Escorts eyes bids from PE players to raise capital

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Escorts eyes bids from PE players to raise capital

Rajan Nanda, CMD, Escorts, said the company is expecting bids from private equity players to raise capital. “We are looking to finalise a deal with PE players up to 10-12% for Escorts Construction Equipments in Q1 FY09.”

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Excerpts from Markets Midday on CNBC-TV18 Watch the full show » RELATED NEWS Escorts Q2 net profit at Rs 9.68 cr ALSO READ See latest News about Escorts See previous management interviews See what other Experts & Brokerages are saying about Escorts Escorts BSE | NSE 28/05/12 Are Mutual Funds betting on Escorts?

Escorts Q2 FY08 standalone net sales stood at Rs 531.47 crore as against Rs 573.64 crore on a YoY basis. For the same quarter, its standalone operating profit came in at Rs 32.68 crore as compared to Rs 44.56 crore YoY, whereas the standalone net profit stood at Rs 9.68 crore versus Rs 6.71 crore YoY. During the same quarter, its interest expenses stood at Rs 15.92 crore as against Rs 21.8 crore. The OPM stood at 6.1% versus 7.8%.

Rajan Nanda, CMD, Escorts, said the company is expecting bids from private equity players to raise capital. "We are looking to finalise a deal with PE players up to 10-12% for Escorts Construction Equipments in Q1 FY09."

Excerpts from CNBC-TV18's exclusive interview with Rajan Nanda:

Q: Could you walk us through the debt status of the company as a stance for now because there has been a significant reduction in the standalone interest expenditure of the company on a YoY basis?

A: Our debt levels have come at very manageable levels, and the remaining debt has a term. We don't want to prematurely retire that debt as we are already coming to an investment phase. We are seeing growth opportunity in products, engines, other sub-products, and agricultural business. Our debt levels are reasonable at this point.

Q: A year back, it was around Rs 700-800 crore. Where do you stand as of now and what kind of targets are you laying in terms of repaying that debt and bringing down your interest costs?

A: From Rs 700 crore to Rs 550 crore, our debt is down to Rs 150 crore. In this term loan, we have a balance of about three years and our interest costs are not too unmanageable at that level. It is a working capital credit management because we have been working in soft markets and hence are short- term borrowings went up.

Q: This year for the stand alone basis, there seems to be a bit of a squeeze coming in your operating profit margin figure, how do you plan to go about it in the next quarter and what are you aiming for?

A: Our second quarter is much stronger than our first. Our growth rate is 23%, despite the fact that the industry is flat. If we are growing in sales, we are gaining in market shares. The third quarter is obviously the season period. From the current month onwards, I think we are harvesting a good crop. Had it been a mature approach and mature announcements at the government policy levels, the markets in agriculture wouldn't appear as unsettled as they are today. The price support was an issue earlier and then loan waiver became the next issue. The new loan waiver was one aspect. To sell tractors they need finances from PSU banks, and there was a reluctance to release new loans. We believe the market has depth, and has opportunity. The farmer is now growing and taking on crops with higher yields.