India, US doing well, see negative nos out of UK: Tata Chem

For Tata Chemicals, India and the US have been performing well, but the company expects to see continued negative numbers out of the UK, says R Mukundan, MD, Tata Chemicals. The company has a net consolidated debt of Rs 6,000 crore.

On gas price hike, he says it will be a pass through for the company. Mukundan adds for price hike to be positive, it needs to be accompanied with increase in supply. He says otherwise it will have a negative impact.

Below is the transcript of R Mukundan's interview with Reema Tendulkar and Sumaira Abidi on CNBC-TV18.Sumaira: We have seen growth across your verticals in the quarter gone by. With the kind of visibility that you now have for Q2, how is Q2 panning out and can you help us with an outlook for FY15?A: We had highlighted at the end of the Q1 when we had done the conference call as well as to the shareholders at the annual general meeting (AGM) that certainly there is one amount, which is going to come and impact the Q2 is the impact of the VRS settlement, which we did in Magadi. So that is going to negatively impact the numbers by about USD 8-9 million, the final numbers are yet to come. And that is a one of item, it\\'s the cost of restructuring which was not factored in.Other than that we do expect Q2 also to move in sync with the way we had planned the Q1. We certainly do see in soda ash the whole momentum and the market continuing. Our plants are fully sold out. We will continue to see negative numbers out of UK because that will take time till Q3 of 2016 when it will become positive once the new steam turbine has been put in place. Magadi should start showing positive results in Kenya from Q3 of this year. So Q2 will show a negative because of the USD 8 million adjustment. But from Q3, it should start moving to positive zone. So soda ash all in all should be profitable, US and India performing well. As far as the consumer business is concerned, I think that would also continue to move in positive zone. Of course, the impact of the railway freight will come to see the numbers in Q2, and in Q1 the benefit which we got because of delayed impact of railway freight was about Rs 17 crores. But the numbers overall are looking good and we are quite happy with it.

Reema: Government will be hiking the prices of gas soon. That is the expectation and whenever it does, what kind of a price hike will you need to take and in your view, what kind of an impact the company will have to face on the back of higher gas prices?A: On this our view has been fairly consistent. We continue to state that the government policy on gas pricing in fact is a pass through for us. We are not impacted. But what we are saying is any price increase must come along with volume increase from the suppliers of gas. So price increase at the same volume does not make any sense to us at all. So if at all price increase is granted, it must be on the incremental volumes so that the nation benefits as a whole. So our view on this has been that there is a committed gas output, which the suppliers of gas were to give to government and consumers, they must meet that commitment. Right now we have seen a huge shortfall on that, whatever maybe the reasons, that must get addressed. So gas price hike with the increase in supplies is a positive. Gas price hike without increase in supplies is a negative. That is the way I would put it. As far as the impact on us is concerned, we are the most energy efficient fertilizer unit in India and higher input costs means we become even more financially viable vis-à-vis the competition.Sumaira: Could you tell us what your debt levels are at and also what is the subsidy pending now from the government?A: Our net debt position on a consolidated basis is Rs 6,000 crore and on a standalone basis it is close to about Rs 2,000 crore I think, that's the broad figure. The standalone debt would reduce over a period of time. Our view is that it should go to half the current figure in the next four-five years. The consolidated debt would also reduce to about half the number. But it would reduce in a bullet way because the repayment schedule of our overseas debt is at the end of seven years. So while the debt will remain in a book, we are quite capable of paying off all the debt.