Expect net debt to reduce by Rs 300cr post QIP: Sintex
In an interview to CNBC-TV18 Amit Patel, managing director, Sintex Industries said that the company's net debt will reduce by Rs 300 crore after its qualified institutional plan (QIP).
"With this new exercise, our balance sheet will look completely different in March. Our debt equity would improve from 1.3:1 to 0.8:1," he elaborated.
Below is the edited transcript of Patel’s interview with CNBC-TV18.
Q: Caould you take us through the details of the qualified institutional placements (QIP), is it true that you have raised Rs 175 crore and the average price was about Rs 65.9, what exactly is the cost of the money for you?
A: We have a repayment of about USD 293 million in March 2013. We have done is raised USD 32 million in way of QIP and raised USD 140 million in ways of step down convertible Foreign Currency Convertible Bonds (FCCB) bonds.
These two put together would give us about USD 170 million. Sintex already has about USD 130 million in cash on its books and that would take care of obligations in March.
Q: What does all this do to your debt and your equity? What is the cost at which you have raised the new money? Is it slightly more than or is it the same as the cost of the money that you will pay back?
A: Because of this new entire exercise, our balance sheet in March will look completely different and our net debt will go down by about Rs 300 crore. Our debt equity would improve from 1.3:1 to 0.8:1 and that would put our balance sheet in a very strong position.
Q: How is monolithic doing, there is also an expectation that overseas will look better and H2 as compared to H1, do you see that playing out in the next two quarters?
A: Our monolithic business is steady. Our goal has been to release our working capital which has been blocked. We want to make sure that the business itself is cash positive or cash neutral.
But monolithic only accounts for 20 percent of a total topline whereas 80 percent of our business mostly custom moulding business has been doing phenomenally well, even in Europe and in US. Looking at a strong push from pre-fab as well as custom moulding business, we expect large improvement or substantial improvement in the bottomline.
Q: There are governmental announcements that they are going to look at the big projects and have them pushed, there was some help given even to power sector through SEB loans, none of which have been revamped? On the ground, are you getting more demand for monolithic structures because that is connected to the real sector likewise in your pre-fab and plastic moulding, are you seeing consumer demand trough out and improve or are you continuing to see the situation as it was three-six months back?
A: Most of our monolithic business is state-driven and the positive noises are all coming from the central government. Monolithic business has not changed per se a lot but if things or the momentum continues, we think that within six months, things will be far different than what it is today.
Q: In the plastic moulding and the consumer related business?
A: For the pre-fab business we depend a lot on central government and we are seeing substantial improvement than last year.
Q: What about margins, margins were a bit disappointing in Q2 although rupee was slightly beneficial, how do you see that playing out in Q3-Q4?
A: Last year Q2 – the quarter that we are comparing has been extremely strong for Sintex. One would not see margin improvement coming in Q2 2012, but Q3 December end is looking very positive.