Khopoli plant to double total capacity: Rama Steel Tubes

Rama Steel Tubes has a capacity of 36,000 tonne per annumn and is looking to double the same by the end of this financial year from its Khopoli plant, says Naresh Kumar Bansal, CMD, of the company.Speaking to CNB-TV18, Bansal says the company expects a growth of 6-7 percent in its EBITDA margins as it has started making square and rectangular hollow sections which have higher value addition.He expects the turnover to increase 1.5 times the last year on the back of new plant and the Dubai subsidiary.Of the total produce, 20-30 percent is exported and the company is operating at 75-80 percent capacity utilization, he adds.The company is debt free and has increased revenues by 125 percent in the last two quarters, Bansal says, adding that there is no impact seen in the market as far as safeguard duty is concerned.Below is the verbatim transcript of Naresh Kumar Bansal's interview with Reema Tendulkar & Mangalam Maloo on CNBC-TV18.Mangalam: You are in the business of manufacturing steel tubes so could you tell us where do you source your steel from? Is it imported or it is domestic and also tell us how does the safeguard duty affect you, does it benefit you or is that a bad thing for you?A: We are basically procuring steel from indigenous sources that is in Northern India but in Western India, we are sourcing from JSW Steel and Essar Steel and we are also using some imported material. As far as safeguard duty is concerned, right now there is hardly any impact in the market but in the period to come it will affect the market. I think market will absorb this safeguard duty.Reema: Very recently your Khopoli plant got operational because of which your capacity would get doubled. What would this mean in terms of your revenues, what would you clock-in in FY16 as well as in FY17?A: We have just started this plant. In the month of May we have started the production in Khopoli and our capacity is 36,000 tonne per annum. Seeing the demand in western region of our country, we are doubling the capacity by this financial year end.Mangalam: What exactly is affecting the company's margins, what is your raw material cost because if we look at it, the EBITDA margins are just close to around 4-4.1 percent?A: Right now we have started manufacturing hollow sections. Earlier we were making round pipes, now we have started making hollow sections i.e. square and rectangular. The value addition is more; we are expecting a higher EBITDA margin percentage wise. Mangalam: By how much? A: 6-7 percent we are expecting from Khopoli plant.Reema: If you could just tell us what your revenue projections are for the company? A: Revenue projections, total turnover last year was Rs 200 crore and this year it will increase with the help of Khopoli plant maybe 1.5 time. Reema: So 150 percent? A: Yes because we have installed capacity 36,000 tonne and with that our revenue will increase. Moreover, we have started one subsidiary at Dubai and there also we will get some revenue. Mangalam: We understand that exports also constitute about 30-35 percent to your revenue. So, could you give us a sense of what the order book is from domestic companies and on the export book? A: We are regulator exporters, we are exporting for the last more than 10 years and between 20-30 percent we are exporting and I think we will maintain these exports. Mangalam: What is the order book? A: Orders are coming regularly. Right now we are booked for another one month for exports as well as domestic. Reema: So you are operating at full capacity utilisation? A: Not full, maybe at 75-80 percent. Reema: How has the quarter gone by been for the company in terms of demand?A: Demand was good. We have increased our revenue by 125 percent in last two quarters.Mangalam: In that case could you give us a sense of what the balance sheet of the company looks like, what is the debt on the books and do you have enough cash to cover that? A: Ours is a debt free company. We have hardly any debt termed-on. We have only working capital.