Managing Director Asad Daud said the expected increase in revenue was due to both capacity already commissioned and additional capacity expected to come online in the current quarter.

In July-September 2024 (Q2FY25), the company reported a turnover of ₹94 crore, with a margin of 21.4% and profit after tax of around ₹14 crore.

The company made an inorganic acquisition at the start of the financial year by acquiring Hyd-Air Engineering, a company specializing in fittings.

Discussions are underway with several companies regarding possible strategic investments, although these are in their early stages, Daud said.

This is the verbatim transcript of the interview.

Q: 25% is what you guided for, 16% is what you did. Are you still maintaining that 25% forecast, especially when capacity comes in December?

A: In terms of our forecast, we are therefore looking at growth of 25% for the whole year, particularly in terms of profit margins. And I am sure that we will be able to exceed our growth in terms of profit. In terms of revenue, we are looking at growth of around 20-25%, particularly due to the increased capacity that we have already commissioned and will commission this quarter.

Q: So just to clarify, 20 to 25% is the revenue range that you gave, the revenue growth range, and the profit growth will be greater than 25%, right?

A: Yes, that’s true.

Q: What are the emerging prospects for the working capital cycle? It appears a few pockets have become stretched. So how do you see this playing out?

A: Working capital over the last six months has actually been a little bit strained. This is solely due to the Red Sea crisis. Many shipments have been delayed. Many ships were ignored. This therefore led to an increase in working capital requirements. I assume that over the next few quarters it will remain high, but I hope that from the next financial year we can see some reduction in the working capital cycle.

Q: And do you know that the margins you said of 20 to 25% would correspond to revenue growth, net profit would be 25%. If your revenue grows 20%, you’re obviously building margin expansion, but if your revenue grows 25%, are you likely to see margins of around 20-20.5%, as you did in the first semester. or do you expect it to reach your previous guided band of 24-25% by when?

A: If you see that in the first half of this year, our EBITDA margins increased by almost 100 basis points and we are looking at 24-25% EBITDA margins over the next three to four years . On an average annual basis, if you see, that’s going to be about a 100 basis point increase in margins every year. Obviously, with the increase in turnover plus with regard to the new capacity and the new products that we have lined up, I am confident that we will be able to achieve our profit margin targets.

Q: Regarding inorganic opportunities, you briefly mentioned that you were on the lookout. All we should be hearing about over the next quarter, the second half of this fiscal year, is point number one. And in your export mix, are you seeing demand pressures? Because the world is said to be slowing down, even though various geographies are still doing very, very well.

A: So, in terms of inorganic acquisitions, we have already made one at the start of this financial year. We acquired a company called Hyd-Air Engineering, which specializes in the fittings business. We are also in talks with a few companies for possible strategic investments. Obviously, we’re at an extremely early stage so we won’t be able to comment until something materializes.

On the demand side, yes, some regions of the world are slowing down, notably in Europe, but over the last two to three years we have been aggressively focusing on the Middle East as well as the US market. So you see that now almost 57% of our total exports go to the Americas region. Europe is down, but the US region is doing pretty well.

The company, which has a market capitalization of ₹2,475 crore, has seen its shares rise 18% over the last year.

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