VA Tech Wabag eyes strong business rebound next fiscal, eyes HAM, OCOP projects
Having repositioned itself as a pure play water technology company in the past few quarters, VA Tech Wabag is looking to focus on remaining asset light and bid for projects in the municipal sector in India in which the funding is secured through multilateral agency participation.
The Chennai-based company is looking to pursue growth in business in India and abroad through the organic route, but would keep its options open for an acquisition if there are compelling reasons. Keeping in line with its plans to grow its presence in the digital and advanced technologies space and bring in artificial intelligence (AI) based systems for water treatment, the company could look at a small buyout in the digital technology space, said VA Tech Wabag Managing Director & Group CEO Rajiv Mittal.
The company had been largely unscathed from the Covid-19 pandemic and had used the current financial year in consolidation and maintenance of business. “The company has an order book position of over Rs 11000 crore. This gives us revenue visibility of almost three years”, Mittal told India Water Review recently.
Despite the slowdown during 2021-21, during which business slowed down keeping in pace with the world, the company is looking to post strong growth next fiscal.
“In every project that we would bid, we will have someone like multilateral agencies or the Centre to invest. With secured funding in place, we will being in our expertise to execute the project,” he said. The company is keen to bid for projects, in which multilateral lending agencies like World Bank, ADB or JICA have assured funding.
The company is also looking to substantially grow its overseas presence considerably from the current 35 geographies. Going forward, the revenue from overseas presence could surpass the Indian earnings, indicated Mittal.
Mittal said the company’s positioning as a total solutions provider in the water space has already provided it an edge in emerging business models such as ‘one city one operator’ (OCOP) that the Centre is adopting in large projects, including sewage treatment projects under Namami Gange programme.
The Centre has adopted the OCOP concept in four projects, of which VA Tech Wabag has secured two. Also, the company has secured several projects under the hybrid annuity model (HAM) on a PPP basis. VA tech Wabag is eyeing more HAM projects, with Mittal point out that “BOOT models will work too much, not for the company”.
The company had recently raised capital to the tune of Rs 120 crore from some marquee investors through a preferential issue. “We feel that our balance sheet is not leveregaed enough. We intend to do so when needed”, Mittal said, adding the cash flow position had significantly improved in last 12-15 months and the money raised recently would help to meet working capital requirement.
VA Tech Wabag had posted consolidated revenue of Rs 2557 crore in 2019-20. In the first-half ended September 2020, it posted revenue of Rs 1039.22 crore on consolidated basis, a dip from Rs 1092.65 crore for H1 of previous year. Profit after tax on consolidated basis for H1 of 2020-21 came down to Rs 21.80 crore as against Rs 29.71 crore in previous year.
For the second quarter ended September 2020, revenue on consolidated basis was Rs 608.35 crore as against Rs 636.12 crore while PAT for the September 2020 quarter was Rs 16.69 crore as against Rs 27.09 crore in previous year.
On a standalone basis, the company’s revenue during the first half ended September 2020 was Rs 634.18 crore, a sharp drop from Rs 766.82 crore during same period of the previous year. Even profit after tax became one-third on standalone basis at Rs 12.10 crore in H1 of 2020-21 from Rs 37.85 crore in the previous year.
“We are not aiming for any big growth during current fiscal due to reasons beyond our control. This year is more of a consolidation period for us. We will end this fiscal with flat or marginally higher revenue,” said Mittal. For next fiscal, the company is looking to have revenue cross the Rs 3000-crore mark due to strong execution of existing projects in hand.
The company is also looking to grow the share of revenue through operation & maintenance (O&M) contracts, a move that will help it improve margins and profits. While the EPC business currently contributes about 68 per cent to VA Tech Wabag revenue, the O&M share is at 32 per cent. Overall, the municipal segment contributes as much as 87 per cent of the business while industrial segment contributes remaining 13 per cent.
