Patel Engg raises $75m via QIP, not to dilute further stake

Patel Engineering had raised USD 75 million, or Rs 345 crore, via a qualified institutional placement (QIP). In an interview to CNBC-TV18, Rupen Patel, Managing Director, Patel Engineering, says he was not looking to raise money further, despite having an enabling resolution to raise USD 500 million. "The promoters are not keen on diluting more stake." He added that the money raised would be used for its power, realty business.

Patel sees a huge traction in the company's order book. "We plan to take it up by 50% in the next six months."

He expects to sell 500-600 flats in FY10.

Here is a verbatim transcript of the exclusive interview with Rupen Patel on CNBC-TV18. Also watch the accompanying video.

Q: Can you confirm the amount that you have raised and whether you are going to raise capital in more tranches since you have an enabling provision of USD 500 million?

A: Yes. We have raised about USD 75 million and considering the dilution we are not keen to raise further at this point in time because we are not keen on further dilution. 

Q: Can you just walk us through what the money will primarily be used for and what kind of investors participated in this issue?

A: The money primarily will be used for investments in power, in real estate and for ongoing operations so the order book has seen a maximum amount of traction in growth this year. The order book has grown to close by 50% in six months so funding will be used for that. It would be a little premature to comment on investors as the shares are yet to be allotted.  

Q: So for the rest of this financial year there will be no more equity raising or dilution?

A: No. Promoters are not keen to dilute further so I do not think that there should be further dilution.

Q: You spoke about power and real estate where the capital will be used- can you take us through the real estate front first what exactly you are about to develop because you have a fairly significant 1100 acre land bank?

A: In terms of real estate we will be starting up with Bangalore Electronic City. This year where they will be building homes which are high in quality and affordable, in short the mantra is giving out quality at affordable prices. We anticipate that we should be able to sell about 500-600 flats this year itself and that should start beginning next month. In Mumbai itself we will be starting construction of about 1 million sq feet of commercial space to be leased out which should complete in a year and a half.

Q: What kind of cash flows do you expect from the real estate business and starting when because so far real estate has not kicked in significantly to your revenue stream as such that comes generally from engineering and construction?

A: Our revenue today is totally from engineering and construction. We have been working and monetizing the real estate. The cash flow should start this year itself. We anticipate that cash flows from real estate the revenue should be in excess of Rs 200-300 crore this year to start with and will further accelerate next year.

Q: Will any of this money be used to pare of debt or is all of it going into project expansion?

A: Most of it will go into project expansion. Only a small portion will go in to pay debt so the inter cost can be reduced and the company can leverage itself further.

Q: What is it that your debt levels stand at right now?

A: The debt equity stands at close to about 1.4 right now.

Q: What about power? How significantly would this money help in capacity addition and what kind of revenue addition are you expecting from the power side?

A: From the power side we have two projects right now. One is 2000 mega watt thermal power plant in Nagapatnam. We are waiting for the last moment of permission. The total investment should be close to around Rs 5000 crore on that project and we hope to achieve financial closure in the first quarter of next year and start work thereon. The revenue is expected from this project would be in excess of Rs 3000 crore when commission. In terms of the hydro power project the revenue should be close to around Rs 400-500 crore and we achieve that work will start in the last quarter of this year.