Entered B2C seg; plan $150m investment in UAE plant:Shilpi Cable

In an interview with CNBC-TV18, Manish Bhatt, CEO, Shilpi Cable Technologies spoke about the outlook for the business going forward.

Bhatt said the company will be making investment of USD 150 million in the UAE plant. The company he said has entered the B2C segment via the brand ' Safe'. They are into house wire, modular switches and we have also got miniature circuit breaker (MCB) in that segment.Below is the verbatim transcript of Manish Bhatt's interview to Reema Tendulkar & Mangalam Maloo on CNBC-TV18. Mangalam: What is it that the company is doing in terms of revenue growth because if we look at your revenue growth in FY16, it is higher by almost Rs 600 crore while if you look at all the other companies in the cable space, none of them have shown this kind of traction? So where are you seeing demand come by from and who are your key clients? A: If you analyse Shilpi Cable, we have different segments and one part of the business is B2B where we are present in telecom, automobiles. The nature of this business is high entry and high exit barrier. So we have been working for some time and we have been getting successes and hence that is leading us on growth, for example telecom; today we are supplying to each and every telecom operators in India. Automobile, we have a substantial share in two-wheeler and we are trying to get into four-wheeler segment. So likewise every segment, since we are increasing our penetration and also share with penetrated account, is giving us the growth. Second, we have also initiated in this segment, introduction of new products, for example in telecom we are now getting into antenna to ensure that we continue to grow. However, another area where we have now entered is into B2C where we have launched a brand called 'Safe'. We started with house wire and now we have introduced modular switches and we have also got miniature circuit breaker (MCB). So in this segment we are presently focusing on creation of a distribution network like a fast moving consumer goods (FMCG) model. So we are now present in almost 18 states. So all of this, new development plus increase is giving us growth in each of the segment leading to this growth for almost 40 percent year-on-year. Reema: What is the kind of investment you will need for this B2C segment - Safe? A: All put together, we envisage an investment of around Rs 50 crore in terms of building up of capex for all the businesses put together. Mangalam: We saw some announcements come by along with your Q4 numbers where the company will setup a plant in UAE, for which you will have to take about USD 100 million worth debt. If you look at the debt on your books, any which way it has increased from about Rs 94 crore odd to Rs 256 crore in FY16. USD 100 million debt accounts for almost Rs 6,000 crore odd, how are you planning to do that and how are you planning to fund it? A: If you see the business, one is domestic and other is an international business. Last year we did around Rs 1,900 crore in our domestic business and overall we have done Rs 3,900 crore. This business which we are doing in international market is mostly a trading business, which we are doing in copper as well as some telecom products. Our strong hold is in manufacturing and selling manufactured products but being a small and medium-size business (SMB) and a desire of going international we first wanted to establish ourselves. Now that we have got the market, we are converting those products into manufacturing by putting this investment there. So it's USD 150 million investment out of which USD 50 million is through equity and USD 100 million through debt. So, around 60,000 metric tonne of copper will be churned out from there, so that is basically supporting our international business. Reema: What would your total debt be after you take on this USD 100 million for your UAE plant? A: For Indian operation we have Rs 200 crore of debt and non-fund based since we deal in copper, we have around Rs 750 crore limits. So all in all Rs 950 crore is our limit which is there in India. Reema: You have utilised the entire credit limit. You would have a consolidated debt of Rs 950 crore as of now. A: It varies time to time depending on the LCs we have opened. Mangalam: A couple of concerns with regards to the promoter stake holding, in fact it has come down from 75 percent to almost 41 percent. We saw a bit of increase last quarter, what is the trajectory there. Are the promoters looking to increase stake in the company further and what about the 74 percent stake which is pledged? A: As far as pledging is concerned, it is all pledged to the bank because we have a high requirement of working capital. The promoter stake is at 41 percent. 10 percent is with the trust which is owned by the company, so almost 51 percent and 4-5 percent more share, even as an option last to last year which is getting converted, so it will go up by another 5 percent. Reema: So promoters will increase their stake by 5 percent in the next one year from 41 to 46 percent? A: Right. Reema: Could you also tell us what the company\\'s growth is going to look like on the whole for FY17 on a consolidated basis. Last year it was 21 percent topline growth. What should we expect for the next year or the year that we are currently in? A: Looking at each of the segment the incremental things which we are doing, I do not see any reason why we cannot continue with the growth which we have been maintaining so far.