The disappointing June quarter numbers were an aberration because of some problems at the client level and because of working capital issues, JP Chalasani, CEO, Punj Lloyd tells CNBC-TV18.Also, operating profit declined because of the hit from the currency depreciation in Libya, he says.These issues have been resolved, and the company's performance for the remaining quarters of this fiscal should look up, Chalasani says.He says the order book for the June quarter was around Rs 3700 crore, compared to Rs 7000 crore for the whole of FY15. He expects the order book for the first half to increase to Rs 10,000 at the very least.Chalasani is confident that the company will be able to meet its standalone revenue guidance of Rs 8000 crore and consolidated revenue guidance of Rs 10,000 crore. Below is the transcript of JP Chalasani’s interview with Latha Venkatesh & Sonia Shenoy.
Sonia: It has been a very troublesome time not just for your own company but for a whole host of infrastructure companies in your sector. Do you think it can get worse than this or is this the worst that you have seen in terms of financial performance?
A: As far as the Punj Lloyd is concerned, I do agree that sectorally there are some issues but to be more specific about Punj Lloyd the quarter one has been a bit of an aberration for us for valid reasons. If you look at our topline which is somewhere around Rs 685 crore is down mainly because of two reasons. One, about Rs 300 crore we couldn’t do because of the clients related issue in our offshore business both in India and abroad. These issues are more or less resolved except for one project which also is also likely to get resolved by the end of this month. That is one reason why we lost about Rs 300 crore which we should be able to recover in this quarter and the next quarter.
However, a significant reason why our topline has been less this year, this quarter has been because of the tight liquidity position. We had absolutely no working capital coming into the operations in the last quarter. That is because the corrective action plan through the Joint Lenders Forum (JLF) route which was started or launched by banks sometime in September 2015 got concluded only end of June. Therefore, during the quarter we hardly had any working capital coming in to the operations.
Now that has been done we have an incremental fund based and non-fund based working capital which started flowing in towards end of July. These two factors put together is what our topline has come down otherwise we would have shown higher than the quarter-on-quarter as well as last year the same quarter topline as per our targets.
However, because these two issues are now resolved the both client related issues as well as working capital related issues we expect that progressively in the next three quarters we will be able to pick it up and at the end of the year we will be back on stream of what we set ourselves as a target._PAGEBREAK_
Latha: What should we expect as a run rate for revenue if that Rs 300 crore order is back on track? Should we expect Rs 1,000 crore runrate?
A: More than that, as I said earlier we should touch anywhere around about Rs 8,000 crore for this year in the balance quarters. However, for two or three reasons why we think that we will be able to hit that run rate. One is because the working capital issue is behind us now and the fund started flowing in significantly. Second, these issues got resolved. Third, the order pipeline has been exceedingly good this year. For example, in the first quarter the order size of a one or we have been placed as a lowest, the most favoured bidder has been about Rs 3,700 crore.
All of last year the order book has been Rs 7,000 crore just in the quarter one we are about Rs 3,700 crore and another Rs 27,000 crore bids are been put in and we are just waiting for the results and Rs 27,000 crore more worth of bids are due in the next 45 days which have been shortlisted by us; we are not bidding for everything in project. If you look at it about Rs 45,000 crore worth of bids would get decide in this quarter even if we take a hit rate of about 20 percent. So we will cross Rs 10,000 crore of order book in the first six months itself.
So, therefore looking at the new order book coming in, looking at the working capital is behind us in this quarter, looking at the client related issues being behind us the aberration what we had in the quarter one would be behind us. Obviously it is going to be gradual pick up in Q2, Q3 and Q4 because new orders would take some time to give us revenue. I am reasonably confident that we will reach the target of Rs 8,000 crore plus.
Latha: You said Rs 8,000 crore revenue? You are expecting that that means Rs 2,500 crore every quarter?
A: Absolutely, It won’t be an equal distribution in the quarters.
Latha: I just wanted to know whether I heard the number right?
A: Absolutely.
Sonia: I was just looking at your profit and loss (P&L) and even your interest cost on a quarter and quarter have gone up so this quarter it is about Rs 235 crore versus Rs 188 crore last quarter. Do you think the interest cost will continue to balloon because you were mentioning tight liquidity situation? What can we expect in the quarters to come?
A: The reason the interest cost has been higher this quarter compared to last quarter by about Rs 40 crore is mainly because one is the Libyan bank guarantee what we have given for Libya projects, the bank guarantee charges have been recovered one time now for about 30 crore and about Rs 15 crore is what cost us in terms of upfront fee and advisor fee and everything for completion this cap that is about Rs 45 crore. If you take out that we are exactly at the same level as last quarter about Rs 189 crore or so.
Another reason which I need to mention is that our EBITDA has been negative in this quarter mainly because that Rs 150 crore we took hit on exchange rate in Libya. Now we are working towards settling our claims across the table because the cash in for us today is more important than cash coming in few months later or few years later. In fact we recovered more than Rs 300 crore of cash this quarter. In the process we have given up about Rs 100 crore. We have written off Rs 100 crore on this so that is the reason why we see the EBITDA negative. Rs 150 crore of exchange rate and Rs 100 crore of write off but it gave us more than Rs 300 crore of cash into the company.
For entire interview, watch accompanying videos.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
