Power Mech Projects - Not a typical Power Infra Company

I had started looking at this company when it came out with an IPO as I found it to be interesting reading the IPO notes of various brokers, etc.,. But wasn’t able to apply due to liquidity issues.
Disclosure – Finally was able to buy from secondary market post listing. Hence disclosure at the beginning itself that I am invested in Power Mech Projects.

Purpose of the IPO was to provide Motilal Oswal PE and exit and at the same time raising cash to pay debt partially and to utilise rest of the funds for WC requirement.

Luckily Nirmal bang also started covering this stock and has come up with a detailed report on the same (can be found here). I am utilising excerpts from Nirmal Bang report to provide a brief summary on the stock.

CMP – Rs. 607.
Current Mkt.Cap.- Rs.890 Crs.
FY16 Rev. Expected – Rs.1600 crs. (as per mgmt.)
Promoter Stake- 64.5%
Company Url.- http://www.powermechprojects.in/

The first step of setting up a plant is the most arduous for any power company. It requires intense engineering expertise which is often in short supply—and also proves expensive to acquire and retain. The simpler option is to outsource the heavy-lifting: Enter Power Mech Projects, a Hyderabad-based company, which spotted this opportunity back in 1999.

Power Mech Projects (PMP) is an integrated power infrastructure services company providing below services to power plants which are nothing but the business segments that Power Mech. operates in:

  1. Erection, testing and commissioning (ETC) of BTG and BoP equipment (67% of FY15 revenue) - ETC work is provided to thermal, gas and combined cycle power projects covering BTG packages including various types of boilers (HRSG, WHRB, CFBC), turbine generators, electrostatic precipitators (ESPs), hydro turbines, structures, pressure parts, air systems, fuel oil systems, coal systems and BoP packages including structural steel works, ash handling, coal handling, fuel oil systems, water treatment plants, fire protection systems and high-pressure piping works.
  2. Civil works (13% of FY15 revenue) - civil, structural and construction works which are ancillary to its ETC business.
  3. Operations & maintenance (O&M) (20% FY15 of revenue) - AMC, repairs, renovation and modernisation, residual life assessment, scheduled shutdowns, retro-fits, overhauling, maintenance and upgradation services for thermal power plants, hydro power plants and gas turbines.

In 2013, it built, tested and commissioned projects for a cumulative capacity of 40,000 MW across India. It also erected 65 boilers and 80 turbines during the period. And, in the process, it crossed Rs. 1,000 crore in revenues for the first time.

Few Clients-
BHEL, NTPC Limited, Doosan Power Systems India Private Limited, Adani Power Limited, L&T Ltd-Thermal Power Plant Construction BU, Thermal Powertech Corporation India Limited, GE Power Services (India) Private Limited, CLP India Private Limited, BGR Energy Systems Limited, Thermax Engineering Construction Co. Limited, SEW Infrastructure Limited, KSK – Arasmeta Captive Power Company Limited, KSK - VS Lignite Power Private Limited, KSK –Mahanadi Power Company Limited, Abir Infrastructure Private Limited, Siemens Limited and Reliance Infrastructure Limited.


  • First generation entrepreneur, Mr. S Kishore Babu.
  • Spent the first 14 years of his career in an engineering company, Indwell Construction.
  • Rose up the company’s ranks to additional managing director and, later, to joint MD. At this point decided to branch out on his own.
  • Driving force behind Indwell Construction’s success, built strong associations with NTPC and BHEL during his stay at Indwell; hence thought why not venture on his own, rather then doing it for somebody else.
  • Tapped into his extensive network and founded Power MeCH.
  • Has leveraged his personal touch and execution skills to gain contracts from several large power producers in India.
  • Colleagues describe him as someone who is relationship-oriented.

Salient Features-

  1. Largest and most credible ETC company – 38% market share while in the highly profitable O&M business (19% margin) it holds a 60% market share in private IPPs.
    2.Worked on 16 out of 21 super-critical plants in India as well as both operational UMPPs.
  2. Gets 1 out of every 2.5/3 orders from NTPC and BHEL.

Some Financials and Ratios-

  • OPMs – 12%
  • ROCE - 24%
  • ROE – 22%
  • P/Bv. – 2 times
  • Asset turnover – 4 times
  • Receivables – 52 days (industry avg. 92 days)

Future Opportunities-

  1. Revival of stuck IPPs worth 57GW.
  2. Servicing of Chinese plants (60GW capacity in India) through a joint venture with a Chinese firm.
  3. Opening up of state utilities to private O&M contractors.
  4. Focus on increasing share of foreign business. (6% of FY15 revenue and 14% of order book)
  5. Focus on O&M business which has healthy margins of 19%.
  6. As per CRISIL, over the next four-year period the opportunity size of AMC services in thermal power sector in India is estimated at Rs75bn. The total opportunity size includes power plants of central utilities like NTPC as well as state power generation companies, which currently do not give out AMC contracts to private parties but prefer to do it themselves.

Threats – (Direct copy paste from the Nirmal Bang report)

  1. Significant time and cost over-runs in lump-sum price contracts and item rate contracts on account of delay by PMP or its sub-contractors can affect the profitability and working capital cycle.
  2. PMP’s operations are dependent on a large pool of contract labour and any inability to access adequate contract labour at reasonable costs at project sites across India may adversely affect its business prospects.
  3. Inability to effectively manage project execution and milestone schedules may lead to project delays, which may adversely affect PMP’s business.
  4. Any economic downturn or other factors adversely affecting investments in the power sector will adversely impact the demand for PMP’s services.
  5. Any significant and unforeseen increase in competition can affect the profitability and market share of PMP adversely.

Points I like -

  1. Have liked what I have been able to read and understand about the promoter. First generation entrepreneur, understands business very well, looks like having an aggressive mindset, has been able to achieve scale in a business where it isn’t easy to attain scalability.
  2. Company has shown that it can achieve scalability in a difficult business. Future plans also points towards this that scalability can further be achieved.
  3. Small company and is the market leader.
  4. Niche segment that requires lot of technical expertise. (creates entry barriers)
  5. Has maintained decent margins and good return ratios despite being in an industry related to power.
  6. Has done well at a time where power as a sector hasn’t done well, and I think things for power sector would eventually improve gradually (maybe slowly) as government’s increasing focus on clearing bottlenecks in the power sector, opportunities for service providers should grow. For e.g. visible steps being taken by govt. higher coal production by Coal India in the last few months, reforms in fuel linkages, setting up of railway lines for coal evacuation, and steps taken towards restructuring of distribution companies in some states.
  7. Good return ratios of the segment it operates in.
  8. Good WC mgmt. despite being in a stressed sector like power. (should improve further as mgmt… is focussing on O&M business and wants to increase its share to upto 30% in future.)
  9. Margins should improve with rising contribution of O&M business.
  10. Annual maintenance contracts should grow due to a rise in installed base of IPPs in recent years.
  11. PMP is in the process of setting up a large heavy engineering facility in Noida for making non-critical equipment and spare parts to service 60GW Chinese facilities and other equipment like hydro turbines. This reminds me of AIA Engg. Kind of business. I like this as I see this as an extension to O&M services business. Company is already providing O&M services, then why not use spare parts etc.,. manufactured internally. I think that Power Mech’s presence and dominant position in the O&M services business should be an advantage for this new plant.
  12. This looks like a segment where small players may not find it easy to enter as needs technical expertise & credibility and big players like BTG or BOT guys may not be interested as this segment maybe small from their point of view and also non-core for them.
  13. Nirmal Bang report states that Chinese and Koreans are competition only in product manufacturing and supply and wouldn’t be able to or wouldn’t be willing to compete in this business segment where Power Mech operates. The report states that Chinese presence may infact translate into business opportunity and not a threat. I see the above JV with a Chinese company as a proof of this that Mgmt. maybe sees this as an opportunity.

Power Mech looks like a play on it getting better valuations and then being driven by improved earnings. There are no like to like comparable players with closest one being Sunil Hitech and BGR Energy Systems. Power Mech seems to be trading at discount to both these Sunil and BGR as it is trading at 10-11 times earnings and at an EV/EBITDA of 4.8 (estimated FY16), whereas BGR trades at 15 times earnings on TTM basis and EV/EBITDA of 8.25 times and Sunil although trades at similar valuations as Power Mech but Power Mech has better return ratios, operating metrics, WC cycle as compared to both BGR and Sunil.

I think Power Mech should trade at 15 times earnings or EV/EBITDA similar to BGR i.e. 8 times.

Hence I have taken a position expecting a re-rating and after that better numbers driving the stock price post re-rating.

P.S. - This is not a buy/sell recommendation. I am an amateur investor and not capable enough to analyse a stock. Above are just my views on Power Mech., which may be biased as I am invested in the stock. Please do your own due diligence.


  1. Nirmal Bang Report
  2. Forbes Article
  3. Other articles and info available on the net

Discl: Sold Power Mech (PM) today.

Reason - Selling PM is not a change of view on PM or not because I am not convinced about PM. It is just because I further added to present holdings of both Ajanta (as a core long term holding I found Ajanta giving good entry points at these level) and Indian Terrain (post results I think Indian Terrain has become more attractive).

CONFERENCE CALL - from Capital Markets

Expects to close FY16 with a revenue growth of 7-8%

Power Mech Projects held a conference call on Feb 15, 2016. In the conference call the company was represented by Kishore Babu, CMD; Kodendaramaiah, Director; Rajendran, COO and Satish, CFO.
Key takeaways of the call

Income for the quarter ended December 2015 was up by 10% to Rs 354.80 crore of which ETC was Rs 210 crore; civil is Rs 51 crore and O&M is Rs 94 crore. And the EBITDA was up by 22% to Rs 48.02 crore. Eventually the net profit was up by 32% to Rs 20.36 crore.

Order backlog as end of December 2015 was Rs 3600 crore. Of the order backlog the ETC order book is about Rs 2000 crore, civil is Rs 500 crore and O&M is Rs 1150 crore.

Order intake for 9mFY16 was Rs 1200 (ETC Rs 256 crore; civil Rs 127 crore; O&M Rs 800 crore).

The company expects to close FY16 with an order intake of Rs 2000 crore compared to Rs 1350 crore in FY15

Strong traction in O&M order inflow in 9mFY16. O&M order intake in 9mFY16 was Rs 800 crore compared to Rs 200 crore in the corresponding previous period.

Of the total erection order backlog the share of BHEL is coming down from about 60% in FY15 to 50% in FY15 and now it is 40% of current order book.

Of the order backlog the share of International order is about Rs 460 crore. International order intake in 9mFY16 crore is Rs 96 crore.

The company has submitted bids for O&M orders worth over Rs 500 crore from SEBs. The bids are for two projects and the first one worth Rs 265 crore will open in another 20-30 days and the second project which is of Rs 300 crore ticket size will be opened in April 2016.

The company likely to add about Rs 700-800 crore worth of orders including Rs 250 of O&M order from SEB in Q4FY16. The company to end this fiscal with an order intake of about Rs 2000 crore compared to Rs 1350 crore in FY15.

Sustainable O&M margin typically will be about 18-22%. O&M segment revenue will be 40% of the company’s FY17 revenue compared to current 27%.

Of the current order backlog the share of slow moving orders are Rs 180 crore largely in erection.

The company expects to close FY16 with a revenue growth of 7-8%. Margin will be in line with Q3FY16 numbers. Given current order book the company expects a revenue growth of 12% in FY17.

Of the FY16 revenue O&M share is expected to be about Rs 370-380 and for FY17 it will be about Rs 450 crore.

Debtors as end of Dec 2015 were Rs 220 crore. The working capital days were 65 days.

O&M orders are typically for 2-3 years.

The company is looking at civil jobs in railways and irrigation. If any orders materialize the civil vertical get a boost.

Employees on payroll is about 5000.

Hydro Magus, the subsidiary company is engaged in supply and construction of hydro plants on EPC basis, Renovation & Modernization, O&M etc. Its Current order backlog is Rs 35 crore and the company expects addition of another Rs 20 crore orders by end of this fiscal. Revenue for FY16 is expected to be about Rs 20 crore. Typically EBITDA for its business is 15-16% and a net margin of about 6.5-7%. Next fiscal the revenue is expected to scale up to Rs 45-50 crore. The CoD of Noida workshop will be declared before March 31, 2016.


any view on huge contingent liabilities of PMP ltd

Recently announced orders increase order book by approx. 650 cr. Stock price also responded a bit with orders. What I want to know from fellow members, which company fits well for peers for powermech projects. I want to do peer comparison, but in screener.in it shows L&T, voltas etc. that is not comparable.

Disc: Invested at lower levels.

23 Aug 2018 could be a decisive date for PowerMech (NCLT case on Lanco Infratech)

There are four little-known companies eyeing Lanco Infratech. “One can buy shares of acquirers in the companies as NCLT cases could see a 40-70 per cent haircuts. With a sound balancesheet and probably in the right cycle cyclically, if stronger companies acquire a company at a 60 per cent haircut – and the IRR on that acquisition is northwards of 20 – the market is more likely to rerate that company than the lender, which took the haircut,” Rohit Agarwal from Kotak Life Insurance recently told ET Now.


Powermech Projects Ltd

Highlights Of Q2 FY19 and H1 FY19 Results


  • Quarterly Results
    • Revenue grew by 55 % to 538 Cr from 347 Cr loss last year same quarter
    • Revenue mix is
      • 175 Cr come from mechanical segment which was 141 Cr last year same quarter.
      • 208 Cr come from chemical segment which was 77 Cr last year same quarter.
      • 140 Cr come from O&M segment which was 142 Cr last year same quarter
      • 11 Cr come from electrical segment which was 4 Cr last year same quarter
      • 5 Cr come from other income
    • EBITDA grew by 54 % to 72.22 Cr from 47 Cr last year same quarter
    • PAT grew by 67 % to 28.4 Cr from 17 Cr last year same quarter
  • H1 Results
    • Revenue grew by 42 % to 1003 Cr from 708 Cr last year same quarter.
    • Revenue mix is
      • 356 Cr come from mechanical segment which was 285 Cr last year same quarter.
      • 350 Cr come from chemical segment which was 165 Cr last year same quarter.
      • 268 Cr come from O&M segment which was 132 Cr last year same quarter
      • 21 Cr come from electrical segment which was 14 Cr last year same quarter
    • EBITDA grew by 42 % compare to last year H1
    • PAT grew by 50 % compare to last year H1

Key Highlights

  • Jump come from International business specially in term of execution in south east project , Bangladesh and Oman , Nigeria project is yet to start and it will start in November.
  • Second big contribution come from sect oral and civil work mostly from Vishakhapatnam project it is expected to be completed by 19 month but company is trying to close it by 15 month.
  • In term of Power and Non-Power there has been a complete shift from power to Non-Power. Q2 Non-Power stood at 148 Cr that is 28 % of total revenue. H1 Non-Power revenue stood at 257 Cr which is 25 % of total revenue and power stood at 75 % of total revenue.
  • Revenue from international market in Q2 stood at 130 Cr which is 24 % of total revenue and in H1 it is 25 % of total revenue rest 75 % revenue come from Domestic market.
  • Working capital also getting improved it was 187 days last year and now it is 160 days
  • Debtors days are 64 days compare to 74 days last year same quarter
  • Inventory days are same 11 days compare to 11 days last year same quarter
  • Company will achieve 150-152 days working capital days by the end of financial year.
  • Cash flow stood at 54 Cr compare to (-38) Cr last year H1
  • Order backlog grew by 30 % it was 4268 Cr at the opening of FY19 and now it is 6948 Cr. Company is able to turnaround the business. Order worth 3670 Cr added and expected 4200 Cr more added this year. Project worth 300 Cr are at L1 stage.
  • Company was able to get 520 Cr of mechanical jobs.
  • Company has not added any resource in FY19.
  • In O&M side order backlog has gone up by more than 20 % from 801 Cr to 977 Cr. Total addition till today is 472 Cr. Company expect to end up by 580-600 Cr by the end of year or more than that.
  • Railway work is doing extremely well.
  • Electrical work of northern railway and rural electrification job undertaken by company which company is working in M.P. and north east the work is going as per schedule. Now company will see how they perform in North east railway electrification to be in focus.
  • International Business
    • Company has taken a job of 70 Cr in Kuwait. In Bangladesh major development has taken place by taking 350 Cr of job in EPC business in boiler than structural civil work.
    • There is huge opportunity in gulf countries specifically in Oman. In Oman there is major refinery that is coming up with work opportunity of 300 Mn dollar and company focus is to get 50-60 Mn dollar from there and lot of work is done over there.
  • Major expansion is going on in steel business . This year end company will able to end by 4400 Cr of order book and backlog of 6500 Cr in second half company is expecting another 1100 Cr of conversion. Company is looking now beyond 2019.
  • In EPC segment out of 1,64,000 MW 6400 MW is in place with EPC player. About major 5 player is in field. In coming 2-3 year there will be increase in pricing because of capacity addition coming up.
  • On O&MK side two things happen. In MP company take another job of 40 Cr in the O&M business . Company is the lowest bidder for the 18 MW unit of about 180 Cr process of approval is in place.
  • In NTPC, 4-5 % MW capacity addition is planning in couple of year and they would like to enter into a long term repair and maintenance business on each project each plant and than some project in MP and KPCL is coming up.
  • Focus will be on increasing the margin and select projects and how to drive the export business and non-power business and power business.


  • Why there was dip in margin and what will be margin guidance for FY19 ?
    • 13.32 % to 13.40 % for the full year. This quarter slightly dip is because of BHEL fnacl project which was in closing from last one month. Now the mix has come down old project compare to new project. Only 1 or 2 projects are left out. In H2 it should slightly improve. On full year basis the EBITDA margin will be more than FY18.
  • In term of revenue mix company was saying 2100 Cr and civil work is 35 % in the first half so would it be similar for full year or slightly higher ?
    • For Full year FY19 civil work will be close to 32 %. Because 30 % will come from O&M than company have mechanical project for International and domestic. International project like Saudi and Oman are fast track project. In Nigeria company will bid in now so that will be also start picking up. So mechanical will be close to 34 $. There will be jump from electrical because railway electrical work will start building that will be close to 6 %.
  • What will be the interest cost trend in H2 going forward ?
    • It will be more because there is increase in base rate of banks by 0.20-0.25 % so unless there is no reduction come in base rate the Interest cost will be same as H1.
  • Now with 75 % of project being completed so can similar executing can be expected going ahead and which project will be driving that ?
    • 75 % is till date. In Q2 it is hardly 55 % so that attraction will continue in Q3 and Q4 also. The project like railway electrical and Nigeria project , 3 project in Bangladesh , IOC petrochemical project. So these are the project which will start building in this quarter.
  • From where will growth come in O&M segment ?
    • Company already have 150 Cr of L1 order book log in had that should increase to almost 550 Cr compare to last year company want to touch 600 Cr order book. The civil project which are running currently will be renew in every 2-3 years. The new project which company is working on which is in MP, Karnataka and some of the shutdown jobs are coming in bigger way so out of O&M is 600 Cr.
  • What kind of growth expect in hydro project and water treatment plant and what margin is expected ?
    • Company has started one project and looking for 1 or 2 more not more than that. Focus will be on the R&M jobs , captive lead in the small and median segment where the margins are better ensure focusing.
  • What will be the aptitude for more order inflow and company comfort level ?
    • On the end of year company will have 4200 Cr of order book and 6700 Cr order back log at the end of the year and perhaps company is confident on growth of 25 % in coming time. To achieve 4000Cr of order book by next year. Company has to enhanced the segment in Non-Power sector , O&M expansion into the Non-power segment also & Non-TCP sector. On export side company is looking at minimum territory particularly in East and investment are coming up in Oil and Gas sector in middle east as Oman refinery will play a major role in non-power segment and company will be looking at that type of things. In domestic there is 500 Cr of back log in the Non-power mechanical side where company don’t need to add any assets on acquisition requirement company should carry that in future also both in the steel side , petrochemical side and wherever opportunity are coming up. In domestic power sector growth will be there in which BHEL will be in continuous focus.
    • In next 24 month company will be focusing in adding of 3800-4000 Cr order book and in mix of power and non-power will remain 50-50 % of that 4000 Cr the 753 Cr of O&M which don’t require much effort it will close to 500 Cr in renewable and rest will be new contract both in power and Non-power. Rest 3000 Cr company need to work more of 3000 Cr in mechanical could be 600-650 Cr and international 500 Cr. So there could be 350-400 Cr of addition in mechanical which is quite possible.
  • Does the 4000 Cr order book company looking will rise top line by 30 % CAGR ?
    • Yes because in term of execution everything is in place till 2021.
  • How does the big school order will start execution is there a financial exposure required here since it is a hybrid annuity kind of structure ?
    • Company is working in a support from Sub-contract model now close to 1300 Cr almost 700-750 Cr company have identify the sub-contract where company will have back to back arrangement. Now receipt is link to payment while company bidded at time also company have the back to back arrangement with 13-14 % leading. So company don’t need funding at all company will give external support from resource Cranes , equipment and man power for which company will charge separately . This is the model for 50 % and balance 50 % will work out in combination because government is giving 10 % advance with interest of 6.5 % which is very much than expected. So company will avail the W.C. from government. The gap is 30 % out of which 20-25 % will be loaded from constructive margins. So rest will have combination of internal accrual plus project specific type with book that company already discuss with SBI and some of other banks which will be from a specific level which will take care of complete project execution of 50 %. It already started and company settled office at Vishakhapatnam and 50 % survey is already completed. The mobilisation is in full swing. The building construction will start in December but in terms of ground execution has already started because it is a fast track project so government is targeting to complete in 24 month. Company has set 18-19 month as target.
    • Company has set one more office in Vishakhapatnam for allocating manpower and company is distributed completely activity in 20-30 hubs. So that is made for different school at different district.
  • Kindly provide order book log for O&M and mechanical from international market ?
    • Total is 1280 Cr out of which 20 Cr is from Q&M side and rest is mechanical for the quarter an total till date is 6944 Cr .
  • What was the management thought process behind acquiring tower cranes of LANCE to go in asset heavy model from asset light model business ?
    • It was for some assets line Cranes but pricing doesn’t get set so company drop the Idea and company get completely out of that strategy . Company has already done CAPEX of 30 Cr and may be 4.5 Cr will add up additionally but now it rolled out.
  • How is the CAPEX in acquiring captive power plant going on ?
    • Company will be expanding it O&M segment in captive power plant and not creating any asset in captive power. So that O&M will become 800-900 Cr for full year.
  • Is there any pick up in private Capex front specially for captive power plant when company can have the EPC part of it ?
    • Investment are starting in Oil and Gas , Fertiliser. There are captive power plant investment coming For example JSW is doing expansion for a captive power plant. NALCO is also coming up with investment of 50 Cr and they are going to put up a additional capacity for a captive power plant where company is already there for many of O&M jobs and there company is looking for new capacity for the captive power plant. For every steel and refinery plant there is a captive power plant needed. Company focus is to increase captive power plant business in O&M segment.
  • Did the prices will come down in EPC project and does margin is expected to increase there ?
    • Margin are still under pressure in the EPC power plant project but on the O&M side company will continue to get good margin and export side also margin will be better. In Non-Power segment also company will try to get good margin.
  • How is the synergy of power segment to other segment like refinery , EPC so how company is utilising capacity for non-power segment ?
    • Earlier company was doing 4 lakh metric ton of work which come down to 2 lakh metric ton so there is gap of 2 lakh Metric ton and company is trying to fill it up with the existing project. Advantage is company don’t need to retain the people the only job is to look on people and beside that all the current assets are used in non-power mechanical jobs too. The job is not so different so there is perfect synergy.
  • Of the 1300 Cr project of school what will be the annuity and what investment will company do and what is the different payout of that ?
    • This is broadly 40-60 % model. So doing the constructive period company will be paying 40 % in spite of that they will give 10 % advance on interest of 6.6 to 6.8 % and rest 60 % will be stable in 10 instalment in rest 5 years with a interest of 6.6 %. So for the 60 % payment company have contract with the sub-contractors. So in 60 % that is 1300 Cr company need to invest 800 Cr in which half of that will come from supplier and half will invest by company. On top of that company profit is 22-25 %. This will be in SPV.
  • How does company see competitive intensity in international project and what kind of run rate can be seen going forward ?
    • International business will be more than 20 % of total revenue. This time it cross 25 % because of project in Saudi , Oman . There are plenty of opportunity in Saudi , Nigeria , Oman and Bangladesh but company want to do very selective business so this business will be not more than 18-20 % of total revenue. Beyond that company does not need to expand because company have so many things to do in domectic market. On competitive side company is comfortable in taking job and good part is when company entered from India no body has extend from India in power sector so that will be positive . Now company is able to bid better because now company have the infrastructure , organisation and asset created in Dubai, Africa and Oman. Company want to trigger 18 % minimum margin. In international market lot of companies are coming now. Company will be focus in O&M as company is working in ti from last 3 years. Company will rest at it at 20 % as company have 1800 people that will be peak level.

Management Comments

  • As the civil price is going up company will only focus on selective projects where cash flow is seen.
  • Company margin profile will significantly go up and there will be lot of improvement in the cash flow front.

Good result.


Sub: Receipt of orders worth Rs 412 Crores

If anyone attended the AGM or knows answer to these questions I complied going through the company AR may response:

  1. As per presentation of Q1 20 page 16, the opportunity size is huge. In AR company writes, they can handle 55 project sites and 41 O&M sites concurrently. What is the basis of this precise assumption as no two projects or O&M contracts are similar in nature? Also, how many concurrent sites are they managing now?
  2. What are the key execution challenges and what are the key differentiation strategy for which customers would choose them? Are all these contracts won through tendering process? If yes, what is their bid to book ratio historically?
  3. One remarkable thing for company is during very bad phase of power sector in India, the company almost doubled its revenue from 2012 period but ROE, Cash Flow substantially reduced where EBITDA margin remains constant at about 13%… Is it fair to assume that more and more cash is getting tied up in the business? Or can we make any other assumption which is reasonable and plausible? If that much cash gets tied up with incremental business, there is limit to growth without damaging Balance Sheet ……. What are promoter thoughts on this issue?
  4. Incremental revenue growth through outside funding when govt or semi govt bodies are payment maker ---- a possible death trap for many companies. Assuming promoters are well aware of this issue, how they manage to ally apprehensions of potential investors? (Here I am keen to know his thoughts and approach than a precise answer)
  5. Is it possible to get margin break up of ETC, O&M, Electrical & Civil Construction Works and segment wise capital employed in 4 segments? They don’t provide it. Proportion of Civil and Construction has grown from 13% to 37% of revenue between 2015 and 2019 …… It is margin dilutive from a common sense view…… But is it a right assumption? If not, why not?
  6. On Rs. 82/- EPS, and Rs. 127/- CEPS when company gives Rs. 1/- dividend means company generate almost no cash which is a bad signal about business quality and minority friendliness …… What is management response?
  7. Sajja Kishore Babu …… Salary Rs. 8 cr …… Second highest pay …. CFO … Rs. 32 L and two vice presidents of Rs. 32 L each ……. How a company with Rs. 2200 cr revenue can manage with so thin managerial bandwidth? What are plan to scale up the organizational strength?
  8. They need to pay out unsecured advance to subcontractors and its more than 1/3rd of yearly total subcontract expense (Rs. 300+ cr against Rs. 800+ cr) …… this is big source of cash blockage …… Is it the uniqueness of their model or their subcontractors are not bankable entity or is it some other expense to get the project? It is important, as company hardly receive any mobilization advance from customers? So there would always be strain on cash flow if it is their business model. What are thoughts of management?
  9. Why there is unspent CSR expense? It is a small amount but shows management intent.
  10. Rs. 800 cr of guarantees outstanding ……. Reason, purpose and maturity of these?

All figures from Standalone only

Disc: No investment but trying to understand


Insider Buying


Increase in holding by HDFC MF

1 Like

Power Mech Projects Limited bagged Rs.9, 294 crores Mine Development &
Operation Project from Central Coalfields Limited (CCL)


Company’s plan for diversification is bearing fruit. Last Annual Report also gave a lot of hints about their plans.

Latest Investor Presentation

It is incredible that they got the above-mentioned project. It speaks volumes about their reputation.

The concession period is 25 years including two years of development period with an option of extending the contract for a period of another 10 years with the consent of both the parties. With this, the total contract period will extend up to 35 years.


New Order received - 448crs.


  1. Highest ever Qtr, 900+ Cr Rev, PAT 47 Cr
  2. OCF - Up 45%, FCF - Up 39%
  3. Net Debt - down 15% despite 44% growth
  4. Margins improving, yet to reach peak.
    FY22 EPS - 94.5

Investor Presentation:

Technical chart:



Powermech won a large Rs 62bn FGD order from Adani and is the L1 bidder for another Rs 15bn of contracts. Order book is worth Rs 100bn.

Has run up sharply, is it discounting all the growth now?

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Here is a twitter thread I wrote about the company when it was at 1250. I’ve discussed valuation in details. It has given a run up since then so judge the present valuation accordingly.