Financial Daily from THE HINDU group of publications
Tuesday, Mar 28, 2006
Expect debt to go down Rs 1,000 cr: McDowell
Mr Ravi Nedungadi
McDowell has mopped up $230 million via its GDR and FCCB issue to repay debt. The CFO at McDowell, Mr Ravi Nedungadi, says he expects debt of about Rs 1,000 crore to come down.
Excerpts from CNBC - TV18's exclusive interview with Mr Nedungadi:
After you repay your debts, what is the interest outgo going to be and how much is it going to come down as a percentage?
It will be substantial because the current debt level is about Rs 1,950 crore and Rs 500 crore is working capital debt, which we will retain and will use the vast majority of the fund that we have raised through the GDR and FCCBs to repay the balance debt. So, I expect about Rs 1,000 crore to go down.
In FY07, by how much is your interest cost likely to go down?
The debt that is being repaid is somewhat high cost. We had borrowed this with the intention of acquiring Shaw Wallace exactly a year ago.
So, I would estimate about Rs 85 crore to go down.
Can you take us through the arithmetic of FCCB itself? When are those bonds available for conversion and what is the kind of dilution that will happen thereafter?
The FCCBs are convertible at anytime after 45 days.
It is a five-year bond and has been issued at a premium of 30 per cent to the reference price.
The reference price is Rs 660, which was the price at which we issued the GDR.
What kind of dilution are you expecting, if and when they are exercised?
As and when that exercise will happen, it will result in a dilution of a little over 3 per cent.
Any other plans of acquisition?
Any more consolidations or buyouts we can expect from your company in the near future?
Nothing immediately on the cards.
The company has had a good trading year this year and we will have a substantial increase in both sales and profitability, which is in line with what we had decided for the last three quarters.
As the benefits of the synergies from combining these businesses come together, we expect that will continue to remain positive.
We hear that locally, Indian corporate rates have really gone up; Indian banks have really pushed up interest rates over the last couple of months.
Does it affect companies like you at all or are you fairly comfortable with your foreign borrowings and you don't have to come into the Indian market at all?
Obviously, the current liquidity crunch and the attendance in weight increases will have some effect.
To a large extent, we are sheltered from that and we have used borrowing since two months including foreign currency; borrowing to keep the average rate of the working capital low.
There will be some impact, but I think it is too early to estimate exactly what that would be.
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