See order growth; margins to be in double-digits: Transformers

Cost rationalization aided margins growth in the fourth quarter of FY16, says Vinod Mason, Director of Strategy at Transformers & Rectifiers. The company reported 51.8 percent rise in total income to Rs 248 crore and operational efficiency improved to Rs 28 crore. The EBITDA margins expanded to 11.1 percent.The company’s current order book stands at Rs 900 crore. Most of the orders come from State Electricity Board and power utility companies like NTPC and PowerGrid, he says. The company’s focus continues to be on special industrial transformers, he adds. Mason expects margins to sustain in double-digits, adding that the company has exposure to healthy SEBs only. Below is the verbatim transcript of Vinod Mason’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: It is an extraordinary performance in the Q4, it still pulls up your yearly average. It is a little difficult to predict FY17, would it be as good as Q4, would it be better than FY16?A: It will definitely be better than FY16 and I wish we could maintain the same growth at which we have -- the figures which we have achieved for the Q4. However, I think it may not be same in all quarters but more or less we will try to come near to that. The whole team is quite upbeat now; the Q4 has given a good boost. The team was feeling a little demoralised because our first nine months were not very good; this three months has boosted the morale of the whole team. We are all looking forward to that and I don’t think we will be looking at negative anymore.Sonia: I just wanted to ask you about what the order inflow has been in this quarter? Can you give us more details on your order book and where are you seeing a pickup in order activity, is it from the state electricity boards (SEBs), is it from any of the private players or from names like Power Grid Corporation (PGCIL)?A: Basically the predominant business is from SEBs and the central utilities like Power Grid and NTPC. In the last year or the last quarter which we are talking about, we haven’t got anything from NTPC but our bulk of the business has come from SEBs and PGCIL. We got a very good order from Power Grid for 14 numbers 765 KV transformers and Power Grid is now looking up because we already have tenders worth about 48 transformers and 118 reactors of 765 KV.The 400 KV business is picking up from all over, Power Grid as well as SEBs. So, that gives us a good opportunity to expand the order book further. Today we are carrying order book of close to about Rs 900 crore and that is a very healthy order book from any standard. We are practically full for the next year and looking forward to some gaps here and there which we are confident of booking in near future.As far as the industry business is concerned, I think we have told your channel about couple of months back that our focus is on the special industrial transformers and I am very happy to tell you that we have got a very good order, the largest to be manufactured by any Indian manufacturer a furnace transformer of 130 MVA for Mexico and that is big and once we supply that it will open up the whole market for us because that market outside India was mostly with the European manufacturers.Latha: This Rs 900 crore order book you are talking about, does it include that L1 status you said you were in at the end of your Q3 numbers, you said for four of 315 MVAs you were – it includes that?A: We got that order.Latha: Will your margins be around this 5.5 percent, can it do better?A: We are looking at around that. At the moment our objective is that the EBITDA this particular quarter we have achieved 12 percent. If we can keep the EBITDA at double digit, we are confident that we will be able to do well.Sonia: The issues were for the last many quarters that the SEBs were not paying, there were a lot of over dues over there. Have you seen an improvement there?A: There is an improvement. We are not concentrating on the SEBs where they are in trouble. We have been primarily where the money is coming. So, we are okay on that because bulk of our supplies are to the SEBs which are not that unhealthy, rather they are healthy ones.