See margins recovering by mid 2014: BGR Energy Systems

Despite its margins being under pressure, Raghupathy is bullish on recovering it in terms of EBITDA and profit after tax (PAT) by the middle of 2014.

"We will be executing the Solapur and National Thermal Power Corporation (NTPC) boiler order. We have improved our margin by bulk purchases. We are expecting a Balance of Plant Supply of Equipment and Services (BOP) contract. I am unable to share the name of the customer but it is an order worth Rs 1700 crore," he adds.

Below is the edited transcript of Raghupathy's interview to CNBC-TV18.

Q: Give us an outlook on where your margins will be at by the time FY13 closes up and in the first half of FY14 as well. Do you think it will be under pressure as more competitively bid engineering, procurement and construction (EPC) and some of the boiler, turbine and generator (BTG) orders start contributing to your revenues?

A: The end of year 2013 would be under pressure but we would recover by middle of 2014, EBITDA as well as profit after tax (PAT).

Q: On what are you basing this confidence? Are the fresh pipelines of orders of a higher margin? What is the nature of those orders?

A: We will be executing the Solapur and National Thermal Power Corporation ( NTPC ) boiler order. We have improved our margin by bulk purchases. We are expecting a Balance of Plant Supply of Equipment and Services (BOP) contract. I am unable to share the name of the customer but it is an order worth Rs 1700 crore. We have cleared L1 and we will announce it when the customer announces it.

Q: So, by the end of calendar year 2013, where do you see your order book at?

A: Rs 13578 crore is the order book by the end of year 2013.

Q: That is a little lower than Rs 14000 crore you said at the end of the second quarter. So, should we worry that orders are not really breaching that Rs 14000 crore mark?

A: You have to look at in a macro level. Not many orders are getting finalised in the country. Under these circumstances, the largest tender was NTPC tender where we had taken the maximum number of orders. There are many projects which are coming up, for example Mahagenco for Nashik, Tangenco for Udangudi, APGenco at Vijayawada 800 megawatts, MPGenco of 660 megawatts and Haryana. So, there are many projects which are going to be finalised by middle of 2014. In the past, our strike rate had been good and we expect to continue the same.

Q: Are you confident? How many of these orders will hit the bidding ring?

A: We will bid only if they achieve financial closure and the customers are confident of achieving financial closure.