NDTV Profit in Conversation with Sorab Agarwal Executive Director of ACE
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00:00 We have a very special guest joining us today. Saurabh Agarwal, Executive Director of Action
00:05 Construction Equipment joins in. Action Construction has been a star in the last couple of quarters,
00:12 couple of years. In fact, the stock itself is up over 250% in the last year. It's been very,
00:19 very action-packed. The last six months have also been fairly euphoric for the company. So lots of
00:24 investor interest in this one. Saurabh joins us now to talk to us about the company, the outlook
00:29 and growth guidance. Hi Saurabh, firstly congratulations. You've had a pretty fantastic
00:34 quarter and the outlook I believe looks as promising. Let's start by recapping how the
00:39 quarter has been. Your revenue was up 37%, EBITDA was up 80%, margins have improved substantially as
00:45 well. Profitability is up nearly 90%. You want to break that down for us?
00:50 Yeah, good afternoon. Things have been good in the recent past and I would say especially
00:56 after the country started recovering post-COVID and it has been only northwards since then. Yes,
01:04 there was a blip in 2022 because of the war and then inflation, hyperinflation, everything hit
01:09 but things are very much normalized and the demand very much came back I would say in the
01:14 quarter for last year and has been continuing since. If I talk specifically of the last quarter,
01:19 yes again we were able to do our Stellar numbers and again our biggest ever quarter with respect
01:25 to revenue and profitability and even in profit terms. So things have been good and the momentum
01:31 still continues and going forward I think we are in the right space with respect to
01:37 where we are operating and we are trying to do all the right things to make everything happen.
01:43 Saurabh, in your CONCOL you had guided, I mean you are managing to do close to 800
01:49 crores of top line every quarter. You have guided for 4400 in terms of top line by F526.
01:58 Are you on track to achieve that in terms of capacity addition? I do know that you have also
02:03 acquired some land. Will you have enough capacity to fulfill that revenue guidance number by 26 and
02:09 also is there an upside risk to this because clearly you have been outperforming most
02:14 optimistic expectations recently at least? Yeah, so many questions involved but I will
02:19 try to break them down. See F523 we did close to about 2200 crores, a little plus minus. So
02:27 let's say by F526 I think we are on track towards the end of 4400. But in saying this I would like
02:33 to say that we are also on track I believe that maybe taking our turnover 3x over the next 5-6
02:40 years. So that looks possible. The way our country is glowing I would say at the current juncture
02:47 and with respect to capacity yes. Hold off last year which is currently on F524. We were
02:53 struggling with some capacities and deliveries. So we have done some CapEx, put our capacities
02:58 in place and now we are capable of close to about 4000 crores revenue which we can actually attain
03:04 and our current industrial park which is close to 100 acres. So I think the maximum potential there
03:09 is to go up to 5000 crores and the real estate prices and especially land, industrial land,
03:15 the prices are going up. So we thought it prudent to acquire land for our future growth beyond 5000
03:22 crores of revenue. So that land is already in place, most of the CapEx we have done is in place.
03:28 Some parts of it will become functional even in quarter 1, quarter 2 further adding to our
03:33 crane capacities. And if I talk about capacity utilizations, currently with our expanded
03:38 capacity we are already operating at 80% in cranes and in the next quarter I think we will add
03:45 more capacity which will flow in. And with respect to our construction equipment we are about 50-60%,
03:51 with respect to our metal handling division about 60% and agri is 40-45%. So hopefully we have
04:00 enough space to cater to the market in the next one year and obviously we will keep on planning
04:05 on the go as it happens. So just to understand this, with your current capacity you could achieve
04:12 a top line of 5000 crores, is that the right assumption here? See the right assumption is
04:18 with our current facilities in place after upgradation and brownfield being mixed together,
04:23 we are capable of 4000 crores and which we were owning the main about 100 hectares where we are
04:31 settled. So with that we can go to a potential of 5000 crores plus. So we have to still set that up
04:38 with respect to reaching 5000 crores which we might do in the next year. And this is with regard
04:43 to the land as well that was purchased for 82 crores right, that is where the additional capacity
04:48 is going to be built in? No, this is on our existing land. So about 82 acres of land we have
04:57 already done agreements and hopefully by April we should be acquiring the entire chunk. It's in two
05:02 pieces of 22 acres and 62 acres, 61 acres of land and that should be with us in quarter 1 of next
05:09 year. That is to go beyond 5000 crores, you know your country allows us. So by the end of the next
05:17 financial year you will have this 82 crores of additional, of the land that you have acquired
05:21 which will have additional capital as well. So if I had to ask you for a ballpark, by the end of
05:26 F525 what will your capacity stand at and what sort of numbers would that then go to in terms
05:33 of revenue? If you were, you know there was this 100% utilisation or 80-90% which you currently
05:39 stand at? Yeah, our capacity for pick and carry cranes should be by the end of F525 or less the
05:46 middle of F525 should be close to about 15,000 pick and carry cranes, close to about 800-2000
05:52 tower cranes. I mean all put together it's easier to maybe convey it in a revenue term.
05:57 Maybe we will be close to about 4500 to 5000 crores in the next year with respect to capacity.
06:05 Currently we are at 4000 crores capacity. Right. I'll talk about the various verticals in a minute
06:12 but talk to me about your margins. I know you have guided for annual margins at a run rate of 15%.
06:17 This quarter has been exceptional. I think your margins have come in over 16%
06:21 up nearly 400 basis points from what we saw in the same quarter last year.
06:26 What has led to that margin expansion and is that sustainable going ahead?
06:30 Yeah, I think mainly it is to do with operating leverage. So I believe that with every 500-600
06:37 crores increase in revenue of the company on an annual basis, we can increase our margin by close
06:42 to about 1%. And obviously this was also driven by the hyperinflation because of the Ukraine war
06:51 last year. So that came under control in quarter 3 of last year. I mean it started to come under
06:57 control. So the full effect came in this year. So with operating leverage playing in with the
07:01 commodities being reasonably stable and rightly priced, I think these are the two main contributors
07:07 apart from all the cost reduction and value engineering and the other aspect that the
07:12 continuous process in the company. Right. I want to talk to you about the fact that
07:19 you've got various avenues which contribute to your top line. Tell me what sort of growth are
07:26 we expecting in each of this? So if you look ahead and I'm not talking next quarter, more from a two
07:32 to three year perspective, where do you think growth is going to come from? Will it be cranes,
07:36 construction equipment, metal handling and agri segments? What is the big bet for the company in
07:41 terms of biggest growth or maximum growth? See, with respect to revenue contribution,
07:48 cranes is our biggest segment contributing about 70% followed by construction equipment at 14%
07:53 and metal handling and tractor with about 6.5% and 9.5% respectively.
08:00 So going forward, I believe that our cranes will continue to grow at a similar pace,
08:06 maybe slightly slower or even faster. That time will tell. Construction equipment should be our,
08:12 you know, as a segment should be able to grow the fastest. We believe that growing there at a pace
08:18 of, you know, 40% plus over the next four or five years should be possible because we are new
08:23 entrants, our base is small, but now our product is well accepted. So I believe that construction
08:29 equipment will be fastest for us and definitely with respect to our forklifts, we've been growing
08:34 at 15-20% on an annual basis. I believe that there is a scope to grow at 30-40% there and
08:40 I think in the next year we should be able to attain similar growth. So I mean, our own 30-40%
08:48 is about 15-20% in forklifts as well. And hopefully, sorry, and the last segment, I agree.
08:57 So we've been growing at 15-20%. We would love to grow faster than that. We have put all our,
09:04 you know, all the corrections, all the things have been done, you know, to facilitate growth
09:08 there. So let's see how fast we are able to take it further, faster than 15-20%.
09:13 [Music]