Captains Speak

Published: Dec 29, 2021
Updated: Dec 29, 2021

EPC orders highest in 25 years

“At the end of the last fiscal year (March 31, 2021), our EPC order book at Rs 8,437 crore was the highest-ever in the quarter-century history of Welspun Enterprises,” reveals Balkrishna Goenka, chairman of the $ 2.3 billion Welspun group of which WEL is a part. He adds, “Of this order book, Rs 5,893 crore is accounted for by the road and Rs 2,544 crore by the water segment. At the end of last year, our EPC order book was the highest ever at Rs 8,437 crore, comprising Rs 5,893 crore (road) and Rs 2,544 crore (water).” The company is in the process of acquiring the HAM project worth Rs 1,900 crore of the Kozhikode Bypass. Likewise, the company has invested (including loans) Rs 1,030 crore in the HAM road portfolio, Rs 444 crore in the road BOT project, Rs 93 crore in the water BOT project, Rs 320 crore in the oil & gas sector and Rs 54 crore in other assets, total amounting to Rs 1,941 crore.

Regarding the jv with the Adanis, Mr Goenka joined hands with the Adani group to form Adani Welspun Exploration Ltd (AWEL) with the shareholding in the ratio of 65:35, WEL holding 35 per cent through Welspun Natural Resources, a wholly owned subsidiary of WEL. The ‘Format B’ uploaded on the portal of the Directorate General of Hydrocarbons by AWEL states that the gas discovery made and announced earlier has got potential commercial value.

The drilling of an exploratory well in the NELP-VII area struck substantial quantities of gas and condensate at three reservoir levels. The pay zones and flow rates encountered have exceeded AWEL’s initial estimates. “This discovery of natural gas reserves is in an area off the Mumbai coast, spread across 714.6 square km, and the block is located in the prolific offshore basin,” explains Mr Goenka. According to him, preliminary analysis of the data indicates that the block has a high commercial potential with GIIP (Gas Initially In Place) contingent resources to the tune of 514 bcf (billion cubic feet) with additional prospective resources of 50 bcf. Further, seismic inversion, convential core and PVT studies of data collected from the discovery well are being analysed to assess the full potential of the find. Though the company’s share is to the tune of 35 per cent in the JV, it could go a long way in changing its fortunes.

RAISING FUNDS

The company has a short-term loan of Rs 97.3 crore and Rs 505 crore of long-term borrowings. Commenting on its funds requirements over the next two to three years, Mr Goenka says, “We envisage the same at Rs 260 crore, comprising Rs 220 crore for existing road assets (HAM and BOT) and Rs 40 crore for oil & gas. However, simultaneously, the company is hoping to start monetising some of its assets going forward, which will free up funds for future growth opportunities.”

Elaborating on the company’s business outlook, Mr Goenka says, “Currently there are around 27 HAM projects of NHAI with a total project cost of Rs 310 bn, whose bids have been announced. We are selectively targeting participating in bids for a few projects, while preserving our threshold return expectations. Simultaneously, we are also evaluating road HAM projects of states and municipal agencies. This is in addition to selectively evaluating EPC and BOT (toll) projects.”

On the prospects of the water segment, Mr Goenka points out, “The Jal Shakti ministry’s ‘Har Ghar Nal Se Jal’ scheme of providing drinking water access to all by 2024 is expected to result in a potential opportunity of more than Rs 6 trillion over the next four years. We will actively focus on these projects.”

Analysing the performance of the company during the financial year ended March 2021, Mr Goenka, reveals, “FY21 was a challenging year in many ways — we progressed and emerged stronger. Over the next few years, we see significant opportunities in infrastructure and aim to achieve operational excellence through them. We are optimistic about the company’s growth buoyed by the growth in outlay in the National Infrastructure Pipeline. Our robust order book provides visibility of delivering sustainable growth over the next couple of years, thereby creating longterm value for our stakeholders.”

CASH-RICH

Concluding, Mr Goenka says, “We are well-positioned for early financial closure of new projects, given our healthy cash balance. More importantly, we will continue to pursue an asset-light model while focusing on operational excellence and prudent risk management.” The company had cash balance of Rs 375 crore as at year-end. The company’s total income on a standalone basis for FY21 stood at Rs 1,439 crore with an operating EBITDA of Rs 174 crore and net profit of Rs 107 crore against Rs 1,813 crore, Rs 215 crore and Rs 159 crore respectively in the previous year. On an equity capital of Rs 148.86 crore, it holds reserves of Rs 1,536 crore.