Apr 17, 2013, 06.27 PM IST | Source: CNBC-TV18

Targeting 10-11 % margins from canal project: Valecha Engg

Valecha Engineering has won an order to build canal at the Indo-Nepal border. The project will help irrigate around 2.8 lakh hectares. The value of the project is around Rs 360 crore.

Valecha Engineering has won an order to build canal at the Indo-Nepal border. The project will help irrigate around 2.8 lakh hectares. The value of the project is around Rs 360 crore.

Jagdish K Valecha, MD, Valecha Engineering says along with this new order their total order book has reached Rs 2500 crore, which has to be completed over the next 28-30 months.

“The margins that we are working on for the canal work is around 10-11 percent,” he added.

He further added that about nine months ago they took a conscious step to focus more on engineering, production and construction (EPC) projects vis-à-vis build-operate-transfer (BOT) projects because BOT segment has got issues on funding and issues by way of good projects coming out by the government.

Below is the verbatim transcript of his interview on CNBC-TV18

Q: I understand that you have got some orders, can you take us through what is this new order and what does it take your total order book to?

A: The new order is for canal work. It is a part of our irrigation segment. It is a 11 kilometer long main canal with distributaries and it totals to around 125 kilometers in length. It is near the Indo-Nepal international border and will help irrigate 2.8 lakh hectares. The project has to be done over a period of two and a half year. The value of the project is around Rs 360 crore.

Q: What is your total order book and therefore visibility in terms of work that you will do?

A: The total order book including this new order touches Rs 2,500 crore in which the irrigation segment will have around 20 percent, so around Rs 500 crore. The bridge and the metro will have 30 percent with about Rs 750 crore and the balance 50 percent will come in from roads and highway segment, that is about Rs 1,250 crore. That is the total breakdown of Rs 2,500 crore of order book, which needs to be completed in the next 28-30 months.

Q: In last two months this would be your third or fourth order that you have announced. Has the activity picked up, what kind of margins are these new projects being allotted at?

A: About nine months ago, we took a conscious step to focus more on engineering, production and construction (EPC) projects and we have selected five-six states. We took this conscious step because the build-operate-transfer (BOT) segment has got issues on funding and issues by way of good projects coming out by the government. 

This is a culmination of the result that you see just now over the large effort that we have put in. The margins that we are working on for the canal work is around 10-11 percent.

Q: Just two weeks back we were discussing about what is happening in the BOT space and the National Highway Authority of India (NHAI) game changer - would you relook at that particular space or you would stay out of that?

A: We will relook at the BOT space carefully but not immediately because the interest spiral as well as the bank support is very critical for the success. We have a wait and watch policy and if the NHAI commits to its commitment on land, as well as the environment the way they are talking then we will take a step forward in that direction.

Valecha Engg stock price

On April 16, 2014, at 15:29 hrs Valecha Engineering was quoting at Rs 41.00, down Rs 2, or 4.65 percent. The 52-week high of the share was Rs 50.55 and the 52-week low was Rs 17.60.


The company's trailing 12-month (TTM) EPS was at Rs 9.86 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 4.16. The latest book value of the company is Rs 156.74 per share. At current value, the price-to-book value of the company is 0.26.

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