I think the revenue profile would still be at least whatever we have had now-minimum of around 35 percent to 40 percent will be the revenue in Mukand
Mukand Limited 's board on Monday approved the transfer of its alloy steel business to a subsidiary for a total enterprise value of Rs 1590.
In an exclusive interview to CNBC-TV18, Rajesh Shah, co chairman and managing director, says the aim is to only give the company's alloy business a new identity and not to sell it off.
Shah says the company may bring in a strategic partner in the future for expansion. He further adds that no new money has come in.
"The Rs 1590 crore is only an internal adjustment," he explains.
Below is the verbatim transcript of Rajesh Shah's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Latha: What exactly is the idea of transferring the alloy steel business to the subsidiary, have you found a buyer, what is the plan?
A: Our alloy steel business is what we have transferred to a 100 percent subsidiary. As you probably know that is our main business and it is a business in which we are giving a major thrust to our business, which is meant for the automotive industry is where the steel goes. Over the last 15-20 years we have built this up in a very strong way with our own technology and become the number one in the country as far as the quality is concerned and now we should grow it. So the idea is to only give it a separate identity, a separate kind of a thrust which we would be able to do, there is no question of selling it off or any such thing, this is very much part of Mukand's business. It is a core business that we have taken and we look forward to expanding it further within this particular structure that we have got right now.
Latha: Why should it go to a subsidiary for you to give it a thrust? In any case it is your big business, what is the advantage? I would have thought the normal reasoning would be you probably getting a strategic partner or some kind of equity help?
A: Yes, that is possible that over the next few months we are likely to talk to people to bring in a strategic partner, a partner who could help us with further global marketing or to build up the business. So this is what we are looking at and we have not finalised on anything at the moment, all our options are open and we hope to be able to do it over the next year or so.
Sonia: This Rs 1,590 crore is just an internal adjustment, right? There is no fresh money that goes to the listed entity?
A: Exactly. This is right now done on the basis of the vigorous valuation processes that we have come to a conclusion, our board met yesterday and we took this decision to make it a 100 percent subsidiary at this valuation. Right now, you are absolutely right. There is no other money transferred or anything like that.
Latha: What is left in Mukand then if you take this to the subsidiary?
A: In Mukand, we have our engineering business, machine building business, our infrastructure business where we were involved in construction of growth projects for the NHAI, we have our stainless steel long products business which is again one of our important businesses which we are having world-class quality in long products and we sell this all over so this is what we are having in Mukand. We have much of our other assets here in Thane, in Kalwe, those are also with Mukand.
Sonia: Once you transfer this alloy and steel business to a subsidiary, what could the revenue profile and the profit profile of the leftover business look like?
A: I think the revenue profile -- this would still be at least whatever we have had now minimum of around 35 percent to 40 percent will be the revenue in Mukand. We have done something very similar when we had a smaller bright bar and wire business, we have taken that out, we made it into 100 percent subsidiary, later we were able to find a partner who came in at 40 percent of the equity and we proceeded with them. That was an international company that proceeded to help us and work with us and we had expanded that business as well. So we see something similar to this.
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