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Mahan Industries (Rs6)
Mahan Industries is supposed to be a non-banking finance company...

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‘Electricity for all by 2012 is not possible’

Sunil Hitech Engineers Ltd has its presence in the engineering segment and in the power & steel sectors. Sunil Gutte, joint managing director, talks to Amritha Pillay on the company’s order-book expectations and his outlook on the power sector

ML: What are your order-book expectations for FY2010-11?
Sunil Gutte (SG):
This year, we intend to bag around Rs2,000 crore worth of projects for FY2010-2011. Last year, our aim was to bag around Rs1,500 crore worth of projects, but we secured around Rs1,400 crore. There was a shortfall of Rs100 crore. The reason for this shortfall was the hit ratio applicable in bids. We might have to bid for Rs6,000 crore-Rs7,000 crore worth of projects in order to achieve our target (for this fiscal).

(ML): Could you give us a break-up of this expected order-book?
(SG):
The steel segment would be around Rs200 crore, the balance Rs1,800 crore would be from the power sector. Essentially, 70% of these orders would be from the generation side. We are not very focussed on transmission and distribution (T&D). We are aiming at not more than Rs300 crore (worth of) orders in the T&D segment.

(ML): What are the main concerns on the distribution side?
(SG):
Work is happening, but the structure of contracts is not contractor-friendly, as payments are made only on completion of the project—without any interim payments, monthly payments or advance against material. A lot of working capital gets blocked. The involvement of various local agencies in laying distribution lines is also an issue. The client does not get you the required permissions. There is delay in such projects.

(ML): What do you think of the ministry of power’s goal which says: ‘Mission 2012: Power for all’?
(SG):
These targets are very difficult to achieve. Though projects have been awarded, execution is an issue. No project on the distribution side can be completed in one year. Generation will increase capacity, but if the distribution network is not there, then existing distributors will benefit, but rural electrification or 100% electricity (for all) will not be possible.

(ML): How do engineering companies like Sunil Hitech get affected due to the increasing number of environment-related issues before starting a project?
(SG):
Not much. Most players ensure that the clearances are in place before the EPC (engineering procurement & construction) contracts are announced. However, this could be a major issue with independent power producers, who prefer to start work before the clearances are awarded.

(ML): What is your company’s perspective on the steel segment?
(SG):
Our expertise in this area is limited. So we are concentrating on the energy side. In the steel sector, actual work is evident only in the case of a couple of strong players. Amongst the private players in the steel segment, the work process has slowed down. At least for the next two years, the dominance would be from the power segment in our order-book.

(ML): To augment your huge order-book plans, do you plan to raise any funds?
(SG):
For sales worth Rs1,500 crore, we do not require any equity. If we get larger orders and the order-book touches a mark of Rs3,000 crore (or more), then we may require huge capital. We have tied up on the debt side for the Rs2,000 crore worth of orders we will target in this financial year.

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