ISGEC Heavy Engineering registered 3% fall in consolidated sales for the quarter ended Mar 2020 to Rs 1541.45 crore. Lower sales together with 140 bps fall in OPM to 3.4% dragged the operating profit declined by 32% to Rs 52.07 crore. Other income has grew by 26% to Rs 18.68 crore and thus the PBIDT was down by 23% to Rs 70.75 crore. The interest cost more than doubled (up 105%) to Rs 14.23 crore and the PBDT was down by 33% to Rs 56.52 crore. The depreciation was up by 17% to Rs 26.93 crore. But the PBT was down by 52% to Rs 29.59 crore. The share of profit from associate was a loss of Rs 0.04 crore compared to nil in the corresponding previous period. The PBT after share of profit from associate was down by 52% to Rs 29.55 crore. The taxation was down by 30% to Rs 16.18 crore and the PAT was down by 65% to Rs 13.37 crore. The minority interest was up by 24% to Rs 0.92 crore. Thus the PAT after MI was down by 64% to Rs 14.29 crore.
- Marginal downside in revenue was largely driven by lower machinery & equipment manufacturing (M&E) and EPC revenue. Sales of M&E revenue was down by 13% to Rs 351.27 crore (or 22% of sales) and EPC revenue was down by 3% to Rs 1099.80 crore (or 68% of sales). The sugar was up by 8% to Rs 154.25 crore and others was up at Rs 3.82 crore compared to modest Rs 0.03 crore in the corresponding previous period.
- EBIT for the period was down by 41% to Rs 44.55 crore dragged largely by segment loss at both M&E and others segment for the quarter compared to profit in the corresponding previous period. The segment profit of EPC was up by 51% to Rs 46.35 crore despite lower sales and that is largely due to higher segment margin. Segment margin of EPC expanded by 150 bps to 4.2%. The segment profit of sugar more than doubled (up 112%) to Rs 16.32 crore gained by higher sales and 150 bps expansion in segment margin to 4.2%. The M&E segment registered a loss of Rs 10.50 crore (against a profit of Rs 36 crore in corresponding previous period) hit by lower sales and segment margin turn negative 3% (against 8.9%). The others segment registered a loss of Rs 7.62 crore (against a profit of Rs 1.68 crore in corresponding previous period).
Yearly performance
Consolidated sales was up by 16% to Rs 5852.15 crore but with OPM contract by 30 bps to 5.0%, the operating profit was up by 11% to Rs 294.68 crore. The PBT was down by 5% to Rs 216.49 crore hit by lower OI, higher interest and higher depreciation. The EO and share of profit from associate was nil for the period as well as corresponding previous period. With taxation stand lower by 21% to Rs 65.86 crore, the PAT was up by 5% to Rs 150.73 crore. After accounting for higher MI, the PAT (after MI) was eventually higher by 3% to Rs 146.42 crore.
Other developments
Effective April 1, 2019, the Company adopted Ind AS 116 "Leases", applied to all lease contracts existing on April 1, 2019 using the modified retrospective method along with the transition option to recognise Right-of-Use Asset (ROU) at an amount equal to the lease liability adjusted by the prepaid rent. Accordingly, comparatives for the quarter and nine months ended December 31, 2018 and year ended March 31, 2019 have not been retrospectively adjusted. The adoption of the new standard resulted in recognition of 'Right of Use' asset of Rs 15.40 crore and a lease liability of Rs 15.07 crore as on the transition date i.e. April 1, 2019. The effect of this adoption ln the statement of profit and loss is increase in depreciation and finance cost of Rs 0.90 crore and Rs 0.83 crore respectively for the quarter ended March 31, 2020 and Rs 3.33 crore and Rs1.74 crore respectively for the year ended March 31, 2020 and decrease In lease rent cost of Rs 1.14 crore for the quarter ended March 31, 2020 and Rs 3.80 crore for the year ended March 31, 2020.
Update on Cavite Biofuels Producers: The Company was executing a contract to design, engineer, procure, construct, commission and deliver a Bio-Refinery project for Philippines based Cavite Biofuels Producers Inc (CBPI). A dispute arose and it was referred to the arbitration under the Singapore International Arbitration Centre (SIAC). The Company was in discussion with CBPI and its promoters to settle the arbitration out of court. In terms of settlement arrived with CBPI and its promoters, on October 3, 2019, the Company through its Wholly Owned Subsidiary Company, namely ISGEC Investments Pte. Ltd., Singapore, has acquired CBPI with its related assets and liabilities including bank loan of USD 35.8 million. The acquisition was done at a token consideration of USD 100. The Company is making efforts to sell CBPI and all its assets and liabilities and group companies (the "Disposal group"), in order to recover the amounts due to it.
The Company has been in talks for sale with various parties but these could not progress further due to Covid-19, which has been ruling over South East Asia for the last several months. In view of this, the sale is unlikely to be completed within one year from the date of acquisition as required in paragraph 8 of Ind AS 105.
Hence, this group of assets and liabilities are no longer classified as "Held for Sale" and have now been consolidated as subsidiaries In accordance with Ind AS 110 In the Consolidated Financial Statements.
Initial accounting for acquisition of CBPI to be done as per fair value prescribed under Ind AS 103 "Business Combinations" is under progress and therefore, as permitted by para 45 of Ind AS 103, book value of assets and liabilities has been considered in accounting in the financial results for the quarter ended December 31, 2019 and March 31, 2020 and year ended March 31, 2020.
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