Astec sets up herbicide plant; expects 30% growth in FY13

Ashok Hiramat, chairman of Astec Lifesciences spoke to CNBC-TV18 about the outlook for his company in the new year.

Q: Your new plant which is going to get commissioned in March of this year. What is the kind of capacity it will add and even revenues in FY13?

A: In terms of capacity, we will more or less double our existing capacity. In terms of revenues, we see about Rs 40 crore coming from the first year of operation and in the second year, it should go up to Rs 60 crore a year from that plant.

Q: Could you take us through what the new manufacturing site will primarily be involved in?

A: The first project we will be putting up on site, it's a large site and the first part of the development there would be for the manufacture of herbicide for a multinational which is on a long-term contractual basis. Further phases would be manufacturing of intermediates for herbicides. It will be a multipurpose plant which will manufacture intermediates for various kinds of agro-chemicals.

Q: Have you already finished tying up for sale of herbicides and agro intermediaries that you will be developing?

A: Yes, the first part is already done. We have got long-term contracts for which the plant is going to be commissioned in March, so that's already tied-up. The second one is something that I am not in a position to tell you right now but we are in advance stage of negotiation and once the contract is through, we will make a public announcement which will be the second phase of that expansion.

Q: You export about 30-35% of your products, so any impact on account of rupee depreciation that you might have noticed?

A: In the short run we had a negative impact because the imports were not hedged. Therefore, by the time we acquired the payments, we had to pay a higher price from what we planned for. But in the long run, we see this as a positive for us because our comparativeness vis-à-vis China improves considerably. So our realisations and margins will improve, and on the whole, I would say positive impact for our industry.

Q: For one-two quarters, have you changed your hedging policy which will enable you to get benefit of that or are we likely to see that hit at least in the near-term, going forward?

A: First of all, there is a new RBI circular which says that we don't have to give the effect of some of these things in your profit and loss account. So, we don't see any impact on it, but we do have a natural hedge as our exports are more than or equal to our imports.

The hedging policy is going to be a mix-match of cover and open positions. So our policy has changed to some extent and we are getting more cautious in our approach, going forward.

Q: Can you give us some sort of guidance for FY13, where do you see your profit margins stabilising?

A: I think we will go back to our original profit margins at about 10-12% profit after tax margins, and we see that in FY13, we should see a growth of about 30% on FY12 figures.