Merged Welspun Proj to be profitable in FY15: MD Garg

Sandeep Garg, managing director,  Welspun Enterprises says the company's merged entity  Welspun Projects is expected to be profitable in FY15.

Speaking to CNBC-TV18, Garg says that after this merger, every Welspun Enterprises holder will get 12 sharers of Welspun Projects.

The company has merged Welspun Enterprises, Welspun Infratech, Welspun Plastics, Welspun Infra Projects and Welspun Projects on the recommnetdation of its audit committee.

According to the company's statement the merger will aid capitalise the market opportunities with a consolidated cash of Rs. 800 crore.

Below is the verbatim transcript of Sandeep Garg's interview with Latha Venkatesh and Ekta Batra on CNBC-TV18.

Latha: Can you just take us through what is merging into what?

A: We demerged the Welspun Corp and an entity was formed which was called a mirror image of Welspun Corp as Welspun Enterprises. Under it we had various layers which included Welspun Infratech, Welspun Infra Projects, Welspun Projects Limited. There were various layers within the enterprises and we decided to streamline the whole organisation to gain some fiscal benefits as well as streamlining the operations and accordingly we decided to merge all the entities into Welspun Projects which is the operating company.

Latha: So now Welspun Enterprise and Welspun Projects are both listed. What is the swap ratio?

A: The swap ratio for every share of Welspun Enterprises, the shareholders will get 12 shares of Welspun Projects.

Ekta: Can you give us a sense that after the merger process takes place what will the balance sheet as well as the P&L look like?

A: The balance sheet of the merged entity should be about Rs 2,000 crore approximately. The numbers are still being worked out and in terms of the profitability because these two entities Welspun Enterprises and Welspun Projects are in entirely different arena we expect the entity to break even on the financial year basis.

Ekta: On EBITDA or profit level?

A: At the profit level, at Profit Before Tax (PBT) level.

Latha: Welspun Projects will be the listed stock?

A: Yes, that will be the surviving entity.

Latha: And at the moment they are not both in the black, Welspun Projects and Welspun Enterprises?

A: No, Welspun Projects has made some losses in past.

Latha: The last reported was not a profit, there is a Rs 1 crore profit for the June quarter?

A: Yes, Q1 was profit but as a whole year indication is it will not remain profitable.

Latha: So will the merged entity in FY15 itself be profitable?

A: Yes, it will be breaking even.

Ekta: Can you give us a sense on why are you doing this?

A: There are two reasons that we decided to do it. First was that it gave us a fiscal benefit. Secondly it gave us operational efficiency. There was enough cash trapped within the various entities and there was about Rs 800 crore trapped in with various entities which is something which we want to consolidate and really play for the larger businesses rather than playing with very small balance sheet on smaller businesses on a standalone basis. So that was the purpose which drove us to consolidate.

Latha: Will there be any further changes to  Welspun Corp or Welspun India?

A: At this point in time no. We are contemplating no further corporate actions on those two entities.

Latha: Which one of this is more export dependent of all your listed stocks?

A: Welspun India is the most export oriented and then comes the Welspun Corp. Both are very export oriented.

Latha: This is largely an infrastructure company, Welspun Enterprises?

A: Yes, we are into infrastructure, oil and gas and we were in steel, we recently sold the Maxsteel. So this is the whole restructuring that we are doing in the group to get out of the businesses.

Ekta: Any other hiving off of businesses or maybe any other sort of inorganic plans either way which is lined up for the company?

A: At this point in time we are not thinking of any hive offs from the group. We have structured ourselves reasonably lean and mean at this point in time and fit for the businesses that we want to target. With the cash availability on the consolidated entity we

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