Mr. Chandrakant P. Sanghvi, Chairman and Managing Director, Sanghvi Movers Ltd., has been one of the pioneers in the cranes hiring industry in India. Having started the Company back in 1989, he brings with him mammoth experience of more than 20 years in the crane business. With strong entrepreneurial spirit, Mr. Sanghvi has been instrumental in building the Company from scratch, thereby scaling newer height at each stage of the organizations journey. Under his leadership, the Company has maintained its monopolistic position in the industry since inception. Mr. Sanghvi is a Graduate in Engineering and has completed his Masters in Engineering from the United States.
Sanghvi Movers, the largest crane hiring and engineering company in India and 7th largest in the world, provides medium sized heavy duty world class cranes on rental basis for various infrastructure and core projects. The company has a fleet of more than 374 hydraulic and crawler cranes with lifting capacity ranging from 20 MT to 800 MT and a strong regional network with depots across Nagpur, Chennai, Pune, Bangalore, Bharuch, Jamnagar, Gadag, Cuttack and Delhi. SML’s client list includes Reliance Industries, Reliance Energy, BHEL, NTPC, Lanco, Aditya Birla Group, Vedanta Group, Tata Steel, L&T and Suzlon.
Speaking with Anil Mascarenhas of IIFL, CP Sanghvi says, “We are revamping our fleet and replacing used cranes with brand new ones. This may not give us an edge immediately but will give us an edge in the future.”
With the RBI continuously increasing the rates, does it have a direct impact on your business?
The interest rates are firming up and it will put some kinds of strains on our profitability eventually. The main worry is that because of interest rates hardening, there are chances that the projects may get delayed, take little more time or some may pull back their investments. But we think these may be a short term phenomena and we are optimistic that things will improve from the second or third quarter.
The power sector has not taken off the way you would have liked it to. Have these developments changed your focus on other verticals?
On the whole, the industrial crane industry in India has enjoyed strong growth on the back of the country’s economic development. Capacity utilisation levels have also improved. We are focusing more on the wind mills and power sector. Our revenue would be 60% from the core sector itself and these require specialised cranes. We are also focusing on the refinery sector.
Have you done work in nuclear power earlier?
No we have not done any work in nuclear power earlier.
What would be your current order and when would it be executed?
We have an order visibility of over Rs2.25bn so far for the full year.
What could you think would be the entry barriers today because you say you are the only one to have such kind of cranes?
Earlier, finance was the entry barrier; today that is no more a constraint. I would think we have the edge in terms of specialization, which to an extent remains a barrier. The biggest barrier is the risk that one is willing to take in this business. Things have changed over the years and our margins have also come down. It is more to do with competition. A lot of people are entering into this field but there are also people who undercut and make things difficult even for established players.
What could be the biggest challenge for companies like yours?
The biggest challenge would definitely be retaining our people. Given our expertise, we become poaching ground for competitors. The other challenges include successfully bidding for major orders and collection of receivables.
What could be the major opportunity you see over 3 to 5 year period?
We were very much optimistic on the power sector especially thermal power sector. However, the power sector projects are taking longer than usual. While we wait for power projects to take off, we have been able to successfully deploy our equipment and also pay back the banks. This year we have committed Rs 170 crore expenditure but depending upon the market situation we may end up with spending Rs 200 crore. Keeping all the expansions in mind, we feel that by 2015 we should become debt free.
I would think many others would be finding it difficult later to arrange for cranes and the required finance by which time we would have already repaid our debt.
Any new sectors you plan to tap?
The transportation laws are changing in the country; we need to use hydraulic multi-access trailers. We are trying to do transportation of equipment on our own.
What would be the number of cranes you have?
At present, we have around 380 cranes.
Give a brief overview of your financials?
On a conservative basis, in terms of top line we should grow by 15-16% and bottom line may be by 8-9%.
For the year-ended 31st March 2011, Net Sales stood at Rs 359.29 crore as against Rs 328.76 crore for the corresponding period of last year (FY10); registering a growth of 9.32%. PAT for FY11 stood at Rs. 86.31 crore, as against Rs. 90.42 crore for the corresponding period of last year. The EBITDA for FY11 stood at Rs. 255.80 crore as compared to Rs. 252.66 crore in FY10. Diluted Earnings per Share for FY2011 worked out to be Rs. 19.94, as compared to Rs. 20.89 for FY2010.
The revenue for the quarter ended March 2011 has been increased primarily from Wind Mill, Power as well as Refinery. We expect the growth to happen on the Wind Mill sector as well as Power as well as Refinery. Presently, we have a presence with almost all the Wind Mill companies like Suzlon, Gamesa, Kenersys, Region Power, Cinovel Gujarat Fluoro Chemicals.
Similarly, we are working with BHEL, NTPC, Lanco, BGR Energy and in refineries we are working with Bhatinda, that is HEML plus we are working with Dahej with ONGC and Paradip. Going forward, we expect that the 35% of the revenue will come from Wind Mill; maybe 35% to 40%. 35% may come up from the Power, total 70%; 10% will likely to come from Refineries, 8-10% from the Steel plant.
Comment on your capex plans.
We propose to do a Capex of Rs. 240 crore subject to the approval of the Board of Directors and market conditions. Rs. 160 crore will be spent for buying brand new cranes, Rs. 45 crores for used cranes, the total number of cranes to be purchased out of this Capex would be around 40. This also includes Capex to the tune of Rs. 35 crores for the purchase of prime movers and multi-axle trailers.
The funding of CapEx would be done through the conventional method of 75% bank finance and 25% internal accruals. The principal amount of secured loans which is due for repayment in financial year 2012 is Rs. 163 crores and the incremental debt will be to the tune of Rs 20 crores.
The estimated debt as on 31st March 2012 will be around Rs 670 crore while the net worth of the company after the retained earnings would be around Rs 630 crores.
Could you explain why your EBIDTA has come down?
Our EBIDTA margin has come down primarily because of increase in operating expenses, bad debt to the tune of Rs. 5.61 crores as well as provision for doubtful debt to the tune of nearly Rs. 1 crore. We expect the EBIDTA margin (considering other income) in the range of 70-72%.
What is your message to your share holders?
We have expanded our cranes in anticipation of a better growth in the economy. We see any slowdown as a temporary setback and are confident of doing well going ahead. We are in this business for over two decades. We have created a sound base in terms of our business model. We have an impressive track record in terms of service, delivery of the cranes and execution of projects.
Moreover, we are renovating our fleet and replace used cranes with brand new ones. This may not give us an edge immediately but will give us an edge in the future.