Nelcast eyes IPO to fund expansion
The Chennai-based Rs 270 crore Nelcast, one of the largest producer of Spheroidal Graphite (SG) iron castings in the country, plans to come out with an IPO to fund its proposed capacity expansion and foray into new products.
By TNN |
CHENNAI: The Chennai-based Rs 270 crore Nelcast, one of the largest producer of Spheroidal Graphite (SG) iron castings in the country, plans to come out with an IPO to fund its proposed capacity expansion and foray into new products.
Nelcast, which began its operations in a small way over two decades ago with a 1,200 tpa foundry capacity at Gudur, Andhra Pradesh, had a combined capacity of 72,000 tpa at the end of 2005-06, with the second foundry having been established at Ponneri, north of Chennai. Its combined capacity has since increased to 1.02 lakh tpa now, with 42,000 tpa at Gudur and 60,000 tpa at Ponneri.
"With the surge in demand for castings from the automobile industry, we have drawn up plans to further increase the combined capacity to 1.5 lakh tpa by 2008," Mr J Joseph, managing director, Nelcast told a press conference here on Tuesday. "With the automobile market as well as that of auto components registering steady growth, we have to continuously look at options to expand capacity," he added.
In addition, it has also drawn up plans to get into value added products as auto component is one of the fastest growing export sectors in India. "We will soon be moving from casting to machining (auto components) and after establishing machining of castings, we will embark on to sub-assemblies, which is increasingly preferred by manufacturers across various sectors," Mr Joseph said.
According to him, the expansion of capacity as well as foray into value added products would require about Rs 65 crore. The company has recently filed the necessary papers with the Sebi for the proposed IPO, through which the promoters will dilute about 25% of the equity. Sebi clearance is awaited.
Nelcast, which began its operations in a small way over two decades ago with a 1,200 tpa foundry capacity at Gudur, Andhra Pradesh, had a combined capacity of 72,000 tpa at the end of 2005-06, with the second foundry having been established at Ponneri, north of Chennai. Its combined capacity has since increased to 1.02 lakh tpa now, with 42,000 tpa at Gudur and 60,000 tpa at Ponneri.
"With the surge in demand for castings from the automobile industry, we have drawn up plans to further increase the combined capacity to 1.5 lakh tpa by 2008," Mr J Joseph, managing director, Nelcast told a press conference here on Tuesday. "With the automobile market as well as that of auto components registering steady growth, we have to continuously look at options to expand capacity," he added.
In addition, it has also drawn up plans to get into value added products as auto component is one of the fastest growing export sectors in India. "We will soon be moving from casting to machining (auto components) and after establishing machining of castings, we will embark on to sub-assemblies, which is increasingly preferred by manufacturers across various sectors," Mr Joseph said.
According to him, the expansion of capacity as well as foray into value added products would require about Rs 65 crore. The company has recently filed the necessary papers with the Sebi for the proposed IPO, through which the promoters will dilute about 25% of the equity. Sebi clearance is awaited.
Incidentally, Menakeru Infrastructure, a Hyderabad-based investor had recently picked up 1.53% of the company's equity stake at Rs 155 per share, including the premium of Rs 145. While the promoters hold around 93%, the rest of the equity is with the investor and the employees.
Nelcast is a leading supplier to commercial vehicle majors like Tata Motors, Ashok Leyland, Eicher Motors and Tata Cummins, besides to tractor makers like Tafe, Mahindra & Mahindra and International Tractors. In addition, it supplies to several auto component units. It also supplies to automobile units like Ford in the US, besides to the European and Australian markets.
"Nearly 60% of our production goes to automobile and sub-assembly units, with the bulk of the rest to tractor makers," Mr Joseph said. Exports are expected to constitute around 8% of the total sales this fiscal.
Nelcast achieved a turnover of Rs 270.32 crore and a net profit of Rs 7.02 crore for the fiscal 2005-06. For the nine months ending December 31, 2006, it reported a turnover of Rs 254.89 crore and a net profit of Rs 14.1 crore.
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