See full year EBITDA margin at 9%: McNally Bharat

Despite a second quarter profit dip, McNally Bharat's Wholetime Director & Group CFO Prabir Ghosh expects full year topline to be better than the previous year. He expects to clock Rs 2,200 crore sales for the full fiscal year. He expects to see full year EBITDA margins at around 9 percent.

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Ghosh says the company's borrowing has gone up because of payments getting tight in the market. As a result of this, interest payout too has gone up, he adds. He expects the borrowing level to come down by March. Below is the verbatim transcript of Prabir Ghosh's interview on CNBC-TV18 Q: Your earnings were a bit disappointing. We saw your profits decline 80 percent on Year-on-Year basis. It come in at just Rs 1.6 crore. What is your expectation of how the second half of the year will pan out?
A: For the full year we definitely expect our top line to be higher than last year. We are expecting that we should be able to have a top line of about Rs 2,200 crore for the full year. If you really go into the numbers for this year what we can find while there is a little increase in EBITDA margin, from last year's half year level of 8 percent it has gone to 9.9 percent.
However, borrowing of the company has gone up and because of that interest payout has been high this year which we have also mentioned in our earlier releases that because of payments getting tight in the market the overall payments position has definitely temporarily been affected and the company's overall cash flow has been slightly under strain and to take care of the business the company has to increase its borrowing levels, which has increased the borrowing level and as a result the interest has gone up. So the decline in profit is mainly because of the higher interest during this period which has gone up substantially. Q: What led to this increase in operating margin and is this sustainable at 9.9 percent?
A: Increase in operating margin is definitely sustainable. We can definitely see around 9 percent EBITDA margin for this full year. In the first half mostly the beginning for design at the high margin area happened so the EBITDA margin is generally there in the first year, but even if we see the second half margin overall year we expect that the margins should be higher at around 9 percent definitely. Q: On account of this working capital stress do you all see the need to increase your borrowing limit further from where it currently stands at?
A: As on today there should not be any increase in the overall limit. What exactly the borrowing has gone is basically working capital cash credit utilisation level has gone up. We expect to see strong visibility of some of the payments coming off some of the public sectors by March where actually our money was stuck up for a substantial period, because there is some positive development because some of the project has been gone for preliminary inspection which is through, so constituent upon that in the second half we expect some of money coming from those outstandings and receivables and by March we think the borrowing level should definitely be lower than what it is today. Having said that interest cost for the full year definitely will be on the higher side, but we do not need to increase the borrowing any further than what we are today.