Buyback priced at max Rs 70/sh: JK Lakshmi Cements

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In an exclusive interview to CNBC-TV18, wholetime director of JK Lakshmi Cements , Shailendra Chouksey says that the board has priced the share buyback at an upper limit of Rs 70 per share. "We have allotted Rs 97.5 crore for the buyback, and that will not be a problem for us bcause we have Rs 600 crore on our books," he said, adding that they will deploy the cash in two years.

JK Lakshmi Cements posted a good third quarter, with net profit jumping almost 10 times to Rs 49.2 crore. "This was mainly because of MAT credit entitlement of Rs 12 crore," he added.

Going forward, Chouksey says that he sees the uptrend in cement prices to remain. "The issue was that we had a lot of cost push in the last one year which we could not pass on due to market conditions," he explained.

Below is an edited transcript of his interview. Also watch the accompanying video.

Q: Could you take us through your numbers? We see some kind of growth on the top-line and your PAT isn't that bad as well- please take us through your numbers?

A: We have seen a 39% growth in our net sales at Rs 438.8 crore. Our operating profit after other income stands at Rs 108.95 crore, which as compared to Rs 34 crore on the corresponding quarter is nearly three times.

In terms of our profit after tax, it stands at Rs 49.24 crore which is over 10 times the figure that we clocked in the corresponding quarter last year. Even if I compare to the previous quarter, it is more than 6 or 7 times because it was only Rs 6.49 crore in the previous quarter.

Q: But that is also aided by MAT credit entitlement of nearly Rs 12 crore?

A: In a way you are right.

Q: Your other income has also increased on a year on year basis. What kind of cash are you sitting on?

A: We have almost Rs 600 crore on our balance sheet right now on which we are earning dividend income etc. That is why you are finding our other income increasing in this particular quarter.

Q: What kind of debt are you sitting on considering that you have various expansion plans amount to approximately Rs 1000 crore?

A: If you see the figures in isolation, the fact is that we have a multiple projects going on simultaneously right now. For instance we have our grinding unit which is gets completed next month, which is about a Rs 100 crore project. We have recently completed our tower projects totaling to about Rs 76 crore.

We have started work on our Greenfield site at Durg which is a Rs 1250 crore project. Cumulatively we have about Rs 900 crore debt on our books which we had to take for all these projects. So what we see as the cash sitting right now would get deployed over next 2 years. We expect our Durg project to get commissioned by October 13.

Q: Post these various expansions would go up to 8 million tonne. You had indicated that you would be looking at 10 million tonne so are you looking for any kind of inorganic growth?

A: Yes. We have also pitched in for operating Udaipur cement works plant and the BIFR sanctioned for the same has also been cleared, so hopefully we have yet to work on that in terms of structuring and how would the financial structuring of that company would be but that would give us about 1.5 million tonne additional capacity in the course of 2 years.

Q: Could you also take us through what kind of capacity utilizations you'll were working at? The last time we spoke you were indicating that you'll were nearly upto the 90% odd mark. What kind of capacity utilizations were you'll working at in the past quarter and in the coming quarter what kind of capacity utilizations you'll are looking at and also how do you expect the prices of cement to vary in your areas of North and West India?

A: The capacity utilization first, this quarter we are fairly satisfied that we operated at 99% capacity utilization which if I compare with the industry overall on pan India basis it was only about 74%. Even if I see the industry which were operating in North and Gujarat where we are essentially operating, the average capacity utilization in this two states have been around below 90%. So I think we did quiet well at 99%.

In the coming quarter that is January to March I would expect that we should achieve 100% capacity utilization because we are seeing that demand being more buoyant, demand having picked up in almost all the markets that we are operating in this quarter. So I am expecting the strength to continue as it is the January-March quarter is normally good for cement industry as there is a lot of government buying which takes place before their budget lapses. So all in all I would expect these people to have a capacity utilization to remain at 100%.

Q: What about the cement prices to behave in the Northern and the Western regions where you have maximum exposure?

A: The cement prices did see an upward movement in this quarter and I would expect that trend to maintain. The issue is that we had a lot of cost push in the last one year which we could not pass on due to market conditions, so I hope that this price trend would continue.

Q: Your buyback has been announced and I think you'll are looking at picking up nearly 10% of your equity share capital. Could you take us through that how will it be funded and when is this likely to come on board?

A: The total fund which is being year marked for this buyback is about Rs 97.5 crores and therefore the funds involved is not very much. We have just seen that we have about Rs 600 crore sitting in our balance sheet. So funding of this buyback is not an issue at all, it's just about Rs 100 crores it's not affecting any of our plans.

Q: What kind of price are you looking at?

A: The board has recommended an upper limit of Rs 70 per share, which is over 35% premium of the last two months' average of about Rs 44-45.