In an interview to CNBC-TV18, Neeraj Saluja, the managing director of SEL Manufacturing talks about its new greenfield textile plant. This project is being implemented in SEL Textile which is a 100% subsidiary of SEL Manufacturing.

Saluja says the spinning project investment under SEL Textile is close to Rs 1,000 crore. “Of which Rs 700 crore is debt which is already tied-up and the balance is from internal accruals. The denim ratio is the same,” he adds.

Below is an edited transcript of his interview. Watch the accompanying video for more.

Q: We understand that a greenfield integrated textile project is what you are setting up in Punjab. What will this scale up your capacity to with regards to spinning and what kind of an investment have you made for this?

A: This is going to be an integrated textile plant where it will have all the facilities right from manufacturing of yarn to weaving of denim fabric, processing of fabric and then to readymade garments. In spinning this will add to another around 2 lakh spindles to the group capacity which post all expansions would be close to a million spindles and denim is one thing which we are not present into and this is a new segment we are getting in.

Q: Is this new plant under SEL Textiles which is your 100% subsidiary? Last time you had indicated that you are considering an IPO of close to Rs 100 crore. Is that been differed? Where is the funding for this coming from?

A: This project is being implemented in SEL Textile which is a 100% subsidiary of SEL Manufacturing. On the IPO part it is still on hold. The board has still not taken the decision and the funding part has been partially funded through internal accruals, equity and debt.

Q: What's the kind of investment you need for this?

A: The total investment on this project is going to be close to Rs 1,600 crore.

Q: When does this become operational?

A: It will be in two phases. Spinning will be the first stage and denim in the second stage. Spinning would be operational by October 12, 2012.

Q: Rs 1,600 crore is a substantial amount by way of investment. How much was internal accruals, how much was debt and what will the debt on the books stand at?

A: The spinning project investment under SEL Textile is close to Rs 1,000 crore of which Rs 700 crore is debt which is already tied-up and the balance is from internal accruals. The denim ratio is the same.

Q: What's the kind of return on an annual basis once this complete unit is formed that you can expect from it?

A: It's not a standalone vanilla spinning project or it's not a commodity project. It is going to have end-to-end operations from spinning to fabric to garments. So we’ll have the full benefits of it being totally vertically integrated.