Ahluwalia Contracts eyes 20-25% growth in FY16 & FY17

Shobhit Uppal, Deputy Managing Director, Ahluwalia Contracts from sidelines of Religare Capital Markets midcap conference spoke to CNBC-TV18 on the outlook for the company going forward.He is confident of the company meeting its topline target of Rs 1100 crore for FY15 and growing at 20-25% for FY16-FY17 backed by new orders from the public sector covered with escalation clause. The company has already completed 90% of the old low margins orders, said Uppal.The net order book for the company stands at Rs 3500 crore dividedly equally between public and private. And orders from the private sector are likely to pick up over the next 6-12 months, he added.On the execution front, he said the pace of execution on the public side has picked up but is still slow on the private sector side because of liquidity issues.  The company sees re-development and smart cities as future growth drivers.Below is the transcript of Shobhit Uppal's interview with Reema Tendulkar and Ekta Batra on CNBC-TV18.Ekta: Can you give us a sense in terms of what your order books stand at at this point in time and has execution of the order book picked up and your outlook for the second half?A: Our net order book stands at Rs 3,500 crore and the break up is 50:50. 50 percent is private and 50 percent is public sector. The execution has picked up on the public side. We are seeing more orders coming in and also the pace of execution has also picked up in the last six months. As far as the private sector is concerned, it continues to be hit by liquidity issues and the execution is slow. As far as the next half of this financial year is concerned, we are on target to meet our plans to have our topline of about Rs 1,100 crore and the first six months we have closed at a profit of about Rs 34 crore and we hope to maintain this in the next six months.Reema: This Rs 1,100 crore target is for FY15 or FY16 on your revenues?A: Yes, it is FY15. Over the next two years that is FY15 and FY16, we plan to grow at the same pace which is about 20-25 percent.Reema: Can you tell us what the margins on the new orders are, at what range?A: These are double digit margins at about 12-13 percent.Ekta: I wanted to touch upon the margin bit a little more, we do understand that your operational performance saw strong turnaround in Q2 where it came in at around 11-12 percent versus a negative margin in the same quarter last year and EBITDA loss, we do understand that it might have been pushed up by legacy order so it could have been a one-time, could you just give us a sense on what the margin picture looks like in the coming quarters and whether the previous quarter was in fact an aberration?A: No, in fact if you see both the last two quarters, we have maintained a net profit of about 7 percent and as I said earlier we aim to maintain this. This is largely due to the fact that the new orders that we won in the public sector - they are all coming in with the escalation clauses where we are not hit with the market volatility and as I said earlier, the margins are better. The old legacy contracts - 90 percent of those contracts we have finished. So they are less of a burden and 10 percent which is left that also we will finish in the next six months.Reema: What is the difference in margins between your public as well as private orders; can you quantify that on an average?A: As things stand today, there is very little new work in the private sector primarily on account of the liquidity issues, the margins in the government sector are better at 12-13 percent but once the private sector picks up, which I feel will pick up in another six months to one year then the margins will be similar in the private sector also.Ekta: Can you give us a sense in terms of what the redevelopment orders in the NCR region looks like for you? Is that a big opportunity?A: It is an opportunity which is still developing. There has been a large tender or a series of tenders, which were floated by NBCC which is a redevelopment of Kidwai Nagar. We were one of the bidders, though not successful bidders but what we are seeing with such government project management companies like NBCC, that there are more such orders on the way not only at the centre but also in states. So yes, going forward, this along with smart cities will be potential order book consolidation for us.Ekta: A rough size?A: It is very difficult to comment on the size as of now but just to clarify further, as I said the government activity has picked up and picking up orders in the future, I don’t think is a problem. We are in a state to pick and choose now.Reema: If you do an Rs 1,100 crore revenue in FY15 that turns out to be about 15 percent growth for the full year if you look at it on a year-on-year basis is that the kind of growth, 15 percent growth that you expect even in FY16 or do you think given the pick up growth could be higher maybe 20-25 percent for FY16 revenues?A: We are targeting a 20-25 percent growth in FY16 and FY17. It can be as I said -- orders are not a constraint, it can be higher but we are deliberately keeping our targets conservative as of now.Ekta: Can you give us some update on your Kota project?A: Kota is our sole build-operate-transfer (BOT) project, which is ready for launch. The building is completed and about 40-45 percent of it is leased out so in the next two months time, we hope to launch it.Reema: Any fund raising that the company requires, what does the balance sheet currently stand at or any debt that you are looking to raise?A: Not at the moment because as I said earlier, our growth targets are conservative and we aim to use a lot of surplus infrastructure that we already have.