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00:00 Hello and welcome, you are watching the small and mid cap show here on NDTV Prophet. I am
00:13 Harsh Saita, with me is Mahima Vachrajani and we are going to focus in on two stocks,
00:19 one being Imami and the other one more immediately being Samvardhana Mother Son. Now strong quarter
00:25 for Samil, may be a one off also impacting profits, so the profit growth was strong.
00:32 Consolidated net debt though has come down by around 10,000 odd crores from the 12,500
00:38 crore number and in fact, let me take it straight across to Puneet because he spoke with the
00:42 management CEO Pankaj Mittal and CFO Kunal Malani and he began by asking them about the
00:47 highlights for the quarter gone by. Listen in to that complete conversation.
00:51 We had very good performance on the wiring harness division, both in India as well as
00:55 internationally. The units have continued to improve and as we manage our company plant
01:02 by plant, all plants started to show improvements after they were impacted by COVID and other
01:08 challenges to war, material supplies and other things. So operational performance have been
01:13 seen, we have improved inventories as you saw that the overall company has done very
01:17 good return on capital employed from 11% of last year to 17% this year. And we also had
01:24 very good communication with our customers to gain more volumes from them, support them
01:30 when more orders and also to have been sharing with them in terms of the impacts which were
01:37 there due to the cost escalations which came in due to materials as well as on the human
01:43 cost. So that all around there have been very good improvement and we expect that we continue
01:49 on our path of improvements in most of the geographies.
01:58 And if I might add on the 450 odd crores of adjustment you're referring to for the quarter
02:04 that has two elements largely to it. One is on account of improved performance, improved
02:11 outlook of the business and the internal restructuring that we have done. As you know, we have assimilated
02:15 a lot of assets on the SMRTBV and also being a country that's all enabled us to get deferred
02:24 tax benefit for some of our past tax losses. So that's around about 230 odd crores and
02:30 the remaining 200 odd crores is an account of compensations that we have received from
02:36 the customer against some of the forex losses that we had booked last quarter. If you remember
02:41 last quarter we had highlighted that Argentina had a lot of one-offs in terms of the devaluation
02:49 of the currency that happened and that's been compensated by partly at least compensated
02:55 by the customer in this quarter.
02:58 Now just a follow-up on that. Now going forward as well whenever we will see if any kind of
03:05 forex losses in emerging markets or any other geographies as well, do we expect to be compensated
03:10 by the customers even if not in when we look at the full year performance basically we
03:15 will see any kind of quarterly lag go away. So going forward as well do you see the rest
03:21 of the impact for example for the Argentina business you said being compensated for the
03:27 company?
03:28 Look, Argentina was a situation which the currency was devalued by over 200%. So that's
03:37 completely exceptional event that happened and hence it's against that exceptional event
03:42 that we work with the customer to try and find a solution. It's in the normal course
03:48 we don't expect forex compensation to happen in the normal course of business. On the contrary
03:54 actually we try and see that most of our businesses are being done at the same location and in
03:59 the same currency in which it has been supplied to the customer. So we try as much of natural
04:04 hedging as possible but obviously there are geographies like Argentina where this is a
04:08 challenge and got aggravated because of capital controls that the government put in there
04:16 to save foreign currency at that point. So hence it was an extraordinary situation which
04:22 is what we had highlighted in quarter 3 and again highlighted how the compensation came
04:27 from variety of customers there also in this quarter. So we did say then that we will be
04:34 working with the customer to find a solution and we did that in this quarter.
04:38 Now I just want to talk about the CAPEX plan. We've seen roughly 4000 crores of CAPEX down
04:44 in this particular year. That's almost double of what we did last year and going forward
04:50 as well we are having 18 greenfield plans coming up in the next 2-3 years. 5 have been
04:57 added in this quarter as new ones. So I just want to talk about the CAPEX plan in general
05:02 over the next 2-3 years and also how are you seeing the CAPEX plan over the next year since
05:08 we are starting at 525. Any kind of guidance but any kind of range that you could give
05:14 us how are you seeing the CAPEX for the company?
05:20 So look I think the CAPEX is a function of again the set of opportunities that we are
05:24 getting. So do bear in mind that our order book is looking at close to 84 billion and
05:29 this is only automotive. On top of it when we add YACHO that's an additional potentially
05:35 4, 5, 6 billion that we get added. So it's a fairly large order book that we have and
05:40 the CAPEX is in tune towards achieving it. Also we had highlighted that the developed
05:47 part of the world is still 10-15% below pre-COVID. It's the emerging part of the world where
05:52 like India, China where at least automotive volumes have already hit post-COVID levels
05:58 and even higher and hence the need for setting up new capacities there. That's how our growth
06:05 CAPEXs were embedded. There were 12 that we announced last time, there are 18 now so 6
06:10 more have got added in this quarter. The total CAPEX that we anticipate for next year is
06:16 somewhere in that 5,000 crore level plus minus 10 or 100% and out of this 5,000 around 2,000
06:24 crores is what is going to get spent in these CAPEXs on the greenfields at least next year.
06:30 And a fair chunk of that at least this time around seems to be also on the non-automotive
06:35 side, nearly 70% of this will be on the non-automotive side. So it's an outcome of I think the support
06:44 and the trust that the customer has on us which is reflected in the order book and then
06:49 reflected in the investments that we are doing. And do note that in spite of doing 4,000 crores
06:56 of CAPEX, in spite of assembling 10, 12 different acquisitions last year, in spite of all that
07:04 we have reduced our leverage, we have reduced our leverage ratio to 1.4X, pretty much the
07:10 same at the beginning of the year. In fact, this quarter we paid down 1,800 crores of
07:15 debt and hence from a pure financial perspective, I think we have all the way with all to manage
07:21 the CAPEX without necessarily raising any form of equity and we still are on a deleveraging
07:26 path that we've made. Now, your presentation did give a lot of qualitative details on electric
07:35 vehicles. So the percentage of India is roughly just around 2.2%, but for North America is
07:41 upwards of 7%, for Europe it's 11%, China is at 26%. So how are you seeing, because
07:48 the company is very, very global in nature, an outlook on EVs globally as well over the
07:53 next two to three years, because we are seeing that most countries have carbon norms as well
07:59 as we are seeing new emission norms for automobiles as well. How are you seeing the trend in general
08:04 for EVs going forward? And also if you could give us some more picture on India as well
08:09 as apart from the global picture for electric vehicles.
08:14 So we do see EVs are spanning out well, but the growth pattern, which was supposed to
08:21 be quite a steep, is not there so much in the current situation. Hybridization of the
08:28 vehicles have also taken place. As far as our company is concerned, our products are
08:33 powertrain agnostic. We supply to EV vehicles, hybrids, as well as ICE vehicles. And in that
08:41 sense you would see that the company has performed in this very disruptive environment in a very
08:46 good way. Most of the car makers are going to achieve these norms, which are there in
08:54 many different ways. So it's not just about focusing on one particular technology and
08:59 technology is continuity of work. As far as India is concerned, also we do supply to the
09:05 EV vehicles in India, hybrid vehicles, as well as ICE vehicles. And we do see that the
09:12 trend is that the car makers are trying to find many different solutions to the problems
09:18 which are there in front of them to solve. So the technologies will continue to evolve
09:23 more and more solutions for the users who will come in and there will be lots of breakthroughs
09:30 to meet the environmental regulations which are there. That's the direction in which we
09:35 see that there will be multiple solutions which are there in the market.
09:39 One stock that is in focus today is Imami Limited. The stock is on a tear on the back
09:43 of its Q4 earnings. Revenue was up 6%, EBITDA was up around 5%, and net profits have increased
09:49 by 3%. But to discuss more about how FY24 has gone by and how FY25 is shaping up, we
09:56 have with us Mr. NH Bansali, CFO and CEO of Imami, who joins us now. Welcome to the show,
10:02 sir. I'll start by addressing the elephant in the room. A lot of FMGG companies are seeing
10:08 green shoots in rural recovery. What is the trend that you're observing?
10:14 Yeah, we also feel that the trajectory is turning and rural has started picking up.
10:21 This quarter witnessed a rural growth as well, while general trend, which was still there,
10:26 was declining, has also shown slight growth. So, all the channels have picked up well and
10:32 all the channels, the brands are also doing extremely well. The summer has been good.
10:37 The forecast for the monsoon has been good. So, all these favourable factors are expected
10:41 to deliver good growth in the times to come and has also been witnessed by the performance
10:46 in the last quarter.
10:47 Sure, Mr. Bansali, Arshad is also joining in. Quickly, with regard to, you've guided
10:54 for a double digit growth in terms of top line. Volume versus value, how do you see
10:59 it evolving at least in FY25, maybe FY26 is a bit far off?
11:04 Yeah, we expect around 2.5-3% kind of a price growth, rest would be the volume.
11:11 Understood. And just with regard to how costs and margins are evolving, I'll talk about
11:18 ANP spends later, which is advertising and promotion for benefit of viewers. But outside
11:24 of that, how are margins really evolving for you? You know, double digit top line growth,
11:31 would you therefore also guide for maybe a double digit margin, double digit volume,
11:35 is that something that could be looked out for and where do margins go?
11:41 So we are expecting a double digit growth for the next fiscal. And in terms of margins,
11:48 we have already delivered a gross profit expansion of 270 basis points in the last quarter. And
11:54 also for the year, there has been an expansion in the previous fiscal. We believe that the
11:59 costs have reduced and has come to a reasonable level and there could be a slight further
12:04 decline, but broadly it would remain at this level. And advertisement and promotions also
12:10 we spent, we have invested huge in the last quarter. It had grown by almost 39%. And for
12:18 the next fiscal, we feel that advertisement and promotions would remain at the last year's
12:23 level.
12:24 Understood. Mr. Bhansali, you know, I want to understand that for Imami, the core categories
12:30 in niche have been witnessing a slightly slower, you know, user edition. And these are the
12:37 products which, you know, have a lot of market share at, you know, at present. So in terms
12:43 of volume growth, in terms of your core category, what is the trend that you're expecting in
12:47 FY25?
12:48 So, for the core categories, also, if you look at, we are the leaders in wherever we
12:54 are, be it Boroplus or Navratna or BAMS. So we have a leadership position and our market
13:00 shares have remained intact or has improved. And we expect all the brands to perform well
13:07 given that the seasons, the discrete risk spends are going to increase. In fact, two
13:15 brands have not performed to our expectation, but since they are highly discretionary kind
13:20 of cash king or a fair and some, but we are taking steps and we also believe that with
13:26 the increase in the spending power of the discretionary spends, we believe this would
13:33 also turn and deliver good growth.
13:38 Okay. So on the ANP side of things, you know, a 39% uptake for Q4, your ANP spends versus
13:47 Q4 FY23. Talk to us about some of these trends playing out. So you're investing, of course,
13:53 but do you likely see a taper in this number in FY25 on a higher base? What's the kind
14:01 of number one can expect? Also, when do you start to realize value from some of these
14:06 investments you're making?
14:09 So we expect for the same kind of a fiscal percentage number. So what you mentioned is
14:14 about the last quarter, about the quarter four, there has been an uptake of 39%, but
14:19 on an overall level, our advertisement and promotion spends would remain at the same
14:24 level as it was in the previous fiscal. So for the FY25, it would be almost around that
14:29 only and then year on year basis.
14:33 Understood. Mr. Bhansali, you know, now that we're seeing green shoots in the rural demand
14:38 recovery, what are the kind of headwinds that you're expecting in the sector overall in
14:42 FY25 then?
14:43 Yeah, all said and done, there would always be headwinds in terms of economy, in terms
14:51 of some what if the seasonal vagaries have increased a lot. But that has been there in
14:59 the past as well. So we expect that the past there could be some base impact as well. And
15:04 if with the normalization of the monsoon, winter and summer, things would be more optimistic
15:11 and we would be able to deliver what we had expected.
15:14 All right, sir. So I want to try and focus on the new categories, especially grooming
15:22 for men. The men company, Brelaire, both combined recorded a revenue of 200 crore for FY24.
15:29 In fact, men company is now EBITDA positive as well. Talk to us about the growth here
15:35 going forward just in these categories. What's the kind of trajectory that it grows from
15:41 here?
15:42 Yeah, so these are all new edge tending companies where we have invested and they have become
15:48 our subsidiaries. And we expect relatively much higher growth on these brands and companies
15:55 because they have a lot of potential and the size relatively smaller. So we expect good
16:02 growth to come in as it has happened in the past.
16:06 Understood. Mr. Bansali, you know, when we talk about FMCG companies, we always talk
16:13 about the play between the organized and unorganized sector. So are you still seeing that the unorganized
16:19 sector is taking over the FMCG companies in terms of demand as well as in terms of volumes?
16:28 See, now, if there are good ideas, the people can have their products on direct to consumer
16:37 and there are many platforms. So it is more about delivering good products, value added
16:43 products at right price and with the right positioning. So we believe that everything
16:49 all will coexist and those who has better products and value added products, they will
16:54 survive and get more stronger.
16:56 Understood. Mr. Bansali, you know, I would like to come back to the margins part again
17:01 and I want to understand that, you know, in your call, you said that you're expecting
17:04 some kind of margin expansion. So if you can define that sum for us, if possible, and what
17:09 will be the levers for this margin expansion?
17:12 So if you look at our margin trajectory, currently we are around 26 percent plus and
17:18 even during the pre-COVID period, we were at 27, 28 on a little higher as well. So we
17:28 believe that given that we would be on the investment mode with a few of our strategic
17:34 investments and also behind our core brands, we believe that the margins would remain in
17:40 almost the same level. There could be a slight improvement.
17:43 Right. So you've also suggested that Q2 FY25 onwards, there are going to be certain specific
17:50 strategies to scale up male grooming. They're going to be different from the current strategies
17:56 you employ?
17:57 We are working on it and we are on the drawing board side and there could be many things
18:05 which may come up. So we will keep on pleasing the consumers and we will try with newer ideas.
18:11 We will come up with this. You will see it in the market.
18:14 Understood. And, you know, one more question in terms of cost of raw materials. How have
18:21 they played out for FY24 and where do you see the cost of raw materials shaping up in
18:27 FY25?
18:30 So the materials which had increased in the earlier period, the cost had increased and
18:35 they have become very benign and they have come to a very reasonable level. And that's
18:39 why there had been a margin expansion in the last quarter as well. We believe that these
18:44 costs are going to remain at this level or may decline a bit. But broadly, our gross
18:51 margins are expected to remain almost in this kind of a level.
18:55 Well, Mr. Vilsali, thank you so much for taking our time and speaking with us at NDTV Profit.
19:00 It's time to slip into a short break. So stay tuned.
19:02 Thank you.
19:08 Thank you.
19:13 you