Key takeaways of the call

Engineering business witnessed improved order booking and execution during the quarter ended Sep 2018.

Engineering order book excluding Sri Lanka order was Rs 975 crore as end of Sep 2018. The orders are executable over a period of 18 months to 24 months.

Order intake for the quarter is Rs 497 crore.

Sri Lanka Order - significant phase of civil work has commenced. Whilst the revenue recognition is insignificant, the company expects substantial revenue recognition in the 2nd half of the current financial year. The company has earlier given a guidance of incremental revenue of close to 35-40% of the total order in the current year and will hopefully meet the target.

Higher margin for engineering segment in H1FY19 was largely due to combination of factors such as improvement in operating efficiencies, better order mix or execution of orders with better margins. Sri Lanka content is very small in overall engineering segment. Hope the margin to sustain at current levels.

Increased demand requirement has resulted in higher off take during the quarter for chemicals business. However, margins have remained under pressure due to rising commodity prices.

Improved realizations and overhead control has resulted in containment of losses in consumer products.

In the consumer product segment, the company continues to focus on strategies of looking at segments where the emphasis is more on technology and solution such as the rural and the institution market. In the rural market the company works closely with various entities such as the government, NGO and the village communities to take care of the drinking water requirement of the rural community. Consumer Products segment will be close to breakeven by next fiscal.

The company won't give a general guidance but visibility of order book is good.

As regards chemical division the company is operating two sub divisions namely, resins and chemicals. In resins the company is in the midst of increasing the capacity in its manufacturing facility at Ankaleshwar and during Q1FY19, it had taken a partial shutdown for around two weeks to facilitate the CAPEX. Consequently execution of certain orders got deferred to Q2FY19.

CAPEX planned for FY19 was about Rs 50 crore.

Current political crisis in SriLanka will not hurt the operations of the company.

Cash position has come down by end Sep 2018 due to two reasons 1) mobilisation expenses for SL order where civil work commenced and 2) cash with bank was shifted to fixed deposits.