In an interview to CNBC-TV18, GD Mundhra, Director, Sarda Energy and Minerals spoke about the financial performance of the company and the road ahead.
The company posted strong set of Q1FY15 earnings, with the EBIT margins for the steel segment seeing a jump. Sarda Energy’s profit after tax soared 34 percent to Rs 40 crore in Q1FY15 from Rs 29.9 crore in the same quarter a year ago.
Below is the verbatim transcript of GD Mundhra's interview with CNBC-TV18’s Nigel D'Souza and Ekta Batra Nigel:
Nigel: Your margin expansion is clearly a big positive because this has come in in excess of around 22 percent, sustainable going ahead or do you think the best has already come in?
A: If you see, our EBITDA margin for last three-four years has been around 20 percent. With the stabilisation of pellet plant, coal mine operations and coal washery, we hope we will continue to maintain our margin. It has improved little bit mainly because of the stabilisation of our pellet plant as well as coal mine operations.
Ekta: What is the guidance at least for your steel EBIT margins because that is the one which saw the most incremental upside came in at 24 percent versus 18 percent year-on-year (Y-o-Y), so what led to that improvement, what was your capacity utilisation in the quarter and what is your guidance in terms of possibly even improving these margins?
A: Margin mainly has been controlled by the pellet plant and it has been operating at more than 100 percent of the capacity. Secondly, there has been an improvement in the steel prices. Prices of pellet, steel -- both have led to increase in margins in the steel business.
Nigel: How much of a pellet do you sell outside and how much of it do you use captively?
A: We are using mainly captively and whatever surplus we have, we are selling to outsiders. It is mainly for the captive use.
Nigel: There is an announcement on August 11 when you said that in fact restoration of operations at one of your iron ore mines, now you will be getting lumps as well as fines from that particular mine, do you see that in fact you will be using some part of that and your sales will increase of pellets because you will not be using it, could you break that up for us and what kind of an incremental revenue could you see?
A: We have announced that our iron ore mines, which was closed for almost five years has restarted. As we gradually increase more and more use of iron ore for making sponge iron to that extent, there will be a surplus available to sell the pellet. We have almost five years to restart the iron ore mine. Now we are concentrating on stabilizing operations and trying to optimise users of the iron ore. So this will take some time. As we include the uses of the iron ore for making the sponge iron, to the same extent, we will be having surplus of our pellets which we will be able to sell to the outsiders.
Nigel: How long will it take for these operations to start? Can we see it in the next three-four months or will it take a year or so, when can we see results coming out of this iron ore operations getting the go ahead?
A: We will see that quarter-on-quarter (Q-o-Q), there will be a contribution from the iron ore mine, we have already started it. Gradually, we will ramp up the capacity utilisation as we use more and more iron ore, more and more bottomline and margin will improve.
For five years, we have been trying to restart the mines first. So now having restarted the mines, we are trying to stabilise the operations. It will take some time to exactly tell you when we will be able to optimise our capacity.
Ekta: Your net debt stood at Rs 1,422 crore as of March 2014, what does it stand at currently and what is the progress in terms of possible balance sheet reduction if that would be one of the aims of the company?
A: Out of this Rs 1,462 crore debt, which you are looking at in the balance sheet, against that we have about Rs 500 crore worth of liquid investments. Borrowing is at about Rs 400-500 crore. Net-net debt is about Rs 1,000 crore on the balance sheet and we do not have any expansion programme in hand as of now. We will keep repaying our debt so this year we will be repaying almost Rs 200 crore debt and that will reduce our debt price overall.
Source: moneycontrol