In an interview to CNBC-TV18, Rupen Patel, MD of Patel Engineering said that the company will be getting arbitration payments over next one year.He was speaking in the context of the government announcing tweaked arbitration norms for construction projects.
He said that the expected payment is worth Rs 2,000 crore through arbitration awards.
Below is the verbatim transcript of Rupen Patel's interview to Latha Venkatesh, Sonia Shenoy & Anuj Singhal.
Anuj: If you could give us some numbers, how much of your money is stuck in arbitration and what would that mean for you going forward, if you could give in terms of debt figures and the kind of money that is expected to flow into your balance sheet?
A: The debt figure of the company as on March 31 stands at approximately Rs 4,500 crore. The money is stuck in arbitration. We have arbitration under process at different stages close to about Rs 5,000 crore and we have arbitrations won in excess of Rs 2,500 crore. Therefore, what you should see with this cabinet decision is that money will flow in 75 percent of the arbitration awards won will flow in the next one year. So, debt will go down at least by Rs 2,000-2,500 crore in the next one year.
Latha: That is what I wanted to ask, if Rs 2,000 crore comes what is the sense you are getting, that money gets paid out within a quarter and if it is paid out will that directly go to reduce your debt? If you do that what will be the finance cost fall?
A: The finance cost of about Rs 4,500 crore is close to Rs 500 crore a year. So, if we reduce half the debt in the next few quarters, you will see the debt cost of Rs 2,500 crore, approximately Rs 500 crore a year. So, you should see the interest cost go down by at least half to about Rs 250 crore which will directly bring up the bottomline.
Latha: The remaining Rs 2,500 crore of those that are struck in arbitration. What is your sense as to when that arbitration awards may come and how certain are you that they will go your way?
A: Traditionally arbitration normally took seven-eight years to reach a finality but now with the new cabinet decisions everything is going to be put under new arbitration act. So, you should see monetisation of Rs 2,500 crore in the next 18-24 months. Therefore, we shall see Patel bringing down its debt substantially over the next 12 months and then again further reduction will take place in the next 12 months.
Latha: You plan that because you will have lesser expenses you will be able to bid more? Do you see a growth in order book? Is this all a debt reduction story or is it also a growth, margins and other story as well?
A: Today, because of disputes and stuck receivables, the industry is stuck in terms of high debt which is impacting the balance sheet which is resulting in limited growth. The government is coming up with enough infrastructure work. So, what you will see in the next few quarters is balance sheets of construction companies which are stuck receivables improve and then bidding for larger project.
Sonia: So, can you just give us a sense of the business so far, what is the order book currently of Patel Engineering and what kind of order visibility do you have over the next 6-12 months?
A: The order book currently stands close to Rs 8,000 crore and we are confident that we should increase the order book by at least 50 percent, if all goes well.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
