A consolidated debt burden of Rs 34,249 crore and a loss of Rs 1,073 crore during FY13 is hard news for any company, particularly for its finance head.
Even if this reflects a general trend with several infrastructure companies facing margins pressure, it is a matter of concern for diversified infrastructure company Lanco Infratech Ltd. The company sees a couple of tough quarters ahead followed by a turnaround, as it expects better performance at its power division, and construction work to pick up. It will also divest a stake in some power assets (coal, hydel, solar and wind) and road projects.
The GMR Group was among the first to launch a series of divestments that helped the company turn the corner. Will Lanco be able to repeat this?
T. Adibabu, Chief Operating Officer, Finance, Lanco Infratech, tells
How do you rate your performance for the quarter and the year?
It is extremely bad even though the macro-economic conditions are not conducive for infrastructure companies. The industry and the company are passing through a difficult phase.
Hope things will get better within 5-6 months. The Government is making efforts to sort out sector concerns, including clearances, and banks are also likely to soften interest rates. All these will have a positive impact on the company.
To what reasons do you attribute such a performance?
Normally, we expect power plants to function at about 80-85 per cent plant load factor. Due to poor coal and gas supplies, of the 4,000 MW capacity, the capacity utilisation is below half, at 49 per cent. The coal plants are functioning at 52 per cent and gas plants at 35 per cent.
It has become difficult for power plants to break even, as it requires about 55 per cent output. All these have resulted in losses. The construction business has also been hit due to project implementation issues.
How do you plan to fix these concerns?
In the next few months, there are indications that the fuel problem will be addressed by both CIL for coal and Empowered Group of Ministers for gas supplies. Once these are addressed, we will be able to hike the load factor. This will provide enough cash flows and things will get better automatically.
You are saddled with a debt burden of about Rs 35,000 crore. Isn’t it worrisome? Will you need a debt recast?
Of this, Rs 17,000 crore is for projects under operations and the rest for those under implementation. The latter is not an issue.
The debt for projects under operations is a matter of concern. These will get sorted out once the power generation goes up. There is no need for debt recast. Cash flows will take care of it and also make us positive.
You have been talking about divestment for some time but have not managed to close them as yet?
The perception about Indian infrastructure as an investment destination has been badly hit. It will take some more time for this to get better. Overseas investors are not in a hurry. We expect to close some deals soon.
We have divested our stake in a 10 MW wind farm in Tirunelveli in Tamil Nadu to a spinning mill and are in negotiations for the divestment of more wind, hydel and solar power assets.
Given this background, your ability to invest will be hit. What are your plans?
We have planned a capital expenditure of Rs 2,500 crore during the current year, which includes Rs 500 core towards equity. But we have decided to go slow on the expansion of some power plants, as we expect coal supplies to materialise only by 2015.
What about receivables?
We had close to Rs 3,700 crore in receivables. Of this, we have managed to get about Rs 800 crore, including Rs 600 crore from Uttar Pradesh and Rs 200 crore from Karnataka. Karnataka owes Rs 1,800 crore, Uttar Pradesh, Rs 400 crore, Haryana, Rs 200 crore, and Tamil Nadu, Rs 200 crore. We expect to realise them during the year.
How are you going about the Australian mining project?
We hope to break even during the year and get into positive mode by next year, as we take up expansion and increase capacity.