Setting up shaft machine for export orders: Precision Camshaft

Precision Camshaft initial public offering (IPO) of Rs 405-410 crore will open today and close on January 29. The company plans to a part of funds raised to set up a new machine shaft for its export orders, says Yatin Shah, CMD & Promoter of the company. Speaking to CNBC-TV18, Shah says it will take 2.5-3 years to achieve full utilization for the new plant. Currently, the company is functioning at 85 percent utilization.The company manufactures and supplies camshifts across the world and currently enjoys 10 percent product share globally. Shah says 70-75 percent business comes from exports, which the company will maintain despite currency headwinds. Shah says the company is making efforts to improve its margins in near future.Below is the verbatim transcript of Yatin Shah’s interview with Nigel D’Souza on CNBC-TV18.Q: You are looking to raise roughly around Rs 400 crore, Rs 240 crore via the fresh issue. What exactly is this required for and I believe that you are looking to establish a machine shop for ductile iron camshafts. What can that mean in terms of revenues going ahead, what are the benefits of this? A: Always setting up a machine shaft for machining of ductile iron camshafts for which we have got orders from certain overseas customers so it is against committed contracts that we are establishing this capacity. Hopefully this should generate 1.5 time revenue when it peaks up.Q: You are looking to invest Rs 230 crore and it should give you roughly around Rs 350 crore?A: When it is full. Q: When is that possible? A: 2.5-3 years. Q: Going ahead, I was just looking at your exports contribution, roughly around 75 percent of total sales currently, so foreign currency fluctuation will play a role, what is your take on it, are you totally dependent on exports, are you looking at maintaining it at around 80:20 or going ahead are you looking at changing that mix?A: I think the mix would continue to be where it is today. Roughly about 70-75 percent would come from exports and we have distributed between various currencies so I think we are fairly well spread to manage risks of any currency fluctuations. Q: So the rupee depreciation then in fact would be a positive for you going ahead? A: It is a positive for us. Q: Also let us talk about a couple of your clients. Ford and General Motors, I believe that in fact the numbers are doing the rounds it is they contributed close to around 60-70 percent of your total sales. I was just looking through Ford sales numbers and in fact there is some stagnation that is going on over there. Do, you believe that there is a risk to your revenues going ahead or are you fairly confident?A: We are fairly confident. We are into a different market segment altogether. We are into small and medium car market segment and that market segment within Ford and General Motors is doing pretty good today as of now also. So, I think it will be fair to assume that the focus that we have on these two companies is going to be pretty good. Within General Motors or Ford, we are distributed between various regions of the world, not necessarily just concentrating on a plant.