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Astral CFO sees average 15% revenue growth in next 3-5 years

Informist, Friday, Oct 21, 2022

 

–Astral CFO: Hope to see average 15% revenue growth over next 3-5 years

–Water-tank, faucetware sales to power growth in revenue

–To have 100 faucetware showrooms by Dec, 400 in 2023

–Co has around 5 bln rupees in cash reserve

–Call on share buyback, dividend only after 2 quarters

 

By Sunil Raghu

 

AHMEDABAD – Plastic pipe maker Astral Ltd expects a 15% annual growth in revenue for the next three-five years on the back of new business ventures and a likely rise in demand for construction-related items, Chief Financial Officer Hiranand Savlani told Informist.

 

The city-based company’s revenue had risen 37% in the year ended March on the back of pent-up demand during the COVID-19 pandemic. Savlani said it will be a tough ask to maintain the same growth rate considering the high base and costs.

 

However, further easing in input costs could bring an upside. “If the cost of construction materials, such as cement or steel, falls by 10-15% more, the Indian real estate business would see a boom for the coming five years at least.”

 

The company has benefited from the recent correction in commodity prices and logistics costs, following the spike seen during the pandemic. The fall in raw material prices has nearly halved the company’s costs on some inputs, helping stabilise its margins that had taken a knock.

 

Astral divides its business into two verticals, with plumbing and paints being the first and adhesives the second. Plumbing includes pipes, fittings, water-tanks, faucets, sanitaryware, and paints. 

 

The plumbing business is the mainstay for Astral group, and it accounts for nearly three-fourth of its revenue, with the adhesives business contributing the remaining one-fourth.

 

Savlani said he expects the water-tank as well as faucets and sanitaryware segments to emerge as key drivers of sales growth.

 

He said revenue from the water-tank segment is likely to grow multi-fold. Astral had invested nearly 1 bln rupees so far in the business that was born after the 2020 acquisition of a company, which generated 470 mln rupees in sales in 2021-22. This year, the company hopes to double the number.

 

“In the first six months of the current fiscal, we have almost reached our annual revenue from the tanks business last year,” he said.

 

For its adhesives, faucets and sanitaryware business, Astral is working on having no less than 100 showrooms by December, and total 500 by the end of 2023. So far, it has only one, which earned it a revenue of about 100 mln rupees a month.

 

“We hope to earn anywhere between 100,000 rupees and 10 mln rupees per month from each showroom, depending on the location,” Savlani said. “It is a huge opportunity, and you would begin to see a sudden spike in our earnings once our showroom network is on ground.”

 

On the paints business, in which the company is a recent entrant, Savlani said Astral targets no more than 1% of the little over 600-bln-rupee market. This objective, he said, will also keep the company out of the fierce competition between the top four paint makers of the country.

 

In April, Astral had acquired a majority stake in Gem Paints for about 1.94 bln rupees.

 

Gem Paints has 28 brands and is in the business of decorative and industrial paints, along with varnish, coatings, and home decor products. The company posted 2.15-bln-rupee revenue in the year ended March, and is in the process of setting up a new 160,000-sq-ft plant at Nelamangala, Karnataka.

 

Savlani said his company will sell paints under its own ‘Astral’ brand from April, as per the contract with the promoters of the acquired company.

 

He said, thanks to all these developments, Astral looks to double its total turnover in the coming five years, and gradually see the share of the pipes business fall in the overall revenue pie.

 

 

CASH RESERVES

Speaking on the company’s financial health, Savlani said, Astral had cash reserves of about 5 bln rupees, which it will share with its equity investors either in the form of share buyback or dividend. The company will wait for at least two quarters to take a call on this issue, he said.

 

“We would continue to invest in expanding our business and with volatile economic indicators, we want to be watchful and be sure of what is likely to happen in terms of raw material costs or freight rates.”

 

Savlani said the company will not use its cash reserve to acquire any new company; it would rather focus on consolidating its acquisitions for “at least two years”.

 

At 1420 IST, shares of Astral traded 1.8% lower at 2,004.30 rupees on the National Stock Exchange.  End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Ranjana Chauhan

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

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© Informist Media Pvt. Ltd. 2022. All rights reserved.

Source: Cogencis

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