DSIJ Interview with,Amit Sudhakar CFO, Kisan Moulding
CFO, Kisan Moulding
"A healthier and leaner balance sheet ranks high on management's agenda"
Recently your company has raised around Rs.59 crore. Can you tell us how you will be deploying these funds? Also, do you think your company would be in need for additional funds?
We raised ~ Rs.59 crore via a preferential allotment of 5 million shares last year. These funds were raised to meet our working capital requirements and selling and administration expenses. We have sufficient capacities to meet incremental demand envisaged over the next couple of years and hence we don't expect to raise any funds for capex purposes.
However, based on our expectations, growing sales would necessitate increasing working capital requirements, at the least. We have been constantly working towards improving our balance sheet and achieving a profitable growth. This implies that some of the incremental working capital needs would/could be met by some easing up of debtors on our books.
Do you have any other plan to raise funds other than fresh equity infusion? As a part of our corporate restructuring exercise initiated two years back, we had identified some non-core assets which we had planned to monetize. While we have sold some such assets in the previous financial year, we plan to dispose off some more assets in the current year. At this moment, we don't intend diluting equity anymore.
Can you throw some light on your strategy to revive your company's bottomline performance?
1. While we always had a reasonable strong brand and good products, aggressive capacity expansion during the economic downturn weighed upon our performance. Over the last couple of years, the management has drawn up strategic turnaround plans and successfully implemented several of them, as listed below:
2. We have streamlined our business by changing our product mix to focus on high margin products.
3. High margin, niche products (solvents, fittings, etc) were identified and seasoned professionals were inducted in the organisation with the sole focus on growing those segments. 4. We increased the number of SKUs and currently are amongst the largest, in terms of SKUs (+2800 SKUs) domestically.
5. We have addressed areas like working capital, which needed immediate attention by raising funds via equity dilution
6. Non-core assets were identified and some (worth ~Rs.14 cr.) have been already disposed off in the previous financial year with more in the sale pipeline in the current year.
7. We successfully automated our mother plant at Tarapur to improve productivity and quality, while reducing our labour costs.
How do you plan to encash opportunities arising from various government initiatives such as doubling the farmer's income and push for affordable housing for all by 2022?
The 'Kisan' brand enjoys a strong recall with its target audience in agri pipes segment. That said, we have undertaken several activities to improve our market share in the non-agri pipes and fittings business. While our regular distributor/ dealer meets help us stay updated with customer demands, our internal R&D team work towards bettering our customer experience by developing products accordingly. For instance, we have recently developed self-locking column pipes (patent pending), which could prove to be a game changer in the agri pipes segment. Roping Amitabh Bachchan as our brand ambassador would help drastically improve our brand recall in all the segments and act as a catalyst in widening our customer connect. We also hope to increase our distributor/dealer network (currently 500+ distributors and 30,000+ dealers pan-India).
You have reduced your debt recently. Can you tell us what proportion of debt you are targeting in your overall capital structure in the coming fiscals?
Reduction of debt was one of the strategic calls taken by the management. Accordingly, our term loan repayments have started from beginning of 2017, with a reduction of Rs.20 crore every year. While it is relatively early to put a finger on the exact debt number or gearing ratio that the company would be comfortable with going forward, a healthier and leaner balance sheet ranks high on the management's agenda.