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We expect H2 to be much better than H1: Sunil Bohra, Minda Industries

Post elections and post monsoon, things should start improving, says Bohra.

ET Now|
May 17, 2019, 01.50 PM IST
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Sunil Bohra, Minda Industries-1200
The demand has been subdued since October but our Q4 was a little better than Q3, sequentially., said Sunil Bohra, ED & Group CFO, Minda Industries, in an interview with ETNOW.

Edited excerpts:


If you could share with us some of the key factors for this quarter and where do you see the pain points?

Last quarter was impacted by various issues. There was price increase in terms of insurance cost or various regulatory factors. The demand has been subdued since October but our Q4 was a little better than Q3, sequentially. PAT improved from Rs 69 crore in Q3 to Rs 73.5 crore in Q4. In fact, our revenue also is marginally higher.

However, once we entered the new year, the volumes still remained subdued. We all know the numbers which have been given in detail by the OEMs. But this again is a big impact because of the overhang what has been continuing in terms of the liquidity factor, etc. Plus, because of elections, we are hopeful that post elections some time, post monsoon the things should start improving. So we do expect our H2 to be much better than H1.

As we all know, the OEMs have given a guidance for the full year in the range of 5% to 6% and we are confident that we will be able to clock a double digit growth in the full year, north of 10%, backed with whatever activities we have been doing in past in terms of adding capacities, adding new appliance, adding newer products and premiumisation.

All this put together, we are confident that we will be able to clock a double digit growth in both revenue and profitability in 1920.

What is the outlook in terms on ancillary players because typically it comes with a lag. Can we see some more pain as well and how would the production cuts impact your overall financial picture?

We are definitely going to be under pressure. Currently the Q1 volumes are not that great in terms of growth. But in addition, due to the direct impact of OEM on auto ancillaries, our strategy has been to add more value to our products.

But how do we premiumise our products? How do we add newer products and how do we increase our kit value? Over last year to this year, we have increased our kit value in the range of 5% to 10%. The top-end model which we sell, the kit value is almost Rs 80,000 to Rs 90,000 per vehicle, starting from a base model of Rs 4,000 to 5,000. So, we have been able to increase our kit value. We have been able to increase because of premiumisation because of increase in regulatory norms -- be it airbags, be it reverse parking assistance systems (RPAS) which will be mandatory from July. The AIS-140 vehicle tracking maintenance system has become mandatory from January. So, there is a direct impact of the OEM volumes on all the auto ancillaries, our strategy has been to grow more than what the auto industry has been growing and these are the two-three key reasons we are confident about as we will able to clock much better growth in FY19-20, compared to the overall average industry growth.

When do you see demand recovery coming in? Will that be back-ended and is it going to be only visible from the second half onwards?

It is very difficult to guess the consumer sentiment you know that very well. But currently our strategy has been to be ready for the next leg of growth. We all know that in FY18, all looked like going in the right direction but unfortunately in the second half too many negatives coincided at the same time.

In terms of price impact, we expect it will smoothen over the next few quarters in terms of the NBFC or the financial issue, the liquidity is now I am sure going to get eased. Post elections, the sentiment is definitely going to be better because today we all know how difficult it is to carry cash but in the farm or the rural segment, there is still a lot of cash transactions. It is not only auto components, the entire consumer industry has been impacted because it is difficult to carry cash in the system because of elections.

We are confident that post elections, things should improve. But in terms of real demand growth, we are hoping that it should come in H2. That is not only a hope, we also believe that when we migrate from BS-IV to BS-VI, there definitely will be a significant price increase in the cost of owning a vehicle. We expect that people who have been deferring their purchases, will come into the market before the BS-VI norms kick in and got impacted by the price.

That is one of the other key reasons why do we believe that in H2 things may be actually much better than what we are seeing in H1.

What is the sense you are getting from the replacement market? Has that helped to offset the OEM slowdown at all?

It is very difficult to predict the impact on slowdown but we definitely are impacted. We have created capacities last year and we are ready for the next leg of growth. When Maruti set up the plant in Gujarat, we set up our facilities in Gujarat. Our capacities are ready. Obviously, they are not fully utilised. Once we see an uptick in demand, it definitely will help plus we are putting a lot of emphasis on after market.

Our aftermarket sales are growing in double digits for the last few years and we expect that momentum to improve significantly in the coming quarter. Our aftermarket sales this year is expected to cross Rs 650 crore. We have more than 600 dealers across the country and a very strong network. We are confident that this will also add significant value addition or revenue growth going forward.
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