With a mix of technology and efforts to scale up its businesses in terms of capacities, geographical presence and products offerings, Bartronics India has emerged as a fast growing company providing solutions and products such as inventory and logistics management to different sectors. It also offers different technologies such as smart cards, used for data capturing and identification.
Bartronic's turnover has grown at a CAGR of 71 per cent over the last five years to Rs 182.23 crore in FY08. The company is now aiming to grow even bigger. Its order book stands at Rs 510 crore (excluding Rs 400 crore order from ESIC) indicates good visibility.
Sudhir Rao, managing director, Bartronics India, in an interview with Jitendra Kumar Gupta, talks about how the company plans to achieve its goals.
What is your growth estimate for revenue over the next two years and how you will achieve the same?
In the current financial year ending March 2009, the company will achieve around Rs 500 crore as the topline. For 2009-10, we expect to cross a turnover figure of around Rs 1,000 crore.
We have bagged some prestigious government projects and many others are in the pipeline. Once some of them get converted into actual orders, we will have a fairly strong visibility even on the Rs 1,000 crore figure for 2010. This in turn envisages a growth rate of over 100 per cent
Where will the growth come from?
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The growth is expected to come from three fronts. Firstly, the Smart cards business in India is at a nascent stage, this will strengthen over the next 2-3 years, with many more government projects being announced and the banking industry embracing smart cards as a replacement to the magnetic stripe cards.
The next area of growth for Bartronics will be its international operations where again, we are in the first year of operation. These markets will provide the 100 per cent growth opportunity because of their current low base. Finally, the India’s retail industry boom is another factor which will contribute significantly to our future growth plans.
What is your USP? And, how do you look at the increasing competition, going forward?
Bartronics continues to drive its leadership position by being early entrants into the latest technologies. With a strong customer base built up over the years, most of whom have an Annual Maintenance Contract.
Bartronics enjoys the advantage of access to any new requirements for implementing its solutions to the existing customers. Its USP is its ability to provide end-to-end solutions including post implementation support .Also, being a close-knit market, it is extremely difficult for a new entrant to develop relationship with the same set of customers and out-do
But, at the same time, whenever the market is attractive, I mean pure economic theory tells us that the competition will hot up, so we do expect some announcement from some of the corporate sectors of setting up smart card facilities over the next 12 to 18 months.
The company is taking steps to quickly scale up its operations through organic and inorganic growth options so that within the next 2-3 years, the company attains a formidable size.
During FY08, your smart card capacity utilisation was just 37.5 per cent. Can you elaborate on this?
For FY08, the production was only for the period beginning December 07. However, since January 08, the manufacturing has geared up significantly and currently the plant is operating at over 90 per cent capacity utilisation.
Will the integration programme undertaken make any difference to margins?
More or less, the margins are similar because we adopt a free pricing approach. The backward integration project for manufacturing of modules for the Smart Cards segment should give us a cost advantage ranging from 5-8 per cent.
In smart cards, the average realisations are just about Rs 30 per unit. Do you see realisations declining in light of higher competition in the future?
The average realisation so far has been low due to the dependence on a single consumer vertical i.e. the telecom sector.
As the consumer base increases to the government sector, and then on to the banking sector, the realisations will increase. Even with the introduction of the 3G cards, the realisation jumps up by almost 50 per cent.
Some of the government projects that we have recently won require cards to be supplied which are much more sophisticated. Here the realisation is up by more than 100 per cent.
Similarly, banking cards requirement, which we are expecting to start after 2010, will have realisations which would be higher at least by 200 per cent.
Many government projects are reportedly pending or delayed. How will it impact your growth rates?
Most of these government projects, though they are being announced continuously, we are expecting a large scale take-up on these projects to happen only during the next financial year, which means beginning April 2009 onwards. And that is the reason why none of these projects have been considered into our order book.
How do you plan to integrate the recently acquired companies? Also, what benefits will accrue in future in the terms of revenue and business?
We should see the synergies setting in by next month. The benefits would be in terms of cross fertilisation of expertise, rationalisation of manpower and overall significant advantages of economies of scale.
Are you looking for more acquisitions?
We intend looking at acquisitions as an integral part of our inorganic growth options moving forward. This would mean that we are likely to look at an acquisition for kickstarting our European operations. Similarly for the Middle East and possibly for China.
Are you looking to enter new segments, if so, what all are they and the opportunities therein?
Yes, the company has been looking at possible expansion in its product/service portfolio by introduction of Point of sale (PoS) products for the Indian Market.
Secondly, we have been working on solutions for the Indian Market using GIS/GPRS. These technologies are expected to become commercially viable over the next couple of years.
What is the progresse with regards the MNIC cards, which have multiple uses (Ration Cards, Voter ID Cards, etc). And what is your role and opportunity?
The opportunity is fairly large. Just look at the number of families who are below the poverty line, I think that itself gives us a fairly strong figure.
However, it is difficult to estimate the benefit to companies like Bartronics mainly because these are largely dependent on the government. Bartronics will continue to play a pivotal role in ensuring that it is at the forefront whenever these initiatives get translated into ground realities.
Any plans to dilute equity to raise funds?
Looking at the kind of opportunities that have been coming our way, we may need to take a re-look at the capacities, but we would like to take this call somewhere around the end of second quarter and the reason for this is because many of these opportunities will translate into actual business, probably in 2009-10. So, we would not like to take an investment decision right now based on these orders, without getting a confidence on the traction at the ground level.
