New plant to cost Rs 52 cr: JHS Svendgaard

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » RELATED NEWS JHS Svendgaard IPO opens for subscription JHS Svendgaard IPO opens on September 26, 2006 BSE | NSE 01/01/70 Are Mutual Funds betting on ?

JHS Svendgaard   laboratories public issue of 67 lakh shares opens today. Shares are being offered in the price band of Rs 49 to 58 per share.

The company's new plant is coming up in Himachal Pradesh. Its MD Nikhil Nanda says the total estimated cost of this plant is about Rs 52 crore, which will get operational by December 2006.

The company, he further adds, has signed up recently with two major retail chains of India for their in-store private label brands.

Excerpts from CNBC-TV18's exclusive interview with Nikhil Nanda:

Q: You are looking at raising about Rs 33-39 crore via this issue. Could you put into perspective the plant that's coming up in Himachal Pradesh, the capacity of that plant, when will it come on stream and more importantly are you also looking at raising debt for your total capex?

A: We have already tied-up a debt of about Rs 21.5 crore with our current banker, that's Centurion Bank of Punjab. The total estimated cost of the new plant coming up at Himachal is about Rs 52 crore.

We are expanding the capacity to a great extent for all the interesting orders that we have in hand plus the prospective customers. As some of the products that we have been manufacturing till now were not covered in the MRP based excise and have just got covered in an MRP based excise from June 2006.

So with regards to that, we are well ahead of any prospective competition in terms of timing as plant would be ready for operations by December 2006.

Q: Give us an idea of the retail segment and how much of a fillip that could bring into both your profitability as well as your margins, which currently stand at about 19%?

A: Globally, we are already doing work for some of the big global retail chains and in India also we have signed up recently with two major retail chains for their in-store private label brands.

Because of the non-disclosure agreement, we would not be able to give out the names of the companies that we have signed up with.

Q: If you can give us an idea in terms of client base, how much has it expanded and how many more clients do you hope to be able to garner in this retail space?

A: We are actually looking at getting almost close to the maximum percentage of the retail space in India in the organized sector because we are working with some of the big names in the retail segment at the global level.

So that's kind of due diligence done for the retailers in India or the retail chains, which are coming up in India. When they get to know that we are working with company X, it's a comfort level that they get.

Q: One word on your margins going forward 19% is where you are maintaining them for now but with the launch of these new products, do you expect some pressure to build up on the margins or are they likely to remain at these levels?

A: We in fact expect the margins to grow better because of the anchor free technology, which we are getting into India in the toothbrushes segment and the capacity expansion, which is happening in the denture effervescent tablet segment. This is a major product and a major market for us in the US.