57 like to do a joint ventures.
15:59 It would be convenient to do with a private limited company.
16:02 So we have floated this company as a subsidiary
16:04 for its parent company, Apollo Megasystems.
16:08 In fact, we are talking to that extent
16:10 with the three different companies.
16:11 And you will soon get to hear the news
16:14 that we will be acquiring a few companies down the line
16:16 in the next one quarter.
16:18 So what is the kind of number you're looking
16:20 at in terms of acquisition?
16:21 How large is the size that you're looking
16:25 for in terms of acquisitions?
16:28 Ticket size could be as small as 10 crores up to 150 crores.
16:32 Understood.
16:33 And margin accretive?
16:36 So this includes both startup companies as well as
16:39 mature companies who are looking for growth
16:41 and who has good technology as well, both domestic as well
16:45 as international.
16:46 We are also looking to acquire some technologies overseas
16:49 who would like to do a licensed production in India
16:52 as a make in India and also for the global markets.
16:55 And your current margins, 20% plus maintainable
16:59 post all of these acquisitions and even your ROC numbers,
17:03 et cetera, maintainable in double digit
17:06 post these acquisitions?
17:08 Absolutely.
17:09 They are maintainable.
17:10 But mostly these acquisitions will
17:12 be done through Apollo Defense, not through the parent company.
17:15 So the balance sheets of that is totally
17:17 different to that balance sheet, although it
17:19 will be an aggregate balance sheet.
17:20 But if you take an average out of the consolidated balance
17:24 sheets, yes, the numbers will improve as well.
17:26 Fair.
17:27 And with regard to the way in which you're
17:30 progressing on R&D, what's the thought process
17:34 and how much are you going to be spending on R&D?
17:39 And second, I also want to understand,
17:41 it's a disruptive industry, right?
17:43 What are the kind of modes you have?
17:45 See, R&D is a constant investment
17:52 that we do every year.
17:53 In the last quarter, we took an approval from the board
17:56 to invest up to 50 crores for the upcoming financial year,
18:02 for which the new initiatives that we
18:04 are taking, both in the defense and space domains,
18:07 we'll be doing continuous R&D, both for the upgrading
18:12 the existing technology, as well as for the development
18:14 of new technologies.
18:16 But the markets are growing.
18:17 And in this growing market, updating the existing
18:20 technology is something which is very vital for us
18:23 to sustain in this market.
18:24 So that's the spree which we are going in.
18:29 OK.
18:30 And also, can you just guide us as to what mix does your--
18:35 what mix does it stand at, domestic versus export?
18:39 As of now, we don't have any export orders.
18:42 But in the next financial year, we
18:43 are expecting-- we have already started bidding internationally.
18:46 So probably in the next financial year,
18:48 definitely we are sure we'll be able to claim
18:50 some good projects.
18:53 All right.
18:54 Thank you so much, Mr. Krishna Syakumar, for joining us today,
18:58 giving us all of that perspective on both defense
19:00 as well as Apollo Microsystems.
19:02 But with that, I believe we're completely out of time
19:04 on this edition of the Small and Mid-Cap Show.
19:07 From Mahima, myself, everyone who puts the show together,
19:09 thanks so much for watching.
19:10 Stay tuned for more news on NDTV Profit.
19:13 [MUSIC PLAYING]
19:16 (electronic music)