We will touch Rs 1000 crore revenue mark in 1-2 years: Sorab Agarwal, ACE

Talk to us a little about the boom that one is currently seeing in the construction and mining activity. What really is the on-ground situation like? Are you also seeing increased traction in your business and order flows because of this sign of revival?
Last year was relatively good for us and we have been able to increase our revenue and with respect to the business momentum, with respect to all the things that have happened last year and continue to happen, we are placed ideally for future growth from here. Just to point out, you mentioned Rs 1000 crore over the next three years. It will be faster than that and the current scenario seems to be very buoyant, order books, order flows, number of enquiries are all definitely going up. Since January, we have been seeing a good uptrend in the numbers.

Since you are so confident that you will manage to hit this Rs 1000 crore mark sooner than three years as per your earlier guidance, what is your order book visibility like right now? What is the pipeline and what is the order book status as of last count?
In our type of business, people generally do not wait long enough for deliveries. Generally we remain booked for about one, one and a half months and sometimes up to two months. Currently our order positions are going up to one and a half, two months and that means we have to ramp up production. Going by that and considering the fact that April is generally a slow month compared to February and March, we are again seeing a momentum in place.

Where is this sudden resurgence coming from?
As of now, I would say demand is picking up in road sector, railways, metro construction and to quite an extent urban infra activity. Roads are leading, On the contrary, I would say real estate still has to catch up. It is going very slow as of now and I am sure within this year that will also change with the industrial capex catching up.

How much of this demand is cyclical and how much of this demand is structural? Today things are looking good but it may just peter out after three months. The construction activity has been so poor when the cycle starts and the initial days look very rosy and then activities tend to peter out. We have seen that in 2014-2015 also once?
There are two aspects of this with respect to our business; the first one being hard core construction or infra activity and the second one being real estate.

In most of equipment, if I talk of our revenue mix with respect to hardcore infra and real estate, it is 90% to 10% and with respect to infra, I see no reason that it should peter out. I do not want that to happen and because things are looking good, the government is focussed and especially with the GST coming in, their tax base increasing, their collections increasing, the monetary position of the country increasing, this is only going to go up from here as of now. Yes, real estate is in pain and that pain would continue at least over the next six months to one year.

Can I safely assume that large part of your demand is a function of government spending? The demand may be coming via the private sector but is the end usage linked to government order?

Not really to government orders but yes it depends on infra activity that can be government spending. But that could also be private spending. But yes, the current increase can be owed a little bit to the government spending side as well.

Like I said, I am sure that industrial capex and investments into infra by private sector is going to go up sooner or later. That again would add boost the current activity level.

Is the spending largely restricted to the urban areas?

Not really but urban infra is playing a major role because bridges, flyovers, servers or even water pipeline projects, everything is increasing now.

You said you will be able to achieve this Rs 1000 crore revenue mark in less than three years. Would it be one year or would it be two years, if you could give us an exact timeline?

You see I would love that it happens in one year and I am sure we will target that but to be a little bit realistic, I think one to two years.

Are you fully funded in order to meet a target of Rs 1000 crore? Are the cash flows and internal accruals enough or will you have to raise debt or equity?

No, I do not think we require any funds to grow from here because as far as the capex is concerned, we already have capex in place which we had carried on in the years of 2011-2012. now to increase our revenue.

Leave a Reply

Your email address will not be published. Required fields are marked *