Capital Markets India
Sri Lalita Cement Industries Limited, Hyderabad
Los Angeles, Oct. 21, 2012
R. Srinivasan, NRIpress.com
An investment opportunity was offered by Sri Lalita Cement Industries Ltd. (SLCIL), Hyderabad, incorporated in 2004, to NRIs in California by its promoters. It was arranged by Indian Associations of California- the United Federation of Indo-Americans of California (UFICA) at Torch Restaurant in Buena Park, CA on Friday, October 12, 2012.
Mr. R.K. Sharma, retired Chief General Manager of State Bank of India, as consultants introduced the team of promoters and senior executives. Mr. P. Subba Raju is the promoter and the first director, who has vast experience in the cement industry, with leading companies.
Mr. P. Lakshmipathi Raju, Executive Director made a presentation that the plant is located at Raghunatha Palem Village in Nalgonda District in Andhra Pradesh with a capacity of 2 million tonnes per anum with a 15 Mega Watt co-generation thermal power plant which will take care of its energy needs. The project is completed 80% and is expected to go into production by April 2013. The company is expected to reach Break Event Point (BEP) at 56% capacity.The revenue is epected to be Rs. 800 Crores assuming a selling prie of Rs.40,000 per Ton of cement.
The net profit margin is expected to be15-20%. He said that the company will use a new German technology to produce cement and saves energy by 80% compared to current technology. SLCIL adopted World Class State-of-the-Art Advanced Technology for the first time in Indian Cement Industry based on 5 benefits to the HOROMILL & GEARLESS MOTOR DRIVE TECHNOLOGY. It has low pollution, and low sound. It is located at about 20 KMs east of Hyderabad in 100 acres. Main buildings structures have been built. The original investment of Rs. 700 crores is not enough, and it requires Rs. 1320 crores. The run into cost escalation, caused by inflation and price increase of construction materials, is requiring an additional capital of $ 30 to 35 million at this point , for which the promoters and the senior executives were here soliciting equity participation from NRIs in the USA.
Mr. Siva Prasad, a Director of the company and a management consultant was fielding questions from the audience, potential investors. He said that the company’s market share will be about 2 to 3 % of the market share. To a question how are they going to compete with the giants of the industry such as ACC who have over 80% of the market share, he said that they have technological advantage for low cost production by which they will be able to compete. He said that the company will issue shares of Rs. 10 (par value)at a premium of Rs 5 per share costing Rs. 15 per share. He expects the shares to sell around Rs.60 when introduced in the market. Currently the company is held as a private one, and has not gone public. To a question why they prefer to raise equity capital in the USA, Mr. Siva Prasad said that he prefers some ownership of shares by NRIs, also to avoid too much interference by domestic investors in the management of the company.
Mr. V. Rama Gopal, a retired Executive Director of Indian Bank is also a consultant for the company who was also present and answering questions from the audience. What was missing from their presentation was a current Balance Sheet, and an estimated Income Statement (Profit and Loss Account) to a point of Break even, which could have clarified many of the questions the potential investors might have.
The Bankers to the company are State Bank of India, Andhra Bank, union Bank of India, and State Bank of Patiala. As one of the bankers to the company State Bank of India California President and Vice President and Manager, Artesia, CA were also present. The meeting was held at Torch Restaurant in Buena Park, CA on Friday, October 12, 2012.