The long-term prognosis is very good backed by strong orders and Q4 could be a breakeven performance, said S Ramnath of ITD Cementation.
S Ramnath, CFO, ITD Cementation is upbeat of a bounce back in numbers for the fourth quarter (October to December). The company follows calendar year as their financial year.
The third quarter is traditionally a weak quarter for them and moreover, client-induced delays related to payments added to their woes, he said. However, the long-term prognosis is very good backed by strong orders and Q4 could be a breakeven performance, said Ramnath.
With regards to Ganga Cleaning projects, he said the potential size of the project is very large but it is still some time still for projects to get underway.
ITD Cementation numbers was bit subdued in the third quarter ended September, 2014. The total income was up 8 percent but they reported a net loss of Rs 22 crore because of higher finance costs.
Below is the transcript of S Ramnath’s interview with CNBC-TV18's Latha Venkatesh and Ekta Batra.
Latha: What were the main concerns that led to this net loss?
A: The main reasons I would say were three fold. First of all June to September quarter is traditionally the lowest in the construction space because of monsoon and other reasons and we have had elongated problems in some sites. So that affected our progress.
However, that apart there were operational issues on certain projects because of client induced delay in payments and other things. Therefore, we had basically gone slow on some of these projects because we don’t want to get into a working capital situation.
Latha: Clients would largely be government guys?
A: About 65-70 percent of our projects are through government or quasi-government bodies, but 30-35 percent is still from private parties.
Latha: Who is the bigger defaulter on payments, is it government or is it private parties?
A: I won’t say defaulter but that they are going slow on payments. So we can’t push projects fast enough. We had to incur some cost in Jammu because of the situation there and those kinds of things, and we also had to take a write-down some projects because of continuous payment issues. So we withdrew from some projects.
Ekta: Do you expect that to continue into the next quarter as well?
A: December quarter is our last quarter for the company because calendar year is our financial year. So, last quarter is traditionally better but generally profitability pressures will continue for some time in our industry.
Although our orderbook is robust and we are doing well, long-term prognosis is very good but current client liquidity related pressures on project executions will continue for a couple of quarters.
Latha: Have you heard from the Ganga Cleaning Authority guys, have you got any orders from them?
A: No orders yet because they are still focussing on cleaning the water and other things, those kind of things. That has to come first. Naturally any development of the river front and other things and those will come later.
Ekta: We have a question from one of our viewers Mr Rahul Rana from Varanasi for you who asks ITD Cementation was responsible for Sabarmati River Project which was roughly about Rs 300 crore in size. Now the Ganga Cleaning Committee has been formed under the new government as well. What is the rough potential of an order size of this project?
A: This is a question I have addressed earlier also. The potential size is very large but then as I said since Ganga is a very long river, 1,600 kilometres and how much of that needs to be taken up in what time frame, those are the questions one need to ask.
Latha: Would you turn around into the black in the current quarter itself Q3 or would it take Q4?
A: Q4 I would expect to be about breakeven sort of a quarter I would say or something around that at this point of time, but going forward our order book today is pretty good Rs 4,400 crore odd plus we have already bagged orders worth about Rs 500 crore odd till date in October and in the early six days of November. So, going forward we look at much better performance.