1.6 million Passenger Vehicles were sold in the Domestic market: Abhishek Jain
PPAP Automotive Limited (PPAP) is a leading manufacturer of Automotive Sealing Systems, Interior and Exterior Automotive parts in India. It’s core competence is in Polymer Extrusion based Automotive Sealing System and Injection Molded products. The company manufactures over 500 different products and continuously targets to achieve zero ppm in Quality and Delivery performance for all its customers.
Replying to Yash Ved, Abhishek Jain, CEO & MD at PPAP Automotive Limited informed “The industry produced 1.96 million cars which is an increase of 5.2% y-o-y.”
NB: What is your outlook for the auto sector?
Abhishek Jain: We are quite bullish on the growth of the Auto sector both in the near term as well as on a longer term perspective. India is poised to become the fifth largest passenger vehicle market in the short-term and achieve a status of being the third largest market in the long-term.
The demand for automobiles is rising due to cheaper cost of ownership as well as development of infrastructure. The rise in the per capital income coupled with the increase in disposable income will catapult the demand of the industry. The industry is continuously focusing on giving a higher value added product to the customers. This focus will also drive up the demand as the users can get better value for the money.
NB: What are your plans for the road ahead?
Abhishek Jain: We want to continue to focus on our existing core competence which is Extrusion and Injection process and build higher value added products on these platforms. We are developing our Product Design and R&D capabilities so that we can deliver a one stop integrated solution to our customers.
In order to be more attractive to the customer, we intend to establish our manufacturing bases closer to their operations. We are setting up 2 green-field manufacturing facilities in the western and southern zone of the country. With the setting up of these two plants, the company shall have its footprint across all the key automotive hubs in the country. We are also expanding our Pathredi plant to meet the growing requirements of our customers.
We will continue to focus on opportunities which give us profitable growth and continue to add new customers and new products in our portfolio.
NB: Brief us about your collaboration with Tokai Kogyo Co. Ltd? Are you looking for other JVs?
Abhishek Jain: The relationship with Tokai Kogyo started in 1989, more than 25 years ago. The intent of this partnership was to deliver sealing products to Maruti, which was getting established in India.
Since then, we have been able to add all Japanese OEM’s, who have set up their plants in India, as our esteemed customers. After establishing the leadership position with the Japanese OEM’s, now we are focusing on establishing the same position with the other OEM’s. Primarily, all our activities are focused on meeting the current and anticipated demands of the customer.
In 2007, we signed another Japanese company, Nissen Chemitec, as our technology partner for the injection molded products. This relationship helped us to grow our leadership position in interior products for Honda.
In 2012, we established a new company called PPAP Tokai India Rubber Private Limited (PTI) for manufacturing rubber sealing systems. This company was established along with Tokai as an equal partnership. We are focusing on what the customer desires for us. We are open to make new relationships as long as the customer sees potential value in these partnerships.
NB: Brief us about your financials?
Abhishek Jain: The company is making its roots financially strong with healthy and sustainable EBITDA margins (FY17 EBITDA Margin of 18.8%) at operating level with a healthy DE Ratio of 0.14 as on September 30, 2017. Our 3 year Revenue CAGR is 12% and the PAT CAGR is 30%.
In the first half of the current year, the total income (net of excise duty) stood at INR 179.55 crore compared to INR 162.36 crore in the same period last year. EBITDA stood at INR 36.71 crore compared to INR 27.73 crore last year, which is an increase of 32.4%. The net profit increased by 65% and was at INR 15.14 crore. The EPS for the first half stood at INR 10.81.
Considering the sustainability of the performance, the board of directors have declared an interim dividend of 20% that is INR 2 per share. The long term credit rating has been upgraded by Crisil to A+/Stable.
NB: What is your growth target for FY18?
Abhishek Jain: The domestic PV segment has seen a 9.2% y-o-y sales growth in the H1FY18. A total of 1.6 million Passenger Vehicles were sold in the Domestic market and 0.36 million were exported. The industry produced 1.96 million cars which is an increase of 5.2% y-o-y according to ACMA figures.
PPAP during the same period has grown by 10.6% with the total income net of excise duty at INR 179.55 crore in 1H-FY18, compared to INR 162.36 crore in the same period last year.
In the current year, the Passenger Vehicle production is expected to grow by 7-9%. We are confident that our growth will be higher than the growth of the industry.
NB: Comment on your capex plans?
Abhishek Jain: We are setting up two Greenfield plants at Chennai and Gujarat respectively and undertaking a brownfield expansion at Pathredi at the aggregate cost of INR 35 crore. The total capex for this year shall range around INR 45 crore. All these plants will be ready by the end of this financial year. With the setting up of these plants, we shall have a presence in all the key automotive hubs of the country.
With our focus towards improving the asset turnover ratio, we are sweating our existing infrastructure in a much more planned and dedicated way. Our capex requirements will be significantly reduced in the next couple of years as these plants will be adequate to meet the growing requirements of our expanding list of customers.
NB: What is your capacity utilisation?
Abhishek Jain: The capacity utilization for the first half stood at 80% on a company level.