– Mr K. Shankaran

Rajalakshmi Sivam

TTK Prestige, leader in the pressure cooker market, has been investing in expanding its product portfolio and ‘Prestige Smart Kitchen' retail outlets that will sell an entire range of cookware.

Mr K. Shankaran, Director, Corporate Affairs, TTK Prestige, spoke to Business Line on how the company is making best out of the current scenario.

Excerpts from the interview:

Have you seen any slowdown in the home appliances industry? How have the sales of your key division of pressure cookers been in the September quarter?

Barring the seasonal impact, we are not witnessing any slow down in the home appliances industry. In our experience, the demand in the urban market and tier II cities continues to be satisfactory. As regards the volume growth in cookers, the second quarter saw a 20 per cent growth with higher sales from the Diwali season. Volume growth in October and November was also satisfactory.

What is your target for sales growth this year?

The year is progressing according to our plans. Normally, the ratio of sales between the first and second half is 48:52. However, assuming that primary sales for Diwali would happen in the first half we wanted to achieve 52 per cent of our annual plan in the first half itself. This has been achieved. Notwithstanding the slow down in the Middle East and the UK markets, we should be able to achieve the remaining part of the annual plan in the second half.

How is your reach in the smaller towns where you say demand is growing?

We have a distribution structure in which sales happen through direct dealers, authorised re-sellers, network of our own showrooms — Prestige Smart Kitchen (PSKs), large format stores, and to institutions. As of now we have 216 PSKs spread over 20 States. With this distribution system we are in a position to cater to the smaller towns.

However, while we have penetrated the Southern and Western markets, there is still room for penetration in North and East markets. With our new product range we should be able to do this over the next two years.

TTK Prestige has been showing a higher growth compared to the industry. How has your market share moved in the last three years?

Our market share is certainly rising. Since the market is split between organised and unorganised sectors, it is difficult to estimate the market share. However, in the organised sector for cookers and cookware, we enjoy a share of more than 40 per cent in terms of value of the branded market.

Can you brief us on your expansion plans and your new plant at Uttarakhand?

In Uttarakhand, we already have one unit manufacturing inner lid pressure cookers. This facility started commercial production in 2007. We are putting up a new unit in the same location to manufacture appliances which will initially cover gas stoves, mixer grinders, induction cook tops, etc.

Once the production is stabilised in the new unit, the manufacturer's margin, which now forms part of the outsourcing cost, will accrue to the company. This can improve margins by 3-4 per cent. The profits made from this unit will be entitled to 100 per cent tax exemption for the first five years. In the next five years, 30 per cent of the profits will be exempt from tax. Thus the overall profitability of the company on the appliance vertical is expected to increase.

The total investment in this unit is Rs 12 crore.

Do you see your export sales catching up? What percentage of the overall turnover do the export sales make?

The export market is witnessing severe demand recession. During the last three years, our key export markets have been the UK, Middle East and Sri Lanka. All these markets are slowing down and we do not expect much growth from the export market in the short run. In any case, exports constitute just five per cent of the company's turnover.

Are you comfortable on the cash side, how much of debt have you repaid so far? How is your debtors' cycle?

The company is cash positive as of now. We expect to remain significantly cash positive even after spending Rs 12 crore on capex.

The company has land in Bangalore which you said is being developed into commercial space. When is the income expected to flow from this?

The earlier plan was to put up a mall which would have entailed a steady stream of rental income. However, the market for malls does not appear to be bright. Hence the developer has suggested that an office-cum-residential complex can be put up. The revised plans are under preparation and will be submitted for sanction.

In the new model, the company's income will consist of lump-sum and rentals. The estimated company's share of lump-sum is around Rs 100 crore, while the steady rental income will be around Rs 6 crore a year.

We expect the project to take off sometime during the current financial year. Giving a period of 24-30 months for development, the cash flows can be expected during the calendar year 2012.