Aim to reduce debt equity from 0.6 to 0.4 in '16: Vardhman

According to an IIFL report, Vardhman Textiles is looking to reduce operating expenses and would focus on consolidation.Speaking about the above developments and the outlook for business going forward Neeraj Jain, Joint MD of the company told CNBC-TV18 that cotton production this year was better due to recent rainfall in Gujarat. He said the company aims to reduce the debt equity to 0.4 from the current 0.6 by FY16-end with the help of operating cash flows and not through any equity infusion or further debts. The operating cash flow for last year was Rs 900 crore or so, he added.Below is the transcript of Neeraj Jain’s interview with CNBC-TV18's Reema Tendulkar and Mangalam Maloo.Reema: Before we come across to the company's plans and consolidation just one quick question, how has this year's deficient monsoon impacted paddy production and therefore cotton prices?A: Earlier we were expecting the cotton to be a little lower because the monsoon was not sufficient but the recent rainfall in Gujarat specially we are expecting the cotton crop maybe almost be comparable to last year. So, our group estimation is it could be 370,000-375,000 bales.Mangalam: How does that affect the cotton prices now?A: It depends upon how much cotton can get exported. Last year we exported close to about 52-53 lakh bales from India. So, if not the cotton crop per se but the export viability or the export of cotton will determine ultimately the prices of cotton in India.Reema: Just today there was actually a note from a brokerage which indicated that the company is now looking to reduce their operating expenses. They are focussing on consolidation. Could you give us what are the avenues by which you will cut down your operating expenses and by how much? Therefore what would be the medium-term targeted margins?A: There is nothing special because it is a continuous effort of consolidation and reduction which we keep on looking at but at the same time when you are expanding the capacity in a big way lots of concentration goes on to those activities and since we are seeing as of now we will be in the consolidation phase. So, we are looking at every cost in a different way. So, there is no exact plan that we will be reducing it by this much percent etc. but we are trying to understand and look at how to utilise the assets, how to reduce the costs and how to make the products a little better. So, these are a couple of ideas/concepts the company is looking at but there is no concrete numbers which I can mention that this is the percent reduction or improvement.Mangalam: Now with most of the capital expenditure (capex) behind the company could you give us a sense of what the increased cash flows would be and thereby what would be the increased reduction in the debt would be?A: Debt level on a consolidated basis are close to about 0.4 - 0.35 as on March 31, 2015 and our best case scenario as of now the plans are now to spend about Rs 1,000 crore in the next three or four years time. If you go by last year's cash flows or even the moderate cash flows by this year end there should be considerable drop in the debt to equity.Mangalam: Could you give us some absolute numbers?A: The absolute debt to equity standalone which was 0.6 or so can come down to about 0.4 or so. Reema: And all this will be done only via operating cash flows?A: That is true. We are not looking at any equity infusion or we are not looking at any further debts. It is only the reduction via the existing cash flow.Reema: What is the operating cash that you generate per quarter and has it gone up?A: Generally our cash flow for the year - I can say only for last year it was close to about Rs 900 crore or so. This year is too early for me to say how much it is going to be.Mangalam: Could you give us a break up of what is the proportion of your yarn revenue and your fabric revenue and going forward what is the proportion likely to be considering you are expanding capacities in fabric?A: Generally our proportion of yarn and fabric today will be two third and one third and since we will be expanding the fabric capacity and this is not a major expansion which is planned in the yarn there could be this possibility that this may go to about 55 or 45 something like that.