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Garware Technical Fibres CMD on maintaining margins, new acquisition plans

“We are also now expanding a little bit outside of the salmon farming industry which used to be and is still our core business, some of the areas like the Mediterranean market, where new species of fish are becoming more industrialised is an area that we are also focussed on”, says Vayu Garware, CMD,

Saurabh Mukherjea has been talking positively about the company and one of the reasons has been that the company has been able to maintain margins at around 20-21% and this is despite the material pressure coming in. Going forward do you expect some sort of slip in the margins, or do you expect it to continue at the 20% mark?

We really appreciate all the positive feedback we have received from various people in the market. To answer your question about raw materials, yes, our raw material is basically oil based and it tends to move along with the oil prices and of course oil has skyrocketed. So, have our raw materials. However, in our company, over the last decade or so, we have changed from almost only 30% value added products to now almost 80% value added products. Our products are based on the benefit that we can deliver to customers and because of that, we are able to pass through the input cost hikes, sometime with a lag, particularly in the international markets.

Finally, as raw material prices stabilised in the fourth quarter of last year, we were able to see our margins coming back completely and we expect that to continue. Stability helps us, volatility is more difficult but it is only a matter of time so we can sustain, and maintain the margins.

Could you throw some more light on of market share gains? How has that panned out? What is the number currently and in terms of the value-added product, it is already at 80% What are you doing to scale it up further? Are you adding new product lines ?

Yes, so to answer the first question about market share we operate in 13 different verticals. The market shares vary across each of these but in the bigger verticals like salmon farming, aqua-culture, and global fishing industry, we have high market shares even in the sports industry. They continue to grow, and we continue to penetrate markets like South America etc. where we are still growing our market shares further in the Norwegian market.

Our strategy of continuing to grow market share is very strong and it continues to be a high priority for us. In terms of value addition, yes, one of our core strategies is to even cannibalise sometimes our own products with higher value-added products. In our company, key focus is on new products and R&D. Every business has a goal of having more than 30% of their sales coming from new products developed within the last three years. We continuously have a strong product pipeline and some of those deliver a lot of value to customers. Hence we see them upgrading their own systems with our new products.

Let us talk about your sports net business. We have seen a double-digit growth in that business segment of yours. Do you expect to see a stronger growth going ahead given that you also have FIFA as well coming around the corner?

Are you venturing into new geographies? Are there any acquisition plans?

We are in about 75 countries around the world. Penetration in new geographies is a key focus for us to grow our market shares. For example, Chile is a large salmon farming market. We are growing very aggressively over there, and our team is making progress. Our strategy is to grow in some of these areas.

We are also now expanding a little bit outside of the salmon farming industry which used to be and is still our core business, some of the areas like the Mediterranean market, where new species of fish are becoming more industrialised is an area that we are also focussed on.

We are penetrating further in the countries that we already exist in, or are operating in. On M&A, it is a part of our focus, we have a very strong balance sheet and we have cash on hand. We are continuously looking for the right opportunities. We have a team which is quite focussed on it but M&A at the end of day must be a very strong strategic fit. Now acquisition will always be dependent on finding the right fit and that transaction going through.

Anything at an advanced stage that you can discuss with us? What is the size of the acquisition are you looking at?

Sure, I cannot mention any specific project right now, but I can give you some idea what our strategy is. Being our first acquisition, we will be a little bit careful and so the size will be something that we can digest well and integrate well. It also needs to be in the areas of businesses in which we are active, and we can add value. That is a very core part of our strategy. In terms of location, we are right now looking at an international location, which will take us closer to our customers right now. All of our manufacturing is in. We are looking at having a relocation outside which will be closer to customers for a quick turnaround type of requirements which today, we take some time to service from here particularly with the logistics challenges that are happening etc

Tell us a bit more about the logistics issue. Is that something that has impacted the business? Are you still seeing supply chain issues and with respect to the pricing of the freights etc. how is that panning out?

On the inward supply chain, we do not have much of an issue. Most of our raw materials are purchased in India. We do not have any major issues there. We have some key requirements which come from overseas but even during Covid, we had a very conscious programme to diversify that supply chain which has worked well and continues to work well for us. I think on that side we are quiet. On the outside, supply chain export has been a concern. There are two aspects, one is of course the freight rate itself, and the second is more importantly the availability of containers and the turnaround time.

We are again able to pass through freight rates to our customers. We talk to them, and it is a well-known international issue. Most customers are quite receptive and accepting of that. The issue is in getting containers and turning around faster that has extended the order to cash cycle. Because of that, we are seeing a lot of improvement from the last quarter. We could dispatch a lot of materials that went out even before the end of the year. Most of that went to our own subsidiaries overseas and that revenue will come in this year.

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