Man Industries likely to grow 50% in FY24: Dr. R.C. Mansukhani, Chairman

Dr. R.C. Mansukhani, Chairman, MAN Industries (India) Limited, talks about the Q3FY22 numbers, margin, order book situation, benefits from the budgetary announcement, export market, the ongoing geo-politically tensions and its impact on his business and working capital situation among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

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Q: Run us through the key highlights of the Q3FY22 numbers and do you think that the visible growth trend will continue in the future as well?

A: As per expectation, we achieved a revenue of Rs 635 crore in the quarter compared to the last year when it stood at Rs 548 crore. There has been a growth of around 16% in the turnover. The most important factor is that we posted an EBITDA profit of Rs 63 crore, despite the fact that the Government of India has discontinued our export incentives. It will be declared by the end of this year. In these three months, we received new orders worth Rs 900 crore. Generally, we get orders of around Rs 500-600 crore in every quarter but this time it stands at Rs 900 crore. Currently, orders worth around Rs 1,100 crore is pending at our end, which will be completed in the next five to six months. We have also submitted new bids of around Rs 20,000 crore and we are likely to get very good orders out of that. The bids are present at different stages and most of the orders are related to oil and gas. As regards the company's future, production of our value-added products and blending products will start in April. Similarly, our ERW where we have invested around Rs 160-170 crore will start from the second quarter of FY23.

Q: There is pressure on margins due to rising costs. What is the normalised margin range you expect for the company going forward?

A: In the margin, commodity didn't have any major impact on our company. Rather than, there is a slight difference as export incentives were not available. Otherwise, our EBITDA is almost the same. Going forward, we are focusing more on value-added products. So, we are expecting an EBITDA of around 11-12% next year. Because our value-added product will start from next month and the ERW plant will also be functional. Borrowing is almost zero in our company, our term loan is zero and whenever there is a requirement of working capital, we arrange it. So, the cost of interest is about to below. Overall, the company's targets are good for the next year and we are targeting a 25-30% growth in turnover in FY2022-23. In FY2023-24, when our full-fledged production will be in place, so, we are expecting a growth of around 50% from these levels and 25-30% growth will be visible immediately in the next six to eight months.

Q: Usually in times of margin pressure do you have the flexibility to re-negotiate contracts or do you have to execute them at a fixed price and therefore take a margin hit? Also, would you keep such a clause in future contracts, so, that you can renegotiate as per the commodity picture?

A: We have fixed-price contracts and our buying is at a fixed price. So, we do not speculate and the prices which were to increase has increased in the last one to one-and-a-half year and the market is stable now and will remain stable in the coming times as well. Our position is day-to-day and the raw material is also booked day-to-day. So, we are hardly impacted by these factors. As the company is moving towards high-value-added products and its turnover is increasing and interest is decreasing, so, if there is any small movement in the commodity then it is diluted. Therefore, going forward, we are not quite worried that there will be pressure on the margin. That problem is less in our industry, it may be in other industries.

Q: We have already talked about the order book at the start. But let us know about the execution timelines for the same and how much order book will be completed by the end of this year and what next? In which order you are L1 and what is the visibility in terms of the amount of the deal over a period of four to five quarters? 

A: At the time of the result, we had an order book of Rs 1,100 crore, which is good for the next five to six months. Let's assume that one-and-a-half months are left, so, this quarter will go well for us and the next quarter is already booked. For the quarters ahead of that, our position is very strong at many places but I cannot highlight where we are L1 and where not as it will not be right to speak about it. However, our position is quite strong and we will have a strong order book for the next year as well. So, all these orders will be materialised in the next one to one-and-a-half months. We will start the new year with a handsome order book position and the margin will be higher compared to the last year. We are working in the same direction for our shareholders.

Q: Budget had big announcements that can benefit your company including water connection for 3.8 crore houses, Agri focus, river linking and sanitation projects. What is the future opportunity for you from these announcements?

A: A huge capacity for water pipes is available with us. But the government has had problems related to funds in the last two years due to the COVID, the state government didn't have money but we did good work. Going forward, the Government of India has increased its allocation for the Nal Se Jal Scheme from Rs 50,000 crore to Rs 60,000 crore and it will have a positive impact in the coming days. So, we are factoring it for the coming days and we will get additional benefits out of it. In addition, the oil prices have increased so much in the world now, it is ok for the time being as it stands at around $90-95 per barrel but in the time to come, if it continues to run around $75-80 per barrel then oil pipeline growth will continue across the world. It will be in India and the international market. Our share in the international market stands at around 50-60%.

Q: How the export market is looking and where traction is good? Are you identifying some new markets to enter and where the business could be better and also name the challenging markets? Do you think that the ongoing geopolitical tension will have an impact on your business? What is your order book status there?

A: We are out from the ongoing geopolitical tension that is going across the world. Our market is the Middle-East and South-East Asia. Our approvals and we are working in these markets for the last 25 years and we are safe there. Some projects are coming and we are working closely on those and all of those will be reflected in the coming time. The order book will strengthen and profitability will also improve. So, we do not have any threat from them right now, except for the time being there is a fluctuation in Rupees and stock markets are not doing well but it is a secondary subject. These factors will not have a huge impact on our business. Even if the oil prices are at $75 per barrel then also our position will be good and if it is $95 per barrel then also it is going to be good. So, we are moving ahead by factoring in all those things.

Q: Update us on the kind of CapEx that has been lined up for FY23 and what are the capacity expansion plans? Also, do you have any working capital concerns?

A: Working Capital has been assessed well and the company is in a quiet comfortable position at present. Our company doesn't have any term loan that has to be paid so there is not a problem of cash in the company. As far as the order book is concerned, then as I have informed you that after an order book for the next five to six months, a new evaluation is going on at our place. So, in the coming year, operations of our regular businesses plus value-added product and ERW will start and we will be benefitted from it as well. So, I am expecting that there will be a growth of at least 25-30% in FY23 from the turnover at which we will end this year. And, there will be a growth of 50% in FY24 from the same operation. The company's utilisation - which is longitudinal type at our place - is booked around 70-80%. We do not have a huge order book in the water pipeline business but is likely to grow in the coming days as the Government of India and the state government have declared several projects and they will mature in the coming time, which means the order book will strengthen in itself.