VA Tech Wabag sees 20% increase in order book this year

Speaking to CNBC-TV18, Rajiv Mittal, managing director of VA Tech Wabag, said that the company’s performance would have been upbeat if exceptional item could have been avoided. However, he added that there is an increase of 20% in the company's orderbook this year compared to the last year.

Below is a verbatim transcript of Rajiv Mittal's interview with CNBC-TV18's Latha Venkatesh and Gautam Broker. Also watch the accompanying video.

Q: First let’s not discuss the exceptional item. Shorn off that exceptional item, how would your numbers have looked? Would you have made a much better profit number?

A: We are very much on the track as far as numbers are concerned despite many external factors both in international market and domestic market creating an impact. Even after that our order booking has been on track. We are booked to Rs 1,800 crore of order and our order book stands at about Rs 3,400 crore, which is about 20% higher than last year.

So, we are very satisfied. Including the projects which are under execution, the margins on the projects have continuously improved. There have been issues like inflation but we have been able to manage our projects well.

Q: Before that let us handle the item, the question that I am actually asking you. Your exceptional expenditure on account of that adverse arbitration case and litigation is Rs 9.7 crore. As well you have taken some other prior period expenditure and your total exceptional expenditure is Rs 12.86 crore. Would it be fair to say that your profit therefore, should be read as Rs 46 crore plus about Rs 12 on account of additional expenditure? Is that the way we should look at it?

A: That’s right, it’s not Rs 46 crore because if you see even after this exceptional item, our consolidated profit is still Rs 52.6 crore, which is the PAT we have done on a consolidated basis.

So, if that is our number, this is one-time expenditure and we had also mentioned that in our RHP (Red Herring Prospectus) when we went for IPO. Because even before acquisition of our subsidiaries abroad, this item was very much there and this is a project which was under execution in 90s. So, this was a long arbitration which we had mentioned in our RHP and this is about Rs 12.9 crore, approximately Rs 13 crore; we had to take a hit in the last fiscal year for two projects.

Q: Can you give your investors reasonable assurance that there are no more such shocks that they will have to take?

A: Yes, I think we have already had this subsidiary for almost 3.5 years now. I can tell you that in last 3.5 years, we have been able to close a lot of these old projects which were under the previous owner and we have been able to get all the bank guarantee returned and also collected cash.

So, I can give you assurance that there is no arbitration as of now as we speak of pending. So, we do not see any risk in the future. In India, we have never had such case of arbitration, we don’t believe in arbitration but this was something we inherited when we took over the subsidiary.

Q: If you see your standalone numbers, your standalone income is Rs 730 crore and an EPS of Rs 56. On consolidated basis while the sales go up quite a bit to Rs 1,220 crore, the EPS actually comes down a bit to Rs 53. Would that trend change in FY12 - FY13? Would you see some more bottom line contribution from your subsidiary as much as it’s coming on topline?

A: Absolutely. If you take this exceptional item out, even our subsidiaries have done very well. In fact, if you take it on the euro basis, they have also grown both on the top line and the bottom line. So, one was the exceptional item, which has taken the profit out of their balance sheet. Second was also the translation loss because we had done our numbers based on euro of about 68 last year and over the year the euro fell down by almost 12%. So, it was translation loss, which did not help us.

So, these were the two factors and I don’t see that euro can go much lower than what it was last year - 58-59. If that does not go further down, I am sure the subsidiaries will also contribute to the bottom line and to the EPS.

Q: Also a word on your EBITDA margin for Q4. The EBITDA itself is down I think about 4% and EBITDA margins have come in at 16% versus 18%. What's the likely trajectory as we go forward in FY12?

A: If you see, we are not a quarter-on-quarter company because we are into project business, which we have mentioned many times. So, we should not be looked at on a quarter-on-quarter basis. But if you look on year-on-year basis, our EBITDA margins have improved both on the standalone and on the consolidated basis. Also our bottom line has improved in terms of absolute numbers and also in terms of percentage of revenue.


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