Pune-based Vascon Engineers, which recently secured orders worth Rs 245 crore for construction of two residential projects, says that company will enjoy margins of around 15 percent for these projects.
The bigger of the two orders at Rs 130 crore is from UP Housing and Development Board and the other order, valued at Rs 115 crore, is from Sheth Creators Pvt.
Managing Director R Vasudevan told CNBC-TV18 that timeline for the project win ranges from 30-36 months and that it has been selective in bidding for orders.
He further said that macro-economic slowdown is leading to delays in project execution due to which the company has incurred some losses.
Meanwhile, the company is looking to raise Rs 100-150 crore via asset sales and rights issue. It aims bring down debt from the current Rs 320 crore.
The company had reported Rs 14.52 crore net loss during the October-December quarter on a revenue of Rs 85.03 crore.
Below is the verbatim transcript of R Vasudevan’s interview with CNBC-TV18’s Reema Tendulkar and Sumaira Abidi
Reema: You have won new order close to Rs 245 crore. Could you tell us the timeline of execution and what the margins will be on this order?
A: We have order from two locations; one from Lucknow and other from Mumbai. The margins on these would be in the region of about 15 percent. One of the orders from Lucknow is for a three year period, 36 months contract and the Mumbai order is about 30 months contract period.
Sumaira: What are the margins you will be enjoying on these products and can you tell us what your order book now stands at?
A: Traditionally, on profit after tax (PAT) level we usually end up at about 6 percent, but on a gross level we touch about 15 percent on the projects, if we complete the projects in time and as per schedule. It is only when the projects goes beyond the schedule period or if there is an unusual escalation during that period that the pressure on the margins get hit. But traditionally that has been our experience in projects where we have been able to do it within time. If the client is been able to make those payments for us to complete those projects within time then we will have had a good healthy bottomline, but in the last two years we have had issues on those matters and we have taken a hit on the bottomline on some of the projects. These two projects are of about two-and-half to three years.
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Reema: What excited the street is that on a year to date basis up until December 2013 your order win stood at Rs 252 crore and you have got an amount which is equal to that, just in one go in the month of March. Does that provide you a lot more by way of revenue visibility for FY15 and if you could tell us what your growth estimates will be for next year?
A: We have an order backlog of about Rs 1,100 crore today. In between for a year or so we were lying low, trying to finish our backlog of orders which were not adding to our bottomline. We were in a phase of consolidation and we have been choosy about picking projects, choosy about picking up the clients. We focus now more on design build contract, we have good control on designing a construction friendly project and that is the key reason that the margins will become better for us in the days to come.
Sumaira: On a nine month basis, on a consolidated basis you are reporting a loss of about Rs 17 crore odd. Where will you end up for the full year and when can we expect that you would perhaps break into the black?
A: These are the effect of the backlog projects which got delayed and which had got stuck because of the economic scenario and cash flows from the client for whom we did these projects. We had to carry these losses in this year. Going forward in the quarter we will still be doing the same numbers in the same proportion as we had shown for the first nine months.
In the coming year 2014-15 we definitely are online to improve bottomlines. We should turnaround during that year although may not be substantial but in the next year, in the ’15-16, back to our old margins and we should be – plus these new order books and the better bottomline, we should be back to the old levels.
Reema: Do you all still have any backlog orders which resulted in your having lower margins, any of these legacy order that are still with the company and if you could quantify on that?
A: There are some of them which we are closing. That is why I said during this period of the year, we will continue to show the uptrend as what we showed in the first nine months, but going forward there are also other planning which we are doing in the company in terms of some asset sales and some of the increase in real estate income which will improve our bottomline.
Reema: You said that your total order pipeline is Rs 1,015 thereabouts and out of that Rs 1015, how much would be these backlog legacy orders?
A: There would be about Rs 150-200 crore or so
Reema: You mentioned that the company is also looking at various asset sales etc. Could you quantify that?
A: In the coming year, we are looking at raising about Rs 100-150 crore by way of asset sales as well as getting in some rights issue done and issues like that, so that we reduce our overall debt level exposure which is at present at about Rs 320 crore, bring it down and take it forward.
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