In an interview with ET Now, ‘ Anil Gupta talks about the upsides of the COVID-19 pandemic and the company’s decision to reduce exposure in some areas. Edited excerpts:
We’re on the cusp of a decent pickup in economic activity, how does that look for the Engineering Procurement Construction (EPC) business? Have you seen a rise in orders on ground?
Two years ago, we instituted a policy to reduce our exposure to the EPC business; we have only been doing EPC in the transmission and distribution segment, mainly with government utilities.
Basically, because the working capital was stuck, we decided to reduce exposure.
Now, our focus is on the development of retail marketing. As for pickup, we are seeing very good demand for our wires and cables from the construction sector, from infrastructure and real estate. We are also seeing pickup and we hope that our business will be benefited greatly with that.
How much of your business comes from the cables and wires segment? Particularly, the retail segment? Because we’re seeing a huge boom in housing, realty and construction too, how much do you cater to that segment?
Approximately 37% is expected to come from retail. Of our total turnover, about 10-12% will come from EPC, the rest of it comes from the institutional business of wires and cables, which we sell on a B2B basis. So, roughly, 50% of our business will be coming from B2B businesses, whether it is export or institutional, 12% from EPC and around 37% from retail.
How are you handling raw material cost price pressures? Are you able to pass it on to consumers?
We are absolutely able to pass the impact of raw material price increase. First of all, in retail, we always carry inventory and our prices are revised every 15 days as policy. So far, as institutional business is concerned, some of the contracts are on price valuation basis and contracts which are on firm prices we ensure that we have sufficient raw material hedging or in stock for those orders. So we work on our value addition, our EBITDA and net margins so we are not impacted by the pressures of raw material input cost increases.
Where is your current order book and if you could break it down segment wise as well in terms of inflows?
Our present order book is close to 3,000 crore out of which around 1,300 crore is the order from our cable business and around 1,000 crore is pending orders of EPC and the remaining 200 odd crores are from exports. As far as retail is concerned there is no order booking in retail. The order comes and is dispatched within a week or so and we are maintaining stocks across the country, as well as in our factories, so these orders are executed on time.
Would agree with me when I say that your top line right now will increase but that is largely because of raw material prices and the return ratios will remain compressed; is that a fair assessment?
You are right. Our growth is expected to be more than 20%, this financial year, and it’s definitely coming, the top line is coming from the increase in input costs. In volume terms, it is there’s a slight decline, but our margins, our EBITDA have improved compared to last year and we expect that EBITDA will improve further in the coming quarters.
Because of COVID-19, every company has reinvented their cost structure – some by design, some by force and some have changed permanently – what are the cost savings because of COVID-19 you’ve seen?
There are two types of savings one during COVID-19 – one, even with 20% of lesser manpower, we were able to cope up with the similar production and productivity and we were able to improve the productivity.
Secondly, during this period a lot of cost is reduced on travelling and other expenditure like events because of the COVID-19 restrictions so that’s another cost saved. I mean we have not tried to reduce our costs on advertising or our other promotional activities, but the cost is reduced because of no international travelling, very less domestic travelling which we used to do for marketing and seminars.