HCC Q1 declared its results today the company’s standalone net sales was at Rs 865.9 crore versus Rs 729 crore (YoY) and a standalone net profit at Rs 30.8 crore versus Rs 35 crore (YoY).

Ajit Gulbachand, CMD, HCC said that the company’s Q1 numbers include Rs 61.6 crore on account of land sale. The OPM of the company was up 16% and there were MTM forex losses of Rs 50.6 crore in the last quarter, he said.

Gulbachand informed CNBC-TV18 that the high steel prices have impacted the company’s margins. He also said that the company has price escalation clauses built on entire order book and these clauses safeguarded the rise in input costs. Axis Bank invested Rs 200 crore in Lavasa, valuing Lavasa at Rs 10000 crore, he said. He expects to clock revenues from Lavassa this year.

Excerpts from CNBC-TV18's exclusive interview with Ajit Gulabchand:

Q: There has been a mismatch in terms of there being an other income due to the land sale and the Forex losses of Rs 50 crore odd due to the FCCB? How has the quarter been for you operationally?

A: It has been very good. We have increased our turnover by 22.5% over the last quarter, which has touched Rs 895 crore. Our operating EBITDA margin is up by 16% to Rs 91 crore. Our profit before tax and other income, which includes risk is up by 12%.

However the total other income includes a capital gain on sale of property for our real estate business of Rs 61.9 crore and a foreign exchange mark to market loss of Rs 50.6 crore. So, our total other income is about Rs 11 crore. If we don’t take this into account, we have an increase in profit before tax and other income by 12%.

Q: How are you facing challenges in terms of the cost pressures, the increase in cost prices? Have those affected your margins because on an EBITDA margin level you have probably done close to 10-10.5%, whereas we expected close to 11.5%?

A: There is a 16.5% increase in there. There is of course an impact of the steel price and other price rises. But however, we have taken care of price variations. For example oil, which we directly consume, prices are star rated and therefore we have no impact. However, increase in oil prices has impacted transportation costs. Steel price has a certain impact.

But the steel prices have gone up way beyond. Many of our clients like Andhra Pradesh Government, Delhi Metro Railway as well as the Indian Railways have now decided to compensate for this rise in prices. Several other clients have put this under consideration. So a good part of this price rise would be mitigated. But there will be an overall impact.

Q: On an overall order book basis, what would be the percentage of order book, which would have these price escalation clauses built-in?

A: On all of them.

Q: How much would you be able to cover by way of price rise?

A: Almost all the prices that have gone up. It is oil where the price rise is high. Direct consumption of oil, stands rated since actuals has no impact. It is a complete pass-through. As far as steel is concerned, some of the clients have now agreed to do and that would be a complete pass-through.

The general impact on the economy as a result of all this therefore comes forth in the form of services to us - transport services and others - those would have gone up and a certain impact of that would come. But a good part of that would be mitigated by the price indices. So, we would know a little better as we go along during the year as to how long the inflation part remains.

Q: Do you feel given the current scenario that there could probably be a scale-back on orders given out by clients?

A: I will put it differently. Whilst we will have a certain amount of slowdown particularly in the Private Public Partnership, whose decisions of investment are dependent on interest rates, there would be a slowdown. If the slowdown comes down to 5-6% of GDP, we are still discussing a very high growth rate. We have got used to 9%, so this is very low.

So, we will see increases in performance during the current year and as well on the order book side. Many of the orders are already in hand. We have about Rs 4,900 crore worth of orders where we are lowest. So those will turn into actual orders. Therefore I do see a slowdown. But it would not be enough to affect the growth path that we are on.

Q: In the wake of how the real estate industry is looking right now, could you give us an update on Lavasa? There were reports that you are probably looking at some kind of private equity infusion into Lavasa in certain patches?

A: No, we are not. In Lavasa, Axis Bank has already invested Rs 250 crore in the form of convertible preferential shares and debentures. That places the valuation of Lavasa at about Rs 10,000 crore. In addition to that, there are a lot of special purpose vehicles that would be setup at Lavasa, in which other people would be investing.

As far as direct sales, this year we expect to recognise revenue in Lavasa. Our June tranche of sales was sold out in about 5-6 days. So far our registered revenue from sales is about Rs 550 crore in Lavasa. So, we are doing well on the Lavasa front both from a point of view of giving investors as well as from a sales point of view. With revenue recognition this year, the project would have come onstream.

Q: You have a particular tranche of sales that you wanted to do in June and you managed to do that. Is there a target set up for Lavasa and probably going ahead? Do you expect to meet that very comfortably?

A: We would be meeting all our targets. However construction is a challenge and we have to build all that we have committed. This continuous challenge of constructing as fast as we can sell will remain with us.