Analyst Meet / AGM - Analyst Meet

27-May-2015, 09:10
Va Tech Wabag held analyst meet after it declared results for March 2015.

The meet was addressed by Rajiv Mittal, Managing Director of the company.

Highlights of the call:

For the quarter ended March 2015, Va Tech Wabag reported a 1% rise its consolidated sales to Rs 907.73 crore. OPM rose 80 basis points to 12.3% which saw OP rise 8% to Rs 111.47 crore. Consolidated net profit was down 1% to Rs 70.50 crore.

In FY 2015, consolidated sales grew 9% to Rs 2436.16 crore. OPM stood at 8.6% which saw OP grow 11% to Rs 209.47 crore.

Depreciation for FY 2015 includes a reversal of Rs 10.61 crore which represents the impact of change in accounting policy from WDV method to SLM method. The company also revised useful life of the of fixed assets. Thus depreciation for the year is higher to the extent of Rs 4.51 crore.

EO gains stood at nil against Rs 5.06 crore. Thus PBT after EO grew 1% to Rs 167.10 crore.

Consolidated net profit was down 3% to Rs 110.10 crore.

Delay in finalization of Target Projects and Significant depreciation of Euro led to lower revenue growth.

In FY 2015 total cost rose due to increase in site employee cost for Istanbul O&M Project in Turkey.

OPM was impacted due to provision of Rs 25.0 crore in FY 15 towards LD in Oman Desal project (Rs 15 crore) as conservative and prudent accounting practice.

In FY 2015 there was pressure in the Indian business, whereas the rest of the world did well.

FY15 standalone revenue grew 7% despite robust order book, largely impacted by the execution challenges and tight liquidity conditions.

Also on the margin front the rest of the world has done pretty well.

More or less results were in line with the guidance except that there was a translation adjustment required because lot of its business comes from the European markets where the euro was very weak. This gave the company a 10% jolt. Otherwise the result was well within expected range.

Order Book stood at Rs 6800 crore including Framework Contracts of Rs 1400 crore (On receipt of advances / LCs / Notice to Proceeds or achieving financial closure, Frame work contracts will form part of the company's firm order book).

Order Intake stood at Rs 2977 crore.

In FY 2015, interest cost rose largely on account of borrowing cost of Ujams BOOT Project in Namibia and Istanbul Project in Turkey.

In FY 2015, finance cost rose largely due to increase in performance guarantees issued to new projects.

Delay in new order intake led to lower Book and Bill revenue.

Total cost fell in March 2015 quarter due to reduction in variable pay of employees.

In Q4 Finance charges rose mainly due to increase in working capital and increase in performance guarantees of new contracts.

Non Current Liabilities on Consolidated Balance Sheet increased on account of Long Term Borrowing for BOOT project in Namibia. The same has increased on standalone basis on account of Increase in Customer Advances. However this gets compensated by reduction in Customer Advances in Other Current Liabilities.

Cash and bank balance stood at Rs 311.2 crore against Rs 370.2 crore.

Gross Cash stood at is Rs 422 crore on consolidated basis.

Net cash stood at Rs 310.3 crore. Long Term Borrowings for investment in Ujams BOOT Project is not included.

Decrease in Net Cash is also because of Euro depreciation. This is to the tune of Rs 30 crore.

Standalone short term borrowings reduced to Rs 63 crore in FY 15 from Rs 89 crore in FY 2014.

Net working capital excluding cash is 68 days

The company has a business model which is asset light model. It does not invest in assets. But last year in Namibia it invested in one of the projects which is a long-term 20 year concession in Namibia.

This was a good opportunity where waste water came from various industries and Va Tech Wabag had opportunity to showcase its technology. The company invested about 12-13 million euro in this build, operate and transfer (BOT) project and that is a reason debt was high and subsequently its interest cost went up. Debt and interest cost went up just because of this single project.

The company has been in Namibia already for 15 years producing potable water from waste water.

The management does not see lot of transactions happening in India. India will remain probably subdued. Rest of the world will see a lot of activity especially in the South East Asia and Middle East. The company recently ventured in to Latin America.

The company sees good enquiries coming in from Latin.

The company expects about 65% of its business coming from the rest of the globe and about 35-40% only from India at least for FY16.

There was a lot of discussion happening on various flagship initiatives taken by this government, one of which was Namami Gange. Other than that, there was Swachh Bharat initiative and also there are smart cities.

In the last three weeks back there were discussion on Namami Gange. Earlier a figure of Rs 51,000 crore was allocated and on that front the government already approved Rs 20000 crore for Namami Gange.

For smart cities the government has allocated another Rs 50,000 crore.

For Swacch Bharat, AMRUT (Atal Mission for Urban Renewal) government has allocated another Rs 48,000 crore.

All put together is in last two three weeks the government has allocated almost Rs 1.20 lakh crore.

It was heartening to see a proactive government.

Order intake was strong in domestic business at Rs 1170 crore in March 2015 quarter against just Rs 470 crore for the nine months. This is despite many orders in which the company was L1 and was to be booked in March 2015 quarter were delayed. The orders of Rs 730 for power plants are the largest sized in the history for the company.

In FY 2016 the management has guided that Revenue will be in the range of Rs 2800-3000 crore & order intake will be in the range of Rs 3500-3700 crore.

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