MTAR’s closing order book would reach Rs 700 crore by the end of FY22: Srinivas Reddy, MD

P Srinivas Reddy, Managing Director & Promoter, MTAR Technologies Limited, talks about Q1FY22 numbers, export markets, margins, current and expected order book in FY22, National Hydrogen Mission, product range, CapEx and Atmanirbhar Bharat among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

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Q: Let’s start with earnings a bit. Run us through the key highlights of the quarter ended June 2021 and what led to the growth because COVID had an impact in this period?

 A: Q1 performance was fine, exports were good, in domestic we did even better. Due the Wave 2.0, the division of space and nuclear were completely shut yet whatever production and manufacturing were to be done, the company has done it continuously in Q1FY22. So, we can expect a better and better performance in the further quarters to come.

Q: Exports have risen by almost 52%. Was that due to the low base and what would be the normalised contribution of exports vs domestic revenue in the quarters ahead?

A: It will be more or less 50-50%. Domestically, the offices that have opened in domestic sectors in the second quarter will go through the inspections and clearances after which more or less they will be in the same ratio for the entire year. 

Q: Going forward, how the margins are looking because commodity cost pressures are visible on the companies? What would be the targeted margin range for your company for FY22?

A: It will be similar to the last year, probably, we will do slightly better by 50-100 basis points. So, the margins will remain the same. We have planned our supply issues very well, so, they will not be impacted. 

Q: You had an order book of Rs 365 crore at the end of Q1FY22. What kind of order visibility you can see and what is the revenue visibility it is providing? Also, going forward, what kind of order is expected in FY22?

A: During the year, the orders which were about to come in the first quarter but the offices at domestic level didn’t function fully, but we are expecting very good orders from all the domestic sectors including export orders. So, by the end of FY22, we will have a very strong order book of close to Rs 700 crore. The closing order book would be close to Rs 700 crore by end of the year.

Q: Can you specify it further in terms of where the orders are coming from and which of the orders are in pipeline at present and which are the big ones that you are looking for?

A: We are expecting a huge order coming for exports in this quarter as well as from nuclear and space. Then progressively, we will also get orders in Q3 and Q4 and we will progress on it.

Q: The Government is talking about the National Hydrogen Mission? Do you see any opportunity as an ancillary to companies that will be operating in the space? Is it a large area where you would participate?

A: Definitely, it will be a big area and the government has just announced it. We have already started its technology and have also exported the hydrogen units. So, it will be a joint effort by our US company and India together to process the installation that will be required. We are still working on it, so, whenever it happens, it will be a great opportunity within the country. 

Q: The product range is quite interesting in your business. Do you have any plans to expand the product range beyond what you are doing right now, if yes, what would be the products that will be placed on offer?

A: We are launching roller screw, which is a 100% import substitute and to date, all the defence and space were importing it. By probably in a couple of months, we are launching that roller screws. Similarly, we are going to work on expanding our capabilities our sheet metal factory and other factories are getting to furnish this year and they will be commissioned. 

Q: By when this fabrication facility for the sheet metal will turn operational? Can you provide an exact timeline and what kind of additional revenue you can generate from this facility?

A: The sheet metal factory would be ready in October and fabrication by March. It will give us a wider scope of customers in exports as well as the domestic market, both for space, defence as well as in exports in a big way. 

Q: What kind of CapEx has been lined up for a couple of years and how will you raise it? Because expansion works are going on, so, how is the working capital situation? 

A: We don’t have much CapEx. As said earlier, we have a very small CapEx for bottleneck initiatives. We already had an existing CapEx is enough to handle the growth for the next two to three years. Only additional CapEx is of the sheet metal, specialized fabrication will require an expenditure of around Rs 80-85 crore. We are well placed as far as having enough capacity to handle the growth in the future.

Q: Government has a special focus on Atmanirbhar with maximum production within India so that we can reduce our dependency on the import. It is also announcing the PLI scheme at constant gaps. As a company what will be your focus upon on the PLI scheme and Atmanirbhar Bharat and what kind of orders you are expecting that will open for the Indian companies due to these factors?

A:  MTAR was born in 1970 just for indigenization. Currently, what is happening is that the government is giving an additional push to it. Our R&D is working on many projects of defence and other products that we are developing. So, it will be very encouraging for us now because the government is taking special steps at present. In that way, we will progress faster in the indigenization of various systems and sub-systems for defence as well as products, where we do not have to import any further. So that is the main focus for MTAR for so many years and this additional push will help us a lot.