KAMDHENU LIMITED Robust Financial Performance for Q1 FY20

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By K Ashwin Mobile: 09920183006 Email: indianshowbusiness@gmail.com

Royalty Income up 29% Y-o-Y to Rs. 24.4 crores

Franchisee Sales (Volumes) up 20% Y-o-Y to 6.32 lakh MT

Profit after Tax (Steel Business) up 44% Y-o-Y to Rs. 9.5 crores

Total Profit up 14%* Y-o-Y to Rs. 6.8 crores

Kamdhenu Limited, India’s largest manufacturer and seller of branded TMT Bars, in the retail segment, has declared its Unaudited Financial Results for the Quarter ended 30th June 2019.

Update on the hive-off of the Paint Division

  • Our Board has recommended a hive-off of the Paint Division through a de-merger into a separate mirror image shareholding company.
  • Due to the fire at our Paint factory in April, the process of the hive off has been slightly delayed and we expect the hive-off to be completed by the end of this financial year which would result in independent and better management focus on both the businesses, better operational efficiencies and unlocking value by listing both as different companies.

Business Highlights for Q1 FY20

Particulars (Rs. Crores)

Q1 FY20

Q1 FY19

Y-o-Y

Royalty Income

24.4

18.9

+29%

Franchisee Volumes (in Lakh MT)

6.32

5.26

+20%

Profit Before Tax (PBT) – Steel Business

12.8

10.2

+26%

Profit After Tax – Steel Business

9.5

6.6

+45%

Total Profit After Tax

6.8*

5.9

+14%

* Excluding exceptional loss of Rs. 0.68 crores

  • The Company has recouped its business strategy by reducing B2B Trading Sales and focus on improving efficiencies in Own Manufacturing and on franchisee-based business model which have led to increased Margins and Better efficiencies with Higher RoE and RoCE
  • Steel Business contributed 82% of Revenues whereas 18% is from the Paint Division
  • Post the fire at our Paint Plant, we have started outsourcing of paints and the business have resumed normalcy.Update on the hive-off of the Paint Division
    • Our Board has recommended a hive-off of the Paint Division through a de-merger into a separate mirror image shareholding company.
    • Due to the fire at our Paint factory in April, the process of the hive off has been slightly delayed and we expect the hive-off to be completed by the end of this financial year which would result in independent and better management focus on both the businesses, better operational efficiencies and unlocking value by listing both as different companies.Update on the Paint Plant
      • During the quarter, a major fire broke out in the Paints factory of the Company due to which the inventory at the factory, property, plant & equipment got damaged substantially. There had been no human casualty in the said fire incident. The carrying amount as on date of fire of inventories, property, plant & equipment damaged in the fire was to the tune of Rs. 45.68 Crores.
      • The inventory, property, plant & equipment so damaged in the fire were validly insured and insurance policies were effective as on the date of such fire. The company has filled insurance claim of Rs. 45 Crores with an Insurance company and the process of assessing the claim settlement has been initiated and is underway. The management of the company is confident that the amount claimed from the Insurance company is certain to be realized valid and subsisting insurance policies, accordingly the company has recognized insurance claim receivable as on 30th June 2019 amounting to Rs. 45 Crores (to the extent of amount claimed) in books of account. Any deficit/surplus in the amount of Insurance claim shall be recognized as expense/income upon final settlement of the claim.Commenting­­­­­­­ on the results and performance, Mr. Satish Kumar Agarwal, Chairman & Managing Director said:

        “We have started FY20 on a strong note. Despite the slowdown in the steel industry, due to our business model we have been able to improve our overall sales volumes by ~20%. This was mainly driven by our strong execution strategies and our brand pull, created through our large distribution and marketing strength.

        For the quarter, our Royalty Income grew by 29% to Rs. 24 crores. The company is on course to beat its target of Rs. 100 crores as Royalty Income during this financial year. Along with this we also expect to add more franchisee capacity going forward and reach the 5 million MT per annum capacity by FY22.

        We have been able to improve our profitability significantly in the steel business and have reported a 44% growth to Rs. 9.5 Crores. This has been on the back of a conscious decision on changing our business strategy by way of reducing B2B Trading Sales. The focus has been more on improving efficiencies in Own Manufacturing and on franchisee-based business model which have led to increased Margins and Better efficiencies with Higher RoE and RoCE. It has also helped us to reduce our Working Capital requirements.

        Due to the fire at the Paint Factory, we had some disruption in that business. It had been decided on immediate basis to outsource production of the paint products from third party manufacturers at various locations. The Company has ensured the quality standards by deputing its own technical team at the manufacturer’s plant. The paint business have resumed normalcy.”

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