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“Third Quarter Financial Year '13 Results Conference Call of CEBBCO”

February 4th, 2013

SPEAKERS: Mr Ajay Gupta - Whole-time Executive Director, CEBBCO
Mr Ammeet Sabarwal – Dickenson Seagull IR

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there has been no resignation from our top management employees and our top management team is in place completely. CEBBCO. On behalf of Dickenson Seagull IR. CEBBCO was started by Dr. Over to you. sir. ladies and gentlemen. Gupta. Aanchal. And the promoter family is one of the largest distributors of TATA Motors. 2013 Moderator: A very good afternoon. and private equity holding of 11% by TATA Capital. I would like to now hand over the conference to Mr. Ammeet Sabarwal: Page 2 of 16 . I am Aanchal Rastogi. For the duration of presentation. Good evening. Thank you for standing by and welcome to CEBBCO Quarter Third Financial Year '13 Results Conference Call.Third Quarter Financial Year '13 Results Conference Call of CEBBCO February 4th. And we'll have a question-and-answer session after the presentation. Before I hand over the call to Mr. Deloitte has been our auditor and there has been no negative qualification by the auditor as such at any point of time. Ajay Gupta. CV Division in India with the relationship extending more than 50 years. accounting for around 35-40% market share. Just to give a brief clarification on some of the rumours in the market. let me welcome you all to the earnings call of CEBBCO for the quarter ended 31st December 2012. all participants' lines will be in a listen-only mode. organized by the Dickenson Seagull IR. with some of the members being exTATA group as well as Indian Railways. CEBBCO is one of India's leading designers and manufacturers of vehicle bodies for non-passenger CVs. Thank you. We have with us today Mr. Our board of director comprises of seven members with more than 50% consisting of independent and nonfamily members. the moderator of this call. Kailash Gupta in September 1979. everybody. Whole-time Executive Director. Ammeet Sabarwal from Dickenson Seagull IR. The company maintains very strong corporate governance with Deloitte as auditor since 2007-08. let me just take you through the brief introduction on CEBBCO and how the company has performed in this quarter before joining the call for Q&A.

25% YOY driven by the business as well as from the replacement replica market. The first nine months of FY13 have witnessed a complete delinking of growth from the CV cycle. Even if we see the entire sales. EBITDA margins have improved 463 bps point YOY to 18. The company has strategically balanced its distribution among the CVs. So if we remove that.2Cr and PAT of Rs 40. the company has been able to maintain the revenues as well as the margins in the FBV business.2Cr.000 units of capacity which would become operational in Q4. Now let us come to the quarterly performance of the company. Page 3 of 16 . Only around 7% of the total shareholding has been pledged. For nine months ending December 2012. which is higher than the whole year of FY12 EBITDA of Rs 70. OEMs as well as the replacement market. So even if you see our complete growth. Basically we had Rs 40Cr of revenues from the railway business. The company is operating at 100% capacity utilization and would further benefit from the additional 10. the drop in sales is nothing but absence of the railways order that we had in the first two quarters.000 units.8% benefiting from the efficient operating leverage as well as the judicious mix of the business. We would like to clarify there has been no sale of pledge shares by the company. And there is no sale of pledge shares. CEBBCO's growth continues to be driven by the FBVs.8Cr. this was informed in the prior quarter conference call. CEBBCO has reported an EBITDA of Rs 89. There has been no concern as such from the demand from the OEM side. we are well on track to achieve our guidance that we had given of 30.Third Quarter Financial Year '13 Results Conference Call of CEBBCO February 4th. it has been done through a judicial mix of FBV as well as the replacement markets so in order to get a higher blended margin. Now just to give a brief about how the industry is performing and how CEBBCO is performing. that too also for working capital purposes. Net sales have grown by 4. 2013 Also there has been rumour on the pledge of shares.4Cr and a PAT of Rs 48.

Okay. I mean if somebody requires an explanation on anything. please study the results of the company. I would like to state that there is nothing wrong in the company. Ammeet. Participants. 2013 With this. Hello? When is this 10.000 capacity getting added? Sameer Shah: Page 4 of 16 . we'll take the first question from Mr. There is just no problem whatsoever. We have been running normally and in the most efficient manner. you are requested to press "0" "1" on your telephone keypads and we will announce your name. please look at the fundamentals and then take a conscious call or whatever you feel correct to do. Whatever has happened is because of probably the market forces. I have also been very worried for my entire shareholder community and the investors because we are not happy with the stock price fall. sir. Moderator: Thank you so much. you are requested to press "0" "1" on your telephone keypads. I would like to hand it over for questions. most happy to answer. And I am personally and on behalf of the management at complete loss of words as to why the stock price has taken the shape the way it has in the last two days. Sameer Shah from ValuesQuest. please go ahead and ask your question. Ajay Gupta: Thank you very much. With this. Any questions from any participants. my request to everyone would be that please don't go by rumours. Ajay Gupta to take you through the quarter and how the company has performed before going through the Q& A process. Over to you Mr Gupta. On behalf of the management and the promoters. So. I believe I've given a decent introduction to the company. Sir.Third Quarter Financial Year '13 Results Conference Call of CEBBCO February 4th. and thank you to all the investors and the shareholding community that have taken time out to participate in this call. Our results came out just two days back and which has been pretty much in line with what we have been saying. I am most free. I would like to hand over the call to Mr. any questions from any participants. I repeat. we will now start the question-and-answer round.

just for the understanding. the market would be growing. So that business would have gone to competition. but we don't anticipate -- Sameer Shah: Ajay Gupta: Sameer Shah: Ajay Gupta: Sameer Shah: Ajay Gupta: Sameer Shah: Ajay Gupta: Sameer Shah: Ajay Gupta: Sameer Shah: Page 5 of 16 . And we are only doing replica to the extent where it doesn't impact CV -. our customer relationships. I'm saying if we take replacement out of the market. for the FBV? Yeah. I am personally confident that it should happen in this quarter. Okay. okay. because as I understand there was a lot of demand from the OEMs itself and the whole capacity expansion is based on their push. We're trying to pick up things faster.Third Quarter Financial Year '13 Results Conference Call of CEBBCO February 4th. the market is growing and that's one reason why you haven't seen our numbers fall even though CVs have fallen. that is what I believe. right. Our problem is we are constrained we capacity. we would do that. not creating an impact. So how would OEs take this? If you see the transcript of the last quarter also. Will it be available for the whole of FY14? Yes. So. We are just handling it with extreme caution and care and taking it on a day-to-day basis. OEM market would also be growing? Yes. And these OEM sales which we have diverted to the replacement market. probably to competition or probably we would have sold chassis. right? Yes. which is pretty historical in nature in our case. you know. 2013 Ajay Gupta: There has been a small delay in the expansion. And sometimes we would have to compromise on replica for FBVs. Yeah. But again. So. how would the OEMs take it. I had explained that we are trying our best to increase the replica numbers and at the same time maintain the relationships with the OEM. you know.FBVs.

it is -. thank you very much. then it becomes difficult to again regain the market share. One that under the rule that we had asked for the approval. please go ahead. what happens to it. if I'm not mistaken. and all of us would become beneficiaries of the trust for a long-term tax planning because family trust is far more tax-efficient. honestly Alright. That problem has been -I don't see that as a problem for us. where you had not accepted the takeover in case there is transfer between the two promoters within three years. that is my father-in-law. can you just explain there was -. And the lawyer suggested that it's better to just. you know. Hi Ajay. you know. you know. So where I'm coming from is. sir. they don't have the authority to give the approval Sameer Shah: Ajay Gupta: Sameer Shah: Ajay Gupta: Moderator: Dhiraj Sachdev: Ajay Gupta: Page 6 of 16 . and that all of us would shift the shares to him. sure. you know.I don't know. Sir. give to him and in turn he would give it back to the trust as a settler. And for a family trust. Yeah. take an informal guidance from SEBI so that tomorrow there is no issue on that. Now.December 1st SEBI order in relation to interstate transfer between promoters. Thanks a lot. it may not be comparable but Exide had big OEM sales and. Exide. I don't have the data with me of us refusing an order. the shares have to be gifted by one settler. Now the next question is coming from Dheeraj Sachdev from HSBC Global Asset Management. September or October. Thank you so much. Ajay. I'm sorry. Okay. for example. I'll just explain to you. And SEBI said two things. when you divert from one segment. the intention of that order was completely different from what the market is understanding.Third Quarter Financial Year '13 Results Conference Call of CEBBCO February 4th. Dheeraj. And so we wrote to SEBI I think sometime in. Thank you. Our idea was as a family to create a family trust. 2013 Ajay Gupta: And I don't have the data with me. we decided that let Dad become the settler. No.

So we said let it be as it is. Dhiraj Sachdev: So right now there is no transfer that has happened between the two of you? No. it's there in our balance sheet. let it continue. there is no liability against us. you know. there is another rule which clearly states that interstate transfers between family members and relatives don't require SEBI approval and can be done even one day after the company is listed. So there will be no cash flow impact on us. but I can you give the exact amount as on date probably tomorrow. But yeah. Yeah.Third Quarter Financial Year '13 Results Conference Call of CEBBCO February 4th. Okay fine. as on date it has been put on hold because we don't want any wrong messages going out. Okay. in the future because we paid up all of it under protest. and that's what we are doing currently. thank you. currently there is no transfer that has happened. about Dad and myself. And so honestly speaking. the second thing is on entry tax regarding the state of Madhya Pradesh which has been levied and which you have challenged it. we can do that even today. I believe the aggregate amount is about 10. sir. And that's it from my side. But for the time being. What is the extent of this liability in case it is against you? No. Before moving on to the next question. okay. I request to press "0" "1" on your telephone Ajay Gupta: Dhiraj Sachdev: Ajay Gupta: Dhiraj Sachdev: Ajay Gupta: Dhiraj Sachdev: Ajay Gupta: Moderator: Page 7 of 16 . Thank you so much. I mean the intent would be to create a family trust in the long-term. And we continue to deposit it under protest. And well. which gets over in October 2013. rumours per se. and that's fine. Sir.15 crores. but we just thought that let's just wait because unnecessarily we got quite a few phone calls from the market that. If the order. if we lose also. right? Yes. 2013 till three years of us being listed. Dhiraj. Secondly. Thank you so much. Ajay.

Just a few questions. any specific reason of your FBV capacity getting delayed to fourth quarter. I just wanted to know what is the order book now in hand. on one end you said that there is growth in the OEM space and then you are also stating that you maintain the relation in terms of you are not annoying anyone by. Sir. sir. we are trying our best to manage it. last time we recollect that you had shared that you have a firm order book of 2000 crores. I'm getting the next question from Mr. No. I mean. sometimes we definitely do upset a few people. Okay. I think it was expected long back? Ajay Gupta: Ravi Mehta: Ajay Gupta: Ravi Mehta: Ajay Gupta: Ravi Mehta: Page 8 of 16 . I think that’s not a right indicator and I would request you not to look at that. But we have run on full capacity. you know we have open orders from all our OEMs. one thing on the shift from OEM to replica segment. even though the order book could be of any number. I mean. good evening. And we basically sit the OEMs at the beginning of every month and finalize the order for that particular month. Please go ahead.Third Quarter Financial Year '13 Results Conference Call of CEBBCO February 4th. But. this figure. How are you maintaining that? We are able to remove quite a few of the -. can you share on the FBV front. let me explain to you how the order book works. undersupplying or something. 2013 keypads. And I don't remember saying exact. which are blanket orders. one on the volumes. Ravi Mehta: Hi. Okay. Now those orders are basically very large in nature but they don't give you an exact look of the way the business is going to transform. sir. I am not going to say that we are absolutely perfect because there are pressures from every end. what volumes you've done in the quarter? We actually don't share volume details publicly. you know. And. Sir. So. But anyways. its relationship management what I would call. sir. I think. Ravi Mehta from Money Logix.You know.

any progress on that front or anything -No. Ravi Mehta: Ajay Gupta: Ravi Mehta: Ajay Gupta: Moderator: Pankaj Chopra: Ajay Gupta: Pankaj Chopra: Ajay Gupta: Page 9 of 16 . He is a senior partner or the managing partner of that fund. shortly in the near future. Mr. on the inter-model railroad trailer MoU that you had signed.Third Quarter Financial Year '13 Results Conference Call of CEBBCO February 4th. And he has been on our board right since the day they invested. this was a private equity transaction I believe before the IPO? Yes. Yes. who was a very senior management person. just a question on this strategic shareholding by Tata Capital. Tata Capital runs a couple of private equity funds. So. I am sorry for that. So. I mean. I will apologise personally on that. How are you doing? Fine. So he overlooks all the aspects of the business sitting under various committees that he does. that’s it from my side. Ajay. Thank you very much. We are still negotiating the terms for supplies. when this was done and what are the terms. But we are hopeful of trying to tackle that immediately. Hi. He is also on our management committee and the audit committee. it was expected in the end of third quarter but it has got a little delayed. I think. This is also private equity fund which has invested in us. And we just want to be a slightly conservative on that front. And. Pankaj Chopra from Reliance. Pankaj. And they also have a director on our board. and we are getting stuck with the supplier on terms of payments. Ajay. All the best. he is the MD of that fund. sir. And they have picked up about close to 11% stake in the company. you know. okay. it happened about two or three months before we did the IPO. can you just throw some more light on. which is Akhilawasthi. sir. 2013 Ajay Gupta: Yes. Okay. sometime in July-August of 2010 just before our IPO. How are you? Good. This investment happened sometime in – it was a pre-IPO deal. You can please ask your question.

The next is now from Priyanshu from New Warren Company. There was a lock-in of about one year post IPO which is now over. Rajesh Nandu from Nandu Finance. that means a significant sale of the stake? Sorry. as per SEBI laws. But typically the rule is that if you are a director on the board and you have a financial stake. please go ahead. Okay. Thank you very much. Sure. there is no lock-in. I think. I mean. thank you very much. Sir please go ahead. Can you repeat the question? I am saying when you decide to sell the stake. Now the next in line is Mr. No. when you said the selling of the stake. So typically the practice followed by Tata Capital and all the private equity funds is that they resign from the board and then two or three months later start selling even if it’s a small stake so that it doesn’t appear that they were ever in information which is more than what is available in the public domain. you know -. I mean. 2013 Pankaj Chopra: Sure.Third Quarter Financial Year '13 Results Conference Call of CEBBCO February 4th. Honestly. So nothing like that. you are talking about the significant or the complete sale of the stake that you resign from the board before that? No. Sir. Are there any terms in terms of sort of a lock-in that might has been there at the time. Ajay Gupta: Pankaj Chopra: Ajay Gupta: Pankaj Chopra: Ajay Gupta: Pankaj Chopra: Ajay Gupta: Moderator: Moderator: Page 10 of 16 . and a substantial financial stake.standard operating procedure is that you would resign from the board actually three months before or at least two or three months before you start selling your stake. you will resign even for a small stake because you don’t want to get caught with any of the insider trading laws of SEBI. Sir. then if you ever decide to sell it you would pretty.

I think. not in our factory. we were operating at full capacity so Was it your factory or was it the client’s where the railway order was executed? Sorry. Since -.I mean. no Priyanshu that is the difference. Ajay Gupta: Priyanshu: Ajay Gupta: Priyanshu: Ajay Gupta: Priyanshu: Ajay Gupta: Priyanshu: Ajay Gupta: Priyanshu: Ajay Gupta: Priyanshu: Page 11 of 16 . Just one second. you know. I think. So it’s actually over and above what we have as installed capacity. And the order from Braithwaite was actually executed in their factory. But just repeat the question. we operate at full capacity which includes the fungible capacity. Thanks a lot. Priyanshu. We have bid for quite a few. Yes.in first two quarters we generate more revenues because of railway order which wasn't there at third quarter. That was my – I just wanted a reply for that. I have got confused a little. and that’s the top up. Yes. Definitely not. how the margin is looking – the new order book that you are getting We haven’t got any new orders from Railways. But. We are hopeful whenever we get them then. Okay. you have been operating at full capacity in all the three quarters. My question is in the last -. So. There is no significant change in that? No. we will execute. CVs? CV is the ongoing business. Thank you. And most of the railway capacity is fungible into the CV capacity. Yes. Look. sir. I have understood your question. whatever we executed in our factory remains constant in the first three quarters and the top-up was what we executed in their factory which was substantial portion in Q1 and then minority portion in Q2 and that completed the order. Okay. Any change in. 2013 Priyanshu: Hi. sir.Third Quarter Financial Year '13 Results Conference Call of CEBBCO February 4th. That’s very helpful. sir. No. Priyanshu.

these last two quarters in terms of -30. Okay. Thanks. I think. So. Sir. Yes. 2013 Ajay Gupta: Moderator: Thank you.000 – about 7500 or 8000. we don’t have a problem in ramp up. So -Okay. sir. 7500 or 8000. just wanted to understand – so because of this delay in capacity expansion. in your estimate how much sales would you have lost? Because it seems that your revenue from your commercial vehicles.000 comes in -I mean. seems to have stabilised at a certain level. Sure. And -. And. Hi. Compared to – How much you -. I will come back with more questions later on. It’s the capacity that’s a contraint. you mean on a quarterly basis. Thanks for taking my question.okay. Okay. okay. on a quarterly basis we would do about two-and-a-half-thousands. right? Yes. I mean. The next question is coming up from Mr.Third Quarter Financial Year '13 Results Conference Call of CEBBCO February 4th. Sir. in terms of the – so what I want to understand is that this flat-lining has been completely on account of capacity or replica also will take some time to ramp up? No. it’s around 25-30% higher? Yes. So just wanted to understand ki once this 10. Thank you very much. Thank you so much. including both commercial vehicle and replica. sir. Amin Tehrani from Deutsche Bank. Amin Tehrani: Ajay Gupta: Amin Tehrani: Ajay Gupta: Amin Tehrani: Ajay Gupta: Amin Tehrani: Ajay Gupta: Amin Tehrani: Ajay Gupta: Amin Tehrani: Ajay Gupta: Page 12 of 16 . please go ahead. whatever that number is.

we have a very large order book. but I don’t think that’s a correct indicator or that should not mislead you in any manner. Mr. Okay. you know. We typically sit with OEMs at the beginning of the month and finalise what we are going to execute in that month. Uday Shah: Ajay Gupta: Uday Shah: Ajay Gupta: Uday Shah: Ajay Gupta: Uday Shah: Ajay Gupta: Uday Shah: Ajay Gupta: Uday Shah: Ajay Gupta: Page 13 of 16 . So we are just in the process. Good evening. Uday Shah from Sales Essence. please go ahead. Next question is coming up from Mr. If you are running on full capacity right now. the margins in the railway business would be more than CV business? Yes. I would assume so.Third Quarter Financial Year '13 Results Conference Call of CEBBCO February 4th. Okay. Good evening. And. so what will be the growth in revenues and bottom line in FY14? Sir. we have definitely bid for quite a few tenders. definitely. 2013 Moderator: Thank you so much. we don’t give any guidance in terms of revenues impact. we are hopeful of getting more orders from Railways. sir. sir. And what is your current order book? Sir. to share something with you would be wrong. sir. Gupta. Mr. Gupta. Thank you. but that’s not a clear indicator because the order book is mainly open orders from OEMs. But. And do we see more orders from Railways? Yes. So I could give you a figure for the order book. we only give volume guidances and we will be coming out with that in Q4. But till the time it doesn’t materialize. Sir. Thank you. we have invested a large chunk in the railway plant and we are aggressively following up with areas of opportunity that exists in the railway space.

Sunil Shah from ENAM Securities. Hi. So that’s what it is. and that translates to about Rs. you know. so basically we will -. sir. So the dividend could be in the range of about 12-13 crores coming out. We had formulated a policy of paying 20% of our PAT as dividend. That’s the board policy as on date. That continues as on date as on -Yes. right? Yes. there is no change in that. Okay. And. Good evening Sunil. will closes here around 60 to 64 crores. Yes. please go ahead. Good evening Ajayji. And we have now started with this thing. 2. we have now started making the applications for tri-fac.50 or something of that type on the shareholding. the next question is from Mr. the 20% payout is what we will stick with. sir it’s working out to a yield of about 5% current market price – meaning. My team was busy with making the audit preparations.because I am not allowed to do that. We will come back to you on that one. 2013 Moderator: Thank you so much. Now. That I can confirm to you as on -So. -. Sir. There is no change in that. Okay. Your calculation is correct. sir any sense on the tri-fac numbers that could come in the fourth quarter? No. Sunil Shah: Ajay Gupta: Sunil Shah: Ajay Gupta: Sunil Shah: Ajay Gupta: Sunil Shah: Ajay Gupta: Sunil Shah: Ajay Gupta: Sunil Shah: Ajay Gupta: Page 14 of 16 . Sir. if I just look at the numbers and try to do little bit of analysing. then despite. sir? It sounds correct. just one question is on the dividend payout policy. Sunil here. is my maths correct on that one. Sir. not taking the tri-fac number.you know. but I am not going to confirm or disconfirm your PAT figures -Just the policy.Third Quarter Financial Year '13 Results Conference Call of CEBBCO February 4th.

So most of them are for the refurbishment bid on it. I mean. Thank you so much. Thank you so much sir. any change? No. okay. if I see your railway revenues from the refurbishments. Siddharth Bera from MK Global. And just on your railway side. like the tenders are mostly for the wagon manufacture. sir. first is the interest cost in this quarter has been sequentially slightly in the lower side. Sir. Is it also for the refurbishment part? No. thanks for the opportunity. Siddharth Bera: Ajay Gupta: Siddharth Bera: Ajay Gupta: Siddharth Bera: Ajay Gupta: Siddharth Bera: Ajay Gupta: Siddharth Bera: Ajay Gupta: Moderator: Page 15 of 16 . sir. Thanks. And the last question for the day is coming from Mr. sir. Ajayji. Sir. No. for taking this question.Third Quarter Financial Year '13 Results Conference Call of CEBBCO February 4th. I mean. And the overall debt levels. okay. Thank you. what will be your debt or working capital levels if you can guide us? I think working capital levels would be similar to what we had in September balance sheet numbers and that’s what it is. the new wagon tender has not come out yet. We are hopeful of getting. As soon as we get we will inform the stock exchanges and thereby inform the public at large. 2013 Sunil Shah: Ajay Gupta: Moderator: Okay. You can take over the floor for final remarks now. There are no further questions. they have been pretty on the lower side. Sir please go ahead. Okay. So. Okay. sir. Thank you very much. Questions. Thanks. Okay. Like I told you we have bid for a couple of tenders but we haven’t got any confirm order yet. Okay sir. Okay. I mean could you give us some outlook on how is it with respect to the – what is the visibility on the refurbishment business? No. Okay. Thanks a lot. there has not been any significant change.

You may all disconnect your lines now.if anybody in the management -. But I can only assure you that the company has been running normally. Thank you everyone. Thank you very much. We know that all of you all or some of you all must definitely be under pressure because of the sad events that have taken place in the stock market in the last two days. 2013 Ajay Gupta: Yes. There is nothing abnormal or anything which is a negative shocker or something that justifies the stock price fall.Third Quarter Financial Year '13 Results Conference Call of CEBBCO February 4th. Thank you so much participants. Thank you and have a great day. I would like to thank all the investors for having attended the call. Thank you.please feel free to let us know we are all available for you. sir. And we are – all of us are there and will continue in our endeavour to try and meet all your expectations and continue to do well in the business. With this we conclude the conference call for today. Thank you so much. Thank you. I would request you to continue to have faith in the company. Thank you. Management: Ajay Gupta: Moderator: Ajay Gupta: Page 16 of 16 . And if there is anything else or if anybody wishes to have a call -.