After GVK Power & Infrastructure reported a consolidated net loss of Rs 235.57 crore for the July-September quarter against Rs Rs 57.19 crore year-on-year, the management said that the one-off cost of Rs 56 crore impacted the bottomline.
Speaking to CNBC-TV18, director and CFO A Issac George says the finance cost and depreciation will remain high even in Q3.
The total debt of the Hyderabad-based company stands at Rs 23,700 crore.
According to George, paring debt is a must to bring down interest cost. The company is looking at various options like qualified institutional placement (QIP), initial public offering (IPO) and private equity investments to raise equity.
The company is hopeful of reducing a significant amount of debt by April 2015.
Meanwhile, George believes the first three units of Alaknanda unit are likely to be commissioned by January.Below is verbatim transcript of the interview:
Q: This quarter has been another weak quarter for GVK Power. You have reported a massive loss of close to about Rs 230 crore. What is the outlook on the margins as well as profits going ahead at least in Q3 and Q4?
A: There are a couple of reasons for this loss. One, we reported a loss of Rs 235.56 crore over income of Rs 698.76 crore. A onetime charge of Rs 56 crore has been charged to the profits of the company and that has contributed to the loss.
Two, the capitalisation of the assets in the T2 terminal in Mumbai and the expansion terminal T1A in Bangalore, the financial charges associated with the capitalisation which has been debited to the profits is pretty substantial.
It is roughly about Rs 150 crore in Mumbai and about Rs 50 crore in Bangalore. Likewise depreciation was also higher at Rs 150 crore in Mumbai and roughly about Rs 52 crore in Bangalore. These three things have contributed to the loss of Rs 235 crore.
Going forward, this one-time charge of Rs 56 crore will not be there in the third quarter. However, the financial expenses and depreciation will continue.
The only redeeming feature that can happen in the third quarter is that we expect the power projects to start working because in the second quarter, out of our 900 megawatts gas-based power projects, only 216 megawatts of gas-based projects worked for 5 days in the quarter and the remaining were all shut down.
Energy contributed to a good portion of the loss. We hope that with the government now considering pooling of gas we could find a positive signal coming in. If we are in a position to operate even at 40 percent PLF then the numbers will be totally different in the third quarter.Q: Your interest costs have shot up dramatically this time around. What is the debt on the books right now and what is your plan for the rest of FY15?
A: Roughly around Rs 23,700 is the total debt on the books.
Q: Any plans to bring it down this year?
A: Yes. We have some plans for paring this debt. This debt is pretty high and we have been working on this. We are looking at the possibility of raising equity to reduce this debt and are confident that by the first quarter of next year we should be in a position to pare this debt by raising equity either through QIP or IPO or through a private equity investment.
One of the three will happen and then we should be in a position to pare a substantial portion of the debt.Q: What about the roads business because that also has seen a significant decline at the EBIT level in terms of margins? What can be the expected revenue as well as sustainable rate of margins in the road side of the business?
A: The Jaipur-Kishangarh loan operating project in the road portfolio has performed very well. It has performed better than expectations.
We had a turnover of about Rs 73.88 crore in quarter two and the EBITDA was a robust Rs 52.29 crore. We had a net profit of about Rs 16.8 crore. So that was the performance of Jaipur-Kishangarh.
Jaipur-Kishangarh continues to perform very well, there is absolutely no doubt in that but the huge burden of interest is something which is eating into the profits. Unless we pare the debt by at least Rs 2,500 – 3,000 crore we will continue to have this particular problem of higher interest cost.
Q: You indicated that it is a three-pronged approach to reduce your debt. You are working on a QIP, an IPO as well as a private placement. Which one is at a faster stage of completion, which could happen in this fiscal year according to you?
A: As far as the QIP is concerned the documents are ready. The only thing is that the price is not what we want to do a QIP for. So, that is the biggest problem that we have. But we are ready to go but then when there is a movement in the price which is positive for us possibly then we can do a QIP.
As far as the IPO is concerned work is going on. Hopefully, we should be there by the first quarter of 2015. Private equity investing there are some serious discussions going on.
There is a due diligence that is also going on. So private equity investment you can’t say has happened till the money is in the bank.
We will have to be a little patient but there are really serious guys who are looking at this particular project.
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