Order book at Rs 11k cr; see 8-12% margins: Kalpataru Power

Sonia: Can you tell us the nature of these orders and what does this bring your total order book to?

A: The new orders which we have received on September 30th are for transmission line international projects and oil and gas pipeline project in the country. The transmission line international projects are in Malawi and Kuwait which have to be delivered over the next 24 months. The oil and gas pipeline project is from Oil and Natural Gas Corporation (ONGC) which needs to be done in next 24-30 months.

However, the orders which we have secured in the first six months are in the range of Rs 3,500 crore much better than what we had done in the complete previous year.

Latha: At what margins do these come?

A: All the orders are at different margins levels, but typically our operating margins are in the range of 8-12 percent, but every order would be different depending upon the nature of the job and fixed price, variable price and some of those aspects.

Latha: What is the percentage of your order book that comes from aboard?

A: As of today I think more than 50-55 percent of our order book is international at a standalone Kalpataru Power Transmission Limited (KPTL) level.

Sonia: Out of this Rs 3,500 crore order book that you are sitting at, can you give us the breakup of how much is coming from infrastructure, how much from transmission or pipeline projects?

A: This Rs 3,500 crore are the orders which we have received in the first six months. It is not necessarily our order book; our order book is much higher. However, out of this closer to 75 percent comes from transmission the balance 25 percent is infra and besides this we are L1 in orders worth more than Rs 2,000 crore which has split equally between domestic and international which should come in the next few months depending upon whenever the approval comes through. However, with this I think we will have clear visibility of revenue at least for the next 18 months or so._PAGEBREAK_

Sonia: What is your total order book?

A: Our total order book as of end of Q1 was around Rs 5,500 crore and then depending upon the revenue for the quarter should be anywhere in the range of Rs 5,500 crore-6,500 crore.

Latha: Are you sure the entire international order book does get implemented? I mean we have got even mighty companies like Larsen & Toubro (L&T) worrying about their international orders. Are they all likely to be fulfilled?

A: Majority of our orders are in areas where we don’t have any impact of anything to do with let us say oil or terrorism or any of those. Therefore, if you look at the last three years, our international revenue has grown up ex-potentially by 25 percent year-on-year. So, in three years from USD 150 million, our international revenues crossed USD 300 million and so as the order books.

So, I don’t see any major concerns because we have been in the international area for more than ten years now and with exposure to more than 40 countries yes, it is challenging, but I don’t see that as a concern. We built our organisation to make sure that we deliver.

Latha: It is not company specific it is more that governments don’t have any money; their commodities are not earning enough money. It is just that international governmental budgets are shrinking. So, which are the major areas from which you get orders globally?

A: Currently, we are mainly operating in Africa, Commonwealth of Independent States (CIS), South Asian Association for Regional Co-operation (SAARC) and Middle East and North Africa (MENA). If you remove the Middle East area majority of them are funded by one of the funding agencies which would be African Development Bank Group (AfDB), World Bank, African Investment Bank (AIB) and in the MENA regions we have very limited orders in Kuwait and Qatar. It is not that the exposure is very huge.

Sonia: Can you give us a guideline on what your income growth could look like by the end of the year? Because in FY15 give and take everything your income grew just about 1 percent. On a base of Rs 7,200 crore of revenue how much do you think you can grow by the end of this year?

A: On a consolidated basis we wouldn’t have very significant growth on the topline. Our current year focus is significantly on improvement in margins. If you see our first quarter as well as whenever you see the second results you will see significant improvement in margins coming from some of our subsidiaries. So, it is not going to be significant as far as revenue growth is concerned. Our focus is more on making sure that improvement in there in profitability. So, current year we wouldn’t have very significant growth on topline.