KEC Int'l sees order book crossing Rs 6000cr by March 2010

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » Nifty BSE | NSE 31/05/12 Are Mutual Funds betting on Nifty?

KEC International has recently received orders from Power Grid and MSEB. It has also received orders from West Asia worth Rs 400 crore. The company also won a further Rs 132 crore in orders from Maharashtra State Electricity Distribution Company.
In an interview with CNBC-TV18, Ramesh Chandak, MD of KEC International spoke about the company's order pipeline and the cables business.
Here is a verbatim transcript:
Q: Take us through the order book at this point in time, how much has it expanded it from say six months ago levels?
A: The order book currently is about Rs 5,500 crore which is after up to date execution. Earlier also our order levels were around Rs 5,500 crore. So, our order intake is currently matching with the execution cycle. We expect a lot many orders in the pipeline in the next four weeks. Currently, this order which we have received from Maharashtra is a rural electrification order, which is to do rural electrification closer to the Kalyan area. This order is worth about Rs 132 crore which is to be executed over a period of 18 months time.
Q: What kind of margins are you expecting to make in the next six months?
A: As I have always maintained, margins between 10-11% can be expected on a long-term basis and maybe occasionally it could be a little more. But on a longer term sustainable basis, I would still say margins between 10-11% are likely.
Q: How is the Middle Eastern market looking, when would the orders start trickling into the revenues as well?
A: Typically once we get the orders, the first three-four goes into augmentation, planning and getting the designs approved. Normally for about 3-4 months time, the revenue starts coming in and the peak is always after 8-9 months and again in the last three months the revenue is less because only the completion thing is going on.
Q: How is the Middle Eastern Market shaping up?
A: The market has picked up pretty well and now crude prices have stabilized at USD 70 per barrel plus and in most of the Middle East we are targeting a price of USD 65-70 per barrel. So all their infrastructure plans are on and all the tenders, which were held up for some point of time are now in the pipeline. So we are seeing a lot of activity in the Middle East happening currently.
Q: What are the tenders you've received from Power Grid?
A: We received Power Grid some time ago, not very recently. But there are orders in the pipeline. Power Grid typically has the maximum tender flow in the last quarter of the year. That has been their practice.
Q: Can you put a number to it? What kind of increased orders are you expecting by December 31 and more importantly by March 31?
A: The order book would be much higher than Rs 6,000 crore at the end of March.
Q: In your RPG Cables business you've incurred losses for many years. When do you plan to see a turnaround in your cables business?
A: The turnaround is not very difficult really speaking. It is only that the company had to set a few things in place. Now they have already sold the land, so their interest costs have gone down to that extent because they have reduced their borrowing by the entire amount for what they have sold the land.
The business in the power industry and distribution is picking up. So once it gets merged we will definitely be able to turn around in very quick time.
Q: You saw a 10.8% margin last time. You won't see higher margins you think even though you received new orders?
A: I don't think there is a dramatic change in terms of percentage of margins. As I said, we'll see between 10-11% margins on a long-term sustainable basis. But the volumes would be bigger. So, accordingly the absolute number of margins must be much higher.
Q: Will the completion of the takeover of the RPG Cables and all the possible synergies that you can get improve your margins at all?
A: Typically it takes six months to complete the merger. It depends upon the two high courts and a lot of approvals. So, hopefully before March our merger should be through.