Close to Rs 750 crore stuck in Qatar projects: Voltas

Tata Group firm Voltas is facing a major headwind in Qatar as around Rs 750 crore has been stuck due to delays in the realisation of overdue receivables and execution timelines, said its MD and CEO Pradeep Bakshi. In some projects, bank guarantees were "unethically" encashed by some contractors, which was an "uncalled" action to make quick money, derailing the international project business of Tata Group firm in the December quarter, he added.

"Unprecedented things are happening in that area, especially in Qatar, wherein, unfortunately, our dues are not being paid to us timely, and inordinate delays are happening. We have completed the project and handed it over, and despite that, payments are not made," Bakshi told PTI.

Voltas has already approached the Indian government for help on the issue and also approached the Embassy in Qatar. MEP (mechanical, electrical, and plumbing) contractor Voltas has completed the projects in Qatar and handed them over as per the contract. However, its bills are not getting certified and paid.

"There has to be some basic ethics when you do business with your partners... Unfortunately, our payments are not coming. "The total gross outstanding is close to Rs 750 crore. There is an additional exposure of 375 core in bank guarantees," Bakshi said.

Most of the projects are getting over in the last six to seven quarters, and Voltas is incurring huge losses because of this, which is uncalled for, he noted. In the December quarter, Voltas reported a net loss of Rs 27.60 crore, which was on account of the Electro-Mechanical Projects and Service segment, which reported a loss of Rs 120 crore.

In FY23, Voltas had to make a provisioning of Rs 106.43 crore over the cancellation of the contract and encashment of bank guarantee. "Voltas is having this with multiple customers, including Sidra Medical and Research Centre, North Gate Mall, Commercial Boulevard Development etc," said Bakshi.

Voltas has a long history of more than four decades in project business, and this is the first time in the last few quarters (around 1.5 years) that it is facing such headwinds, mainly on account of Qatar, he added.

"As a remedial action, we are becoming very choosy while selecting the project. We are very selective. And wherever we think it is backed up with proper funding, it is through renowned contractors and the client, those who are good paymasters. We are going to them only. Now, we are not taking any chance whatsoever," he said.

The company has project business in GCC countries, including UAE, Saudi Arabia, Qatar, Bahrain and Oman, and was part of several iconic projects of the region like Burj Khalifa, Mall of Emirates, Bahrain City Center, and Palassio Mall in Qatar, among others.

Over the outlook, the company said it is consolidating its presence further in the room air conditioner sector, as its penetration level is still very low. Moreover, people are upgrading from window to split AC as their disposable income is increasing.

"If you look at our penetration levels in India, which used to be about 3 per cent, nowadays, it has moved to around 5-6 per cent," he said, adding that "now our consumption base is at par with China. Our population is this sort of blessing in disguise for us as the number of youth is growing".

According to Bakshi, demand for room AC from smaller towns is also increasing substantially.

Voltas is investing around 1,000 crore in the segment, of which Rs 500 crore is for setting up a compressor plant, and the rest is for capacity expansion in the next five years. About funding, Bakshi said: "We are a cash-rich company, but if needed, we will borrow also". Voltas is also operating a JV with the Turkish multinational household appliances manufacturer Arcelik - Voltas Beko, which is one of the fastest-growing brands in the appliances business.

"We have retained our leadership position in the AC category. Even in categories like semi-automatic washing machines and refrigerators, we have registered good growth and gained market shares," Bakshi said.

(Except for the headline, this story has not been edited by DNA staff and is published from PTI)