DCL to tap market for funding new plant

The Vadodara-based Diamond Cables Ltd (DCL), in a bid to tap the growing fire-resistant flexible cable market, has decided to set up a new plant at Vadodara to meet demands of the housing industry.

The company will invest Rs 30 crore to set up the plant at Savli in Vadodara district and raise Rs 20 crore through a public issue and a rights issue.

The new household cable manufacturing facility is expected to become operational by October, 2004.

While the public issue is expected to raise Rs 10 crore, the rights issue too is expected to raise another Rs 10 crore and the company will put in the remaining funds through its surplus.

Both the public and rights issues are expected in the first week of April.

Officials, however, did not provide more details, saying the lead managers are working out the details.

"In a major change of strategy, DCL has now decided to target the OTC segment for cables. We earlier supplied cables to big companies, but now we plan to target housing clients like builders," Amit Bhatnagar, joint managing director of DCL, said.

He said with one crore new houses coming up every year in the country, the market for household cables is expanding fast.

"Even if 20 per cent of the builders use quality fire-proof, no smoke cables, the market is worth over Rs 4,000 crore annually," Bhatnagar said.

Explaining the strategy, the official said fire-resistant no-smoke cables will be directly sold all over the country through a network of 65 dealers.

"At present, only Finolex manufactures these cables, which are high quality copper cables. According to estimates, the electricity bills are reduced by at least 20 per cent if quality cables are used," Bhatnagar said.

The company has already purchased the machinery for manufacturing household flexible cables at its proposed plant.

The machines have been bought from Nokia-Melifer and will be a twin-line manufacturing facility.

"We are expecting a sale of around Rs 100 crore in the first year of commissioning this plant," the official said.

The company has received another boost as about ten days ago bankers have agreed to reduce the interest on debts from 16 per cent to 10 per cent.

The company will save over Rs 25 crore in interest over the next five years because of the debt restructuring.

The borrowing of the company stood at Rs 82 crore.

SBI, IDBI, Central Bank of India, Syndicate Bank and State Bank of Saurashtra are the main financiers.

An ISO 9002 company, DCL is one of the fastest growing electrical conductor manufacturing companies, registering an annual growth rate of 76 per cent in sales and a 67 per cent growth rate in profits over the past three years.

Clients of the company include ABB, Reliance Energy, Tisco, Telco, L&T, Cimmco, GIPCL, GEC, KPCL, Crompton Greaves and several state electricity boards of the country.

After registering a turnover of around Rs 80 crore last year, DCL expects to cross a turnover of Rs 100 crore this fiscal year.