Welspun Corp, the B K Goenka group flagship, which had been suffering huge losses post its diversification in infrastructure and steel business in 2010-11, has demerged these arms into a separate company. Akhil Jindal, director, group finance and strategy, Welspun Corp in an interview with Dhwani Pandya spoke how demerger would help the company to focus on core business. Excerpts from the interview:
What are your plans for the future?
Post demerger, pipes and plates would be one entity and steel, oil and gas and infrastructure would be another. In case of oil & gas we are at the exploration stage, we still have not announced any commercial discovery. We are doing this in collaboration with Adani, where we hold 35% equity and Adani holds 65%.
Where are these oil & gas assets?
These are small assets in different locations, five or six of them, including one in Egypt. We will come back to you in case of any significant commercial discovery. Initial studies related to these block were done in Nelp 6 and 7, now we are in various stages of exploration.
After exiting Leighton what plan do you have for infrastructure business?
We have many other businesses, we have been operating road assets, water assets, eight construction projects, both in water and transportation. There are some small EPC work. We need to now re-question the new business growth possibilities.
Since Leighton's under balance sheet of Welspun Enterprises, can it be utilised for other businesses apart from infra?
I have no clarity at this juncture. Even without this deal all our needs for fund were being fully met. Third business in Welspun Enterprise is Maxsteel which has a gas based direct reduced iron (DRI) plant. Post fall in KG D6 ouput plant faced severe gas crunch leading to huge production drop. We have started getting good amount of gas now, from GAIL. At peak production we require 0.8 mscmd, we are getting around 0.4-0.5 from allocated sources and we are buying 0.1 mscmd from market. We are currently operating at 40-50% capacity. We are breaking even with the supply of 0.4 mscmd. We are also developing a technology called PGP at this plant which will basically produce gas from coal, so we will meet balance 40% of our requirement through this gas producing plant. We have virtually reached financial closure for this plant and we would be able to produce gas at $7 per mmbtu. We expect this plant to start operating by next calendar year.
How is the order pipeline looking?
Our current order-book of pipe is 800,000 tonne globally, or Rs 5,500 crore. In the last nine months on an average we have got a margin $150 per tonne, or Rs 8,000-Rs 9,000 per tonne; and our EBIDTA is in 11% – 12% range. On an average, we bid for 2-3 million tonne of pipes and we have a conversion rate of 25-30%. While there is substantial amount of enquiries from the international market, domestic demand still remains subdued. Post elections there could be a pick-up in projects, which may improve demand.
What's lies ahead for Welspun Corp after demerger?
Demerger will help us to focus on our core pipeline business, where we have significant international presence and we would like to further strengthen it. We are looking at making more inroads into the European market. If that market reaches substantial level, we may even consider to set up a plant. Setting up the plant makes more sense than acquiring a plant in Europe, because majority of European steel pipe plants are old and do not have latest plant and machinery.
You current debt level is too high..
Our current net debt is around Rs 2,200 crore and our interest payment annually is around Rs 150 crore. In next six months around Rs 700-Rs 800 crore of debt will be retiring, around Rs 300 crore in this financial year and remaining in next.
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