Technofab Engineering is looking to venture into railways. The company recently started bidding for railway projects with electrification vertical being the key focus. Speaking to CNBC-TV18, director Arjun Gupta said the company has placed bids for three-four projects in railway electrification space though it is yet to see any meaningful pick up in this bidding.
The engineering company is eyeing close to Rs 200 crore ordering opportunity in the railway sector. The company plans to diversify its market in terms of sectors and geographies. Around 40-50 percent of its revenue comes from the international segment, said Gupta.
Below is verbatim transcript of the interview:
Q: In your recent information update on the exchanges, you have spoken about diversifying into the railway segment. Which specific area or vertical will the company possibly venture into?
A: We have looked at the railway electrification part of the business, not the other aspect. But we are open to look at other ones also. So we have already put in about three-four bids in the railway electrification part of the business.
Q: How big can this opportunity be in the electrification segment? Any numbers that you can help us with?
A: The fact that they are looking at investing into the expansion of the railways itself presents a big opportunity for companies like ours and in a year, about Rs 200 crore is an opportunity that would be there for a company of our size, in the railway electrification part of the business.
Q: There have been a slew of announcements by the new Railway Minister. However, has the bidding already started for some of these projects?
A: We have not really seen a lot of improvement yet on the ground level, 'Acche Din' are yet to begin. We will only see the impact of that in a year-year-and-a-half from now because projects are going to get announced, projects are going to get bid.
Ultimately, when we start bidding and we start getting the award of the projects, we are going to be somewhere in end 2015, early 2016 and for those businesses, for those opportunities to come to us. So the impact of that in topline and in business would actually be in 2017.
We also continue to focus overseas, a lot of our business comes from international part, which is in Africa mainly, but 40-45 percent of our business is international and that's been something that has helped us sail through the last three years and manage the business growth, not in a very positive way. But moving forward, at least 10-15 percent growth every year and that's primarily because of the international business because there has not been much traction on the domestic side at all.
Q: Since you mentioned about the African operations, has the work started on the Liberian project? How big is this order?
A: The customer did call us in the beginning of this year for a meeting and they have started to look at ways and means of starting the projects again.
We are looking at putting in claims for the time period that we were not moving on the project and I think that is going to come in the year 2015. The project value is around USD 12 million and so, we will see the effects of that in the new financial year 2016.
Q: What kind of opportunities do the recent coal mine auctions open up for a company in your line of business?
A: One avenue could be the coal mining sector, but that really helps us more in power generation which in the last three years has not seen much opportunities. But again, with the coal mining sector opening up, the auction happening, private developers will go ahead and start putting up plant and that will open up opportunities for us in the BOP sector, in the piping systems, in the firefighting, water treatment, waste product treatment sectors, which have been traditionally our sectors till about five years ago. So, I see opportunities opening up in the BOP sector but that again would be about a year, a year and a half down the line because projects are now going to get conceived and funding is now going to come into
Developers will now start putting plans for approvals, and by the time it comes to BOP contractor, it is going to be one, one and a half years down the line. So, most of the growth that we're going to see on the domestic side in any of the sectors is again a year-year-and-a-half down the line. The opportunities will start opening up for us to bid and more opportunities, more bids.
The prospects will improve, the margins will improve, but again, that is in 2016-2017.
Q: How has the overall order inflow momentum been for the company, particularly in this quarter? Generally, for a lot of capital good companies, this is the quarter when we see the maximum finalisation of orders.
A: In infrastructure space, in construction space that we are in, I don't think quarter-to-quarter really plays a role in our numbers. We look at a year-to-year growth. The projects get delayed, the projects get expedited, so orders get booked, turnovers get booked or not booked.
These things are dependant on the space of the project and not on a quarter to quarter basis. So, we right now have an order book of Rs 1,500 crore and we are maintaining that and are bidding a little carefully because we want to make sure we get orders that are profitable and today, we have an L1 position of about Rs 450 crore. So, out of that I think maybe, one order or two orders might come in before March 31, but I think most of it will be in the first quarter or second quarter next year.
Q: We saw a good bump up in Q3 margins crossing 8 percent and even for the nine months you've maintained a healthy level of 7-7.5 percent. Is that the trajectory we can expect for this year and next year?
A: I think it should be between 7-8 percent. We will maintain somewhere in 7-8 percent range.
Q: What about the topline and maybe the bottomline?
A: On the topline, we are looking at a marginal increase up to about 10 percent, a little below 10 percent of what we did last year, so we are maintaining our numbers pretty much. What we had stated earlier also.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
