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HCC says Andhra turmoil will mean lower revenues

HCC feels that its FY10 revenues would have gone up by Rs200 crore, if it would have been allowed to work on its projects in AP normally

Hindustan Construction Co Ltd (HCC), which has considerable concentration of its order backlog in Andhra Pradesh (AP), says that its FY10 revenues would have gone up by around Rs200 crore, if the company would have been allowed to operate normally in the state.

“If we had no such constraints and if we would have had to do this (the projects) at a full pace, we would have had at least Rs200 crore more turnover for the entire FY10,” said an official from HCC.

HCC’s order backlog in AP, a state that has been embroiled in political trauma which started with the death of its chief minister YS Rajasekhara Reddy, is about 30% of its total orders. HCC has not stopped work on its projects in the state, but the progress is slow, said the HCC official.

HCC had an order book of Rs15,703 crore as on 31 December 2009 and expects it to reach about Rs21,000 crore by March this year. The power sector accounted for 40% of the revenues for HCC while roads and irrigation segments contributes 28% and 32%, respectively.

Ajit Gulabchand, chairman and managing director, HCC said, “The (AP) state first had elections, then it faced turmoil with YSR Reddy’s death and further by the Telangana issue. I think it should substantially correct itself from our point of view by March. I think with the new financial year open, they will have lot more funds at their disposal to clear that (the receivables).”

Depending on the progress of its projects, HCC said that the AP government owes it around Rs600 crore, out of which Rs260 crore are from the past three months alone. HCC feels that the state government would start clearing its dues from February onwards.

Similarly, HCC has also lost revenues on its power projects, especially on its Lohari-Nagpala hydel power project in Uttarakhand due to local issues like the Ganga Bachao Aandolan.  

“About 50% of our order backlog is from power projects and most of our projects are running on schedule.  The work on Lohari-Nagpala project has been temporarily suspended sometime in June-July 2009. There is a suspension of this project, but not termination. We would have lost about Rs35 crore-Rs40 crore in the past five–six months due to this suspension,” said Vinayak Deshpande, president and chief operating officer (COO) for EPC & construction, HCC.

The company, however, is positive over its road projects and sees better margins in the future. Mr Gulabchand said that the company expects a more steady flow of infrastructure projects in the next financial year.

“I think the order backlog that is going to come forth would definitely have better margins, because we will now be taking more value-added projects. In addition, the size of the road projects that the government is coming out (with) will also be bigger. This will require bigger companies to participate. I think we are going to go forward with slightly increased margins on an average,” he said.

For the third quarter to end-December, HCC reported a net profit of Rs14.80 crore and total revenues of Rs945 crore.

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