In an interview to CNBC-TV18, Subash Menon, managing director and chief executive officer, Subex said, there are two tranches of foreign currency convertible bonds (FCCBs) outstanding at this point in time. He further said, the company hopes to have a solution over the next three-four months.
He further said, the company hopes to have a solution over the next three-four months. “We are absolutely confident that we will have a solution in one form or the other. And that’s what we are working towards at this point in time.”
Below is the edited transcript of his interview on CNBC-TV18 with Reema Tendulkar and Latha Venkatesh. Also watch the accompanying video.
Q: What is the total amount of face value of the foreign currency convertible bonds (FCCBs)? What will it mean in terms of the discounted value, if you want to buy them from the market?
A: There are two tranches of FCCBs outstanding at this point in time. Tranche one is USD 39 million in face value. Tranche two is USD 55 million in face value. So, the total is USD 94 million.
Where are they trading at this point in time? We believe they are trading in the region of about USD 1.15-1.16. USD 94 million is equivalent to something like USD 108-109 million. So that would be the cost of buying them back, if one were to look at that option.
Q: What is your plan then? Are you planning to buy them back from the market or will you be repaying the bond holders? What is the game plan to raise this kind of money?
A: As regards the second set of bond, tranche two, is concerned, the bond holders have clearly agreed to roll that over for a three-year period. So, we are not looking at buying back or redeeming or anything like that with regard to those bonds. That is the larger tranche of USD 55 million. They will get rolled over for a longer period of time. So, the maturity date will get pushed out into the future.
As regards tranche one, we do intend to redeem that in an appropriate time. Currently, we are looking at options to access that kind of funds. It could be through debt or equity or a combination of the two, some kind of instrument which is probably a hybrid of get an equity. So, these are all the options that we have in front of us. We still got about six months to address those issues. We hope to have a solution over the next three-four months.
We are absolutely confident that we will have a solution in one form or the other. And that’s what we are working towards at this point in time.
Q: With respect to tranche two, you have already spoken with creditors to roll it over. Could you provide us a little more details with respect to how much will it cost, the coupon payment, the structure of the restructuring of your FCCBs?
A: With regard to the details of that, the different components of that restructuring, we are still working at that. But it is quite certain that the date that will get pushed. Coupon, we expect the coupon to remain, we don’t expect that to move up. There are other terms that are there. These are terms that are still under discussion.
What has been agreed upon is that the coupon will stay. So, there will not be a higher cost in that sense for the company from a percentage perspective, from a coupon perspective and the date will get moved up.
Q: About the earlier tranche of USD 39 million worth of FCCBs, what really is the game plan? You said that it might be a mix of debt or convertible instruments through which you may raise money. What kind of equity dilution are you looking at?
A: I quite naturally can't give you all those details now. All I can tell you is that it will be a combination of debt and equity. It could be a quasi instrument as we have been indicating. We still do not have clarity on that instrument.
We are clearly looking at the future, what we need to do in the company for the next four-five years. This particular move that we take now will be in line with that long-term plan. But as such what instrument, what terms, I will be able to share that with you only in a couple of months time because we are still working towards that.
Q: Is the global USD loan market still accessible or is it very tough, given the situation which European banks find themselves?
A: We do see an opportunity to access USD loans and a combination of Indian loans and USD loans resulting in a lower cost of capital.
Subex stock price
On November 27, 2015, Subex closed at Rs 15.37, up Rs 2.37, or 18.23 percent. The 52-week high of the share was Rs 18.35 and the 52-week low was Rs 9.12.
The company's trailing 12-month (TTM) EPS was at Rs 0.43 per share as per the quarter ended September 2015. The stock's price-to-earnings (P/E) ratio was 35.74. The latest book value of the company is Rs 13.01 per share. At current value, the price-to-book value of the company is 1.18.
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