Moneycontrol
May 06, 2013 03:55 PM IST | Source: CNBC-TV18

Aim to cut debt by Rs 5000cr in FY14: JP Associates

The year gone by was challenging year for the company, said Manoj Gaur, executive chairman, JP Associates. The firm has invested around Rs 39000 crore in various business including real estate, hospitality, cement and construction.


Jaiprakash Associates March quarter profit slipped 56.5 percent year-on-year (YoY) to Rs 124 crore due to poor show from its mainstay businesses including cement and construction. Sales too declined 4 percent YoY to Rs 3864 crore as overall demand in its segments remained subdued


While explaining what went wrong in FY13, Manoj Gaur, executive chairman, JP Associates in an interview with CNBC-TV18 said, it was a challenging  year for the company in terms of demand and input cost.


The firm is already invested around Rs 39,000 crore in various business including real estate, hospitality, cement and construction. "We are not keen to further invest in any new project," added Gaur.


The company has a debt of Rs 54,000 crore, which it is trying to bring down by atleast Rs 4000-Rs 5000 crore by FY14. The company is also confident of achieving atleast 14 percent growth in current year on improved visibility in business environment.


Below is the edited transcript of Gaur's interview to CNBC-TV18.

Q: In cement space there has been some slippage both in terms of revenues and performance. Could you take us through what you saw in terms of volume growth and whether realizations as well were under pressure through the course of Q4?


A: For Jaiprakash Associates Ltd (JAL), where about 21 million tonne (MT) capacity is housed, it had a good quarter where we could produce and sell almost about 4.5 MT in this quarter. On a group level, we did about 22 MT for the year, which was about 15% growth for JP Cement year on year basis. It was a challenging year. The country witnessed cement consumption of 7% and we could produce and sell in different zones. That is why we could register a growth of 15%.


Q: There seems to be a delay in terms of the cement stake sale, something the management has talked about in the past and something that you are keen on in order to help your debt situation. Could you update us on whether or not that cement stake sale will take place and by when?


A: As cement is a public domain, we have committed ourselves to bring down our debt to a reasonable level. On a group level, we are consolidating debt for power and for Infratech. The total debt is about Rs 54000 crore, but the entire exercise of asset creation that took place during last about six-seven years, has created assets and today they are in excess of Rs 90000 crore.


For the western plants, there has been interest from many companies and even the newspapers keep reporting this particular subject as if they are privy to all the information. Yes, we have been having discussions. It is not a question of valuation or any other matter. It is more a question of perception, understanding and we have been very close to finalising our discussion but it has not happened so far.


I confirm and emphasize that as a company, South West plants are hived off to monetize these assets, to bring down debt. And sooner or later, I am quite confident at least Rs 4000-6000 crore debt reduction would be witnessed in this financial year. Will people choose to believe newspaper reports or will they actually see how it happens, is something only time will tell.


Q: Because of the drying up of order inflow pipeline in the construction segment of Jaiprakash associates, the revenues from this segment have been under stress. Will we start seeing a meaningful revival in this segment's revenues in FY14?


A: Unfortunately, for many reasons which can be classified as policy paralysis or very uncomfortable economic scenario, the government is not able to come out with new projects. NHPC, is also facing the brunt for it.


As far as new investment is concerned, as JP Group we have definitely taken a decision that there will be no new capex, no new investment and whatever we have in our hands, we will complete and consider it our working. So, as far as engineering and construction arm of JP group is concerned, JAL is concerned we are clocking about Rs 6500 crore annually. I don’t think that it is a small size. Last year we got four contracts in Bhutan, so, projects are there and we feel that it is a good time to take a plunge.


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We shall do for contracting business is in our blood but we will not make an investment just for the heck of it or take a project just for the sake of it and then abandon it. JP Group is never known to abandon any project whatever maybe the circumstances. So, we are satisfied as far as our order book is concerned and we are very hopeful to have atleast 12-14 percent growth for FY14 that is the plan we have and we hope to achieve that.


Q: The big project to come through this year was the Yamuna Expressway where some analysts have expressed concerns about the slowdown in traffic volumes. By how much does that put to risk, the potential cash flow situation that investors had envisaged from this expressway?


A: I want to be specific here that we had invited analysts from Mumbai to visit Yamuna Expressway and see for themselves how the first land parcel is getting developed. And whatever the data we present, whatever pictures we show, unless people see themselves, they cannot comprehend the level of opportunity JP Infratech has for everybody.

As far as toll collection is concerned, let me be very frank here that toll collection is seeing increase month after month. The level of toll collection which was there in September to December 2012 has gone up by more than 40 percent in the last two months on month-on-month basis. As far as real estate development is concerned, I think we have bucked the trend.


Infact, in the year 2012-13, despite a very challenging environment, our real estate sales have shown increase. It carried forward the momentum of the previous year and we did discuss during the analyst meet that as far as JP Infratech is concerned, we are exploring and we are successful also to monetize some of the land parcel to bring down the debt even in JP Infratech. So, I would disagree on this, infact we are satisfied with the progress JP Infratech is making in toll collection as well as its real estate segment.


Q: Jaiprakash Power Ventures is still a capital intensive part of your business. How do you plan to raise the kind of money required for capex over there? Will you still be looking at this asset sale/ equity issuance options?


A: Even though people have their own concerns about some aspects of debt and balance sheet of JP Group, I think Jaiprakash Power Venture other than JP Infratech has demonstrated its inherent strength when it raised USD 150 million of qualified institutional placement (QIP) issuance successfully in Feb. And this actually addressed the requirement of equity infusion for FY14.


With 2200 megawatt (MW) in operation in JP Power out of which 1700 MW is hydro and 500 MW thermal, this year our very important Nigri Thermal power plant which is very much part of JP Power is going to be commissioned fully. Hydro tests of the first boiler 660 MW has been already successfully completed and we are going to start this power generation from first unit in November 2013 and the second machine has been targeted for synchronisation in March 2014.

Coal block mining development has also started and we are going to have another analyst meet at our coal block in the month of July 2013 when we are targeting to dispatch coal from coal block to the Nigri Thermal power plant. So, by the end of March 2014 I will like to confirm that we will be having a generation base of about 3500 MW and as far as equity issues are concerned for this financial year, we have no plans to raise equity.

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