Key takeaways of the conference call

Standalone OB stand at Jun 30, 2019 stood at Rs 6052 crore of which consultancy order book was Rs 2379 crore, exports Rs 1117 crore, leasing Rs 140 crore and turnkey Rs 2416 crore. Of the order book about 73.4% are Government & PSU orders and balance 26.6% are others.

Gross order inflow (including scope increase/reduction) in Q1FY20 stood at Rs 473 crore [Consultancy Rs 285 crore; Exports Rs 160 crore; Leasing Rs 17 crore, Turnkey Rs 2 crore]. The current OB to be executed in next 1-3 years.

The standalone operating revenue (excluding other income) MOU target of the company for FY20 will be Rs 2300 crore with a minimum operating profit margin of 23.2% for FY20. The company is confident of achieving or even surpassing it.

Lower other income for Q1FY20 was largely due to higher base. Q1FY29 had impact of one off item of provision/liability reversal amounting Rs 25 crore. This had an impact of 640 bps on EBITDA & PBT margins and 420 bps on PAT margins in Q1FY19. The company had made provision for pay revision and Diamond Medical Scheme. These two provision had surplus i.e. Rs 8 crore in case of Pay revision and Rs 17 crore in DMS. The company has decided to write-back that surplus in FY19. So there is no margin concern.

Export EBIT margin lower in Q1FY20 compared to FY19 was largely as in Q1FY20 the company had an export revenue to the tune of USD 5 million from spares, which is of lower margin in nature. This has its impact in export segment margin.

Exports were driven by DEMUs and Locomotives to Srilanka and Myanmar

OI in Q1FY19 include Rs 17 crore exchange gain and Rs 7.4 crore export incentives.

Turnkey projects for the company largely comprises of Second line (Line Doubling) projects or Third line projects, railway electrification and workshops. Typical execution of these project works except workshop takes about 2-2.5 years. The workshop projects will be around 3 years.

Industrial engineering (that is workshop orders) order book is about Rs 867 crore as end of June 30, 2019.

Turnkey will continue to account for about 20-30% of overall sales and an EBIT margin of 2.5-3.3%.

Standalone Tax rate normally will be around 34%.

Of the quarterly order inflow

Expects 12-15% growth for domestic consulting. Expects consultancy margin to be around 44% going forward.

Billing in Mauritius Metro consultancy project has not started.

Consultancy order pipeline is also good with one overseas highway consultancy is under various stage of finalization. Similarly one metro project is under discussion.

Export margin in Q1FY20 was slightly lower due to USD 5 mln of spares exports. But blended margin of exports for FY20 will be in the range of 20-30%.

Awarding of turnkey projects was delayed/waited for budget presentation. With that is completed now, the awarding will start happen going forward.

Current run-rate of employee cost will continue for rest of the quarter as there is no major recruitment drive planned this fiscal.