Acquisitions may help co grow 40% in FY17: Borosil Glass

After acquiring Hopewell Tableware in January, Borosil Glass has now entered the primary pharma glass packaging business by acquiring 60.3 percent stake in Nashik-based Klasspack. These acquisitions may help the company grow by 40 percent in the current fiscal, says Shreevar Kheruka, Managing Director and Chief Executive Officer, Borosil Glass. He expects consolidated revenues to rise to around Rs 560 crore in FY17 against Rs 400 crore last year.Borosil paid for the aquisition by internal accruals, with Kheruka adding that the company does not have any debt in its balance sheet. Klasspack is a small company with around Rs 30 crore revenues, but he says they may try their best to increase this number in the coming year.Below is the verbatim transcript of Shreevar Kheruka's interview to Reema Tendulkar and Nigel D'Souza on CNBC-TV18.Nigel: It appears a pretty interesting acquisition, 60 percent stake is what you have acquired, could you give us some more details, what is the amount that you have invested in this, what kind of capex does it entail and what is the outlook going ahead?A: Klasspack is a manufacturer of pharmaceutical glass packaging that is basically glass ampoules and tubular glass vials. Borosil for the last 50 years has been a premium supplier to the pharmaceutical industry for its laboratory glassware range. I am pleased to say that we have market leadership position here.In the last few years, we have seen increasing stringent compliance in the pharmaceutical sector. This includes all aspects of pharmaceutical production. So one of the main categories is pharmaceutical packaging and using Borosil\\'s reputation and experience in specialty glass production, we feel we can leverage the Klasspack\\'s production facilities and give the pharmaceutical industry a very high quality alternative for their pharmaceutical packaging needs so that was a rationale for the investments.I am not able to disclose the amount invested for non-disclosure agreement (NDA) reasons but suffice to say that most of the largest portion of the investment was made by primary infusion. So the funds will be used for expansion of the production facility. It is getting more compliance, clean rooms, automatic camera inspection and other such new facilities.Reema: How did Borosil glass pay for this acquisition?A: It was paid by cash.Reema: Internal accruals or have you raised debt?A: Internal accruals.Reema: You also indicated that the reason for acquiring Klasspack is for the production capacity. What is the total size?A: At the moment, they are a fairly small company with a turnover of about Rs 30 crore roughly. We feel that they can expand their turnover substantially in the next few years because there will be a large growth in the sector.Nigel: Can you give us numbers? Rs 30 crore is what it is doing currently, you believe that it is going to expand. Would it expand double, triple, four times what does it look like? Also, you said that you have acquired this via internal accruals, what is the balance sheet looking like of Borosil, what is the debt, what is the cash?A: There is no debt in the company. Borosil is completely debt free. There is barely any working capital debt either. It is quite a cash rich company and we also acquired another company early this year called Hopewell Tableware that was in the consumer products division of a company.So the balance sheet is quite strong and the business has been growing well in the last few years. So, we are looking to utilise the cash for expansion by virtue of purchasing companies that would be analogous to our sector.Reema: In Q1 or the latest earnings, financials that we have, your revenues were close to about Rs 400 crore for FY16. With these acquisitions, what you think your FY17 revenues could look like because you have already made that investment in the other company, now this?A: On a consolidated basis, we expect, we will be growing at about 40 percent this year. So we should be somewhere around Rs 560 crore in this year with the acquisitions as well. It could be depending on the consumer business -- it is dependent on Diwali. So a lot of the sales come during that period and I hope that we have a good Diwali this year. The signs are looking good but let us see what happens. I expect somewhere around 40 percent growth number.Nigel: FY18, FY19 what can you scale it up to, what will the numbers look like?A: It is a bit early to say because we have to see how the market responds or the customers respond to us but we can look at multiples of expansion in terms of the market potential and I am sure we will execute well but it is a bit too early to call any number beyond this current year for the acquired companies.