BGR Energy bags largest EPC contract for power plant

Excerpts from CNBC-TV18’s exclusive interview with BG Raghupathy: 

Q: Could you break up the order right now as it stands? How much money would you account for, in the current quarter from this order? How does the incremental flow come in? 

A: The current quarter we would take Rs 250 crore and then spread over in the next three-years. 

Q: What are the kinds of power capacities that you are likely to build on account of this order? 

A: This is two into 600-MW coal firepower project in Rajasthan. Incidentally this happens to be the largest single order the company has won and according to our knowledge this is also the single largest order in the country for engineering, procurement and construction, or EPC of a power project. 

Q: We understand that your order book now stands at Rs 11,000 crore. How does this compare to the order book six-months ago? Are you seeing any plateauing of the pace of growth of your order book? 

A: Six-months ago our order book was Rs 3,000 crore. About a three-weeks ago we got an order for Rs 3,100 crore from Tamil Nadu Electricity Board and now this order of Rs 4,900 crore it is standing at Rs 11,000 crore now. In the next six-months we hope to reach Rs 20,000 crore.  

Q: Where do you see the orders coming in? Is it the State Electricity Boards, because now more than 50% of your order book is from State Electricity Boards (SEBs)? 

A: Yes, more than that in fact. The orders are also going to come from State Electricity Boards.   

 Q: What will be the size of those orders? 

A: We are going to bid for about Rs 18,900 crore in six-months time and our targeted share of another Rs 9,000 crore from this Rs 18,900 crore order book basket.  

Q: What does it take your revenue target for FY09? How much of the money would you book in this financial year and what kind of growth are you forecasting on it? 

A: We expect 2008-2009 to reach a turnover of Rs 2,500 crore  

Q: With the PAT? 

A: With a PAT of 78% and 2009-2010 will be Rs 4,000 crore. 

Q: Are you expecting the moneys to come easily for all these contracts? There are telltale signs of slowdown in the economy, the raw materials have gotten expensive and so have interest rates. Do you see any impact on your margins and volumes of companies like yours? Do you see any impact on the money flows coming from people who give you contracts? 

A: The people, who gave us a contract have already secured the complete, financial closures. So the money is there. The equity from their side has already been paid in and the financial institutions have sanctioned the debt portion. So money flow is no problem at all.  

Q: What about your own margins in the phase of inflation and interest rates?

A: Steel prices and cement prices may go up but we are provided for a contingency adequately.  

Q: You mean you have a cost escalation? 

A: No; we don’t have a cost escalation but in our costing we have provided contingency for escalation adequately we are provided for and it will not affect our margins. 

Q: What about capex or funding at your end? Is that all tied up? 

A: It is all tied up. Even the working capitals for these projects have already been tied up. 

Q: You mean to say that your company sees clear visibility of revenues at least for the next two-years or even better even thereafter? 

A: I have in front of me next three-years revenue and in fact if you notice whatever we have said in the past, we are achieving our milestone targets perfectly.  

Q: Would you say that this would be two of the entire industry the power project construction, EPC industry? 

A: The potential is very huge. Today we don’t- many people may not realise how much of power we need but the way the growth is happening the number of new factories are coming up. There will be huge demand for power and I doubt with all that is planned we will be able to meet this power. Hence there is adequate opportunity for the EPC contractors in this country.