Kapil Mehan, MD & Group CEO of Zuari Agro Chemicals expects subsidy payment of minimum Rs 1000 crore from the government within next couple of months, which will help bring down overall borrowings by June. In an interview to CNBC-TV18 after the company raised term loan of Rs 160 crore from RBL Bank, Mehan said, the loan will fund capacity expansion at its Goa plant and total borrowings on books will now be Rs 3000 crore. The company is working towards paring debt and looking to raise Rs 200 crore via a rights issue as well, he said. Below is the transcript of Kapil Mehan’s interview with Nigel D’souza and Reema Tendulkar on CNBC-TV18. Nigel: We got news early this morning that you have taken a term loan of around Rs 160 crore from RBL Bank. Could you give us a few details? What exactly is the borrowing cost of this Rs 160 crore and also, in the last few quarters, we have seen that the finance cost has been eating into a majority of your operating profit as well. So, what exactly does this take your total debt to? How will the finance cost look on a quarterly basis. A: Let me first deal with this Rs 160 crore term loan that we have taken from RBL Bank. This is primarily to fund our expansions that we are doing in Goa of our nitrogen, phosphorous and potassium (NPK) plants and one expansion is already commissioned which is around Rs 105 crore and another one is underway, which will get commissioned sometime in August or September of this yea. So, primarily, it will go there and part balance is for our normal operations or part funding of our working capital, etc. But substantial part of it will go into upgrading our facilities which will add about 1,50,000 tonnes of additional production of NPK fertiliser. So, that is what we are looking forward to that. Overall, the borrowing levels continue to be high because the government has not given any subsidy payments which have been pending for sometime now. And we hope that from April onwards, that will start easing up as the past backlog gets cleared and we expect that this year, with the prices coming down, subsidy levels also will have been slightly lower than it has been in the recent past. So, that borrowing level will start coming down from when the season begins sometime in June-July. So, we will see the borrowing levels coming down because till then, to maintain our operations, we will have to keep borrowing as well as funding some of the subsidy delays. Reema: Could you tell us what the balance subsidy amount is which is due from the government and how much are you expecting in April? A: We have right now, about close to Rs 1,500 crore of subsidy from Zuari and we expect that most of it due, so only the bill of March will not be due. So, theoretically, most of it should come, but then procedural delays are there, so we hope to at least, the bills which are cleared with an on account payment which is 90 percent of our bills, that should come in April and May. So, we expect April-May should be close to about Rs 1,000 crore of subsidy getting cleared. Nigel: I did not get those numbers. What exactly is your total debt currently and what was the borrowing cost and what was the borrowing cost and for this Rs 160 crore, what was the borrowing cost, both those numbers? A: This is base rate plus some few 20-30 basis points but I do not have the exact number with me right now. But, as far as total borrowing levels are concerned, they are still upwards of Rs 3,000 crore at the overall aggregate level, including all type of borrowings and finance and all those things put together which is pretty high for our size of operations at this stage. Reema: On February 29, the board also approved the rights issue. How much are you looking to raise and by when? What will be the kind of dilution it will entail? A: It is a rights issue, so we do not expect any dilution to take place and the banking and finance committee will finally decide the final rate, how much we are going to do, but we are looking at somewhere around Rs 200 crore to be raised through the rights issue. And that does not entail any dilution. Zuari Agro Chem stock price On March 23, 2016, Zuari Agro Chemicals closed at Rs 141.50, up Rs 6.20, or 4.58 percent. The 52-week high of the share was Rs 270.00 and the 52-week low was Rs 118.20. The company’s trailing 12-month (TTM) EPS was at Rs 4.26 per share as per the quarter ended December 2015. The stock’s price-to-earnings (P/E) ratio was 33.22. The latest book value of the company is Rs 191.01 per share. At current value, the price-to-book value of the company is 0.74.
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