Subsidy amount may be at Rs 1500 cr: Mangalore Chem

On time and bountiful monsoons are a big plus for Mangalore Chemicals & Fertilizers, says its managing director Deepak Anand. For the company, Q2 and Q3 are the best quarters. In Q1, it most of the time posts a loss as shut downs for urea plant and for the Di Ammonium Phosphate (DAP) plant are taken into account, he says.

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Anand says this year's subsidy amount that will be due from the government at the end of the year may be well over Rs 1,500 crore if there is no supplementary Budget.
Anand told CNBC-TV18, the company hopes to clock a turnover of more than Rs 3,700 crore and a profit before tax (PBT) of over Rs 100 crore. "The only worrisome thing going forward is that the government may have run out of their annual Budget already in 2-3 months which is what we were worried about when the Budget was passed," he says. Below is the verbatim transcript of Deepak Anand's interview on CNBC-TV18 Q: In the quarter gone by, your sales growth has been very tepid, just a growth of about a percent and a half, you are still reporting a loss of a Rs 12 crore, could you tell us how FY14 will look with respect to your topline growth, any kind of guidance, will it still be loss making?
A: If you look at our quarterly results historically, normally there is a loss in Q1 because we take our shutdowns for the urea plant and for the Di Ammonium Phosphate (DAP) plant. So, while we had a slightly higher turnover, we had a significantly lower loss period last year. If you take EBITDA, at the EBITDA level we have made a profit of about Rs 9.7 crore against a loss of Rs 1 crore odd of last year. Q: Which would be your better months, would Q2 itself start showing better numbers?
A: Q2 and Q3 are traditionally the best. This year fortunately the rains have been on time if not a little early, they have been bountiful in our operating territory, which is Karnataka and the other southern states. So this year at the moment this is looking quite good. Q: What would you forecast in terms of revenues and EBITDA for Q2 and Q3 you think?
A: It should be year before last I guess. Last year was a disaster because of the drought. So we are all hoping that this year we should match if not better the way we did year before last.
Year before last we clocked a turnover about Rs 3,700 crore and a profit before tax (PBT) of over Rs 100 crore. Hopefully we will improve on that. Q: What is the debt on your books at this point in time and what will it be by end of the year?
A: At this point of time the debt is basically working capital debt. There is very little long-term debt and whatever little there is for our conversion to the gas project, we have to convert our ammonia/urea plant to gas which is in process at the moment. Q: I thought you have Rs 1,200 crore as total debt.
A: That was working capital debt. As at 31st March we had more than Rs 1,100 crore due as government subsidies. Q: When will this Rs 1,100 crore come through?
A: That has more or less come. This quarter our working capital debt is down. Subsidy dues are down. The only worrisome thing going forward is that one understands that the government may have run out of their annual Budget already in 2-3 months which is what we were worried about when the Budget was passed.
_PAGEBREAK_ Q: So you may have some working capital requirements further down, is that your worry?
A: We will have massive working capital requirements. Q: What will your finance costs be for the year? What are you estimating?
A: It really depends on whether the government approves a supplementary Budget or does some kind of special banking arrangement. Q: What do you estimate will be this year's subsidy amounts that will be due from the government at the end of the year?
A: If what we have heard is true and there is no supplementary Budget it will be a frightening figure. It will be well over Rs 1,500 crore by the end of the year which for us is a fairly substantial amount. Q: This money will be met by the end of the year, isn't it? It is not usually rolled over to the next year, is it?
A: Normally what happens is the government under budget the subsidy, they run out of subsidy. Normally it used to be historically in the last quarter of the year. Last year it happened in the second half of the year. This year the way it is going it looks it will finish after the first quarter or before the end of the first quarter and then they pay the subsidy out of the new Budget which is in April. The money is secure. It is not that the money will not come. Q: But your working capital requirements will go up.
A: Yes. Q: If your working capital requirements go up how much will it impact your interest costs?
A: I do not want to hazard a guess on what our working capital requirement will be, but depending on the factors I mentioned earlier, whether there is a supplementary Budget or a special banking arrangement it will be directly proportional to what the government dues are. I am happy to state that at least our debtors from the market are non-reconcilable. Q: What is the final promoter holding at this point in time? What does UB Group, Deeper Fertilizer and Zuari Agro hold as of now?
A: I do not have the most up to date count. A couple of days ago, UB Group was about 23 percent, Deepak Fertiliser was around 24.5 percent, Zuari Agro was just under 17 percent. Q: Do any of them get board seats now?
A: There is nothing at the moment. There was no talk of it and I am really not the correct person to answer. Q: If they have made a request for a board seat it would have come to you or you would be in the know.
A: No, it would not. It will go to the board. Q: Any communication from the UB Group management that they are looking to increase their stake from the current 23 percent?
A: I really don't know.