Moneycontrol
Jul 05, 2016 03:16 PM IST | Source: Moneycontrol.com

Techno Electric sees margins growing at a CAGR of 13-15%

The company has got massive orders from Power Grid in the last one year amounting to Rs 1,500 crore, said PP Gupta, the MD of Techno Electric & Engineering, adding, that the total order book for the company is Rs 3,000 crore.

Techno Electric & Engineering, a niche player in Engineering, Procurement, and Construction (EPC) segment in the power sector, expects EBTDA margins to be around 13-15 percent from FY16-18e, said the company's MD PP Gupta.

The company has bagged massive orders from Power Grid in the last one year amounting to Rs 1,500 crore, he said, adding, that the total orderbook for the company is now Rs 3,000 crore.

EPC segment, which contributes to 90 percent to the overall business, has an orderbook of Rs 2,600 crore as of March 2016, he added.

He expects a CAGR of 25 percent in revenue during FY16-18e.

He maintained that the company has consistently been rewarding its shareholders and that the dividend payout for FY16 was 400 percent.


Below is the verbatim transcript of PP Gupta's interview with Reema Tendulkar & Mangalam Maloo on CNBC-TV18.

Mangalam: If we look at your financials, 92 percent of your revenue comes from the engineering, procurement and construction (EPC) business. Could you give us the margin breakup of all your three businesses, generation, transmission and distribution? What kind of margins you enjoy in these three segments?

A: We are a niche player in EPC segment in power sector. Generally our EBITDA margin ranges from 15 percent plus on an average whether its transmission or distribution or generation, they are very similar in terms of contents and technologies or solutions involved in them by and large.

Reema: Bonus is a way of largely trying to reward shareholders. Would you look at some other matrix perhaps increase the dividend payout, what is the current dividend, if you pay, or would there be any other avenues like buyback in order to return cash to the shareholders. What is the company's plan in terms of rewarding shareholders?

A: The Company has been consistently rewarding and improving the reward to the shareholders. The dividend payout for '15-16 has been around 400 percent. We have paid interim dividend of 250 percent another 150 percent is proposed as final dividend. Last year we had paid out 350 percent, a year before that we had paid out about 250 percent. So we at least pay out about 25 percent of our profit after tax (PAT) as dividend as a dividend policy.

The bonus share is definitely a reward to the shareholders but additionally our attempt was to improve liquidity in the market for the shareholders additionally, so that more of our shares are transacted in the market place.

Mangalam: Despite giving the dividend you still have about Rs 300 crore worth cash on your books, so that means the company is indeed well funded to participate in the tariff based competitive bidding projects. Are you looking forward to do that, in fact you were expecting a strong order inflow coming in from Power Grid for the solar park EPC as well, any development on that front?

A: We are already a part of green corridor transmission systems or Power Grid now. We are working at four prominent places and we are definitely expecting more business from Power Grid. We have got huge business from Power Grid in the last one year to the tune of about Rs 1,500 crore, first time in the history of the company. So our total order book as of now is about Rs 3000 crore and definitely looking forward to a growth period in the company by no less than 30 percent a year on a compound annual growth rate (CAGR) basis.

Mangalam: You were looking at exiting your wind business, right? You have already sold 45 megawatts for about Rs 200 crore and you have plans to sell the remaining 150 megawatts as well?

A: We have on the cards but let me share with your viewers this year has been hugely rewarding in wind business. Not only wind has been got but even state government has made grid availability very strongly so our generation is almost double of what we generated last year for the same period. Say up to June of course this data will be taken up in the quarter ending meeting but they are in the public domain also we have generated almost about 90 million units as against 40 million only last year. So, we see huge gain in a wind business this year. Obviously we will enhance these asset values also going forward but given their right valuation we like exit these assets and invest more in PBCB or transmission assets.

Mangalam: What would the right valuation be because you have sold about 45 megawatts at around Rs 50 crore so the remaining 150 would come up to around Rs 600 crore as well perhaps?

A: No, last year we sold 45 megawatt for Rs 215 crore. So, we expect these assets to realise no less than Rs 850 crore on an average further additionally for the company.

Reema: Have you found prospective buyers?

A: We are in discussion with one or two buyers. However, may be we will see through the season ourselves this year now because season is so rewarding and so rich. The very bottom line out of wind assets alone will grow by no less than 3 times. Last year if you don’t consider the other income we had a bottom-line of about Rs 25-30 crore. So, we expect Rs 70-80 crore out of wind assets for this year which is hugely rewarding.

Reema: It is likely the sale may not take place this year a well?

A: Absolutely, because it is very rewarding this year.

Reema: Only if you get Rs 850 crore then you are willing to let go off your wind assets?

A: The very reward on the bottom-line also enhances the value of the assets at the time of exit you know.
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