ECB funding for FCCBs repayment almost finalised: Rolta

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ECB funding for FCCBs repayment almost finalised: Rolta

KK Singh, chairman and managing director of Rolta says, external commercial borrowings (ECB) funding for FCCB repayment is almost finalised. “It’s almost in the last leg of finalisation. We should be able to do that in the first week of January.”

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Excerpts from Markets Midday on CNBC-TV18 Watch the full show » ALSO READ See latest News about Rolta See previous management interviews See what other Experts & Brokerages are saying about Rolta Rolta BSE | NSE 29/05/12 Are Mutual Funds betting on Rolta?

Rolta India has foreign currency convertible bonds (FCCBs) of about USD 135 million are due in June 2012.

KK Singh, chairman and managing director of Rolta says, the company is confident of repaying FCCBs due in June 2012.

In an interview to CNBC-TV18, Singh says, external commercial borrowings (ECB) funding for FCCB repayment is almost finalised. "It's almost in the last leg of finalisation. We should be able to do that in the first week of January."

According to him, interest rate on ECB funding is likely to be around LIBOR +5%. "We will eventually look at equity raising to repay debt," he adds.

Below is the edited transcript of his interview with Latha Venkatesh and Sonia Shenoy of CNBC-TV18. Also watch the accompanying video.

Q: How are you planning to meet your FCCB redemption cost? Will it be through internal accruals, through external commercial borrowings (ECB) funding, what is the plan?

A: We are tying up the ECB funding. It's almost in the last leg of finalisation. We should be able to do that in the first week of January. Six months before the due date, we get the permission from RBI to raise ECB for that purpose. So, we should be able to do that and then finalise it.

Q: What will likely be the interest rate on such a loan?

A: Upper cap for such ECB is LIBOR + 5%. So, it will be within that price range. I don't see it to be anything much lower than LIBOR + 5%.

Q: But do you expect that you will be able to manage within LIBOR + 5?

A: That is the price range from RBI guidelines. So, it cannot exceed that. I believe that we should be able to do within that price range.

Q: The European market is very tight because of its own problems. Even trade credit companies tell us trade credit is becoming very tight. This is a large commitment. Are lenders willing to give it to you at LIBOR + 5?

A: Yes. We have our committed bankers who have been supporting us since beginning. They are very much in line to support us for this.

Q: What will the amount be?

A: The principal amount of USD 96 million. With aggregate interest, it is almost about USD 135 million.

Q: So your ECB will be to that amount, right?

A: Almost to around that amount.

Q: When do you expect to tie it up, what is the date we can hear?

A: I think in the first week of January.

Q: The other issue is the free cash flow. There is an expectation that you are going to become free cash flow positive very soon. Can you give us an indication of the timeline on when you will become free cash flow positive?

A: We have been transforming our business. In last three or four years, we have transformed it tremendously. We have transformed it from a service company to a solution company. This has been the key of our success for last few years. We have gone up in terms of margins, we have gone up in terms of value chain. And that has been possible because we have acquired the best of the technologies, best of the companies which have come and we have added them into our stable.

IT as a matter was fact was not a business for us. We were more of a geo special and engineering company. We have also added IT as a main business for us. So, we are in that phase where the growth has come through acquisitions and through all kinds of investments. We believe this will continue for another 6-12 months and then we should be stabilising and probably then we can take a breather after that.