Tata Power bottomline to improve Q2 onwards, says MD

Interest and depreciation is completely predictable and as the revenues grow, the units continue to contribute and the contributions will take care of both the interest and depreciation.

Below is the edited transcript of his interview to CNBC-TV18.

Q: How are your numbers? What went right with the revenues and what are you guiding for full year revenues?

A: Our revenue grew over 20%. When one is in a project phase and is expeditiously investing into various projects, the advent of interest components will always be there and that phenomena is visible on the balance sheet.

As we make our units commercial both at Mundra and Maithon, the depreciation comes into the system and it will take sometime before the revenue spurts up from these operating units. So these are initial times for them.

Positively, the Mundra unit which was commercialized in July-end has in the last 15 days is working at 100% plant load factor. So the contribution is immense. One, will have to wait till the depreciation on slot that comes in because of the capitalization and it gets completely taken over by the contribution.

Q: On Mundra Project, can you highlight how the bottom line looks like at this time because we understand that there were losses of Rs 40 crore. What would be the trajectory going forward on the bottom line. What can we expect in terms of stablisation?

A: The figure of Rs 40 crore is a per month number on account of fix cost on ground commitment in Mundra. Holistically, now our profitability even on consolidated basis takes care of the negative impact of Mundra because of performance from other units.  

So, going forward we will continue to have larger contribution and therefore larger profitability will appear on consolidated. But when you look at standalone, which is the investment vehicle, as Tata Power the profitability is handsomely higher compared to the Q4 of the previous year as well as the Q1 of the last year.

Q: While one understands the inevitability of interest cost and depreciation cost at certain stages of projects going on stream it has nevertheless invite S&P outlook being lowered from stable to negative, could you give us some guidance in terms of how the interest cost and depreciation will pan out?

A: The two aspects are completely disassociated. The outlook that was put on watch by the S&P was not on account of interest or depreciation component. It was on account of the breaches that we had after impairment on our various covenant.

When we impaired and provided for impairment, to that extent the equity component becomes less and therefore the debt to equity ratio suddenly showed up a very different regime so S&P to us on the radar. Now, on that effect we have gone back to the lenders for the waiver of these conditions because they know very clearly on what circumstances the provisions have to be kept. 

The investors took this to their credit committee and have started to communicate wavers. On a holistic basis, in next four weeks we would get the formal communication of wavers, that will take care of the S&P part.

Interest and depreciation is completely predictable and as the revenues grow, the units continue to contribute and the contributions will take care of both the interest and depreciation.