Will do what it takes to improve cash flow: Lanco Infra

Shaheen Mansuri
Moneycontrol.com

After posting losses for five consecutive quarters, Lanco Infratech is doing what it takes to ease its balance sheet. From hiving off non core businesses, to trimming workforce, to recovering dues from Uttar Pradesh and Karnataka discoms -- the Gurgaon-based firm is staking all steps to pare debt which currently stands at around Rs 35,000 crore.

The firm has already divested stake in its 10 megawatt( MW) wind farm in Tirunelveli in Tamilnadu to a spinning mill and is keen to sell stake in its existing wind, hydel and solar power assets. Read This: Lanco Infra up 10% on Rs 3294 cr EPC order win. Read This  Lanco Infra up 10% on Rs 3294 cr EPC order win)

Speaking exclusively to moneycontrol.com, Nagaprasad Kandimalla, head of business development at Lanco said, "A general slowdown in infra sector dented investor sentiment but things are looking up now. It will take some more time for this to get better. We are expecting to close a few deals soon,"

The firm which has interests in power, engineering, procurement and construction (EPC), infrastructure and natural resources, is cutting down its workforce by atleast 10 percent each quarter to bring down employee cost.

“We are rationalising workforce as part of our consolidation strategy,” added Nagaprasad. The firm has brought down its workforce by 25 percent to 6000 employees in the year gone-by. He, however, did not divulge any target to save cost by reducing employees.

One more issue bothering the firm, is the poor financial health of state power distribution companies which is hurting Lanco's cash flows. Out of the total receivables worth Rs 3,000 crore, about Rs 2,500 crore are overdue from the discoms.

Nagaprasad is hopeful that the health of state electricity boards is likely to improve in a few months.

However, on a cautious note, brokerages state that timeframe of improving cash flow needs to be monitored for the stock which has declined around 32 percent so far this year. Lanco's losses in FY13 surged to Rs 1073 crore against Rs 112 crore in the year-ago period, as power division’s dismal performance continued on fuel scarcity.

Below is an edited excerpt of Nagaprasad's interview to moneycontrol.com

Q: Your legal tussle with Australia's Perdaman Chemicals is finally over. What is the roadmap ahead now?

A: We have agreed to settle the protracted AUD 3.5 billion legal tussle with Australia's Perdaman Chemicals over coal supply issues related to our Australian unit, Griffin Coal. The purpose behind this nominal offer was to end the litigation and move forward with the mine expansion plans and enhancement of export facilities at the Bunbury port. We believe the settlement with Perdaman removes a major overhang on the business prospects of Griffin Coal and significant ‘damages’, which might have arisen from the lawsuit in case of an adverse judgment.
 
Q. Have you lined up any capex for expanding facility in Australia?

 A. We plan to invest around 1 billion Australian dollars (AUD) to increase the annual production capacity of Australia-based Griffin Coal to 16 million tonne from the current 4 MT may be in 3-4 years. After increasing the production capacity, Lanco we would be looking at increasing exports. Currently we export around one million tonne of coal from Griffin to countries including China and South Korea, while the remaining is supplied domestically to various industries in Australia.
 
_PAGEBREAK_

Q. Would there be any funding related concerns for Griffin?

 A. We are in a better position to expand capacity in Australia. Since we will embark on an expansion programme by increasing exports, there wouldn’t be much of a problem. Initially, there would be some parental support for Griffin but gradually it will come down to zero level once we are close to break-even, hopefully soon. We also believe, prospective buyers would now be open to examine Griffin as an investment opportunity.
 
Q. Can you update us on your overall business?

 A. We will be expanding our overall mining capacities. We are in the process of adding around 500 MW capacity to the existing 4000 MW in next five years. We are also expecting to get clearances on forest railway line and port connectivity soon. We are also hopeful of achieving financial closure by next year.
 
Q. Several infra majors are cutting corners to grapple with slowing economy and high input cost. Are you also following trend by downsizing staff?

 A.  In-line with trend globally, we are rationalizing staff. While ramping up operations, we are scaling down on flab, which a conglomerate of our size has to do in tough times. Globally, companies are trimming staff, if required. This initiative is a reflection of economic conditions.

Q. To ease pressures, are you looking at hiving off non-core businesses?

A. Yes, we are looking at creating value by hiving off non-core assets like real estate and even power projects at an appropriate time.

shaheen.mansuri@network18online.com