By: Vartika ChoudharyV-Guard CFO Sudarshan Kasturi
Sudarshan Kasturi, CFO at electrical appliances maker V-Guard, loves making decisions in uncertainties as he says that is what the management in companies is for. Even before the pandemic, finance leaders have been living in an increasingly volatile world, and the virus has added further uncertainty, he said.
“The complexity of the environment in which we operate has increased with the pandemic. We need to be clear and strong enough to overcome this (event),” Kasturi said as he discussed demand outlook and FY22 growth prospects in the backdrop of the second wave in an interview with ETCFO.
V-Guard is into making air coolers, solar water heaters, etc. It grew 8.7 per cent to Rs 2,699 crore in fiscal 2020-21 as compared to 3 per cent de-growth reported in the preceding fiscal. Edited excerpts from the interaction.
Q: What has been the business impact due to the second wave?
Demand has been affected due to the second wave; it is down to about 40-50 per cent so far in the current quarter. But we are seeing e-commerce sales growing amid restrictions though that’s not a huge number in absolute terms.
We expect demand to return to about 70-75 per cent in June as more and more states gradually unlock. The company is keeping a close watch on the possibility of the third wave..
Q: Do your capex plans stand in the wake of the second wave?
We aim to spend Rs 140 crore as capex for the next two years. The plan largely remains unaffected; we remain hopeful of a strong recovery going forward and don’t see any significant delay in the expansion. We aim to increase our northern markets’ share of revenue to about 50 per cent in the next five years; the company is on course to achieve that target.
Q: What’s your outlook for the subsequent quarters?
We hope to pick our momentum back from Q4 where we grew over 58 per cent year on year aided by a strong build-up in demand for summer products. Also, the electrical appliances sector has seen significant expansion, which should augur well going forward..
Q: Do you love making decisions in uncertainties?
That is what the management in companies is for. But even before the pandemic, finance leaders have been living in a volatile world; the virus has further added uncertainty. The complexity of the environment in which we operate has increased with the pandemic. We need to be clear and strong enough to overcome this.Q: What have been your biggest challenges so far in the pandemic?
The biggest challenge has been ensuring employees’ health and safety. (V-Guard has had more than 2,302 employees as of March 2020). We prioritised their safety. We followed strict protocols to protect our workforce.
Another challenge was to ensure that our supply chains remain intact. In the lockdown period, some manufacturing plants had to be shut down. The operations of vendors were disrupted due to shortages of raw material. But we managed to come out of that.
Q: How do you go about deciding on investment proposals?
A thorough business case is drawn for each proposal and then we analyse what sort of returns are expected from each. At the end of the day, we only invest in proposals that give us profits above a certain threshold level.
Q: How do you approach annual budgeting and forecasting?
We have a very sophisticated forecasting technique. Every month, there is a sales and operations planning cycle which drives our short-term planning. We have a rolling forecast mechanism in place, which means we look at the demand signal to see how the following few months will be, and we plan our back-end operations and so on based on that.
Q: What factors do you take into account while developing a financial strategy?
There are three factors in total. First, we consider our growth plans, then we see what sort of resources are to be allocated in R&D, product development, or marketing functions, and then last is the channel strategy (traditional or online or a mix of both) which we use to make financial plans.