Current order book is at Rs 15000cr: Gammon India

Gammon India has declared its first quarter results. Its net loss stands at Rs 19.6 crore versus profit of Rs 28.9 crore on year-on-year (YoY) basis.

In an interview to CNBC-TV18, Girish Bhat, chief financial officer of Gammon India says, the company’s order book has been quite strong. "It is around Rs 15,000 crore," he adds. Below is the edited transcript of his interview with CNBC-TV18's Gautam Broker and Ekta Batra. Q: What is your view on margins? What led to this significant cut this time? How do you see it panning forward? A: I think the main cause is our top-line growth. The top-line growth has been down by 10%. It is mainly driven by the funding to our various sites because we have got a tough environment, especially in the liquidity side of the business. Since April, all the banks have stopped giving unsecured loans which were in the business, especially for the infrastructure. We are in the process of securitising all these unsecured loans. That is taking little time because of the bureaucracy in the banking circle. So, mainly the funding to our production and manufacturing sites has been impacted. The fixed cost at the sites has been constant. Therefore, it has impacted our top-line growth. It has created an impact on our EBITDA margin. So, EBITDA margins are down by 3 percentage points, at around 5.5%. We were operating at around 8-8.5%. Q: Execution pickup is slow because of stretch working capital cycle, how do you see that changing? Has that affected your top-line this time around? Do you see it improve in the coming quarters? A: You are absolutely right. The infrastructure industry is going through a little bit of tough times because of delayed policy decision making, impact of liquidity in the market place, and slowdown in the production. The impact is also in terms receivables. Our receivables have gone up by around 25%. Our inventories are up by around 15%. So, all these have impacted our working capital. It is a cycle which we would like to come out with. I am sure it will take around one more quarter for us to come out of it because we are in the process of working with banks in terms of securitising all our unsecured loans. That is taking little more time. But the good part is our order book has been quite strong. It is around Rs 15,000 crore. Of that, around 35% is on transportation, around 40% is in energy and power and around 25% in the building, water and irrigation projects. Since the order book is quite good, we are quite confident. It will take some time for us to come out of this, but we are sure we will do that and make it happen. Q: With regards to the order book, you did mentioned that the order book remains strong, could you just highlight exact position of the order inflows was in this quarter? Which sectors did you see the maximum strength from? A: We have received an order worth around Rs 1,000 crore. It has been encouraging that we are in the commercial and residential building sectors. We want to grow quite strong. We have got one prestigious order of around Rs 400 crore with Brookfield. We are in the process of constructing in the next 24 months, an 82 storied building at Bombay Central. We are very positive and optimistic about the orders, though it is a tough market because the competition is tough. So, therefore, we don’t want to quote in terms of the orders with lower margins. We are very cautious at what price we order and get those tenders. We are quite optimistic, but we have to be really disciplined in terms of how we get those orders and at what margins. _PAGEBREAK_ Q: Your debt has doubled in FY12 versus FY11. What is the current debt on the books for the company as of today? There was some talk that there could possibly be paring down of debt via asset sales, could you give us an update on that? A: Our debt today stands at around Rs 3,200 crore. It has been funded by a lot of short-term loans. So, really we would like to get into securitising this debt. It is not right time for us to divest our assets, if one wants to really reduce the debt. But we will be on that process over a period, over the next few years. The good thing is that all these debt can easily be supported by the assets which we own. I think we have taken a lot of debt last year to support our metropolitan projects, where we have secured clear land titles to an extent of around 185 acres. And that has pushed our borrowings to an extent of around Rs 600 crore.