Hope to be profitable by FY13 says ITI

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Manufactures and suppliers of telephone, communications equipment and parts ITI expects to be profitable by FY13 irrespective of its merger with MTNL and BSNL.

Speaking to CNBC-TV18, KL Dhingra, chairman and managing director of ITI said, "The merger seems to be a remote possibility because there is some opposition from BSNL and MTNL on this merger. But on our own we should be in a position to come back to profit by year 2012-2013 definitely."

Losses incurred by ITI in FY11 have been reduced to an eight year low, he added.

He also highlighted that company has been suffering due to increased imports of equipments from China and other European countries. It is facing issues like availability of finance and lack of support for research and development.

However, he feels that the draft national telecom policy 2011 has addressed all these issues and hopes that the proposals announced in the draft if implement will benefit the company.

Below is the edited transcript of the interview. Also watch the accompanying video.

Q: What did you take away from yesterday's draft national telecom policy because Sibal spoke a lot about how India could become a global hub for telecom manufacturing and how lot of telecom equipment produce should be indigenous? What are ITI's plans for the next few years along those lines?

A: If one looks at the fortunes of ITI, ITI has suffered because of reasons that telecom equipments have started being imported from China and other European countries. Secondly, R&D has not been getting any support. Thirdly, the availability of finance has also been an issue.

The new telecom policy addresses all these issues in one go. They are talking about setting up of Telecom Finance Corporation this will meet the requirement of the funds for all service providers and telecom equipment manufacturers.

They will also create an R&D corpus which will be available to all domestic manufacturers of telecom equipments. About 80% of telecom equipments are going to be bought from domestic sector with 65% of value addition.

We see a lot of scope for ITI to get into manufacturing mode as early as possible. We also see a lot of funding support coming from government for R&D activities. We also see a lot of scope for finance to be freely available to us from Telecom Finance Corporation and banking sector. They have also said that telecom is likely to be declared as an infrastructure sector.

Q: Once this kind of financial support is made available to you are you confident that you will be able to supplant some of the imported items of equipment which telecom service providers use today or will it take a long time for ITI to scale up to that level of technical excellence?

A: No. I don't think it will take much of the time. There are two-three developments which have taken place in the last six-seven months. Firstly, our losses have come down to all time low excluding grants in the year 2010-2011 to level of Rs 358 crore.

Losses incurred in earlier years have been much higher. This is despite the fact the most of the service providers in the public sector have not done well and also been into losses and their losses have gone up.

Secondly, the government is also talking of having an alliance of PSU under DoT. We have already signed the NDA and will be signing MoUs with C-DOT. We are going to start manufacturing of telecom equipments immediately with products which have been developed by C-DOT which is a DoT arm.

Q: How significantly do you see your order book and revenues going up once these products start to kick in?

A: A committee was constituted under the DoT which was basically to look at the strategic alliance between PSU of the DoT.  This committee is in the stage of submitting its recommendation to the government shortly. It could be anytime, today, tomorrow or next week.

With that most of the telecom equipment requirement of BSN is going to be produced by ITI with technology developed by C-DOT. Same is the case with the procurement of MTNL also.

Q: In fact the telecom ministry yesterday was talking quite a bit about the role of the public sector companies, in that light do you think our proposal to look at a possible merger between MTNL, BSNL and ITI might be muted or do you see yourself existing independently as a supplier to these entities?

A: I would like to draw your attention to the recommendation of the board for reconstruction of public sector enterprises made about three months back. They wanted the DoT to look at the possibility of a merger of BSNL, MTNL, ITI. But I do not see happening now because there is some opposition from BSNL and MTNL on this merger. But I feel that on our own we should be in a position to come back to profit by year 2012-2013 definitely.

Q: That merger is unlikely in your eyes?

A: It is under consideration but there are some issues related to manpower, pay scales, gratuities and absorption. I see that merger seems to be a remote possibility as far as ITI is concerned. But I definitely see that ITI will come back to profit by end of 2012-2013 on its own irrespective of merger plans.

Q: Where do things stand with your Board for Industrial and Financial Reconstruction (BIFR) filing?

A: BIFR was supposed to have a final call on the revival of our company on September 5. But ministry just wanted little more time to give a final thought to the revival package which is under finalisation.

They have requested the BIFR to give them time. I have got a feeling that by this month end the DoT will be in a position to finalise the recommendations which will be placed before the BIFR in its next meeting. I expect the decision of BIFR to be taken in the next two to two and half months time.