IRCON has an order book of Rs 35,000 crore at present: Mukesh Kumar Singh, CMD

Mukesh Kumar Singh, Chairman & Managing Director (CMD), IRCON International, talks about March quarter numbers, profitability, current order book, expected growth in the order book, pending claims, disinvestment as well as international business among others during an exclusive interview with Swati Khandelwal, Zee Business. Edited Excerpts:

Q: You have recorded over 100% growth in the EBITDA QoQ. Is the low base is the only reason or you have seen a strong recovery and the same trend will continue in the future as well?

A: IRCON International has progressed at a very good pace in infrastructure in the last five years. If we look at our turnover in 2016, then it stood at Rs 2,400 crore and despite the pandemic, our turnover in 2020-21 stands at Rs 5,200 crore. And in the FY2021-22, we have a target to take our turnover between Rs 6,500 crore and Rs 7,000 crore and we expect that we will be successful in doing so. So, you will be able to see that our pace of project execution is quite good and has progressed at a continuous pace in the last five years. As far as profitability is concerned, if we consider profitability after including the other income then we provide an EBITDA margin of 13-14%.

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And, if we have a look at just the core business excluding the other income then also we give a profit of around 9%. So in this way, if seen in comparison with an infrastructure company then this is a very good number. These numbers have brought a good feeling among the public for IRCON, a good dividend-paying company and we have had a record of providing good dividends, in which we provide almost half a portion of the profit after tax to the investors in form of dividends. In total, it is a bright outlook and I would like to assure the people that they have an investment in a very good company and they should be happy about it.

Q: Can you please quantify the numbers on profitability and revenue front and what target you have set for FY22 and how much you can reach? Also, update us about the total order book situation and what is the split between railways and highways?

A: I'll take the last part of your question first about the size of the order book. We have an order book of Rs 35,000 crore at present. As of March 31, 2021, we started with an order book of Rs 34,600 crore and we have taken a new order of another Rs 600 crore of railway electrification in the recent past. In total, we have an order book of Rs 35,000 crore. This year, we have a target to make a turnover of around Rs 6,500 crore to Rs 7,000, which means the execution of work in tune with this.

We also have a target to increase the order book and have an aim to increase it from Rs 35,000 crore to around Rs 41,000 crore, which means the addition of another Rs 5,000 crore to Rs 6,000 crore in the current year. We have definite plans to take orders worth Rs 5,000 to Rs 6,000 crore and you will be happy to know that in FY2020-21, despite the pandemic, we received new orders worth Rs 4,100 crore and mostly through competitive bidding, except Rs 60 crore, and expect that the trend of increase in the order book will continue further and we will increase the pace of execution further.

As I said earlier, our profit after tax (PAT) and EBITDA is quite good in comparison to the peer group and we will continue with the trend.

Q: What are the segments from which more orders will come? Can you please throw some light on the split of this Rs 5,000 to Rs 6,000 crore?

A: Our main work is in the railway sector and 85% of our business remains in the railway sector only. Accordingly even last year, the order book that we received includes 90% from railways. In this financial year 2021-22, a project of Sivok - Rangpo is running and there is a possibility of getting additional work worth around Rs 4,500 crore and our proposal in relation to the same has reached the railway board. So, we are expecting an increase of around Rs 4,500 crore in our order book.

In addition, we are also participating in solar power as IREDA (Indian Renewable Energy Development Agency) has floated tenders for CPSEs. We are expecting an order of Rs 2,300-2,400 crore from there. So, Rs 4,000 crore and around Rs 2,300 crore is coming from just two works. In addition, as I said, in the current year we have already received work worth Rs 650 crore. So, an increase of around Rs 5,000 to Rs 6,000 that I have said is quite conservative.

The orders will be more than this and it will not be less than it. In that sense, we are quite confident that orders will be added and increase the execution pace. As you saw that we did work for Rs 5,200 crore last year, we have an intention to complete work worth Rs 6,500 crore to Rs 7,000 crore. So, overall, it is a win-win situation for all the investors as well as the stakeholders.

Q: Currently how much is the pending claims are there for the company and how are you planning to settle them? Also, what is your exposure with NHAI and what kind of negotiations is taking place with them?

A: As you know, all our plans are government plans because the infrastructure segment is dominated by the government. So, 85% of our product is associated with works related to the Ministry of Railways or rail-related projects. We do not have any claim pending with the Railways, they are good paymasters and we continue to receive our money. The good thing is that the size of the receivables that we are supposed to get from our clients is quite small.

Yes, we have some disputes with the NHAI but we have just four to five road projects and we do not have any dispute with the ones that are running. There are some old projects, where we have invoked arbitration and for its conciliation, NHAI has brought a new method and we have already solved two of the cases under it. In those, under mutual satisfaction, we have devised a good solution and settlement has been reached in those due to which we have received good claims in those two projects, apart from what, we have done.

So, our size remains small in the case of claims. Even though we are an infrastructure company, despite that, neither our receivables are quite large nor there is any issue related to claims that can bother us.

Q: What kind of discussions are going on for stake sales as the government is selling 16% stakes in IRCON to raise about Rs 662 crore? What is an update on that front? Also, are there any talks related to disinvestment?

A: Currently, 73% stake is with the Government of India. 27% has been disinvested in two tranches. There are no plans related to disinvestment this year, neither there is any discussion regarding it. The government of India has not had any such discussions with us yet neither we are aware of any such development. So, I don’t think that any disinvestment will happen this year.

Q: This means that the government’s plans for OFS of 16% are likely not to happen this year?

A: As I have said that in the first tranche 11% was divested and 15% was divested in the second tranche. So, around 26-26.50% of stakes have been divested and around 73-73.50% of stakes is remaining with the government. And there is no possibility of making any more divestment this year neither I have any information about it.

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Q: You have an international presence as well. So, update us on the way the situation is pending outside India and what is your outlook on international business?

A: Since last one-and-a-half year, our efforts in the international business - because traffic has been closed – have not been able to get momentum. In the current financial year - we have accustomed to virtual conferences by now – we are trying to get some work in Malaysia and talks related to it is on - but it will not be appropriate to say anything about it. But we are hopeful that we can get some work from there if things keep going well. Besides, we are also trying to get some work at different places, like we are having our eye on two to three projects in Bangladesh in terms of rail and railway. Hopefully, we can succeed in getting some work from Bangladesh as well.

Similarly in Sri Lanka, where our railway project is running, formal discussions are going on in the road and rail sectors. So, overall in these countries I have named, we are likely to get some work and this will be in addition to the order book of Rs 6,000 crore. So, our outlook for growth in the order book for the current year is quite positive and we are quite upbeat about it.