Tata Chemicals posted a steady set of earnings in the fourth quarter boosted by its inorganic chemicals business. The year-on-year revenues were only slightly up 1.70% at Rs 2,555 crore against Rs 2,511.5 crore.
Earning Before Interest Tax Depreciation and Amortisation (EBITDA) was up 8.20%, while operating margins came in at 20% against 18.80%. Profit after tax (PAT) was also up 23% at Rs 356 crore against Rs 288 crore.
Tata Chemicals chief executive R Mukundan, in an interview, said the company set a target of Rs 5,000 crore in revenue from consumer business in three to four years.
Watch: Eyeing Rs 5,000 crore revenue from consumer business in 3-4 years, says Tata Chemicals Edited Excerpts: Q: What is the primary reason for the slowdown in revenue? A: Fundamentally you would have noticed that we have been restructuring our business or reshaping the shape of business, we have completely exited fertilisers, that has also meant that some level of erosion of the numbers which we have had. In addition to that, our focus has shifted in terms of the consumer product business to look at mostly the modern trade. Especially for the new product launch we do find that keeping it tight and keeping it narrow in the initial phase is a much better strategy. So there was a shift in the way we worked on that. The sharpest impact has come from pulses, where we had a complete change of strategy to having a long supply chain to a very short supply chain and I think that has played very positively in terms of margin, but has certainly impacted a bit of revenue growth numbers. However, we are now tracking much healthier numbers in terms of revenue growth and you should see that positively playing out going forward. Q: In terms of margins, your margins have come in at about 20% this time around, and when we had last spoke, you had said that the comfortable range you would like would be anywhere between 16 and 18%. Do you think you would like to maintain the 20% growth band in terms of margins going forward? A: In terms of margins, a lot of it depends on the market conditions. So, I really think market conditions have been very favourable to us. So I would credit part of that to the margin. However, I would say that if you add the level of margin which we are earning from a business plus the investment we are putting in in terms of building businesses, in terms of building brand, I would still stick by the 18% number. However, now having tested 20%, we will try to test 20%, but really it is a function of the market conditions. So I would say for the last at least six to seven months, the market conditions have been extremely favourable. Q: In terms of your North America and your Europe operations, you have said that Europe has stabilised as well, but going forward in FY19, how do you expect the business to shape up? A: Europe is actually running a very good business. In my view, they have done a very good job. My comments were mostly around the unfortunate operational incidents they have had which basically impacted their turbine operation. They could have earned some extra money through sale of electricity to the consumers which is an additional income they usually earn, and that was impacted. The main product sales were not impacted. So I reckon even going forward the product sales will be strong. If you look at the businesses, we have got two businesses there, one is soda ash and the other one is salt business. Salt has been absolutely rock steady. There has been no shift in that. I think that business would continue to hold well. It is the soda ash business, while the product business has done well, what usually would happen as an additional income coming out of power sales, was impacted slightly because of some disturbances in the turbine which have been fixed as of now. Q: I also wanted to talk to you about PAT. There is an exceptional item as far as PAT is concerned. Do you think this kind of momentum would continue, would we see some sort of dip now going forward? A: In terms of the one-time income that will not be there next year, so, I think we need to factor that. So if you look at the PAT numbers, 888 is the number which came out of the one-time sale of the fertiliser business. That would not repeat itself, but on its own, I think we will maintain the momentum in terms of the profit numbers. Rest of the company would maintain that. Q: Before I come to the consumer business, I want to talk to you about the monsoon. There is an expectation of a normal monsoon this time around and you have a significant presence in Rallis India as well that would perhaps be directly impacted. What is the kind of expectation out there? A: Firstly, as far as Rallis is concerned, we have fairly de-risked the business model. At least if the monsoon is even slightly below average, it is not going to impact the business. There has been a large amount of de-risking which has happened. However, as far as the monsoon concerned, the news is good. My team report from Colombo is very positive, I have got one other the team members call from Colombo today morning to say it is raining heavily there and he sees this as the onset of monsoon. So it should be hitting Kerala any moment. Q: Talking about the consumer business, that is a business you all have been focusing on, it has crossed Rs 2,000 crore in revenue and when can expect the Rs 5,000 crore mark? A: We clearly have targeted Rs 5,000 crore mark in anywhere better three to four years. We are working towards it, it may come a year sooner or a year later, but it is around that time-frame. Q: What new categories would you enter into? A: Right now we are focused on the two platforms which we have, which is the pulses platform. That itself is a huge variety. If you look at it, we started with the basic pulses, we have now launched organic pulses, in addition that we launched besan, and from besan we went to khichdi which is pulse and rice put together in a format you can readily eat. We have launched chilla mixes, very soon we will be coming out with other mixes which we have pulses in them like dhokla, idli, and dosa. So it is going to be a range of products which are going to come out. So, pulses is big business in India and I think we are not yet finished on growing the pulses category. In terms of spice, again, I think we are just beginning to penetrate the reach. So, we will build that business. We have couple of categories lined up, but the opportunity in these two is fairly large and we will continue to focus on this. Q: How do you think the cluster approach of the Tata Sons will work in terms of integrating this business with the other businesses as far as the Tata Group is concerned? A: We are already working very closely. For example, if you look at the launch of the khichdi or chilla mix or the new nutri-mixes which we have launched in the market, they were done in online stores, both Tata as well as Amazon, but on the offline, which is physical retail, it was first launched in Star Bazaar. So we have a clear arrangement internally that we will work very closely together starting from product development, engaging, finding out what is the best channel to reach the customer and also engaging with the customer. So, this approach of learning from each other and working together is really building up very strongly. Q: Talk to us about the debt, how has it moved? We have seen a significant debt reduction as well coming in. A: In terms of debt, I think the standalone is already positive cash. This is a very good news for the company. We had said we will be positive cash by the end of the year. The consolidated net debt is about Rs 1,800 crore. I see that also rolling down fairly fast. So, we should be debt free in both aspects fairly quickly. Q: Will FY19 be better than FY18? A: We always hope so.