Expect order book to continue over Rs 10,000 cr: KEC Intl

KEC International declared their third quarter results. According to the press lease their net sales were up 23 percent and the order book has crossed Rs 10,000 crores. Profits stood at Rs 29 crore, excluding a Rs 43 crore gain from land sale which was last year. So profits stood at Rs 29 crore against Rs 37 crore but last year the profit got boosted.

In an interview to CNBC-TV18, Ramesh Chandak, managing director, KEC International said their cable business did not do well but for their core business of transmission there was no drop in margins which stood at 8.7 to 9 percent.

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He further said, they have a good order base of Rs 10,000 crores and the Power Grid Corporation of India Limited (PGCIL) order book now stands at over 30 percent as against 15-16 percent earlier.

He expects momentum of order inflow to continue. "We expect our order book to continue at more than Rs 10,000 crore levels, in spite of our execution going up," he asserted.

Below is the edited transcript of his interview on CNBC-TV18

Q: Can you take us through what else impacted the profit, Rs 29 crore would be a tad disappointing and what is the margin picture?

A: You are right that the margin at Rs 29 crore looks very low in relation to Rs 37 crore, on a smaller turnover. One of the main reasons is that we had some new profit centers established like power system, cable, telecom, railway, water and because we have taken many orders for the prequalification purpose. Two, the cable business which is an established business of ours did not do well because cable market currently is under tremendous stress. However our core business of transmission, the margins are still at 8.7-9 percent. So there is no drop in our regular core business.

The new businesses are almost striking a breakeven level and probably this will get corrected in two quarters time. After that we are seeing that going forward, margins will be better. It is good that we have created order base of Rs 10,000 crore, which will help us to grow even in the next year.

This year, growth has been very satisfying and we have grown at 23 percent. Overall, if you look at the order mix, we have tremendous amount of orders from Power Grid Corporation of India Limited (PGCIL). The PGCIL order book itself is now over 30 percent which used to be 15-16 percent earlier.

Q: What is the blended margin this time?

A: It is only 6.1 percent.

Q: Can you throw some light on the other income which has fallen to Rs 7 crore versus Rs 57 crore on a year-on-year (YoY) basis?

A: Yes, it is because of the land sale. Entire difference is only land sale

Q: Can you throw some light with regards to the finance cost also for the company which has risen on a YoY basis by 27 percent, what is the average run rate that we could expect in terms of finance cost for the company?

A: If you look at the finance cost in terms of percentage of sales, it is same. Last time it was 2.9 percent, this time as well it is 2.9 percent. Since, we are an infrastructure company; our large borrowing is the working capital, which increases in line with the turnover. So, if there is a growth in turnover, there is a growth in finance cost at the same rate. There is not a single difference in that.

In fact in our working capital interest has been lower because this year, we have taken the loan for our cable plant of almost Rs 150 crore and that interest has also started hitting our balance sheet. In spite of that, our interest to sales ratio is still the same.

Q: Most of your orders have been from the transmission sector up till now, can you just detail what sort of order inflow can we expect going forward for you?

A: We are seeing the momentum continuing. Today, we have Rs 10,000 crore order book, in spite of our execution going up by 30 percent. So, our order intake has been quite substantial. We expect our order book to continue at more than Rs 10,000 crore level, in spite of our execution going up.