Engineers India upbeat on heavy order-book

Ashok Kumar Purwaha, chairman, Engineers India Limited explains to CNBC-TV18 that the company bagged orders worth more than Rs 900 crore in the first quarter, from April to July.

Purwaha expects the company to post reasonable growth after recording continued growth in turnover of 50% with PBT and PAT levels at over-33%.

Below is an edited transcript of the interview. Also watch the accompanying video

Q: You have bagged a Rs 700-crore order from BPCL. Where does this take your order book? I think at the end of the fourth quarter your order book was worth Rs 4,600 crore. Where does the book stand now?

A: At this moment, our order book is over Rs 5,500 crore and during the year we have added orders worth over Rs 900 crore to our books.

Q: What is scenario regarding the award of orders? Is the pace of expansion adequate to keep you fully occupied for the next year?

A: The 12th Plan has earmarked an investment of USD 1 trillion for the infrastructure sector which I think is a very healthy sign. The hydrocarbon sector is to witness investments USD 60-70 billion in the next five years. So the situation has begun to improve.

Q: Is the 12th Plan document your only source of optimism? The 12th Plan document is premised on a GDP growth of 8-9%. The GDP growth lingers at 6.5%, it was 5.3% in the last quarter. Is there anything on the anvil? Are you actually seeing a flow of orders?

A: You are very right. In the first quarter, from April to July, we bagged orders more than Rs 900 crore. In the coming months, there will be further announcements regarding orders from our end.

Q: Even if a lot of projects are granted approval, by when do you think the consultancy work will begin?

A: In the consultancy business, the project starts from the time you are given a go-ahead. Since we provide consultancy across the entire process from concept to commissioning, we enter projects at various difference stages.

Q: What share of the business do you think will come from the consultancy business this year?

A: I guess the present Rs 720-crore order which we bagged is for consultancy. So out of the over Rs 900 crore of major orders, about Rs 950 crore is from the consultancy business.

_PAGEBREAK_

Q: Your order book visibility for the moment is very good. You have an excellent run rate in terms of revenue growth. You posted 40% in FY11 and 31% in FY12. What is your forecast for revenue growth in FY13?

A: Our turnover has been growing at a rate of 50% and our PBT and PAT levels have been above 33%. Last year, the PBT and PAT were at 31% and 22% respectively.

So we are going to post reasonable growth. But one cannot expect the same growth of 50% to continue. When the base level increases, there is going to be an appreciable growth in the top-line and bottom-line.

Q: So you would still manage a PBT of 25%?

A: I think it is not right for me to be giving any of those guesstimates. You will know from our quarterly results which will be announced in about a month’s time and we will keep you informed about our progress on a quarter-to-quarter basis.

Q: Capital goods have begun to post a serious rate of deceleration. So, if you can record growth at double-digit rates that would be an outperformance. Can you give us a broad direction?

A: I think you need to look at it from a perspective of starting the year with Rs 4,600 crore. We were already at Rs 5,500 crore of which major portion is from the consultancy business. We expect more assignments in the next few quarters.

Q: Last quarter, your margins actually declined by over 5 percentage points. By when do you think the BPCL project will start contributing to revenues and will that aid margins in the near-term?

A: The BPCL project and our zero date have started. Typically 20-25% of the revenues come in the first year, with the second and third years raking in the major portion of 30-35%. The project is expected to be commissioned by the end of 2015.

Q: Have you been consulted or informed by the government of India about any divestment in your company?

A: No, not yet.

Q: They haven't even sounded you on any such moves?

A: No.