Will continue to report steady performance in core biz: EIL

Ashok Kumar Purwaha, Chairman of Engineers India says the industry has been facing slow pace of growth on projects side for almost a year. “We are evaluating newer geographies in international markets,” he told CNBC-TV18 in an interview.

Engineers India's net profit fell 16.17 percent to Rs 129.34 crore on 35.55 percent decline in total income to Rs 511.22 crore in quarter ended June 2013, compared same period last year. Purwaha says the company continues to report steady performance in its consultancy business even in a weak environment. Below is the verbatim transcript of his interview to CNBC-TV18 Q: If you can first just take us through the key pressure points that the company is facing not just in this quarter, but in the quarters to come and whether your numbers will continue to be subdued like this? A: I think as you know that we are into the two segments of our business one is the design engineering and project management consultancy segment and the other is our lump sum turnkey segment. You must have noticed that the design engineering consultancy, which is our core business and where we have a good – margin numbers are much of a larger size that has seen an upward trend compared to the similar quarter last year. Even if you compare it with the last quarter we have maintained almost a similar position. So, what it really shows is that even when the markets are subdued for the last 2-2.5 years in the project sides we have really done well in the design engineering consultancy segments. That also gets reflected by our operating margins which are 25 percent plus against the similar quarter which was in the range of 20 plus percent. So, these are the positive kind of a things and this trend of a consultancy is likely to continue because we are getting into some of the newer geographies into the overseas market. We are into newer geography of Bangladesh, Indonesia, Nigeria and also targeting some of the new assignments there into the Gulf Cooperation Council (GCC) Countries where we have a good presence. Q: Since the division is doing well, will you be able to scale it up since the other division is seminally weak, will you be able to scale this up adequately in the rest of 2013 and FY14? A: Engineers India Limited, as a strategy we have been working onto that. We are into our core areas of work within our country, which is hydrocarbon, in all value chain of hydrocarbon, as well as into the nonferrous metal, but we have also progressively been diversifying into the other areas - water and waste water managements are there, solar power in the power sector is there. We are also doing some assignments for the nuclear side. So, we are going in tandem with the Government of India’s policies and that the projections coming in, in the infrastructure development where we can provide our value addition in terms of our design engineering project management services of higher quality. But besides that we are also looking towards is more so in the overseas markets, some of the new markets as I said we had been able to crack it. So, I am sure in the coming months and coming years we are going to be doing much better in our – not only in domestic, but in the overseas segment as well. Q: Do you see your turnkey projects business contribute a lesser than what it is contributing currently and do you see the margins in the turnkey projects business sliding to well below the seven percent mark that you have seen currently? What is the order book on turnkey? A: You must have seen that only about last week we have bagged another one order against international competitive bidding for Chennai Petroleum for about Rs 670 crore worth of an order and this is one of the project which got cleared very recently from their environmental approvals. So, this is one new project, which we have got very recently. So, we are also looking into some of the other opportunities both in the domestic as well as in the overseas market in the turnkey as well. So at this moment we are very confident that the company is going into the core business within the country in the overseas market in design engineering project management as well as into the lump sum turnkey segment. Q: So what will you do by way of revenue growth for full year you think? A: I think it is not right for me to be giving you numbers. You very well know that reasons therefore. But the trends can tell you that when we have a good robust order book position which is improving from this, which is right now in the range of about Rs 3,800 crore and it is mix of both consultancies and lump sum turnkey. We are expecting some more assignments which are under discussions to happen and then we have about eight months, the whole year is in front of us. So, we are looking towards that, the year around this is going to be better than the earlier years in terms of our order inflows, which is we are expecting.