CyanConnode Holdings Plc (LON:CYAN) Chief Executive Officer John Cronin caught up with DirectorsTalk to discuss new funding agreement and its strategic focus on India’s smart metering rollout.
Q: John, you’re in the process of scaling the business and you’ve announced a new unsecured convertible loan note with a new lender. Could you explain the structure of the loan and how it will work for CyanConnode?
A: So, this new lender for $7.5 million, I mean we’re fairly pleased by the way to announce this transaction and it’s with a company called Smart Sustainability Solutions. They are part of an Abu Dhabi-based global investment company and we’ve been working with this group for some time now. With this loan, hopefully, it will be start really of a long-term relationship with the group. They’re a big business and they’re very focused on the modern energy supply market, which is what we’re in, and therefore potentially a good strategic partner for us.
If I take the elements of the loan, it’s really positive, and let me just go through what I mean by that.
First of all, it’s unsecured and it’s great to have a loan that way. Secondly, a very attractive rate of 7%, in India, you’d pay for rates anywhere from 10% to 12/13%, so 7% is very good. The short-term borrowings that we took out in March, that we said to everybody was short-term whilst we look for something more longer-term, this is all part of the plan, so this is helping us repay that. This provides a real good level of working capital for us and investment capital for the businesses, that’s what we need to carry on going forward.
It’s exactly what we wanted. We’ve always said we wouldn’t dilute people at the PLC level but what we’ll do is to look at other ways of raising capital where we need it for our growth.
Q2: Just focusing on if and when the loan note is converted into equity. How will that work as shareholders may be concerned about dilution?
A2: We’re actually conscious of the dilution point for shareholders, I’m a shareholder as well and so I believe that we’ve negotiated a real good flexibility, really, around the terms of the loan to ensure that we arrive at the best solution for all of us, all of our shareholders.
Let me just go through some of the key points:
Number one, conversion is in 60 months and that’s only if we’ve not decided to repay the loan, that’s our decision as CyanConnode to repay the loan or not. Redemption, then, the second point, is three to five years. The third point that I would say is conversion is to be mutually agreed, one on price, two on the entity, i.e. whether it goes or converts into a subsidiary or into holdings. We have a say in that, and we’ll make the best for our shareholders to the best value and the best return.
Q3: You also talked about project funding and the announcement. How does that work and who are you talking to?
A3: This is a key point for all of us, all of us that are shareholders. We need project funding. We win these projects and what we’re going to do is not really look at the PLC level, we’re not going to look at holdings to fund these projects that we’re going to win in India.
Let’s first of all say that the scope of works out there is enormous. There’s something like in excess 110 million smart meters to go at still as a lead bidder and that’s worth in excess of $10 billion. Now, we’re focused on bidding as an AMISP, that means the lead bidder and we’re looking realistically, out of that 110 million plus, round about 10 million of those meters where we think we will have the best chance of winning. So, we’re very focused on that and very deliberately looking at it to about 10 million.
We expect to be successful on some of these bids, obviously, and so we’re preparing with our partners to help us generate the project funding going forward. We’re not waiting for the projects to come along; we’re talking already to people. So, we’re talking to various funds, including Smart Sustainability Solutions themselves.
These are big opportunities which represent huge growth for shareholders so let’s not underestimate the opportunities we have in India as a lead bidder.
Q4: Sounds like CyanConnode is clearly positioning itself to win new projects as an AMISP. Will you also continue to bid to be a subcontractor?
A4: Yes, we’re bidding as both. An AMISP that I’ve just outlined, where we’re targeting 10 million smart meters but separately, we’re also bidding for an excess of 76 million smart meters as a subcontractor.
This is when another company will be the AMISP or the lead bidder and we would just supply the communications element of the project in the same way that we have done for the last 12 years in India. This allows us to cover nearly the whole of the market with a dual approach, and we think that strategy is a winning strategy.
Q5: You’re setting the outlook for the business to better match the speed of the smart meter rollout in India. How is that progressing?
A5: Well, first of all, we’ve got to hold our hands up. I’ve got it wrong in terms of forecasting the speed at which the smart meter projects in India would be rolled out. As a subcontractor, we are in the hands of others as they’re the lead bidders, the pace at the rate they roll out and we underestimated that last year.
So, what we’ve committed to shareholders is that we will reset our forecasts on a much more conservative basis, still good, still growth, but on a conservative basis. Last year we based our forecast on what we were told too literally, this year we’re evaluating and allowing for any risk of delays. Importantly as well, really important, we have not lost any orders, the revenues that were not taken in financial year ‘25 have just moved to the right into ‘26/27.
