We need to work on Americas & Middle East markets: Welspun

S Krishnan, CFO of Welspun Corp, said that the company's order book is an indication of the road ahead. There are challenges and we will need to work on Americas and Middle East, he said.The upside, he said, will come in the second half of this year. "We have managed to knock off Rs 520 crore of our debt thanks to working capital improvements."He did agree that the business environment was challenging. "Our balance sheet will help it withstand it."Below is the verbatim transcript of S Krishnan’s interview to Surabhi Upadhyay & Nigel D'Souza on CNBC-TV18.Surabhi: It seems to be slightly challenging especially at the bottomline level because you have seen a bit of an expansion in that loss. If you could just take us through where the pressure was this quarter?A: This quarter is again a continuum of what Welspun Corp's business is. We are a projects company so our business runs year on year (YoY). This quarter as was the last quarter, Q4 of the previous financial year, has not been as well as the previous has been.The India part of the business has been doing well but our overseas businesses -- US and Saudi -- have not pulled as long as well as they did last year. So, that does impact the numbers.However, if you look at it in terms of the current reporting, which is under the Indian new accounting standards (IND-AS) the impact seems a little muted. However, fundamentally if you look at our business the order book is a criteria what our business is and what our future is, we have been -- for several quarters now -- in the range of around 900,000 tonne to a million tonne. Even at this quarter, after having executed about 258,000 of tonne of volumes, our order book is about 958,000 tonne, about Rs 5,500 crore roughly in terms of value. That is in many ways is an indication of the road ahead.There are challenges. We will need to work on our business in the Americas and in the Middle-East but I think there is upside that is coming, which we will see more as we go into the second half of this year than in Q1 or Q2.The other thing that we would like, which is something which possibly we can manage internally as a management, is the balance sheet. That agenda we have been pursuing very consistently over the last couple of years, we have continued progress on that. As of March 2016 our net debt which was around just over Rs 2,000 crore under the erstwhile Indian Generally accepted accounting principles (GAAP) system is now around Rs 1,500 crore.Surabhi: That is net debt, long-term and short-term put together, you have brought it down to Rs 1,500 crore?A: So, about Rs 520 crore is we knocked off largely because of working capital improvements. The working capital efficiency of the business has improved as we had indicated that we will be able to do that. Our net debt on an IND-AS basis is less than Rs 1,000 crore and the business environment will remain challenging but our balance sheet strength is what will help us withstand it and as well as help us capture upsides in the years ahead.Nigel: You were talking about your business you were sounding reasonable optimistic so that is good but what about the realisations, your volumes have taken a bit of a knock. The realisations would be higher as well as your margins have seen some compression why is that?A: With IND-AS we are around 200,000 tonne last year’s Q1 was around 193,000 tonne so we are slightly better. If you look at the global numbers, we are at around 252,000 tonne last year whereas this year we are around 251,000 tonne so volumes are not dropped. The business environment as we have been saying remains challenging.We are trying to manage this on a YoY basis. Large projects, global projects is where Welspun comes in as a global player. The business model that we have where we basically service the global markets from our US, Saudi and the India facilities helps us capture upsides in some markets and downsides also are less pronounced.Surabhi: If you could help us kind of give a rough number to that looking at the environment that you just described what is the sort of realistic sustainable level we can expect in terms of margins as we move down the year and also the outlook on the order book?A: The order book as I said we have done about 250,000 tonne on a Indian GAAP basis. We have an order book, which is around 958,000 tonne and if you go based on the order book today, we should be comfortably crossing more a million tonne. This also is based in our performance over last four financial years where we have delivered over a million tonne consistently year after year. Based on that we believe we should be able to continue that trend for this year as well.Margins we may see slackness; we have seen slackness in the last quarter, we have seen slackness in this April to June quarter we may see some slackness in the quarter ahead as well. However, we will see the second half of this year improving in terms of margins and as we come to the end of this financial year the orders that will come in we will see will better than what has been the orders that we inherited when we started the year. So, the margin outlook for the years ahead or the quarters ahead will be better maybe if not for the immediate Q2 but the second half of this year will be much better.