After seeing a decline in sales in an otherwise strong December, Pramod Arora, joint managing director, Archies is now awaiting its strongest occasion of the year- the Valentines Day.
Speaking to CNBC-TV18, Arora tells he expects robust performance on February 14 despite the slowdown.
"It has been a very challenging time for us but coming to the next quarter, which has the Valentine's Day in it and which has been one of our strongest occasions for the year - there we feel there are going to be a lot of positive sentiments and we are going to see a robust performance during the Valentine season," he adds.
Additionally, Arora says talks of the promoters selling stake in the foreign company are totally unfounded.
Below is the edited transcript of the interview.
Q: There has been some market talk that perhaps promoters are looking to sell their stake in foreign company that you hold. Can you take us through how much of this is true and if it is then what are the plans?
A: We are not in talks with anybody to sell any stake as of now and the reports are unfounded.
Q: Talking about business, Q2 was a rough quarter for you. Second half, particularly of December is seasonally a stronger quarter with a lot more festive seasons. So generally if you could tell us how much better will H2 be vis-à-vis H1?
A: The year overall has been very challenging. It has been challenging for the economy overall and the retail industry in particular. The sentiments have been very low and the consumer sentiments have been lower.
Footfalls have seen decrease in various malls and markets and specially being in an industry where a lot of discretionary spend goes in. It has been a very challenging time for us but coming to the next quarter, which has the Valentine's Day in it and which has been one of our strongest occasions for the year - there we feel there are going to be a lot of positive sentiments and we are going to see a robust performance during the Valentine season.
Q: Also the way I understand it that the net debt including some of your short-term borrowing has gone up significantly, is there any plan to bring down this debt and what kind of levels would you be targeting?
A: Our short-term debt basically consists of working capital requirements. Since the whole economic scenario has been very low, typically our working capital requirements are uptil Q3 and Q4 onwards we have robust cash flow. There we see the working capital usage coming down till about March.
Since we plan ahead for seasonal products, that is when we start using our working capital limits. This is not something which we are much concerned about. Yes, this year definitely has been on the higher side on the utilisation of our working capital limits. But going forward, we see that again rationalising in Q4 and coming back to normal situation.
Q: As on the first half of the fiscal year, your total revenues were Rs 87 crore, your FY13 revenues were around Rs 200 crore which means it is quite likely if you assume the same run rate that you have done, FY14 will see a revenue degrowth for the entire year as opposed to FY13?
A: Yes, definitely. That is what we had projected earlier keeping in mind the low sentiments and there would be a marginal drop in the revenues and fairly a little more drop in the bottomline. However, as I said, since the sentiments were low and the elections are around the corner, as soon as we are through with the elections and if we get a stable government, things are going to rapidly turnaround.
We have continued to look for store space around the malls and markets. So, when the markets are down and the sentiments are low, we build up capacity of our retail footprint so that we can encash when the market sentiments improve.
Q: As of last quarter, your revenues had come down to just about Rs 80 lakhs, is there a possibility given the weakness in consumer sentiment, the company might report a loss in your bottomline?
A: No, I don't think there will be any loss. There will be a definite dip in the bottomline because Q3 and Q4 have always historically generated major chunk of profits. So, we will definitely be seeing a slowdown in the bottomline but no loss per se.
