Increased capacities hiked interest costs: Adani group

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Increased capacities hiked interest costs: Adani group

Speaking to CNBC-TV18, executive director and chief financial officer of Adani group, Devang Desai, says that interest costs have increased mainly due to an increase in capacities.

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » ALSO READ See latest News about Adani Enterpris See previous management interviews See what other Experts & Brokerages are saying about Adani Enterpris

Even though Adani Group reported good operational performance was good, high interest costs hit net profit again. Speaking to CNBC-TV18, executive director and chief financial officer, Devang Desai, says that interest costs have increased mainly due to an increase in capacities.

Going forward, Devang is confident about volume growth for the second half for FY12.

Below is an edited transcript of his interview with Sonia Shenoy. Also watch the accompanying video.

Q: First if you could tell us what you are doing to address interest cost because although there has been a good jump in EBITDA performance, your profits have not grown as much?

A: The basic structure is that we have three large verticals - one is coal trading which is the traditional business where we have 50% market share and that has seen very robust volumes. We have seen 20 billion tonnes in the first six months and we expect to reach about 40 million tonnes. The margins are more or less at same levels roughly, about USD 8 per EBITDA.

The second vertical is the power generation and transmission, where we have done sales of about 6 billion units which you as you up to the end of the year it will go up to 16 billion units. We have seen good merchant revenues here and as more capacities are added, of course the interest cost and depreciation has been charged up to the P&L account.

Port has seen very good volumes; in six months done 38 million tonnes and as we move forward with our overseas acquisition of Abott also being included in this now, we will easily cross over of 100 million tonnes by the year end. The port EBITDA margins have also been intact in terms of almost 68-70%.

The broader theme is that there have been more capacities added so interest cost will come in. Some amount of exchange fluctuation has also been taken as mark to market, and that too also we see over a period of time getting further relaxation. As we have a very integrated business which uses coal to power theme with logistics as an important competitive edge, our enterprise business in terms of the structure should be resilient.

Q: Could you give us any indication of what the second half of the year looks like? Do you think you will be able to maintain this 60% revenue growth in trading and doubling of power revenues?

A: We don't give guideline but we are very confident about our volume growth and especially with large market share as in the port. If you see our port profile, Mundra is number four port in the country including the public and private ports put together. So that is something which is large market share, much better in terms of our slightly troubling days ahead.

In terms of macro levels too, we will feel that we will be able to sustain profitability to certain extent. Some amount of issues on the power industry is there they should possibly have to be looked at cautiously as we move forward.