No plans to sell or develop Mulund land: Hercules Hoists

Shares of transport services company, Hercules Hoists have been rising on expectations that the company would develop its land at Mulund (a suburb in central Mumbai) after moving the entire facility to its Khopoli plot.

Disappointing the shareholders, chairman Shekhar Bajaj told CNBC-TV18 that the company would keep its Mulund land vacant and would not develop it unless they see some good acquisition opportunities. He said, "One of the best things to do is to keep the Mulund land as it is than converting and paying taxes on it." He pointed out that the company is cash-rich without any bank borrowing. "Selling this land would bring in further surplus cash, which is not needed at the moment," he explained. Bajaj said that they have neither thought of monetising nor do they want to develop the Mulund land. "We have shifted our total operations to Khopoli where the capacity can go up to Rs 300 crore from Rs 100 crore," he elaborated. Below is the edited transcript of Bajaj's interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video. Q: There have been reports that you could look to monetise your land in Mulund. Would you confirm that? What are your plans? A: Hercules Hoists is a low-key stock of the Bajaj group. The company is doing extremely well with a turnover of Rs 117 crore, an EBITDA level of 35% and profit after tax (PAT) of Rs 29.75 crore. As far as our Mulund land is concerned, we are neither monetising nor wanting to develop it at this moment. We have shifted our total operations to Khopoli where the capacity can go up to Rs 300 crore from Rs 100 crore, which is more than three times the size of the Khopoli work. We can increase our capacity substantially. Last year, we did around Rs 117 crore and are looking at about Rs 130 crore for the current year. Q: What do you intend to do with the Mulund land since you are shifting operations to Khopoli? A: Our Mulund land is completely empty. We have locked it up and have not applied our mind on what to do with it at this moment. We do not need funds. We would keep our spare land as it is than converting it and paying taxes on that. Hercules Hoists is a very cash-rich company without any bank borrowing. If we sell it, we would get further surplus cash. There has been a continuous appreciation of this land. Unless we have some good acquisition opportunity where we need funds, we won't look at developing this land. Q: Do you confirm that you have had no talks with developers or interested parties for an outright sale or development? A: Absolutely. We have not even thought about it. We are not looking at it very seriously for the near future. It is difficult to answer this question from a long-term perspective. Q: What is the core business of the company? You indicated that you see sales growing by 15%. What kind of order book and profitability is that based on? A: Last year, we earned 35% EBITDA which is a difficult number to maintain. Further increase in EBITDA levels is not possible, but we have been looking towards maintaining it. In terms of profitability, similar improvement should take place. The market has picked up. When the market is down, people like to go for established brands rather than taking chance with new brands. We are a 50-year old company. We started as a joint venture with a Germany company HADEF which continues to hold 5% stake. About 69% is held by the promoters and remaining is in the market place. We expect our fiftieth year to be very good. We expect to expand our additional activities into other related businesses. We do not have plans to get into a new businesses. With our present capacity, we require to look at exports very seriously as it has good opportunities and scope. We met the top 41 distributors at the dealers meet. As a brand, if anybody would like to buy established products like chain pulley block, electric hoist and a wire rope hoist where safety is very critical, the buyer doesn't bother if anybody gives them 2-5% cheaper. It could be very risky and dangerous if the chain breaks or quality is not up to the mark, which is why, people do not like to try new brands. We are market leaders in chain pulley block, electric hoist and wire rope hoist. This is the reason why we can get our margins and required growth.