mgmt interview-19 jan..for ur reference..

n an interview with CNBC-TV18, Nrupender Rao, Chairman of Pennar Industries Limited, spoke about his outlook for the company.

Here is a verbatim transcript of an exclusive interview with Nrupender Rao on CNBC-TV18. Also watch the accompanying video.

Q: Your revenues were up 30%. Could you just break up where the volume growth came in from?

A; Our volumes came in from the auto, railway and the engineering sector. We were cold roll steel company some time back. We have transformed into an engineering company with supplies to the engineering, heavy engineering and the infrastructure sector. Lately, we have also moved into the construction sector with a subsidiary called Pennar Engineered Building Systems which will make pre-engineered steel buildings.

Q: What kind of components do you supply to the auto companies and who are your key clients there?

A: We supply steel profiles and various steel based components to companies likeTata Motors, Ashok Leyland, Eicher and TVS Motors. All the major auto companies are our customers. On the railways we supply to the integral coach factory at Perambur and the rail wagon factories in the Kolkata area. Hence, we have moved quite a bit aggressively into supplying coach components and the stainless steel profiles for the railways for both wagons and coaches.

We are also in road safety. We make crash barriers for the highways. We are also in the pollution control sector by making dust collectors which are electro static precipitators to companies like Thermax, L&T and ABB who are the major manufacturers of this pollution control environment for cement and other mineral plants.

Q: What is your order book is today? Break it up between the auto sector and railways segment.

A: All these customers that I talked about are continuous. We keep on getting continuous orders for example Tata Motors and Ashok Leyland have been customers of ours for a long-long time. We clocked Rs 210 crore sales in the last quarter. In the next quarter January to March, we expect to better it and probably end up with something like Rs 230 crore sales, which would if broken up largely about one-third in the engineering sector, one-third in the heavy engineering and one-third will go into infrastructure and construction sectors.

Q: If you do Rs 230 crore in the current quarter of Jan-March, by the time you get into FY11 would you have run rate of around Rs 250 crore a quarter which will get you Rs 1000 crore annual sales?

A: We presented in the last balance sheet itself that our aim is to get Rs 1000 crore mark in the year 2010-11 and Rs 230 crore next quarter. We definitely are very confident of achieving a run rate of Rs 250 crore per quarter to make it Rs 1000 crore plus in the coming year, which is 2010-11.

In addition our subsidiary company, Pennar Engineered Building Systems has been commissioned and they are already carrying an order load of Rs 50 crore. In FY11 we expect to have a turnover of at least Rs 150 crore. So Rs 1000 crore on the main company and Rs 150 crore on the subsidiary is what we are planning for next year.

Q: You had margins of about 14% plus, do you think you can hold on to these kind of operating margins given how metal prices are moving?

A: We have been steadily increasing our EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) margins. It used to be about 11% a few years back and we have slowly moved up to 14%. Our efforts have been to add more and more value added products, more on engineering content, more of knowledge content, more of design content that is going in. So we expect that to definitely retain the margins and definitely slightly better it next year.

As far as the steel price is concerned, we being in the secondary sector, we buy hot roll steel, cold roll steel and process them to make various engineered products. It’s really a pass through, so really speaking the steel prices per se don’t affect us, our performance.

Q: So you are saying next year, if you do Rs 1000 crore of sales you will be able to report Rs 140-150 crore of EBITDA?

A: Yes, we definitely are in that region.

Pennar Ind.....Showing  strength......Trading at 35.6 even in market weakness

 Dividend  is not received yet.

I have taken initial exposure in this , as I am very positive on companies serving railways(and metro) and Auto sectors.Also PEBS is interesting (where Everest industries also entered).I am bit concerned about the management( because of pennar patterson liquidation).If anybody have more info on management please put in the forum.Thanks.




Edited by analyst_i - 03/Mar/2010 at 6:46pm