Greenply looking at Rs. 600-cr capex for greenfield unit in AP.

Greenply Industries Ltd. has planned a greenfield unit for manufacturing medium density fibreboards in Chittoor district of Andhra Pradesh.

The plant would have a capacity of producing 3 to 3.6 lakh cubic metres MDF a year.

“We are looking at a capital expenditure of around Rs. 600-Rs. 650 crore for the project. The plant is expected to be ready sometime in 2018-19,' Rajesh Mittal, Managing Director, told BusinessLine.

Mittal said that the company acquired 106 acres 45 km off Tirupati. It is now in the process of placing orders for the machinery.

'We expect to start the construction work as well installation of machinery within a year from now,” he added.

Greenply is planning to raise fresh debt of around Rs. 300 crore for the project. 'We are planning to fund half of the project cost through fresh debt. The balance would be funded by internal resources,' said V Venkataramani, Chief Finance Officer.

The current debt level of the company stands at around Rs. 330 crore, he mentioned.

'The equity base being Rs. 470 crore, the debt equity ratio stands at 0.7:1. We are trying to keep the ratio as close as possible even after going in for fresh debt by paying off older long-term debt of around Rs. 180 crore in the next couple of years,” Venkataramani explained.

Currently, Greenply has a MDF unit at Patangarh in Uttarakhand.

This has an annual capacity of producing 1.8 lakh cubic metres of MDF. Greenply’s market share of MDF in the country is around 30 per cent.

The proposed project would consolidate Greenply’s leadership position further in the segment.

In 2014-15, out of Greenply’s turnover of Rs. 1,564 crore, MDF contributed Rs. 408 crore.

According to industry analysts, MDF fetches better realisation than plywood, the dominating item for Greenply.

'Investments in the current business down cycle would also produce cost advantage for the company,' said a market analyst.

HBL