Key takeaways of the conference call

Engineering order book as end of Sep 30, 2017 was roughly about Rs 500 crore and the order inflow during Q2FY18 was about Rs 90 crore.

Engineering order flows and dispatches did not witness any significant improvement in Q2FY18.Whilst several orders are in the advanced stages of negotiations, their finalizations have been delayed. The overall slowdown in the capital goods sector coupled with the recent structural and policy changes in the economy has contributed to the decline. Expects situation will improve soon.

Execution of domestic orders on hand suffered in Q2FY18 due to GST uncertainty as customers asked to defer despatches. With lower revenue the company could not recover the fixed cost in certain division of engineering business and this hit the overall profitability of engineering business.

Sri Lanka order execution is on schedule and revenue has been recognized in this quarter based on work progress. The company has booked revenue to the tune of Rs 43 crore in H1FY18. Expect to book around 20% of the contract value in current fiscal as a whole as against earlier guidance of 25%.

Customers are evaluating the impact of change in tax structure or GST and defer finalisation of contracts. Resolution of query relating to anti-profiteering provision in GST law is taking time.

Orders enquiries improved and it stand at about Rs 4000 crore. Expect GST related issues get resolved in Q3FY18 and there will be turnaround in order intake and execution. Slight improvement in overall cash flow of customers which was impacted for short period post GST roll out and this will improve the execution and order inflow.

Growth of chemical business is adversely affected due to lower off take in some of the Heavy Industry customers on account of market conditions. Slow recovery seen in some segments which affected dispatches in Q2. Expect performance of H2FY18 will be better than H1FY18.

Consumer products sales turnover and consequential margins adversely affected due to the lingering effects of tax changes.

Capex for this fiscal will be Rs 30 crore and largely in chemicals business.

Export revenue in H1FY18 was about Rs 125 crore (as against Rs 88 crore in corresponding previous period) largely contributed by engineering division.

Despite weak Q2FY18 due to GST uncertainty the company is confident of reporting slightly a better number than last year in both revenue and bottom-line. The company expect single digit growth in engineering business and maintain margin going forward.

Revenue lost in Q2FY18 will be made up in H2FY18 in case of engineering division but that will not be the case in case of chemicals and consumer products. Slight recovery from GST impact in October 2017 but the total impact has not faded away and hope it will soon goes off.