In FY 2011 the company changed its name from Saraswati Industrial Syndicate Ltd. to Isgec Heavy Engineering Ltd. All businesses were consolidated and now marketed under a common brand name – Isgec.

March 2018 quarter results

Sales for the quarter ended March 2018 fell 12% to Rs 818.87 crore. OPM fell 130 bps to 5.8%. Thus OP fell 28% to Rs 47.78 crore.

Other income fell 68% to Rs 9.47 crore. As interest cost fell 74% to Rs 1.81 crore and depreciation stood at Rs 19.17 crore up 15%, PBT went down 50% to Rs 36.28 crore.

Provision for taxation was down 31% to Rs 9.66 crore. Finally PAT fell 54% to Rs 26.62 crore.

FY 2018 results

For FY 2018, sales fell 16% to Rs 2615.37 crore. OPM fell 180 bps to 6.5%. Thus OP fell 34% to Rs 169.86 crore.

Other income fell 22% to Rs 72.34 crore. As interest cost fell 66% to Rs 7.12 crore and depreciation grew 5% to Rs 67.15 crore, PBT went down 37% to Rs 167.93 crore.

Provision for taxation was down 38% to Rs 48.95 crore. Finally PAT fell 37% to Rs 118.98 crore.

In accordance with the requirement of Ind AS, revenue from operations for the quarter ended 31st March, 2018 is net of Goods and Service Tax (GST). However, revenue from operations for the period up to 30th June, 2017 is inclusive of Excise Duty. Accordingly revenue from operations for the quarter and year ended 31st March, 2018 are not comparable with the previous period.

Consolidated FY 2018 results

On consolidated basis, for FY 2018, sales fell 6% to Rs 3825.86 crore. OPM fell 190 bps to 7.8%. Thus OP fell 24% to Rs 296.69 crore.

Other income fell 39% to Rs 57.28 crore. As interest cost fell 49% to Rs 22.16 crore and depreciation grew 7% to Rs 80.75 crore, PBT went down 32% to Rs 251.06 crore.

Provision for taxation was down 30% to Rs 85.65 crore. Finally PAT fell 32% to Rs 168.41 crore.

Bank guarantee invoked

(a) The company is executing contracts to design, engineer, procure, construct, commission and deliver a Bio-Refinery project in the Philippines. There was manifestation of latent conditions leading to cost overrun and delay in completion of the project within the contractual delivery date. The company notified the customer that these risks were to their account under the contract. The customer issued directions to continue with the project and started paying the additional cost to the subcontractors directly. The project is substantially complete. The customer, on 30th January 2018, however, invoked the Bank Guarantees amounting to about Rs 134 crore and wrongly terminated the contract, and also claimed damages.

(b) The company has referred the dispute to Arbitration under the Singapore International Arbitration Centre (SIAC), as per contract with the customer.

(c) The legal advice is that the company has good prospect of success in proving its claims against the customer and accordingly no provision has been made in the books of accounts.

Has identified various growth strategy initiatives through slew of technology tie-ups

The company has identified various growth strategy initiatives.

One of the business opportunities identified is Air Pollution Control Equipment. The company has concluded technology tie-up arrangements to cover almost the entire range of Air Pollution Control Equipment required for coal based power plants as also some equipment for other industries.

These include the incorporation of a Joint Venture Company named Isgec Redecam Enviro Solutions Private Limited, with Redecam S.p.A, Italy, for Bag Filters and Hybrid Filters for particulate Matter Reduction in Cement and Steel Plants.

The other technology tie-ups were for Selective Non-Catalytic Reduction Units with Fuel Tech, USA for reduction of Nitrogen Oxide (NOx) in Thermal Power Plants and Cement Plants, and for Wet Flue Gas Desulfurization Units with Babcock Power Environmental, USA for reduction of Sulfur Dioxide (SOx) in Thermal Power Plants.

Technology transfer agreements with regard to other equipment executed in FY 2017 are as under:-

Cement Machinery:

(i) Pyro Processing and Clinker Cooler Units for Cement Plants with Claudius Peters, Germany and Partner Teknik, Turkey.

Presses:

(i) Hot Stamping Presses with AP&T, Sweden.

Water Treatment:

(i) Industrial Waste Water Treatment and Desalination Plants with RWL Water, Israel.

Process Plant Equipment:

(i) Screw Plug Heat Exchangers and Process Waste Heater Boilers with TEi, USA.

(ii) Process Fired Heater with Riley Power, USA.

These tie-ups are expected to result in business in the years to come. No major investments are envisaged for the manufacture of these products.

Valuation

The stock trades at Rs 5803.