House of Pearls lines up Rs 500 cr for expansion

House of Pearls Fashions Ltd (HOP) filed a draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (Sebi) on October 10 to raise funds from public to part-finance its backward and forward integration expansion plan in India and abroad.

The company is planning to double its capacity from 20 million pieces per year to 40 million pieces a year at a capital expenditure of up to Rs 500 crore. The phased expansion is expected to be completed by 2010.

House of Pearls, which operates from 11 countries in six continents, is planning to consolidate its works in north India by bringing them under one roof in Gurgaon.

In order to capture the market share in the textile-hub, the company has already bought five acres of land to set up a manufacturing unit in Chennai with 1,000 machines to begin with.

Additionally, 1,000 machines would be installed in 2008 in this plant to fully utilise the capacity. The total cost of this project is estimated at Rs 100 crore.

The most important part of the current expansion plan is setting up an enterprise resource planning (ERP) system in India which would be a one-stop source of information about the company's services across all facilities.

"This will facilitate our customers across the world to get a one-point solution to any queries about our service, designs etc," said Deepak Seth, chairman of HOP. The company is in talks with NIIT to work on the facility and bring synergy to this project in Gurgaon.

Apart from this, HOP is looking to set up at least seven retail shops of its own in 2007 for which the company is in talks with local players to identify sites.

"This is part of the 47 retail shops that we are planning to set up in the next three years. Apart from that, we are also looking at about 150 merchandised shops to sell our products throughout the country in order to cash in on the ongoing retain boom in India," Seth added.

The company provides services from sourcing of fabric to shipping. "Buyers need to just plan their growth and then come to us with their detailed investment plants. We take care of the rest of the responsibility till goods are delivered to customers," Seth said.

In the third phase, HOP is planning to acquire one small to medium retail chain to spread its wings in global retail chain arena. The company is in talks with a number of global retail players but nothing has been finalised yet, Seth said.

HOP is eyeing about 30 per cent year-on-year growth in the years ahead as compared with the industry standard of 18 per cent.

These projects would be financed through initial public offerings (IPO), debt and equity, which are being worked out. The company is negotiating with a number of banks for financing the projects, Seth said.