Gammon India crashed nearly 20 percent to touch a new 52-week low of Rs 26 on Friday after reporting a huge loss in the third quarter. In an interview to CNBC-TV18, Girish Bhat, CFO of the company says that investment in realty sector and power business internationally led to the stress on the balance sheet. "We are in the process of monetising our real estate projects and also bringing in new partners in the power business to reduce debt," Bhat says.
Going forward, Bhat feels, the key challenge for the company is to maintain liquidity in business. "We are quite confident to deliver an EBITDA margin of minimum 5 percent for the next quarter," he says.
Below is the verbatim transcript of Girish Bhat's interview on CNBC-TV18
Q: The key problem with your company right now seems to be interest cost and high debt. If you can give us any indication of how you will be able to reduce it, any kind of asset sales, land sales that you may be contemplating?
A: Yes, our debt has gone up because of our investment in the real estate projects as well as our power business internationally. We are in the process of monetising our real estate projects and also bringing in new partners in the power business to reduce debt.
However, I just want to talk about the results. In last six months, we have been facing very tight liquidity position arising out of deceleration in the economy. Indecision by various government segments in the large PSU client level is affecting our project progress and the project variation.
Even the projects connected with the power sector in the private space are in trouble with the overall slowdown in the power investments and the same are not progressing as expected. This has necessitated us in reassessment of the jobs considering the delay in the jobs execution and on account of funding difficulty. Therefore, many of our jobs have turned negative on the increased cost stretched timeframes and hence we have recognized losses of these projects upfront.
Company is entitled to the claims of prolongation as well as other variations which would be a matter of arbitration and dispute. And company is entitled to the claims of prolongation as well as other variations which would be a subject matter of arbitration and dispute. Pending these claims and settlement on a prudent basis is not considered in excess of the cost that we have incurred. Hence, the key challenge is to have liquidity in the business.
Q: Are you seeing any chance to pass on these costs? Do people who have given you the contract allowing you to pass on these costs?
A: Absolutely, we have got a very fair claims prolongation as well as variations which we are working. We have seen that in the past, and are confident in the future that through the dispute resolution mechanism and arbitration we will be in a position to get these claims in our favour but it will take some time.
Q: When can we expect you to turn profitable at least at an EBITDA level?
A: From the next quarter we are quite confident to deliver minimum 5 percent EBITDA margin.
Q: In FY13 will you be as a full year also in the red?
A: Yes, we will be very positive in FY13. If you look at it from a marginal level, EBITDA level, we may be marginally positive at around 2 percent level.