There is no particular reason for monetizing land assets, says Ramesh Chandak, managing director, KEC International with reference to its Thane land deal with Tata Housing .
Chandak says the company got a good deal from Tata Housing and will garner about Rs 212-215 crore from the same.
On whether the sale was done to lower debt levels, Chandak says the company is comfortable with its book position.
"Our debt equity is good. We are at 1.2. So we don't have any shortage of funds. The land was lying without any use. We have already invested in Baroda so there wasn't any particular reason for doing this," explains Chandak.
Below is the edited transcript of the interview to CNBC-TV18.
Anuj: I wanted some clarity on your land deal which you announced. Can you tell us the kind of money that you will be getting and the kind of money your profit and loss will be getting and when will this get reflected?
A: This is the land which we had for RPG Cable in Thane and we had little more over seven acres of land. We have been able to get about Rs 29 crore per acre. So, the approximate value will be about Rs 214 crore depending on the actual calculation of the land but in that ballpark number of between Rs 212-215 crore.
We had anyway closed the factory sometime ago and the intention was really to sell that land. We were able to get a good deal from Tata Housing. The deal will get completed in about three months and by that time the deal should be closed but we have already signed an agreement to sale and have also registered it.
Ekta: Any more land deals such as these which are lined up for the company and the reason behind monetisation of the land at this particular time?
A: There is no particularly reason for monetizing this land because this is a land available which was vacant and we already started a plant in Baroda, we have invested money there so the intention was really to monetize this so that our borrowing can come down because we had borrowed money for putting a plant in Baroda. So naturally it will reduce the borrowing level of the company.
We don't have any other land parcel which is for sale as of now, this was the one parcel which was available which is clearly surplus and we had no use at this point of time. And there is no particular reason that we are going to use these funds anywhere else, simply these funds will go in reducing the borrowing only.
Ekta: IIFL believes that your international order book going forward will look quite robust, can you just give us a sense on how exactly the order inflow is panning out on an international basis and margins based on that as well?
A: Today we have an order book of more than Rs 10500 crore which is roughly 50 percent international and 50 percent domestic and that has been our trend. So, it is not that we got more orders in international markets and less in India. In both the locations we have been able to secure very good orders despite whatever market exists. So we had some good gains in Tanzania, in Saudi Arabia, in Indonesia etc. Hence, we are seeing that in bits and pieces there are good tenders coming in.
We are still seeing lot of flow of the tenders in international market and since our spread is very good, that helps us really to expand our business internationally and that is really helping us to grow that business.
This is also the reason that in the last two years the cycle was down, our sales have been growing regularly. If one really looks at the last five years, our CAGR is more than 19 percent. So, I think we have been able to capture the opportunity wherever it comes. In many countries we have gone for the first time.
Ekta: How is the balance sheet for KEC International looking at this point in time? What would your debt levels stand at this point, what are your working capital needs and are there any plans in terms of reduction of it going into FY15 quite aggressively?
A: Our debt equity is very good, it is around 1.2 so debt-equity is not very bad. We don't have a shortage of funds, we have enough bank limits. Since we have monetized these assets, naturally our debt will go further down and to some extent the borrowing will come down because that is what will happen.
But the intention was not that because the debt level is higher and we wanted to monetize the asset. It is just happening that way but our debt levels are just normal, there is nothing abnormal in the debt level, our working capital cycle is one of the best in the industry, our net working capital is less than 90 days. So overall we have no pressure on the balance sheet as far as our funds are concerned. But on the contrary this Rs 200 crore inward monetisation will definitely help us to further improve the position.
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