Astec Lifesciences to raise around Rs 61.5cr via IPO

In an interview with CNBC-TV18, Ashok Hiramath, Chairman and Managing Director of Astec Lifesciences spoke about the latest happenings in his company and the sector.

Below is a verbatim transcript of an exclusive interview with Ashok Hiramath on CNBC-TV18. Also watch the accompanying video.

Q: Tell us briefly about your company and how you plan to use these funds that you will raise?

A: Our company is basically engaged in the manufacturing of agrochemical active ingredients and pharmaceutical intermediates. This is the reason why we are a Lifesciences company. We intend to raise through this initial public offering (IPO) between Rs 57.5 to Rs 61.5 crore depending on which part of the price band we are at. The applications of the fund would be about Rs 32.5 crore for expansion of our manufacturing capacities, so increasing capacities of our existing products and introducing some new products. We intend to spend about Rs 2.5 crore on beefing up our Research & Development (R&D) department, so that we can get into the CRAMS research model of business. We intend to spend about Rs 3.8 crore on registrations mainly in Brazil and India.

Q: At the moment only half the issue has been subscribed, though of course you have some time to go. Incase you fall short, will your plans get postponed in terms of expansions?

A: We are fairly confident that this will be subscribed. However, in the unlikely event it does not. We have recourse to other means of financing which should mean that we go ahead with all our expansion plans.

Q: You have had a negative cash flow for certain periods of time. Is this a major concern that you have? When do you plan to generate and move into the positive territory?

A: When a company is in a growth phase, you do tend to see negative cash flows because there is money blocked up in inventories and receivables. If you see the first quarter, we had positive cash flows. So it is really a function of what kind of capital expenditure we are doing and the working capital cycle. Hence, I believe that we should be able to see positive cash flows too.  

Q: Besides these negative cash flows, couple of your promoter companies are making losses. There will always be a concern with investors that money which is being raised could be used to make up for losses else where. Is there any reasonable guarantee won’t happen?

A: The ones that you are talking about, they virtually have no other business activity, their loss is in the range of less than Rs 1 lakh or in that range. So it is completely insignificant. They are just that they happen to have some historical reasons for the existence. Therefore, they are deemed to be promoter companies. However, they really have no financial implications on the operations of Astec.

Q: What kind of overseas expansion plans are you looking at? Is there any major geographical region that you have planned to target?

A: For our registration activity, we focused on Brazil. However, at the moment we have lot of work going on in the European Union (EU) countries. We are obtaining registrations country by country of there. In the next couple of years, we should have them in virtually in all the countries there. That market is a protected one at the moment undergoing what is called an Annex-1 phase for our products. So our focus is mainly in those areas.

Q: When will your expansions promised from the IPO proceeds be completed?

A: Our scheduled implementation is that we should have our plans up in running by third quarter of the next financial year.

Q: So that will be basically end 2010?

A: Yes.