Key takeaways of the conference call

The Sethusamudram Project has been awarded to the company on nomination basis with provisional rates. Since the expenses being higher than revenue the company was forced to book losses on this project. However the company has also asked for enhanced rates by presenting facts and figures.

The company has a receivable of about Rs 50 crore as far as Sethusamudram Project as per the provisional rates and if the government agrees for enhanced rates then the receivables will be higher depending on the enhanced rate.

Negative operating margin in FY09 is largely on account of SethuSamudram project. But with that project being stalled and no idea of when the work will resume again, the company expect to sustain positive normal margins clocked in FY10 going forward too.

Dredger fleet of the company comprises 13 dredgers including a new one that added in March 2010. Out of these about four are new dredgers with less than 10 years of age. The other 9 dredgers were of 20-35 years old. Out of these nine old dredgers the company proposes to replace two and for which the company has already placed orders (with an Holland yard) and these two new dredgers will get delivered & added to fleet some time in 2012. The two dredgers will be funded through long term borrowings and internal accruals.

Apart from the normal dry docking schedule, the dredgers are fully deployed. About four dredgers are scheduled for dry docking during current fiscal ending March 2011. The dry docking is mostly done in Indian docks and expenses will be in rupee denominated. But for Colombo yard it is USD denominated.

In the west coast ports, the channels will get silted post monsoon and has to be desilted. So this will be recurring business every year.

The company has chartered about 2-3 dredgers for the captive dredging work of Paradip Port during FY10. Similarly the company has also chartered dredgers for Sethu Samudram Project as well. So chartering route will be taken up if there is a need.

Being a PSU, the company will not acquire used dredgers. Moreover the operating and maintenance costs will also be higher for used dredgers. The waiting period for a new dredger is 2-3 years as of now.

Though there are lot of port projects coming up in private sector, the company is now to compete for dredging works just as any body else. The company has competition from Mercator Lines and couple of other domestic players as well as international players.

In FY 2010 about Rs 460 crore came from long term contracts and balance from short-term projects.

Orders under pipeline - The Kolkata dredging work of Rs 350 work is assured for the company and as far as Paradip Port is concerned, the company is doing capital dredging job worth Rs 280 crore. In addition some normal maintenance dredging works are also expected from west coast ports.

When it comes for capital dredging, the global players offers entire solution if the port want to build berth they offer both dredging and civil works as well as they will recover the fixed costs elsewhere and be competitive. As far as maintenance dredging is concerned the company is on par with other players.