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    Recovery in financials likely from June quarter onwards: Gautam, MD, Sheela Foam

    Synopsis

    Amid a slowdown in housing sector, the growth in mattress business has largely been led by the shift to a modern mattress from unorganised rural products, says Rahul Gautam, MD at Sheela Foam.

    rahul-gautam-bkGuest contributor and other agencies
    When we have a far simplified version of tracking down evasions that is when the advantage would come. The government is moving towards that but I guess it has its compulsions.
    Despite the economic slowdown, Sheela Foam has managed to post the best revenue growth in five quarters. Do you see better numbers in Q4 than what we have seen so far?

    I must say that a considerable amount of growth comes from the acquisition made in Spain which was completed on 14th of October. Hence, the inflated numbers in the third quarter. This shall be a continuing story as growth over corresponding quarters will always be there. We have also registered some growth in the local Indian markets, though small, there is growth.

    What will be the impact of the corporate tax cut and how do you measure the effects?

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    We have opted for the new corporate tax rate which has added to the bottom line for sure. However, is it an incentive enough to go and invest? I would say probably not yet. We still look for the consumer demand to boost and then attract investment. But, now could be the time and we should be making some investments in this calendar year.

    Trying to understand the very basics of the mattress market, you have a replacement market and you have a new market. Amidst unrelenting liquidity crisis and poor sentiment in the housing sector what is happening to the housing demand. What is its impact on the pockets where you cater and how are your sales inching up?

    Primitively, there is a huge part of the country that still sleeps on some kind of cotton mattresses, rugs or mats and they are constantly converting to use a modern mattress. We are trying to infiltrate the market at a local level. Moreover, in the existing modern mattress market, there are two aspects: one is housing and the other is people replacing the product. To be honest, the industry has not done enough working on trying to replace products and in my opinion there are enough virgin markets to cater to. So, in spite of the slowdown in the housing sector the growth has been primarily based on this conversion from the unorganised rural products to a modern mattress. Also, we introduced at least three new products which cater to local markets, which are a little lower on the price points and still have enough value to deliver.

    You logged good numbers when the economy was in a slowdown. It had an impact on consumption and human behaviour. Things are looking up now and bad has not become worse thankfully. We are somewhere in between where things are inching higher. When will that translate into numbers for you?


    I would look at it from the first quarter of the next financial year, though, whatever time has passed as far as this quarter is concerned the trends are positive. The trends are positive for us in addition to Spain acquisition. Therefore, I think the sentiments are changing very slowly. Unfortunately, for us at least the budget did not kick start as we expected from it but there were some signs of increase in custom duties on footwear, furniture and mattresses. This could help us see a slight growth in the consumption of polyurethane foam for the local manufacturing. Having said that, I expect that from the first quarter of the next financial year it should really become much better, I cannot say kick start but become much better.

    What about the companies that were complaining about the GST rollout and the kind of impact that has had? What shall be the implications of that and how has it affected the business?

    GST rollout has impacted in two ways: one it has helped the unorganised sector to become a little more compliant with the payment of taxes etc. but please appreciate that 70-80 per cent or 90 per cent of India was in a kind of an unorganised segment where only cash used to rule. There is a very small change that is happening, it will take time. As far as GST is concerned, there are many people who question whether for a country like India even if it was the right kind of tax or not. But I am not questioning that. I am just saying that the basic nature of it is taxing everything. People are becoming more and more wary of this and that it is no longer advantageous to evade and avoid GST and the government is also trying to plug the loopholes. I think the biggest advantage will come when the whole process and the structure is simplified where we would have one rate of tax. When we have a far simplified version of tracking down evasions that is when the advantage would come. The government is moving towards that but I guess it has its compulsions.



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    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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