Plan to raise Rs 40 cr via sale of 2 arms: Gallantt Ispat

Gallantt Ispat is looking to raise Rs 40 crore via sale of its two subsidiaries, Shree Surabhi Wheat Products and Shree Surabhi Flour Mills. The fund raised will be utilised for capacity expansion and other corporate purposes, Mayank Agrawal, CEO of the company told CNBC-TV18."We are planning to sell-off both these subsidiaries and we aim to raise about Rs 40 crore through this sale subject to board approval", he said.Below is the verbatim transcript of Mayank Agrawal’s interview to Sumaira Abidi and Nigel D’Souza on CNBC-TV18.Sumaira: We understand that you are looking to dispose off your assets in Shree Surabhi Wheat Products as well as Shree Surabhi Flour Mills. How much are you looking to raise from this and what do you intend to do with this money?A: As you are aware, the company is engaged in the business of iron and steel making and flour products. So, through amalgamation of Gallantt Udyog Limited with a company, the company had acquired two flour mills in Bihar and Uttar Pradesh (UP). For better and efficient management and control and operations it was decided to transfer it to the subsidiaries.Now we are planning to sell-off both these subsidiaries and we aim at raising about Rs 40 crore of capital through this sale subject to board of directors' approval. This fund shall be utilised for our expansion proposal of steel making and other corporate purposes.Nigel: After this you will still be left with some part of some agro business I am guessing. What is the remainder of the business, are you looking to completely exit that as well?A: No, we already have a flour mill in our Gallantt Ispat Limited. It is a very modern flour mill and this we shall continue to run. If need be in future and if the demand permits, we would look at expanding this modern unit itself. So, we will not be exiting from the business.Nigel: You spoke about your expansion plans. Take us through that, what is the total cost, what are the total funds you require for your expansion? I was just looking at your BSE announcement and you are taking quite a big expansion on Direct Reduced Iron (DRI), on your steel melt shops, on your rolling mill production as well. What is the total cost, what is the total capex that is required, how much is already been incurred and could you break it up for us? If it is a Rs 500 crore then I believe you are getting some subsidies, internal accruals, debt, break it up for us.A: The total expansion is Rs 311 crore. By this expansion, we aim at enhancing our captive power plant capacities from 18 megawatt to 53 megawatt. Thereby we are adding 35 megawatt. In sponge iron we are increasing the adjusting capacity from about 1 lakh tonne to 3 lakh tonne per annum and steel making from 1,67,000 tonne per annum to 3,30,000 tonne per annum.So, thereby we are approximately more than doubling the steel making capacities and approximately tripling the power plant capacities. Total investment of Rs 311 crore would be met by internal accruals and generations and profits and we are not proposing any term loans.Sumaira: Could you break that up?A: Approximately this project will take about two fiscal years for implementation. So for the current fiscal year we are expecting a profit of about Rs 50 crore. So, approximately Rs 100 crore in two fiscal years would be coming from the internal accruals of the project.We also have some Rs 30-40 crore of cash surplus at the moment and we are due to receive Rs 250 crore approximately from the state government, which is against industrial incentive scheme. Out of this Rs 250 crore that we have to receive from state government, we have been in a legal fight in High Court and Supreme Court, which we have apparently won and we see it coming shortly.Nigel: By when can you receive this Rs 250 crore, it is a rather large sum of money, are you factoring that you will get it in FY17 itself, do you believe there could be an appeal over there?A: We expect to get it by December 2016, in another few months.For full interview, watch accompanying video...