In an interview to CNBC-TV18, Ajay Hans, managing director, Petron Engineering Construction shares his views on the latest order bagged by the company.
Below is the verbatim transcript of the interview to CNBC-TV18.
Reema: The company recently won some orders. Could you tell us the total size of the order wins and what the order book currently stands at?
A: This is a recent order that we have bagged and this is around Rs 25 crore, these two projects and the current order backlog is around Rs 1,200 crore for us which is decent considering the size of our company today.
Ekta: Can you tell us what your future bidding will look like and what is the average margin that you would be executing on these orders that you have in hand?
A: Practically, this market is very competitive as we are operating in a very critical industry. We are working for all construction business for civil, mechanical, electrical, instrumental, refractory insulation and commissioning services and these are specifically for industries like cement, steel, power. We are carrying our quite critical works. So as the market is opening, the capital market people are investing, I see good opportunity in near future and margin should certainly be better once more opportunity comes to the market.
Ekta: What about the future bidding. What is your project pipeline in terms of bidding?
A: We are doing very specific bidding with specific clients and we are looking for long-term relationship with the industry and we have a history of getting repeat of orders, like these two orders also, its like repeat order to us, with NCC we are already executing the mechanical erection package and these are additional package which have been awarded to us for critical piping. Cement and power are two areas where we would be quite prominent in future and we have executed lot of such projects in the past with the industry. Petron is a known entity in the industry for executing these projects.
Reema: For how many more quarters do you expect a loss?
A: We expect to improve every quarter on quarter and as the capital market is going to get open, we expect from the next monsoon onwards lot of order should flow in, there are not enough competent contracts which are available currently specifically carrying out the construction activities and we are doing hardcore construction activities. So we see that good number of order should flow.
Reema: But you still likely to be loss making even through the whole of FY16?
A: Cannot say right now but we would be improving a lot and that's what I can say right now.
Ekta: Can you tell us what your debt cost look like though your finance cost is on a low base, what is concerning is that in the previous quarter it jumped up 30 percent on year on year basis, are you seeing any working capital issues or any delay in payment which is taking place?
A: We are carrying out projects where some of these projects are Gas Authorities of India as well as Indian Oil Corporation where payment terms are back ended. Similarly we are in the stage of completion in many projects or recently completed like Lafarge, Adani Power, so all these payments are now started flowing in and all these projects almost reached at a stage of 90-95 percent completion, so these back ended payments have started coming in which has already eased our liquidity position and cash flow working capital requirement will go down in near future.
Reema: What the current receivables, if you could give us the number as well as the total working capital loans right now?
A: As of date the total working capital loans all together would be in the range of Rs 100 crore and receivables are more than Rs 150 crore as of date.
Reema: How much of these receivables would you receive by the end of this fiscal year that is March 2015?
A: I expect at least 30 percent of these receivables should come in because some of these receivables go on cyclic basis because in construction industry you carry out the work first and then you bill and then you wait for these payments, so it is not advance kind of thing. One-two month kinds of things are always available on credit.
Ekta: Can you give us a sense in terms of who your repeat clients are, for example where do you get majority of your orders from, which clients and how much of your order book comprises of repeat orders versus fresh orders?
A: We are prominent in getting repeat orders and that shows the credibility of Petron in the market like Indian Oil Corporation though this is a government concern where we get these orders through proper L1 bidding kind of system but in the private sector we are working with Lafarge, we have received orders from UltraTech around six months back we have received a repeat order from UltraTech from grinding unit in Nagpur, from Madras Cement, which is now known as Ramco Cement , we are getting continuous orders from them for almost more than last five years and we are associated with them for ten years. We target the clients and provide the services in order to get long-term association with them; we look forward for a long-term association and accordingly work for it.
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