The management of APL Apollo approved issue of securities worth Rs 200 crore in its recent board meeting on Saturday. The company is looking to increase its volume capacity from current 10 lakh tonne to 12 lakh tonne, Ashok Gupta, MD, APL Apollo told CNBC-TV18.
Gupta said the funds will be utilised for expansion plans of the company. Volume growth is expected to be funded through both securities and internal accruals.
The company is looking at East India for capacity investment, he said, adding that he is expecting a growth of 25 percent in volume and bottomline in the current year by acquiring market share of smaller companies.
There are plans to invest in land and licensing with capacity of 1.5 lakh tonne at an investment of Rs 50-70 crore, Gupta added.
Below is the transcript of Ashok Gupta's interview with Reema Tendulkar & Mangalam Maloo on CNBC-TV18.
Reema: With respect to this fund raising via issue of securities, when are you likely to raise this money issue? Why are you raising this money Rs 200 crore?
A: We are raising some fund of around Rs 100-150 crore perhaps in next quarter itself because of our ongoing expansion plans. Every year we spend around Rs 100-120 crore on future expansion. Our capacity currently is around 10 lakh tonne. We are trying to take it to around 12 lakh tonne this year.
For that we will need around Rs 80-100 crore worth of investment and this investment will be partly funded from these new issues and partly from the internal accruals. Also, at times we get opportunities for the acquisition and this fund will help us whenever any opportunity arises.
Mangalam: So is there any opportunity on the anvil right now?
A: We are looking at some possibilities in the eastern region. Currently, we have significant capacities in the west, north and south but nothing in east. Also we are looking something outside India, but at the moment we do not have anything in hand. We have certain things; we are still scouting for more so as and when something comes, this fund will come very handy at that time.
Reema: Your capacity will go up by nearly 20 percent to 12 lakh tones. What does this mean in terms of the company's revenue growth as well as in terms of the margins as well? What can we expect for FY16?
A: If you observe our performance over last three years, we have been trying to maintain a growth of around more than 25 percent every year. To maintain this growth, it is essential that the capacities also keep pace. In tune with that we are increasing our capacities, which will mean that this year our growth in volume terms will continue to be more than 25 percent. In the bottomline also it has to be more than that. Next year again that is FY17, we plan to grow by more than 25 percent in volume and bottomline. So year-on-year (Y-o-Y), we are planning to grow by 25 percent, mostly by taking market share from the smaller players.
Mangalam: While we are seeing some volume growth, it is the margins which have come under pressure presumably because of the weakness in steel prices. Your margins Y-o-Y have collapsed by about 50-60 bps. Do you see this trend going forward considering steel prices are on a downtrend?
A: Steel prices being on the downturn has helped us improving our margins. Even in the last year, FY16 if you observe, we have suffered a stock loss of around more than Rs 45 crore. It is because of our stock loss that our margins are looking lower. If we had not got the stock loss, our margins would have been closer to 8 percent. This year hopefully, we will not have that kind of stock loss at least, so the margins will improve and plus being the low prices we expect the margins to be much better this year.
Mangalam: So do we see about 8 percent odd margins in FY16 there?
A: Much more than eight percent.
Mangalam: Any range that you would like to specify there?
A: I would say that you wait for Q1 and Q2 results, quarter-on-quarter (Q-o-Q). You will see every the results improving time to time.
Reema: Can you give us some colour on the potential acquisitions or the targets that you are considering. What could be the size of the company that you are looking to acquire?
A: There are two things here. Till now, if you observe for last four-five years, we have been focusing on Brownfield expansion. We have sufficient space in our factories. That is how we are adding 2 lakh tonne in this year, but that space is now getting limited. We have to go in for new places.
We could be looking at some areas where we can get the land and the licenses and put up new equipment. In all the cases, we hope that the equipment will be new, only land and approvals maybe available. We are looking at something where we will be able to invest around Rs 50-70 crore and create a capacity around 1.5 lakh each. So, these are the areas we are looking for, hopefully we will find something in the next couple of months.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
