May raise Rs 450cr through PE investors: Karuturi Global

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CNBC-TV18 | 14 October 2010

Karuturi Global is expecting Rs 150-200 crore in revenue from the agri business, which the company says will be used to fund expansion plans. The firm is engaged in the businesses of floriculture, processed foods and information technology.

Ramesh Krishnaswamy of Karuturi Global in an exclusive interview with CNBC-TV18 said the company will be using the funds to expand its business and get more traction in Africa. The company is still holding discussions to garner Rs 450 crore through PE players.

Below is a verbatim transcript of Ramesh Krishnaswamy’s interview with CNBC-TV18’s Latha Venkatesh and Gautam Broker. Also watch the accompanying videos.

Q: If you can detail your plans in Africa. One understands the rose exports business somewhat but there is a lot of investor curiosity on how is your African business doing, how much of land do you have, in which countries, what is the available infrastructure and when will one see revenues from those land parcels?

A: The future plans of Karuturi Global, the growth will be coming from Africa, especially from Ethiopia. The government of Ethiopia has allotted 3 lakh hectares in a place called Gambella which borders Sudan and Ethiopia and another 11,700 hectares in Bako, which is around 250 km from Addis Ababa.

These are the two places where we are going to have future growth primarily in the agriculture space. In the first phase we will be utilising one lakh hectare where we are planning to grow maze, rice and palm oil. Subsequently we may go into sugar and then we will start developing the other hectare.

 

Q: Can you give us some kind of a timetable?

 

A: We have already started developing those lands. In the current financial year we might generate around Rs 80 crore of revenues from the initial development. The next financial year we might see a quantum jump in our revenues, probably around 75% growth to our existing revenues and then a steady growth of around 25% year on year.

 

Q: Is the land over there developed in terms of infrastructure? What will you have to put in and what kind of margins will you make in a place like that?

 

A: These are virgin lands. We will have to develop the land, clear it, approximately the capex for rice will be around USD 2,000 per hectare and the same will be for maize and at USD 6,000 per hectare for palm oil. We are initially planning 70,000 hectares for maize and rice and around 20,000 hectare for palm oil.

 

Q: So the margins will work out to what? Is it 10% margins in the first year, is it less than that?

 

A: Our margin per hectare will be around 40% earnings before interest, tax, depreciations and amortization (EBITDA) margin and in palm oil it will be 20%.

 

Q: There is some talk that you maybe differing your proposed rights issue. Could you explain why and what other funding option you would be looking at?

 

A: As of now immediate capex we will require around USD 300-310 million, out of which we have almost firmed up about USD 200 million from Indian banks. We are looking at around USD 22 million from global depository receipts (GDR) about USD 33 million from warrants and remaining from our internal accruals.

 

We have already progressed well in our project plan. We have brought in about 2,475 horsepower tractors which are large tractors, about 25-30 normal tractors and a whole lot of earth moving equipments. The work is on.

 

Q: What is the equity dilution by FY11 and FY12?

 

A: The equity dilution as of now – the equity is around Rs 48 crore, it will go to about Rs 80 crore.

 

Q: We also understand that you are looking to raise about Rs 450 crore from PE investors. By when do you expect to close the deal?

 

A: That is still not fully firmed up, we are in discussion. I cannot give a timeline as of now.
Original source: CNBC
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