Sanjiv Goenka, RP-Sanjiv Goenka Group, tells ET Now that their debt equity was down to 0.6:1 for March 18 and it will further go down despite Rs 800 crore capex.
Edited excerpts:
The RP-Sanjiv Goenka Group had a commodity tagged status earlier but has now emerged as a structurally superior manufacturing company, making specialty grades of carbon black. Is the transformation complete and what is the next leg going to look like?
This is something that we started working on two-three years ago when we realised that we have to move away from commodity blanks. This year, as a percentage of sales our non-rubber blacks will be 10%. Last year, it was 5%. Before that, may be it was 1-2%. For March 19. our specialty sales will be 31,000 tonnes. This is compared to about 15,000 tonnes last year and about 7,000 tonnes the previous year.
We are adding more capacity, better technology, more and more products and this is the way to grow. Secondly, the part of the transformation journey has been in terms of improving efficiencies in yields. We have improved efficiencies across every operating parameter in the factories — procurement, logistics, supplies, palletisation and transportation. It appears to be a different company. It was a difficult decision three years ago when we changed the entire management. Every functional head, the CEO, everyone was changed and that change is bearing fruits today.
The company has improved significantly. It is beginning to lead in all operating parameters across the industry. Today at 5,15,000 tonnes, we are the largest carbon black producers in India. We are adding 80,000 tonnes in Mundra and Palej which will be operational in the next nine to 10 months. We are looking at another 1,20,000-1,50,000 tonne capacity in Chennai at a cost of about Rs 500 crore.
The industry report suggests that you are poised to grow carbon black volumes at 9% and revenue in high teens over next couple of years. What are you aiming at?
Whether it is 8% to 10% or 7% to 8% or 9%-10%, growth is robust. We are sold out on capacity and we will continue to sell our full capacity. We will produce and sell. Things look good for us. We expect margin improvements from our shift in product mix, shift from rubber blacks to non-rubber blacks, from commodity blacks to specialty blacks and our addition in capacity.
Our debt equity is already down to 0.6:1 for March 18 and it will further go down despite Rs 800 crore capex. The effort is to reduce debts, reduce interest, and focus more and more on productive investments, on high yielding investments and investments that are going to be more remunerative than the existing ones.
Since crude oil is a key input for your products it is higher price coupled with the rupee depreciation I am guessing would weigh on your blended margins how is it that you see your EBITDA ranging this year even as the share of specialty great carbon black does actually increase?
Our margins have been maintained and if anything, slightly improved in the first couple of months of this year. Crude prices have been at its highest in the recent past. At this level, we do not really anticipate it to impact margins and we have an understanding with the tyre industry that as far as price increases or decreases are concerned, they are taken over by the tyre industry.
We do not get benefit of reduction or the hit of an increase. We have shifted to adjust in time kind of supply so we really do not speculate on booking crude in advance. We just have the anount of crude that we need for production. It is a just-in-time kind of a thing. Whatever we need immediately is what we buy and so there is really no inventory gain or loss on crude.
Let us talk about Saregama. You staged this mega comeback this year by riding on Carvaan, a preloaded retro looking musical device. How has this helped growth?
Saregama has reinvented itself. It has been a very satisfying journey. Our idea was to create a disruption in the delivery model in the product itself because everything about music had become digital and wireless. We hit upon this idea of Carvaan. It has been a runaway success. We were doing 50,000 sets a month. As we go on, we expect to get to close to a lakh sets a month. We can do a lakh today but we are constrained by the production facilities, not the market. The response has been phenomenal.
The other day somebody told me that at the Zurich station, he saw somebody selling Carvaan. Theywere peddling it as Indian music innovation but it is great to know that even individuals are now buying and trading. Obviously, there is a market which is emerging. People are using it as gifts for their parents and grandparents and that is what we had expected. It is travelling not only to urban India which is the beginning, now it is going to rural India, outside the country, to UK and USA. Carvaan has been a great hit. We expect Carvaan volumes to grow significantly in time.
What are your plans to monetise this vast library of songs? How would you take the story forward?
On the digital platforms, we are increasing our viewership. The monetisation that we get from You Tube has gone up twice over the last couple of quarters. Things are improving but yes we have a huge IP. The idea is to capitalise upon that and Carvaan is one such idea. You will see more ideas as we go on. I cannot speak more about them at this stage but you will definitely see more Carvaan like ideas which we have worked on already.
What about the power segment? What are the big trends that you are seeing for the sector and where you would be placed?
I do not really want to speak much about CESC at this point in time because we are not really supposed to be speaking about it. We are in some kind of a silent period. But yes, the power sector looks good. You will see a revival in generation, distribution, privatisation impetus and franchises being awarded in different states. Most of the private franchises have actually done well. The power sector looks definitely much better than the past.
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