We got more than we were looking at for EPC orders and to that extent, it is a big challenge but we are confident that we should be able to wrap it up by next year, Shekhar Bajaj, CMD, Bajaj Electricals, tells ET Now.
You have bagged a sizable chunk of orders from UP but analysts see execution risks and aggressive pricing in the recently bagged orders and higher than estimated rise in working capital requirements. Ddo you believe this will remain a concern in your expansion plans?
Though the order is for Rs 5000 crore, we have done a survey and found that many of these low-cost houses do not exist and therefore the order may be brought down to may be Rs 3,000- 3,500 crore. That is one.
Second, in terms of aggressive pricing, we still have priced it at our normal EBITDA level which is 7% to 8%. We have not priced it below that. Those are the numbers which we can still expect out of this order.
The timeframe for the UP order is also very tight. We have looked at it and we say that we should be in a position to complete it partly this year and most of it by next year. To that extent, it will give a substantial boost in terms of our turnover and bottom line.
Although you have targeted only two to three orders with aggressive pricing, you have 16 power distribution orders to electrify villages. Tell us more about the recent order wins?
Our order book was going down and we did not have sufficient orders for power distribution under rural electrification. Therefore, we bid aggressively in the tenders as we did not know how many we were going to win. We were hoping to get four or five orders but ended up winning 16! So, we got more than what we were looking at and to that extent, it is a big challenge but we are confident that we should be able to do that, It will give us a different trajectory. We will show our capacity and capability to take up bigger challenges for the coming years.
Tell us about the total order book at hand. Where do you see the order book by the year-end?
As far as power distribution is concerned, we have got this order for next two years. We are not looking for any new orders for next 12 to 18 months. We are not quoting for any new tender because this is sufficient to keep us busy for next two years.
As far as other businesses are concerned, there also we have got good orders but we are still quoting for them because we still have the capacity to do a little more. Overall, the order book is over Rs 8,000 crore. As I have mentioned, we may actually end up with about Rs 6,000 crore order book and we should be able to cover it in this year and may be next.
The consumer products business has seen initial signs of a recovery with a 15% volume growth in fourth quarter. Do you hope to improve this performance in the future quarters to come?
Yes because our distribution network is in place. We are serving 160,000 outlets on a weekly basis which we want to increase to 200,000 outlets. Therefore, with the government thrust and the money available in the rural market, via distribution we are covering almost 500 districts and with that coverage we should be able to show a better growth rate than we have shown in the fourth quarter. The first two months have been good. Let us hope June also turns out to be good.
Your target is to regain the market share loss since RREP implementation, over FY19-FY20. But analysts believe gaining market share is not going to be easy as competition has intensified. How do you plan to address this concern?
The full game of India is distribution and therefore I do not think any other competitor has the type of distribution network that we have created in the last two years. We have taken a market share hit but now that the markets are established, our distribution is in place and in spite of competition, we would be able to gain back our market share. It may take a couple of years but we will grow faster than our competitors. That is something which we are very clear.
You were losing T&D orders over the past one to two years because of conservative pricing. You adopted aggressive pricing approach in the recent tenders with the target of winning about two to four orders. What is the outlook then on the EPC segment growth?
The EPC segment growth will be substantial because of these new orders that we have taken for next two years. If you do not deliver these orders in time, then other issues will come to the fore.
So, there is no alternative but to have substantial growth. Even 30-40% growth is quite possible as far as EPC is concerned because we have got orders which we have to execute. After we start executing, we will see how we will go about in the future but one thing is very clear that EPC should give us good turnover and contribution in next two years.
Gross debt has increased by Rs 7300 crore in FY18 with increase in EPC revenues and is expected to increase further by Rs 250 to 300 crore in FY19 on execution of the UP projects. What is the outlook on debt management?
We are looking at debt equity capital. We are rotating it three times. Suppose we do an extra Rs 1500 crore, we would need an additional Rs 500 crore of capital but Rs 200- 300 crore will come out of EPC business alone. Maybe we need additional debt of about Rs 200-300 crore, which is substantially going to come out of our consumer business where we do not really need much cash. There is no cash flow issue at all for executing these orders.