Co's net worth to grow Rs 160 cr post loan restructure: Sakthi

In a filing to the Bombay Stock Exchange today, Sakthi Sugars said Asset Reconstruction Company Limited (ARCIL), which acquired the company’s loans totalling Rs 508.74 crore from banks, has restructured the loans.

The restructuring includes loans worth Rs 61 crore to be converted into equity and remission of liabilities worth Rs 102 crore on complying with certain 'conditions of the sanction'.

Speaking to CNBC-TV18, M Manickam, Executive VC of the company, said that the company’s net worth will increase by Rs 150-160 crore. About 63 percent of the company's debt has been restructured.

He further said that the company’s debt will come down by Rs 60-70 crore post the loan restructuring.Below is the transcript of M Manickam’s interview with Nigel D’souza and Reema Tendulkar on CNBC-TV18.Reema: Could you tell us how this will impact Sakthi Sugars, this restructuring by asset reconstruction companies (ARCs)?A: We probably will get the Rs 101 crore waiver coming in as a reversal of interest provided earlier. That will be the first impact and Rs 61 crore will be converted to equity, which will also increase the net worth of the company. So, the net worth of the company will probably increase by about Rs 150-160 crore as a result of that and the liabilities will reduce to a similar amount. This should give us a good balance sheet to work with.Reema: So, your net worth will increase by Rs 150-160 crore, right?A: Yes.Nigel: You were talking about diluting some equity. How much of that equity will be diluted? What will promoters hold post this conversion and also, could you tell us what rate will this conversion be done at?A: We are still negotiating, because as per the provisions of the act, they have negotiated a settlement. We have not got a confirmation from ARCIL yet, so we cannot really comment on the pricing. Right now, we hold about 74.5 percent that might get diluted depending upon the pricing that we are able to finally get from that.Nigel: You were talking about your balance sheet looking much better, your net worth is likely to go up much higher. What exactly is the debt numbers currently on your balance sheet, how does this restructuring help you? And also, could you tell us any plans of reducing it going ahead as well?A: What will happen now is we have almost about Rs 850-900 crore as debt and that will stand reduced, by way of about Rs 60-70 crore by way of conversion and about Rs 110 crore that is not part of the debt, the accumulated interest, which will get reversed. So, we think that we will come to a more manageable debt and the way things are going forward, it is restructured for the next 6-7 years, so the next 6-7 years, the sugar industry is supposed to perform well. We should be in the position to close off the debt before the term ends, probably earlier.Reema: But your net-debt will only come down by Rs 60 odd crore from Rs 850 crore to Rs 900 crore. So, that is still pretty high.A: No, that Rs 100 crore, we have already accounted and it has been provided as debt. So, we will have that Rs 160 crore reduction on the debt.Reema: So, that should bring it down closer to Rs 700-750 crore.A: That is right.Nigel: Your market capitalisation currently of the company is roughly around Rs 385 crore. Rs 61 crore will converted into equity. So, we are talking about a dilution at current market price of more than 10 percent.A: Possibly. We will have to figure out what can our pricing we finally get from ARCIL. That finally will depend on what kind of pricing we agree. So, it would be more than 10 percent certainly.Reema: Is there more debt which is going to be restructured because only Rs 508 crore has been done. Your total debt even after the reduction would still be in excess of Rs 700 crore. Is there going to be any other part which is going to be restructured?A: Right now, ARCIL covers about 55 percent of the debt and the last quarter, we had reorganised another 8 percent, so almost about 63 percent has been restructured and 20 percent of the loans were already standard, so we have another 20 percent. So, pretty much 80 percent is on track and about 20 percent will have to be restructured.Reema: 20 percent of the debt is yet to be restructured.A: That is right.Reema; Will your total interest payments come down because ARCs have restructured the loan and if yes, what will be your annual interest payments in FY17 and how much lower would it be compared to FY16?A: The interest payment will come down because we were on a contract of about 12-14 percent earlier. Now, it will be around 10-11 percent. So, there is a difference of about 2-3 percent on the rate of interest. Also, there is reduction of about Rs 150-200 crore. So, you would have a substantial reduction in the interest provision for the company.Nigel: So, things will look quite good because I was just looking at your finance cost. As it is, they have come down drastically in the last one year or so. On a quarterly basis, now you are paying close to around Rs 11 crore, so going ahead then, we will be looking at a net profit in the coming year and also given that there has been an entire turn in the sugar cycle, we can expect even an operating profit.A: We should be looking at an operating profit now, because the sugar prices have improved. I have always been maintaining our breakeven is Rs 34, so we are at breakeven today. So, we should be fairly comfortable for the next 2-3 years.Nigel: And we will expect a profit number coming in FY17, net profit?A: Yes, net profit for FY17 should be possible.Reema: Sugar prices now would be around Rs 34?A: Yes, Rs 34 per kilo is the price right now. They were around Rs 25-26 last year. So, there has been an increase of almost around Rs 9.Reema: And this price should sustain given that demand/supply dynamics?A: I think so, because of the production and the drought, I think this price will sustain.