KEC International held a conference call on Oct 29, 2015. In the conference call the company was represented by Vimal Kejriwal, MD & CEO and Rajeev Agarwal, CFO of the company.

Key takeaways of the call

Order backlog as end of Sep 30, 2015 was Rs 9872 crore. Order Intake in H1FY16 stood at Rs 4591 crore and so far in current fiscal (till Oct 25, 2015) the company bagged orders worth Rs 5146 crore. In addition the company is L1 in orders in excess of Rs 3000 crore. Of the L1 order book, large portion to the tune of 70-80% is from international market.

Consolidated net sales for the quarter ended September 2015 was lower by 7% to Rs 2020.9 crore. However with EBITDA margin stand expand to 7.7% from 5.6% in corresponding previous period, the EBITDA stood increased by 28% to Rs 154.8 crore. Facilitated by higher other income, lower interest and depreciation, the PBT jumped up by whopping 689% to Rs 68.9 crore. Eventually on an inflated base, the PAT was up by 118% to Rs 44.1 crore. Taxation for the quarter was a provision of Rs 24.8 crore compared to a write-back of Rs 11.6 crore in the corresponding previous period.

Lower sales is largely on account of 11% fall in T&D revenue (excluding SAE Towers) to Rs 1506 crore for the quarter ended Sep 2015. The SAE Tower revenue was up by 9% to Rs 201 crore. Lower sales for Q2FY16 was largely due to soft commodity prices, forex translation impact (Brazilian Real that decline 50%) and delay in conversion of L1 position into firm orders.

Impact of soft commodity prices on topline was about Rs 70-80 crore and that of currency impact (translation loss) is another about Rs 50 crore.

As domestic orders are largely with price variation clause the company has to pass on the Soft commodity prices to customers and that has resulted in lower sales. Of the total order backlog about 47% overseas orders and balance are domestic orders.

Secured a DBFOT project for setting up of a 400 KV double circuit transmission line with a line length of 172 kms and project cost of Rs 260 crore from RRVPNL. The project to be completed in 21 months from appointed date. Equity commitment on the part of the company is not in excess of Rs 50 crore as the project comes with viability gap funding. The project is funded by 70% debt and 30% equity including VGF.

The earlier stated position of the company as far as BOT projects has not changed and the company is not to bid for large interstate projects. The company is clear that it don't want to be an asset owning company and thus once the projects is completed it will look to monetize the project.

Of the earlier revenue guidance of 10-15% for FY16 the company is not expect to end the fiscal with a sales growth close to 10% mark rather than 15%. However of the earlier stated EBITDA margin of 7.5%-8%, the company is expected to end fiscal with a margin close to 8%.

Delay in conversion of L1 position into firm orders is not expected to continue. Some delay in MEA is to do with delay in internal approvals and nothing else, so projects struck will get converted to firm orders in next 2 months.

Crash in crude oil prices have not impacted the investment in Middle East especially in Power sector. Saudi continues to spend on power, education and health. Saudi has recently award two large power projects. The period of Oct-Nov 2015 to witness tenders and bidding for power projects worth Rs 12000 crore in Saudi itself.

Uptick in SEB levels especially in southern grid particularly TN & Karnataka. Outside WB and Rajasthan are coming out with more tenders. SEB exposure is 12%.

Positive EBITDA in SAE in Q2 & H1FY16 compared to negative in corresponding previous period. Order in Mexico are there. Improvement is expected in SAE in H2FY16.

Currently about 10-12% of overall revenue comes from Saudi.

International market is witnessing aggressive pricing with increase in players from India/SAARC region.

About Rs 280 crore of cash come into the system with asset/land monetization in the last 12 months and that helped lower interest cost.

Working towards to reduce interest cost to about 3% of net sales in H1FY16 it was about 3.6% compared to 4% in H1FY15.

Legacy orders were reduced to about Rs 20 crore and will get closed soon.

Commodity prices seems bottomed out and no further softening is expected.