Well placed to meet March FCCB liability: Sintex

Sunil Kanojia, Group President, Sintex Industries, says that the company has applied to the RBI for redemption and as soon as we receive the redemption we will take a call to redeem it. 

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Below is the edited transcript of his interview to CNBC-TV18.

Q: Can you provide information about FCCB repayment that your company has to make by March? Are you on track to meet close to USD 300 million repayment and how much of the FCCBs have been funded by high cost debt?

A: We can redeem FCCB anytime from September onwards to March 2013. Right now we have applied to the Reserve Bank of India for redemption and as soon as we receive the redemption we will take a call to redeem it.

We have already organized funds to the tune of USD 292 million. As soon as we get the nod we will redeem it. As regards the modes of funding, we had a qualified institutional placement (QIP) close to Rs 180 crore and FCCB of USD 150 million, at a step down 7.5 percent coupon rate for first two years and then 3.75 for the next three years.

So USD 140 million will come from this source, USD 130 million will come from within the company via cash accruals and promoters will put in 10 percent of equity to match with the QIP, so their stake remains the same. We have matched fund against the liability that is falling due in March.

Q: What will be the changed picture in debt levels once you are done with the FCCB and the QIP?

A: We were looking forward for the FCCB redemption issue. With this issue we wanted to look at our debt equity structure in a long term way, make certain structural changes for improving return on capital employed and cash flow accruals.

By the end of this financial year we may see an improvement in return on capital employed by 350 bps and 250 bps in 2014. We expect to see return on capital employed at 19-20 percent from the current 13.3 percent. The debt equity ratio should come down from 1.2:1 to 0.8:1. We should also generate around Rs 250 crore of free cash flow this financial year.

Q: Do you have any capital raising plans or requirements for FY14 as well?

A: When we went for redemption of FCCB plan for raising funds, we took a call to do it on a long-term basis rather than accessing the market again and again. So, we have already taken a call on a long-term basis for choosing QIP, promoter warrants and FCCB route.

I do not think we will access the market again in 2014 and it should take care for at least three-four years going forward. We had capex in the last five years, capacity has been generated and the turnover was flat in H1, so in the H2 we will look for a good growth going forward.

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