Pennar Industries Limited

Insights of Q2 Concall,

1. Aspirational Margin 5% : one point to note is that the revenue was flat or perhaps fractionally lower than the corresponding quarter last year. Now this is as per our stated intent to replace our low margin revenue with higher margin products and services. We had guided to this in the previous few quarters. Specifically, our water EPC, our solar EPC, our retail revenue, and this is well over 100 crores for the previous quarter in the previous financial year has been replaced with higher margin and sustainable revenue from our pre-engineered buildings (PEB) division, tubes division, and our process industry equipment business, and also body in white.
   Q2 PAT margin @ 2.75% (Track this margin on Q-o-Q basis)

2.Working Capital & ROCE : working capital. September 30th working capital days stood at 76 days. The annualized ROCE was at 21%, and our target ROCE for the year is 24%.
Our target working capital days is 72 days, and by the end of this year, we are confident we will achieve this target. However, working capital days in September at 76 days is a little bit higher than what we would have ideally liked to have been at. This is because of delays and liquidating some of our current assets in the revenue streams that we are closing. We consider this to be a short-term issue, and we will fully liquidate our current assets in the revenue streams that we are closing by the end of the year, and this will bring our working capital back to our target levels.

3. Capacity / Assets Turnover Ratio: 8X of CapEx
   Aditya Sen: Sir, what would be the revenue potential of the CAPEX that we are going to commission by the end of this year?
   Aditya Rao : We typically aim to have an asset flip of eight on an annualized basis on the CAPEX that we spend. So, the revenue to asset flip is about eight. That’s what we are adding. And the vast majority of our CAPEX is at that level.