In an interview to CNBC-TV18, Shekhar Bajaj, Chairman & MD of Bajaj Electricals says that the margins in the June quarter were impacted due to the loss in engineering & projects business.
Bajaj Electricals hopes to make profits in the last quarter of FY14 says Shekhar Bajaj, chairman and managing director. Bajaj in an interview to CNBC-TV18, says the company’s engineering and projects (E&P) business is down as the company is trying to complete all its unfinished projects.
“Our next quarter and other quarters will be hit when we complete the projects but before end of this year, all our old contracts will be all completed. Whatever hits are required to be taken, we will take it in the next two-three quarters and the next year would have all good order books.,” adds Bajaj.
The company’s net profit in the first quarter plunged 95 percent year-on-year to Rs 0.66 crore as loss from engineering & projects business more than trebled.
Below is the edited transcript of Bajaj’s interview to CNBC-TV18.
Q: The sore point of the numbers are the margins now dropping to 2.6 percent and that has taken your profits down to lakhs, we haven’t seen that kind of a number in a long time, can you take us through what is troubling the margins and the bottomline?
A: In out lighting segment, profits are flat. Our sale is up by 3.2 percent, our margins are up from 4.8 percent to 4.9 percent.
In case of consumer durables, our margins have improved by 0.8 percent from 8.4 percent to 9.2 percent, resulting in our profit going up from Rs 32 crore to almost Rs 40 crore which is an improvement of almost 22 percent. That has impacted us though we have had a growth of 52 percent in sales from Rs 120 crore to Rs 180 crore.
Inspite of that, the profitability in the EPC business is substantially down and the reason is that we are completing all old projects. Therefore, more the completion takes place, the bigger the impact takes place.
Our next quarter and other quarters will be hit when we complete the projects but before end of this year, all our old contracts will be all completed. Whatever hits are required to be taken, we will take it in the next two-three quarters and the next year would have all good order books.
Our order book as of today of Rs 920 crore against Rs 680 crore that we did last year, we are looking at a sell of over Rs 1,000 crore in the current year. So, it is a growth of almost more than 50 percent and we have grown by 53 percent. In July, we have grown by other 90 percent. So, I think the 50 percent growth level in EPC business is not a problem. Main thing is that we have to complete all the old projects and that is why the faster we finish that and take the hit, the better it is.
Q: How much more losses you have to endure on the EPC business?
A: I cannot give you a number because what happens is when you close a site and when you are handing over, there maybe some shortages, there maybe other unexpected things. It is like opening a car when it comes for repairs. When you open the engine, many other things come up.
All new orders are at good margins and we have got full control on that, the old one when we are closing 90 percent is completed. The second quarter may see these problems while by Q3, all these things should be over. Post that the new orders will be making profits. So, next year we can be very clear that E&P will be making profits.