Since Prime Minister Narendra Modi-led government came into force from May 26, India is expecting a slew of reforms and clearing of infrastructure projects and boosting growth in this sector being just one of them.
Experts believe 'ache din aa gaye hain' and so, the markets are definitely looking positive from hereon. Ravi Kulkarni, wholetime director, Pratibha Industries believes the present government is giving lot of emphasis on infrastructure which is very encouraging to mid size companies like Pratibha.
The construction company is hopeful of clocking around 15 percent growth in FY15 and will possibly be able to hold margins at 14 percent levels in coming years, says Kulkarni.
The current order book of the company stands at Rs 8,000 crore
Below is verbatim transcript of the interview on CNBC-TV18.
Q: How is business looking, you have close to Rs 8,000 crore order book currently but what are the orders in the pipeline? What kind of revenue trajectory would you expect in FY15?
A: Market definitely looks very positive. We have a new government and we hope that government will do something good in the coming years. The market is picking up since we have seen Modi, the Prime Minister who has successfully done things in Gujarat. So we feel that India will pick up since the leader is good and apart from that the present government is giving a lot of emphasis on infrastructure which is very encouraging to companies like us who are in the mid size.
Q: What would that translate into in terms of expected growth?
A: I am sure that all the construction companies are very happy and the growth is going to be very good. When you talk about the numbers, year-on-year (Y-o-Y) we are growing at 15 percent. I hope we will definitely stick to 15 percent growth.
Q: The market is also looking better in terms of valuations and you were considering exiting the pipe business because it has been lagging given the oversupply, any progress on that?
A: We are basically into construction of water pipelines; we are not into manufacturing of any kind of pipes. We definitely feel there is improvement in the construction side and there are a lot of projects in pipeline which are happening now; when you talk about water projects, when you talk about infrastructure, when you talk about urban; so there is a lot of overall growth in India and we are hoping that things will move very fast. It is not magic and nothing will happen overnight, but the government is very positive in taking quick decisions and so, we are happy that things are moving fast and we have been bagging a lot of projects.
Q: Can you give us details of what these projects are; is it purely urban or do you have any presence in rural as well?
A: When we have bagged projects they are all water jobs, we have bagged water jobs in Gujarat, we have taken jobs in Rajasthan, we are successful in taking jobs in Maharashtra, we have taken jobs in building side. So overall, it is a mixed bag of various sectors when you talk about various projects. It is basically a mixed bag of projects. In Gujarat we have taken jobs of around Rs 1,400 crore.
Q: What kind of margins would these projects bring around; as per your last financials you were sitting on a 14 percent margin profile, will that continue in FY15 or will it be much better?
A: We will try to stick to what we have been achieving and if it is better, nothing like it.
Q: Tell us a little more about the order book. Can you give us details about whether you are L1 in how many projects and in which states?
A: Under the current situation we have around two-three projects which are under negotiation and hopefully, we should take it. In another 15-20 days we are expecting some good result on it but as of now Pratibha Industries is focusing more on execution. At present we have an order book of around Rs 8,000 crore which is a sizeable order book and we need to complete those jobs. So our complete focus is on execution which needs to be tightened. If we need to stick to those margins we need to complete the job. Taking jobs is one thing but finishing job is important.
Q: What is the size of these two-three projects which are under negotiation?
A: It is around Rs 500 crore.
Q: Each?
A: No, not each. All put together they are around Rs 500 crore.
Q: What about your manufacturing division, it has been a drag on your books for a while? What is the outlook there?
A: Our management has decided that we will stick to our core business and our core business is construction. We have already sold our pipe mill and it was on the verge of going. So we just want to get out of the manufacturing unit.
Q: Will you exit the manufacturing business completely?
A: Yes.
Q: What are the valuations that you have got for the pipe mill, you said you are just going to be closing it?
A: The total valuation of the pipe mill is around Rs 100-125 crore. That has to go out from our books which will give a lot of boost to our current business which is our core strength. Also, we are getting out of all the non-core assets.
Q: What are the non-core assets the company is sitting on?
A: We have a pipe mill, we have land which we want to get out of, we have a Build–operate–transfer (BOT) building which we had taken and hopefully, that is also on the finalisation stage. These are the three four assets which we want to come out of.
Q: What is the debt currently and how much by way of debt reduction could you bring about by sale of non-core assets?
A: We expect to reduce around Rs 300-400 crore. That will really help us and boost us for the current business.
Q: What is the total debt?
A: It is around Rs 1,000 crore.
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