Harish Kumar Agarwal, Chief Financial Officer, at Kamdhenu Group said he is inclined to tap a strategic investor for Rs 200 crore investment planned in the company’s paint business to achieve the target of Rs 1,000 crore sales by FY26.
Getting a strategic investor would help the business to scale to another level, and also bring the focus on technology, unlike private equity investment where the focus is mainly financial investments, the CFO said.
“We are targeting to invest Rs 200 crore in about next three years to achieve our target of Rs 1,000 crore sales in the paint business. The exact modalities of this fundraising, whether it will be through a private equity investor, a strategic investor or a mix of on-tap funding and bank borrowing, etc, will be decided after we get the approval from the NCLT (National Company Law Tribunal), which we expect in the next six months. But we would be more inclined towards a strategic investor since that will bring focus on technology as well as help scale the business to another level,” Kamdhenu CFO told ETCFO in an interview.
The investments will be put into setting up a new plant as well as in branding, the CFO said. The company’s current plant in Rajasthan can scale the business to Rs 450 crore but beyond that a new plant would be required, he said. The company is planning to set up this plant in Central India but is yet to decide upon the exact location, he added. The CFO said that the demerger will enable the company to cater to increasing demand in a sector that is growing at 18-20% annually.
Kamdhenu’s paint business was about Rs 200 crore in FY21, the CFO expects to close fiscal FY22 at about Rs 250 crore, and sees it growing to about Rs 350 crore in FY23.
“The paint industry is witnessing around 18-20% annual growth, but we are expecting to grow at a much faster rate at 30-40% in the coming years,” the CFO said. Successful demerger of paint business and its scaling will be top focus areas in FY23, he further said.
20% growth in steel branding business
The CFO sees a 20% growth in the company’s steel branding business in the financial year 2022-23, banking on continued demand momentum. This will translate to about Rs 18,000 crore sales. The steel branding business forms over 80% of the company’s turnover. Kamdhenu clocked about Rs 12,000 turnover in FY21; the CFO expects to close the current fiscal FY22 at about Rs 15,000 crore sales.
“With the easing of restrictions after the third wave of the pandemic, business recovery has seen a positive spike. The steel industry is looking at a very healthy growth prospect. In addition to huge latent demand, the government’s focus on infrastructure development will boost demand for construction materials, especially steel TMT bars and allied products,” Agarwal said.
Kamdhenu is looking to expand its capacity to 50 lakh MT of TMT steel bars in the next two years through the franchisee route, the CFO said.
Inflation
The CFO said high inflation doesn’t impact the company’s steel branding business significantly. He said the company and its channel partners mainly operate in the secondary markets, where the prices of the finished goods more or less remain the same in a year.
It is the paint business where the inflation impact comes in, he said. The CFO deals with these inflationary pressures usually by passing on the costs to consumers as and when passed on by the market leader, he said. Kamdhenu had last increased the paint products prices in November-December by about 10-12%.
