Bartronics shake-up to produce 3 units; recast may bring more profits

Bartronics India, the automatic identification and data capture (AIDC) and smart card solutions major, is consolidating all its operations under three separate entities.

The restructuring is expected to offer the newly formed entities several advantages in raising funds and other operational
metrics besides easy management.

“The tangible benefit from the restructuring will be visible in terms of each of the entities contributing more to the company by focusing on their specific business areas. We should be able to provide the exact details of the new entities by March-end,” said Sudhir Rao, managing director, Bartronics.

The company has appointed KPMG to provide the blueprint for the restructuring. Once restructured, the company will have new entities with specific focus on international business, citizen services and smart card manufacturing & financial inclusion.

“We already have a subsidiary in Singapore. Through the restructuring, we are trying to transfer all our international operations to this subsidiary. This entity will continue as a subsidiary of Bartronics,” Rao explained.

Apart from Singapore, the company has operations in the US and Middle East. It is also planning to explore opportunities in Europe and South America.

Bartronics is also executing the Aapke Dwar project in Delhi for citizen services.

The project is expected to improve cash flows for the company when the kiosks coming up as part of the project start generating revenues.

“Considering the scale of activity in Aapke Dwar and the revenues that would come in, we are planning to make citizen services a separate entity. After that, we will look at similar projects in other states through this entity. We are yet to decide whether this would be a subsidiary or a division,” Rao said.

Similarly, the smart card manufacturing would also be converted into an entity.

The company has bagged contracts from 14 banks for participating in the financial inclusion programmes.

The smart card manufacturing entity is expected to gain pace after the financial inclusion projects are fully launched.

The Aapke Dwar project, which includes setting up around 2,000 kiosks in Delhi for citizen services, is currently behind schedule.
All the kiosks were expected to begin operations in January 2011.

However, only around 300 kiosks are ready and 130 are becoming operational.

“There is a delay due to certain issues related to seeking permissions for setting up of the kiosks. We are now expecting to open about 1,200 kiosks by April 2011 and another 800 kiosks by May-June 2011,” Rao said.

Once operational, the company claims, the project would contribute about Rs500 crore per annum to the topline.

“We will start seeing revenues from this project starting 2011-12. However, 2012-13 would be the first full year for accruing revenues from this project,” he said.

The Aapke Dwar project has been taken up with an outlay of about Rs800 crore including Rs270 crore in the form of equity and the balance through debt.

For the quarter ended December 2010, Bartronics recorded Rs202.5 crore in revenue and Rs4.9 crore in profit.

The Ebidta margins are at about 29%. The company has an order book of about Rs700 crore including Rs50 crore from smart cards and Rs550 crore through solutions.

The company carries a total debt of about Rs638 crore including an unsecured debt of about Rs253 crore.

The company is now working on a strategy to discharge the debt by recovering some of its dues.

The company, as on December 31, 2010, carried debtors for Rs557 crore.

“There were some issues in recovering these dues because of problems in collections. We have already collected about Rs327 crore and the balance will be recovered shortly,” Rao said.

The recovered funds would be used to clear off some of the company’s debts including loans taken at an average rate of about 12.5%.

FCCBs worth $50 million too would come up for redemption in February 2013.

“We are not worried about the funds for redemption. In fact, several bond holders are asking us to provider long-term bonds replacing the existing bonds. We are yet to evaluate the options,” Rao
said.

However, the fourth quarter of the current year is likely to remain lukewarm for the company with the order book not showing any signs of improvement.

The trend is likely to force the financial indices of the company to remain flattish for the full year ending March 2011.