New order in Oman to add 10-15% to revenue: McNally Bharat

McNally Bharat alongwith EMC has won a new order worth Rs 2048 crore from Sohar Bitumen LLC in Oman. McNally's share in the project will be nearly Rs 1,024 crore. McNally’s Wholetime Director and Group Chief Financial Officer (CFO), Prabir Ghosh told CNBC-TV18 that the new order will in achieving double digit margin growth this year. The company has been given 20 percent amount upfront, Ghosh said adding that the execution period of the projects is 24 months. With this project, the company’s order book stands at Rs 6,000 crore, he added.The company has parternered with Engineers India to provide technical support for the project. Ghosh said the company is working on its business strategy and plans to concentrate on high value projects instead of higher number of orders. Ghosh expects consolidated margin of 8-9 percent and revenue growth of 10-15 percent in FY16. The company is looking to win more orders worth Rs 1,500 crore to Rs 2,000 crore in the current year. Below is transcript of Prabir Ghosh’s interview with Reema Tendulkar and Sonia Shenoy on CNBC-TV18.Reema: Some details about this order, the timeline of execution, the kind of margins that you will enjoy, how much will it add to your revenues?A: This is an order in Oman. This is in a Bitumen refinery, which is coming up in the Sohar area and the total size of order awarded to the special purpose vehicle (SPV) were both, Mcnally Bharat (MB) and EMC group are 50-50 partners on about USD 315 million and out of which Mcnally share will be about USD 157 million, roughly about Rs 1,024 crore. The execution of the project is around 24 months from the date of receipt of the order. The advance is expected to received maybe after the first week of November and this order has got a 20 percent upfront advance so, that also helps the company with liquidity and cash flow. And this being a processed order and this will have a double digit margin for sure. We have also taken Engineers India as a technical partner, because this being a Bitumen project where EIL is one the leaders in the technology. So, we are taking Engineers India as one of the technical partner in the order.Sonia: So, there will be a 20 percent upfront advance which will help you with your working capital. This order has come in from Sohar Bitumen in Oman, any more order visibility that you are getting from the Oman region?A: Let us first consolidate this order, but definitely there are a number of opportunities in that entire area which we are seeing. And unlike others, we are not concentrating on pure construction. We are targeting value added order mainly in the oil and gas sector because a lot of refining capacity is going to be built in that same area and we have an eye on that area. So, we will right now focus on value-added orders in this area.Sonia: So, what would this order take your total order book to?A: With this our total order book will be close to Rs 6,000 crore as of today. Reema: Is this project too, a value added order win for you which means basically, are these margins higher compared to the company average?A: Yes, definitely. Margins are much higher because  these are double digit margins. So, margins will definitely be higher.Reema: So, if these are the kind of orders that you are targeting from here on, by the end of this year, FY16, what could be the consolidated margins of the company?A: It depends again on the pattern of execution, which we are working out. So, at this stage it will be a little difficult because we have just received the order. So, all the nitty-gritties are being worked out. But consolidated margins, we should expect to be close to around 8-9 percent.Sonia: And in FY15, your revenues were around close to about Rs 2,200 crore. What revenue growth would you expect by the end of FY16?A: We are still trying to exceed that revenue by at least 10 to 15 percent, so that is our plan.Sonia: You did mention that you have Rs 6,000 crore of order book currently, but what could be the order visibility for the company for the next six months?A: Next six months, as I mentioned, we are totally re-strategising our business. We are trying to reduce number of orders, but actually targeting high value orders so that our efficiency and productivity increases. Having kept this thing in mind, maybe we will be targeting another Rs 1,500-2,000 crore max within this financial year because we have to close all the existing jobs which are at the final stage. We will target not more than Rs 1,500-2,000 crore till March 31. And after that, definitely, we will build the order book.Reema: Will your margins be in double digits next year, FY17, as these new high margin orders start kicking in?A: Yes, next year definitely we can expect the margin should be much higher because total effect of the entire business, which we are targeting should get a full-year effect in that year.