Pentafour To Be Debt-Free By Pre-Paying Rs 150 Cr

Pentafour Software and Exports Ltd has decided to pre-pay all its debt liabilities aggregating about Rs 150 crore.

"We are aiming to become a zero-debt company within the next two years,'' says V Chandrasekaran, managing director, Pentafour Software. The objective of the debt pre-payment exercise is to cut down the interest burden which had increased considerably during the last few years.

Pentafour Software had to shell out almost Rs 25 crore as interest for the year ended March, 1998.

"We think that the company's profitability can be increased considerably if we bring down our exposure to debt," Chandrasekaran said.

"We have orders valued at $150 million to be implemented over the next 18 months. Generating the required cash flows to foreclose our borrowings will not be a problem," he added.

 

Of the company's total debt of about Rs 150 crore, foreign currency loans amount to Rs 66.5 crore. Pentafour has an outstanding amount of almost Rs 50 crore from a forex loan availed from the Bank of India. The company also has forex liabilities of Rs 13 crore from Dresdner Bank and Rs 3.61 crore from Exim Bank.

The company proposes to pre-pay its foreign currency loans first despite the fact that it has adequate cover against currency fluctuations by virtue of its software export operations.

Loans aggregating to Rs 14 crore from IDBI and Rs 9 crore from IFCI will also be pre-paid. Non-convertible debentures aggregating to Rs 30 crore will also be redeemed at the appropriate time. The company will also pre-pay unsecured loans to the tune of Rs 5.51 crore. Pentafour Software has an equity base of Rs 17.04 crore. Last year, it had an interest burden of Rs 25 crore. Even if the interest charges are brought down by Rs 17 crore, it would translate into an increase of Rs 10 in its earning per share (EPS).

Pentafour Software had completed a $11.16 million GDR issue in October last year to fund its expansions. "We have completed our expansions for the time being. Our focus is now on consolidation," Chandrasekaran said.