Govt to divest 10% stake via FPO route: EIL

Ashok Kumar Purwaha, chairman, Engineers India, says that the government is planning to disinvest around 10 percent stake in the company via follow-on public offer (FPO) route. The FPO is likely to hit the market by the second quarter of 2013-14.

He also added that last nine month results indicate a dip in the topline but the company has been successful in maintaining the bottom-line in terms of both profit before tax and profit after tax levels.
In 2011-12, the order inflow was Rs 760 crore and it has doubled to Rs 1440 crore in 2012-13. Majority of the orders come from the consultancy segment where the margins are higher and the company has been able to tap newer markets in  Southeast Asia, Bangladesh and Nigeria in the same segment.    
Also read: Problem for NMDC is ore evacuation, not production: CMD   Below is the edited transcript of his interview to CNBC-TV18. Q: According to the media reports the government has initiated stake sale process and they will start the process by scouting out merchant bankers. Can you brief us on the latest developments?
A: The government had decided to disinvest 10 percent via FPO route and the process for the selection of the lead managers and legal advisor is on. The same is expected to get into position in the second or third week of May and then onwards the whole process of the 10 percent disinvestment will take off. Q: What is the likely mode of divestment which the government could adopt? Some media reports have indicated that the stake sale may not happen the offer for sale (OFS) way as has been seen for many PSUs in FY13?
A: Follow-on public offer (FPO) route will be used for the 10 percent divestment by the government. Q: By when could the FPO hit the market?
A: The process has already started for appointment of the lead managers and the legal advisor. The whole process of the Request for Proposal (RFP) document, filing it with Securities and Exchange Board of India (SEBI) for the required approval will start and then we will also do the required marketing through the road show within domestic and overseas market. Today, it is targeted for the second quarter of 2013-14. Q: Your order book has declined for both FY12 and the first nine months of FY13. Is it due to completion of projects or the order inflows have been weak as we have seen for the economy?
A: Our nine month results indicate that there has been a dip in the top line but we have successfully been able to maintain the bottom-line in terms of profit before tax and profit after tax levels. In 2011-12 the order inflow was Rs 760 crore and it has doubled to Rs 1440 crore in 2012-13 and majority comes from consultancy segment.    
Out of Rs 1440 crore, inflow of Rs 140 crore comes from the EPC segment that is lump sum turn key segment. So, the year 2012-13 has seen the highest order inflow in the consultancy segment in the last five years. Q: How much increase in revenues and margins can investors expect in all key segments in both this and next year?
A: We are servicing two segments; consultancy and lump sum turn key. We are doing high-end and complex nature of projects in the consultancy segment. So, our margins in consultancy are much higher compared to the lump sum turnkey segment. We have been able to procure more orders to the tune of Rs 1300 crore plus orders in the year 2012-13 in the consultancy segment.
Around 10 percent of that came in from the overseas market; in the overseas market we are able to enter in newer geographies where we were not present earlier. In the consultancy segment, we have been able to crack the Southeast Asia, Bangladesh and Nigerian market. All these are positive signs for the coming years where our consultancy margins have been better compared to the lump sum turn key and we have done much better compared to 2011-12 in consultancy segment.