ISGEC Heavy Engineering hosted a conference call on Feb 15, 2022. In the conference call the company was represented by Aditya Puri, Managing Director; S K Khorana, Executive Director and Company Secretary; Kishore Chatnani, CFO.

Key takeaways of the conference call

Order inflow for Q3FY22 and 9mFY22 was Rs 893 crore (vs Rs 1468 crore Q3FY21) and Rs 4109 crore (vs Rs 3390 crore Q3FY21) respectively.

Order Book as on 31st December 2021 stood at Rs 7224 crore (against Rs 6536 crore).

Of the order backlog about 77% is project orders and 23% are product orders. Share of export order in the order backlog is about 13%. About 42% of order book is from PSUs that offers some PVC on steel fuel oil etc. All private sector order roughly about 58% of the order backlog are fixed price contracts.

On industry wise the order backlog break up is power 26%, sugar 11%, railways 7%, refineries 22%, Chemicals/petrochemicals/fertilizers 7%, steel/cement/aluminium 13% and others 14%.

Order book of ISGEC Hitachi Zosen stood at Rs 616 crore as end of Dec 31, 2021.

Own ethanol plant of 100 KLPD at Saraswati Sugar Mills has commenced operation in Dec 2021. And it has already at about 100% utilisation. On full capacity the distillery can give a revenue of Rs 180-200 crore per annum. Supplies from vendors and manpower from contractors are available normally.

Time and cost overruns was there in EPC projects with high civil construction portion and further there was also impact of Covid related disruptions coupled with shortage of skilled manpower. This has impacted the revenue.

Reduction in profits is due to increase in steel and commodity prices for fixed price contracts impacting both Manufacturing and EPC segments

Lower margin to continue to for another couple of quarters on account of fixed price contracts as well as lower high margin exports orders due to covid. PVC contracts is not 100% pass through and that impact was also led to lower margin. Older order taken at lower prices will keep reducing and newer order with better price will increase leading to improvement in the margin going forward.

Overall demand is encouraging and enquiries are good. The company is fully booked and thus become choosy considering volatile commodity prices. It is a conscious decision.

Expect some order from distillery/ethanol order by end of this quarter.

In Ethanol market the company has long presence in case of Boilers. Executed few distilleries and hope to get some more. Try to get 20% market share in this segment ethanol/distillery segment.

Standalone net debt as end of Dec 2021 was Rs 296 crore and net borrowings on consolidated level was Rs 756 crore.

Eagle press – some loss is expected for this fiscal and next year onwards the company expected to book profit with order booking is good.

About 50% of boilers orders are non-coal based.

The factories and project sites of the company were working normally during 3rd Wave of Covid pandemic, but has closed its EPC business offices at Noida, Pune & Chennai from 13th January 2022 to 21st January 2022. Before and after the closure, offices are working with 50% attendance and balance employees are working from home.

Major new order inflow - Order for supply of Boiling House plant from a leading business conglomerate for their sugar factory expansion project from 10500 TCD to 13500 TCD and for Process Conversion from Plantation White Sugar (PWS) to Refined Sugar. Domestic order for juice extraction plant for a leading sugar manufacturing company. Export order from Vietnam of 1250T Tandem press line with automation and scrap conveyor. Received an order for 25 medical oxygen plants from leading defence organization.