Will use Rs 250 cr for capex; debt reduction: Orient Green

Nigel: Just a couple of days ago there was a preferential allotment of around Rs 250 crore so just wanted couple of details in terms of that? What will these funds be used for and also could you give us an update on what exactly is the debt?

A: Basically, out of the Rs 250 crore - Rs 125 crore will be used for expanding our projects; another 57 megawatts will be coming in. The other Rs 125 crore would be used for retiring the banks loans, the high cost banks loans and getting longer tenures, so that we will lead to a larger savings.

The 57 megawatts that we are looking at is basically between Andhra Pradesh, where we have got 43 megawatts site ready; we are waiting for the financial closure and another 14 megawatts which we are putting up in Madhya Pradesh.

However, overall debt that the company has is about Rs 1,600 crore, we will be drawing more funds for this project plus overall we will be looking at reducing the debt over a time to come in the next few years.

Reema: Of this Rs 1,600 crore only Rs 125 crore will be used to reduce your debt. So that is not going to change the high interest that you are paying?

A: Yes, in fact we are looking at doing some refinancing. We are already in advance talks with various banks for both the old wind assets and the new wind assets both in terms of reduction in interest rates as well as longer tenure. So, we expect a savings of about Rs 25-30 crore in the first year itself and going forward it will be a larger interest savings.

Nigel: Could you tell us currently what is your borrowing cost and what is it likely to go down to? I mean we have got the absolute numbers, Rs 25-30 crore on a year-on-year (YoY) basis.

A: The borrowing cost is about the old wind assets is about 15 percent borrowing cost and the new wind assets is about 13 percent and we expect to reduce it by at least about 2 percent with longer tenures from the existing seven to eight years to about 15 years which the banks are now looking into.

Reema: How soon will you be able to conclude your talks on refinancing your loans? When will this benefit of Rs 25-30 crore of lower annual interest rates kick in?

A: In fact, as far as banks are concerned, we are in an advanced stage of talks with most of the banks for both the old and the new assets. We are looking at completing it by December this year.

Nigel: Could you also tell us, post this particular preferential allotment, what will the promoter holding goes to? If I am not mistaken, it was at around 75 percent as of June, 2015.

A: The promoter holding, there is a Singapore structure so that overall promoter holding is about 75 percent of which the Shriram Industrial Holdings itself will be about 49 percent. The Shriram Industrial holdings share will go down to about 42 percent after the preferential allotment and we may collapse the Singapore structure also overall._PAGEBREAK_

Reema: If I am not mistaken you had already taken an approval to raise close to about Rs 400 crore via a qualified institutional placement (QIP)? As far as our understanding you haven’t still raised that. Are you still looking to do that?

A: We will be looking at more funds. First is the 57 megawatt expansion that we are looking at. After that we are looking at more expansions in time to come, in fact we are already in the market looking for the second phase of expansion so we will be looking at QIP or any other investment vehicles.

Nigel: But you will not be taking more debts because that Rs 125 crore you will be looking to fund part of the 57 megawatt expansion then you are saying that you make look to expand even further so you will be looking at only the QIP route and may be this preferential allotment route. What is the total capex that is required for this 57 megawatt plant?

A: The 57 megawatt will require capex of about Rs 400 crore of which about Rs 125 crore is coming from equity and Rs 275-285 crore is coming from the debts. So, going forward if we are looking at another 75-100 megawatt, it's an immediate thing that we are looking at again it comes to about Rs 6.50-7 crore per megawatt and the 30:70 debt equity ratio.

Reema: So, the total capex for the remaining few months of this year as well as next year as well as the additional equity that you are looking to raise via any route?

A: We are exploring various options. Nothing finalised as yet, but we are in talks with various people for the fresh equity that we will be raising, either through a qualified institutional placement (QIP) or through various investments partners.

Nigel: What is the peak debt that we can expect from your company and also you had announced plans to demerge your biomass business in June, any update on that?

A: The peak debt levels will be about Rs 1,700 crore because once we draw about Rs 275 crore, there will also be some payments and also longer tenures that we will be getting and lower interest rates and we will be retiring some of the debts with the equity funds. As far as the demerger is concerned, both the biomass and the wind assets, we are looking at demerging. The target is March, 2016. We will complete the demerger process. We have already applied through the courts, etc. for the demerger process, but the effective date will be October 2015.