Expect orders from defence, mining sectors in Q2: BEML

The first quarter of FY14 may be little sluggish in terms of order flow for state-run heavy industrial equipment maker BEML for which opportunities look bright in times to come.

In an interview with CNBC-TV18, P Dwarakanath, CMD, BEML said that he expects healthy order flow from defense and mining sectors. Currently, the firm's order book stands at Rs 5800 crore. The firm which supplies rail cars for the Delhi and Bangalore metros expects a turn around in Q3FY14 on the back of steady order from its mainstay sector, the railways."Profitability in rail sector is going to be much more than last year", he said. Read This: Rail Budget 2012-13: Increased demand for coaches to benefit BEML Below is the verbatim transcript of his interview to CNBC-TV18 Q: Can you take us through where that 40 percent plus jump in sales came in Q4 – what kind of orders have kicked in and whether this growth or pick up is sustainable? A: Basically, we moved well in the mining sector, mining construction equipment in the last quarter was very well and rail has been steady through the year. The difference of the last quarter we were able to make up quite a few projects that got delayed. So, all three put together we are able to give a net sale of Rs 1,122 crore and profit before tax (PBT) of Rs 43 crore. This growth is going to be quite okay for the first quarter maybe little sluggish. However, second quarter we are going to pick up on the mining and defense. Rail is going to be very steady and Q3 is going to be a big turn around for us. That is how the mining construction equipment goes on. Q: For FY14 what is the order book for BEML look like as you open the year? A: We are almost at Rs 5,800 crore order book positions and have a very comfortable order book position in railways, almost about Rs 1,800 crore. On the defense we are almost about Rs 2,000 crore and the mining equipment will start off with Rs 450 plus. As it goes every day we want to pick up quite a few orders in the months to come. The main hope is that coal production is going to be ramped up almost 62 to 65 million tonne this year. That throws up lot of opportunities for us in the equipment side which we have a very strong presence. We got a good market share in mining construction, high in equipment. Q: What does it mean for profitability because FY13 despite a strong Q4 you still have earnings before interest, taxes, depreciation, and amortization (EBITDA) level loss – do you see that changing around in FY14? A: Yes. If one looks at FY13 we had to make two things. One has been that some provisions we had to make. We moved very-very conservatively and we doubled the precaution. Two, our expense has gone up a little. As we can see in the months to come our mining construction equipment is going to pick up a lot. As I told you the coal sector is going to go up because the production will move up and that is going to matter a lot for our profitability. The second point is the rail and metro segment which was a little loss making. In FY13 we moved into positive side. From minus 21 of FY11-FY12 we moved into plus 37 in FY13. That is going to add up quite a bit. Profitability on rail sector is going to be much more than last year. We are going to get back growth. There was an issue set back FY13, which is going to be better. We are finding some solutions to go forward. By Q3 we should be getting into a much better numbers at the bottom level. Q: That defence order book is the tricky part, what is the risk right now of cancellations on defence space because of the issues as you alluded to? A: There is no cancellation. It is a question of finding some solution on some tricky issues which we should be quite hopeful to be able to find solution very shortly. There is no question of any cancellation as such on defence side.