Manoj Gaur, executive chairman of Jaiprakash Associates Limited (JAL) is surprised at the recent under-performance of this company in the secondary markets. "We have been able to maintain decent growth rate," he said.
Going forward, he said, the company aims to maintain a growth rate of 40%. "We expect debt to scale down significantly in FY12," he said adding, "The treasury stake sale remains an option to pare down debt."
Gaur expects FY12 EBITDA above Rs 4,000 crore. “We expect construction revenue share above 40%,” he said.
Below is a transcript of Gaur’s interview with Udayan Mukherjee and Mitali Mukherjee on CNBC-TV18.
Q: The obvious concerns are to do with working capital, cash flows and the balance sheet because interest rates have gone up quite a bit. There is also some tightness of liquidity, which a lot of the infrastructure companies have to grapple with. How are you positioned with regard to that as you go into fiscal year 2012?
A: I have been surprised by the stocks performance maybe perhaps due to the sectoral underperformance etc. The results will be out very shortly but you will be happy to know that we have been able to maintain a good growth rate as far as fiscal year revenue and EBITDA is concerned and things are looking nice.
In FY10, we had revenue of about more than Rs 10,000 crore, which was almost 60% up over a previous year. At this high base, it appears that all the divisions worked well and we may have been able to clock a 40% growth rate. The results would be out shortly.
So as far as JAL is concerned, I think things are good because all the projects, which we are executing, are doing well. The cement capacity has come on-stream and our plants are not in south zone where there is an overcapacity situation. We are operating in other zones, which are namely north, central, western. We have been able to clock a growth of almost 45% in cement dispatches over the previous years.
Q: At this point what is the kind of debt on books that JP Associates has? For FY12, would you see that getting higher because of your projected growth expansion plans both in power and cement?
A: In these two years – the FY11, which we have just finished, and FY12, which we are now entering — the capital employed in cement is INR9000 crore. Then as far as group is concerned, over INR25,000 crore capital employed will start performing. The project should be completed. I see very comfortable situation as far as all group companies are concerned generally speaking and JAL specifically.
The exact number as far debt is concerned we would be known when we would come out with the audited results. But I can tell you that now there is no short-term debt in the company. All are long-term projects debt, which are having a moratorium of about two to three years and then repayment is spread over four to seven years.
Secondly, I see the debt portion coming down sharply in this financial year because we expect good EBITDA numbers to come even in this year and also we would be taking various measures which would bring down our debt significantly.
Q: What kind of EBIDTA numbers are you looking at for fiscal year 2012? Also, what are these other measures that you spoke about?
A: This company has been performing successfully over many years now. For the nine month period, we had an EBITDA of 24%. I have very high confidence that it will not be less than to 23-24% or rather maybe 20-25% for the entire year when we come out with the numbers. As far as FY12 is concerned, I expect that we can maintain a good growth rate in JAL.
With the capital employed, we had a very heavy debt taken for various cement plants and those projects now are either completed or will be completed over the next two-three months. They all will be giving revenue. They are all be earning profit.
I am very confident that the debt would be reduced quite a bit. You mentioned about the treasury stock and some other steps. Well, treasury stock is one of the options. There are other steps that can be taken. JAL holding significant stake in infra, tech, power — we can all live with that and there can be other options also.
Q: Can you give us a blueprint of how much money can come from any of these asset sales in FY12, which can go towards deleveraging? Do you think you can do something close to INR4000 crore of EBITDA next year (year ending March 2012)?
A: During last three years, we discussed about revenue, guidance and EBITDA. Due to India’s economy and the company doing well, we have been able to achieve those numbers. I am more than confident. I would not like to discuss the blueprint today. But, yes, I am very confident that we would have EBITDA of at least Rs 4,000 crore going forward in this FY12 and debt, which was there around Rs 18,000-19,000 crore on the balance sheet of JAL, I see it would be down to around 16,000 or 15,000 crore in FY12.
Q: Cement dispatches have been quite strong but there were some disappointment again on the realisations that you posted for cement. On that how much of a recovery do you see given the kind of volume offtake there is in the market right now?
A: The point is that there is always a mismatch between the capacity and capacity of the market to absorb it. At the same time, our capacity came from different part of the country. It is not concentrated only in one or two zones. So, while I will agree with you that realisations were under pressure, especially in 3Q of the last financial year, I think 4Q was a good quarter. You would see this reflection in numbers of every company.
I am happy to tell you that we had a very good quarter last year. We hope to maintain this even in the last financial year. Last year JP Group could produce and sell about 16Mt, out of which JAL did about 15Mt. Other 1Mt was from the joint venture company. But this year we are operating around 25Mt already. We would do at least 20Mt cement dispatches in JAL this year.
Q: What is the margin picture looking like for FY12 because last quarter too while real estate margins were very strong?
A: There are two-three things regarding margin pressure, which is beyond our control like coal, logistics etc. It is beyond control of any manufacturer. We can absorb part of it because of technological superiority. Even then it cannot be done in full.
Second is the market per se to absorb the new capacity and you have seen the IIP numbers, which have come up recently. But the situation is much better. In fact, I have to say that even though we can wish EBITDA level of about Rs 1,200-1,400 per tonne in cement, it had sunk to almost Rs 400 per tonne in Q3.
However, the situation would be better — it maybe about more than INR1000/t. That is why I feel that this financial year should be better. I am quite confident about it.