There has been a buzz around divestment in Neyveli Lignite. The stock has seen an upward traction in the last few sessions. The government owns 93.56% in the lignite mining company. The last time around when the government tried divesting, it had met with strong opposition from the DMK and Left parties.
In an interview with CNBC-TV18, Mr K Sekar director finance at Neyveli Lignite Corporation spoke about divestment, plans for capacity expansion and the road ahead for his company.
Q - Your stock had not risen as much as the other divestment candidates, but over the last few weeks there has been a catch up. Have you heard anything from the government yet about the divestment?
A - There is no official communication from the government, which is from the Ministry of Coal to NLC so far. But we come to understand that the government is taking a policy to disinvest to the extent of 10% of the stacks of the public sector units, which are listed already. Our company is already a listed company and we have already been disinvested to the extent of 6.44%. So the balance 3.56% may come. But all that depends upon the decision of the government and the direction from the government.
Q - So it is then logical to assume that you may hear from the government anytime soon now?
A - Yes, it is natural.
Q - Do you have any on stream expansion plans so as your shareholder can value your company now?
A - We have got many power projects not only based upon lignite but also based upon coal and other resources. We want to add to the extent of 7,000MW before the end of the Twelfth Plan, for which by the beginning of the Twelfth Plan we will be putting up all the work for that. So we have 7,000 MW on the anvil to add.
Q - Can you speak of the more immediate expansion plans, your plants in Rajasthan?
A - Let me provide a brief account of our existing capacity now. We have at present 2,480 MW of capacity and we are generating power, supplying to the southern grid as well as Tamil Nadu. We have now got a 2 x 125 MW power plant at Rajasthan. First unit has already been synchronised and we expect commissioning by the end of November. We are expecting the second unit by February or March 2010.
Similarly we have got another 500 megawatt unit being set up as the expansion of the existing thermal power station too. That is expected by the middle or the third quarter of next year.
Q - Can you give this in the form of some more numbers. What is the kind of volume expansion you see in the later half of this year and also in FY11 in percentage terms?
A - By the end of next year we will be adding 750 MW. That is 250 MW at Rajasthan with a linked mine of 2.1 million tonne of capacity. The miners have already come to the stage of production. Then at Neyveli, we are having 500 MW power plant which will be added up during the middle of next year or the third quarter of next year. This is also linked to a 4.5 million tonne of lignite mine.
Q - So by FY11end what will be your total capacity over FY10?
A - At present we are at 490. We will add up by 25%.
Q - Your second quarter margins got compressed by higher employee costs and some other expenditure. What are your margins likely to be in the second half of the current year?
A - We have performed very well during the first quarter and second quarter of this year. The profit before tax for the quarter ended September was INR 339.47 crore over INR 261.37 crore in the last year for September.
Q - If I can rephrase my question, what I meant was that Q2 over Q1 your EBITDA margins fell. I wanted to know what kind of margins will you operate at in the second half? What will your margins be for the October-March period?
A - Second half we will be having the same thing 28% to 30%.
Q - Do you expect to do the same in FY11?
A - The third quarter we will have a lesser target because it is a lean season for us during which it is a monsoon period for us because we are running open cast mines. Our target will be less but we will be producing up to the mark. We have taking all precautionary steps for facing the vagaries of the monsoon and we are maintaining production.
(Sourced from CNBC-TV18)
