See strong order pipeline; aim to lower debt: Shriram EPC

In an interview to CNBC-TV18, T Shivaraman, MD & CEO, Shriram EPC, says order traction has been good for the company, especially after the newly-awarded Rs 214 crore and the Rs 200 crore orders. He also sees a strong pipeline of fresh orders is bullish about the business.

As of now order book backlog for the company stands at Rs 4000 crore but bulk of the execution is expected over the next year, he adds. So, even though the topline for the current year would be muted, there will be substantial growth over the next two years, says Shivaraman. The company is also looking at paring down its debts. It sold a cement asset worth Rs 550 crore, so after the amount comes in the P&L, the debt would stand at Rs 1000 crore, he adds. Also read: Expect to beat Nasscom guidance on $ rev growth: Persistent Below is the verbatim transcript of his interview on CNBC-TV18 Q: Just a few days back the company won orders worth Rs 214 crore, could you tell us some more details about it, when will the revenue from these reflect in the profit and loss account and what the margins will be on this order? A: Basically these are two orders one is of about Rs 150 crore from Bharat Petroleum Corporation (BPCL) for works at their Kochi refinery expansion project and the other was a Rs 57 crore order from MCBM Bombay for a pipe rehabilitation contract. These are typically two year contracts, so we will see the revenues flowing over the next two years. Also one and half months ago we announced another Rs 200 crore set of orders in the water business. So we are seeing good traction in order flow. Margins would vary in different verticals, so margins will be fairly decent and as we go do the engineering we will see how things work out. Q: In terms of your overall order backlog where do you stand and what kind of numbers do you think you will be able to deliver in the full year? A: We have currently a backlog of north of Rs 4000 crore of orders. Execution of bulk of these will happen in the next year. This year will be little muted because some of the orders were received quite late in the year and there were delays in the financing by the customer but now Rs 4000 crore is financially closed. So we expect this year the top line to be flat compared to last year but next two years we see substantial growth because most of these Rs 4000 crore will have to be built out in the next two years. We will also see pipeline of fresh orders so we are reasonably bullish about business as things move forward. Q: Your finance cost in the last quarter was more than double of your EBITDA itself, your finance cost was at Rs 68 crore versus an EBITDA of Rs 32 crore, where does the debt currently stand at and what are the plans with respect to pairing it down? A: Our debt is little skewed because we had a large exposure to a cement asset Jayajothi Cements which we sold in the last quarter. The cash inflow from that sale has not yet fully filtered into our P&L because the transaction happened in the last quarter and the money is not yet fully in the P&L. So once that comes in the debt numbers would be lower. Also because last quarter was monsoons quarter in our water business, we could not do much revenue in the quarter. So top line was quite depressed, that will correct itself in the coming quarters. Q: How much is the cash you all got from the sale of that cement business? A: We have got a total of about Rs 550 crore of cash from the transaction and most of it is in now but there is little bit left but once that comes in our borrowing position will be better. After that debt will still be north of Rs 1000 crore but we are working on reducing it.