See Rs 600 cr revenue in FY17 from orderbook: Walchandnagar

He further said that the company will focus on defence and aerospace going forward and sees these sectors along with missiles contributing 65 percent to its FY17 revenue. 

Walchandnagar expects a growth of 20-25 percent in its operating profits for FY17, he added.      Below is the verbatim transcript of GK Pillai’s interview with Latha Venkatesh and Reema Tendulkar on CNBC-TV18. Reema: While the improvement in your margins is heartening it is still a loss of Rs 15.5 crore in the quarter gone by. For FY17 do you have the confidence to say that the company will be in the green or report a profit on the bottomline? A: Definitely FY17 the company is on a present strong order book of Rs 1,000 crore. We are planning a sale of Rs 600 crore for the year with a profit of almost about Rs 660 crore on profit before tax (PBT). What Walchandnagar Industries has been doing is, if you had seen, we have been puting a lot of emphasis earlier on the legacy businesses of EPC of sugar and boiler which slowly we are coming out of it because of lower margins and a very stiff competition from not so high-end manufacturers. So, the company is going to put more focus, the company has already started putting focus on the defence, nuclear, aerospace and missiles in these segments. For the coming year 2016-17, the focus is almost 70 percent on this segment and it is only about 30 percent on the traditional business of sugar and boiler. Latha: Were you not going to demerge all these units? When is that going to happen? A: Nothing has been firmed up on those lines, on those aspects. Though there has been some discussions but nothing has been firmed up yet but the focus whether it is demerged or not demerged even as Walchandnagar Industries entity per se, the focus for the company will be more on the strategic sectors. As we call it the DNA of the company wherein our strong point is the DNA of Walchandnagar Industries will be the DNA i.e. defence, nuclear, and aerospace. Reema: Since you are shifting away from your legacy business does that mean your margins will also improve? You have given us a guidance in the PBT levels of 10 percent, what about at the EBITDA level? A: It will definitely be almost about 20-23 percent at the EBITDA level. The margins will be better in this business but at the same time I would like to also mention here that though we are shying away from this legacy business but there are certain projects which are already there which we will have to complete and which will also have some impact on the results for the next year. Latha: This Rs 4,000 crore can you give us a breakup as to where the orders are coming from? A: Not Rs 4,000 crore, I said the present order book is about Rs 1,000 crore of which we plan to do Rs 600 crore for the coming year. Latha: What is the defence position then? A: Defence, nuclear – nuclear is not much, but in my present estimates we have not considered any new inputs from the nuclear business. Once the Civil Liability for Nuclear Damage Act (CLNDA) issue gets sorted out then only the orders will start coming and the sales will happen. Perhaps in the year 2017-18 but for 2016-17 of what we plan about Rs 600 crore, we feel that the defence, aerospace and missiles, these three segments will almost constitute more than about 65 percent. Reema: When we look at your notes to account, it appears that some inventory has been held up which is worth Rs 26 crore on account of cancelation. Will you be looking at perhaps writing off this inventory or are you hopeful of recovering the amount? A: No, not at all. We are not going to write-off those inventories at all. Reema: But it has been there for a few quarters? A: I know it has been there for quite a few quarters but these are all very critical imported equipment which has been bought for a certain cement plant and it is lying in the inventory. So it is not one of those materials which can be just sold off. It is the material which has got real intrinsic value. Latha: You said Rs 1,000 crore order book, in February when we interviewed your team, we got a number of Rs 1,250 crore, so order book is less now? A: Rs 1,200 crore were the order backlog at that time. Even now the order backlog is Rs 1,200 crore but for a Rs 200 crore order it is in the sugar and energy segment. Basic problem of Walchandnagar Industries was very low margins in the sugar business so we are trying even whether we should accept such orders or not and the order which has been delayed, it is Rs 200 crore order has been delayed for a pretty long time. Latha: Your finance cost is also high; will you be paring down debt? A: We have such a plan of some of the non-core assets what we have either to sell them so that the finance cost can be brought down. Primarily this is basically on account of the high tax or interest burden for servicing the two large projects.