Target to reduce debt by 40-50% in FY16: GMR Infra

Turnaround in the energy business aided growth in the second quarter, Madhu Terdal, Group CFO of GMR Infrastructure said. All the projects are operational now, he said. The company’s topline grew 15 percent to Rs 3,090 crore and EBITDA rose 54 percent in the second quarter. Plant Load Factor (PLF) for the EMKO was 83 percent, highest so far. He expects PLF to be in range of 70 to 80 percent for both its plants – EMKO and Kamalanga. The Tamil Nadu power agreement, which was stuck, has been finalised and will give sales of upto 16 MW in coming quarters. Terdal also said that dues are coming in from state district companies. The company received Rs 72 crore from the Maharashtra board. The company has managed to reduce its debt by Rs 450 crore, he says adding that the target is to reduce by 40-50 percent in FY16, he added. The airports business was marginally down due to seasonality. The company is looking to raise funds close to Rs 400-600 million in its airport business, he said. He expects tariff collection to be close to Rs 90 crore in coming quarters.Below is the transcript of Madhu Terdal’s interview with Anuj Singhal and Ekta Batra on CNBC-TV18.Anuj: Good performance from your company, especially in the energy vertical – six times jump in earnings before interest, taxes, depreciation and amortisation (EBITDA). What led to that kind of performance and going forward, is the trend likely to sustain, not in terms of percentage growth, but in terms of the kind of profitability that you have reported?A: It is good to hear for the first time the anchor asking us that the improvement is there in the performance. So, it is good to hear and getting recognised. Even in the last quarters, I had made a statement that the GMR is on the verge of turnaround. I think for successive second quarter, we have shown that continued performance and hopefully this trend is likely to continue in the coming quarters as well. This has been achieved basically, by the turnaround in the energy sector. In fact, if you can recall, whether it is our debt problem as well as our financial numbers, they were brought down by the negative growth and negative performance in the energy sector. You will see that after the increase in the debt, GMR has ensured that all our projects are now completely operational and there results are now what they are showing today in front of all the investors and the public. I can just tell you a couple of the improvements. For example, if you take our Emco power plant, it has achieved an all-time high plant load factor (PLF) of 83 percent. It achieved a revenue of Rs 360 crore for the quarter and for the half year, it made a revenue of Rs 650 crore. And EBITDA moved from Rs 92 crore for the previous quarter to Rs 130 crore for the half year period. You can see that. Most significantly, the Tamil Nadu power purchase agreement which was stuck for a while has already started and we have started pumping in about 56 megawatt which is likely to shoot up to around Rs 160 megawatt in the coming few weeks.More importantly, we have started even recovering the dues from the distribution companies. For example, Maharashtra Distribution Company has already cleared about Rs 72 crore worth of dues. So, this has started in our cash improvement portion. Coming to Kamalanga, we have already achieved a PLF of 68 percent for the quarter and the EBITDA has moved from Rs 133 crore which was last quarter, now for the half year, it is Rs 200 crore. Very significantly, again, the Bihar government, though the Central Electricity Regulatory Commission (CERC) approval is full to be approved, they have already accepted partial jump of 13.8 paise per unit and that has already started. In addition to that of course, flexible packaging, our flexible restructuring package in both Emco, Kamalanga and couple of road projects are out there. So, you will see that all around there is an operational improvement and these trends will continue to be showing in the next coming few quarters and years as well.Ekta: For Kamalanga as well as the Emco power plants, what might the PLF be by the end of the fiscal? In terms of your guidance for the PLF, where do you see it by the end of FY16?A: In terms of the PLF guidance, I guess, this trend should continue in the range of between 70 and 80 percent, the PLF trend should continue.Ekta: For both plants?A: Yes. One more important point which I want to draw your attention is basically, people were already asking questions on debt. So, let me address that question straight away. In this quarter, in this half year from between March and September, our corporate debt has been reduced by as much as Rs 450 crore. And you can see that in the interest cost, already there is a reduction of Rs 33 crore for the current quarter. So, you can see that the trend of reduction in the debt has already started. And most importantly, let me give on number which will confirm what I am telling. Our net debt to EBITDA ratio for the year ending March, 2015 was 15.50. but for the September, half year, it has fallen down as much a about 400 basis points. Now, it stands at 11.8. So, you can see about four points reduction in net debt to EBITDA shows that our EBITDA has started improving and as a result of that, our leveraged portion has also started improving very significantly.Anuj: That point is taken but it is quite high, the interest cost component. Taking away more than your EBITDA and leading to overall net losses. By when do you think you will be in a position to report profit on a consolidated basis, on a quarterly basis as well?A: It will be incorrect to talk about profit after three years of continuous stress in the power sector. I think we should have some more patience when we really start seeing the results. Anuj: Let us put it this way. In terms of reduction of losses, will that trend continue and by how much?A: Absolutely. For example, the cash profit which was in the last quarter Rs 60 crore, this quarter compared to the previous year of quarter two, quarter two, 2015 our loss was Rs 206 crore. But this quarter, we have achieved a cash profit of Rs 134 crore. So, this is a significant jump of Rs 340 crore in one year time. And if you look at EBITDA numbers, it was Rs 590 crore last year. This year, it is Rs 900 crore, it is a 52 percent jump in the EBITDA. So, if you can see that, the trend has started improving, so there is a significant reduction in the losses. There is an improvement in the EBITDA. Debt being either constant or slightly more on the projected, but corporate debt which is the real cause of concern has started showing the downward trend. I think these things will show that our health of the balance sheet, our health of the leveraging portion has started improving gradually.Ekta: If your interest outgo was low by Rs 33 crore on a sequential basis, it still stood at Rs 873 crore. How much lower do you think you can reduce it in the second half?A: As I was speaking that this year, we have got a target to reduce our debt by at least about 40-50 percent. Without actually telling the numbers, I can tell you that we are on target. We hope to achieve our corporate debt reduction to the extent of around 40-50 percent than what level they were at March, 2015.Ekta: Can you safely say for Q3 and Q4, you interest outgo will be lower than this particular Rs 873 crore that you did in Q2?A: Yes, without any doubt.Anuj: Let us talk about your airport division. What is the update on that? Any plans to have any kind of restructuring there or in terms of any kind of stake sale? We keep hearing about that. Anything planned in that line?A: Airport sector, absolutely there is no question of any stake sale. Both the airports are doing wonderfully well. This quarter results are slightly marginally down basically because of the seasonal factors, but airport as a sector continues to go a very robust help. If you are seeing, one of the major irritants in the tariffs, which was in Hyderabad Airport, that has been significantly, completely resolved now. As a result of that, in the coming quarter, we will have a Rs 90 crore additional revenue that is coming and in the next whole year, the overall revenue should be jumping in the range of around Rs 380-400 crore. So, that was the most because this has already been Directorate General of Civil Aviation (DGCA) has already approved Hyderabad Airport to collect all the airport charges.So, that has been resolved and you will see a lot of developments in the real estate space in Delhi Airport in the coming weeks and already if you see, already Delhi Airport has achieved an EBITDA of Rs 800 crore for the half year. In terms of the what you are hinting at, obviously, we are looking at a sort of a fund raising at the our GMR Airports Limited. I can only say that GMR is pursuing a variety of options in terms of fund raising. And I will not be able to tell more details on that but, definitely you will see some amount of fund raising in the airport sector.Anuj: Any timeline or ballpark number, if you could give us in terms of the fund raising?A: We are looking at a significant money ranging from around USD 400 to 600 million in the airports sector, but there is no fixed time limit because airport sector is a very attractive sector. The deal will be done on the terms which will be beneficial and attractive to the airports sector as well as GMR. But there is no pressure on us to do anything in a hurry. But importantly, if you have seen, already we had completed a very successful rupee bound a few months back and we are looking at in the pursuing the government scheme of either Masala Bonds, perhaps, Delhi Airport will also be looking at the option of Masala Bonds as well.Ekta: What is the status of the two captive coal blocks, Talabira as well as Ganeshpur?A: We have already taken over both the mines and in terms of Talabira, entire machinery and everything has been mobilised. All the finding has been completed and as on August 3, 2015 Talabira started operating. And already about 1,23,000 tonnes of coal has been produced till October 31, 2015 and this will ensure that the first unit of our Chhattisgarh coal mines will get into production at a very short term future. In terms of a few weeks, the unit one of Chhattisgarh should start the production.