"The JV will start with import of fully built machines then go into semi knockdown condition and slowly it will indigenize the whole manufacturing and assembly of these machines in the country," Kapil Mehan said.
Our total investment initially will be in the range of Rs 16 crore only.
Kapil Mehan
MD
Coromandel International
In an interview to CNBC-TV18 Kapil Mehan, MD, Coromandel International spoke about the company's joint venture (JV) with Japanese firm Yanmar Co Ltd and Mitsui & Co (Asia Pacific) Pte Ltd.
"This JV will help us to offer state-of-the-art rice planting services to farmers in Andhra Pradesh and Tamil Nadu, Karnataka and other states as the time goes by," he said.
Under the JV agreement, the capital contribution will be in the ratio of 40 percent by the company, 40 percent by Yanmar and 20 percent by Mitsui.
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Below is the verbatim transcript of Kapil Mehan's interview with CNBC-TV18's Anuj Singhal and Ekta Batra
Ekta: Could you take us through the details of this joint venture with regards to farm equipment manufacturing and would this then be your foray into this space?
A: To enhance rice productivity, there has been always a need felt for mechanizing some of the farm operations. We have been doing this farm mechanization as a service for the last three years in Andhra Pradesh and it is a sort of the sequel to advance that thought further. That is why we found that Yanmar is one of the leading manufacturers of rice transplanters and other agricultural machineries.
For the past some time, we have been in discussion with them. Finally, we were able to strike a joint venture (JV) agreement with them which was initialed on April 25. This will help us to offer state-of-the-art rice planting services to farmers in Andhra Pradesh and Tamil Nadu, Karnataka and other states as the time goes by.
The JV will start with import of fully built machines then go into semi knockdown condition and slowly it will indigenize the whole manufacturing and assembly of these machines in the country. That will bring down the overall cost and hopefully will expand the mechanization market in the country, which is very important as the people move out of rural areas and agriculture into non-agriculture jobs. Agricultural operations would need to be mechanized for both sustainability as well as higher productivity.
Reema: You have a 40 percent share in this JV, what is the investments that your company will be making and secondly, what is the kind of return that you are expecting by way of revenues from this in the next one year?
A: The total project cost is Rs 40 crore as we estimated at this point of time. We are in the process of detaining it out further. Our total investment initially will be in the range of Rs 16 crore only. For one year, we don't expect that any major revenue gains etc will come but it is a long initiative. We believe that with manufacturing and vendour base that will get developed over a period of time in India, we should be looking at turnovers, which will be far exceeding this investment level. At this point of time, I am not in a position to share any number with you because other details are still being worked out.
Coromandel Int stock price
On April 28, 2014, Coromandel International closed at Rs 219.60, down Rs 0.75, or 0.34 percent. The 52-week high of the share was Rs 260.50 and the 52-week low was Rs 162.40.
The company's trailing 12-month (TTM) EPS was at Rs 9.72 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 22.59. The latest book value of the company is Rs 76.83 per share. At current value, the price-to-book value of the company is 2.86.
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