Shifting focus to value added pipes: Zenith Birla

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Shifting focus to value added pipes: Zenith Birla

Zenith Birla is coming out with a follow-on public offer, which opens today. It plans to raise Rs 131 crore for manufacture of tubes, used in the auto sector. Chairman of Yash Birla Group, Yash Birla says that they are shifting their focus to more value added pipes.

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » RELATED NEWS Zenith Birla announces FPO of 2.38cr equity shares Zenith Birla (India) Limited announces “Public Offer” Zenith Birla FPO opens today for subscription Quick look at Zenith Birla FPO Zenith Birla BSE | NSE 31/05/12 Are Mutual Funds betting on Zenith Birla?

Zenith Birla is coming out with a follow-on public offer, which opens today. It plans to raise Rs 131 crore for manufacture of tubes used in the auto sector.

The company's Chairman Yash Birla says that they are shifting their focus to more value added pipes.

Excerpts from CNBC-TV18's exclusive interview with Yash Birla:

Q: You are raising Rs 131 crore, you are essentially now looking at foraying into the auto space. What is the capex that you have laid out and what are you going to use this money for?

A: Basically Rs 131 crore is the issue size. Out of that Rs 88 crore is going to be used for the plant and machinery.

The rest is for the existing working capital requirement and working capital requirement for the project, which is basically for CDW pipes called Cold Drawn Welded pipes, which are mainly used in the auto sector. And there are some issue expenses, which totals to Rs 131 crore.

Q: Give us an idea of this expansion that you have on the anvil. Is it going to be focussed towards a particular sector and how soon do you hope to be able to make this facility functional?

A: Basically what we have today is standard pipes, standard ERW - Electric Resistance Welded pipes, which are used mainly as water pipes. We are getting into pipes for the auto sector, which mostly go into two wheelers and also in the four wheelers and the tractor industry.

So we are shifting our focus to more value added pipes, from the standard pipes what we have today to CDW pipes, which are going to go for the auto industry. We envisage to start the commercial production by November 2007, which is almost 11 months from today.

Q: How do you see margins panning out for particularly this division because HR Coil prices have started moving up and that's likely to have an impact on the cost aspect?

A: Hot rolled coil prices have been moving up and down. We do not have a problem with that because the demand is more than the supply. Since the demand for this product is more than supply, we can pass on the price to the ultimate consumer.

The long-term prospect of a hot rolled coil will be stable; it won't be so volatile as it has been in the past and we do not have a problem with hot rolled coil prices because ultimately it is passed on to the consumer.

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