Tulsyan NEC to invest Rs 65 crore on new capacity

Tulsyan NEC, a BSE-listed Rs 250 crore Bangalore-based plastic woven bag and steel bars manufacturer, is firming plans to invest Rs 65 crore for capacity expansion and backward integration.

Lalit Kumar Tulsyan, executive chairman, Tulsyan NEC said that the plastic bags division will nearly double its capacity to over 20,000 tonnes per annum at a cost of Rs 15-25 crore. The steel plant's raw material sourcing will be derisked by setting up a 200-tonne per day sponge iron plant.

The company proposes to meet the capex through an equal mix of debt and internal accruals. As of April 2004, the company's reserves stood at Rs 17 crore. He said, the plants will achieve full production over a 24-month period.

The company's steel plant in Chennai has a capacity of 50,000 tonnes per annum now, while the plastics division in Bangalore turns out 12,000 tonne per annum now. The company's moves on backward integration is primarily aimed at improving margins, from the present 1.2 per cent of turnover to over 2 per cent.

For instance, the company commissioned in September last a Rs 12 crore, 75,000 tonne billet and ingots plant. Following this, it plans a sponge iron plant, along with a captive 6-megawatt power plant, that will feed the billet and ingots plant.

This is expected to cost between Rs 40 crore to Rs 50 crore. The company will install the plant in phases, with the first stage targetted to go onstream in the next eight months. With an assured raw material base, it has started branding its TMT bars and stopped production of the inferior 'tor steel'.

The plastic division will get a four megawatt bio-mass powerplant as well. Plans are still on the drawing board though. The capacity expansion in this division is slated to service the increasing overseas demand for jumbo bags.

After the full-fledged launch of jumbo bags five months ago, exports have surged to 40 per cent of production from 10 per cent earlier. The company, which makes upto 2 tonne capacity bags for the polyester chips is looking at entering food packaging, conductive bags and lumber packaging segments.

Another move to address margins is the relocation of plants in both divisions. It has already shut its unit in Whitefield in Bangalore and shifted the plant to its Doddaballapur facility. Similarly, the rolling steel plant at Ambattur in Chennai will be moved to the smelting unit at Gumudipundi on the outskirts of Chennai over the next five months.

Tulsyan said, these moves will address logistic concerns, besides save energy at the steel plant. Hot billets turn cold, during transportation and have to be reignited. Also, by freeing up the property at Ambattur, which happens to be IT hotspot in Chennai, the company hopes to unlock its value by a joint venture or outright sale soon. The property is valued around Rs 8 crore now.