“The order book position of Power Mech Projects is getting stronger by the day. Till November 13, 2020, the company has received orders worth Rs 2,836.2 crore and if straws in the wind are any indication, the total orders during the current fiscal ending March 2021 will reach Rs 4,000 crore,” points out S. Kodandramaiya, Director-Business Development.

Analysing the performance of the company during the first three quarters, he says that the order inflow upto November 13, 2020 was Rs 2,836.2 crore, of which erection orders were Rs 556.2 crore (or 20%), O&M Rs 262.1 crore, and civil and other works Rs 2,017.9 crore (or 71%). Of the order inflow, about 44% was power and 56% was nonpower. The order backlog as on November 13, 2020 was Rs 6,791.8 crore (up from Rs 4,574.8 crore as of March 31, 2020), of which power sector orders were 59% and non-power orders were 41%. Erection orders were Rs 2,462.7 crore (or 36%), O&M orders Rs. 991.9 crore (or 15%), electrical works were Rs 266.8 crore (or 4%), and civil and other works were Rs 3,070.4 crore (or 45%). However, he adds, “Despite a strong order book, the execution cycle suffered across all segments due to Covid.”

According to Mr Kodandaramaiah, O&M operated at an 86% level in Q2FY21 vs 85% in Q1FY21. In O&M, customers have not been able to operate at full capacity due to Covid restrictions. The company expects O&M operations to touch a 96-95% level in Q3FY21 and about 100% in Q4FY21. Excluding O&M, the other business operations together operated at about 55-60% in Q2FY21, compared to 45% in Q1FY21, and are expected to reach a 90% level in Q3FY21 and further to 100% by Q4FY21. Overall, operations were at 65-70% in Q2FY21 (up from 56% in Q1FY21) and are expected to go to 90% in Q3FY21 and 100% in Q4FY21. The company hopes Q4FY21 will be a normal quarter for PowerMech Projects on an overall basis.

The company faced challenges in the Bangladesh project (Maitree, where it has an order book of Rs 840 crore), ranging from labour to transportation. Similar challenges are faced in the Kareswaram project, the Bhusaval project and some cross-country pipeline projects in Gujarat and other western states of the country.

MARGINS HIT

Mr Kodandramaiya reveals that margins got impacted due to a lower level of execution together with an increase in costs due to Covid, such as idle manpower cost during quarantine, remobilisation cost of labour plus visa cost in case of overseas projects, additional transportation cost, safety measures, etc. The remobilisation cost was Rs 9-10 crore in the Maitree project alone and overall it was about Rs 25 crore. However, this will not recur.

Having bagged orders worth Rs 2,836 crore order till now, the company expects to add another Rs 1,500-1,600 crore of order booking/inflow in the balance 4 months of the current fiscal. Some orders are in advanced stages of finalization. Under normal circumstances, the current order backlog could give a revenue conversion potential of Rs 220 crore per month. The target of the company is to improve execution of the order book to Rs 220-230 crore a month. In order to do so, the company has to put more resources on the job.

Pointing out that “indirect/worker astrength as of now stands at about 15,000 workers, which is just about a couple of thousand less than the peak level,” Jami Satish, CFO, adds “This gives confidence of a pick-up in execution for the company. The company bagged two O&M contracts, one in the power sector for a 660 MW power project and another in the non-power sector (Bhusan Steel) for Rs 70 crore.

ORDER BACKLOG

The management expects the order backlog to be about Rs 8,000 crore by the current fiscal’s end. Of this, the O&M backlog should reach a level of Rs 1,700-1,800 crore, and EPC and erection around 35-40%.

In the case of the Bangladesh project, the company has completed only 25% of the order book. The project, that got disrupted due to Covid, has come back to normal in terms of execution. In the case of the Yadadri project, only 12% of the work (civil, structural and mechanical) is completed, with about Rs 800 crore worth of the order book yet to be executed. In the Rs 284 crore Bhusawal order, about 40% of structural work has been completed. The company has just completed mobilisation for L&T’s Buxar (Bihar) project worth Rs 176 crore. In the Dangote refinery project, about 65% of the work is completed. About 40% of the work is completed in the case of the Rs 400-crore JSW order (both Bellary and Dhelvi together). The company has completed about 60% of the order book in the Gujarat and Maharashtra cross-country pipeline project.