Kalpataru Power expects rail order book to double in FY17

The company reported good set of earnings for the fourth quarter, revenue increased 26 percent to Rs 573 crore year-on-year (Y-o-Y) and net profit clocked an impressive 80 percent gain to Rs 72 crore (Y-o-Y).Below is the verbatim transcript of Manish Mohnot's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18. Sonia: The margins looked very healthy this time at 25 percent. Is there scope to generate higher margins in FY17? A: In FY17, the margins would definitely be better than FY16 on a totality basis. Although our operating margins would continue to be in the range of more than 10.5 percent but given the volume growth projected of 25 percent, the absolute numbers would be much higher compared to what we have done in the current year. Sonia: You said that margins in FY17 could be better than FY16. What about the revenue growth? In Q4, you have generated about Rs 600 crore of revenues, which is a growth of 26 percent. Tell us about what the triggers could be in FY17 and what kind of growth are you expecting? A: We have order book visibility of around Rs 10,000 crore as of now. Given the order book visibility, which we believe that we should be looking at a minimum 25 percent growth on revenue, this revenue growth will also help us improve margins. Latha: Where are the orders coming from, are they domestic, are they foreign orders as well? A: Current order book is 50 percent domestic, 50 percent international but in the next three-six months we believe a lot more orders to come from the international side. So going forward, we believe that current year a lot more order should be international than domestic. Latha: Are the margins better there? A: Yes, typically international projects have better margins given the risk ratio and also working capital cycle is much lower in the international projects compared to the domestic projects. Latha: Should we expect that in FY17 your margins would be at double digits so better than even current year? A: In terms of operating margins, yes, more than 10.5 percent, so current year we have done in the range of 10-10.5 percent, we should be 10.5-11 going forward into the next year. Sonia: Any plans to reinitiate the process of listing or for your subsidiary Shubham Logistics? A: Not in the next few years at least. Sonia: What about the order breakup? Most of your orders have been coming from Power Grid. Has the ordering increased from Power Grid, can you give us more colour on that? A: We are seeing a lot more traction coming from Power Grid and state electricity boards (SEBs). In the last six months we have got a lot many orders from Power Grid. On the domestic side, out of our order book, our total consolidated order book around 30 percent is domestic is India out of which 50 percent is Power Grid. Latha: What did you say your order book is now? A: Standalone order book, we have visibility of around Rs 10,000 crore as of now and consolidated order book including JMC in the range of Rs 16,000 crore as of now. Latha: If you were to include any of your L1s? Do you have L1s in any more orders? A: Yes, we are L1 in approximately around Rs 2,000 crore as of today, which we believe will materialise in the next few months. Latha: This usually would last you for how many years or months, this kind of an order book, Rs 16,000 crore consolidated and Rs 10,000 crore standalone? A: We have clear visibility of revenue for the next 24 months as of now. Including L1 it would be more in the range of 27-30. Sonia: Any orders from the railways? A: We are seeing a lot of traction on railways and lot of tenders have come up in the last three-four months. Order book on railway is around Rs 600 crore today but we expect it to double in the current year. So, huge traction coming up on railways both on orders as well as on delivery. Latha: JMC projects have a lower margin than yours? A: Yes. Latha: Can you up it? A: Typically JMC is a contracting business which has less value addition than Kalpataru. So 8.5-9 percent is a margin projection there. From where we were two years ago -- we were at 4-4.5 percent -- we have nearly doubled in three years. So I think we should be at 8-8.5-9 percent going into the New Year. Latha: There order visibility is Rs 6,000 crore? A: Yes. Sonia: You said that 25 percent revenue growth is what you are looking at for FY17, right? A: Yes.