Currently the company is in the process of investing Rs 200 crore at Verna, Goa where it is setting up a modern hi-tech manufacturing facility to produce auto cables, foam-skin jelly filled cables and co-axial cables for the computer, television and Internet sectors.
"We have been exempt from sales tax for 13 years and given income tax benefits in Goa, whereas our units in Maharashtra attract 4 per cent sales tax and have to pay 2 per cent octroi," P.P Chhabria, chairman of Finolex Cables said.
The Goa facility is expected to give the company a competitive edge as the cost of manufacturing in Goa will be much lower due to hi-tech plants and low or no taxes will enable it to bid for cables supplies to DoT and the private sector at a much competitive price.
From the current net profit margin of around 12 per cent from its turnover realised at its Pimpri and Urse facilities, near Pune, Chhabria expects the Goa facility to reap a much higher net profit margin of over 15 per cent.
The company has targeted a turnover of Rs 500 crore from the Verna unit alone in fiscal year 2001-2002. In fiscal 1999-2000, Finolex Cables clocked a turnover of Rs 576.04 crore (Rs 465.56 crore) turnover inclusive of excise, while it posted a net profit of Rs 70.65 crore (Rs 62.01 crore).
"Due to a highly efficient and modern manufacturing unit at Verna we expect to earn much higher profit margins and will save 6 per cent on sales tax and octroi on our projected turnover of Rs 500 crore from our Verna unit alone," Chhabria said.
The Verna facility of Finolex Cables has a capacity to manufacture 30 lakh cable kilometers (CKM) which is already on stream, while the Urse unit has a capacity to produce 70 CKM.
The focus in manufacturing foam skin cables from the conventional solid low density poly ethelene (LDPE) at Verna will result in savings of upto 8 per cent.
Finolex Cables is the first company in the country to have the ability to produce foam skin jelly filled cables.
According to Chhabria, the Department of Telecommunication is expected to soon insist on the cables manufacturers to supply foam skin jelly filled cables due to the savings it expects to accrue from its annual Rs 3,000 crore to Rs 3,500 crore cables purchases.
Finolex Cables is also in the process of getting into the manufacture of 105 degrees auto cables which can tolerate higher heat levels in high-powered car engines. It will be setting up 2 lines at Verna for auto cables manufacture at a cost of Rs 80 crore.
This facility is expected to go on stream in another two months time.
The auto cables are being currently supplied to auto majors or their OEMs like Delpha Automotive, a part of General Motors, Tata Yazaki, AMP of the US and Siemens.
Besides, the Verna facility will also manufacture hybrid cables for the television, telephone, computer and Internet connectivity by December 2001.
The Goa facility, which has a total workforce of 252 people, will employ 500 people once all the manufacturing lines get into commercial production by the year 2002.
Chhabria said the company has ensured that locals who are BE and engineering diploma holders are trained at its Urse facility for future induction at Verna.
