Key takeaways of the conference call

Sales for the quarter was lower by 10% to Rs 446.49 crore and the operating profit was lower by 56% to Rs 19.03 crore on the back of 430 bps contraction in operating margin to 4.3%. But hurt further by higher interest cost (up 45%) and higher depreciation, at bottomline it was a loss of Rs 3.23 crore compared to a profit of Rs 16.69 crore in the corresponding previous period.

Fall in Q3FY12 sales is on account of vigorous monsoon and Cyclone affecting execution of orders in Southern and East Coast of India. Moreover couple of Jobs were on hold in Q3FY12 that along with stage wise billing in design & build jobs have impacted the turnover.

Order backlog as end of Dec 2011 stood at Rs 5906.26 crore and of which about Rs 2535.70 (or 43%) is commercial, Rs 2577.17 crore (or 44%) is infrastructure, Rs 508.12 crore (or 9%) is residential and balance are industrial.

Slow moving orders forming part of order backlog is Rs 1314.77 crore and that is part of the infrastructure segment order backlog. The share of fixed price contract to order backlog stood at 21.6%.

Order intake for the quarter was Rs 453.19 crore (up from Rs 249.57 crore in Q3FY11) and that for 9mFY12 was Rs 2710.85 crore (compared to Rs 2376.535 crore in 9mFY11). The order booking increased by 82%yoy and 14%yoy for the quarter and nine month ended Dec 2011 respectively.

Order backlog of subsidiaries i.e. CIL and NGCL as end of Dec 2011 stood at Rs 78.34 crore (up from 49.34 crore in Q3FY11) and Rs 79.85 crore (up from 45.27 crore in Q3FY11) respectively.

Jump in Interest cost for the quarter is largely on account of increase in borrowings as well as higher interest rates. The company made advance payments to procure Steel and Cement that coupled with delayed payments from Debtors resulted in higher borrowings. The overall borrowings has increased to Rs 528.77 crore (up from Rs 518.18 crore as end of Sept 2011). Moreover the company resorted to higher utilization of CC limit and Short Term Loan Facility during the current quarter.

A substantial portion of steel and cement were procured on advance payments, which enabled the company to reduce price of procurement in Q3FY12. This trend may continue if buoyancy in order booking remains.

Bulk materials prices have reduced from their peak due to better availability of materials. Favorable conditions prevailed for procurement of cement at slightly better prices in view of the fact that cement companies were not operating at full capacity.

As Q3FY12 turning into a subdued one, the company expects to end the current fiscal with a flat/marginally higher revenue compared to earlier sales guidance of 10-12% growth in topline.

While the blended EBIT margin of current order book is 5% the new order booking are with a margin of 8-10%. Low margin orders forming part of current order book is about Rs 1200 crore and the company expects that to get completed/extinguished in next 3 quarters. Thus the company expects the pressure on margin to continue for another 3 quarters.

Out of the slow moving order book of Rs 1315 crore order worth about Rs 850 crore has not seen any progress or not seen any movement at all. The company will take a call on moving this out from the order book after waiting till end of this fiscal and having a negotiation with the client for cost escalation.

The company expects to dilute its stake to the tune of 49% each in SEZ and Solar project and about 39% in Delhi Carpark project. While the equity dilution in carpark project is expected to happen after the approval of Delhi Municipal Corporation that in Solar project will happen after completion of the project.