Expect topline growth of 10%, EBITDA over 8% in FY17: KEC Intl

KEC International's revenue and earnings before interest, taxes, depreciation and amortization (EBITDA) were below estimates in the third quarter ended December. Vimal Kejriwal, MD & CEO of the company, attributes a flat topline to low commodity prices. Furthermore, he says that KEC's Brazil business was impacted due to the currency issues. One of KEC's clients, Power Grid, has currently bid for projects worth Rs 4,000 crore, he says, adding that KEC's total orderbook stands at Rs 9,200 crore.Meanwhile, the company is targeting 20 percent volume growth this quarter and has guided for 5 percent topline growth in FY16, Kejriwal says. He expects topline growth of 10 percent in and EBITDA margins close to 8.5 percent in FY17. Below is the verbatim transcript of Vimal Kejriwal’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Sonia: You haven’t seen any up move in your topline this time, so that would come as a bit of a disappointment. Can you take us through what the order book was in this quarter and what is the order visibility like for the next six months or so?A: If you look at our order book for this year we have announced orders of roughly around Rs 6,700 crore from April onwards which is almost 24-25 percent higher than the corresponding period last year. If you look at the order book as a stock today, then we are roughly around Rs 9,200 crore which is slightly higher than what was there last time. So, it is in line with our flattish topline. Order book has grown and we do expect that with our L1 of Rs 3,000 crore the order book should be decent at the yearend also. Latha: Your earnings before interest, tax, depreciation and amortization (EBITDA) is very good how would you manage an EBITDA of 54 percent higher although the topline is flat?A: As far the topline is concerned most of our orders have a pass-through clause on the commodities. If you look at the commodities, aluminum, steel and copper both have been down by almost let say 30 percent or so. So, many of our order, let us say we are selling steel towers to Power Grid at Rs 80,000 now we are selling at Rs 60,000 so, which is where the issue on the topline is there. We don’t have quantitative details shared with you but otherwise if you look at the quantitative numbers we have done almost 20 percent higher in terms of physical volume of work. The second impact which we have on the topline is that we have a Brazilian subsidiary SAE Towers which by itself is doing very well but the Brazilian Real (reais) by itself has come down from 2.8 to 4 for the year. So, that has an impact on the translation, when you translated into the Indian numbers. As far as EBITDA is concerned I think last year we had some negative numbers coming out of our this same US subsidiary and also of our infra businesses. Those have improved significantly. So, while transmission remains our bread and butter and has been doing around anywhere 8-10 percent these businesses had substantial negatives coming last year which has come down significantly.Latha: So next year what should we expect 10 or even better?A: Next year should be 10. Let us see if the commodity moves positively it can be better than 10 also. I am talking about 10 percent growth based on the current commodity prices. Latha: Let us get an EBITDA guidance going then?A: EBITDA from last year 6 percent this year we should close anywhere between, nine months we are at 7.7 percent. So, hopefully we should be around the same number or may be slightly improved. We have been talking about 7.5 to 8 of the year. Next year we will probably closer to 8.5.(Interview transcribed by Vrushali Sawant)Watch video for full interview