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Isgec Heavy Engineering has a history of 80 years and is a diversified heavy engineering company with interests in Process Equipment, EPC Power Plants, Boilers, Sugar Plants & Machinery, Mechanical & Hydraulic Presses, Castings, Contract Manufacturing, and Trading.
In FY 2011 the company changed its name from Saraswati Industrial Syndicate Ltd. to Isgec Heavy Engineering Ltd. All businesses were consolidated and now marketed under a common brand name – Isgec.
June 2019 consolidated quarter results
For the quarter, consolidated sales jumped 29% to Rs 1194.44 crore. OPM fell 370 bps to 6.0%. Thus OP fell 20% to Rs 71.58 crore.
Other income grew 14% to Rs 950 crore. As interest cost jumped 85% to Rs 9.01 crore and depreciation grew 18% to Rs 22.49 crore, PBT went down 33% to Rs 49.58 crore.
Provision for taxation was down 17% to Rs 21.38 crore after which PAT fell 42% to Rs 28.20 crore.
Minority interest stood at a positive Rs 8 lakh against a negative Rs 1.05 crore after which net profit fell 41% to Rs 28.28 crore.
2019 consolidated results
In FY 2019 consolidated sales, jumped 32% to Rs 5050.66 crore. OPM fell 250 bps to 5.3%. Thus OP grew fell 10% to Rs 266.21 crore.
Other income grew 20% to Rs 68.76 crore. As interest cost went up 15% to Rs 25.55 crore and depreciation grew 2% to Rs 82.48 crore, PBT went down 10% to Rs 226.94 crore.
Provision for taxation stood at Rs 82.92 crore after which PAT fell 14% to Rs 144.02 crore.
Minority interest fell 89% to Rs 1.25 crore after which net profit fell 9% to Rs 142.77 crore.
Segment results
For the quarter, sales of from the Manufacturing of Machinery Equipment Division fell 28% to Rs 295.65 crore and accounted for 24% of total. PBIT from the same fell 48% to Rs 24.42 crore and accounted for 40% of total.
For the quarter, sales from the EPC Division grew 90% to Rs 839.62 crore and accounted for 67% of total. PBIT from the same grew 62% to Rs 28.34 crore and accounted for 46% of total.
For the quarter, sales from the Sugar Division fell 3% to Rs 121.37 crore and accounted for 10% of total. PBIT from the same fell 49% to Rs 11.66 crore and accounted for 169% of total.
Other details
The company has been executing contracts to design, engineer, procure, construct, commission and deliver a Bio-Refinery project in the Philippines. There was manifestation of latent conditions leading to cost overrun and delay in completion of the project within the contractual delivery date. The company notified the customer that these risks were to their account under the contract. The customer issued directions to continue with the project and started paying the additional cost to the sub-contractors directly. The project is substantially complete. The customer, on 30th January 2018, however, invoked the Bank Guarantees amounting to about Rs 134 crore and wrongly terminated the contract, and also claimed damages.
The company has referred the dispute to Arbitration under the Singapore International Arbitration Centre (SIAC), as per contract with the customer
The legal advice is that the company has good prospect of success in proving its claims against the customer and accordingly no provision has been made in the books of accounts.
SIAC has constituted the Arbitral Tribunal. The Arbitration is likely to take about 3-4 months for completion. There is no other change till date.
Valuation
The scrip trades at Rs 365.
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