Power scene dull; relying on Mid, Far East orders: BGR

India doesn’t seem to augur well for power plant manufacturers, says BGR Energy Joint MD and CEO A Swaminathan. 
 
According to Swaminathan, the company is looking both in the Middle East as well as Far East for new projects. “In order to keep our order book and see that we make good amount of bottomline as well as topline we need to look outside,” says Swaminathan in an interview to CNBC-TV18. He expects the lull in power sector to pick up in late 2014 or early 2015.

The company recently bagged an order from Iraq for 500 megawatt power plant valued at USD 246 million. Below is the verbatim transcript of A Swaminathan’s interview on CNBC-TV18 Q: Recently, we have seen quite a bit of order inflow for your company, what kind of margin profile could some of these orders enjoy?
A: We just bagged an order from Iraq, this is for a 500 megawatt (MW) power plant in Iraq and is valued at USD 246 million. Since current scenario in India doesn’t seem to augur well for the power plant manufacturers, we are looking both in the Middle East as well as Far East and this is first contract that have been able to get in the Middle East. Going forward, we will see how we pan ourselves in Middle East as well as Far East besides India. Q: Where were you placed in terms of bidding, were you at L1, L3? Also, what margins would you enjoy in this particular order?
A: We were not L1 but there was a problem with the L1 bidders there and that is why we came into bid and ours were far superior than L1 bidders. Also, with regards to margins, we expect EBITDA to be around 12-14 percent which we have maintained in almost all the contracts. Q: Is it becoming a strategy by a lot of companies such as yours to bid for more international orders? Is that a trend going forward because that is something which is an expectation from the likes of L&T and maybe their focus would be more on export as opposed to domestic orders, would that be the case for BGR and is that a trend that the industry is looking at?
A: There is a lull in the power sector in India now for reasons known to all. We expect that to pick up possibly in late 2014 or early 2015. In order to keep our order book and see that we make good amount of bottomline as well as topline we need to look outside.
We have been strategising on this for a year or so. It is not that we just went into the market now and got it, we have been strategising and planning about going out and we were concentrating on the jobs from outside. We are successful quite early just within a year but if things improve in India in early 2015, we will focus here as well. Q: By when do we expect big ticket investments domestically because even the EGoM has made it mandatory for companies to source equipment domestically, Chinese competition was a big problem for companies like yours even that issue has been resolved?
A: Our investment is already planned. It is only staggered in a way to match the market requirement and we expect the investment to improve substantially towards 2014 second half because that is when we expect the market to pick up.