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Sep 28, 2012, 10.51 PM IST
In an interview with CNBC|-TV18, Puneet Dalmia, MD, Dalmia Bharat said the company is planning to fund the deal through cash surplus and internal accruals. At present, the company is looking to ramp up sales in the new company.
Here is the edited transcript of the interview on CNBC-TV18.
Q: When you work out the capacity of 1.5 million tonnes, the price works out to about Rs 3700 per tonne and the deals that are being spoken off in the market is more like USD 120 per tonne. Of course Ambuja did the wholesome deal at USD 200. Why are you buying so cheap?
A: No we are also assuming that this is the size of the equity check. We are also assuming debt of approximately Rs 500 crore. So the total range in enterprise value will be somewhere in the range of USD 115-120 per tonne because there is also a power plant here which is about 27 megawatts. If you just look at the cement capacity, the range is USD 115-120 per tonne.
Q: How do you plan to fund this?
A: We have the cash so we are going to fund it with internal accruals and our past reserves and surplus.
Q: Why did you buy this plant? What was the business case and more importantly, what will be your priority, to bring down the debt?
A: The immediate challenge is to ramp up sales. This plant has been running at 40-50 percent capacity utilization. We are going to put some great technical people and great sales people to ramp up sales. In the long term, we are very excited about the north-east market because we invested in Calcom earlier this year and with Calcom we will have a load of synergies.
We feel that we will be able to create a very profitable and a significant footprint in the north-east with this acquisition. But the immediate plan is to stabilize the plant technically and to ramp up sales as quickly as possible. We also believe that the demand in the north-east will grow between 13-15 percent per annum because there are a lot of hydro power projects and road infrastructure that is going to be built there apart from housing.
As income growth happens in that region and as government spend increases, we think it is a very attractive region to invest in.
Q: What is the annual interest burden that you are assuming at this point?
A: We are going to assume an annual interest burden of about Rs 60 crore.
Q: And what will be the EBITDA of the plant that you have sold, the stake?
A: The EBITDA I think will depend on how soon the ramp up happens but, I can't give any guidance on EBITDA right now.
Q: Will you look at more acquisitions now that you might have some cash?
A: We have taken a very significant exposure in the North-East. Our plan is to first stabilize and prove our investment thesis and for now, we just want to roll up our sleeves and get to work.
Q: What kind of revenue can we see in the balance six months of the year and what kind of revenue can we assume for FY14 for Adhunik Cement?
A: I can't give that guidance right now because we still have to integrate it and see how quickly we can ramp up the production and sales. I cannot give any financial guidance either on top line or bottom-line right now.
May 21 2013, 13:56
- in Results Boardroom
May 21 2013, 11:05
- in MARKET OUTLOOK