Girish Bhat, CFO, Gammon India expects the company's corporate debt restructuring (CDR) to be approved shortly, which includes a two-year moratorium plus eight years of repayment schedule.
The debt-ridden company's interest rates will be at 11.5 percent, with a promoter contribution of around Rs 92 crore, Bhat says. “This will give us a breather in terms of executing the project and bringing some liquidity back into the business,” he told CNBC-TV18.
Gammon India has an exposure of Rs 14,000 crore to a consortium of eight banks led by ICICI Bank and Canara Bank. Banks of around Rs 10,000 crore of the debt is in the form of non-fund based exposure, and Rs 4,000 crore is fund-based exposure. The debt is supported by bank guarantees and letters of credit.
Below is the edited transcript of his interview with CNBC-TV18:
Q: Can you break down how the debt may be restructured?
A: Yes the CDR package has been approved provisionally subject to confirmation of the minutes by the CDR. The key salient features are really in terms of overall debt. Our package is two years of moratorium plus eight years of repayment schedule which has been put. Our interest rates will be at 11.5 percent and our promoter’s contribution is around Rs 92 crore. So this is broadly how the package has been structured. This will give us a breather in terms of executing the project and bringing some liquidity back into the business.
Q: Do you get fresh liquidity from the banks after the restructuring?
A: Yes that is what the proposal is.
Q: How much will you get?
A: We have talked about around Rs 750 crore.
Q: Since you have a two year moratorium could you tell us how the interest cost will be in FY14 as compared to FY13, how much will it come down?
A: I think the interest cost will come down by around Rs 280 crore and we are going to get the funded interest term loan (FITL) against that but that is a temporary breather.
Q: You all indicated that the promoter will have to bring in Rs 92 crore.
A: That is in the next six months. Currently 50 percent and in the next four-six months balance 50 percent.
Q: When will this money come in?
A: I think immediately when we are implementing the proposal the first 50 percent should come in and the balance in the next four-six months time.
Q: So when will the banks sign?
A: We are planning to sign the documents in the next week or two weeks.
Q: Who are your top bankers?
A: Our top banks are ICICI Bank, Canara Bank, Bank of Baroda, Punjab National Bank, Syndicate Bank. So we have a consortium of eight banks.
Q: How do you expect revenues therefore to pan out in the current year as well will you come back into the black?
A: Clearly this current quarter as well as coming quarter because of the rainy season will be tough. I hope the last two quarters will be quite strong and I am sure we will be in a position to improve our EBITDA margin by the end of the year close to around 5-5.5 percent.
Q: More than the EBITDA margin what will be the actual revenues be because the tense part of the Q4 numbers was that your revenues were down 12 percent. Q4 is an excellent quarter normally for construction companies and you reported lower sales so there were worried about your order book. Therefore if you can tell us how revenues will grow say in second half or full year as well how was your order book looking?
A: On a full year basis our top line should grow anywhere between 5-10 percent. Our order book has been quite good at around Rs 14000 crore. The good part is in the last four months we have got new orders worth around over Rs 2000 crore which is a positive sign. With the CDR package we have got balance non fund base limits of approximately Rs 2500 crore which will really help us to bid for new projects and working on a really good growth project.
Q: So you get into the black in some quarter in FY14?
A: Definitely. I am saying at EBITDA levels but clearly next year the interest burden will go back again sharply because this is a temporary relief for us. And therefore the focus has to be on a process in terms of reducing the debt as we move forward.
Q: With respect to this reducing of debt, are there any plans of monetizing any real estate assets or just in general reducing the debt in FY14?
A: Yes in the CDR package we have put up the proposal of demonetizing the assets over a period of seven years and divest part of the stake in the subsidiary companies to reduce the debt levels.
Q: Will any of it happen in this fiscal year?
A: I don't think anything will happen in this fiscal year but what we have committed in CDR package we will be in a position to do that.
Q: Have you all committed to an absolute amount that you all will say X amount in the next seven years?
A: We have covered around Rs 2000 crore of debt monetisation over a seven year period.
Q: You said you have Rs 2000 crore of fresh orders. Who is giving orders?
A: We have got orders from hydro sector.
Q: You said you will sell your stakes in subsidiaries, how many BOT projects you have? I guess that is what you are referring to when you say monetizing?
A: Not BOT projects, it is a separate company which is Gammon Infrastructure. I am not referring to that, what we are talking about monetizing our real estate especially on the land what we have acquired in Dombivali, part of the project which is running in Bhopal. So these are two big projects which we are executing and that is why we will be in a position to demonetize those assets. These projects are real estate development projects.