Pitti Engineering will have a top line of Rs 2,000 crore by FY24/FY25: Akshay Pitti, VC & MD

Akshay Pitti, Vice Chairman & Managing Director, Pitti Engineering Limited, talks about Q1FY22 numbers, second-quarter expectation, expected top line and bottom lie by FY24/FY25, order book status, CapEx and capacity utilization among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts: 

Q: Results are good both YoY and QoQ and the company has moved to profit from loss. Tell us which had been the reasons for the same and will trend will continue further?

A:  As far as moving from losses to the profit is concerned, there was a lockdown in the first quarter last year but this time there was no lockdown due to which if we look annually then we have come from loss to profit. On a quarter-on-quarter basis, the revenue was flat as sales were a bit depressed due to the second phase, yet our performance was good. We have declared a turnover of Rs 175 crore and posted a profit of Rs 7.4 crore. This is led by a strong demand order book from our clients. We have never seen this kind of order book for the last three decades and expect that the order book will continue in the same manner for the next three to four years. 

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Q: Should we expect that the second quarter will be a very strong and good quarter for the company as the revenue loss of the first quarter will be made up in the second quarter?

A: Definitely, as I said, there was a revenue loss of Rs 35 crore in the first quarter because of the COVID second wave, which would make up. At the same time, we will grow further in the second quarter. We have increased our capacity by 10% in the last three months and its full impact will be seen from the second quarter. 

Q: In the investor presentation, you have said that you are seeing a multi-year growth cycle, which you have not seen for the last three decades. Based on the same, what will be your top line and bottom line in FY24 or FY25?

A: Our estimate regarding FY24/FY25 is that we can reach a top line of Rs 2,000 crore with a PAT margin estimate of about 6% to 6.50%.

Q: What is your current order book, and can you quantify that where the numbers will stand by the end of FY22?

A: The order book of three months is typically provided in our industry and as of the day, our order book stands at Rs 450 crore and new orders are added to it every month as our customers release the schedule, it gets added to it. So, based on forecasting, the year’s order book looks to be Rs 800 crore, but the confirmed order is only Rs 450 crore. 

Q: You have already decided on a CapEx of around Rs 80 crore in FY21 and FY22 & in FY23 there is a combined CapEx of Rs 200 crore. So, how and where the CapEx will be used and is there any visibility in the future?

A: The CapEx will be used at our mega-factory of Aurangabad as per the approved plan from the Maharashtra government. In the next two quarters, we will continue to increase our capacity on a quarter-on-quarter basis. We can make modular expansion within our company, so in each quarter, we expect the capacity to keep going up. 

Q: What is the current total installed capacity and where it will be by the end of FY22? Also, update on the current capacity utilization levels of the company?

A: We had an annual capacity of 36,000 tonnes in March 2021, which increased to 39,600 tonnes in June 2021 and by the end of the financial year the capacity will reach up to 45,000 tonnes. Capacity utilization stands at 60% at present and it is expected that it will reach 90% by the end of the year. 

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Q: In Q1FY22, you clocked margins of 16%. With the new CapEx coming in the stream will the margin improve further in coming years or 16% is the sustainable margins going forward also or we can expect better margins from here?

A: Margins, if we look at the current steel prices, then it will remain stable at 16% but the steel prices are going up at a very fast and if the pace continues then our margins may decline a bit as our per-ton realization remains constant. In absolute terms, there will be no reduction because we are in the processing industry and there is a complete pass-through of the raw material price increase and decrease. So, in percentage terms, there can be a slight decline going forward from here.