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Aug 11, 2016 12:52 PM IST | Source: CNBC-TV18

Inox Wind says margins to increase with new orders

In an interview to CNBC-TV18, Devansh Jain, Executive Director of Inox Wind, talked about the company's order book, getting repeat orders from CESC's subsidiary, and why he expects better margins on newer orders going forward.

In an interview to CNBC-TV18, Devansh Jain, Executive Director of Inox Wind, talked about the company's order book, getting repeat orders from CESC's subsidiary, and why he expects better margins on newer orders going forward.

Below is the verbatim transcript of Devansh Jain's interview to Latha Venkatesh, Sonia Shenoy & Anuj Singhal.

Anuj: Give us some numbers. This would mean USD 50 million in terms of revenues?

A: Yes, this would mean USD 50 million and importantly this is a fourth order from Surya Vidyut which is a subsidiary of CESC. We hope to continue the same momentum with this company.   

Sonia: Tell us about the order pipeline currently and what the order book stands at with the new order in your kitty?

A: We disclose our order book at the end of every quarter. As of last time, we had an order book of about 1100 MW odd. We have our results coming out in the near future, so we will be disclosing our present order book. However, we have added, what is in the public domain, is almost we have disclosed about 400 MW of orders since then and at this point in time we are on the verge of closing or are in very advance stages or on the verge of almost 700-800 MW of incremental orders.

Latha: Does this come with better margins?

A: Absolutely. The product mix is changing because we are coming out with larger turbines which are turbines with 113 meter blades as oppose to 100 meter blades and also in certain places giving the generation based incentive (GBI) is aspiring at the end of this financial year. There is rush to implement projects within March. So to that extent margins should go up on these incremental orders.

Anuj: I keep getting a question on social media that when Inox Wind's initial public offering (IPO) came out and it got listed, it got huge subscription but it has not delivered any returns, in fact it has been hugely negative returns for shareholders since listing. When can your shareholders expect gains, when can the company show blockbuster numbers?

A: There are two or three things. One, when we listed we had a huge oversubscription for about a year since the IPO investors made a hefty returns, we were trading at a significant premium to the IPO price. It has been over the past six months that the market seems to have been not too favourable for Inox Wind.

Having said that as a management the important thing for us to do is to achieve the targets we have committed. We delivered on the profit margins, we have delivered on the growth numbers, we have delivered on the absolute profitability. I do understand that there have been some concerns around receivables and we tried to explain it at the end of our full year financial results.

Sonia: That concern continues. Your receivable days are still at almost 200 days, if I am not wrong. Has there been any improvement since the last time we chatted, both on receivable days and on working capital days?

A: We did explain last time, when we declared our March results that optically it's about 200 days but if you look at it from the perspective that majority of the sales, typically in wind business are in Q4. The absolute number of days over the last financial year went down by about 15 days. So we came down from about 148 odd days to about 130 days while we have maintained that our eventual target is to get to about 90 days. I think we are well on track to do that. However, what is difficult to commit is - will it happen within Q1, will it happen within Q2. The issue which was in hand was the fact that typically policies come in towards the middle of the year in the wind sector. As a result of which you stock up inventory and then you start implementing in Q3-Q4 and then there are certain period of days which you give to your customers to make those payments.

However, what has changed now is that we have had a new facility which has been commissioned and as a result of which we have incremental manufacturing capacity which has kicked in and hence we have not been stocking up or mismatch inventory and as a result of which many customers were delaying payments, one. Second, we have made sure that all incremental orders are backed by LCs and at the end of the day we do not need to chase for any of our payments. Third, the most things which I would like to reiterate and remove concerns, typically in many EPC businesses payments get stuck and then there is no alternative but to go the legal recourse. In wind turbine business we control the operation and maintenance (O&M). So if people are contractually defaulting, you always control the services, not that that is what is happening, but we have taken enough corrective action and we are a debt free company.

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