Shree Ganesh to pump USD 50-70m for overseas acquisitions

Umesh Parekh, MD, Shree Ganesh Jewellery House in an interview with CNBC-TV18 said that the company is looking to acquire chain of stores in UAE and USA. The company is looking to invest USD 50-75 million into these new acquisitions. Further, the company is aiming to achieve Rs 400 crore bottomline next year.

Below is the verbatim transcript of Parekh's interview with Sonia Shenoy and Reema Tendulkar of CNBC-TV18. Also watch the accompanying video.

Q: It is learnt that Shree Ganesh Jewellry is considering an acquisition of a chain of stores in UAE, is that correct? If yes, how much are you willing to pump in for this acquisition?

A: The company is looking at acquisition for stores not only in UAE but also a large chain in USA. The company wishes to pump in approximately USD 50-75 million into these new acquisitions. But, we are still at the stage where we are deciding on the valuations of the target company.

Q: How will you fund this, will it be from internal accruals or are you looking to raise some funds?

A: The company has a very healthy balance sheet. This year the profits have really shot up and it is approximately Rs 275 crore up. We can do this with internal accruals. There is no plan of raising funds from public or QIPs as of now.

Q: Could you tell us in what stage currently your talks are with all these chain stores sales, whether its in UAE or US and when might this acquisition get completed?

A: We are looking at a time frame of approximately 120 days, but you known how acquisitions are. But, definitely, by this financial year end and next financial beginning we would be in position to start implementation of the new acquisition which we are going to take.

Q: Your refining business will be commencing from next month, could you tell us what the size and what capacity is this refining business? How will it contribute to your financials?

A: This year we have implemented a plant of refining capacity of 25 tonnes, which in its size is one of the largest refining capacities in India. But the first phase of commencement would start within 60 days, so it will give a good impact on my financial health for next financial year to the tune of approximately Rs 75 crore in growth of bottomline.

Q: Apart from this Rs 75 crore what would your net profit look like in the next financial year?  I have an indication of somewhere around Rs 400 crore or so, that will be a good jump on a YoY basis. Is that the figure that you are working with, Rs 400 crore on profits?

A: We are looking at Rs 400 crore bottomline in the next year, this is apart from the refining business. Our organic growth, this year we have done approximately Rs 5,350 crore in topline and Rs 275 crore in the bottomline in the last financial year.

Next year we anticipate a growth of around 50%. Organically we should grow at Rs 375-400 crore in bottomline and of course with this refining business coming in, we may see a further increments of Rs 65-75 crore.

Q: What do you hope to do in terms of margins? Last time you said you are looking to diversify into diamonds as well, but that has not proven to be so lucrative for you guys. At 8% in terms of operating profit margins, you think you could go higher than that?

A: With this new module, new verticals of refining business, margin would go up, Rs 75 crore on Rs 400 crore is a substantial increase in margins. There is a huge competition in diamond market, even Gitanjali has recently acquired a chain of stores in Italy. But, when there is healthy competition, there is also healthy demand. We are trying to cope up with this demand in diamond segment.

Q: In 120 days you said you would complete this acquisitions, post that how many stores are you hoping to clock in. How many stores will you guys have?

A: Post acquisition we should have approximately 75 stores. Currently, we are having around 20 stores in India.

Q: Is there any plan to scale up your refining business because currently you spoke about 25 tonnes? Would you like to take it higher and also is this all going to be used for internal consumption or are you all looking to sell it to a third party?

A: Company consumed approximately 25 tonnes of gold this year. So with a capacity of 25 tonnes, it will be like an internal consumption. But this is our pilot project, in future we may.

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