Chennai, Aug. 14 SPEL Semiconductors Ltd announced a $7.7-million (Rs 35 crore at the then exchange rates) expansion project in January to raise its capacity to assemble and test chips from 250 million units a year to 425 million.

The project is close to completion. In the second half, the expanded project will be running to full capacity. On the basis of this, SPEL Semiconductors expects its annual turnover to rise to Rs 80 crore (at the current rupee-dollar exchange rate) against Rs 54 crore in 2006-07.

In the first quarter of the current year, the company reported flat results – indeed, net profit (Rs 60 lakh) was slightly lower than that of the same quarter last year (Rs 68 lakh). But this was essentially because interest costs of Rs 65 lakh — noticeably more than the net profit itself — ate into the bottomline.

Mr Ar Rm Arun, Vice-Chairman, SPEL Semiconductors, told Business Line last week that the high interest costs were a reflection of the capital investments made that are yet to be recovered by sales. However, there is no dearth of ord ers. First quarter sales, at Rs 15 crore, were 25 per cent higher.

Customer confidence

Customer confidence is high – incidentally, the expansion project was part-funded by a $2.2-million loan from a customer, California Micro Devices. (The loan came in the form of equipment. That part of expansion is now complete. The other part will be completed next month.)

Last September, SPEL Semiconductors announced a 5-year investment programme of $250 million. Mr Arun said that the next round of fund raising could be a GDR or a FCCB issue. “The rupee appreciation has forced us to look at automation options as a means of cost reduction,” he said.

SEZ approved

Meanwhile, SPEL Semiconductors received formal approval for its 25-acre Special Economic Zone at Maraimalainagar, 40 km south of Chennai. (‘Formal approval’ is the penultimate step before ‘notification’, which is the final approval.)

The company owns 18 acres and its parent company, SPIC has another seven. The earlier plan was to have SPIC as the co-developer, but now SPEL intends to buy the land from SPIC and go it alone.

Mr Arun said that SPEL might contract out the development to a real estate developer or form a joint venture with a partner for the project.

The plan is to build a 1.75 million sq. ft facility for leasing out to the IT hardware industry.