Commenting on the company receiving letter of acceptance for a project worth Rs 596 crore from Tamil Nadu Distribution Company, Satish Parakh, MD, Ashoka Buildcon said the work will start from Q4 of the current year and expects net margins to be around 6 to 7 percent.
The power ministry's decision to integrate the Southern grid with the rest of the national gird shows government's keenness to strengthen the power distribution network, so every state will now focus on distribution, he said in an interview to CNBC-TV18.
The company will now try for distribution in Bihar, Punjab, Odisha and other states and are in the process of bidding in Odisha and Bihar.
On equity requirement for completion of under development projects, he said the company would require Rs 400 crore; Rs 150 crore will be from internal accruals and rest from a tie up with Macquarie.
Moreover, although he expects second half to be better than first in terms of growth but expects to maintain revenues same as last year.
Below is the verbatim transcript of his interview on CNBC-TV18
Q: Could you give us some more details about this, when will the revenues of this flow into the company, will it be the whole thing, will it come in the next fiscal year and also what the margins on this project will be?
A: This is a project by Tamil Nadu Distribution Company and the revenues would start flowing by Q4 of this year. Work will start in Q4 and overall margins what we have seen in power transmission and distribution (T&D) sector are around 6-7 percent.
Q: Power Grid is reacting today to the news that the southern state power deficit could possibly now be eased much more because the southern Power Grid is now connected to the national grid. In that sense have you heard of incremental order inflow coming in from distribution companies in order to strengthen the distribution system and do you see that for the company itself, are you all bidding for more projects because of this?
A: Yes definitely government of India is very much focused on strengthening their distribution network because generation and transmission are now already stabilised. So every state is now focusing on distribution network, we are already working in Maharashtra, Chhattisgarh and Tamil Nadu and we are trying for newer states like Bihar, Punjab and other states.
Q: On that account have you seen incremental order inflow come through or are you in the process of bidding?
A: Yes we are in the process of bidding in Orissa and Bihar.
Q: You also indicated that the margins in power distribution orders etc are about 6-7 percent, are these operating margins or net margins?
A: Net margins.
Q: With respect to the other orders that you all are planning to bid for could you give us some more details what would be the size, when will it get finalised?
A: As far as road sector is concerned we today have RFQs pending of around Rs 20,000 crore. We expect these orders to come in the last quarter or may be Q1 of next year.
Q: Which are the projects that you are bidding for or which are the sectors where you have seen execution take off much faster in terms of projects and in terms of orders and hence would that make you more bullish on bidding for those kind of projects going into FY15 just to detail what is picking up and what is moving more quickly of the ground?
A: Karnataka state is focused on bringing out road projects. Tamil Nadu we expect to see few more projects to bid out and execution if you say we have been doing well in Karnataka, in West Bengal. Odisha we do face certain troubles but still we are able to complete in time schedule.
Q: Could you tell us what the company’s current equity requirement is for your various projects which are under development?
A: We require around Rs 400 crore for the balance work to be completed.
Q: How is the company planning on getting this equity requirement of Rs 400 crore?
A: Out of this Rs 150 crore Ashoka would be brining in and Rs 250 crore is tied up with Macquarie. We would be seeing next tranche of Rs 100 crore from Macquarie in Q4 of this year.
Q: Any guidance that you can leave us with in terms of how the second half of the fiscal is panning out versus the first?
A: First versus second would be much better but overall we won't see any growth in the year, we will be almost matching the revenues of the last year.
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