Collections improved in Q1; FY14 EBITDA likely at 12%: BGR

Denying any kind of executive issues on its present order book, PR Easwar Kumar, chief financial officer, BGR Energy says the company saw improved collections in the quarter gone by (Q1).

"As on March 31, 2013 our number of days receivable was about 250 days. It has come down to 205 days as on June 30, 2013. The working capital continues to be at Rs 2,200 crore. We are expecting that by the end of the year we will collect another Rs 200-250 crore and reduce the working capital," adds Kumar in an interview to CNBC-TV18.

Additionally, Kumar expects the company to post an EBITDA of 11-12 percent in FY14 and a profit after tax (PAT) of around 5 percent.

Below is the edited transcript of Kumar's interview to CNBC-TV18.

Q: Your company has delivered a very strong topline growth for this quarter, is this because the company has been able to finalise orders in this quarter, can you take us through the revenue run rate?

A: The revenue growth is basically based on the project scheduling. These are all the orders that we already have on hand which are under execution. We have made a revenue of Rs 820 crore in Q1, of which Rs 760 crore is from power projects division and Rs 60 crore from the product division. Out of this Rs 760 crore, 55 percent comes in from the engineering, procurement and construction (EPC) division and 45 percent from balance of plot (BoP) contracts. This entire turnover is based on the project scheduling.

Q: Just to understand this a little better, it is because the company has won some big orders which have been in the pipeline for long and have just gotten finalised in this particular quarter is it not?

A: Yes, our contracts are basically executed over a period of 3-4 years. So, these are all contracts which are already there in the order book which are getting executed.

Q: Could you help us with how the order inflow position has looked like in the quarter gone by and what have been the key orders that the company has announced?

A: Our closing order book is about Rs 11,900 crore which includes Rs 1,550 crore of order coming in from Odisha Power Generation Corporation Ltd (OPGCL), which we have received recently. So, this gives a clear visibility for the next four years in terms of last year revenues. Last year, we did a turnover of about Rs 3,100 crore. So this gives a clear visibility for the next four years. Our pace of execution will be much higher. In the current year, we expect to do about 25 percent more than the last year.

Q: In particular, can you throw more colour on how the boiler turbine generator (BTG) order inflows have been because the environment suggests very dull ordering activity. We saw that in the case of Bharat Heavy Electricals Ltd’s (BHEL) earnings as well and BGR issues also are pretty much similar to something like a BHEL as well as Thermax?

A: On the BTG, we have received orders from National Thermal Power Corporation (NTPC). We have close to about Rs 7,500 crore orders, which are there in the order book. These are 4-6 boilers for NTPC and two turbines for NTPC project.

Q: Is the company facing any execution issues on the present order book mainly because of delays from the client side as we have seen with other companies in the same sector?

A: Not really. The contracts are going as per the schedule because these are all contracts, which have the necessary clearances and the projects are under execution. The customers are basically NTPC and state utilities. We have two Independent Power Producer (IPP) contracts. The project execution is going at a good pace there also.

Q: What is the working capital cycle of the company right now, have the working capital days on a year-on-year (Y-o-Y) basis worsened compared to the last time?

A: The collections in this quarter have been better. As on March 31, 2013 our number of days receivable was about 250 days. It has come down to 205 days as on June 30, 2013. The working capital continues to be at Rs 2,200 crore. We are expecting that by the end of the year we will collect another Rs 200-250 crore and reduce the working capital.

Q: You also said that you will be doing about 25 percent revenue growth in FY14, do you also still hold on to your guidance with respect to margins because last time we spoke to you, you said that the margins could decline to 11-12 percent versus about 14 percent that you had seen in the previous fiscal year?

A: Yes, on a product mix, depending on the execution, the current year, we would expect that the EBITDA would be around 11-12 percent and profit after tax (PAT) of around 5 percent.