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Ashok Kumar, director of KEW Industries informs that the company currently has Rs 8 crore (Rs 80 million) export orders in hand.
He further adds that the company has been exporting to Italy, France, Germany. Ashok Kumar sees the company's FY07 net sales at Rs 55 crore (Rs 550 million) and profits over Rs 4 crore (Rs 40 million).
Excerpts of CNBC-TV18's exclusive interview with Ashok Kumar:
You are into defence supplies and auto component manufacturing, can you give us a break-up of the two businesses?
Our company is based in Jalandhar and has been listed on the Bombay Stock Exchange for the first time. We have been careful and cautious. This is a conservative policy that we have followed even in pricing the issue.
Four companies list on bourses
We are suppliers of complete assemblies and various components to the two auto giants - Tata Motors and Ashok Leyland in the heavy commercial vehicle sector and multi-utility vehicle sector. Besides that, we also supply to railways, defence and to the rail coach factory at Kapurthala. Nearly 70 per cent of our sales are for Ashok Leyland and Tata Motors.
You also have an export order, where do you export?
Yes, we have been able to export to international giants in Italy, France and Germany. This year, we have orders of about Rs 8 crore in hand and in the fiscal 2006-2007, we hope to achieve even more.
Terex Vectra is an international company with $4 billion capital outlay. They have set up a plant in Greater Noida. It is a joint venture. Our supplies to them, as of now, are nearly 25-30 per cent. In about a year time, it will increase to nearly four times.
With this Rs 8 crore order book, what is it that you hope to do in terms of sales and profits by the end of FY07?
Until September 14, sales were over Rs 22 crore (Rs 220 million). For the remaining period, more particularly from the defence and railways, the orders will come in Q3 and Q4. We are hopeful that sales should be around Rs 55 crore (Rs 550 billion). If everything goes fine then our PAT should be over Rs 4 crore (Rs 40 million) by the end of 2006-2007.
What is the nature of the components that you make for Ashok Leyland and Tata Motors? What is the advantage that you hold there?
We supply hubs, drums, assemblies and shackles to Ashok Leyland and Tata Motors. As a matter of fact, we have been with them for a very long period. Earlier, we used to supply individual components.
Recently, we have started supplying complete assemblies, which weigh nearly 75-80 kg. Ashok Leyland has branded us and given us the status of a tier-I supplier. By tier-I supplier, I mean that the assemblies, which are prepared and dispatched from our end and are directly fitted into their vehicles without any inspection or testing. So we have advantages: one is the value addition, which is higher by 4-5 per cent. We would certainly improve the bottomline.
At this point, what is the revenue spilt between auto components and the supplies that you have for the defence side, and do you see that balance changing?
Nearly 70 per cent of our present sales are for Ashok Leyland and Tata Motors. The remaining is towards the rail, defence and rail coach factory. In this year, the shift would be more for exports, where we would get better value addition.
With the envisaged expansion, we will maintain our supplies at higher levels to Tata Motors and Ashok Leyland, thereby improving our margins and contributing more towards sales.
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