Will focus on bringing down debt, says Punj Lloyd

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Will focus on bringing down debt, says Punj Lloyd

Speaking to CNBC-TV18, Atul Punj, chairman of Punj Lloyd said, the company’s focus will be on reducing debt for the next three-six months. He further said the company’s order backlog is now built to a level where it provides "clear visibility for the next two years."

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Excerpts from Markets Midday on CNBC-TV18 Watch the full show » ALSO READ See latest News about Punj Lloyd See previous management interviews See what other Experts & Brokerages are saying about Punj Lloyd Punj Lloyd BSE | NSE 31/05/12 Are Mutual Funds betting on Punj Lloyd?

Engineering major Punj Lloyd reported a jump in sales of 21% at Rs 2377 crore for the quarter-ended September 2011, compared to Rs 1,958 crore same period last year

The profit after tax (PAT) saw a slight spurt of 3% at Rs 25 crore versus Rs 24 crore, year-on-year.

Speaking to CNBC-TV18, Atul Punj, chairman of Punj Lloyd said, the company's focus will be on reducing debt for the next three-six months. He further said the company's order backlog is now built to a level where it provides "clear visibility for the next two years."

Below is a verbatim transcript of the interview. Also watch the attached video. 

Q: First could you throw some light on what the other income component has been this quarter which stands at Rs 68 crore versus Rs 3 crore on year on year basis?

A: The little gains that we have had that totals up to this particular number. I do not have the full break-up with me right now but it is a reasonably significant amount which is there to be mentioned.

Q: To what extent can the company maintain this kind of a revenue booking in the second half as well?

A: You would say fair to say how can businesses think on a quarter on quarter base as I repeatedly said. The good thing is,our order backlog is now build up to a level where

We have clear visibility for the next two years. They are fairly distributed between South East Asia, that is India, the Middle East as well as now increasingly Africa. We are seeing a good pipe line of deal flow and hope to spend on a reasonably significantly in each two.

Now where it has actually fallen date line I can't actually predict because clients have a tendency of shifting decisions by week or two weeks which we do not have control on, but our order quality is good. Clients are fully funded, project are on, there is no uncertainty about the actual delivery of these projects so it is a good place to be in.

Q: Could you throw some light on what the outlook from Libya because in the past few quarters on account of the political unrest over there you faced a lot of suspended orders what is the outlook on Libya going forward?

A: The good thing is National Federation Council has committed to United Nations that they will actually honour all the commitments. So that is one positive. Our orders were really in different buckets. One was on the upswing drilling side, the second one was on the pipeline or the down stream side, the third was infrastructure.

The first come back would be on the upstream drilling side where people have already visited the clients in Libya. We should start seeing some early traction on that followed by the completion of the pipeline and then would be the infrastructure. Once they prioritise which are the cities in which they would like to focus first.

I would think that over the next three-eight months we should see them all come back.

Q: How is the debt position of the company? Do you expect that you will be able to bring it under control in the next six months?

A: I think our focus first was to really build up a quality order backlog and fix management for the issues that we faced within the last couple of years. Now the focus is on reducing our debt burden and more importantly the cost of debt. A major debt restructuring exercise has begun and since almost 70% of our work is from outside India, we are naturally hedged to borrow overseas where the pricing is much more suitable compared to Indian interest rates. I think that is a major focus over the next 3-6 months. We hope to achieve that.

Q: What will the debt levels come down to and when will you complete this entire debt restructuring and what will be the nature of this restructuring?

A: The restructuring will be in two parts. One is of course, to be able to flip our debt from domestic to overseas. The second, would be to physically build down the amount which will come as a result as some divestment possibly in couple of assets here and there to bring it down. But more importantly, I think it is important to raise the volume of business because that will take care of the risk burden in any case. We are well on our way to achieve or we have already achieved that. It is a function of now the execution which is where we are focusing right now.

Q: Can you give us some more colour on the outstanding debtor position and how much is possibly recoverable?

A: Debtor position is reasonably positive and there are no issues over there. The auditors have their views and the management has their views. There are clients who tend to hold on to the last 10-20% at times, more so in India right now. So it is really a function of that being built out and recovered over a period of the next few months and we are confident that we will do that. Auditors' qualifications, emphasis matters come and go and this is one of those events as well.

Read on to find out Punj Lloyd's order books position..