Paint and steel manufacturer Kamdhenu Ltd plans to hive off its paint division into a new company. The aim is to have better management focus on both sectors. Chief Financial Officer of the company Harish Kumar Agarwal spoke to BusinessLine about the BSE-listed firm’s future and its plan to double the capacity in three years. Excerpts:

What do you have to say on the recent report published by First Construction Council that the majority of TMT bar manufacturers, including your firm, have been using inferior quality materials?

That report was fake. We took cognizance of it and approached the Delhi High Court. The court has stayed the publication of the report. Every year, the steel industry reports a growth of 8 per cent. Our business, on the other hand, is growing at the rate of 25-30 per cent annually. It is only because we have been able to maintain the quality. Having said that, there are few local players whose quality is not up to mark and they have not complied with the Bureau of Indian Standards norms.

What are the major changes the company is planning?

The company has decided to hive off the paint business from the main company and now there will be a separate company for it. The aim is to have better management focus on steel and paint divisions. It will be done on the basis of Scheme of Arrangement on mirror shareholding – percentage shareholding of each of the shareholders of the demerged company would remain the same in the resulting company.

Work has been started for paint segment and now it is in the approval stage. We are expecting that by the coming financial year. This company will be set up in Bhiwadi in Rajasthan.

What are your expansion plans for both the steel and paint divisions?

The target is to increase the volume of both the businesses: steel and paint. In the steel business, we are planning to double the capacity in three to five years. So, now we have the production of 10.5 lakh tonnes of steel in six months which we plan to double in the next 3 years.

In paint division, our capacity is 46,000 tonnes which is divided into three categories: powder-based, water-based and solvent-based.

Currently, we have started outsourcing of the powder segment. We are in the process of replacing the machinery which will be used for the purpose of water-based against the powder-based. So the capacity of this plant will remain 46,000 tonnes but from this plant we can have a turnover of ₹450 crore in the next two years.

What strategy will the company be adopting to increase capacity?

The company is planning to double its capacity in steel business through franchisee route. Investments will be made by the franchisee units. The company is not going to have any investment in expansion. It will be done by the franchisee. For the paint division, there is a sufficient capacity to cater for the next four years. After that the firm will think of setting up a new plant.

There has been a significant increase in total income and total revenue in the second quarter. Reasons for the good performance?

Royalty income has gone up because of the franchisee model. Also, manufacturing of steel went up as technology upgradation improved productivity. Another reason is that the company is reducing its focus on B2B business because of high turnovers and low margins.

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