Patel Engineering has delivered a positive Q3FY08 (consolidated) performance. The company’s net sales are up 33% at Rs 379 crore versus Rs 284 crore. Its net profit is up 32% at Rs 39 crore versus Rs 29.4 crore. Its operating margins  (OPM) are at 23.7%% versus 16.5%.

Rupen Patel, MD, Patel Engineering said that in the coming months, 55% of the company’s revenues would come from its hydropower business.

The company does not have any plans of hiving off its realty business, Patel said and he sees substantial order flow in hydropower projects, going forward.

Excerpts from CNBC-TV18’s exclusive interview with Rupen Patel:

Q: What catches the eye is the operating profit margins at about 23.7% versus 16.5% previously, give us an idea as to what’s contributing to these margins and at what range or level would we see from here on?

A: The company is making its presence felt in the hydro and the power sector, the company has always been operating in the sector. So what you actually see is the order book in excess of USD 1 billion come into play now; from hereon, you will see a major ramp up both in terms of turnover and in terms of profit in the coming months.

Q: Is it basically the hydropower projects which are contributing to this margin business and over all as a part of the revenue, how much would they comprise?  

 A: In the coming months, you will see hydropower contribute of over 55% of the revenue model and in the coming year, you will also see the margins from real estate creeping in.

Q: How much of a margin contribution do you see coming in from the realty business? Even in terms of a revenue flow, how much do you expect the real estate business to contribute?

A: The total development in real estate is in excess of over 6.5 crore sq. ft which is to be developed in the next 8 years. It’s going to be done in phases. The first phase is almost about 1.5 crore sq. ft. to be developed in the next 4 years. So you should see some amount of revenue and profits trickling in, in the next accounting year.

Q: Give us an idea what is the kind of tax rate that you are working with currently and as we have given to understand, you might have to make higher provisioning with some of the government tax incentives coming to a close?

A: Apparently, they are not coming to a close as yet. Based on the advice given by various experts, the tax rate for the company to company is as it is. It will remain same in future also, I think.

Q: Is there an issue of contention there, because there would be probably a cause where you might probably have to look at higher taxes in the next few quarters?

A: No, I am sure that the tax rates for all the quarters will remain the same.

Q: Give us the idea of the enhanced land bank of approximately 1,000 acres. What is your target in terms of land acquisition and by when would you possibly be looking at making this into a separate listing entity, any plans of that?

A: All the 1,000 acres of land is acquired by the company. It exists in major A-metros and B-metros such as Bangalore, Chennai, Hyderabad and Mumbai. This land is to be developed in phases. The total development potential is in excess of 6 crore sq. ft. which could be developed in phases in the next 6-8 years. In terms of spending, the company has not decided on the spending on realty sub-divisions because the land belongs to the share holders of Patel Engineering and there is no reason why the share holders shouldn’t benefit by the same.

Q: What’s there in your order pipeline this time - what are the kinds of orders that you are bidding for and the size of them?

A: We have been pre-qualified to around Rs 9,000 crore of hydroelectric work in addition to our existing order book - all to be bidden for in the next one year. So we see a substantial amount of inflow in terms of hydropower.