Co has proper plans to finance debt: Tata Chem's Ghose

In an interview to CNBC-TV18's Latha Venkatesh and Sonia Shenoy, PK Ghose, CFO, Tata Chem said the total debt for the company including overseas stands at Rs 8,300 crore for which they have a deleveraging plan. The company has proper plans of to finance the debt, he added. Out of the Rs 3000 crore Indian debt, Rs 1200 crore is for working capital, he said. For UK and Kenya too they expect to bring down through restructuring.

Moreover, the cash flows generated in US will support the US debt of USD 315 million. It is a one time payment of 7 years, said Ghose.With regards to businesses, production of urea is going as per plans. The US and India soda ash businesses are also on track, said Ghose. However, the phosphatic  business might see some pressure due to high prices of raw  materials like ammonia and phospheric acid.Subsidy remains a cause of concern for the entire industry, said Ghose.

Belows is the verbatim transcript of his interview on CNBC-TV18Q: Government is considering hiking the gas prices soon, what kind of impact do you see on your business led by the same? A: So far are gas prices are concerned it has moved between USD 6.5 to USD 8.4 and I think no final decision has been taken. If it is within that range then we will be able to generate positive profits on the business.

Although, obviously for some parts of business, gas prices have been passed through. But for the production which is beyond the assessed, re-assessed capacity, there you are likely to be affected. But overall we should be doing fine in the range which the government is considering now.Q: Company had nearly Rs 3000 cr of debt as of March 2014; do you see any pressure from the leverage on the book? What are your receivables due from government in terms of subsidy?A: So first touching on the receivables, I think the receivables is a cause of concern because subsidy has gone up in heaps and bounds over the last three years which has almost trebled and in the last 2 years year-end figures of March have been close to the range of Rs 1700 crores but right now it has gone up further to Rs 1900 crore and that puts pressure on working capital and assuming that has an impact of about Rs 70 crores in terms of interest. Even the plans that come out in regard to financing through the banks, there also while we get small portions of outstanding subsidies there is difference between the interest rates that are refunded to us as compared to what we are taking from the bank and therefore even that has some impact on the profitability. So I think subsidy is definitely a major cause of concern and something which I am sure the government will look into as it affects the entire industry. So far as our debt is concerned I think Rs 3,000 crores is what we are talking about the standalone balance sheet only but the total debt including overseas is about Rs 8,300 crores. We have a very well planned deleveraging plan for the debt. In the US although the debt is about USD 315 million, the cash flows from there are supporting the debt payment. It is at one time payment after 7 years, so while there will not be a reduction in debt there will be adequate cash generated to be able to pay the debt. So far as UK is concerned, we expect that with the restructuring we should be able to bring down the debt from about 120 million pounds to about 70 million pounds. Similarly, in Kenya we would expect the debt to come down which we are restructuring from USD 120 million to about USD 60 million dollars over the next 5 years. All these 5 year plans.You mentioned about Rs 3,000 crores that is the Indian debt but there Rs 1200 crores is on account of working capital which is primarily buyers, suppliers’ credit. This is mainly for funding our imports of cold ammonia, phosphoric acid etc.Q: What's the volume growth likely to be now that monsoons have improved? A: Production of urea is going as per plan and although we did have difficulties last year because the production over capacity which was not fully utilised. I think this year we have planned for that excess production. The entire situation will be considered in October by which time it will be very clear from the government side so that is one.Secondly, as far as Q2 results are concerned, our US and India sod ash businesses are also on track. The other two businesses and I also clarified when you will see a turn around in terms of Kenya and UK where both the units are in the restructuring mode. The Indian urea production business is okay; we expect this year that we will use the full capacity.Finally in terms of the phosphatic business there will be pressure because the raw material prices  of both ammonia and phospheric acid have gone up substantially.