We will maintain 20-25% growth in FY18: Paresh Mehta, Ashoka Buildcon

Talking to ET Now, Paresh Mehta, CFO, Ashoka Buildcon, says they have an order book of Rs 6100 crore of which Rs 1700 crore is in the power sector and Rs 4400 crore in the road sector.

Edited excerpts:


What kind of long-term growth are you pitching to investors?

IDFC Securities has been covering us since our IPO and Shirish Rane is a great expert on infra sector. I believe a lot of investors try to interact with IDFC Securities to make their investments. I believe there should be strong interaction between investors and companies in this conference.

What is your outlook on earnings growth? Can we expect the EBITDA margins of 14% and your PAT growth of 25% plus for the next two to three years being maintained?

The sector definitely looks booming with Bharatmala and other initiatives taken by the central government and a lot of state governments are also taking initiative. The opportunity for growing is substantial. Based on this background, we definitely believe that a lot of opportunity will be there for the company to bid and bug projects. We already have a very strong order book of Rs 6000 crore which we will take to the next two years in a very comfortable way. With the new orders coming in, definitely the growth of 20-25% should not be ruled out in any chance. A similar growth in PAT margins also will continue to happen. In EBITDA margins, we stick to the bidding criteria of maintaining our EBITDA margins in every bid. That also continues to look robust enough in the range of 13-14% and above.

What is the order book outstanding as of today and orders in the pipeline which are in the L1 or the lowest bid status? Could you highlight for us your order intake expectations for the second half?

We have an order book of Rs 6100 crore of which Rs 1700 crore is in the power sector and Rs 4400 crore in the road sector. This is almost more than 2x of our sales revenue for last year. The expectations in the next coming half year is that with the bidding to increase in this half year we expect Rs 3000-4000 crore of order book coming our way. And that should keep our running rate on order book as per expectations and for the growth expectations.

What is the consolidated debt on your books and what is the reduction plan for the same?

On the debt side, on a standalone basis, we have a miniscule debt of Rs 140 crore which is basically for EPC business. On the project base, we have a debt of Rs 4400 crore, which is more project based and this will amortise over the period of the life of the projects.

So very comfortably placed with a debt equity ratio of 2.08 at the consolidated level. On the interest costm we have a couple of projects where we expect 1% reduction. Otherwise, our overall average interest cost is in the regime of 9.75%. We are comfortably placed vis-à-vis the interest and going ahead there could be a reduction of say 100 bps.

What is the outlook on the T&D business? The GST related uncertainty had impacted power projects in Q2. When do you see clarity and revival there?

The GST impact was basically there for the first two months of the GST regime, so in July and August we had challenges in closing our purchase negotiations and also other vendors starting up their own factories so they had stopped production due to the clarity not being there on GST.

The GST issue is no longer a problem. Since September, we are back on track with our procurements as well as execution. In fact, a couple of changes which have happened in the last couple of weeks are going to give more impetus to the execution because cash flows will be more comfortable vis-à-vis GST rates. The problem does not exist now. Most things are settling down.

What is the guidance on revenue and margin that you have in mind for FY18?

For the half year one, we have achieved a 20% growth and I believe that we will maintain our growth for FY18 in the range of 20-25% and going ahead this will be more positive oriented growth.