Captains Speak     

Published: September 30, 2024
Updated: September 30, 2024

Power Mech Projects

Management is confident of 30% revenue growth

According to SK Kodandaramaiah, Director (Business Development) of Power Mech Projects, there are vast business opportunities in sectors like power, non-power, O&M, railways, road construction and industrial projects, worth around Rs 20,000-25,000 crore. Hence, prospects for the company are highly promising, and it expects to post revenues of Rs 10,500- 11,000 crore by fiscal 2028. Mr Kodandaramaiah was addressing a conference call on the company's performance during Q1FY25.

According to Mr Kodandaramaiah, during Q1FY25, the distribution between the domestic and international businesses was 94% and 6% respectively. Contributions from the power sector remained at 54%, while non-power contributed 46%. Net current days, excluding cash and cash equivalents, increased from 112 days in FY24 to 142 days in Q1 FY25, mainly due to elections, and there were delays in realization of receivables, while delays in certification of works resulted in an increase in the current assets of the company. Debt levels are in control -- as on June 30, gross debt is around Rs 581 crore and net debt stands at Rs 40 crore. The debt-equity ratio as on June 30 stands at 0.31x.

Referring to the order book, Mr Kodandaramaiah said that so far in this financial year, the company has secured orders worth Rs 1,746 crore. The order backlog as of August 12 is around Rs 57,793 crore. "If we exclude the 2 MDOs, the unexecuted order book stands at Rs 18,115 crore. As far as expectations for the current year go, it can be said that the overall business environment seems to have improved post- elections and the execution cycle is picking up. Despite a little slowdown in Q1, the management is confident of achieving revenue growth in the range of 25-30% for FY25. Margins are expected to remain stable and further improvement is expected as the MDO business ramps up," he said.

MINE REVENUE

Once the MDO revenue peaks during FY26 and FY27, the margin profile will see a marked increase. On the order book side, the management has set a target of Rs 11,000 crore for FYs 24 and 25. The focus will continue to be on the industrial plant, operations and maintenance, railways and water. Going forward, O&M and the MDO business will provide stability in revenues as well as margins in a significant way.

As for the business outlook, the first quarter saw and order booking of Rs 1,059 crore. Considering the elections that happened, there were some tenders which got postponed. The backlog of orders at the end of June 2024 was Rs 17,302 crore, a marginal improvement over Rs 17,408 crore. The mechanical backlog order was up 2.1% from Rs 6,450 crore to Rs 6,508 crore, while the civil order backlog has grown by 2.3% from Rs 7,814 crore to Rs 7,995 crore.

As regards various opportunities in the power sector, non-power sector and O&M, railways, road construction and industrial projects, Mr Kodandaramaiah said that there was continuous tracking of many opportunities. The management is tracking about Rs 75,000 crore of opportunities and there are hardcore opportunities of nearly Rs 20,000- 25,000 crore.

BHEL has been flooded with orders of Rs 88,000 crore in the last year. There are 3 developments which have led to the uptake: BHEL orders of Rs 88,000 crore for about 13,840 megawatts which well have a significant role in Power Mech's order booking in the current and next year. The second aspect is that Adani is developing 3 major projects -- Raigarh, Raipur and Mahan. The third development is that the present installed capacity is 218 gigawatts and the government is determined to ramp it up to 300 gigawatts by the end of this decade.

N.T.P.C. PLAN

In that direction, NTPC is planning to add about 22,000 megawatts and is already implementing 5,000 megawatts, while for the balance of 17,000 megawatts, it has to place orders in 2 stages. For NTPC, BHEL and Adani, this is what the management expects in the coming years and the total opportunity size can be anywhere between Rs 20,000- 25,000 crore. looking into the various aspects of civil structural, mechanical, and ETC business.

Mr. Kodandaramaiah further said that the non-power segment is also a big business, particularly the railways. Power Mech has Rs 2,500 crore in jobs, including for Bangalore's BMRCL in railway maintenance. Adani jobs are also going up, and some traction is taking place on the FGD jobs also.

There are other opportunities in steel, the non-power sector, minerals and metals. NMDC is planning Rs 50,000 crore of investments in many projects, and should call tenders shortly. Steel Authority of India is planning an expansion in the IISCO Burnpur plant of 4.5 million tonnes with an investment of Rs 30,000 crore, and opportunities are coming from consulant Dastur & Company.

Looking at all this, the flow of orders should improve in the second and the third quarters, while there is another development in the form of optical fiber cables, part of the BharatNet connectivity to every village, at an investment of Rs 6 lakh crore. Power Mech is also looking at important opportunities in Madhya Pradesh, Maharashtra and other places.

EARNINGS BREAK-UP

In the erection business, the company has an EBITDA of around 6%. In industrial construction, the volume of turnover is very low and it is approximately around 10% of EBITDA. In civil power, it is around 10% of EBITDA, while in infrastructure, the sand mining and water divisions are together around 9% of EBITDA. Transmission and distribution get around 3% of EBITDA. It is 20 % in international operations and 18% in O&M, while in the water division, it gets around 19%, and roughly 10-11% in infrastructure. In mining, as of now, only Tasra is operating so the EBITDA margin is 13% during Q1. Hence, the overall weighted EBITDA margin is around 12.2%.

The company expects to post revenues of Rs 10,500- 11,000 crore by FY28 with a 13.5-14% margin. It has also been exploring the green hydrogen space, especially in Saudi Arabia.