In order to align its business operation, engineering major Punj Lloyd plans to convert part of its rupee debt into dollar debt.
Profitability of the firm took a hit because of the mismatch between the interest payment on debt (which is mostly in rupees) and revenue (which is mostly in dollar).
While the company derives 65-70 per cent of its business from abroad, its 65-70 per cent of debt is in rupees.
According to media reports, the company may refinance up to Rs 1,400 crore of its total debt of Rs 5,500 crore through dollar loan over the next six months. This would enable the firm to reduce interest cost and ease the impact of a falling rupee.
In the last five years, the company witnessed over three and half fold rise in interest payment to Rs 780.76 crore in 2012-13. It stood at Rs 220.76 crore in 2008-09.
Converting rupee debt into dollar loan would provide natural hedge to the company as earning money and repayment of debt will be in the same currency.
The firm expects to save Rs 50-60 crore a year once converting rupee debt into dollar loans happens on Rs 1,400 crore debt.
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