Manufacturing to add 40% to income in 4 yrs: Hindustan Dorr

In an interview with CNBC-TV18, SC Sekaran, executive director of Hindustan Dorr Oliver said that the company is expecting to secure orders worth Rs 500-600 crore in March and is confident of closing the year with at least Rs 1,400-1,500 crore of order book.

The company plans to tab the minerals and metals sector in the future and sees it as one of the potential areas for growth. Below is the verbatim transcript of Sekaran's interview with Gautam Broker and Latha Venkatesh of CNBC-TV18. Also watch the accompanying video. Q: You have got some order this time but there was a concern with investors, the first nine months the order inflow was just about Rs 440 crore. Where do you see your order book ending at by the end of this month? A:  We started 2010-11 in the month of April 2010 with about Rs 1,300-1,400 crore of order book. Till date, we have done in the last three quarters about Rs 750 crore. We still continue to be in the same range of around more than Rs 1,300 crore of order book. During the current month of March we are hoping to get about Rs 500-600 crore of orders. We have been already declared L1 with the NMDC for iron ore. We have bidded for some of the water project with some refineries. We are very positive that we should be getting those orders before March 31. We will be closing the year with at least with Rs 1,400-1,500 crore of order book. Q: The buzz has been that there would be some kind of strategic stakeholder that will be brought in either at the Hindustan Dorr-Oliver level or in some of the special purpose vehicle (SPVs) for some of the projects you execute. Any development on that front? A: We are not looking at bringing in a stakeholder at this time of project level. Our project size has been the largest so far - we have been handling Rs 450-500 crore which we will be able to execute with our own banking limits. Coming to the question of the stakeholder in terms of the capital, probably, we are talking about a second workshop for manufacturing because the current workshop in Ahmedabad is full. The manufacturing sector has been doing good especially during the current year, we have about Rs 170 crore of order book with us. Recently, we have bagged orders worth about Rs 75-80 crore from Nuclear Power Corporation of India. All these things give us confidence that manufacturing of engineering goods could be one of the potential areas of growth for Dorr going forward. Q: Your order book from the manufacturing side is just about 15% right now and a lot comes from the environment side which is about 40-50% which is a low margin business. Going forward, do you expect the order flow on the manufacturing side to improve and thus margins could also see an uptick? A: Of course, 100% is what our drive has been. In fact, we want to increase the manufacturing percentage over a period of time. In the next three-four years time you will find manufacturing grows at least to minimum 30-40% of our revenues. On the environmental front which is a low margin business, we are specialising ourselves in the minerals and metal sector. We are currently doing a project for Uranium Corporation of India for a uranium process plant along with Bateman of South Africa. This plant is coming under commissioning in the next four months time. There is an expansion taking place in the same location. Another uranium plant is coming up there. Going forward, metals and minerals would be one of the potential areas of growth for Hindustan Dorr. Q: You said that probably a second workshop will be needed because the Ahmedabad workshop is full up. What are the plans? Are you setting up another workshop and will that concentrate more on uranium and nuclear? A: Yes, we will definitely look at uranium and nuclear and that is going to be one of the drivers for growth. This company has been growing around at 30-35% in the last three-four years. Last year, our revenue was around Rs 871 crore. In March 2011 we should be able to do Rs 1,000 crore plus. Going forward, definitely, we are looking at a minimum growth of 20-25%. Q: You said you are thinking about another workshop and is there a possible strategic partner for that. In a separate conversation IVRCL management had even spoken about a possible QIP of about Rs 250 crore for Hindustan Dorr-Oliver? A: We have taken enabling resolution which has been in place for USD 50 million for QIP, especially, for the second workshop. We are pursuing that and that will also happen. We have already located some of the sites at Dahej in Gujarat, we have identified about 28 acres of land. In Tamil Nadu we have identified two locations; one in Tiruchirapalli where BHEL is situated and the other is in Chennai, and we are looking at a third location in Pune. Once the location is finalised we will be able to start immediately and go ahead with the process. Q: What about DavyMarkham - how much are you expecting to make from that subsidiary? Has it turned around in the past several months? A: DavyMarkham is a company which we took over during January-February 2010. In the current year, their operations have been good. As of date, their order book continues to be around 17-18 million pounds. Recently, we got orders worth about 12 million pounds from various mines from Canada and South Africa. That business is doing well and going forward we see lot of potential for their business. We are transferring the engineering of one of their products - the double drum hoist which is used for underground mining, to India. We will start manufacturing that product at our workshop in Ahmedabad to enable us to become cost effective to compete in the Indian market.