Exposure to defence orders increasing, says Premier Explosives

Nigel: I wanted to understand couple of details; this order is only around Rs 34 crore orders. First things first who is your competition, do you have competition coming from the domestic industry, is it an international order who is your competition in that sense and also you had told us in the past that expect margins to improve going ahead. You are currently doing around 9-9.50 percent. So give us some more details about this order? Is it margin diluted, is it accretive? What is it?

A: This order which we have won was a global tender and we competed against international companies and we got the order. The order is for a product called chaffs and flares which are used as a countermeasure by the air force, navy as well as in army.

Reema: Could tell us the timeline of execution, the margins and with this order what would your net order book stand at now?

A: The timeline is that it has to be completed by the end of 2017. I can’t tell you the margins and other things which you asked for.Reema: What about the order book, where does it stand at?

A: In the last quarter the order book was standing at about Rs 273 crore and present order book as on December 31st is almost the same Rs 268, but the defence part last quarter was about Rs 112 and this quarter is Rs 128.

Nigel: The proportion of your order book that has exposure to defence that is increasing?

A: Yes.

Nigel: You don’t want to give us exact details in terms of how does this affect your operational performance but just tell us one thing your proportion of defence orders increasing. Is that good in terms of operating profit, can you at least give us that?

A: Absolutely, it is much better than the commercial. Commercial has lot of competition and another good news is that Indian Space Research Organisation (ISRO) they have also selected us for making one of the motors for their launch vehicles and that is a great entry for us to get into ISRO market.

Reema: You are clearly participating in global tenders, you have expressed your intention of being a global player and in that regard you had once told us that you were open to divesting stake and bringing in strategic investor. Could you give us some update on that?

A: As you said that we are looking at global markets and we have tied up for two to three products with the original equipment manufacturer (OEMs) and that process is on. Probably by next month or so we will have some numbers clear and then we can tell what capital we will be raising. Certainly, we will be raising some capital for our internal accruals and some by dilution and some by getting more loans.

Nigel: Could you tell us what kind of a stake at least you are looking to dilute? You are Rs 300 crore marketcap, so what kind of funds will you be looking to raise via dilution in particular and also are you in talks with any foreign investors as of today?

A: We are talking to a number of investors and I can’t give you the names until everything is settled down.

Nigel: What kind of a stake are you looking to dilute – 10 percent, 15 percent, 20 percent?

A: Maybe between 10 percent and 20 percent.

Nigel: You look to raise Rs 32 or 60 crore, that is it?

A: Yes, between Rs 32 crore and 60 crore, you are right, almost in that area. We will also supplement it by internal accruals and also another bank loans because right now we are almost debt free.

Reema: If you could also tell us then what the order pipeline is currently looking at? Are you participating in more such tenders and if you could give us some colour on that?

A: We are participating in many tenders and one by one they are in our favour. We have also quoted for another thing called aerial target imitators for air force and if that comes through it will add to our kitty.