Our International T&D business has been very strong in Q3: Rajeev Aggarwal, KEC International

Rajeev Aggarwal, Chief Financial Officer, KEC International Ltd, talks about the quarterly results, factors that played important role in the third quarter and order book status among others during an interview with Mansee Dave, Zee Business. Edited Excerpts: 

Q: Just provide highlights of your result? From where could you see the support coming from and where could you sense concern?

A: Our revenue grew by around 16% in this quarter, while the net profit grew by 30% and EBITDA margin grew 14%, which is more or less in line with our top-line growth. Our profit before tax (PBT) grew by 25% largely because the interest costs have come down by 5% and in term of percentage it turns up to be 2.7% of the top line.

Q: EBITDA was up by 13% but the slight contraction was seen in the margins. What could be the reason for it and what is your outlook on margins?

A: Generally, our margin remains between 10%-1.5% and around 150-200 projects of our company remains functional at any point in time. Margin contraction has not been huge when compared to the third quarter of the last financial year, which remained around 10.6% and this time it, the margin, stands around 10.4%. So, it is a slight contraction but it depends on the kind of projects that are being executed as the margin won't be the same in all the projects. The margin depends on the composition of the project and this is something that decides the movement of margin. But largely we have provided guidance to keep the margin between 10%-10.5% and we are confident enough that we will be able to the margin target by the end of the year.

 Q: Transmission and distribution (T&D) have been a strong one. What is your order book status and what is the expected growth outlook for the company?

A: The international T&D business and the execution of Brazil has been very strong in the third quarter. We have grown by 30-35% in the segment and this is something that helped us to report a 16% growth in this quarter. Besides, our T&D execution has been strong basically in case of the new projects of Senegal, Dubai and Brazil and this had a strong contribution to our revenue growth. However, the tendering activity has remained slightly low in the international market but the huge tender pipeline is visible in the Middle East and South region and expects that we will get good orders from the SAARC region mainly from Bangladesh and Afghanistan as well as the Middle East.

Q: How is the metro and rail segment doing and how big is the order book of this segment is?

A: This is the first time in the civil business domain in which we have received 3 metro orders in the third quarter. The orders include Kochi Metro worth Rs300 crore and two orders from DMDC worth Rs1,900 crore. Thus, we have received orders worth Rs2,200-2,300 crore in the metro space. Their execution has been started and I expect it will have a good contribution to our revenue in the quarter fourth and the new financial year. The beginning of these projects have been a good one and I feel that we will be able to make a good margin from them.

Q: What are your order book guidance of Q4 and outlook for FY21?

A: We have secured an order book of Rs10,000 crore till date and orders of Rs2,500 crore has reached to the L1 stage. So, I feel that we will have an order intake of Rs13,000-14,000 crore by the end of this year. There is not huge growth if compared with the last year's order intake which stood at around Rs14,000 crore and it is going to remain almost at the same position this year too. If talked about the order book then we have an order book of around Rs22,000 crore at present and Rs2,500 L1, which turns to be around Rs25,000 crore. We will try to expand our order book next year to make sure to post good growth in revenue in 2022.

Watch Zee Business live TV below:

Q: Interest cost has come down and the working capital cycle has improved. Will you look at the further reduction in debt?

A: Yes, we are focused on working capital. The days of sales have been brought down to 15-20 days this year, which has helped us in reducing our interest cost as well as the intensity of our working capital. The net working capital has come down to 122 days from 145 days of the third quarter of the corresponding year. The number will be brought down further to 100 days.