Will pay missed interest instalment within grace period: Rolta

Rolta India is confident of making a USD 6.9-million payment on overseas notes before the grace period deadline of June 15, CMD KK Singh says.He was talking to CNBC-TV18 after S&P and Fitch downgraded the firm's credit rating following a default on its 10.75 percent 2018 unsecured currency notes.Singh said an increase in the company's receivables period, from average 120-125 days to almost 185-190 days led to a cash crunch.

But he maintained that the company was transitioning into an IP-led solutions business and is looking to rope in a strategic partner for large projects like defence, something that would help revive margins and return to comfortable leverage levels.

He also clarified that the recent exit of two senior-level management personnel had no connection to the business performance.Below is the verbatim transcript of KK Singh's interview with Anuj Singhal and Ekta Batra on CNBC-TV18.Ekta: Talking about the news which is troubling the market at this point is the fact that you did not make your USD 6.9 million interest payment, which was due on May 16, 2016 and the company has a 30-day grace period we understand. What has happened and are you going to finish the payment within this 30-day grace period?A: Yes, we are quite confident that we should be able to do that. We have been always very punctual on all these payments and we have paid always on time. But this time there were issues about collections and about liquidity and about lot of debtors not paying in time and stuff like that. That was one reason why that became an issue for us and we could not meet exactly May 16 deadline. Then we have 30 days grace. Within this 30-day period we have to pay it.June 15, 2016 or June 16, 2016 is the date by which we expect to pay it.Anuj: There is no liquidity problem as such for you right now?A: There is no such liquidity issue per se but the very fact that we have not been able to pay that shows that there was a need for more funding which is what it is.Anuj: There is a bit of a senior management exodus that has happened over the last two-three months or so, can you explain that as well?A: I think the gentlemen have gone for their own personal reasons, for the reasons of their family, family business and stuff like that.We have a very good team, which has been working with us. So we have good succession plan and the new team has taken over, which I am very bullish about that they will do very well.Ekta: Is the liquidity situation improving coming back to the interest payment that you missed?A: Yes, liquidity situation will improve because this is because of all of a sudden the government, semi-government, defence departments these days are a little behind their payments, which has been there on the ground.Ekta: What has your receivable days gone up to versus what it was on an average?A: The receivable days in an average were about 120-125 days. Right now, they are about 185-190 days.Anuj: Your numbers didn’t look good for Q4 and for the full year as well. Q4 the shocker was margin, 19.2 percent versus 32.8 percent. What went wrong and is this an aberration or should the investors be prepared for some more quarters of these low margins?A: This was one of a type kind of a situation because in this particular quarter, we normally have to get some approvals for deliveries, we need to get their approvals from the customers and once they approve then the deliveries, the invoicing is made. So that could not happen in time. Therefore, the topline got reduced almost by more than Rs 100 crore. That affected the margin as well and that is the reason why it happened.So it is not something which is an ongoing process or anything but I would say that this was one of a kind for this particular quarter. Of course, we are seeing pressures in oil related companies and oil related economies whether it is Middle East or whether it is some other oil companies anywhere else in the world. So they are under pressure but I think as the oil prices are getting better for them, it should come out as well.Ekta: At one point you have guided for FY16 double digit growth guidance but you finished FY16 with around more than 3 percent. What happened there and what are you guiding for in FY17?A: What happed there was because of Q4, which went down and if you have seen nine months, we were doing almost 9-10 percent growth year-on-year (Y-o-Y). So if we would have been able to continue the same growth, which was couple of percentage points every quarter then we would have been fine for the whole year as well.So that went wrong but overall the situation is not such that we will look for dramatically changed position in next year. One thing that we are doing is that as we have become more IP led company and more solutions oriented company, we are cutting off low end services which don’t pay us that handsomely as IP led solutions. That transition we are doing and we will continue to do our next 12 months.So the low end services will go off but that should improve the margin per se based on the overall revenue, which we will be doing.Anuj: When will that large defence order start to trickle in because that is the next big trigger for your company? Also in terms of bringing strategic investors for the defence business, last time you told us that you were looking at that. Has there been any progress on that?A: Yes, progress has been there. We have been looking for that and certainly more than that I cannot be talking but yes, there are progress and as we go forward, we are quite optimistic that we should be able to have the right partner because it is also important to have the right partner into a business who can bring in technologies and who can bring in a lot of other things. It is not the money alone. So we are looking for that and that is going on.As far as the big order is concerned, that is going reasonably well. I think the very major milestone was to submit the project reports in time, which was very important thing.Ekta: In March as well, S&P had downgraded the long-term corporate credit rating from BB- to B+ and one of their concerns was an increase in leverage. So would that be a focus for you in FY17 to reduce leverage significantly on the company's books plus is there any sort of interest default that we can expect beyond what you have right now?A: Of course leveraging is an important issue which we are looking at and as I mentioned, if you are going to go for a strategic partner that will be one of the reasons which will enable us to reduce the leverage in a very drastic manner. So that is something which is on our high card.As far as the other question is concerned, we have some ECB instalments, which are due or which are going to be due over this period. They would have to be negotiated with banks for how to go forward with them. So these problems that we faced today will continue for next few months.Anuj: You reported an EPS of Rs 11.3 for FY16. How confident are you that you will be able to do better in FY17 because FY16 compared to FY17 was lower?A: We should be able to do better than Rs 11.3. There is no doubt on that part.Anuj: Any number that you can tell us in terms of any ballpark number?A: I would rather not give any number but we are certainly thinking that we will be able to do better than this because this was very abnormal quarter.