HCC expects higher turnover in Q4: CFO

Hindustan Construction Company's (HCC) third quarter profit slipped 28.4 percent year-on-year (YoY) to Rs 19.4 crore, hit by provision of Rs 45.50 crore for forseeable loss. It was also hit by lower revenue but operational performance supported bottomline.Praveen Sood, Group CFO, HCC in an interview to CNBC-TV18 spoke in detail about the third quarter performance and the outlook going forward.Below is the transcript of Praveen Sood’s interview with CNBC-TV18\\'s Reema Tendulkar and Sonia Shenoy. Reema: Your topline has declined on a year-on-year (YoY) basis. Can you help us understand the key reason for the same. Was it on account of a slowdown in execution? A: Yes, basically not major problem, but since few of the work which is happening in NH-34 and some of the work which is happening in the Kishangarh because of the seasonal snowfall at these areas and some disturbances in these areas of Jammu and Kashmir the work has slowed down. So, we have a marginal dip in turnover. However we are very sure that we will pick up in the coming quarter. Sonia: The margins on the other hands have expanded considerably. Are these margin levels sustainable? A: No, these margins are not sustainable. Let me explain you why. Normally my business gives me a margin of close to about 11-12 percent and we keep on getting claims. So, again this quarter we have received claims worth about over Rs 215 crore or so which gave me a good margin of close to about Rs 90 crore. So, that is why we got roughly about eight percent margin on these claims extra over and above the normal margin. That is why the margin looks really on the higher side. The normal margin which we make from normal business is close to about anywhere from 11-12 percent only. Reema: So you did indicate that the recovery of the National Highways Authority of India (NHAI) claims helped your profits this time around. So, could you tell us what the total amount of claims is outstanding currently and by when do you see this issue resolving with NHAI? A: We are getting claims for the last eight quarter continuously and one or other claims keeps coming every quarter. That is why our margin continues to remain above 15-16 percent throughout the entire last eight quarters. These are the awards which comes in our favour for the arbitration and then they get enforced into basically the NHAI or NHPC whomsoever the counter party is. They go and enforce these claims into the court and so far today we are sitting on claims worth about Rs 3,000 crore which we got awarded in the last two year period. We have collected close to about Rs 400 crore of money against these claims through the court route.