Nelcast eyes IPO to fund expansion

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The Chennai-based Rs 270 crore Nelcast, one of the largest producers of Spheroidal Graphite (SG) iron castings in the country, plans to come out with an IPO to fund its proposed capacity expansion and foray into new products.

Nelcast, which began its operations in a small way over two decades ago with a 1,200 tpa foundry capacity at Gudur, Andhra Pradesh, had a combined capacity of 72,000 tpa at the end of 2005-06, with the second foundry having been established at Ponneri, north of Chennai. Its combined capacity has since increased to 1.02 lakh tpa now, with 42,000 tpa at Gudur and 60,000 tpa at Ponneri.

"With the surge in demand for castings from the automobile industry, we have drawn up plans to further increase the combined capacity to 1.5 lakh tpa by 2008," J Joseph, managing director, Nelcast told at a press conference on Tuesday. "With the automobile market as well as that of auto components registering steady growth, we have to continuously look at options to expand capacity," he added.

In addition, it has also drawn up plans to get into value added products as auto component is one of the fastest growing export sectors in India. "We will soon be moving from casting to machining (auto components) and after establishing machining of castings, we will embark on to sub-assemblies, which is increasingly preferred by manufacturers across various sectors," Joseph said.

According to him, the expansion of capacity as well as foray into value added products would require about Rs 65 crore. The company has recently filed the necessary papers with the Sebi for the proposed IPO, through which the promoters will dilute about 25% of the equity. Sebi clearance is awaited, reports The Economic Times.