Key Highlights

Post the acquisition of companies in EU, the company took more time on restructuring than originally anticipated. After nearly 2 years, all the losses have stopped and the EU subsidiary has higher orders and better margin visibility.

The EU subsidiary which reported losses is expected to report Ebidta margins of around 8-10% in next 2 years.

The UK subsidiary Mather Foundries will shut down its operations from Sep 17 onwards, post union confirmation. The subsidiary reported losses of around Rs 21 crore in FY 17 and closure will result in some loses of around Rs 7 crore in FY 18 due to closure related expenditure. UK plant land will fetch around Rs 30-35 crore, which will compensate for these losses in future.

The company has launched various new pumps with higher energy efficiencies both in India and in Italy and have received good response. Further products are planned to be launched in FY 18.

The company has strong order book of around Rs 850 crore at domestic level which also includes export orders of around Rs 250 crore to subsidiaries abroad. These orders have Ebidta margins of around 15%. The execution of these orders is expected in next 15-18 months which provides strong visibility in earnings going forward.

Order pipeline remain strong due to emerging opportunities in irrigation, river linking and cleaning, water supply projects, and industrial sector.

Domestically, the order pie will increase from players like NTPC in FY 18. Competition is less in high valued engineering pump segment and with Make in India being accepted, foreign competition has reduced or are being forced to set up the plant in India.

Competition in Engineered pump from foreign players almost evaporated, which was there during 2005-2012 (they are unable to service).

Pumps tenders from NTPC's plant modernisation plan have started.

The company had to bear forex losses in FY 17 due to some repayment of loans taken by foreign subsidiaries. These loses are part of interest cost in FY 17.

Going forward, there are no such forex losses expected due to interest swap. However forex exposure has increased and the company takes adequate hedging to mitigate the risks.

Debt is going to come down going forward with sale of land and reduction of losses. Advances from export contracts have reduced working capital requirements.