Atul Punj, Chairman & Managing Director, Punj Lloyd said with the huge amount of investments going into infrastructure, the company would completely focus on its core capabilities. Defence remains the key area of focus, he said.
Speaking to CNBC-TV18 from the sidelines of India Conference in Japan, Punj said the government is working to resolve the non-performing assets (NPA) issue. He said the EPC sector has made several doable recommendations to resolve the issue because EPC is not a sector where 5:25 package will work.
The company is trying to recover Rs 4700 crore stuck with customers for a long time and hope to recovery at least 50 percent of that in FY18, he said.
The company has already sold non-core assets to reduce debt and will continue to do so, he said
Punj Lloyd traditionally provides integrated design, engineering, procurement construction and project management services in the energy and infrastructure sector. However, it has diversified its interests into aviation, defence and upstream through subsidiaries and joint ventures.
Below is the verbatim transcript of the interview.
Q: Since we are talking about Make In India, let me ask you about your own plans. You have got inauguration coming up on May 4 of your plant in Malanpur, take us through little bit about the defence plans and specifically about the plant in Malanpur.
A: Effectively taking up from the Prime Minister’s Make in India programme, we picked up the challenge and we went ahead and have tied up our first small arms FDI with these development industry which is now getting into production on May 4. So we are making the entire range of small arms. A lot of them were already in use with the special forces in India and we are hoping now not only to manufacture for India but also for exports.
Q: So this is 49:51 joint venture (JV), what kind of investments are we talking about?
A: The total investment on the project is currently standing at about Rs 25 crore. We expect that it should be sufficient for next year when we go into phase II.
Q: Besides defence, we were just hearing about business confidence in India at least within the private sector now being at a record high. What is your own sense and how are you planning to deal with the debt situation, which continues to plague a lot of Indian companies?
A: I think the government is now finally working on a plan to resolve the NPA issue with the banks once and for all. It has been something that has been festering for too long. As an industry, we have been lobbying the government to make various changes, a lot of them have been done and we are now hoping for the final formulae to be finalised between the Reserve Bank of India (RBI) and the Department of Financial Services (DFS) on what exactly are the concessions.
Q: What have you suggested? You said the industry is speaking to government about this, what are the main recommendation made?
A: For one-time restructuring that the construction sector has been asking for. We do not fall into the category of most other industries that have an asset, that has 25-year life so a 5:25 kind of package is not relevant to the EPC sector. So we have made some recommendations specifically around the working progress model, which is our biggest asset is finding a solution that works. So God willing, hopefully sooner or rather than later, we do not know what the government is actually going to approve at the end of the day but we made a series of doable recommendations.
Q: The current debt for you is about Rs 6,000 crore, what is the plan now to try and bring down debt further?
A: Every construction company is desperately trying to reduce its debt and by getting rid of non-core assets, which is a lot of what we have done.
Q: Which you have done some of that already?
A: Yes, as a company we have done a lot of it. At the same time, what we are trying to do is recover money that has been stuck with customers for a long time.
Q: How much would that be?
A: That for us is somewhere close to Rs 4,700 crore.
Q: Any luck?
A: Moving slowly, little slower than we expected but as long as it is in the right direction, it is okay. So hopefully this too shall pass as they say.
Q: In FY18 what is the hope in terms of being able to recover some of that?
A: FY18 we should have recovered at least 50 percent of that.
Q: 50 percent of the Rs 4,700 crore that is outstanding?
A: Yes.
Q: What is it that you are now looking forward to, what is going to be the next big trigger in terms of growth for you particularly?
A: As a company we do not need any other triggers because the amount of investment going into infrastructure which is our core business is so massive that I do not think we should divert our energies by looking at any other place other than defence.
In defence, we are already playing tier-II, tier-III and tier-IV for various programmes, we are working with OFB, DRDO, HEL etc, we hope to deepen those relationships and at the same time we have some tier-I aspirations like in the small arm side where we will be prime bidders as well along with the modernisation of some of the old systems that the defence forces are working with right now.
Q: Are you happy with the pace of movement in the defence space?
A: I think we could have moved faster but the general trend is in the right direction. The government is getting its head around exactly what needs to be done and the realisation the bureaucracy is finally creeping in -- the biggest stake holder in private sector profitability is the government. More than 30 percent of every dollar that we make goes to the government and other than the indirect expenses. So once that kicks in in terms of mind-set change that the government becomes an enabler rather than a regulator, will change this country and I believe that is a work in progress that is starting to happen.
Q: We just heard that CII survey talk about how business confidence is at an high but are you feeling that way about FY18 as well?
A: A few significant events will make the change in that NPA resolution and collection of our money that is stuck with the public sector undertaking (PSUs).
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