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Jan 02, 2013, 04.02 PM IST | Source: CNBC-TV18

Avantha Power IPO to hit mkt in July-Aug '13: Avantha Group

The initial public offering (IPO) of its group company Avantha Power will hit the capital market in July-August 2013. It aims to garner Rs 1,250 crore to Rs 1,500 crore through this IPO.

In an interview to CNBC-TV18, B Hariharan, group director finance, Avantha Group spoke about the latest happenings in the company and the road ahead.

The initial public offering (IPO) of its group company Avantha Power will hit the capital market in July-August 2013. It aims to garner Rs 1,250 crore to Rs 1,500 crore through this IPO.

Meanwhile, a major restructuring of its Belgium operations is also underway. "We will be getting rid of about 200 employees and that will save about USD 15 million on an annual basis. It will be effective from January. Most of the capacities will move to Hungary, which is a low-cost site," he elaborated.

This restructuring will lead to margin improvement in FY14.

Below is the edited transcript of B Hariharan's interview with CNBC-TV18

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Q: What's happening with Avantha Power's listing? You have tried once, but it did not come off. Are you going to bring it to market any time soon or have you already raised money from a private equity player and you don't need to?

 A: No, we are going to bring it to the market sometime in July this year. We have already started working on it.

 

Q: Have you decided on the size of the issue and how much money you are going to look to raise for Avantha Power?

 

A: We will raise about Rs 1,250-1,500 crore. We will come with the issue around July-August this year.

 

Q: Can you just update us on what’s happening with your overseas operations especially Hungary and Canada both in terms of execution slippages, the kind of penalties you are facing and whether there is any resolution on that front?

 

A: I think you will see the resolution happening. We have done major restructuring in Belgium. We have finalised to get rid of about 200 employees there. That’s going to save the company USD 15 million on an annual basis. This will be effective from January, so most of the capacities will move to Hungary, which is a low-cost site.

 

The problem was not in Hungary, the problem was in Belgium. So, that restructuring is going to help us improve the overall margins in the European business. Canada seems to be still under some issues. Hopefully, in this quarter one will see a resolution of Canada also. So, 2013-2014 would definitely be a better year for Crompton Greaves Limited (CG).

 

Q: Crompton Greaves’ investors would have been very worried to see margins plummet to 4.7 percent in the Q2, which was an all-time low. What is the road forward, in terms of margin profile?

 

A: The management of Crompton has given guidance. Last quarter annualised for this financial year is not going to be different from the average they have got. It is 5-6 percent earnings before interest, tax, depreciation, and amortisation (EBITDA) margin for the year. I think they will maintain that guidance. However, going forward one will see a significant improvement in the margin, in coming 2013-2014. This will be due to the restructuring, which is happening in Belgium.

 

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