Expect 12-13% margins from Bihar order: IL&FS Engineering

IL&FS Engineering has signed a pact with the Ministry of Road Transport and Highways for a 106 KM two-lane rehabilitation and upgrade project in Bihar worth Rs 675 crore.S Ramachandran, Chief Executive Officer, IL&FS Engineering is very confident that this project is going to be profitable for the company and with the EBITDA margins at 12-13 percent for the project.The company has around Rs 900 crore to Rs 1000 crore of debt in its books, he says, and efforts are being made to efficiently execute orders to reduce them. The implementable order according to Ramachandran is Rs 7,400 crore.Below is the verbatim transcript of S Ramachandran’s interview to Reema Tendulkar & Nigel D'Souza on CNBC-TV18.Nigel: Fill us in with the few details on this project – Rs 675 crore is the size. Could you tell us what kind of margins are you looking at, I asked this question because I was just looking at your last year financials and in fact you were operating at the loss, so this is going to be profitable?A: Yes, obviously the project is going to be profitable. What we need to do is implement the project in time. Cost overrun, time overrun these are all crucial, it is an engineering, procurement, and construction (EPC) project so I think we have a much better possibility, better play there. It is an 106 kilo meter two lane rehabilitation and upgrading project. We are working in Patna-Gaya, is not very far from there, so we can synergise and utilise the strengths and see how we do this project in time. Reema: With Rs 675 crore added to your order book what would be the order book currently and if you do mange to execute it in the schedule time of 36 months then what should be the expected EBITDA margins?A: EBITDA would be anywhere between 12 and 13 percent. Reema: Your order book?A: No, this project. Order book is a mix of some old earlier legacy projects and current. However, the implementable order book is about Rs 7,400 crore. Nigel: I wanted to ask you about those legacy projects, what is the total amount over there? A: That is about Rs 2,500 crore. Reema: What are you planning to do with these?A: We are closing them one after the other. It is a little painful but we are bringing them to closure one after the other. Hopefully, it may take another couple of years I guess to get these things out of the way and focus on projects that are really implementable and that we have in hand.