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GST may be implemented in Feb Budget
May, 27th 2014

In an exclusive interview to CNBC-TV18, Abhishek Somany, Joint MD, Somany Ceramics sounded very hopeful of things getting better with the onset of new government.

He is hopeful of Goods and Services Tax (GST) being implemented in the next that is February Budget if not the July Budget. GST, would give the organised sector a huge boost, said Somany.

He said the company has aggressive plans with an eye on 20 percent plus revenue growth in FY15. The company has a planned a capex of Rs 40-50 crore, which will be funded by debt and internal accruals, he added. Overall, the company is looking at 10 million sq meters of expansion.

Also read: Circumstances to force govt to take rational steps: Shourie

Below is the transcript of Abhishek Somany’s interview to CNBC-TV18’s Sumaira Abidi and Reema Tendulkar

Reema: With respect to the Q4 earnings could you tell us how much of it is on account with spillover because of the Morbi shutdown and if we exclude it what would have been the sustainable growth rate in your revenue?

A: There was no spillover in the Q4. In fact the Morbi shutdown in December - that hangover still persists and the growth was purely a Q4 growth. Had it not been for the Morbi, our revenues year-to-date would have been about Rs 40-50 crore higher. So, what you are seeing in Q4 is what it was and the earnings are also backed in terms of percentage; our profit before tax (PBT) is back to 4.5 percent.

So, we have really covered a lot of ground on Q4 in terms of profitability what we had lost out in Q2 and Q3 purely because of the gas price increase and also the unprecedented dollar appreciation.

Sumaira: Can you also take us through what the volume growth and pricing has been like this quarter?

A: The last quarter we saw a little bit of price increase because the Morbi region had moved from coal-gas production to natural gas production. So, we did see about 3-5 percent increase in prices.

In terms of volumes, because of the one month outage we could not get any extra volume from that region and about 55 percent of our revenues come from that joint venture and outsource manufacturing from Morbi. Therefore, we lost out on the volume growth. Year-to-date we have grown by approximately 13 percent by volume.

Reema: What's the outlook looking for FY15 and when will the revenues from Morbi unit start accruing in to the profit and loss (P&L)?

A: The Morbi unit’s problem has been sorted out. It was just that whole one month shortage specifically on a quarter-end which was December had a major cascading effect in the last quarter. Last quarter, anyways was one of our heaviest quarters. March being one of the heaviest months for the last 15 years therefore there was the problem; otherwise those issues have weeded out.

We have put in a lot of capacity in the last quarter and we are also putting in capacity this quarter which is Q1. Therefore, from Morbi we expect a reasonable amount of volume coming in for the quarter.

For FY15 our plans are extremely aggressive and we are looking at a 20 plus percent growth going forward for FY15, and with the new government coming in it is only going to get better. But, the 20 percent FY15 growth is going to remain intact. So, obviously the bottomline would be significantly higher than the 20 percent growth in terms of percentage. So, we are very confident and looking forward for 2015.

Sumaira: Also would you be looking forward to the implementation of the goods and services tax (GST) their hope building that you could see it implemented soon. What are your expectations?

A: I don’t think I would want to comment on the expectations; we have been waiting for it for the last three-four years but we do hope that if not this particular budget in July it should be implemented in next 6-8 months in the February budget so we are really looking forward and that would be a huge booster not only to our industry but to the entire Indian industry, more so for the Ceramic sector because we are competing with the unorganiSed sector which the business models of those players are on tax evasion, with the GST coming in our gap between that would reduce and give the organiSed sector a huge boost.

Reema: The board has also approved various expansion plans. The expansion of the ceramic floor tiles capacity at Kadi, expansion at Aroma Tiles Private Ltd, you are also planning to acquire up to 26 percent equity in Sonic Sanitarywear. Could you tell us overall what's the amount of Capex that you have lined up in FY15 and how will it be funded?

A: The Capex has been lined up which is approximately between Rs 40-50 crore. It will be funded by debt and also internal accruals that is going to be the source of fund.

We are expanding Amora by 2.5 million and Vicon by another 2.5 million and Acer by 3 million and our own manufacturing Brownfield expansion of 2.5 million. All in all we are looking at 10 million sq. meters of expansion and we are in talks with another joint venture partner for putting in another 2.5-5 million sq. meters which the board has just approved.

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