Aim to turn EBITDA positive by FY15 end: Punj Lloyd

Below is the transcript of JP Chalasani's interview with Ekta Batra and Sonia Shenoy on CNBC-TV18.Sonia: We are looking at the standalone numbers and it looks like it has been a disappointing performance this quarter, can you take us through what the orderbook stands at currently and what is the expectation for the next couple of quarters for Punj Lloyd?A: This was quite an encouraging results for us. If you had heard us earlier the quarter ending June, we said if you take June quarter as the base, we will keep improving quarter-on-quarter (Q-o-Q). After three quarters of being in negative EBITDA, this time we have the positive EBITDA. If you look at Q-o-Q, from minus Rs 90 crore we have now moved to plus Rs 100 crore at the standalone basis. Even the topline has gone up by about 10 percent at the standalone basis from Rs 1,290 crore to Rs 1,420 crore.

So operationwise there is a significant improvement. When you look at Q-o-Q basis on this, so after three quarters we moved on to the positive EBITDA and we moved from minus 7 percent to plus 7 percent. When you look at year-on-year (Y-o-Y) basis, we will see the differences but then if you look at the previous three quarters performance, the operations are turning around on this. That is one significant achievement in this quarter. So after three quarters, we have a positive EBITDA margin of 7 percent.

Orderbook wise we have said that one of the reasons why we are able to now move from the negative EBITDA to positive EBITDA margins is that we are able to control the operations existing projects start improving their returns and the new project started taking off from this quarter onwards.

Ekta: Since there has been an EBITDA turnaround on a sequential basis as per the numbers, do you expect the EBITDA turnaround to continue into next quarters and if so do you expect even an improvement from the 5.4 percent margin you reported this quarter?A: We planned and targeted this financial year with overall positive EBITDA. Though at the cumulative basis in the nine months, we have negative EBITDA, we will cut off that and by end of March, we will see that we will come to the positive EBITDA.Operations wise, now there is a significant improvement Q-o-Q basis and you will only see the positive side of return on this. The orderbook is good, it looks very good at this stage and there are quite a few orders in the pipeline as well on this. So, orderbook and operations are fine and we just need to concentrate on our debt reduction plan as that is the key for us moving ahead.Sonia: The last time you spoke with us, you indicated that your target is to bring down the debt by 40 percent, what have you done in this quarter itself in terms of debt reduction, what is the absolute figure and how much do you plan to scale it down by in the next three-six months?A: During the quarter of December 31, it didn’t happen because debt reduction was to happen through non-core asset monetisation and the claims realisation. To some extent we had little progress in claims realisation and non-core asset monetisation happened in this current quarter. So as of today, it has come down by about 10 percent the debt and moving ahead, hopefully if more and more claims get realised, we will do the debt reduction.

That is going to be a single point agenda for us having in the last two-three quarters concentrated on improving the operations of the company, which is now on track. Next few quarters our focus is going to be on reducing our debt and debt cost.Ekta: Tell us about the debt figures at this point in time, what does your debt stand at, how much are you going to reduce it possibly in Q4 and will we see the interest cost come down in Q4 from Rs 250 crore that you paid this quarter?A: We hope so. As on December 31, our debt stands at around Rs 6,400 crore and as we speak now it has come down to sub Rs 6,000 crore at this stage. Hopefully in the next 45 days when we have to end the quarter, we should see some more reduction. Plus with interest cost coming down, so sometime in May we would see the significant improvement in position of the debt. I am not saying it is going to end at that point of time but you will start seeing the trend. We are already seeing the trend now, it will continue. So as I said that is going to be our point one to point five priority on the debt reduction cost.

Sonia: In the quarter gone by, another important piece of news was that the FIPB gave an approval to your company to manufacture defence items. Can you give us a sense of what the scope of work could be over there what could the potential be as far as revenues are concerned and when could you start to see them on your books?A: There are two areas - other than the EPC business is what we are concentrating on, one is defence which is expectedly large business moving on this and the second one is we are slowly improving our business in terms of our developmental projects that means we will invest in build-operate-transfer (BOT) projects.

In fact, last week we commissioned 21 megawatt solar project, which we won through our subsidiary in Punjab. So one segment of thing is that we are not just recommending EPC -- we want to create assets on balance sheet so we are gradually improving on that area. We now have a road project, we now have two solar projects for this and we are bidding for few more solar projects that is going to be one stream of revenue as well as asset creation for the company. Second one which is going to play significant role in the company is topline moving ahead in the next few years is going to be defence.

We have the license now on this and we have a strong manufacturing base in Madhya Pradesh, which we have already been manufacturing for few defence public sector undertakings in India as well as some foreign companies. Right now we are in the process of bidding for the number of projects in defence area. Obviously, the defence from bid to conversion takes a longer period on this; it is a long-term sort of a business. We would see a significant revenues coming from defence maybe in a year or two but the action has started now.Sonia: One final question on a number if you can give us - you said that a lot of your debt will be reduced because of claims settlement, what is the outstanding claims at this point of time and how much has been settled already?A: On paper we have about close to Rs 10,000 crore worth of claims on this but then we see that when you do the analysis, which is that what is the most conservative basis realisable is about Rs 3,500 crore on this. Our first target is to see that how fast can we realise Rs 3,500 crore and then we can move on to the next phase.Our concentration is for the debt reduction, which is going to be the key role for us. So our  focused now on how do we get this claims on to the table in terms of the cash and then go back and then retire the debt.So some movements have started and one of the claims in Doha Airport got settled and we received the money. This quarter what we saw is there are some movements but the claims always cannot go by the timetable that you have fixed but there is movement and we are quite hopeful that we move ahead, more and more claims gets realised.