Time Technoplast stock has been on a tear recently in the last ten days or so. There have been two big sales coming in from the promoters. And the company has raised close to around Rs 20 crore.
The promoters sold shares worth Rs 9 crore to develop a land parcel in Mumbai.
Selling shares to fund the construction of commercial property, says Anil Jain, MD of Time Technoplast
Jain further added that they have got construction permission and will be constructing and selling the entire plot.
However, for construction they require about Rs 50 crore. However, will repurchase shares once construction is done, he said.
Below is the verbatim transcript of Anil Jain’s interview to Nigel D’Souza & Sumaira Abidi on CNBC-TV18.
Nigel: The stock has been on a tear unfortunately in the last ten days or so. There have been two big sales coming in from the promoters. You have raised close to around Rs 20 crore. Why are you doing this, are you going to be selling more shares?
A: We have sent an explanation also to the stock exchange. The reason is that few years ago the promoter companies had bought a piece of land at Saki Vihar Road and that has been lying vacant for all this while. Now we have got a customer who is willing to buy this complete commercial property and we have to construct that. We got the construction permission and we will be constructing and selling this entire plot.
However, for construction we require about Rs 50 crore. So, out of that we have provided about Rs 40 crore which is 2 percent of the company’s equity. We might offload temporarily whereby we would complete the construction and in this process we would be able to repay the entire loan that we had for the land – that would mean the entire mortgage on our security will go away and we will be left with enough to replenish our stocks or even more actually. So, the whole idea is to monetise this piece of land which has been lying dormant for so long and since we now have a customer we can clearly see doing it in the next 28 or 30 months.
Sumaira: So what you are saying essentially is that the entire proceeds from this land development will accrue to the company?
A: In a sense yes because we have taken a loan in the promoter company. So, we will repay the loan, therefore the mortgage will go away. We have about 10 percent of our shares priced for the loan that we have taken, so that will go away in the process and then we will be left with enough so that we can not only replenish the share that we are selling right now, which is maximum of 2 percent but we will actually be able to get more than that. So, it is basically to clear up this little thing that has been lagging on our mind.
Nigel: You have raised close to around Rs 20 crore, the requirement is for Rs 50 crore. So, will you be selling more shares, could you give us that number and you are talking about replenishment? After this is done you are saying that you will look to hike stake again in the company?
A: Exactly that is what I am saying. We have said that maximum we will off load two percent of the equity. So, that will be enough. We have some internal accruals in the promoter company, all put together we will complete the construction which will give us something about Rs 200 crore or thereabouts. We will repay the loan for which we have mortgaged some of the shares. So, that will go away, we will still be left with about Rs 125-150 crore which we would use entirely for buying back our equity.
Nigel: So you are saying that 2 percent is what you are looking to sell, currently you have sold only 1 percent. So, then the market should be alert that the promoter looks to sell 1 percent more?
A: But we don’t know exactly when it will be. As the funds requirement will come up we will do that.
Nigel: And this time horizon is what. Next 12 months we should look forward to this?
A: The project will be completed in about 28-30 months. Talking about raising further equity, it will depend upon how our construction plan is done, but yes, you are right 1 more percent you can expect in next few months.
Sumaira: So, you don’t have any internal accruals at the moment or is the second Rs 20 crore which you mentioned out of that Rs 40 crore raised through internal accruals and what is the exact debt?
A: Let me just put it exactly. The total that we require is Rs 40 crore besides the internal accruals, 1 percent we have sold that is about Rs 20 crore we have raised and Rs 20 crore more will be raised.
Sumaira: What is the cash you have already?
A: We have about Rs 30 crore odd which is already in our hand. So, total cost of construction will be about Rs 70 crore or so.
Nigel: Why are you doing all this? What is there for shareholders? After you construct this you are saying 24 months is what it will take etc? Suddenly the street was looking at this stock very positively and now this is going to be a bit of a headwind. So, could you tell us what is there on the table, at the end of this entire process you will fund it etc, at the end of 24 months what does the company get, what does the shareholder get, you are investing Rs 50 crore you have told us, but what comes back then?
A: The shareholders were also concerned about the fact that 10 percent of the company’s equity is mortgaged. So, in this process that mortgage will go away because we would have repaid the loan that we already had. So, that particular sword that would have been hanging on our head will go away and that is what the shareholders would certainly like.
Number two, by doing so we will be left with enough cash so that not only we will be able to replenish what we are selling right now but we will be able to buy more shares from the market. So, therefore if there is liquidity that will be soaked up by us.
Nigel: But once the projects gets completed what you can get. What are the projected revenues, profitability that comes back? Does everything come back to the shareholder or it is going to be all in the promoters hands?
A: No, that is of course with the promoter company but the promoter company has no other use for the money but probably increasing its shareholder in the company.
Nigel: So, nothing comes back to the company from this particular project?
A: Except for the fact that the promoter will have higher shareholding.
Nigel: You are selling at Rs 95-100, do you think that your share is fairly valued at this point of time?
A: No, it is not for me to comment upon that but the inherent — please see what is happening here, our composite cylinder business that I talked to you in the last conference, we were saying at that time 60 percent of our capacity is booked. Now we are not only booked for 100 percent of our capacity but going forward two more years we have booked our entire capacity, so that is a great positive. Also in PE pipes we have expanded our capacity and we have sold most of its capacity as there are few big contractors. Therefore, everything is looking very positive for the company. It is for the investors to evaluate what a fair price would be, but we would like to think that the company is doing extremely well and it should reflect on the company’s shares itself.