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SEL Manufacturing looks to raise Rs 80 crore for expansion

In an interview with CNBC-TV18's Latha Venkatesh and Gautam Broker, Neeraj Saluja, MD of SEL Manufacturing spoke about the latest happenings in his company and the road ahead.

January 05, 2011 / 19:31 IST
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In an interview with CNBC-TV18's Latha Venkatesh and Gautam Broker, Neeraj Saluja, MD of SEL Manufacturing spoke about the latest happenings in his company and the road ahead.

Below is a verbatim transcript of the interview. Also watch the accompanying video.

Q: Is the approval of issuing two crore shares to promoter going to be in one or two tranches? What would be the conversion price of the warrant?

A: This would happen in two tranches and the conversion price is going to be around Rs 40.

Q: What are you raising this money for? And how much will you raise?

A: The entire money is going through a company expansion. So, the company is planning to raise close to Rs 80 crore.

Q: For the last 12 months there has been a sizeable equity expansion. The BSE website says that your equity as of 31st March was around Rs 30 crore, in June 2010 it went up to Rs 60 crore and in September 2010 it goes to almost Rs 99 crore to Rs 100 crore. What is your equity after you have finished raising this two crore shares?

A: There are no further plans of dilution. We are a company setting up the largest spinning plant of the country and 4 lakh spindles with a total capital expansion close to Rs 2,000 crore. But, the entire equity raised is going to be used in funding that project. It is one of the largest projects of the country at one location. It will be implemented in a record time of six months.

Q: Over the year, your share price it has fallen by 80%. One would assume that your earning per share price fall is a response to the fall in the earning per share. You were at about Rs 32 up until the end of last year. But, the first two quarters of this year, the first half it is about Rs 6. So, would your earning per share (EPS) fall worse than half? Are you going to end the year with Rs 10 to 12 from Rs 32?

A: You never take current in the capital and equity markets and it is always the future. Once, the entire expansion is on ground and the top-line and bottom-line has full effect of the Bhopal and other expansions, only then will the right time to determine the EPS.

Q: To service the equity that you have expanded, what kind of revenues in the earnings would you be expecting once the expansions are in place?

A: The Company has installed a per day capacity of 2 lakh spindles, 40 tonne of towel and 70,000 garments. This year, half yearly, we were close to 700 crore and we have been growing at a compound annual growth rate (CAGR) of almost 75%. We will be able to maintain the growth which is going from last couple of years. With these capacities, we will be one of the largest in the country with close to 7.5 lakh spindles, by March 2012.

Q: Do you expect your net margins to remain constant at levels currently or swould they improve with the expansion?

A: The net margins would considerably improve with the capacities and synergies of scale going up. We are the company where the average age of the machinery will be the least. In the spinning vertical, we would be close to 7.5 lakh spindles by March 2012. The average age of the machine would not be more than six months. So, the running cost of will minimum in the industry.

Q: With you doing about 350 to 360 crore per quarter in revenues, can we take this as pro-rata? Can we assume that your revenues would be 1500 crore in FY11? What will be your revenue growth in FY12? Do the entire expansions come on stream in FY12?

A: The entire expansions come on stream by FY12. We have been growing at 350 crore per quarter and will be able to maintain the growth in FY12. There would be a major leap in top-line as well as the bottom-line with the capacities that we are running today and the next year.

Q: If your revenues would be Rs 1,500 crore in FY11, what kind of a ballpark percentage growth can we look at in revenues considering your EPS fall?

A: I cannot give you the figure as of now. The capacity today we are running is close to 2 lakh spindles. On 31st December, the top-line was close to Rs 1,000 crore or half yearly close to Rs 700 crore with the towel and garment capacity. There will be a major jump in the top-line with the capacity growth of almost three times by the next financial year.

Q: Back in February, you spoke about listing the SEL Textile subsidiary. When will you be listing one of those subsidiaries? Are those plans still alive?

A: We got the regulatory approval for SEL textile in October. We are working on filing of the red herring prospectus (RHP) which would happen shortly.

first published: Jan 5, 2011 06:44 pm

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