Tubeknit Fashions to fund expansion via public issue

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » RELATED NEWS Tubeknit Fashions IPO opens for subscription Tubeknit Fashions IPO opens on Feb 21 Nifty BSE | NSE 25/05/12 Are Mutual Funds betting on Nifty?

Tubeknit Fashions which is a company from the knitted garments segment is coming out with an initial public issue of 42.7 lakh shares in a price band of Rs 100-120. The company is looking to raise upto Rs 51 odd crore on the top end of the price band .

P Parthasarathi, Managing Director of Tubeknit Fashions, comments on the company.He states that they are going for the expansion-backward integration for Tubeknit Fashion. Their spinning division is going to absorb about Rs 40 crore and the balance is going for the garment manufacturing expansion including balancing of equipments in the dyeing division.

Parthasarathi adds that the garment facility will be done after FY07 and will start its production before October.
 
Excerpts from CNBC - TV18's exclusive interview with P Parthasarathi:

Q: If you could walk us through exactly what this money of Rs 50 crore would be used for? You are looking to expand your spindle capacity by about 20,000 spindles, could you break it down specifically as to how much would be used for the spindle capacity and how much would be used for the balance?

A: We are going for the expansion-backward integration for Tubeknit Fashion, the spinning division is going to absorb about Rs 40 crore and the balance is going for the garment manufacturing expansion including balancing of equipments in the dyeing division.

Q: How much time will this backward integration take and by when will you actually see all these extended capacities kicking in?

A: The garment facility will be soon after FY07, before October it will start its production but for spinning we have to wait another one more year for that period maybe one and a half year from now.

Q: What would be your individual capacity in each one of these division knitting as well as spinning post the expansion?

A: Knitting division, we are not expanding anything at the moment, what we are having, 8000 kilograms per day knitting capacity will be maintained, as it is and the garmenting capacity which determines the expansion activity from 38000 pieces to another 40,000 pieces add on- 78000 pieces in all.

Q: Why are the risk factors highlighted in DRHP says that the major chunk of your revenues almost 75% of your revenues are coming from the top 10 clients, are you looking at expanding the client base at this point of time, what are your efforts in that?

A: We are increasing the product range and also expanding our market maybe the US market, we have not touched it properly.

Q: Another aspect that has been highlighted at this point of time is that the major chunk of your revenues comes in from the European market, you are talking about building up your position in the American markets as well, how are you going to be looking at this rejig and what kind of a revenue mix are you really targeting in terms of a geographical contribution?

A: European market for us is a fashion segment; we are not in the commodity product. US market is mass conception mostly into commercial and not really value additions there but European market is between so many different countries. We are in the fashion segment so we would like to expand business much more. Also we would like to add the geographical US relationship there, so we will be having 20% revenues from US in future. That is what we are planning for it. So about 80% from Europe and 20% from US in the beginning

Q: Could you break down what your revenue split is between printing, dyeing, knitting as well as weaving and what the profitability breaks up into all of these three segments?

A: It is all individual profit-making centres but it is all in the integrated facility. Of course we are doing some commissioned knitting and commissioned dyeing at the moment but when we are expanding from 38000 to 78000 pieces we will be fully utilizing these facilities in our production line. So we don't have any individual sections profit at the moment in our company.

Q: You derive 76% of your revenues from your top 10 clients, is that something that you are going to look to diversify as time goes on and who are your key clients geographically and if you could list  out the players across?

A: Our major customers are Tesco in UK, the chain retailer and also some of the brands like Tommy Hilfiger in Netherlands which is Tommy Europe so we are selling to these kind of major clients now. Like that we will be going for them in the expansion activity but still we will be going for more fashion segment. We will be going for a joint venture project which we are planning at the moment that joint venture project is a different set up but it is going to help us to touch in the niche market line.

Q: Will it be the brand that you have set up abroad?

A: No it is not like that. The joint venture project is something from Switzerland who are known for kitted fabric they adopt some other method and we are following that.

Q: On a FY07 basis would it be fair to assume that you will close the year with an EPS of close to about Rs 6.5?

A: I can't comment on that.

Q: Net profit level of almost Rs 10-Rs 12 crore?

A: I can't tell you now.