Everest Kanto may set up facility in Iran

MUMBAI: Everest Kanto Cylinders (EKC), the country’s largest CNG (compressed natural gas) and industrial gas cylinder manufacturer, is looking at setting up a new manufacturing plant in Iran.

The company is also setting up another greenfield unit at Gandhidham in Gujarat, where it already has a manufacturing unit, chairman and managing director P K Khurana said on Wednesday.

The company has been contemplating setting up a plant in Iran for the past 4-5 years, but owing to the political situation in that country, it put the plan in the backburner.  However, it continued its supply to that market from its Dubai unit and assisting some local manufacturers in setting up a plant.

“We plan to set up a facility with an initial capacity of 200,000 cylinders per year for which a decision would be taken shortly. As per the local requirement, we would hold 49% stake in the project. Our investment would be about $20 million and production would begin in 12-18 months of us signing the joint venture agreement with a local partner,” Khurana said.

In spite of being a minority partner, management control of the operation would vest with EKC. This would be EKC’s third overseas plant after Dubai and China.

On domestic expansions, Khurana said the company would set up a new greenfield unit with at a designated special economic zone (SEZ) at Ghandhidham with an investment of $50 million.  The company already has a 3,40,000-cylinder capacity in Ghandhidham which is also under brownfield expansion. Post expansions, Ghandhidham facilities would have a capacity to churn out 800,000 cylinders annually.

On Tuesday, EKC said it plans to raise up to $60 million to fund for these capex plans, which would lead to 4-5% equity dilution. This would be the second time since its Rs 90-crore initial public offering (IPO) in December 2005 that the company is going in for fresh capital infusion. In November it raised Rs 92 crore as preferential allotment to some financial institutions.

Khurana said once the new Ghandhidham facility comes up, owing to import-EKC entirely imports its raw material-benefits the company’s margins would improve. “The new facility would be dedicated to OEMs (original equipment manufacturers) who currently account for 25% of sales,” Khurana said.

EKC’s China plant is scheduled to begin production by the end of the year. Khurana said in the second full year of production, the plant would generate $20 million of topline for the company.