ISGEC Heavy Engineering hosted a conference call on May 30, 2022. In the conference call the company was represented by Aditya Puri, Managing Director.

Key takeaways of the call

Consolidated Order inflow is Rs 1442 crore in Q4FY22 and in FY22 it was Rs 5608 (vs 4863 crore in fy21).

Order book as end of March 31, 2022 was Rs 7322 crore (vs 6765 crore in fy21 end).

Order book position is satisfactory and of which about 23% is products business. Export orders were about 15%. 

Hitachi JV – Order inflow in Q4FY22 is RS 70 crore and for FY22 it was RS 520 crore (against Rs 250 crore in FY21).

Choosy in picking up new orders given volatility in commodity prices.

Reduction in profits due to increase in prices of commodities for fixed price contracts impacting both Manufacturing and EPC segments.

 Time and cost overruns in EPC projects with high civil construction portion and impact of Covid related disruptions coupled with shortage of skilled manpower.

Lower profitability of EPC will continue for some more quarter. 

Products business drives its Orders from diverse sector such as oil & gas, petrochemicals, fertilisers, automobiles, castings, soda ash plant, hydro/steam turbines etc.

Today PSU order book is 39% of the total order book. PSU orders have price variation clause. But all of them are high working capital intensive and cash flow is linked to milestone completion. PSU order book share to come down to 20% (which is the usual level normally) with flow in of export orders. Due to covid the exports order flow dried and the share of PSU orders gone up. 

Most of PSU projects will get completed by end of this fiscal. The company was forced to go slower as clients delayed in giving approvals.   The cost at the sites are mounting. So the company is choosy in picking orders and are picking.

Railway order book – It has come down as the company has completed some orders on hand and selective in taking fresh orders.

Growth will be about 5% for FY23.

The 100 kmpd ethanol plant at Saraswati Sugars that was recently commissioned in Q3Fy22 is operating at full capacity.   Since the plant is using B Heavy to produce Ethanol, about 70% of the incremental revenue will come at the cost of sugar revenue. 

Outlook on FGD segment – the market is there for fgd with private and public sector. But the order flow is lumpy.

Have good quantum of sugar stock and profitability will improve with sugar price rise.

Got some enquiries for Philippines plant. Expect the valuation of the plant will increase once the plant is completed and its operations are demonstrated. Expect to complete the plant by June 2023. The company has given the Philippines plant a loan of Rs 50 crore.   Further a loan of 180 crore will be taken up by that company in their book from Philippines bank. At the time of takeover the loan in the Philippines company was about USD 36 mln and the company will rise USD 24 million (equal to Rs 180 crore) now. 

Profitability lower in EPC (adversely impacted by steep rise in material cost i.e. nickel, copper, steel and alluminum) as well as that in sugar and mfg.

Export enquiry has also picked up

Lower Sales and profit for sugar segment due to less quantity of sugar sold as it did not export sugar in this financial year.

No subsidy for sugar exports this fiscal so sugar exports were largely from plant that is in coastal states of Maharashtra and Karnataka. Further the exports are largely raw sugars and going largely to Afghan, Srilanka and Indonesia. The company produces raw sugar only in end of the season. So away from coast and non raw sugar production and absence of subsidy made sugar exports lower.

Export restricted to 100 mln tonnes of sugar. Expect good sugar exports from India.

Automobile demand in North America is improving and thus the automobile end use demand will be better than last year.

Fixed price contract is 60%.

Total capex is Rs 56 crore in FY22.

Consolidated profits are impacted due to interest and other expenses on Ethanol plant under construction in Philippines.