Govt bond buyback to ring in Rs 25-27 cr profit: Zuari Inds

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Govt bond buyback to ring in Rs 25-27 cr profit: Zuari Inds

Suresh Krishnan, managing director of Zuari Industries said they expect one time positive impact of Rs 25-27 crore from this proposal. "The company had Rs 440 crore worth pending bonds," he told CNBC-TV18.

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The fertiliser sector got a recent boost in investor sentiments after reports suggested that government is now weighing options to buyback fertiliser bonds worth Rs 6,900 crore. Talking about this issue, Suresh Krishnan, managing director of Zuari Industries said they expect one time positive impact of Rs 25-27 crore from this proposal. "The company had Rs 440 crore worth pending bonds," he told CNBC-TV18.

Earlier, the government had issued bonds to compensate for subsidies. Krishnan states that the buyback is expected to be at 15% discount.

Below is the verbatim transcript of his interview with CNBC-TV18's Udayan Mukherjee. Also watch the accompanying video.

Q: First, let me ask you about this buyback of Rs 6,900 crore of outstanding bonds from fertilizer companies, have you been formally intimated on that by the government?

A: Yes. We have received a formal communication that buyback should be happening now. And, the closing date is expected to be July 29th. We are still waiting to hear in terms of what the discount is going to be. We expect to get that news by this evening or tomorrow.

Q: What is your expectation on that front?

A: It will be a market based discount. We already hold three different coupons for the bonds. On average, the discount will be close to about 15% and government is expected to compensate 50% loss to the industry.

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Q: So, what could that mean in terms of cash benefits for Zuari?

A: Zuari in total had about Rs 440 crore of bonds in our books, and last year on 31st of March we sold Rs 221 crore at an average discount of about 15% and a similar component is coming in here. We would expect that it will have a positive one time impact to close to about Rs 25-27 crore in our books.

Q: There are talks that a group of ministers headed by the finance minister is taking up the draft policy on urea decontrol as early as next week. Have you heard anything to that effect and are you expecting that this report will now be implemented?

A: As far as urea policy is concerned, we are aware that we are going by two stages: (a) the policy for existing gas base and urea sector, per se, (b) along with that, we are also looking forward to the policy in the new investment. We clearly understand that steps on the policy implementation are moving higher and one should get to really hear more definitive steps in the government in a couple of weeks from now.

However, we are still not clear in terms of whether they're going to announce both for the existing industry and the new investments.