JP Associates eyes debt reduction of Rs 15K-16K cr

Gaur expects the company to bring down their debt to Rs 15,000-16,000 crore by the end of FY12. He said, "We have been working on our debt reduction scheme very sincerely."

Here is a verbatim transcript of the interview. Also watch the accompanying videos.

Q: How is the liquidity position of the group in terms of the project that you need to invest in given your balance sheet situation? How much equity infusion would you require over the next 10-15 months?

A: JP Group consists of three listed companies JAL, Jaiprakash Power Venture and Jaypee Infratech . In this not so comfortable calendar year 2011, JP Group has commissioned Karcham Wangtoo hydropower project. The entire equity requirement for this hydropower project has been met. In fact, the Karcham Wangtoo project has been commissioned before time.

As far as Jaiprakash Power Ventures’ performance is concerned, the revenue, EBITDA and EPS went up. I would not mention the share price as it is hardly an indication of the company’s performance.

We would also commission the first Formula One track and stadium. India will have the privilege of hosting first Formula One. All the equity requirements have been met for the sports venture.

The largest expressway, Yamuna Expressway, is a flagship project of JP Infrastech. This project has almost completed. We hope to commission it in the next three-four months.

As far as the equity requirement is concerned, all the projects have completed. As far as the cement plant expansion is concerned, the expansion is completed. The Group is performing fine in all the spaces.

Q: In our interview last time, you indicated that you hope to bring the debt down to between Rs 15,000-16,000 crore by the end of FY12. Given the kind of equity plans in terms of capex, are you on track to bring debt down to the levels you indicated?

A: We have been working on our debt reduction scheme very sincerely. There is no new requirement of equity for our undertaken projects, whether in Jaiprakash Associates, Power or Infratech.

Q: Could you focus on the various business verticals one by one? Sequentially, there was de-growth for you as far as the cement business was concerned. The market was surprised that realisations slipped for JP, where prices have improved for some of your peers. What is happening with the cement side of the business?

A: Cement is a very regional subject. The demand-supply has a lot of regional colour. Different companies working in different areas have different numbers. For Q1, where the all India consumption remained flat, JP had a growth of 10% in cement consumption. Barring few zones or companies, the entire cement sector suffered. EBITDA numbers for almost all cement companies had a different story to tell.

The biggest concern for cement company has been the coal prices and logistic costs, which is not in the hands of any cement company. Coal has been an issue. Our estimated consumption for Q1 did not grow at all on all India bases, even though we had 10% growth. Cement companies faced some problems.

At the same time, I remain very confident about this sector. An organisation, we remain very confident about India’s potential and requirement of infrastructure. Although other investors have a different view on infrastructure, but India has potential.

Q: Most concerns have centred your real estate division off late. This quarter, the Rs 350 crore of revenues that you logged was lower than what the street might have expected. What happened this quarter? What are your expectations for the rest of the year from this division?

A: There have been a lot of debates during last two years on many occasions that Jaiprakash Associates is heavily dependent on real estate, whereas, real estate is hardly 10% of the Jaiprakash Associates’s (JAL) total revenue.

Real estate has been in news for many wrong reasons off late, but the real estate pie of Jaiprakash Associates centres around only one project in Greater Noida and Noida. I am not bothered about the bit of de-growth in that segment for the first quarter. It is the revenue recognition policy which is important.

A lot of projects will be completed in the coming six months. At the same time, JP Infratech, which has the Yamuna Expressway and real estate along it, has been registering good numbers.

However, during last four-five months, we have observed that this part of NCR real estate has suffered, including the real estate in Noida. At the same time, we have been working on the sales. In fact JP Infratech has sold real estate worth over Rs 10,000 crore.

Q: In your current quarter, the construction margins were almost at 20%. What happened for this quarter? Are these kinds of margin profiles sustainable for the rest of the year?

A: With a good spread from construction, cement, real estate and hospitality, JAL will have almost consistent growth. We completed the Karcham Wangtoo project during the year, which helped a bit. The Yamuna Expressway construction is at peak, which again helped.

JP Associates has been able to bag a very big project in Bhutan, which is a cash contract of over Rs 2,000 crore. We have worked earlier in Bhutan about eight years back and completed big projects successfully.

Engineering and construction business would continue to give good growth. As far as cement is concerned, this year being a good monsoon year, growth will look much better from October onwards.

JAL has been able to maintain more than 30% CAGR in terms of revenue over the last five years successful, even though the Q1 revenue did not show growth. In the coming six-eight months of this financial year, we would be able to cross revenue over Rs 16,000 crore.