7/28/2019 Indian Steel Firms Eye mines in Afghanistan, Mint 20 May, 2011

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www.livemint.com FRIDAY, MAY 20, 2011, DELHI07

Corporate NewsRE P ORT CA RD

L&T net up 17% on robust

sales, beats estimates

BY J OH N SAT IS H K UM A R

john.k@livem int.comMUMBAI

Larsen and Toubro Ltd(L&T), Indias largest en-gineering company, beatstreet expectations posting a17% rise in its fiscal fourth-quarter net profit aided by ro-bust sales and a one-time gain

from selling its stake in a ven-ture. The company warned ofpressure on margins from ris-ing input costs and competi-tion.

Chairman and managing di-r ec to r A .M . N ai k s ai d o nThursday that the environ-ment for growth over the past

year was c loude d by high infla-tion, rising interest rates andpolitical upheaval resulting indelays in the award of projectsby the government.

In this backdrop, contraryto belief, L&T still notched up15% in new order booking,Naik said at an earnings brief-ing.

The firms order intakeslowed to a growth of 15% forthe last f iscal from a com-

pounded annual growth rate of37% for the past five fiscals.The company, with a pres-

ence across engineering, con-struction, electrical and elec-tronics, machinery and indus-trial products, financial servic-es and information technologysectors, guided a 15-20% risein new order intake for the fis-cal year that began 1 April.

Still, when asked to put anumber to the order book size

at the end of the current fiscal,Naik said it could be between`140,000 crore and `150,000crore. At the end of the last fis-cal, the order book stood at`130,217 crore.

On this base, back-of-the-envelope calculations showthat a growth of 15% puts theorde r book size at`149,749.55 crore.

At the begin ning of thelast fiscal, the companyhad initially guided for a25% growth in its orderbook but warned thatthis could be lower. Bythe fiscal third quarter, itcut estimates to 18%

growth, after which someorders got postponed inthe fourth quarter, resulting inthe 15% expansion.

Still, order intake accelerat-ed during the fourth quarter to`30,313 crore, a growth of 27%from the year-earlier quarter,and 38% of the total order in-take of `79,769 crore duringthe last fiscal year.

Through the order marketmay be smaller, were sti ll

strong contenders in the powersector, we see good prospectsin hydrocarbons, both mid-stream and downstream.

Were also well -posit ioned foroffshore platforms, Naik said,adding that due to accumulat-ed delays in the handing out ofgovernment orders, some pro-

ject s may be awarde dthis year.

I am quite hopefulthat things will acceler-ate in the latter half ofthe year, with stability inthe environment. I thinkthe situation looks man-ageable, Naik said.

It also guided for a rev-

enue growth of 25% inthe current fiscal year.Net profit for January-March

rose to `1,686.21 crore on as ta nd al on e b as is f ro m`1,438.10 crore in the year-agoperiod, beating the average es-timate of 17 analysts polled byBloombe rg that tipped netprofit at `1,520 crore.

The firm posted a one-timegain of `226.77 crore in thequarter due to its exit from a

construction-equipment jointventu re with CNH Global NVinMarch.

Net sales rose nearly 13% to`15, 078. 39 c rore f rom`13,374.89 crore. Total expens-e s g r e w 1 4 % t o `13,279.12crore, driven by a 27% rise inconstruction costs to `3,895.66crore and a 33% growth in staffcosts to `815.29 crore.

Investors applauded theearnings performance, send-ing the companys shares 5.9%higher to `1,594.90 on theBombay Stock Exchange, out-performing the benchmarkSensexs 0.3% rise.

While earnin gs befor e inter-est, debt, tax and amortizationmargins rose by 10 basis points(bps) from the year earlier pe-riod to 15.2% for the fourthquarter, the company warnedthat spiralling input costs andintense competition could ex-ert some pressure on operatingmargins going forward. Onebasis point is one-hundredthof a percentage point.

Were putting a lot of effortin containing costs despite ris-ing commodity costs. Weredoing everything possible tocontain margin erosion to50-100 bps, Naik said.

L&T, which is streamliningits organization structure tobetter manage growth, said it

will spin off some divisio nsinto subsidiaries as they ma-ture, but did not comment onany stake sale plans.

C hi ef f in an ci al o ff ic erY.M. Deost halee sa id t ha tsubsidiary L&T Finance Ltd

was awaiti ng regu lator y ap-proval from the Securities andExchange Board of India for itsproposed initial public offerand added that it would waitfor stable market conditions

before launching the offer.On capital expenditureplans, Naik said the firm wouldinvest `2,000 crore during thecurrent fiscal, but since it had`7,600 crore of cash in hand,

would nt need to raise anycapital in the current fiscal.

Firm pegs new orderintake for the fiscal at15-20%, warns ofmargin pressure frominput costs, competition

INVE STM ENT P LA N

Indian steel firms eye

mines in AfghanistanBY AMAN MAL IK , RU C H I R A S I N G H & E L I Z A B E T H ROC H ENEW DELHI

Fifteen Indian steel and min-ing companies plan to forma consortium to invest in ironore mines in Afghanistan, butanalysts say they will have tocontend with diverse interests inthe group and hazards of in-

vesting in the war-torn nation.Indian contenders for the

Hajigak deposits discussed themajor concerns and identifiedthe issues to be discussed withthe Afghan and Indian govern-ments, Steel Authority of In-dia Ltd (SAIL) said in a press re-lease issued after a meeting of

the companies on Thursday.SAIL chairman C.S. Verma

said the group has until Augustto submit bids, and that SAIL isinterested in building a steelplant as well. According to esti-mates, the mine should be goodto produce up to 1 billion tonnesof steel, he said.

The Hajigak deposits, locatedin Afghanistans Bamiyan prov-ince, 130 km west of capital Ka-bul, hold 1.3 billion tonnes ofiron ore. Afghanistans ministerfor mines Wahidullah Shahranipitched these mines as an in-

vestment destination during avisit to India.

Mint learns that Tata SteelLtd, Jindal Steel and Power Ltd(JSPL), Jindal Steel Works,Rashtriya Ispat Nigam Ltd

(RINL), NMDC Ltd and Bhush-an Steel are among the interest-ed companies, although thiscould not be independentlyconfirmed.

Analysts said that while Af-ghanistan is an emerging indus-trial hub, it might not be theideal destination for Indiancompanies.

Most of the companies havedifferent agendas. There wontbe any common ground. It is

also very risky to go there, saidRakesh Arora, managing direc-tor and head of research, India,Macquarie Capital Securities(India) Pvt. Ltd.

There can be other problemstoo.

We have to see how seriousAfghanistan is about industriali-zation, who will control the min-erals, and the safety of the peo-ple, said V.R. Sharma, deputymanaging director and chief ex-ecutive officer of steel businessat JSPL. It is a good industrialhub. The only difficulty is it hasno port. The land route to reachit can be via Iran or Pakistan.

Still, setting up an industrialventure may be a politicall y sig-

nificant move for India.India sees Afghanistan as an

economic hub linking south andcentral Asia and is investing inthe future of Afghanistan, saidRahul Roy-Chaudhury, seniorfellow for South Asia at the In-ternational Institute for Strate-gic Studies, London.

In the case of the Hajigakcontract, I think India will focuson its proven technological ex-pertise and practical experience,

while possibly minimising thenumber of Indian workers. Theproject will be undertaken byIndia but will be predominantly

Afghan-led. he added.Former foreign secretary Kan-

wal Sibal said that apart fromstating its intention to stay therefor the long-term, India is also

sending a message to Westerncountries that as a neighbour ofAfghanistan... India has everyintention of playing a regionalrole even after the exit of extra-regional powers from Afghan-istan.

It also sends a signal to Chi-na that we do not intend to leavethe field free for China to mo-nopolise the mineral resourcesof Afghanistan.

aman.m@livemint.com

E A RNINGS RE P ORT

Wockhardt swings to full year

profit with Q4 net of`161 croreBY C . H . U N N I K RI S H N A Nch.unni@livemint.comMUMBAI

Higher sales and gains fromforeign exchange fluctua-tions helped troubled drugmakerWockhardt Ltd report a fourthquarter net profit of `161 crorefrom a loss of `565 crore a yearearlier.

Sales increased 8% to `978crore in the three months ended31 March. The company made aforeign exchange gain of `159crore in the quarter.

Wockhardts performancethis year has shown significantimprovement, which reflects inits operating profit, primarily

driven by improved efficiencywithin the organisation and thelaunch of new products, saidchairman Habil Khorakiwala.

Wockhardt, Indias fifth-largestpharma company by sales, strug-gled with huge debt and an unex-pected loss from currency deriva-tive products a couple of yearsago.

Wockhardt swung to a profitfor the full year as well, but thequarterly losses and one-time ex-penses restricted its net incomein 2010-11 to `90.62 crore. It hadposted a loss of`1,000 crore forthe previous year. The companyreported sales of `3,751 crore in

the year ended March.The one-time expenses were

mainly related to impairment ofthe companys assets and provi-sions for risk on account of taxtowards restructuring operationsat its French unit.

Wockhardt, which is facing awinding-up petition filed by afew debtors in the Bombay highcourt, was expected to take deci-sions at its Thursday boardmeeting relat-ed to defaultedforeign curren-cy convertiblebonds and ad-ditional reve-nue-makingoptions.

A companyspokespersons aid no u p-dates wereavailable.

Investors were disappointed.Wockhardt fe ll nearly 3% on theBombay Stock Exchange onThursday to close at `337.45,

while the benchmark Sensexedged up 0.3% to 18,141.40.

Wockhardt, which failed tocomplete a signed nutritionalbusiness divestment deal withUS-based drug and nutritioncompany Abbott LaboratoriesInc. in 2009 when it was under fi-nancial pressure to repay a part

of its debt, was reportedly plan-ning to leverage the values of itsmain nutritional brands, includ-ing Farex and Protinex, to ex-pand its revenue stream.

Wockhardt should try optionslike partnerships, co-marketingor licensing of these reputedbrands with other competentplayers to optimise the potential,

which the company could not le-verage so far, said Raj Smartha,

managing di-rector, Inter-link MarketingConsultancyPvt. Ltd, a phar-ma and health-care marketingconsultant.

Wockhardtsdomestic busi-ness grew byabout 15% inthe year ended

March, its market share climbingto 2.05% in March from 1.91% a

year earlier, the company said,citing market data compiled bydrug market researcher ORGIMS. Its sales in the US and Eu-rope also improved.

Wockhardt has restructured alarge part of its debt in an effortinitiated by its domestic lenders,and has been granted an interimrelief by the Bombay high courtin the winding up plea.

NE W GOA LS

After Genpact stint, Bhasin sets

his sights on education sectorBY YO G E N D R A KAL AV AL AP AL LI

yogendra.k@livem int.comHYDERABAD

Given the chance, GenpactLtd chief executive officerPramod Bhasin would like to

work with the government topromote public good after hesteps down from the helm of In-dias biggest business processingoutsourcing (BPO) firm in June,he said in Hyderabad on Thurs-day.

If the government were to of-fer him a suitable role, said Bha-sin, he would take it up. Workingin the education sector is anoth-er option.

We are trying to make re-forms in our education but theyare too slow. They are just tooslow, he said. And the qualityof our graduates coming out (ofcolleges) is not improving. I have

watched this for 10-12 years. Ourtimetable for making changes is

very slow. There is no substan-tive change. And, therefore, weend up being able to hire only6% of the people who apply (for

jobs).Bhasin, 59, will step down as

CEO on 17 June and be succeed-ed by chief operating officer N.V.Tyagarajan, known as Tiger inGenpact. Bhasin will assume the

role of non-executive vice-chair-man of the New York Stock Ex-

change-listed firm he helpedfound.

Everyone has to go at sometime, said Bhasin. There is noperfect time. Genpact is doing

very well. We have a nice acqui-sition done. I think we are very

well positioned. I think thats theright time to go. And I wanted todo some other stuff myself. Idont know what, he said with achuckle.

The allusion to an acquisitionwas a reference to Genpacts$550 million purchase of Head-strong Corp., a provider of con-sulting and information technol-ogy services, announced in

April.About his designated succes-

sor, Bhasin said: He has beenthe COO, he knows the companyinside out. He has been the headof sales and marketing. He wasthe CEO of this company when it

was a captive. He has seen thecompany in all its avatars.

But he has no words of advicefor Tyagarajan.

His choice. I am not going totell him, Bhasin said. The

worst thing an ex-CEO can do istell the current CEO what theythink should be done with thecompany. I think it is up to him.Thats why he is going to be theCEO and I will keep my mouthshut.

Domestic businessgrew by about 15%in the year, market

share climbs to2.05% in March

>MARKTOMARKET:Orderinflowsimprove at L&T >P14

ALSO SEE

Growth chart: L&T chairman and managing director A.M. Naik.

Next move: Bhasin will step down as Genpact CEO on 17 June.

SALES`15,078.39cr

NETPROFIT`1,686.21cr

17%

13%

PTI

HEMANT MISHRA/MINT