Patel Engineering (NSE: PATELENG), a Mumbai-based engineering, procurement, and construction (EPC) firm, expects its order book to touch at least Rs 25,000 crore in FY25 from Rs 19,134 crore as of December 2023 (Q3 FY24), Kavita Shirvaikar, chief financial officer (CFO) of the company told Moneycontrol in an exclusive interview.
“Our order book in March 2023 (FY23) was Rs 20,806 crore. In December 2023 (FY24) it was Rs 19,134 crore. In FY25, due to a large amount of work coming up in the sectors in which we operate, we expect our order book to rise to around Rs 25,000 crore,” Shirvaikar said.
In terms of the sector-wise mix, hydropower projects constitute 60.67 percent of the company’s current order book, irrigation 21.05 percent, tunnelling 11.02 percent, road 2.99 percent and others account for 4.27 percent.
“We are targeting to participate in tenders worth Rs 50,000-60,000 crore in FY25. We have already shortlisted projects we will bid for. If we consider our bid success ratio as 25-30 percent, so in FY25 we aim to get additional work for Rs 10,000-15,000 crore,” she said.
The company is working on the 2,000 megawatt (MW) Subansiri hydropower project in Arunachal Pradesh, in which it is carrying out all the underground work worth about Rs 1,500 crore. It is also executing the 2,880 MW Dibang hydropower project in Arunachal, in which the company’s share of work is worth Rs 1,800 crore.
In Jammu and Kashmir, Patel Engineering is doing works worth Rs 5,000 crore on the Kiru and Kwar hydroelectric projects. Besides, it has other projects such as the Luhri Hydropower Project in Himachal Pradesh and Arun-III project in Nepal, both are for state-owned SJVN.
When asked about the allegations of irregularities in the Kiru hydropower project, wherein the company was booked by the CBI, Shirvaikar declined to comment. Further, on speculations that many such companies, including Patel Engineering, spent on electoral bonds as quid pro quo, the company CFO again refused to comment. Moneycontrol also separately reached out to the company for comments on these issues. The company, however, declined to comment.
Debt Reduction Plan
The company’s debt, five years ago, stood at Rs 5,000 crore. Shirvaikar said currently, it has decreased to Rs 2,000 crore.
“We have consistently monetised our assets, including claims and real estate, resulting in a reduction of approximately Rs 3,000 crore in debt in the last five years,” she said.
Of the remaining Rs 2,000 crore, Rs 1,200 crore is working capital rate and the balance Rs 800 crore is a term loan, which the firm plans to reduce in the next three to four years by selling its non-core asset in the form of some land parcels.
Pumped Storage and Water Supply new avenues
Within the hydro sector, Patel Engineering is also eyeing Pumped Storage Projects (PSPs), Shirvaikar said.
The government of India has set a target to set up 47 GW of PSP capacity to meet the country’s peaking requirement in the next few years. Currently, only four PSPs are under construction and in that, Patel Engineering is working on one project for TANGEDCO in Tamil Nadu. “So, 25 percent of the total ongoing PSP projects in India, we are already doing. If you consider that Rs 3 to 4 crore per megawatt cost will be taken and 47 GW is in the pipeline, we have huge opportunity in the PSP segment,” the CFO said.
Besides, the company is also going to look at opportunities for water supply works. Last year, a joint venture of the company bagged a contract worth Rs 1,275.30 crore from the Madhya Pradesh government for a drinking water supply project. The Jal Jeevan Mission had an allocation of around Rs 70,000 crore in FY24, which is why the company plans to increase its focus in the segment.
However, Shirvaikar said the company’s key forte will continue to be hydropower projects for years to come with its share not going below 50 percent. “Hydro gives better margins over other segments. Majority of our order book is from this segment. India’s hydropower capacity currently is 42 GW and another 18 GW is in the pipeline. So, if you consider Rs 5-6 crore construction cost per megawatt, then also more than Rs 2 lakh crore opportunities are available in the next 4-5 years in the hydropower sector alone, and this is excluding PSPs,” she said.
India plans to increase its hydropower capacity by at least 50 percent to meet the country’s growing electricity demand by 2031-32. Currently, hydropower constitutes only 11 percent of India's total installed power generation capacity.
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