Kwality has signed an MoU with Jharkhand government to set up a project of milk & milk products. This project will have a minimum investment of Rs 100 crore. In an interview to CNBC-TV18, CFO Sunit Shangle elaborates on the agreement and the company’s future outlook.
Below is the transcript of Sunit Shangle’s interview with Reema Tendulkar and Sumaira Abidi on CNBC-TV18.
Reema: Walk us through this memorandum of understanding (MOU) that you have signed with the government of Jharkhand. What will it entail from the company’s side and what subsidy would you get from the government of Jharkhand?
A: This project that we are soon to set up in Jharkhand, will be entailing an investment of almost Rs 100 crore and basically it would be for manufacturing and processing of milk and milk products like ghee and powder, fresh products like buttermilk, curd and milk. So what Jharkhand government has promised us that they would be helping in the obtaining the necessary permission registration that are required for setting up this. And going ahead what we are also looking at is collecting the milk from the local farmers. Milk and the quality of milk when you take it from farmers is much better than when you procure it from other sources. So, total expenditure of this Rs 100 crore would be divided between setting up the processing facility and milk procurement process.
Sumaira: When will this project come on stream and what does this take your total capacity to?
A: This has to be completed in next three years time, so, probably by financial year ’18-’19 this has to commence production and the capacity would be around 7-8 lakh litres a day.
Reema: Seven to eight lakh litres a day? So, in terms of revenues what do you think at current prices this would mean if you have an incremental capacity of seven to eight lakh litres?
A: It would just depend upon the products. Because you are doing basic products and you are doing value-added products, the top-line would be different. As of now, we are still working on the modalities and details about this. So, it would be difficult to comment on the top-lines as of now. We are still working on that.
Sumaira: I have a two part question. One is when we had spoken to you last time, you had said that you are looking at a capital expenditure (Capex) of about Rs 300 crore over the next two-and-a-half years, so does this Rs 100 crore come within that? And also are you going to be taking on any debt?
A: Actually this is a new project that we are considering and it would be over and above that Rs 300 crore that you are looking at. And this would again be a mixture of internal accruals, debt and equity.
Reema: Can you give us the break-up? How much debt will you raise for this?
A: This is just an initial process that we have started. So, we are still working on the details and probably in next three years time the details would be there.
Sumaira: Are there any other states which you could be looking at for a similar project? I mean is there anything similar which is in the offing?
A: Actually at present also, we were supplying some of our products in Jharkhand so, we have been doing a lot of ground work there and we have been getting a lot of support from state government. So, we preferred setting up this unit in Jharkhand. As of now, no other state we are looking at.
Reema: Will the Jharkhand government give you land and what is the kind of investment the government will be putting in, in this and will this be a 50-50 joint venture (JV)?
A: No, it is not a JV, it is a pure MoU that has been entered. 100 percent investment would be made by Kwality only.
Reema: Will you have to make any payments to the government?
A: As of now, nothing like that.
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