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Conference Earnings Call 4Q 2010-11
Company Kirloskar Brothers Ltd
Date: April 27, 2011
Operator:
Ladies & Gentlemen, Good Afternoon! Thank you for standing by, and welcome to
Kirloskar Brothers Ltd. fourth quarter and financial year 2010-11 earnings call.
Joining us today in this conference room are Mr. Sanjay Kirloskar, Chairman &
Managing Director, Mr. Jayant Sapre & Mr. Ramesh Srivasatava, Executive Directors,
Mr. Umesh Shastry, Vice President (Finance), and Mr. G P Kulkarni, Vice President -
Legal & Company Secretary.
Mr. Umesh Shastry will take us through result highlights for the period ending March
2011. All participants are requested to refer to the presentation available on the company
website, www.kbl.co.in.
As a gentle reminder, during the duration of the presentation, all participants are in a
listen only mode. There will be an opportunity to ask questions at the end of the
presentation. If you wish to ask a question, please press *1 on your telephone.
Please be advised that this conference is being recorded today.
I will now hand the conference over to Mr. Umesh Shastry.
Over to you, Sir.
Mr. Umesh Shastry:
Good afternoon Ladies and gentlemen, and welcome to KBL’s fourth quarter earning
call.
Before I begin my presentation, I would like to remind you that the overview and the
discussions that we have today may include certain forward-looking statements that must
be viewed in conjunction with the risks that we face. My presentation is primarily based
on the presentation that is already loaded on the KBL website, so I will just go through
the company level highlights first which will be followed by the sector and the factory
level highlights, that will be followed by brief of the financial both for the company
standalone as well as for the consolidated financial, and then we will tell you about the
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way forward as far as KBL is concerned. Once this is through, we will throw open the
floor for questions and answers.
So, at a company level, I would like to inform all of you that we were selective with our
order booking during this entire year with a lot of emphasis given on the
electromechanical business. We also set up task force for supporting and closing all three
projects that were going on so that we were able to execute these projects speedily. We
did take a lot of initiatives for operational efficiency improvements and we had strict
project monitoring. We also monitored and controlled our sales depending upon the
debtors, mainly in relation to the Andhra Pradesh sale so that we were able to control our
receivables and that the debtor’s level did not go far beyond the sales level. As we had
explained to you in the last analysts meet, we did achieve the completion of the
percentage of completion for two major orders, namely the Bangalore Water Supply and
Sewerage Board for the water sector and the Rajiv Sagar Project for the irrigation sector
in Q4. You would have also noticed that there has been improvement in the operating
results of the company in the current financial year. We also achieved significant
reductions in material costs through various initiatives like negotiations and value
engineering.
I will now give you a brief synopsis about each of our business verticals starting with the
irrigation sector.
As far as the irrigation sector is concerned, we received the first EPC order for the
Satgaon Pathar Lift Irrigation Scheme in the current year. This established us as an EPC
contractor in Maharashtra and also gave us qualification for distribution systems. Also
registration for PWD and VIDC for Class A rating took place, thereby KBL got qualified
for an unlimited value of EPC work which can come. The validation of the world’s
largest irrigation project was done by completing the commissioning as well the PG
testing of the SSNL and the Godavari projects. One important thing that we did was as
far as the AP project was concerned was that we were able to change the payment terms
from the hitherto 70% against supply to 85% and from 15% against commissioning to 5%
against erection, and 10% against commissioning. This definitely helped to improve our
project cash flow.
We have an international project in Egypt which is going on by the name Benban and
Rozaikat and this project is valued at about Rs. 120 crores and this has been progressing
very well as per the planned schedule and it is likely to be commissioned in this year in
October 2011.
Moving onto our next sector, which is the water resource management sector. For the
BWSSB project, we dispatched about 20 numbers large pumps and about 29 numbers
motors in addition to soft starters, and about Rs. 87 crores worth of dispatches were done
in Q4, and we were able to complete the POC as planned in March 2011. Another
important project in the water sector is at Bhopal and the intake well and pump house is
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in the advanced stage of completion, and the electromechanical installation is under
progress as far as this project is concerned. We have also done a lot of work on the dome
and the bridges and pipeline work has also been completed along with the substation for
this particular project. There were certain projects in Kerala which were Cherthala,
Pattuvam, and Meenad, and in Cherthala and Pattuvam, the erection work and
commissioning work has been completed, and the Meenad project has been in fact
inaugurated on February 24, 2011 by Hon. Mr. Premchandra.
Moving onto our next sector which is the power sector, we had a lot of good things
happening in this sector during the year and we would like to inform you that we
manufactured the largest indigenously developed Condensate Extraction Pump at
Krishnapattan, it was an 800MW Unit. We also manufactured the largest Horizontal
Split Casing pump for BHEL Pipava for their thermal power plant. The largest Concrete
Volute Pump installed for any thermal power plant in India was done at the Tata Mundra
project. The CW pumping system was commissioned at Illinois for the Bechtel Power
Corporation in the USA. We also commissioned the Horizontal Kaplan turbine at Darna
HEP. We successfully tested and dispatched high pressure high temperature pump for
NPCIL. The Secondary Sodium Pumps were dispatched, two of them, for the BHAVINI
project after successfully completing the endurance test, and we have also established an
Advanced Technical Product Development (ATPD) Centre at Kirloskar Vadi, which will
have special emphasis on products for the nuclear business.
Moving onto the oil and gas sector, pre-Tendering efforts with Gactel resulted in order of
about 5 numbers UPH Pumps of the value of about Rs. 18.6 million. We also got an
order worth about Rs. 39 million for 10 firefighting VT pumps from Toyo. We made
presentations on FM/UL pumps at Mumbai and Guwahati for various customers, and this
also resulted in generation of FM/UL pump set enquiry from HPCL, and we successfully
installed cooling water pumps at BPCL Kochi & one number turbine driven pump is
currently under commissioning over there.
Regarding the marine and defence sector also which is a small sector today but which is
definitely going to grow, we had some breakthrough orders coming in this particular
sector. We had about Rs. 78 million from CFEES for designing and engineering of the
water mist system for submarine. We also had a Rs. 5 million from KPCL for Devas
pumps with gunmetal material of construction. A Rs. 34 million order from ITD
Cementation was received for dry dock drainage project, and the good thing was this
project was awarded to us on a premium considering the association we have with the
customer. We also had a Rs. 16.5 million order from Alcock Ashdown, Gujarat, for the
Indian Naval survey vessels. We also had the Kirloskar Vadi plant foundries approved
by IRS, and we have also received the certificate for the same.
Regarding the industry sector, there was very good sales growth in this because of
seminars which were conducted throughout India and surveys also were conducted by
agencies to identify certain disgruntled customers whom we were able to once again
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bring back into our fold. We have installed the Intellequip software and this has helped
to reduce the response time as far as interaction with the customers is concerned. It has
also helped to ensure that future projects are designed to KBL specifications because easy
availability of data is there since all the data is available through the software. We
standardized a large range of products and through our dealers we ensured that their
availability was readily there for the customers. Marketing efforts were channelized
towards advanced products so that profitability could be taken care of consequently, and
a lot of significant thrust was given in the industry sector on improving the export
business.
Moving onto the customer service and support sector, a big commissioning of four
numbers CW pumps was done at Tata Power-Trombay and because of that we had about
Rs. 4 crores coming in during the month of March 2011, and we also did receive good
accolades from the customer for this particular activity. Tata Power has now included
our name in their top thirty preferred vendor list. Regarding complaint resolution, 93%
of the complaints were resolved within three days as per our records against the 90% that
we had initially planned, so we have definitely done better on this front. As you are all
aware, we have toll free line now in operation across India and training has also been
specifically provided to all the ASCs there, and we did have a survey report and the
feedback of that report says that about 76% of our customers are happy with the response
and resolving the complaints in Devas products. We will definitely try and take this
upward to the extent possible because that is our endeavor.
Regarding building and construction, this sector achieved both sales and booking in
excess of 60% compared to what we actually achieved last year, and secondary HVAC
orders were received from all across the country through various contractors and also
through approvals from various consultants. We received India’s biggest HVAC order
for the Mumbai International Airport valued Rs. 12 million with 21 pumps, and this order
was received against imported pumps which were basically rejected on technical grounds.
We also received from the Airports Authority of India - Kolkata International Airport of
170 pumps order in which case also the other imported makes and the Indian pumps were
rejected on technical grounds thereby proving our efficiency and superiority. KBL’s
biggest HYPN order from the hotel industry was received for the Hotel Crown Plaza at
Ahmadabad. Order for the Multi outlet Multi stage pumps has definitely increased and
these orders are basically coming in with minimum 30% advance and they are coming in
from right across the country. We had about 350 numbers first monoblock order for
schools in New Delhi, and concept of office space saving works has got us the first order
for multi-outlet multistage in vertical execution in Pune, and now offers are being
submitted to various metros for this particular concept.
Regarding the distribution sector, regarding our 9 inch submersible pumps, we had
demonstrations in the states of Haryana and Punjab and we got very good response
regarding their performance. TISCO Jamshedpur has purchased over 100 number of
Eterna series pumps from us in past year and has also signed a rate contract with us for
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the Eterna range of submersible pumps. We received a very good order for 460 numbers
monoblock from Jammu & Kashmir Agro with a value of about Rs. 7 million, and we
had some promotional schemes which were introduced during the fourth quarter of the
year, this definitely helped to boost sales of certain Eterna, PBS, Shower Joy pumps and
we had about over 800 numbers of these particular pumps which were sold consequent to
this particular promotional scheme.
This takes care of the nine business verticals that we have.
Moving onto some of the highlights of the factories or the plants that we have. As far as
the Kirloskar Vadi was concerned, I will first talk about the large pumps division because
as you are aware, Kirloskar factory has two divisions, the large pumps and the small
pumps divisions. Regarding the large pumps division, the largest horizontal split case
pumps with about 25000 M3/Hr discharge was dispatched for BHEL. We also dispatched
the largest VT pump with about 40,000 M3/Hr discharge for Adani. The Secondary
Sodium Pumps were dispatched to Bhavini as I had already mentioned a little earlier.
Similarly, 20 pumps for the BWSSB project were also dispatched during the month of
March 2011, and we had about Rs. 14 crores of spares which were dispatched and the
total value of spares which were dispatched was a little higher than the plan that we had
taken at the beginning of the year, so this was a good achievement.
As far as the small pumps are concerned, the production rise was about 4.6% compared
to last year, and as far as dispatch was concerned, it was higher by about 5.8% in terms of
quantity compared to the previous year. The MOST implementation is in progress at our
foundry at CI and NF foundry as well as the Split Case division, and there were certain
major orders which were executed in the various business sectors for Bliss Enterprises,
NPCIL, Essar Construction, John Deere, etc., during Q4.
Going onto the Devas factory, we concluded our wage settlement amicably in February
2011. The foundry production target was achieved in all the three shifts as per MOST
that is with 460 minutes working. The manufacturing target was also achieved as per
MOST in all the cells except the single phase cell. The Devas factory actually developed
about 269 new models during the year 2010-2011. It had the highest yearly production of
single phase which was more than lakh numbers. The single phase and the KOS
conveyorised new assembly line was commissioned. This was basically for capacity
enhancement at the plant, and we also had the first pass percentage of castings
improvement, we had the machining rejection levels reducing, and we also had a
significant reduction in the in-house foundry rejection. All this was due to the efforts
which we took in order to improve the quality at the Devas plant. There are a few
pictures which have been loaded on the website as far as the Devas factory are concerned.
I think most of you would have gone through them. For those who have not gone
through them, I suggest you go through the website and have a look at some of the
pictures. We had changes in the quality control lab, new machines were installed over
there.
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Moving onto the update as far as the Coimbatore and Ahmedabad factory projects are
concerned, we would like to inform you that trial production has already commenced at
the Coimbatore plant and the full production will actually commence in April 2011. The
Ahmedabad plant will actually commence production only by December 2011. The
project is a little delayed, but we are quite confident that we will be able to achieve this
target. There are a few pictures regarding how the Coimbatore factory is also looking
like in the website, so those pictures are quite self explanatory as to how the Coimbatore
factory has progressed.
Going onto our Kondhapuri Factory which is primarily where the valves are
manufactured. The largest size spindle sluice valve of 1,500 mm was developed in Q4.
We also developed 3,600 mm Butterfly Valves which is also the largest size developed so
far. Tamperproof Kinetic Air Valve was developed and a patent was also registered for
the same. The Gauge Room & Tool Crib solar panel were established at the Kondhapuri
factory. We received the certification for EMS & OHSAS, and the study of MOST and
the validation of the same has also been completed. The implementation is planned in the
current year, and the order book also for the valve factory crossed Rs. 100 crores.
If you take a look at the pending order board for KBL at the end of Q4 or as at March
2011 end, the order board stands at about Rs. 3,027 crores. This order board is actually
down by about 7% as compared to Q3, but the good thing in the order board is that the
order book for the own products is actually up by about 5.4% compared to December end
and by about 10.3% compared to last year. So, as far as we see it, this is definitely a
positive sign. And the highest percentage of the pending orders still continues to remain
in the irrigation sector at about 47% followed by power with 32% and water with about
12%.
Some of the major orders that we received in Q4 were from the Khargaon Lift Irrigation
scheme as we mentioned earlier for the irrigation sector which was valued at about Rs. 50
crores. We also had from the Bhabha Atomic Research order for the power sector valued
at about Rs. 73 crores. These were two big orders. In addition to that, there were several
significant orders that we received from L&T, the Indian Navy, and also from the country
of Chile during the fourth quarter.
I now come to the standalone financial highlights for the current year moving on from the
sector and the factory related issues. At a standalone level, KBL sales for the year ended
FY11 are Rs. 1,942 crores against Rs. 2,018 crores which we did in the previous year
which is a drop of about 4%. As compared to the previous year, all the sectors except
irrigation, water, and oil & gas sectors have actually crossed the previous sales figures.
The major fall in the total sales of KBL is primarily coming because of fall of Rs. 332
crores in the irrigation sector sales, and this is mainly because as we have mentioned to
you in the earlier analysts meet also, we did hold back the dispatches for the projects of
Andhra Pradesh in H1 of the financial year because of the non-recovery of money from
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them. The current dispatches are being made subject to a maximum cap on the amount
recoverable and the money inflow from that state has also commenced and now the
money inflow is progressing satisfactorily.
KBL was quite selective with its orders in the current financial year because we wanted
to improve our sales mix and consequently our share of the own product sales in the total
sales mix of KBL went up from 43% in the previous year to 49% in the current year.
This also led to a material cost percentage decrease from 74.3% in the previous year to
69.1% in the current year along with our other material cost reduction initiatives that we
did speak about at the beginning of the presentation.
The total expenditure during the current year is Rs. 479 crores against Rs. 360 crores in
the previous year which is a rise of about Rs. 119 crores, but the increase is mainly due to
an increase in ERE by about Rs. 45 crores and the advance of Kirloskar Construction and
Engineers Limited which we did write off in the current year whose value was Rs. 67
crores. The other good thing that has happened in the current year is that despite the
pressure on the working capital and despite the hardening of the interest rates, we were
able to bring down our interest cost from Rs. 34 crores in the previous year to Rs. 30
crores in the current year. The profit before tax for the current year stands at Rs. 103
crores against Rs. 173 crores, but if we remove the Rs. 67 crores KCEL advances which
were written off, the operating profit actually stands at about Rs. 170 crores. So as a
percentage to sales, the operating profit for the current year is a little better than what it
was in the last year because we had reduced sales in the current year.
The major additions to fixed assets in the current year took place mainly because of the
new plants at Coimbatore and Ahmedabad and this was about Rs. 50 crores. The net
current assets have slightly increased from Rs. 594 crores to Rs. 614 crores in the current
year. The loan funds have decreased from Rs. 357 crores to Rs. 349 crores. Now if you
look at the decrease in the loan funds, you will find a decrease of only Rs. 8 crores in
totality, but this is because the term loan for Capex has actually increased by Rs. 45
crores compared to the previous year. So in other words, we have been able to reduce
our unsecured loans and working capital loans by Rs. 56 crores as compared to the last
year. So this is a good reduction which is done by improving our cash flow in the current
year.
If you take a look at the five-year standalone financial for the year, our turnover from
about Rs. 1340 crores in FY07 peaked last year to Rs. 2018 crores and is at Rs. 1942
crores in the current year. The increase has primarily been in the domestic segment. The
export segment has remained more or less flat over a period of the last five years, and in
the current year, our exports are at about Rs. 183 crores. The total assets for the last three
years have also been more or less flat at about just over a Rs. 1000 crores. The net
current assets have gone up from Rs. 250 crores five years back to about Rs. 614 crores
in the current year. There is a decrease in the investment because of the transfer of shares
to KBIL which took place in the last year, which all of you are aware of. The fixed assets
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have doubled from about Rs. 161 crores in FY07 to Rs. 316 crores in the current year
mainly with the Ahmedabad and Coimbatore planned new plants.
The shareholder’s funds are up from about Rs. 602 crores to Rs. 737 crores over a similar
period over five years, and the reserves also stand increased from Rs. 581 crores to Rs.
721 crores. The borrowings have declined a little compared to the last year, but like I
told you the decrease in the working capital and unsecured loans is about close to Rs. 60
crores compared to the previous year. The EBITDA without the extraordinary income
was about 16% in FY07 which was about Rs. 215 crores. In the last year, we had about
Rs. 233 crores which was at about 12% and in the current year, after the Rs. 67 crores
advance write off of KCEL, it is down to Rs. 163 crores. It would have been about Rs.
230 crores or more or less similar to last year’s figures without the write off of the KCEL
advances. Similarly, the PBT which actually went down in FY09 to about Rs. 98 crores
and went up to Rs. 173 crores in the last year, is at Rs. 103 crores in the current year
again after the Rs. 67 crores hit, so the operating profit would have been at about Rs. 170
crores which would have been more or less similar to that of last year. The PAT
similarly stands at Rs. 61 crores as compared to Rs. 118 crores in the last year and the
cash profit is down from Rs. 144 crores in the last year to about Rs. 91 crores in the
current year, but of course, again this cash profit is nothing but the PAT plus
depreciation, so it includes the hit for the KCEL advances write off. The EPS which
declined to about Rs. 6 in FY09 climbed back to Rs. 15 last year and is now down to Rs.
8. The dividend pay out in the current year, we have given a dividend of 175%. Last
year, you would remember that the dividend declared was 175% plus 100% being the
Centenary Year, so we have maintained the dividend rate of last year in this current year
as well. The book value per share has gone up over the last five years from about Rs. 57
per share to about Rs. 94 per share, and the current market cap stands at about Rs. 1055
crores. The turnover per employee has also remained flat at about Rs. 0.7 crores over a
period of the last three years.
The consolidated accounts of the company, before I tell you about the numbers, I would
actually like to tell you that the consolidated financial now the KBIBV which is our
subsidiary company in Netherlands, the SPP Pumps, UK, and the Braybar Pumps, South
Africa, as well as Kirloskar Brothers Europe are the three international subsidiaries which
are now part of KBIBV. In other words, KBIBV happens to be our subsidiary company
and those other three international subsidiaries are subsidiaries of KBIBV. So the result
that you see under KBIBV are the consolidated results of these three entities put together,
and Pressmatic & Quadromatic which were two other subsidiary companies that we have
are also consolidated with Hematic Motors Pvt. Ltd. So that is one more change that you
would notice as compared to the previous year, and Kirloskar Corrocoat which was
considered as a joint venture company 50% last year whereas in the current year it is a
subsidiary company. So when we look at these numbers, we find that the Kirloskar
Brothers International BV had an income of Rs. 459 crores in the last year which went
down to Rs. 411 crores in the current year. This primarily happened because of the rupee
appreciation and the conversion at the year-end rates where we had a fall of Rs. 5 in the
Pound conversion rate and a fall of about Rs. 5 in the Euro conversion rate. But in terms
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of Pounds and Euros actually the income has gone up. The PAT for the Kirloskar
Brothers International BV stands at Rs. 16 crores as compared to Rs. 10 crores in the last
years.
KCEL had an income of Rs. 124 crores in the current year after a write back of the Rs. 67
crores loan which was written off by KBL and which was written back in the books of
accounts of KCEL, and as compared to Rs. 2 crores loss in the last year we have shown
Rs. 1 crore loss in the current year after this write back of Rs. 67 crores.
The Gondwana Engineers Ltd had an income of about Rs. 70 crores in the last year which
fell slightly to Rs. 67 crores, or it is more or less flat, but the PAT actually went up from
Rs. 3 crores to Rs. 4 crores.
Kolhapur Steel also the income remained more or less flat. It was Rs. 35 crores in the
last year and Rs. 37 crores in the current year, but the profitability actually doubled from
Rs. 2 crores to Rs. 4 crores, and we are glad to inform you that this as you are all aware
this was a company which was a BIFR company when we acquired it and from the red
we have actually converted it into green with a very healthy operating profit currently.
Kirloskar Brothers, Thailand, has about Rs. 9 crores of income in the current year. Last
year, it was practically negligible and it had about Rs. 1 crore loss, but this was for the
period ended December 31, 2010. In the current year, from January 2011 onwards, this
company has done a turnaround and we have seen significant improvement in the income
as well as the profitability of this company and this company is going to definitely be in
the green in the current year and do well. In the current year, Kirloskar Brothers,
Thailand, also will become part of Kirloskar Brothers International BV. For the FY11, it
has been reflected separately because it was a subsidiary of KBL, but as per the decision
that KBL has taken, all the international subsidiaries will be subsidiaries of Kirloskar
Brothers International BV located in Netherlands. So for the FY12 results, the Kirloskar
Brothers Thailand also will be shown under the consolidated KBIBV results.
As far as Hematic Motors is concerned, also we had a significant improvement in the
profits in the current year. Kirloskar Ebara, which is a joint venture company, the income
was more or less flat and the profit after tax also declined a little from Rs. 11 crores to
Rs. 8 crores.
With all this, we find as a total income for the consolidated accounts is more or less flat
as compared to last year. It was Rs. 2688 crores in the last year and it is Rs. 2663 crores
in the current year, and the profit after tax stands at Rs. 98 crores as compared to Rs. 114
crores in the previous year.
If you just take a quick look at the consolidated key figures for the last three years, the
income has moved from Rs. 2495 crores in March 2009 to Rs. 2663 crores currently, the
PBDIT has moved up from Rs. 200 crores to Rs. 244 crores, and the cash profit is up
from about Rs. 113 crores to Rs. 145 crores. The PBDIT percentage is more or less flat
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between 8% and 10%, and the ROC is also after going up to about 19% last year has
dropped to about 16% in the current year.
After this set of financial, I will just quickly brief you on what the KBL as a company
will be doing from going ahead. We have decided that we will continue to focus very
strongly on ROCE, cash generation, and cash flow because finally a healthy company is a
company which has got enough surplus money with it. We are definitely strengthening
our project management capabilities and we are continuing from what we started doing in
Q2 or Q3 of last year. We will be working on a selective basis in projects and in
partnership for electromechanical portion of the projects. We will be also ensuring that
recovery and sales are matched so that at no point in time more and more debtors are
created and we will also see how quickly we are able to close all the projects which are
currently under our purview. New initiatives such as nuclear, hydro, and other high value
products are also being taken up.
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Regarding the industry sector, the current export-domestic sales breakup is about 19:21
which we intend to take up to about 35:65. Also the high-end liquid management
products we are giving a strong emphasis and focus on that and we would like to take that
up from about 20% in the current year to about 40% in the next year. Replacement
market which is a good money earner, we also have about 40,000 pumps replacement
market as highlighted by Digit in a survey, and we are definitely going to concentrate on
that. We are going to create a product differentiation in the market for KBL brand
products consequent to which we would like to realize higher sales for the same. There
are a lot of projects coming up in the hospitality and the railways industry which we will
be strongly focusing on, so that we are able to convert them into orders for our company.
There is a big order for ONGC which is currently in the pipeline and we are definitely
going to see how we are going to be able to execute that smoothly. In the Indian Navy
and the Commercial Marine, there are excellent opportunities for the water mist and
firefighting systems which are also being explored. Also we would like to cater to the
Marine onboard requirements in the marine and defence, so we would like to complete
our product basket which we are definitely intending to do in the current year. Outside
utilities and fire, we will be also concentrating on other opportunities in the building and
construction sector. Our focus is to basically capture high margin by focusing on high
value products such as the FM/UL, multi-outlet and multi-stage and the LLC pump. We
would definitely like to target more than 90% on-time delivery with the increased
capacity at Devas coupled with the Coimbatore and the Ahmedabad plants. A lot of
awareness is being created today in the market on LLCT pumps and the BE star-rated
energy efficient products, on Concrete Volute Pump and FM/UL listed products which
will continue through seminars and conferences. We have also installed the simulation
software at our Kirloskar Vadi plant for the methoding of stainless casting so that the
casting quality is improved and we are able to achieve high quality castings with reduced
cycle time. Vadi fracture is implementing most, like I told you earlier, this will definitely
lead to improvement in production efficiency as well as managerially efficiency. We will
focus on high delivery performance as well as quality of our own products and cycle time
for radiographic quality castings. We are taking corrective actions to improve supply
chain in Devas so that we are able to improve our on-time delivery performance. A lot of
actions are being taken in Devas to reduce the inventory, to reduce rejections, as well as
improve the managerial efficiency. Advance action on long lead time items such as
gearbox and castings and actuators along with strengthening of the design department
activities will also help us in achieving a better delivery performance in the current year
as against what we did in the previous year.
With that I come to the end of the presentation and what actually we wanted to tell all of
you in this particular conference call. I would now like to throw open the call for
questions and answers and all of us, the CMD, the two EDs, the Company Secretary, and
I are open and available for any questions that any one of you might have.
Thank you.
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Operator:
At this time, if you wish to ask a question, please press *1 on your telephone keypad and
wait for your name to be announced. If you wish to cancel your request, please press
hash or the pound key.
First on line, we have question from Ms. Kirti Dalvi from Enam. You can go ahead.
Ms. Kirti Dalvi:
Good evening sir; a few questions from my side. There has been increase in our
unallocable expenditure in our segmental results, could you just elaborate a little bit on
that, for the year as a whole?
Mr. Umesh Shastry:
Just give me a minute please.
Ms. Kirti Dalvi:
Sure.
Mr. Umesh Shastry:
Kirti, basically what has happened is that the operating expense is primarily 67 crores
you know has gone up because of Kirloskar KCEL adjustment, okay. And last year we
also had a lot of income from investments, which has gone down in the current year by
about 26 crores, because we had dividend income from subsidiaries and we also had
investment income because of the investments that we had in the bonds which we
actually encashed in the last year. So, 67 crores plus 26 crores is the 83 crores delta
which you will find primarily coming between last year and the current year.
Ms. Kirti Dalvi:
Sure sir, sir the second question is primarily on our operating results, if I exclude that 67
crores from a quarterly other expenditure, our margins have gone up significantly, this is
in spite of having the higher staff cost. So, are these margins are sustainable or is there
particular order which we have booked in this question that has results in such significant
jump in OPMs?
13
Mr. Umesh Shastry:
Margins of course are sustainable, there is no question on that, we have a healthy order
book on hand, and the BWSSB order and the Rajiv Sagar order coupled with the increase
in the products business in the current year has definitely helped us improve the operating
profit.
Ms. Kirti Dalvi:
So, whatever the OPMs we have achieved in the Q4 are the sustainable OPMs for the
year as a whole, can we presume that?
Mr. Umesh Shastry:
As far as the products business concerned, of course. As far as the projects business is
concerned, it depends on the percentage of completion or the projects which are currently
being executed. So, when the POC gets completed it is at that time we will actually book
the revenue and the profits for that particular order.
Ms. Kirti Dalvi:
Kay, so sir in the current order book of almost 3000 odd crores, if you could elaborate I
mean what are the current stages of various orders, I mean the broad base. Are these
majority of the projects in the I mean have passed that percentage of completion method
or they are yet to pass?
Mr. Umesh Shastry:
Currently, as far as the irrigation orders are concerned of about 1400 crores, about 700
crores of that has not even commenced. So, you know, our of the balance 700 crores,
they are at a very infant stage today. So, it will definitely take time before we are able to
complete the 50% POC for those particular projects.
Ms. Kirti Dalvi:
So, probably sir by FY12 all these projects will come to closure to 50% completion at
least.
Mr. Umesh Shastry:
Some of them will, that is what we have planned, yes. The ones which are currently, out
of the 700 crores project that we are currently executing, you know, there are some which
are definitely planned for crossing the POC in the current financial year.
14
Ms. Kirti Dalvi:
Okay, and sir we were awaiting large orders – export based orders, with LOC, what is the
status on that sir?
Speaker:
Well we got some orders from Senegal, and also order from Laos, and we are waiting for
a big order from Senegal, which probably will come by October.
Ms. Kirti Dalvi:
Okay, would you elaborate sir in terms of the quantum of the order.
Speaker:
Well, right now we are working on it, we are not very sure, because it depends upon how
much credit the government is going to give, the Government of Senegal.
Ms. Kirti Dalvi:
Okay, last time in the analyst meet we did say that our product business is looking quite
optimistic, we are quite optimistic on that and we are looking at almost 30 odd percent
growth in our product side business. We still maintain the same status quo on that?
Speaker:
Very much, especially Devas business, the Coimbatore plant is now fully complete and
will be operational by end of this month, and next month it will be producing about 500
pumps and in the next 3 months that plant should be fully operational and produce about
20,000 pumps. The capacity in Devas has been ramped up, and the capacity will also go
up to 50,000 pumps. So, next year’s target that we have taken for distribution, which is
mostly product, is going to be substantially higher. And the same thing implementation
of most, there are some good orders in Vadi, so the product business is looking up.
Ms. Kirti Dalvi:
Sir, if you could throw little bit balance sheet details and consolidated debt or
consolidated working capital?
Mr. Umesh Shastry:
Just give me a minute Kirti.
15
Ms. Kirti Dalvi:
Sure. Sir, by that time can I ask one more question?
Mr. Umesh Shastry:
Sure.
Ms. Kirti Dalvi:
This order book is what…, now, we are completely on a price variable clause, right,
entire order book is on price variable clause, or are there any fixed price contracts?
Mr. Umesh Shastry:
Mr. Srivastav is answering that.
Mr. Srivastav:
All the new orders are PVC, and the old orders there is a some representation from the
various contractors to make it uniform, so for new orders it is definitely there, but old
order we are trying, some of orders where it is possibility it is there.
Ms. Kirti Dalvi:
So, probably what, 70-80% would be on a price variable clause?
Mr. Srivastav:
Out of this 700 crores, yes. Out of 1100, now right now 1100 crores orders are from
irrigation, so out of that 1100, 700 is with PVC, the remaining 300 crores they are any
way it is with PVC, that is power.
Ms. Kirti Dalvi:
Okay, so most of the order book is on a PVC basis?
Mr. Srivastav:
Right.
Ms. Kirti Dalvi:
Okay.
16
Mr. Umesh Shastry:
Kirti, moving on to your question on the consolidated balance sheet debtors, the loan
funds have actually dropped from 452 crores to 392 crores as far as the secured and
unsecured loans are concerned, and the current assets are up from about 1994 to about
2003, so it is more or less flat. The net current assets have actually dropped from about
728 crores to 717 crores.
Ms. Kirti Dalvi:
And sir, gross block?
Mr. Umesh Shastry:
The gross block is currently at …, from 645 crores it is up to 670 crores.
Ms. Kirti Dalvi:
Okay, and sir the last question on AP orders, what is the status now sir in terms of
receivables and the pending order book?
Speaker:
All the dues whatever was there they have already paid, but there is a credit period for
about 60 days, so whatever the remaining thing is there that is they are paying in this
month and next month, so I don’t think any problem of outstanding at the moment.
Ms. Kirti Dalvi:
So, how much money it is still due from there?
Speaker:
Right now it is only 40 crores due, out of which they are paying 20 crores in this month
and 20 crores next month.
Ms. Kirti Dalvi:
And, what about the work on the pending order book, I mean are we supplying the
products as well as commencing any operation from those projects?
17
Speaker:
Yes, I think the old projects, lot of projects have been completed, but new the projects
which is ongoing is a major is Bheema right now, which will get commissioned I think
after they have power and water.
Ms. Kirti Dalvi:
Okay, fine sir, thank you very much and wish you good luck.
Mr. Umesh Shastry:
Thank you.
Operator:
Thank you Ms. Kirti. Next question comes from Mr. Kamlesh Kotak AMSEC. You can
go ahead sir.
Mr. Kamlesh Kotak:
Hello, good afternoon sir.
Mr. Umesh Shastry:
Hello.
Mr. Kamlesh Kotak:
Sir, you said anything about the Andhra Pradesh order, how many of that orders are in
value terms outstanding of the total book?
Speaker:
The total Andhra Pradesh order is pending right now 1100 crores out of total 3000 crores.
Mr. Kamlesh Kotak:
Okay, so what are we seeing as a execution period for this now?
18
Speaker:
Execution period depend upon the cash flow, whatever the funds are there according to
that we are moving. We have decided that if they are having continuously fund flow we
will complete the job faster, if they are going to have the fund flow problem then we will
be slowed down.
Mr. Kamlesh Kotak:
Okay, so as it stands sir currently are we going to have some kind of a positive impact in
terms of order book growth this year and what kind of revenue growth we are looking at
for the current year?
Speaker:
I think as far as orders are concerned, we are looking into different other states right now,
and depending upon the payment terms and the scope we will be selective.
Mr. Kamlesh Kotak:
So, what is your view on the self-growth for this year sir?
Mr. Umesh Shastry:
We can probably look at about a 15% growth over the current year as far as sales is
concerned in FY12.
Mr. Kamlesh Kotak:
Okay, and what kind of order intakes you are looking at sir in terms of whatever bidding
we must have done in the pipeline upcoming?
Speaker:
Will be from power sector.
Mr. Kamlesh Kotak:
Okay, should we get some positive addition in terms of the order book pending compared
to this year’s de-growth.
19
Mr. Umesh Shastry:
You know, what is happening is we are executing the orders quicker than we did earlier,
so I expect that the order board will probably stay the same or so but our sales might
increase.
Mr. Kamlesh Kotak:
Okay, secondly sir as we mentioned in the presentation the number of employees have
gone down from 2900 to 2700 odd, but the cost of employees has gone up by 51%,
consolidated 26%, so how exactly is that has been?
Mr. Umesh Shastry:
See actually what happened was in June 2010 we actually had a salary rise for our
employees which was done after a period of 3 years, which means the last salary rise was
done in June 2007 and then we had a salary rise in June 2010. So, approximately the
salary bill went up by about 35% because of this salary increase. We also had wage
agreements and wage settlements which were done at Devas and the wage settlement
which is in progress in Kirloskar Vadi, which is not yet been signed, but which is in
progress, so we have made a provision for the likely amount over there. And in addition
to that, because of the increased salary burden the actuarial valuation which came for our
benefits of gratuity and leave encashments were significantly higher compared to the last
year because of this 33% rise in the salary. So, consequent to all this it actually went up
by about 45 crores.
Mr. Kamlesh Kotak:
So, the wage agreement that has now been entered into again are for 3 years, so we will
not be seeing any major kind of a hike this year?
Mr. Umesh Shastry:
The wage agreement is primarily for workers, which is we have undertaken for 4 years,
not for 3 years, as far as the staff employees are concerned there is no you know what we
will do is based on the market conditions there will definitely be some increase in the
salaries, but it will not be like it was done last year where it was after a time period of 3
years where it was about 35%.
Mr. Kamlesh Kotak:
Sure, okay. Sir, as regards the write off about Kirloskar Construction & Engineering,
what was the rationale of writing off that big an amount, I mean, and what are the exact
numbers of that entity in terms of revenue and the loss?
20
Mr. Umesh Shastry:
The revenue inclusive of other income for this company was 124 crores in the current
year which included the 67 crores write back of the loan that we wrote off, but the
primary reason for writing off this loan was because we found that you know initially
when we had acquired this company we thought that there was a good synergy because of
the civil work and because of our status as an EPC contractor, but somehow as the time
went by the projects which KCEL itself had quoted for and the orders which it had
received, it happened that they were unable to execute those projects on time and they
landed up in cases where we had necessarily give the money in order for them to be able
to move those projects ahead. There were a lot of cost and time over runs, and you know
over a period of the last one year or so we have been seeing that even though KCEL
today is trying to complete work on all its current pending projects, it has stopped taking
new orders, but it is completing work on all the current pending projects. It will not be in
a position to actually generate that kind of money and repay it back to KBL, so you
know, this advances which we had given to it as far as we took a stock of it, we found
that it was going to be practically next to impossible for KCEL to be able to get this cash
and give it back to us. As a result of which we felt that it was better to take the hit and
write off that amount since KCEL had an inability to actually return that amount to us.
Mr. Kamlesh Kotak:
So, leaving that aside then what is the core operating loss of this entity sir?
Mr. Umesh Shastry:
It is actually 69 crores, because they have disclosed a loss of 1 crores after write back of
this amount of 67 crores, so actual loss is 69 crores.
Mr. Kamlesh Kotak:
On a revenue of 57 crores.
Mr. Umesh Shastry:
On a revenue of 53 crores, that is right.
Mr. Kamlesh Kotak:
So, the way forward what we are looking at in terms of this company now?
21
Mr. Umesh Shastry:
I beg your pardon?
Mr. Kamlesh Kotak:
What is the outlook for this company from hereon?
Speaker:
Actually, you know, whatever order board we will have we will try and execute to make
sure that…, the order board is about 78 crores, we will be executing that to the best of our
ability and we will see how to take that forward.
Mr. Kamlesh Kotak:
So we are not incrementally taking order for this business sir?
Speaker:
At the moment we are not.
Mr. Kamlesh Kotak:
Okay, fine sir.
Speaker:
Because we want to make sure that we get our act together in the stuff.
Mr. Kamlesh Kotak:
So, I think that means we completely have wrong on this acquisition sir.
Speaker:
That is what it looks like now.
Mr. Kamlesh Kotak:
Any ways, okay, thank you very much sir.
22
Mr. Umesh Shastry:
Thanks.
Operator:
Thank you Mr. Kamlesh.
Next question comes from Mr. Manish Goyal from Enam. You can go ahead sir.
Mr. Manish Goyal:
Hello sir.
Mr. Umesh Shastry:
Hello Manish.
Mr. Manish Goyal:
Sir, a couple of questions on, just can you give us a revenue mix in terms of projects and
products for FY11?
Speaker:
About 1200 crores comes from the project, and about 700 crores comes from the
products.
Mr. Manish Goyal:
Okay, and out of this 1200 crores roughly how much would be irrigation and how much
would be power?
Speaker:
450 crores is from irrigation, and around 400 crores is from the power. And rest would
be water.
Mr. Manish Goyal:
Okay. So, basically just to get a sense going forward, say out of this 3000 crores order
book which we have, how much is projects, and how much is products.
23
Speaker:
Right now you have seen that 1400 crores is for irrigation and about 1000 crores is for
power, so 2400, and 375 crores is for water.
Mr. Manish Goyal:
So this entire 2775 crores what you are saying, but this should be including your products
also, right?
Speaker:
Yes, this will include the products for those projects.
Mr. Manish Goyal:
So, roughly can we have the sense in terms of out of these 2775 crores how much would
be products, now your own manufactured products?
Speaker:
It will be difficult to project, but depending upon the project it is normally consists from
10% to 25%.
Mr. Manish Goyal:
Okay, and also basically what we are saying is that from the existing order book what we
have, what we said earlier that our margin should be sustainable say for the full year if we
have seen our PBT margins to the tune of 8.8%, we don’t see that margin should fall
going forward.
Mr. Umesh Shastry:
That is right.
Mr. Manish Goyal:
Okay, and sir as far as, what is the target for basically own manufactured products which
has gone up to 49% in FY11, what do we see in FY12 and FY13?
Speaker:
We will try to take it to about 55% or so.
24
Mr. Manish Goyal:
So, 55% in FY12?
Speaker:
Yes.
Mr. Manish Goyal:
And, may be a couple of years down the line sir?
Speaker:
You know it depends on how business develop, it might go up or it might stay the same.
Mr. Manish Goyal:
Okay, so that gives us some levy to improve margins also going forward, if our own
manufactured product contribution increases?
Speaker:
Yes.
Mr. Manish Goyal:
Okay, and on the wage agreement you mentioned that at Kirloskar Vadi the …..
Speaker:
It is under negotiation.
Mr. Manish Goyal:
Okay, but we have done the provisions in the current year.
Speaker:
That is right.
25
Mr. Manish Goyal:
So, basically going forward now overall employee cost should probably not go, it will
probably not increase significantly for the next 2-3 years sir?
Mr. Umesh Shastry:
It will go as per market conditions, as a percentage of sales definitely you will see a drop
in ERE in the next 2-3 years.
Mr. Manish Goyal:
Okay, and on the cash flow and the debt sir, you mentioned that the focus is to improve
cash flows, so what is the target sir in terms of reduction in debt for FY12, how much
debt can be reduced, and on the working capital also what kind of improvements can we
see?
Mr. Umesh Shastry:
We will definitely try and reduce our working capital and CC by about a 150 crores
compared to the current year. That means we would try to reduce it by a further 150
crores.
Mr. Manish Goyal:
Okay, so debt should also be reducing by 150 crores, can we presume that?
Mr. Umesh Shastry:
That is exactly our endeavor.
Mr. Manish Goyal:
Okay, and sir as far as retention money is concerned, is it possible to give the number say
how much is total debtor outstanding and how much is retention money in that?
Mr. Umesh Shastry:
Just give me a minute Manish.
Mr. Manish Goyal:
Sure.
26
Mr. Umesh Shastry:
Our debtors have actually gone down from about 600 crores last year to about 473 crores,
and the retention debtors have gone up from about 257 crores to 327 crores.
Mr. Manish Goyal:
Okay. So, the debtors doesn’t include retention money, that is separate you mean to say?
Mr. Umesh Shastry:
Yes, debtors I am talking about is the pure sundry debtors without including the retention
debtors, have actually come down from 600 crores to 473 crores, and the retention
debtors have gone up from 257 to 327 crores, primarily you know with the two big mega
projects also that we executed for the BWSSB and Rajiv Sagar, there is a certain amount
which has gone into that in the month of March, but the way the projects are proceeding
we definitely don’t believe that these amounts will remain stuck for long, because the
projects are definitely stated for completion in the first 6-9 months of the current financial
year, so we should be able to get back that money in FY12 itself.
Mr. Manish Goyal:
Okay. But are we not offering LCs for the retention money or it is basically the pure
receivables?
Mr. Umesh Shastry:
No.
Mr. Manish Goyal:
Okay fine. And this number what you have given this is for standalone number, right?
Mr. Umesh Shastry:
This is standalone, that is right.
Mr. Manish Goyal:
Okay, and you mentioned on the way forward you said that exports you are targeting to
increase to 35% contribution to the overall revenue. So, that is …..
27
Mr. Umesh Shastry:
That is only for industry sector.
Mr. Manish Goyal:
Okay, but say overall exports which are roughly 180-190 crores, how do we see going
forward?
Mr. Umesh Shastry:
It will remain more or less at that level barring any major LOC order that we will receive.
So the LOC order will be an incremental thing.
Mr. Manish Goyal:
But what is the order book as far as exports particularly is concerned, out of total order
book?
Mr. Umesh Shastry:
About 80 crores.
Mr. Manish Goyal:
Okay, and the large order we are expecting only likely to come by October November?
Mr. Umesh Shastry:
Yes, if it comes in this year.
Mr. Manish Goyal:
Okay sir. And can you offer outlook on SPP, how is it doing and also what was the
currency translation impact which we saw in FY11 in terms of top line and bottom line?
Mr. Umesh Shastry:
Like I told you…,
Mr. Manish Goyal:
Or may be as complete subsidiary Kirloskar Brothers.
28
Mr. Umesh Shastry:
Manish, we will probably you know….
Speaker:
The sale for the last full year is about 329 crores, and this is from January to December
2010, because their year is a calendar year, but this is in rupees and what has happened is
the rupee pound relationship has gone from 76 rupees a pound to 71 rupees to a pound.
So, though there is a growth in pound terms, there is I mean because of the currency
exchange I don’t know exactly in rupees how it is reflected.
Mr. Manish Goyal:
No, but what I understand is sir, last year in FY10 you had a sales of roughly 397 crores
in SPP, so if you are saying sales were 329 crores which is a significant reduction,
because even if you factor for 7-8% currency translation, has volumes dropped in SPP?
Speaker:
No, volumes have not dropped. I think what we will do is we will give you a number on
this. We will give you a comparison on both the years.
Mr. Umesh Shastry:
I will send you a mail or something Manish on this.
Mr. Manish Goyal:
Okay, and sir last question on the new facility at Coimbatore, you expect that commercial
production to start in the current year.
Speaker:
This month end it will start.
Mr. Manish Goyal:
Okay, so what kind of revenue contribution we can expect in the current year from the
Coimbatore and on a full …..
Speaker:
At least about 25 – 30 crores.
29
Mr. Manish Goyal:
Okay, and on full scale basis both Coimbatore and Ahmedabad can give you what kind of
revenue sir?
Speaker:
Coimbatore is slated to give you 50 crores single shift, and we have plans that as soon as
we, you know, we are also working on establishing distribution network, I think in a
year’s time as soon as we go full single shift we will have to start the second shift. The
Ahmedabad plant should be operational by latest by end of this year, and it has a capacity
of doing about 350 crores. 750 submersible pumps per shift.
Mr. Manish Goyal:
Okay, and sir on capex you have already done 45 crores, so is there any incremental
capex we will require in these plants?
Speaker:
No, we will not require any great capex in the current year, it will be around 40 crores
which is you know including the some equipment for Vadi and for Devas and
Kondhapuri plants for their upgradation and things like that, but the total capex for the
year FY12 will not go beyond about 40 crores.
Mr. Manish Goyal:
Okay. And just on outlook on say power particular sector, basically what we are saying
is that power order book contribution has increased year on year, so it is roughly now
1/3rd
of the total order book, so how do we see this going forward, are we seeing that at
1000 crores order book it is peaking out?
Speaker:
Yes, I think further growth will be better in power compared to irrigation and water.
Mr. Manish Goyal:
No, but what we see is….
30
Speaker:
Power is booming right now, and I think we have lot of contribution in power plant
especially large circulating water pump, condensate extraction pump, intake pumps; so, I
think we will continue with that.
Mr. Umesh Shastry:
You know this is part of our policy of being selective across sectors, and power sector is
one where the customer has a target date by which he has to start generating power and
start selling power, and that is definitely not the case in irrigation, it could be in water
resource management, but power is where customers chase you and they want to do
everything very quickly. This is also why I said that the kind of orders that we have in
hand now are you know they will be completed faster, so we are concentrating on power,
we have a good reputation in that sector also for delivering large equipment on time.
Mr. Manish Goyal:
Sure sir, I agree, the sense what I wanted to get is that a couple of years our order book
for power is somewhat stagnated at 1000 crores, so is it possible that this 1000 crores
outstanding order book can grow faster and also about may be if you can highlight that
contribution of the power sector revenues, revenues from power sector, how it has been
growing and …, what I am basically worried is that at current levels power revenue
should be peaking out?
Mr. Umesh Shastry:
Should be peaking?
Mr. Manish Goyal:
Peaking in the sense that may be the revenue contribution from power may peak out
going forward.
Speaker:
Manish, the power sector order board may have, you know, may not be the same, but if
you look at last year our execution was 301 crores year before last, and this year it is 416
crores. So, we are executing more orders, so even if the order in take is increased our
execution also has increased.
Mr. Manish Goyal:
Yes, that is what the sense I wanted to get.
31
Speaker:
Growth is almost 30%.
Mr. 5:
Manish, you would also be very happy to know that these are power projects that are
being executed now increasingly outside, there is this year we have just commissioned, I
mean in the year under report power projects where we have supplied are in Chile, in the
US, in Vietnam, in Taiwan, so you know they are happening all around the world. So, I
think the acceptance of KBL as a supplier to the industry is getting better, and in India
yes what you are saying could be true, but there are opportunities around the world which
we are able to access.
Mr. Manish Goyal:
Thanks sir. Thank you very much. Thanks a lot for all the answers.
Mr. Umesh Shastry:
Welcome.
Operator:
Thank you Mr. Manish.
Next question comes from Mr. Samir Rachh from Reliance ADA. You can go ahead sir.
Mr. Samir Rachh:
Good evening sir.
Speaker:
Good evening.
Mr. Samir Rachh:
Congratulations on a very good set of numbers in Q4. Sir, just wanted to get some sense
on this 15% growth which you have targeted for the current year, sir just wanted to
understand which are the segments you expect will drive this growth?
32
Speaker:
Power, industry, distribution, customer support and service.
Mr. Samir Rachh:
So, in case of power you expect this 30% kind of growth to continue sir?
Speaker:
Yes.
Mr. Samir Rachh:
Okay, and sir as far as AP orders are concerned – irrigation, last year there was a gap of
some 375 odd crores, you mentioned, so this year also you expect de-growth in that?
Mr. Umesh Shastry:
As Mr. Srivastav mentioned earlier, the billing will be subject to the recovery that comes
in from that state. So, if the money comes in, you know, we will bill based on whatever
we can do, but if the money doesn’t come in we will restrict the billing.
Mr. Samir Rachh:
That is fine, but the way things have gone I think situation in AP would have improved
compared to what it was last year.
Speaker:
Yes, positively.
Mr. Umesh Shastry:
In the last two months the situation is good, the recovery from AP is good, and we
believe that it will continue.
Mr. Samir Rachh:
Sir, as far as margins are concerned, you said you expect flat margins, but overall you
expect the share of products to go up, also …..
33
Mr. Umesh Shastry:
No Samir, I said we will have about 15% revenue growth and about 20% operating profit
growth, so which means that it will be higher.
Mr. Samir Rachh:
Okay, so margins will improve basically.
Mr. Umesh Shastry:
Yes.
Mr. Samir Rachh:
And sir can you give some sense on in total employee this year, how much was this
provision which yo have made for Kirloskar Vadi wage hike?
Speaker:
It will be about 4 crores.
Mr. Samir Rachh:
Okay. Sir if Kirloskar Vadi wage negotiation takes place in the current year, then our
employee cost could go up significantly, right, sir?
Mr. Umesh Shastry:
You know the provision has been made up to March based on our judgment on our
willingness to pay and in the next year’s annual operating plan also that has been build in.
Mr. Samir Rachh:
Okay, and sir , out of this 183 crores exports which we had last year, how much was there
of LOC order?
Speaker:
There was one order from Senegal and one from Loas.
Mr. Umesh Shastry:
Total would be about 20 crores not more.
34
Mr. Samir Rachh:
There significant growth you expect only in FY13 once we get large order which we are
expecting?
Mr. Umesh Shastry:
We are working on it, whenever we get it we will be glad to let you know because we
will be glad to have it.
Mr. Samir Rachh:
Sir, the overall, would you say that, this question is specifically for Mr. Sanjay Kirloskar,
sir would you say that like in terms of performance we have already seen our worst in last
2 years and now actually we are much better company in terms of efficiency, in terms of
product mix, and now actually we are ready to grow faster than what we had done in last
few years.
Mr. Sanjay Kirloskar:
I always worry when you ask questions like that. We will try our best because there is lot
amount of cost reduction programs that are on and also on the other side you know we
are taking orders on a selective basis hopefully so that we will not get into the kind of
problems that we did earlier. Of course it is our wish that we will grow faster, margins
will be higher and that is what we will try to the best of our ability.
Mr. Samir Rachh:
Yes, that is all from my side, all the best.
Mr. Sanjay Kirloskar:
Thank you very much.
Operator:
Thank you Mr. Samir.
Next we have follow on question from Ms. Kirti Dalvi from Enam. You can go ahead
madam.
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Ms. Kirti Dalvi
Sir, just couple of follow up questions again, there have been news that KBL is in tie up
with _______ for the RO plants, could you just elaborate or clarify on that?
Mr. Sanjay Kirloskar:
You know the first thing I wanted to say was that everything that is published is not
necessarily true. I get a call from a guy who says that he has been to Lakshadeep or
somewhere and that KBL is about to sign this contract and what do I have to say about it,
you know, in the typical media fashion; I said if you know this company it doesn’t make
any announcement unless something happens. So, my answer to you is - no comment.
Ms. Kirti Dalvi
Okay sir, the second question on this Kirloskar Construction again, we do have certain
orders yet to execute on that front, so do we see any kind of further loss on those projects
or do we have to provide something additional whatever we have provided in the past, in
the current year do you see that?
Mr. Sanjay Kirloskar:
You know, what we have done is we have given KCL support from KBL, I mean while
we have supported in the form of money we have also now deputed a few people to help
in executing those projects to customer’s satisfaction, because we have to maintain our
brand. So, we will endeavor to the best of our ability to make sure that there are no
further losses, but I cannot guarantee that. All I can say is all known losses we believe
we have taken care of.
Ms. Kirti Dalvi
Okay, and sir in terms of our consolidated order book if you could have a few details on
that, what it is currently?
Mr. Sanjay Kirloskar
The consolidated order board is about…, sorry, KBL’s order board is 3027 crores, the
order board of all the subsidiaries put together is 384 crores.
Ms. Kirti Dalvi
Which includes even SPP pumps and all put together.
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Mr. Sanjay Kirloskar:
Which includes all the subsidiaries that are mentioned.
Ms. Kirti Dalvi
Okay. Thank you very much sir, and wish you good luck.
Mr. Sanjay Kirloskar:
Thank you so much.
Mr. Sanjay Kirloskar:
I will take the last question after this.
Operator:
Okay, the last question comes from Mr. Manish Goyal from Enam. You can go ahead
sir.
Mr. Manish Goyal:
Sir, just wanted to know in irrigation we said that we are again getting qualified for
getting the EPC orders, so just trying to get a sense why again looking at EPC and getting
qualification for distribution, if you can explain this sir?
Speaker:
This is for Maharashtra, and this is having much more portion of the electromechanical as
far as KBL is concerned.
Mr. Sanjay Kirloskar:
You know, we said we would be selective with orders, we also need to maintain a certain
kind of qualification, so if we see a tender which comes out with the kind of terms that
we want, then we would go for that based on the kind of payment terms, the margins that
we are going to make.
Mr. Manish Goyal:
Okay, so like in the market place today what we have seen in the last couple of months
that a lot of orders have gone to competitors, so is it that the terms and conditions of the
orders have changed and we find it that it is not really lucrative to bid for the projects?
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Just wanted to get a sense what are the things we are looking for when we say that we are
very selective in the order?
Mr. Sanjay Kirloskar:
We would like to have as much money as advance as possible, and we have set our
requirements for that. Basically we would like to work with customer’s money rather
than invest in their projects, so that is the basic thing. Then, we would like to have
money on dispatch and today as Mr. Srivastav said a little earlier in most of the cases
even the old ones we have been able to take it to about 85% on dispatch, in some cases
we even try to go for 90%, we also want very little money to be left for commissioning,
we have started putting in back stops so that if the equipment has been supplied, if the
customer is not ready, the customer still has to pay us within a certain number of weeks
after supply of equipment, if he cant commission because of their problems we still want
all the payments to be made to us within a certain number of days of supply. And what
we had said is if the customer cant meet these requirements then you know we would
rather not be there. So, we are asking for some very tight conditions and that is what we
mean by being selective.
Mr. Manish Goyal:
Thanks sir, thank you very much.
Mr. Sanjay Kirloskar:
Thank you.
Operator:
Thank you Mr. Manish.
At this time, I would like to hand the floor back to Mr. Umesh Shastry for his concluding
remarks. Over to you sir.
Mr. Umesh Shastry:
On behalf of KBL I would like to thank all the analysts who did take part in this
conference call. This was the first time we did have a call like this and we hope that it
has been successful and fruitful. We would definitely like to have your feedback on the
same if you can send that to [email protected] it will definitely help us. In case
we there is anything we need to do better, we will definitely be glad to do that.
Once again, on behalf of all of us at KBL thanks and wish you a good evening.