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Friday, February 02, 2007

Post-restructuring HMT to work on profits

The Finance Minister, or FM, has announced a revival plan for the ailing HMT. The package includes infusion of cash and the sale of surplus land. AV Kamat, Chariman & Managing Director of HMT says after one year, the company might get back into the black and after two years, it might look for a joint-venture partner, as proposed by the FM.

Kamat discusses the FM's revival plan for the company, along with how the money will be deployed and also the formation of a joint venture for HMT for the company.

Q: What do you make of this statement from the FM, the fact that you may probably be asked to run as a joint venture company right now and identify your partner who you may link up with?

A: We had approached the government for assistance of Rs 825 crore and today our case has come in for discussion. We are waiting for the information from our DHI. We understand that our case has been taken up and is being favourably considered.

Q: The package will come in as the FM has confirmed, but he is talking about a formation of a JV with other equity or strategic partner for HMT. Have you had any discussions of such a possibility at the management level?

A: The proposal is to have a joint working partner after two to three years. Since the networth issue has not been addressed yet, we had requested the government that we will be scouting for the joint working partner and within two-three years, we will be able to form the JV after the financials have been addressed and the company comes out of the red. This is what we have proposed and we are waiting for the details from the ministry.

Q: Are you saying a JV partner in HMT, if at all, will come in the next two to three years?

A: That is what we had proposed, as it may not be immediately possible to get a JV partner since the financials of the company have not been addressed and the company is still in red.

Q: Even at this preliminary stage, have you had any conversations with any organization?

A: Not yet.

Q: How do you intend to use this Rs 720 crore, which is coming through as a revival package? By when do you think you can use these proceeds to get back firmly?

A: Out of the Rs 720 crore, which the FM seems to have cleared, Rs 180 crore would be spend for investment in the company in terms of the new machines, refurbishing of the machines, training and technology acquisition.

We would like to do technology acquisition for state-of-art machines, which are required for the strategic factor. This Rs 180 crore will be spent for investment in the company.

The other Rs 443 crore will be spend towards writing off of the old loans, which we have borrowed from the financial institutions and also clearing the old debts. Rs 100 crore will be spent in the form of waivers and other interest waivers.

Q: Any details on how this money is going to come in? Will it come in as a lump sum?

A: The money will come in installments. Rs 443 crore has to come in the form of preferential shares.

Q: Once you have done all this and your interest cost comes down, by when do you think you can get back into the black firmly?

A: During 2007-08, we will be into the black. So that's after one year.

Q: By how much will your interest costs come down once you have done this balance sheet restructuring?

A: Interest costs will come down by around Rs 70 crore per year.

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