Good order inflows from Oil & Gas space: Engineers India

Engineers India announced its fourth quarterly earnings. The company saw an increase of 14.96% in standalone net profit to Rs 190 crore for the quarter ended March 31, 2012 as compared to Rs 165 crore in the same period last year.

During the quarter, the company saw a rise of 30.38% in standalone total income to Rs 1,317 crore from Rs 1,010 crore in the same quarter last year.
In an interview to CNBC-TV18, Ashok Kumar Purwaha, chairman, Engineers India talks about his company’s fourth quarter results. He says FY12’s margins have been in-line with the company’s expectations.
“But the fourth quarter has seen higher margin pressure because normally you try to provide with all the warranties, guarantees etc rising out of your order book position when you are doing the final accounting process,” he adds. Below is an edited transcript of his interview. Watch the accompanying video for more. Q: While sales have been quite strong for you this quarter, there is some pressure on margins. What led to it? How much of a recovery do you expect to see in margins going forth?
A: For the year-round, our margins have been reasonably in order and it has been what you have been seeing as guidance in the earlier quarters. So it should not be seen as isolated as a quarter, because the last quarter is the one where normally you try to provide with all the warranties, guarantees etc rising out of your order book position when you are doing the final accounting process.
So if you see the year-round ones both in the consultancy segment as well as in the lump sum turnkey segment, you will see that they are right in orders what we have given guidance in the earlier times. Q: What is the order book standing at now? What does it look like for FY13?
A: In fact the 12th plan which has just started from April 1 and the government’s guidance for the 12th plan expenditure for the infrastructure sector, including the hydro carbon sector has been extremely strong. They are talking something in the range of USD 1 trillion of capital expenditure coming in, in the 12 plan. Most of these 12th plan documents from the various different sectors are getting finalised.
So it is giving a very healthy sign of projects, which are coming both in the oil & gas sector, and the newer sector on which we are likely to be going in. Be it fertiliser sector, nuclear sector, infrastructure, to water and waste water management, city gas distribution etc. We see that in the coming years, the way the 12th plan document has been presented; it is going to give a lot of opportunity for us to be taking up the project activities in other core areas and in our diversified areas.
Besides that there has been a lot of stress from our side in the overseas market and the Middle East market. We are getting into the South East Asian markets. We are already present in part in the African markets. So in the coming years the investment climate has already started looking up in many of these areas. These are the areas where our core strength of working is. We expect the coming years to be good. Q: We understand the contribution from your consultancy and your engineering projects have been growing. What kind of margins do these projects enjoy? Are they higher margin projects?
A: In fact we do all kinds of consultancy work. There are certain high ended works; where high quality engineering inputs are needed where our margins are on a little higher side whereas others have detailed engineering kind of activities, where the lower kind of skills sets and knowledge pool needed there the margins are a little tight. But overall we have been able to maintain a very healthy margin mix, which one can see from the segmental profits what we have presented. Even in the lump sum turnkey segment also compared to the market perspective, we have been doing extremely well.