VG Suresh Kumar, Director Project & Chairman & Managing Director, talks about the June quarter numbers, margins, mega order of Rs 4,000 crore, overall order book, leasing business, international business and growth outlook for FY22 among others during an exclusive interview with Swati Khandelwal, Zee Business. Edited Excerpts: 

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Q: April-June 2021 has been a steady quarter for you. What were the key highlights and what led to this performance, and do you think that it is sustainable growth?

A: Amid the COVID situation, the results of Q1FY22 has been satisfactory. Our main drivers are the consultancy segment that has grown by 10% and the leasing segment has grown well and these two have contributed to our revenue. At the same time, turnkey has had a contribution of around 30% to the revenue. There has been a slight fall in the turnkey because of COVID. In the context of the export that was meant for this quarter, carriages were available at the ports, but shipment didn’t take place due to which we didn’t earn revenue on the front and there has been a downfall in the inspection segment, which has a contribution of 20%. But our profit has increased by 22% and EBITDA has also increased. Our order book has consolidated, and we received the maximum order book in this quarter. This is the highlight for the first quarter of FY22. 

Q: Margins have seen a good expansion and you have been able to bring down your cost as well. What is the expected range on the front of margins, and will the rising commodity prices will put any pressure on the margins, or it has been factored in?

A: The commodity market does not make much difference in the consultancy segment, so, the margin should be maintained in this range itself. There can be slight up and down in a case like if the turnkey segment grows then the margin sees a slight decline, while the consultancy segment increases then the margin will increase. So, the play remains the same. This time, we have focused more on international consultancy, and we have received good revenue from international consultancy and continuing with the focus, the profit we are maintaining along with the top line and bottom line, I think, a stable situation may come there. 

Q: Recently, you won a mega Rs 4,000 crore order. What are the details about the order and what is the execution timeline and what kind of margins you will get from it? Also, update us on the current order book that the company has at present and where it is expected to be by the end of FY22?

A: We have received a turnkey order of Rs 4,000 crore and it has three projects of which two are of around Rs 900 crore and one is of around Rs 1,800 crore. The timeline for the execution of these projects will be around 3-4 years. We are getting slightly higher margins in these projects. Volume is more so we can expect that – the profit of the normal turnkey is between 3.5% to 4.5% and varies, so its margin is likely to stay in the same range of 3.5% to 4%. This is a turnkey margin. If we have a look at the overall order book then our order book at the closing of the first quarter stands at Rs 6,900 crore and adding this, the order book goes up to Rs 11,000 crore. The turnkey that we received this time will take some time in taking off and its results will be visible at the end of the third quarter or the fourth quarter. But there is a slippage in the exports will help this year. Our export and turnkey are also improving and if the situation continues to be the same, then I think, we will be able to meet the pre-COVID levels and maybe go up. 

Q: On the execution front, you have said that we will have to see the way it performs. We have seen a dip of 16% YoY basis. Can we expect a recovery ahead?

A: As far as our turnkey is concerned then we got the first phase of turnkey in 2018 and they have reached the execution phase and there are two factors in it (i) our turnkey projects assignments are ending and two of the projects have already ended and two projects are in an advanced phase. These are the factors due to which there is a dip and there is a slight impact of COVID. But the second phase of turnkey that we have received will take off in the third quarter and will sustain in the turnkey business for the next four years. 

Q: What is an update on the leasing business as we have seen good growth here and margins have also improved? What is an outlook on the front?

A: Leasing is a good segment for us and is increasing gradually in the domestic market. We are also seeing a big opportunity in the international market as well, particularly in the African countries. If we take this leasing model, where they are financially starved and due to finance is not exporting the rolling stock. So, if we take ahead the leasing model to the international markets and make a well-drafted agreement with the government then our leasing segment can grow well. 

Q: Can you share any number of the kind of contribution that we can expect? You have also talked about the international business and seeing good traction from the African business. So, can you please provide a breakup for the same?

A: Presently, in our consultancy segment, our international business has a contribution of about 15% and we will try to take it to 20-25% and we are trying to make it happen and submitting our tenders and it will depend on how much gold I am going to strike. 

Q: What is your growth outlook for FY22 in terms of the top line and the bottom line? 

A: Overall expectation is that we should reach up to the pre-COVID levels and it may go up. It is going to be export-driven this year and less turnkey driven. So, we expect that we will be able to maintain the margins, possibly better than the last year and stay near the pre-COVID margins.