Rajiv Mittal, MD of the co addressed the meet.Highlights of the call by Capital Mkt:
India has seen a stable government and the new government has translated in buoyant mood and sentiment across business communities.There are early signs of economic recovery.There is a paradigm shift in respect of policymaker.The new government has increased focus on Water and Sanitation.The budget 2014-15 had host of initiatives for the water industry.
The âNamami Ganga’project is a project for cleaning up of Ganga and the government has allocated Rs 237 crore for the same. The management feels that this allocation is likely to increase manifold going forward.The budget also came out with Rs 3600 crore project for National Rural Drinking Water Programme.It has also provided Rs 500 crore for reforms in the water sector.
Government keen to bring much needed reforms in Power sector which will increase demand for the company’s products.100 smart cities will create more demand for water.Development of SEZs and creation of 100 smart cities will also increase demand for water.
The new government in India has shown keen interest in the water sector and the management is confident that Wabag with its inherent skills and execution capabilities is well placed to capture a large share of the upcoming water treatment business in the country.The company is investing and focusing on capturing the large opportunity in the water business.There is healthy pipeline of orders in the water sector. `Good traction in AP, Maharashtra, Orissa
Election in few countries led to wait and watch policy. Company had built pipeline of international orders. Slow off take is interim phenomena and will increase in second half.The company is cautious in Libya and Middle East.Its diversification across geographies augurs well during such time. The company is moving towards being local service provider in many countries.Order pipeline in, Philippines and Qatar and Latin America is promising.Due to its focus last year, now the company is well placed in South East Asia and also in Nepal, Sri Lanka and Bangladesh.
This year the company is putting special focus on Middle East as it thinks it has good chance of growing there. It is also investing its time and money in Sub Sahara market.Receivables stand at Rs 1412.39.Debt is close to Rs 206 crore. Long term debt is Rs 110 crore taken for BOOT project for Namibia.Debt for Indian business is Rs 97 crore.
The company is very bullish on India geography after the new government came in. but it does not expect any major impact till second half and feels that the benefits will come in fourth quarter FY 2015 onwards.For the quarter ended June 2014, Va Tech Wabag reported 40% rise its consolidated sales to Rs 401.04 crore. OPM improved from 4.1% to 6.2% which took OP up 112% to Rs 24.81 crore.The company has made provision of Rs 8 crore as per conservative policy of the company for receivables included in other expenses. If during the year the company collects the same it will be reversed.
Also, the OPM is lower because of the mix of the projects contributing to Revenue during the Quarter.OPM for the FY will be same as what the company reported in FY 2014.The total cost of operations in the International Business is under control and this will enable the improvements in the margin.
Interest and finance charges have increased due to servicing of new orders received during FY14 and cost on long term borrowings for the BOOT project in Namibia apart from cost incurred for Oman Desal proect (there was lower cost in June 2013 quarter for Oman project).
Depreciation for the quarter includes a reversal of Rs 2.76 crore which represents the impact of change in accounting policy for providing depreciation on Written Down Value Method to Straight Line Method.
The company has performed impressively during the quarter. The company has won a new large framework contract worth Euro 45 million in the O&M space in Turkey which reiterates the growing stature of Wabag in Turkey and the company’s continued focus on increasing O&M revenues.
The company has order book of Rs 6351 crore including Framework Contracts of Rs 1331 crore (on receipt of advances/LC/Notice to proceed or achieving financial closure, Framework contracts will form part of the company’s firm order book)O&M revenue targeted to increase from CY 20% level to 25% over a period of 3-4 years.
The management is confident of achieving annual guidance for FY 2015 of sales of Rs 2600-2700 crore and Order intake of Rs 3200-3400 crore.