Will declare 2 divestment deals in 4 weeks: JP Associates

The company is also taking a slew of measures to reduce debt meaningfully, Gaur told CNBC-TV18. It plans to announce two more deals on divestment in four weeks and is looking to sell two cement units and two hydro plants under phase 1. Phase 1 will also include the sale of some land bank under JP Infratech.

Below is the verbatim transcript of Manoj Gaur's interview with Sonia Shenoy and Latha Venkatesh on CNBC-TV18.

Sonia: Can you take us through the performance of the cement business this time - you have reported a revenue decline? What were the volumes and the realizations for Q3?

A: In Q3 there has been a decline in cement revenue which fell down to Rs 1343 crore from Rs 1441 crore level of previous year and this is primarily because of the extreme challenges which economy is facing. And as an infrastructure company we are facing the brunt because of multiple reasons and as far as realisation is concerned, it fell down by about Rs 130 per tonne in this quarter as compared to Q3 of previous year. And there was an increase in the coal cost, the logistic cost and the power cost. So this severely impacted the profitability in this quarter.

Other than cement even the real estate number the revenue fell from Rs 612 crore of Q3 of previous to Rs 254 crore in Q3 this year. This is only reflecting that the economy is impacting different segments and in case of JP Associates it is cement, real estate and also the E&C business.

So we have seen a decrease in gross revenue, we have actually even in this difficult circumstances company could earn 24 percent EBITDA margin. But because of the high finance cost the company has reported a loss in this quarter which is about Rs 89 crore.

Latha: We have seen a lot of your peers report weakness in Q3 earnings but you have reported one of the lowest EBIT numbers. Do you think the industry has bottomed out - how many more quarters of pain is still left?

A: Cement as a business has been subjective to multiple taxation, the raw material cost is not under control. At the same time realisation is based on competition and there is over capacity in the cement segment. At the same time with 4.5-4.8 percent growth, infrastructure segment is definitely impacted. As far as my view is concerned I am very much disappointed with Q3 performance. Despite the best efforts of running the plants with reasonable efficiency, power consumption at Rs 85 units per tonne, I am not happy with the numbers, it is depressing.

However the good part is that at the first instance whenever there is a kick start in the economy whether it happens after three months, after six-nine months, cement will pickup. Q3 generally is better than Q2 of any year. I analysed many quarters of at least last five years and I observed that there is improvement in Q4, January was better than November-December and I hope that this momentum will continue. I am reasonably confident that while the capacity utilization has fallen because you specifically asked how the industry is going to do, the capacity utilization has come down from 85 percent to about 73-75 percent. I think capacity utilization will still continue to be hovering in the range of 80 percent because market is just not giving enough space, there are many new entrants, there are brown field capacity utilizations. So I cannot say Q4 will be great but it will be much better than Q3.

Sonia: As you said so yourself, interest costs continue to hit your earnings. Do you stick to your earlier guidance of reducing group level debt of Rs 15,000 crore by end of FY14?

A: We have been taking various measures. I don't think you are fair when you say the fears have come true because we have been working proactively for the last two years and there has been very serious action plan to divest some of the assets. Yes there have been agreements but there have been processes. In our country as a company we have been taking proactive measures to reduce debt, Gujarat Cement we did the agreement with Ultratech, we are also doing other transactions but the statutory approvals take so much time, the process takes at least six-eight months.

Let me add that our company is determined and we are standing firmly, company has got large asset base, we are not greedy to keep our assets and not to keep the faith. In order to be trustworthy we are already divesting some of the assets and these positive results are already accruing and they will happen over a period of next four weeks to may be 24 weeks and I can say that as far as JP Associates is concerned, Jaypee Group is concerned we are meeting all our obligations, with the grace of god we will continue to meet all the obligations, we have to reduce debt.

One thing which I can say and I hope you will be able to show it to the viewers that yes we have grown, we took loans and we are determined to repay all our loans on time. For this divestment will take place, whether it is for one cement plant or two, one power plant or two, it will happen but we will be no debt and that process is already going to give results, you are going to see this.

Latha: In that case, can you give your investors a road map - as to which assets in that case are on the block next? What is the road map on debt reduction? Will you look to refinance your debt? Is that an option or a necessity?

A: Rs 15000 crore debt reduction was at a group level not for JP Associates only, it is for the entire Jaypee Group. So as far as JP Associates is concerned we have done a deal of Rs 4000 crore with Ultratech. There would be two more deals which would be announced soon for a period of four-six weeks and you would see that a target of about Rs 7000 crore would be met in JP Associates.

As far as JP Power is concerned we are talking about hydro, thermal and I say on record that there will be a transaction of may be about Rs 10000 crore or Rs 14000 crore by March or by June. In our country even if there is an intent to do a divestment, it takes lot of time because of approval clearances. I only wish that this can be appreciated.

As far as group is concerned there are two targets which we have made, phase I target, after Gujarat two more cement plants and two hydro power plants. There are some land banks in JP Infra.

Phase II may be one-two more cement plants, may be one-two thermal plants and ultimately you may think it is a wish list but as a group is concerned we will demonstrate three things, we have completed every project which we undertook in last 45 years. Two, we will pay to our bankers on time. Three, we will bring down our debt from present level of around Rs 58000 crore to below Rs 31000 crore by October 2015.