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Last Updated : Sep 03, 2015 02:27 PM IST | Source: CNBC-TV18

Expect 13-14% EBITDA margin in FY16: KNR Construction

In an interview with CNBC-TV18, Reddy says the company‘s order book stands at a healthy Rs 3,600 crore, most of which are EPC based projects.

KNR Construction will see revival in growth with a strong order book post its low June quarter earnings, says the company’s Executive Director (ED) and Chief Financial Officer (CFO), K Jalandhar Reddy.

In an interview with CNBC-TV18, Reddy says the company’s order book stands at a healthy Rs 3,600 crore. Most of these are engineering, procurement & construction (EPC) projects that will be completed in the next two and a half years, he adds.

Reddy expects EBITDA margin to grow by 13 to 14 percent in the current year.

The new orders are coming from government boards like the Ministry of Surface Transport and Highways, he says. He sexpects the build, operate & transfer (BOT) Kerala project to monetize in two years. 

Reddy says the company is not looking to raise capital for construction orders as the clients have to pay 10 percent advance fees.

Below is the transcript of K Jalandhar Reddy's interview with Nigel D’souza & Reema Tendulkar on CNBC-TV18.

Reema: Your Q1 performance was not that great, in fact your revenues were down 28 percent, and your profits too were impacted on the back of higher taxes. How has Q2 panned out? Two months already in this quarter, could you give us an update on the order book, what would be the extent of the new orders that you have received?

A: In April and May 2015, we received around Rs 2,600 crore worth of new contracts and we concluded agreements in June and July of this year. We already have an order book of about Rs 1,300 crore till March end.

So, all the orders put together - Rs 3,600 crore is the outstanding for us. We have a good challenge that we can go ahead and do all these projects within time. Entire order has to be executed within 2.5 years.

Nigel: A good healthy order book is what you are sitting on but what about the margins, the company has maintained margins. How do you see them going ahead?

A: We have been delivering 14 percent earnings before interest, tax, depreciation and amortization (EBITDA) level margins. We will deliver 13-14 percent in future also. I don’t see any hazards in that.

Reema: What are your plans in the Kerala build, operate, transfer (BOT) projects, do you plan to monetise them any time in the future?

A: Yes, we are looking forward to another two years to see securitise this project or monetise.

Nigel: Then where do you see maximum orders coming in from? Investors, they are bullish on road building, have you seen any kind of queries come in from power transmission, renewable energy space?

A: Actually, most of the orders are out from Ministry of Surface Transport of India and National Highways Authority of India (NHAI), which are Central government projects.

Even state governments are coming out with lot of World Bank projects. So, there had been lot of orders inflow that is going to come and we are also targeting our self to get another Rs 1,000 crore worth of contracts by this March end.

So, we have very good targets in front of us, growth is plausible for our company and even our investors are expecting that we shall deliver all these in time.

Reema: So you have already received orders worth Rs 2,600 crore. You are targeting Rs 1,000 crore more of orders, by the end of the year. Will you require capital at all for your execution?

A: Yes whatever we have, all the order book is with Engineering Procurement and Construction (EPC) mode only and we get an advance of about 10 percent from these clients. So, definitely we don’t require much funding right now.

So, going forward we may see if we require any but as of now with this 10 percent mobilization advance what we get, that we will be able to utilise and see that all these projects are done in time.

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First Published on Sep 3, 2015 12:58 pm
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