Aim to reduce debt by Rs 250cr in FY12: Adhunik Group

Excerpts from Markets Midday on CNBC-TV18 Watch the full show »

Arun Kedia, group CFO, Adhunik Group states that they are not in talks to sell their forgings subsidiary. The consolidated group debt currently is at 4000 crores & they intend to move forward and focus on their plans for debt reduction. Having commissioned a pallet plant & started a new iron ore are some of the steps towards reduction of debt.

Below is an edited transcript of the interview. Also watch the accompanying video.

Q: We understand that you are looking to sell your forgings subsidiary. Is that true and if you are looking to sell then what is the status? Have you already identified a buyer?

A: We are not intending to sell our forging business. We acquired this forging business three years ago and stabilized it. We have established new lines of manufacturing there and the business has started to do well. So we remain committed to create more value in this business for all our stakeholders and at the current moment we are not evaluating any concrete sale proposal. The media report is purely speculative and whenever this situation arises, we will inform everybody about it.
 
Q: You haven't spoken to ThyssenKrupp and Sumitomo?

A: If it is Thyssenkrupp and Sumitomo, those are general business talks because they are in a similar line of business. We always explore joint ventures, business alliance, or new opportunities for growing the business. Those stocks are not in the nature of selling off the business.

Q: Are you speaking to Amtek Auto over anything?

A: No. We are not talking to Amtek Auto.

Q: Any sort of plans in terms of the debt reduction for the company? The reports basically indicated that you would possibly be looking to sell off your forging arm simply because you want to reduce debt. What is the situation on that front there?

A: Debt reduction is of course a priority area for us. For that, we would also look at consolidating our business. However, in the current market environment liquidity is a constraint and the cost of capital has gone up which was not anticipated. We are giving debt reduction attention but unfortunately, due to the current economic environment we have not been able to do anything in the past six months. We remain hopeful of doing some kind of securitization transaction or some kind of equity or quasi-equity transaction in our mining company. Thereby we would try to raise some cheap long-term funds and replace debt in the consolidated entity.
 
Q: How much is your debt on books? How much would you like to reduce it by? Give us more details about this mining company.

A: Current debt of Adhunik Metaliks is about Rs 1400-1450 crore. Ideally, we would want it to remain in the range of Rs 1100-1200 crore.
 
Q: This is for the listed Adhunik Metaliks. For the total group entity, what is the debt?

A: Adhunik Metaliks has Orissa manganese & mineral and this forging business. Consolidated debt of Adhunik Metaliks would be about Rs 2200 crore. That is excluding the debt of our power business, which is an SPV and non-recourse separate funding.

Q: If you included that, it would be about Rs. 3600 crore, is it?

A: If we include power then it would be about Rs 4000 crore.
 
Q: So you are planning to securitize your sales of Orissa manganese and thereby raise money?

A: We have recently commissioned a pallet plant there and pallets are in good demand. We have also started a new iron ore mine from which cash flow would start coming from first quarter of next year. Therefore, the top line of the company would increase substantially. We are looking at securitization of opportunities now onwards.
 
Q: What would your interest cost fall to in FY13 for instance compared to FY12?

A: The current interest cost is about 13.5-14%. Through this securitization exercise, we want to reduce debt of about Rs 250 crore at the holding company level. Securitization borrowing would come about 2-3% lesser cost than the normal borrowing process.