Will carry textile business post demerger: Sintex Ind

Sintex Industries announced a demerger of its custom moulding and prefab business yesterday, Sintex-BAPL and Sintex Infra Projects respectively. Sintex Infra and Sintex-BAPL are wholly-owned subsidiaries of Sintex Plastic Technologies.Post demerger, the company will predominantly carry the textile and spinning business, Samir Joshipura, Group CEO of Sintex told CNBC-TV18.Below is the verbatim transcript of Samir Joshipura’s interview to Latha Venkatesh and Anuj Singhal on CNBC-TV18.Anuj: The first obvious question is about the timeline, when will you list Sintex Plastic, if you have any timeline on that?A: Since now it has been approved by the board, it would go through its own process. We need quite a bit of approvals for it -- SEBI, stock exchanges, our shareholders and lenders, and the High Court. The record date is April 1 2016, so, it is from the current financial year but maybe in another six to eight months we should be able to finish this process.Latha: Can you tell us the split of debt, split of cash, all those financial details?A: Let me just broadly outline the structure for you so that it becomes simple to discuss. In the post demerger scenario, there will be two companies Sintex Industries and Sintex Plastics Technology Limited. Both would be listed eventually; Sintex Industries already is. Sintex Industries would predominantly carry the textile business and spinning business and Sintex Plastics would carry plastics.Sintex Plastics would have two subsidiaries, Sintex BAPL, which would do the custom moulding business and Sintex Infraprojects, which would do the prefab and monolithic business.Numbers, it is exactly as what we have been publishing because we have been managing this business this way. 50 percent of our revenue goes to custom moulding, approximately 10-15 percent -- I am talking about 2015-16 revenue, goes to textiles which is Sintex Industries and the rest 35-40 percent goes to the prefab and monolithic which is Sintex Infraprojects. So, that would be the split of the business.The assets and liabilities have been bifurcated based on what it has been used for and we have been very clear. Even the lenders have been very clear what purpose they have been lending us for. So, it has been bifurcated that way.Anuj: Textile is in a much better place right now if you look at the textile business for India right now. It is doing better and that explains maybe the need to demerge. However, going forward how much bigger do you think your textile business can become? As of now it is not that big but do you have any numbers in mind, do you have any targets in mind?A: There are no targets in mind but I can give you an overall direction. 2015-2016 it was Rs 940 crore in our overall consolidated results of Rs 7,700 crore. So, that would remain. However, post that, this financial we have operationalised our phase I of spinning projects that we have put up. This project was put up at Rs 1,800 crore capex and we have already started civil work for the phase II project, which should come up by September 2017.So, both put together should add another Rs 2,500-3,000 crore of revenue. This depends a lot on the yarn prices that would fluctuate -- you can do the math. It would add to the Rs 950 crore which is already there. The timeline should be around three years from now.Latha: I don’t know if you answered exactly how much of debt then gets transferred to the demerged entity?A: I don’t have those numbers with me right now so I would not be able to tell you upfront but the debt has been divided exactly as per what the purpose it has been used for.Latha: I agree that would be the principle but valuation of the company will be?A: I don’t have the exact number right now.Latha: If you can give us an idea of what according to you is the rate of growth of the plastics business and rate of growth of the textile business as you see it now?A: Textile business I just explained because we have put quite a bit of capex last year and we are still putting quite a bit of capex so the growth would be according to it and I just shared some numbers. Custom moulding should grow at around 15-20 percent year-on-year (YoY) basis usually and the prefab business should grow at 20 percent -- pre fab and monolithic, infra business as we call it.Latha: Margins of the two units?A: Custom moulding -- 50 percent of the business is in overseas, Europe and US. So combined margin would be around 15-16 percent. Prefab and monolithic infra business would be something like 20 percent and textile would be 20-22 percent.Latha: A concern which an investor would have regarding your capital, when we last checked 47 percent of the promoter holding was pledged, any change in that. Secondly, there was one dilution -- there have been several dilutions and rights, is there any capital change that we should expect?A: We should not expect a significant capital change from here. The purpose of the rights issue was mainly to improve the balance sheet so that our debt equity improves, it goes below one which we are more comfortable with and that is not a dilution of promoter stake because promoter is subscribed to it. So from that point of view, there is no structural change in the capital.Latha: Pledging?A: No, there is no change in the pledge.