The company would not look at equity dilution to fund new projects but in fact is looking at selling PPP assets worth Rs 1700 crore from the road sector.
While fundamentally, operating margins are intact liquidity concerns are impacting the topline which in turn is resulting in negative bottomline, he said.
The current order book for the company stands at Rs 10,500 crore of which Rs 8,500 is effectively executable and the rest is caught up in client related issues, land acquisitions etc.
Also read: RBI widens infra sector lending sub-category
Below is the verbatim transcript of his interview on CNBC-TV18
Q: The last few quarters have been tough. Last quarter your revenues decline 33 percent, you all had an operating loss, what is your sense for the full year, what is the revenue going to look like and are we likely to see a loss at the operating level?
A: Fundamentally as you are seeing in the sector, there are three major issues that the sector is going through. The equity that assumes to be available as stocks being available, cost of debt has substantially gone up and availability of receivables have also started to get stretched. All these are concerns facing the industry.
The liquidity concern is leading through a reduction in the revenue. While fundamentally operating margins are intact but because of the liquidity crisis, there is certainly an impact on the topline resulting in a bottomline being negative.
Yes, the Q3 also looks very similar and hopefully we should get a better Q4 if cash flows improves, which are likely to happen in the current month.
Q: I wanted to ask you with regard to your working capital, it has been elevated around 160 days odd mark, take us through that, what is the recent update?
A: I think it is a simple function of equity not being available as I was just explaining to you that there are five things that are continuing to happen. One is that the debt is going down because some of the term loans are getting repaid and no fresh loans are being issued. Mobilisation advance is going down because there is serious mobilisation advance collected being recovered against the revenue, order inflow is not happening, retention money is continuing to go up, fixed assets are still getting added because of the commitments made and so are the investments which are getting added. As a result of this, working capital cycle is certainly enhanced.
Q: Is it going to get worse on the working capital in the coming two quarters?
A: I guess we have got saturated on this because I don't see any further possibility of enhancing the cycle. So I don't think it is going to get worse from here. It is going to be around this range.
Q: With regard to your order book. Could you take us through what is it currently standing at and could you break it up for us segment wise?
A: We have got about Rs 10,500 crore of order book, of which about Rs 1,500-2,000 crore is not very effectively executable in the current environment because of the client related issues, land acquisition related issues etc out of the balance Rs 8,500 crore which is effectively executable, we are seeing about Rs 3,000 crore is in the road sector, Rs 1,800 crore in the water sector, about Rs 1,800 crore in the building sector and the balance is spread between industrial construction, irrigation projects, transmission and distribution of power.
Q: Your debtor provisioning is also very high in the previous quarter. It was about Rs 38 crore just in the last quarter, could you tell us the outlook on the debtor provision, have you all managed to recover some money or has the situation gotten worse than even next quarter, we are going to see such a high provisioning figure?
A: In fact the debtor position has improved over the last couple of quarters. While it is still high, if you look at the overall net current assets; the current assets are coming down because with depleted working capital and depleted liquidity, you are forced to recover some of your current assets at a faster pace or even on a conservative assessment, we are able to pullback some cash from the system.
So debtors position and the current asset position is improving. But the solution to this whole infrastructure problem has to come from the government and unless that starts, we do not create a starting point for a change.
Q: Are there any chances of equity dilution if in case you require additional capital and if in case you will win some more public-private partnership (PPP) projects?
A: We are certainly not looking at equity dilution but we are looking at sell of some PPP assets but as you are able to see there are too many assets in the market. So how quickly this will happen will depend on environmental change.
Q: What is the size of the PPP projects that you are looking to sell?
A: We are looking at Rs 1,700 crore project in road sector.
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