Pipavav Defence sees order book improvement in two quarters

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Pipavav Defence sees order book improvement in two quarters

Pipavav Defence and Offshore Engineering expects significant improvement in the order book in two quarters, Chairman Nikhil Gandhi pointed out. Defence orders to drive order inflow in coming quarters, he added.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See latest News about Pipavav Defence See previous management interviews See what other Experts & Brokerages are saying about Pipavav Defence Pipavav Defence BSE | NSE 31/05/12 Are Mutual Funds betting on Pipavav Defence?

During the second quarter FY12, Pipavav Defence and Offshore Engineering 's net sales was up 1.6 times at Rs 449 crore versus Rs 176 crore (YoY) with all the facilities being operational including commissioning of both the Goliath Cranes. The company's profit after tax (PAT) grew 3.5 times at Rs 9 crore versus Rs 2 crore (YoY).

Chairman Nikhil Gandhi mentioned that the company's net debt is at Rs 1,250 crore and the debt-equity ratio is at 0.5 times. He told CNBC-TV18 in an interview that the Goliath Crane and Dry Dock were capitalised in the second quarter.

The company expects significant improvement in the order book in two quarters, Gandhi pointed out. Defence orders to drive order inflow in coming quarters, he added.

Here is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying video.

Q: Your operating numbers are good, but your investors might be a bit concerned about your debt, which has gone up beyond Rs 2,500 crore. What is the reason for that? By when can you pare it down?

A: Our debt is very low. It is Rs 1,250 crore and not Rs 2,500 crore. We are originally approved at 1.5:1 debt equity and have used only 0.8:1. We are one of the lowest debt holding companies into infrastructure for the heavy-duty manufacturing space in the country.

In the last quarter, Goliath Cranes and Dry Dock have been capitalised. Due to this, the interest cost and depreciation has been charged to P&L. This quarter, the profit before tax (PBT) has been reduced, but we have reported profit despite increasing interest and depreciation.

Pipavav Defence is a new company and this is its first operational year. We have achieved significant efficiency in operations, manufacturing and reduction of the cost. We have achieved our goal.

Q: Now that the facilities have been commissioned, how does your order book look like for the rest of this year and going into next year?

A: The order book currently stands over Rs 7,000 crore and we expect it to be significantly higher in the next two quarters, both from the offshore segment as well as specialised vessels.

We will continue to focus on the defence sector, both building of ships for the navy and coastguards, and other different establishments. In defence or even the offshore segment, once you put in a bid, the order takes between six-12 months. But, once they start giving orders, there is no end to it.

The order book is equivalent to more than two years. By March, we would have an order book equal to five years.

Q: Have all issues been sorted out on the Mazagon JV?

A: The defence ministry informed that the process has gone through in a transparent manner. We are happy to know that because we have always stated the same thing. We are in discussing with ministry of defence to make the MoU operationalised. We are sure that shortly this would be put in place.