Below is the verbatim transcript of the interview. Also watch the accompanying video.
Q: Could you take us through CIMMCO's performance? Will there be a substantial jump in the performance of the consolidated entity, now that you can draw synergies?
A: Yes, absolutely. As far as CIMMCO is concerned, it has performed only for one full quarter as of now. After a period of prolonged closure for almost ten plus years, we declared our first working results for the quarter ended March 2011. In the nine month period, we have done a turnover of Rs 117 crore.
As far as the quarter is concerned, we have done almost Rs 110 crore. Primarily, the entire turnover has come in the Q4 of the current year or Q3 because it is the nine month closing that we have done for the last year.
If we look at that benchmark, CIMMCO should become a substantial contributor to Titagarh’s results going forward. As far as our French subsidiary is concerned, we have restarted the operations of that company which was in rough weathers. We have received some good orders there. The dispatches have started taking place. We have dispatched our first lot of wagon last month from the subsidiary.
Now, the order book has started to build up. We recently signed up some additional orders. We have been able to get an order
Q: In the CIMMCO results, there are a lot of auditor comments with respect to money payable to
A: As far as the comments are concerned, CIMMCO has been a company that was lying close for almost 10-11 years. If we compare CIMMCO's balance sheet to the earlier balance sheets, we have cleaned up a lot of what we considered to be unrecoverable or unreceivable amounts that were standing on the books.
What is residual is what the management believes is recoverable or receivable. We do not envisage that there should be any hit on CIMMCO's books going forward.
If we had considered these to be potential serious liabilities, then we would have like the other liabilities cleaned them up as well. It's only a management expectation or our assumptions that we are hopeful of recovering this entire amount.
Q: Titagarh grew by 26% in FY11 and Cimmco’s sales were about Rs 107 crore. What kind of a run rate can be expected in FY12? Do you think this 26% run rate will be maintained?
A: As far as Titagarh is concerned, we have been able to grow reasonably well in FY11. Our endeavour would be to maintain if not exceed that rate. I would not make any forward looking projections, but that has been our endeavour.
In the past few years except for one year where the general economic scenario was not healthy, we have been able to show at least this much of a growth every year.
As far as CIMMCO is concerned, it would really not be comparable because we have worked only for one-and-a-half quarters in the current year.
The growth in percentage terms would be much larger, but we hope to maintain that kind of run rate that we have demonstrated in the last quarter. We have a good order book available in CIMMCO which will take us through to at least good part of the year.
The next year’s tenders as announced in the budget by the former railway minister should be out anytime. These orders generally are expected to be placed by September-October. I am hopeful of being able to maintain that run rate. The company should be able to do the same results.
Q: As you mentioned the order book seems to be decent, the question then boils down to execution. How many deliveries can be marked in FY12, both from Titagarh and Cimmco?
A: As far as Titagarh is concerned, we did total wagons of about 3,000 wagons in FY11. We have crossed 1,000 wagons in Q4 itself where we did about close 1,100 wagons. Now, we would like to maintain the run rate subject to all the orders being placed on time.
There are a lot of free issue materials that the railway has to give. They are being able to give those on time, but the physical performance has been established in Q4 wherein we have done more than 1,000 wagons.
In CIMMCO for Q4 or Q3 March quarter, we did about 450 wagons which get us to an annualised capacity of close to 1,800 wagons. This was the first working quarter, so we are gradually trying to enhance our capacity there. We hope to exceed the 450 number that we did in the March quarter.
Q: How many wagons is the railway department is expected to tender for? How much of that would be your share?
A: The total number of wagons which were announced by the railway ministry budget was 18,000 wagons. I cannot predict the exact quantity because this is the tendering system which has a certain percentage or large substantial percentage of orders that are placed based on past performance.
Going by past trends, Titagarh has been receiving close to 20% of the wagon orders placed. It was CIMMCO’s first year in operation. About 18-20% was Titagarh and CIMMCO got around 10% of the market share in the first year. Even if we maintain the same percentage, we will reach the desired numbers.
Cimmco Birla Ltd was a Birla Co and something went wrong and went in for a huge accumalated loss.
The Co has come out from BIFR and that is a positive for the Co.
Now let us go through the capacity.
The MD says that Titagarh Wagon has the capacity for 4400 wagons/year and Cimmco has the capacity of 1800 /year.
So Cimmco has almost 50% capacity for producing Wagons in compare to Titagarh Wagon and I think that is an excellent capacity for a Co which was in loss for last decade.
The MD also says that they had cleaned up all the books and all left are receivables, good enough to get them back.
Cimmco has shown an excellent turnaround showing a sales of Rs 110 cr and a profit of 12 cr for the qr ended Mar 2011 giving an eps of 5 for Mar qr.on eq of 20 cr.
Promoters hold over 80% and sales should come to 500 cr for next 1 year.
It may happen that Eq may go up but still I feel that will be taken care of.According to me future looks bright for Cimmco Ltd and the stock is showing strength now and may come down after intial euphoria due to excellent results.
One can accumalate Cimmco now and on dips.