New orders to revive growth in second half: KNR

Unseasonal rainfall slowed execution, impacting the June quarter earnings, K Jalandhar Reddy, Executive Director (ED) of KNR Constructions told CNBC-TV18. KNR Construction’s net profit fell 24.2 percent to Rs 15 crore and total income from operations reduced 27.6 percent to Rs 171.21 crore in the June quarter. The company currently has Rs 78 crore of debt on its books.  The company bagged new orders worth Rs 2,600 crore in April and May. Total order book stands at Rs 3,600 crore, Reddy said adding that the orders have to be executed within two years. Advances from the orders will be used as working capital for the company, he said. Reddy expects growth to revive in the second half of year. In the June quarter, the company executed National Highway Authority of India (NHAI) projects worth Rs 700-800 crore. The company has bid for more NHAI projects in states like Uttarakhand, Punjab and Maharashtra, he said.Below is the transcript of K Jalandhar Reddy's interview with Anuj Singhal & Ekta Batra on CNBC-TV18. Anuj: Last quarter wasn’t really good for you. Your income was down substantially, your Earnings before interest, tax, depreciation and amortization (EBITDA) was down, profit also was lower. What is happening in that space and what is the outlook for rest of the financial year?A: I agree that our first quarter went a little bit down because of unseasonal rains as well the orders were received-in April and May. We have received recently new orders about worth of Rs 2,600 crore.These orders can only be executed after 4-5 months from the date of order received as there is a responsibility of designing and environmental clearances and all other issues are pending. Even to mobilise any highway contract, we would be taking around five months. The new contracts whatever we have received, those are under mobilisation stage, so we couldn’t do much about it, but third and fourth quarters definitely we are going to do good.Ekta: We understand that your Kerala Build–operate–transfer (BOT) project was hindered in terms of execution because of the rains. When do you expect it to pick up and hence when will contribute?A: We have completed the provisional completion of the Kerala BOT project. Around 86 percent project is completed and we have been allowed tolling also. This is almost six months ahead of schedule we have achieved. By this next month end we will be able to complete the 100 percent of the project and which is again two months ahead of schedule on this project.Ekta: So, can you tell us what might your order book be at this point in time and what has been the sequential increase that we have seen in terms of your orders, say from Q4 to Q1 and what it might increase to in Q2?A: Yes, before March we have around Rs 1,300 crore of order pending. After April, May and in the month of June, we have received orders worth of Rs 2,600 crore and out total order book stands at Rs 3,600 crore by today and all these orders are to be executed in 2.5 years time. Anuj: For the new projects that you are looking at right now, what kind of margin picture would you target going forward from some of these new projects?A: These new projects are all well in line with our old achieved margins only. There are no decreased profits on that. We will be achieving as good as we have achieved earlier.Ekta: One of the things that stood out is-though it is on a lower base, there was a reduction which came through in finance costs this quarter. What is your debt position at this point and maybe even your working capital?A: Rs 78 crore is the debt what we have right now. All the new projects would get us some advances, so further working capital is easily manageable. Ekta: How much has been bid for by National Highways Authority of India (NHAI) in FY’16?A: In FY16, we have executed almost Rs 700-800 crore NHAI projects.Ekta: And how much has been open for bidding and how much of that have you bid for?A: Coming two months we have about 30 odd bids focused in various places like in Punjab, Uttarakhand, Uttar Pradesh (UP), Madhya Pradesh (MP) and partially in Maharashtra lot of bids are coming in and in these two months only 30 bids are there of big ticket size. So, bidding is happening in a very good manner and all are engineering, procurement, construction (EPCs).