Max Ventures aims to grow packaging biz to 75K tonnes in 2 years

Max Ventures and Industries has announced an open offer of 1.84 crore shares, and in an interview to CNBC-TV18, Sahil Vachani, the managing director of the company said that if successful, the promoters stake will increase to 75 percent.It reported a revenue of Rs 700 crore in FY16 and is looking forward to grow its packaging films - traditional manufacturing business - vertical in the next 2-3 years."We aim to grow our packaging business from 45,000 tonnes per annum to 75,000 tonnes per annum by 2018 via capex of around Rs 250 crore using both debt and internal accruals," he added.Other verticals of the company's business are: real estate, education and investment.The company's long-term debt is Rs 181 crore and short-term debt is Rs 79 crore in the packaging films business and there are plans to raise further capital through both debt and equity in due course of time.Below is the verbatim transcript of Sahil Vachani's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: You have just announced your open offer for up to 1.84 crore shares, what will that take the promoters' stake to?A: Yes, we have just announced an open offer and if successful in its entirety the promoters' stake would increase to 75 percent.Sonia: Can you tell us a little bit more about the business itself? You have a couple of verticals packaging, education, real estate and investments, what kind of upmove do you expect in your revenues? In FY16 it was about Rs 700 crore, what kind of growth are you looking at over FY17 and FY18?A: We have the traditional manufacturing business as the first vertical of Max Ventures and Industries. This is a business in the space of specialty polymers and packaging. This business has been with us for almost 25 years and is a stable successful business. We are looking at growing the business now over the next three-four years and are looking at significant capacity expansion as well.In addition to that we have three more verticals as you mentioned. The education space is something that we are exploring at this time and, by the end of this year, would have a clear indication as to which space one would look at within the education vertical.In addition, we have a real estate development vertical, which we have already started in a small way and the investment vertical that we are also looking to incubate under which we have made our first investment in Azure Hospitality a month or so ago.Sonia: You said that in the packaging business you are looking at capacity expansion, what is the capacity currently and how much do you hope to grow it by over the next two years?A: The current capacity is 45,000 tonnes per anum and we are looking to take it to about 75,000 tonnes per anum by 2018.Latha: You said that you have just brought 11.2 percent stake in Azure so that your first hospitality entry. Which will be the sector that you will concentrate most on, will it be real estate development, will it be hospitality?A: I think for Max Ventures, the idea is to grow all our four businesses, which is the packaging films business, the real estate development business, incubate and education vertical and also focus on an investment vertical.The investment vertical will focus on investments that we are affiliated to or as Max group are present in so for example investments in the healthcare space, in the education space, in tech based financial services, in start-up companies across these industries and sectors.Latha: Can you give us where would your accent lie or even if you can tell us at the moment what is the percentage contribution of each of these packaging, real estate and of course the holding?A: Right now, the packaging forms majority bulk of the business of Max Ventures. The other businesses are in incubation stage. So as we speak, currently, packaging almost contributes 100 percent of Max Ventures and Industries. However, we are looking at incubating the other three verticals like I mentioned and over the next five-seven years, we will see growth in all of these sectors. So we are not looking to grow either one more or one less, I think the idea is to grow across the spectrum all of these four verticals.Sonia: You mentioned that you are looking to grow the packaging business from 45,000 tonnes to 75,000 tonnes that is the capacity. How much would you be investing for this capex?A: Approximately Rs 250 crore.Latha: Would you sell anything? All this requires a lot of money and therefore will you have all this with you or will you be generating cash by hiving off?A: We are going to be looking at opportunities for raising capital, which include both debt and equity as we move forward in due course.Latha: Your debt is Rs 181 crore and short-term borrowing Rs 79 crore?A: Correct, that is in the packaging films business.Latha: You are not therefore looking to increase this debt anytime soon since you are talking of capex?A: The new capex will be funded by a mix of debt and internal accruals.Sonia: You did mention that you have another vertical, which is real estate. Tell us exactly what is the landbank that you have, what are the plans that you have in the real estate space and how much does it contribute to the overall revenue scheme currently?A: Currently, we are just incubating the business and starting it up. So right now, it doesn’t contribute anything to the Max Ventures revenue. However, on the sponsor side, there is a large land bank that is within the NCR belt of almost 6-7 million sq ft developable area and we can look at a possibility of doing joint development with the sponsor side to be able to develop that land bank in due course.Sonia: When do you hope to develop any land there because the NCR market is so very sluggish, when will you kick-start?A: We have started it in a very small way right now with the first project in Uttarakhand and this will be launched in the next year and over the next couple of years we will then look at exploring opportunities for the other land banks that exist.Latha: Can you leave us with some ideas of what kind of a revenue growth run rate you are looking at? It is difficult because there are so many businesses for an investor to guess. Revenue run rate and EBITDA run rate?A: I think it is very difficult to state that at this stage because majority of our verticals are at an incubation stage and something that we are just starting up for the time being. By the end of this year, we will have a clearer idea in the business model of our real estate, our investment as well as our education vertical. However, for the packaging business, it is stated for a very healthy growth. We are looking at an increase in EBITDA in our packaging business as well as an increase in our topline by 2018 with the addition of capacity that is planned.Sonia: From a 10.4 percent margin level currently that you are at, how much do you think you could grow the margins to? Can we expect 12-13 percent?A: For the packaging business, it should grow to 12-13 percent.