36% of revenue coming from non-south areas at present. We are selling in about six categories nationally,
Mithun Chittilappilly, MD, V Guard Industries, tells ET Now.
You have widened your geographical presence. How much is coming from non-south and how much will grow over the year?
Today, about 35-36% of our revenues are coming from non-south areas. This figure is growing very fast every year. It was about 15% to 20% about five-six years back. In about next three to four years’ time, we are looking to hit about 50% from the current 35-36%.
You have also managed to bolster the non-south distributor strength by about four times over FY12 to FY17. What is the plan now?
In non-south areas, we started with one or two categories. Today we are selling about six categories nationally and we are also introducing products like switchgears nationally which is not a very large category today but is growing very fast.
As we go forward, we will see more and more introduction of our entire portfolio of products of 12 to 13 categories and that is the work that we have left to do in the next four to five years.
Margins are vulnerable to volatility in commodity prices. How do you see the volatility and currency impacting your margins?
We had a very adverse environment in the last quarter as far as commodity and currency is concerned. As most of the commodities are also priced in dollars, that will have an inflationary effect and thereby some impact on margins. But the good news is it was a temporary blip. So, there could be some temporary impact on margins. But definitely in Q4, the margins will look a lot better because the commodity prices and currency have strengthened from the lows of 74-75 to 70. Both these will have positive impact. For the full year, we are not expecting any huge issues.
Can we see expect improved operating profitability and low capex drive going forward?
Our capex is not very high. We have spent about Rs 45-50 crore annually on capex. It is not a huge number as far as capex is concerned and considering our cash flows. As far as margins are concerned, we have a plan to improve margins but currently we are still in an investment phase. So we are still expanding in non-south. We are adding people. We are adding distributors. We are adding offices, warehouses, etc, etc. So definitely still costs are high. I think once we hit that 50-50 number I talked about earlier, definitely we will start to see a lot more operating leverage kicking in and we should start making margins closer to our peers.