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00:00We're focusing now on specific companies and Patel Engineering on our radar this morning.
00:05Rupin Patel, Chairman and Managing Director joining us now.
00:09Mr. Patel, a very good morning.
00:10So we're talking about your 400 crore rupee QIP that you've launched recently.
00:18Let's start with what are the plans with these funds?
00:23Where is the focus on this fund allocation?
00:26See, the fund allocation will be towards working capital and part towards reduction in debt.
00:32We have been consistently reducing debt.
00:33Last year we reduced debt by 200 crores.
00:36This time we target to do the same.
00:38Our industry is right now facing a boom, primarily the hydro sector where we specialize.
00:44And we expect very, very large works just after the elections.
00:49Because the government has doubled what it plans to build in terms of hydro projects
00:54over the last 70 years is being planned in the next 10 years.
01:00So you're going to see a huge amount of projects come up.
01:03So what you see is the company preparing for the working capital for upcoming projects.
01:08So large, over 50% of the money will be used for capital expenditure for these projects.
01:13Mr. Patel, in terms, I just want to take that point forward where I think you're essentially
01:20shoring up the dry gunpowder ahead of the next CapEx boom post elections.
01:25Now what are the kind of timelines that you see?
01:28Because you're going to have election results June 4, new government coming in, then a budget.
01:36Do you see all of this coming in towards the end of this calendar year?
01:41Or where do you see a lot of this new set of projects being apportioned?
01:47I would see that the bidding would start somewhere around August.
01:50The bidding for the large projects in the hydropower sector would start around August.
01:55Because the government outlay for this year is 11.5 crores, which has to be spent.
02:01Five months are going to election and results in appointment of the cabinet.
02:06So you will see a huge plethora of work come up just after the elections, one month after
02:11the elections are over.
02:13Patel, if I can come in on your plans going forward.
02:17Now you already suggested that the government will start coming up with a lot more in terms
02:22of influx of projects post the upcoming and impending budget as well.
02:27You also mentioned that there will be a lot more in terms of water flow.
02:31Based on that, I reckon that your capital requirements will also increase.
02:38Considering that, since you are already raising funds through a QIP, perhaps three months
02:43or six months down the line, with your requirement and anticipation of an increase in working
02:50capital as well, do you think that there could be a chance that you would need to raise more
02:55funds via debt or equity?
02:57No.
02:58The company's strategy has been to reduce debt consistently.
03:03If you look at the last three, four years, we have been reducing debt from the sale of
03:09non-core assets, primarily from about 150 crores to 200 crores per year.
03:14So we do not plan to increase debt.
03:16In terms of working capital, what we have done now is we have prepared for the future
03:21the amount of work that is going to come.
03:24So what you see is the company planning in advance, as opposed to getting the work and
03:31raising the capital.
03:32Our company has risen its employee strength from about 1,500 people to about 4,500 people.
03:43We have implemented SAP so that controls can be better.
03:47So what you see, and even financially, so what you see Patel Engineering doing, the
03:51company doing, is management-wise, finance-wise, prepare itself for the next three years.
03:58So I don't think – I think we are good for the next three, four years.
04:01We will not require additional – I don't believe that we will require additional working
04:05capital, either in terms of debt or in terms of equity.
04:09Mr. Patel, if I can also comment on your current order book, where does it stand?
04:14I'm not asking you for your earnings, but in terms of execution of the order book, how
04:19much of your current order book would you expect to execute in FY25 going in?
04:26The order book is around 19,000 crores, with the aging of about 4, 4.5 crores.
04:31So based on the current order book itself, you will see the company grow at around 10
04:36to 15% per year.
04:38That means if Patel does not have to take more work, even on the existing order book,
04:42it can grow at 10 to 15%.
04:44So what you will see, the current order book going into play, we will grow at 10, 15% coming
04:50this year, and then you will see the order book really coming into play, and we should
04:55grow at around 25 to 30% in the coming years.
04:59Mr. Patel, I know we can't really talk about your numbers yet, but I was just, you know,
05:05wondering and wanted to get a sense of what's happening with your margins.
05:10For your nine-month performance, everything looks, looks good.
05:14Net profits have been up significantly, nearly 100%, but that margin squeeze sort of remains.
05:20And I want to understand if that's systemic or something that happens in this business?
05:25Do you see margins improving?
05:28You can't give me a number, I understand, but what is your outlook on margins?
05:31Yeah, see, as we go on, as we become bigger, the turnover, economies of scale will come
05:36in.
05:37As we reduce debt, margins will automatically improve, net profit will improve.
05:41In terms of EBITDA, we have been consistent at 14, 15%, and that will continue in the
05:47upcoming years.
05:48I don't see them going down.
05:49I'll probably see them either stay stagnant or improve.
05:54Any kind of outlook you can give me on EBITDA and margins?
05:59On EBITDA, 14, 15% will be consistent, so that will continue.
06:04In terms of profits and turnover, we clocked about 3,200 crores a year before last, and
06:12a profit of 154 crores.
06:14This year, in the nine months, we finished about 3,200 crores and a profit of 140 crores.
06:20So I think that there's only up or it will go down.
06:24In terms of number of your ongoing projects, we have 48 state, central, and international
06:30business, 48 ongoing projects.
06:32What is the breakup there?
06:34And where do you see, what number do you see those number of projects improving to?
06:39Our co-competency has been tunneling and hydropower projects.
06:42Seventy-five percent of our order book is tunnels and hydropower projects.
06:46About 75%, sorry, 75% is hydropower and tunnels.
06:52About 20% is irrigation works, and the rest is miscellaneous works like roads, buildings,
06:58et cetera, et cetera.
06:59I would say that we would keep the hydropower sector at around anywhere from 65 to 75%,
07:06and we would expand on the irrigation of hydropower.
07:09So combined the two, we would definitely keep it up to maximum to 80%, 80 to 85%.
07:17All right.
07:18Mr. Patel, your expectations, well, I know that this would perhaps be pre-empting, but
07:24should we see the incumbent stay in power?
07:29Your expectations from the upcoming budget, because the Prime Minister seems to suggest
07:34that there could, in fact, be more Big Bang reforms in play should the government come
07:40back in power.
07:43What's the way ahead?
07:44What are you making of, what are you hearing on ground?
07:48If I look at the Prime Minister's vision of becoming the third largest economy, a considerable
07:56amount of money will be spent on infrastructure, and I would see a lot of SOPs for green energy,
08:02wind energy, hydro, and solar in the upcoming years, at least in this budget, and a lot
08:08of government spend in these areas.
08:14Thank you so much, Mr. Patel.
08:15Great to speak with you.
08:17Patel Engineering there on their outlook, and they expect new bidding to come in from
08:23August after the new government is settled in, cabinet has been announced, et cetera.
08:28So that's one to watch out for.