Kamla Dials - Moneycontrol.com

Kamla Dials has been performing well in the retail segment, but what will probably be of interest to investors is that Reliance Capital has picked up an 8% stake in the company.

CEO of Kamla Dials and Devices, Yasho Saboo says, the money raised through this stake sale will be used for the aggresive growth plans that the company has for this year.

Excerpts from CNBC-TV18's exclusive interview with Yasho Saboo:

Q: For how much has Reliance Capital has picked up this 8% stake?

A: The allotment price, which was determined by Sebi guidelines, was about Rs 57.5.

Q: That translates into how much for a total 8% stake?

A: They picked up about six lakh shares at Rs 57.5, which amounts to about 8.5%

Q: What are you proposing to do with this money?

A: We have an aggressive growth plan coming up this year. First of all, we are very close to finalizing an acquisition of a manufacturing base in Switzerland, which is one of our most important market for our watch components and this is the first priority for us going forward.

We are also planning to increase our presence in the watch component business, in watch dials and watch hand segment, also going to Hong Kong and China.

And finally, we are getting into the private label watch manufacturing, which is basically doing complete watches including the designing and sourcing of components upto the final assembly for established watch brands.

Q: Your debt component at this point, as we understand, is secured borrowing at about Rs 26 crore. What’s the kind of interest cost burden that you are facing?

A: We have been able to manage our interest cost burden pretty well. Given that, we have very healthy growing export earnings, which provides us with a pretty natural hedge against that. So our interest costs have been managed well and at the moment, they stand at about 6-7% of the turnover.

Q: The import duty on watch dials has been reduced to 5%. What sort of impact is that having on the company? Further, how much of a new investment are you putting into your new Parvanu factory; what is the capacity and the outlook for that particular division?

A: I think the impact of the Budget is going to be very positive for us because the reduction in import duty on watch dials is really not going to impact us, whether it is in a markets in India or overseas; mainly in Europe and Switzerland.

We are not really competing on the margin at price in terms of quality and service offering. We are very competitive with our Asian competitors, China or Thailand. So even in India, with the duty reduction as far as the prices of our product goes, I do not think there is going to be any impact at all.

On the other hand, it does give a very strong signal and impetus for assembly of watches in India because this becomes much more competitive than importing regular watches. And because the watch components have also been reduced, the duty on watch components have also been reduced.

Q: Are you going to be diluting more stakes? Are you going to be looking at any more private placement?

A: I do not think there is anything immediate at least for the next two years. But as we have growth plans in the watch retail business and there are some technology areas arising out of the watch business, we are certainly looking to grow and if the need arises later, we will certainly look at that.