Force Motors ' promoters- the Firodias- now hold 60 percent of the company, says chairman and managing director Abhay Firodia. The promoters bought 9 percent stake fom Bajaj Holdings, that just recently exited the joint venture.
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Speaking to CNBC-TV18, Firodia says he expects the company's light commercial vehicles and tractors to see a strong growth in the current year.
The company has a capex plan of Rs 200 crore this year, which Firodia adds will be raised internally.
Below is the edited transcript of Abhay Firodia's interview with Latha Venkatesh and Sonia Shenoy of CNBC-TV18.
Sonia: What will be the next growth driver for Force Motors because in this quarter gone by as well your numbers look quite good, your profits grew 35 percent, your margins have improved so in the next leg what will drive the earnings higher?
A: I think the economy seems to be picking up. We operate in the utility vehicle segment which caters to the rural demand and to the working vehicle requirement like the vans, ambulances, rural taxis and so on. This market could be significantly improved over the next few years. So, I don't see any sudden jump happening over the next 12 months. However, it augurs well for the rural economy of India and from that we should benefit.
Sonia: Can you give us a breakup of how much Force Motors earns from the utility vehicle segment, how much comes from auto ancillaries and how much comes from other avenues like tractors, etc?
A: I think tractors is a small part, at the moment it is roughly about 15 percent of our turnover. Basically it is all automotive where we are making working vehicles. There is some business coming out of sale of engines.
Sonia: In terms of a turnover you closed the last year with revenue of around Rs 2000 crore. How much do you think Force Motors could grow its revenues by say in the next couple of years?
A: It all depends on how the market behaves. We have seen a flat topline. Some of the segments in which we have earlier been strong declined like the small commercial vehicles. I would not hazard a guess as to what the topline will be but I believe we are on a good wicket and our light commercial vehicle business and our tractor business should grow nicely.
Sonia: Since you are expecting the demand to improve specifically in the rural areas is there any investment that the company has lined up and how much would that be? Will you be looking to raise any funds from the market itself?
A: At the moment no. We will be able to fund our growth requirements and our product development requirements from internal generations. For instance this year capex is expected to be in excess of around Rs 200 crore and over a three year horizon up to about a Rs 1000 crore but I think we should be able to raise this from internal sources. So, we are not looking to borrow or to raise money from the capital market.
Sonia: How much of this money that you will invest in capex, how much of it will be used to put in to your engine facility in Tamil Nadu and what will the contribution be of the engine business to the overall revenues once you start supplying engines to many of these global passenger vehicle makers?
A: We are already supplying to one and the other facility coming up in Chennai. The investment to begin with is not very large but it will grow over time. Unfortunately I am not at liberty to disclose the capacities that will be created because it is confidential information so far as the car manufacturer for whom this facility is being setup is concerned. Suffice it to say that we will be able to meet their full requirement of engines out of the Chennai facility. As they grow our facilities will also grow.
Sonia: If you could tell us, the Bajaj Group has completely exited their stake in Force Motors, when that took place, did the current management, did the Firodia's buy any stake from them?
A: Yes part of it we bought and part we offloaded in the market.
Sonia: So how much have you bought?
A: I think around 9 percent.
Sonia: What does this take the total promoter holding to at this point?
A: Close to 60 percent.
Sonia: Will you be looking to raise stake further? You have been aggressively hiking stake, you have raised your stake twice in the last six months, anymore promoter infusion?
A: At the moment no plans.
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