Order book at Rs 10k cr; margins to be better in FY13: KEC

Engineering and construction firm KEC International recently won another batch of orders worth Rs 914 crore.

Managing director Ramesh Chandak told CNBC-TV18 that the company's current order book is currently around Rs 10,000 crore. Given the good mix of international and domestic orders Chandak expects KEC's operating margins to improve this year. Here is the edited transcript of the interview with CNBC-TV18 Q: After these Rs 914 crore orders that you all have won, where does the order book currently stand at and what margins have these new orders come in at? A: The current order book is close to Rs 10,000 crore. If you see the last quarter the execution is very high. Irrespective of that, we have received enough orders to maintain our order book position. It is still close to Rs 10000 crore and these orders are at our normal margins. None of them are at very aggressive margins. Proper orders are there. The good part is that, for the first time, we have got a big order for poles for our SAE factory in Mexico.  Anyway, we had intended to increase our production capacity from 5000 metric tonne to 12000 metric tonne. So, that is getting completed. This order will get executed out of that increased capacity. The second big thing is that we received a 765 KV Gas Insulated Substation (GIS) in Tamil Nadu. These are two new things which we are doing. Other than that, most orders are from the normal markets, which are Indonesia, Saudi Arabia, India. There is a good mix of international and domestic orders. So, it’s a very nice combination. Rs 900 crore order is a good order book so far as KEC International is concerned. We are quite happy about the order book which we have received now. Q: Could you tell us a little more on the margin side because your operating margins have already slipped quite a bit. They are down close to about 200 basis points in the last few quarters or so. Are margins likely to remain subdued for the next few quarters? A: Definitely there will be improvement from the last year’s margins. However, those orders will also have to be completed which we have taken at a very aggressive margin, those are largely in the water, railway and the substation side. Now the new orders are coming at a normal margin, but there will be a mix of the execution of old orders and new ones. With the mix of new orders there will be improvement in the margins. Q: So, you are no longer going for aggressive bidding at lower margins? A: No, because now we have got our pre-qualification (PQ). So, we don’t have to do that. Q: Is there any kind of revenue as well as margin guidance you can provide us with for FY14? A: We don’t give guidance so I will not be able to do that. I can only mention that we are starting this year with a better order book, which will definitely ensure that there will be growth this year also. Last year we had good growth and we will this year too.