Longwall technology to boost rev growth, margins: Gayatri Proj

Below is the verbatim transcript of TV Sandeep Reddy's interview with Reema Tendulkar & Nigel D'Souza on CNBC-TV18.

Nigel: Reports indicate that you have got couple of offer projects where Longwall technology is used; it's a technology that is used for underground mining of coal. Can you confirm this? We believe that one of those projects is a joint venture (JV) with a Chinese company. Is that true? What exactly is your stake in that JV and also there is another project of Rs 325 crore with Bharat Coking Coal Ltd (BCCL). Could you confirm both these two orders?

A: The first orders with the Chinese company which is Eastern Coalfields, the Longwall is already been supplied by the Chinese company called China Coal Overseas Development Company (CODCO) and the contract with China Coal is that they have to supply the equipment and also operate the equipment for about six years and extract the coal and supply the coal to the Eastern Coalfields. We have joined as the operation and maintenance contractor from the Chinese, so Chinese are giving us the technology and we will be operating the mine for about six years.

Nigel: What is the order size?

A: It's been about 1 million tonne per annum for about six years. It will be small order of about Rs 400-500 crore over a period of six years.

The other order which we won is developing the mine and then the Longwall mine which includes supplying the equipment and also tunnels and everything including conveyor system and all the EPC work is with us and once that is done by 2018-19, we will start operating the mine for ten years. So that is a separate contract, part of the contract is part two. So part one that we have disclosed about Rs 400 crore is only the EPC component of the contract and the other partner who is supplying the Longwall is caterpillar, so that is a part of consortium with them.

Reema: The first order is about Rs 400 crore. The second order, what would be the potential revenues for you?

A: The potential revenue will be huge.

Reema: Any number because you said it is over ten years?

A: EPC revenue is about Rs 400 crore over the next three years but after that when it's about 2.2 million tonne of coal and approximately the rate is around Rs 700-800 ,which is nearly Rs 200 crore of revenue for the next ten years because the mine gets operational after 2018 or 2019.

Nigel: These couple of orders that you have got for this kind of Longwall technology for mining. What is the total capacity, what is the total number in terms of million tonne and what is the potential because Coal India is talking about around 800 million tonne, 700 million in the next few years. So what is the potential that you can get of orders coming in from underground mining from Coal India?

A: The first order is about 1 million tonne approximately per annum of extraction and other is about 2.2 million, so 3 million tonne. Currently Coal India compared to their entire 400-500 million tonne of coal production, their underground is only about 3 million which they want to apparently increase to 100 million over the next five years.

Reema: This seems to be a lucrative. Are you in talks for further partnerships and order wins?

A: We are also looking at bidding other future projects.

Reema: Any in the pipeline right now?

A: Nothing right now but we are expecting few bids in the next 12 months.

Nigel: You normally do 13.5-14 percent in terms of margins. For these projects that are for underground mining, this Longwall technology that you are going to be involved in, what kind of margins can you enjoy?          

A: Between 15 and 20 percent.

Reema: What is the investment that you had to make in it?

A: There is no investment. We are only a service provider. The equipment is invested by Coal India subsidiary.