Rathi said the company’s UAE subsidiary tripled its revenue last year, and units in Korea, Poland and Mexico are expected to add to growth as they mature. He also pointed to the electrical heating systems business, now 21% of revenue compared to 4% three years ago, as a segment set to expand further on the back of new oil and gas approvals.
The comments come after Tempsens Instruments shares more than doubled from their issue price on the company’s stock market debut on August 28. The stock listed at ₹634 on the NSE, marking a 111.33% premium over its issue price of ₹300. On the BSE, it debuted at ₹631.20, translating into a 110.40% premium.
Rathi also addressed working capital days, which he expects to normalise at around 130-140 days after last year’s spike linked to acquisitions.
Tempsens Instruments is a Rajasthan-based manufacturer of contact and non-contact temperature sensors and specialised cables.
This is an edited transcript of the interview.
Q: Last year you did around ₹450 crore approximately in terms of revenues, with margins hovering around the mid-20s. For this year, what kind of revenue growth are you looking at? I think you’ve been growing at around 20% or thereabouts in the previous year, around 18% to 20%. Do we see a similar trend, and do you grow by around 20%? And are margins sustainable in the mid-20s, or is there scope for improvement?
A: No, we’ll be continuing forward with a similar kind of growth and maintaining a similar kind of margin.
But we’re trying a lot of newer territories and newer customers. So that is what would be helping maintain the margins as well as driving growth. And that is what we think the future holds for the company.
Q: Around ₹550 crore in the coming years, with margins in the vicinity of around 25%. Doable, right?
A: Yes, yes, it looks like we are heading in that direction.
Also, the companies that we started outside India, three of them about two years back, will also be contributing significantly to revenue. So, we see a good growth possibility for Tempsens in the future.
Q: You have pre-empted my next question. The companies that you started outside India—you have earlier said that exports are growing 10% faster than all the other businesses, even though the margins are the same. If you could give us a sense of how this contribution will pan out from these companies, say over the next three to five years, that would be helpful. And also, the demand for categories like electrical heating systems for oil and gas, petrochemicals and defence, along with process manufacturing industries—how much do they account for in your overall sales right now? How is that likely to pan out over the next three to five years?
A: So, regarding the export markets, over the last few years we started three companies outside India, and those would be growing much faster because the initial periods were just the seeding years, and now we are going to see the results.
Especially for the UAE, what we did was that it grew threefold last year.
So, we kind of see that similarly, the geographies that we have started in Korea, Poland and Mexico would be adding similar growth.
Regarding the petrochemical segment, we see that it is going to be a big booster once things settle down on the geopolitical front.
So, this would add to the company’s business in that direction.
Also, I would say the company is adding to the original base of end-user heavy-industry customers, while also adding a lot of OEM customers.
Q: That is what I wanted to know because electrical heating solutions, which accounted for just about 4% of your revenue three years ago, have now become 21% of your revenue. There is a fair amount of growth that you’re seeing- outsized growth here. How much will that be as a proportion of your sales, and is this margin-accretive or similar to the margins that you generate across the rest of your business as well?
A: So, the margins are similar to those across the rest of the business. And we got some specific approvals in the oil and gas segment from some large customers, so we would be going in that direction for those kinds of products.
And that would grow significantly. I would not say the same kind of growth that we saw last year, because that was mainly because of the amalgamation of a company for heaters.
But it will grow a little bit faster than the regular growth rate at Tempsens.
Q: I’m wondering how Mr Amit and Mr Puneet are feeling today, the promoter entities. I’ll tell you why, because they sold some shares in the OFS, right?
A: Yes.
Q: They could have got double today.
A: So, it was a decision, and you never know what value the market would give because when we started, it was like playing a blind game.
Q: I can assure you markets are tricky.
A: Yes, so it could also be the other way around.
Q: Tell us about the working capital days. They’ve got stretched a little bit. But I recall that when your IPO opened, you had said that you expect things to normalise. Now you’re at liberty to give us a number. So, what should the working capital days stabilise at?
A: Last year, the working capital days, as I told you last time also, increased because we acquired some companies.
Those acquisitions were done in the last days of March, and that is why the balance sheet got consolidated. At the same time, that kind of increased the working capital days artificially.
But if you see the year before that, those were the normalised working capital days, which would continue in the future.
Q: So about 130-140 days is a normalised number we should look at by the end of this financial year, right?
A: So, it will be around 130-140 days. So that is the kind of normalised number.
Q: And just finally, do you have any guidance when it comes to the seasonality of your business? Because a large part of your revenue obviously comes from a couple of quarters. What are you doing to reduce that seasonality?
A: No, I would not say the revenue is seasonal. I would say it would be in the ratio of 45:55 for the first half and the second half, so it is not seasonal. But obviously there are some project orders where, at the end of the year, there would be more shipments.
But overall, I would not say it is seasonal. It is quite balanced. Maybe 20% each for the first two quarters, and then 30% each for the second half of the year.
For the full interview, watch the accompanying video
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