See operating margins at 22-23% ahead: ABG Shipyard

India's largest private shipyard, ABG Shipyard has been delivering about 15-16 ships every year from the past three years. In FY12 as well, the company delivered 15 ships, chief executive officer D Datar told CNBC-TV18.

Datar doesn't see any challenge on the execution front. However, tough macro environment is weighing on company's order flow. "Global economies are not well, what is affecting in India is the interest costs, non-availability of money and working capital," he added.

Meanwhile, the company is confident of maintaining operating margins at 22-23% going ahead.

Below is the edited transcript of Datar’s interview with CNBC-TV18. Also watch the accompanying video.

Q: Could you start of by detailing what happened in FY12 in terms of ships that were delivered and what the target is for FY13 or even the first half of FY13?

A: With regards to number of ships delivered, we have been doing extremely well. In FY12 we have delivered 15 ships and should be the highest in India by any shipyard. This is not for this year only, but for about last three years we are delivering about 15-16 ships every year. On operating front I don’t have much challenge. The yards are doing well.

What is happening is on other fronts; global economies are not well, what is affecting in India is the interest costs non-availability of money, working capital. Long-term debts are far to come by. These are operating difficulties which are faced by not only us, but most companies.

Q: To offset that the rupee must be helping you since most of your earnings are export earnings aren’t you being cushioned by the fall in the currency?

A: Both yes and no, as we say export earnings are better because you realise a better rupee than earlier, but at the same time imports also hurt. Sometimes you mismatch the timing of receipt and payments.

Q: What does the order book look like as you step into the New Year and what is it that you think that you can comfortably protect in terms of a margin performance for ABG?

A: As far as margins are concerned, it is better now to talk about EBITDA levels because that is where operating performance counts. If you see EBITDA level margins, we have been consistently doing above 20-23% which is far better in the environment that we are operating.

Even within the shipyard community in India, I don’t any body is doing as good as we doing. But at the PAT margin nothing increases because most of the PAT goes into payment of interest, the higher depreciation, so all these are basically the affecting factors.