Rate cut, reforms can boost export, aid IIP: Videocon

Now, what remains is infrastructure sector. There is not much of a growth in infrastructure sector. People are still shy to invest in infrastructure. They are awaiting clarity on policies like land acquisition bill and goods and services tax (GST). Now, monsoon seems to be good. too. So, there should not be any hesitation for Reserve Bank of India to reduce the interest rate. It is possible to get IIP number of around eight percent.

Ekta: Just concentrating on your exports, can you tell us how your export market is doing at this point in terms of the colour TVs, washing machines, etc. that you do export. You have a fair chunk of it. How is it doing? Has it slowed down at all? What are the trends?

A: We have been exporting colour TV, washing machines, refrigerator, air conditioner, mobile phones and there is no increase so far there. The glass share that is glass panels and LCD glass panels in the third world country have got a very good market. The rupee has appreciated considerably and that is why it has become profitable to export material produced from Indian raw materials. So I think my glass lines is a very good set up.

Consumer durables, well I should be able to export at least 30-40 percent of my production and that is the real export. That is not happening for a company like Videocon, but still we are trying our level best to increase the export. If policies are in place and if the RBI reduces interest rate at least for export by keeping it at parity with the global market, I think exports should go up. Apart from that, export benefits are gone. So, if the government gives some incentive, then at Rs 65/USD rate export should be very good and it would have a very big market and trade gap will be reduced very soon.

Nigel: You were talking about Rs 1,000 crore, that is only around five percent of your total revenue. So, for FY16, what are you targeting?

A: Now, this situation has changed and in between also there was embargo of about India’s product also because of the Prime Minister’s visit to several countries, it appears that now, India is once again on the horizon. Apart from that, global economy which was going sluggish now seems to be [picking up and next year if global economy picks up, my export also will be double, but still that doubling is also not I am satisfied. I would like to have around Rs 5,000 crore worth of export a year. Then this is a good line to sustain.

Nigel: So, looking at exports as a part of the total revenue going from around five-six percent to around 25 percent?

A: Yes, now everywhere you see exports are going up and if somebody tries, like Bajaj Auto whose exports have risen from 10 percent to 50 percent. So, there is a possibility for India, there is demand. So I think we can try and we can make a good export effort. There will be good profitability at a rupee rate of 64-65/ USD.

Ekta: Can you update us on what is happening in the oil and gas business? What is the utilisation of funds that you got from the Mozambique stake sale? And what is the plan in terms of a possible special dividend to shareholders?

A: Our oil business is doing very well, profitability from oil is continuing even though prices are low. But rupee has appreciated so that is not a problem now. Australia business is okay but Indonesia is doing extraordinarily well. Brazil is super. Now that oil reserve is established, I estimate it at four times the Bombay High Reserve. I think we can bring oil to India and it will be a great saving for India’s oil demand.

Ekta: What about the utilisation of that money from the stake sale in the Mozambique fields?

A: Those money, some of the money is used for Brazil, then most of the money has been brought to India and some of the money, around Rs 6,000-7,000 crore is still lying in State Bank India as a fixed deposit. This money we have kept for us because anything in oil business opportunity comes, at that time you have to have a war chest money of USD one billion. So, it always all the companies keep USD one billion ready and then you can get refinanced from the bank. But if you want to be a moving business and not a segment in oil, this is essential part of the oil business.

Nigel: So, there will be no special dividend that will come, that is part one of my question.

A: Our annual general meeting (AGM) has been fixed and if the shareholder, we will put the positions and if the shareholder says that special dividend are required, we should not be against that. But one thing is that the company is in need of money for one or two years till the time we start the Brazil production. Brazil production once starts, then dividend will be automatically coming.

Nigel: Finally, are you demerging listing the oil business at all or is that out of the window?

A: This has been a demerging. Now, one is thing is you should note, that after 2018, 90 percent of the business will be the oil business. So, demerging is not the oil. Demerging may be the consumer durable if possible. Oil this company will be very happy to do the oil and demerger, etc. is not required at this moment for oil business. Okay reverse way is possible. You can demerge consumer durable business and make Videocon Industries Limited as a oil business only.

Because oil, this is a very successful which we have done. We initially we also never thought that such a big oil finding we will be getting everywhere. And after the Mozambique sale and Mozambique finding the way in which internationally our name is there and our Indians are recognised all over the world wide, Videocon oil business. That is why we are very happy to see that all this Videocon becomes a 90 percent oil business company by 2017-2018.