Gayatri Projects estimates that it will continue to grow at 20-percent in FY14 on a Rs 8,000-cr order-book and expects margins to be around 15 percent EBITDA.
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Speaking to CNBC-TV18, managing director Sandeep Reddy adds that high interest rates continue to impact profits and hopes that the central bank will ease rates, going forward.
Below is an edited transcript of the interview on CNBC-TV18
Q: Strong fourth-quarter earnings allowed the company to end FY13 on a positive note. What is the expectation for FY14 in terms of revenues, margins and profitability?
A: We will continue to grow at about 20 percent this year too thanks to an order book worth around Rs 8,000 crore. Some of our irrigation projects in Andhra Pradesh that were dormant till date will commence operations now. So, we expect a stronger growth in volume this financial year. The margins will continue to be around 15 percent EBITDA.
Q: What about interest cost? The full year interest cost is at Rs 270 crore against an EBITDA of Rs 400 crore. Any plans to bring down the levels of debt?
A: The consolidated interest includes interest paid on funds deployed for all special purpose vehicle (SPVs) and road projects that have already been completed. On an average, the interest rate that we continue to pay on loans is around 13.5 percent. We hope the Reserve Bank of India (RBI) will be able to bring down interest rates going forward.
Q: In the next three to six months, are you closer to finding an equity partner for your power projects and SPVs?
A: We are not looking for any partners in the SPVs because nearly five of our road SPVs have already been completed and achieved commercial operation date (COD) while two are under construction. For our power project, we have partnered with Sembcorp of Singapore. We expect the project to commission in May 2014. We have a similar project in partnership with NCC wherein we are looking for, in the next one year or two, an equity partner to divest significant equity.
Q: There have been reports that some your power projects were under stress due to the lack of availability of coal and supply of fuel. What has your experience been in the power business so far?
A: Both our power projects have a linkage from the Mahanadi coal fields and we are located on the eastern coast at Krishnapatnam. We certainly agree that there will be some coal-linkage challenges. The government is also mulling to supply only 60-80 percent of the total quantity committed. To make up for rest of the supply, we plan to use imported coal due to our proximity to the port. We have options to import and run the power plants at full capacity.
Q: What is your outlook on the bottomline and interest costs in FY14?
A: On a standalone perspective, we have posted a bottomline of around Rs 60 crore. On a consolidated basis, the profit has come down mainly due to charges of depreciation on road projects. We have annuity projects which are very sensitive to interest rates and we have to amortise them over the next 15 years.
The initial amortisation costs were exorbitant and dragged profitability lower on a consolidated basis. Profits may increase to touch around Rs 85 crore on a standalone basis. But there is little expectation of improvement in the consolidated profit.