Welspun Projects' decision to exit joint venture with Leighton Group by selling its entire stake will realign the company’s interests in infrastructure space and synergise with its existing businesses, says Sandeep Garg, MD and CEO, Welspun Projects.
In an interview to CNBC-TV18, Garg says that the 40 percent stake sale which will fetch around Rs 620 crore and will be used to delevarge the company’s current debt, which currently stands at around Rs 2,600 crore.
Below is the verbatim transcript of Sandeep Garg’s interview on CNBC-TV18
Q: Could you tell us the rationale for selling your close to 40 percent stake in JV to Leighton?
A: The rationale for selling was primarily to realign Welspun's interest in infrastructure space to synergise with its existing businesses which was the primary driver. Also, in slowdown, we got a good valuation and decided to en-cash.
Q: There were plans in terms of deleveraging the balance sheet. Can you give us an update on what the current balance sheet looks like? Post this deal, how much lighter do you think the debt could possibly get?
A: It would be futuristic statement, but currently the debt stands at about Rs 2,600 crore and this deal is worth about Rs 620 crore in cash. Most of it will be used to deleverage the balance sheet and hence you can make the maths.
Q: What were the financials of this JV? What was the contribution in terms of revenue as well as in terms of EPS that it had to the company which will now get stripped away because you all have sold your minority stake?
A: It is a slowdown in infrastructure industry for the last couple of years, so the contribution in terms of the P&L from the JV was minimal and it was forecasted to be minimal going forward. Hence, I do not foresee any substantial change in profitability of the company.
Q: Would you be looking to monetise any more of your assets or any more stake sales on the cards for the company as a whole?
A: This was an opportunistic decision. It was a good valuation and as a listed entity and in fiduciary capacity if a good opportunity would come, we would take that opportunity, but currently there is nothing on cards.
Q: What was the investment that the company had ploughed in into the JV? You all have got back Rs 620 crore, but what was the investment so that we could analyse the kind of returns?
A: The initial investment was Rs 470 crore in cash.
Q: Thereafter, did you put in some more money?
A: There is no cash consideration and the deal that we are talking about is of cash consideration. The non-cash considerations are set aside.
Q: You said if you do get great opportunity, you could go ahead and sell some more stake to deleverage your balance sheet. You are always open if you get a great opportunity. Could you tell us the other non-core assets that the company has and could be potentially on the block if you get a great valuation?
A: We own a lot of JVs in boot assets and could look at those if there is a value creation. So, it is an opportunistic market. If something comes up, we surely will look at it.
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