Travel and marriages are the two key factors that impact VIP sales; and 2014 looks promising owing to a high number of marriage mahurats, says company chairman Dilip Piramal.
Speaking to CNBC-TV18's Sonia Shenoy and Latha Venkatesh, Piramal says about 40 percent of the company's profits are generated in the first quarter of the year due to more number of travel tours and marriages. He expects revenue growth at 12-15 percent this fiscal.
Also read: Contained costs in Q3; focus now on existing brands: VIP
On the possibility of a price hike, he adds that the company hikes product prices once a year, depending on the input costs. "As of now, things look steady," says Piramal.
Below is the edited transcript of the interview.
Sonia: Last time we spoke with you it was during your earnings and it was a very good set of numbers that the company had reported. Big beat on the margins as well because of the declining raw material cost. However, going forward can you just give us some triggers for the business both in terms of volume growth as well as in terms of margin growth that you foresee?
A: The two main drivers of our business are marriages and travel because we make luggages. In India, marriages are very large opportunities for products like ours. Marriages are ruled by auspicious dates, etc. Last year the season wasn't so great but this year, there are a lot of mahurats right up to June. So, April to June is the main season for marriages as well as for travel and hence our first quarters always are very strong quarters; the strongest quarter of the entire year.
This first quarter of calendar year 2014 is also very good so we see a very good run this year as well as in the whole of 2014-2015 because that sets a trend. If the first quarter is good, we make nearly as much as 40 percent of our profits in the first quarter. So, the outlook looks quite good. Travel is not as buoyant as the marriage season this year but travel should be good.
Latha: Would you say that you will maintain a 15 percent run rate in terms of revenue growth for the year, would it be 20 percent and how would EBITDA grow because last year or even last quarter the EBITDA growth was fairly sterling probably because of lower raw material costs. So, what kind of an EBITDA number can one look at for FY14 and FY15 more importantly?
A: We are keeping our fingers crossed because FY14 is nearly over now. However, for FY15 if we are able to maintain the figures that we did in the last quarter, we will be quite happy. I don't think we will be able to do 15 percent. That will be very good but I think about more like 12-13 percent is likely.
Our EBITDA and our net profit is virtually the same. The profit before tax and EBITDA is nearly the same because we hardly have any interest and our depreciation is also not all that high.
Latha: Would you say that you will maintain a 15 percent run rate in terms of revenue growth for the year, would it be 20 percent and how would EBITDA grow because last year or even last quarter the EBITDA growth was fairly sterling probably because of lower raw material costs. So, what kind of an EBITDA number can one look at for FY14 and FY15 more importantly?
A: We are keeping our fingers crossed because FY14 is nearly over now. However, for FY15, if we are able to maintain the figures that we did in the last quarter, we will be quite happy. I don't think we will be able to do 15 percent. That will be very good but I think about more like 12-13 percent is likely.
Our EBITDA and our net profit is virtually the same. The profit before tax and EBITDA is nearly the same because we hardly have any interest and our depreciation is also not all that high.
Latha: Will you maintain these 8 percent margins?
A: I think we should maintain that.
Latha: Are you noticing any kind of demand resistance for your higher costing products?
A: Surprisingly, it is not so. In the last quarter, we have had very good sales in all are categories; both in the higher as well as in the economy sections. I think that is because we have been bringing out very good products.
We have also been making efforts to see that the areas where we were traditionally not very strong like backpacks and all we are making efforts to bring out new products and new distribution also there. So, that should give us good sales growth. That has already contributed to our sales growth in the last two to three months.
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