After auditor report regarding the debt situation of Lavasa came out, Ajit Gulabchand, CMD of Hindustan Construction Company (HCC), spoke to CNBC-TV18, says he can clear the debt of Rs 2,000 crore in 18 months.

Can you tell us more about the order backlog?

I would say a substantial increase from Rs 19,000 would take place to about Rs 25,000. So this is something that is easily possible because we will be increasing our turnover during the current year. So that increased turnover plus and order backlog would go up by about Rs 6,000-7,000-8,000. So, fundamentally this is what we are looking at.

What is the current debt on HCC?

As I said, our debt has reduced to about Rs 3,275 of which about Rs 1,400 crore is working capital. So that is not a debt. So that leaves us about Rs 2,300 crore or so that we have to pay back.

How do you see that reducing in the coming financial year?

Because I have to get money from the government. I hesitate to give – but we should be able to reduce it.

To what point?

I would like to bring it down to zero but over the next 18 months, we should be able to clear this debt of Rs 2,000 crore.

Coming on very important subsidiary, of course you spoke about Switzerland subsidiary working very efficiently. Lavasa is becoming a pain point for the company, in fact there is auditors’ report which was floating in the market which had red flags, certain financial parameters of that particular subsidiary. How do you read into those read flags? What is your stance as far as that is concerned?

There are two features here. First, let us understand Lavasa was stopped by the government and it created problems for us. It went on like this with non-cooperation from the banks. Finally, when the banks came to a conclusion on how to fund Lavasa on a long-term basis, they took a decision based on which five bankers came forth and implemented. But two-three other important banks backed out of it and stalled the whole process.

As a result, the project got stalled. So obviously, it needed resolution. Now, fortunately it looks like what the RBI did to say that, they should resolve with it. Two or three big investors have shown interest to invest in Lavasa and we are now under discussion to find the resolution between the bankers.

Are these Indian investors or foreign investors?

Investors is an answer.

You spoke about the debt recast plan and you were in talks with the lenders…

We are in talks

You are in talks with lenders as far as that plan is concerned. Help us understand the market and the investors, how far has that plan….

We are not discussing this at this stage.

Could we expect a resolution in the first half of FY19?

This process is underway and all I can tell is that it’s a robust process and it’s under a robust way and there will be solutions, in my opinion.

As far as getting into the nitty-gritty of this audit report is concerned, one point which they have said is that the liabilities of the Lavasa subsidiary exceed the assets by over Rs 2,300 crore – that is a substantial amount.

I do not entirely agree with that issue for the simple reason that the valuations of Lavasa land that we own is anybody’s conjecture. If you go by the ready reckoner that charges the stamp duty, then this does not hold true.

My question here is slightly different. If in any situation the debt recast plan does not materialise, let’s assume it, then in that case would filing for bankruptcy be the only option or the option which you would consider for Lavasa?

I do not know who will file for bankruptcy. We are not going to file for bankruptcy. Even if it goes, it’s also a resolution process. It is not that bankruptcy means that it is going into a liquidation. It’s also a second chance in resolution.

One point in terms of final details of audit report, it says that Lavasa has trade receivables or inflows of about Rs 4,200 crore pending from its various subsidiaries. Help me understand, they have also mentioned that the value of these subsidiaries has significantly eroded?

This is a general issue because the moment the Lavasa project picks up, the valuations of all this go up. Lavasa is not a project that is going to close down. That is all. The subsidiaries are not all owned by us. There are substantial partners in those subsidiaries.

Would you be able to give us a fair sense in terms of what could be the kind of recoverables from that?

As far as Lavasa report is concerned, it was there last year, it was there previous year. Any company that is going through some stress, is going to face same questions and there is nobody who can clearly answer because it is a new kind of project and it is a land value project. As I told you, if I go by the ready-reckoner value, which is almost Rs 2 crore an acre. At 10,000 acres, you are talking of a very different valuation.

When you look at some of these things, the moment you solve the financial structuring of this project, suddenly all these subsidiaries become workable. So my point is that the stalling of the project creates something and the unstalling again changes its value. So you have to understand this.

Because it is a unique project and city development project, it has many unknowns in it and that is why these concerns are there. But the moment two things happened, everything changes.

First Published:May 4, 2018 2:06 PM IST