Recent order won't aid Q4FY14; not divesting assets: IL&FS

Below is the edited transcript of Khattar’s interview to CNBC-TV18.

Q: Very recently you all got a letter of approval for a railway project which is worth Rs 145 crore. How much will it contribute in the January-March quarter and how much of it will flow through in FY15?

A: In January-March quarter it may not contribute much as far as the revenue is concerned, because it is an EPC contract. So, we need to do the design, get it approved and then the real work will start. From the quarter of that certainly it will contribute and the total period is about 30 months, so we need to complete the job within that period. That is how it stands.

Q: You all had received a letter of award for the construction of a particular building in Byculla we understand which was worth around Rs 675 crore. Has there been any progress on that?

A: Yes, we have started concreting it. The design and everything else is finalised and the work has now just begun. So, it will certainly start contributing to us. It is a big job-Rs 675 crore and the height of one of the towers is almost Rs 270 meters. So, we need to have all the new and better equipments to be able to deal with that which we have already organised. So, the work has just begun and it has just come from the ground level, but it will certainly continue and we have done all the arrangements. Offices and everything has been set up and the work has just started.

Q: Given the recent award wins is it likely that in Q3 your margins will be positive, because in Q2 at an operating level, at EBITDA you all made a loss. In Q3 could we at least expect positive margins?

A: Hopefully yes. We feel that will happen for Q3 and Q4. Both top and the bottom-line should start improving. The only problem we have is the high interest cost which is really bringing down the total margins to almost negative and therefore we are just looking into how to deal with it.

Q: Just wanted to come back to this order win of Rs 145 crore which is a particular railway project. The reason I ask is there have been talks and reports of FDI in railway infra possibly being approved. Do you think that we would see any formidable investment of FDI into railway infrastructure and why is there a gap which cannot be fulfilled by Indian companies already?

A: Some of our jobs which are very big, now they are coming out with very large packages. That is where the foreign companies will have an edge over the Indian companies, otherwise for smaller job, Rs 400-500 crore maybe even Rs 1,000 crore I don’t see there will be much of interest.

Q: You all said that you all are working on reducing the debt because interest has been a problem for the company. Many companies have resorted to sale of non-core assets. Does IL&FS Engineering have any such non-core assets that you all could divest?

A: What we are doing immediately now is a rights issue which has been approved by the board and we do hope that that will give us some relief soon and let us see how it goes along. Whatever BOT assets we had, have already been put into a trust now. Basically it is all the high debt which is creating a little bit of a problem which is now being tackled.

When IL&FS Group took over this company there were lot of issues. One by one we sorted out the financial issues to a large extent. There was CDR, there was getting the new limits for the mother company so that they can have this, plus IL&FS Group itself has put in a lot of money to be able to see that working capital and other requirements are fulfilled.

Recently we also asked our SBI bank to have an assessment. We have also approved some limits and over a period of 2-3 months that will also get sanctioned. So, our finance side has seen more or less agreed except how to reduce the interest for which I told you that we are going to have this rights issue.

Coming onto the other work order position, the balance work which we have is approximately Rs 10,000 crore, therefore it gives us sufficient work to be done to have our top-line to be maintained and obviously that will have an impact on the bottom-line.

That is how it stands, but anyway there have been other issues which everybody is aware as far as the construction industry is concerned, the problems of environmental and other clearances, land acquisition. We do hope now government seems to be taking some steps, the, so over the next 3-4 months things will be much better than what they are today, otherwise number of projects were getting delayed because of the environmental and other clearances which are required.