Sembawang set to bolster parent Punj Lloyd

Sembawang Engineers and Constructors, the Singapore-based subsidiary of infrastructure major Punj Lloyd, is planning to enter South East Asian markets other than its regular territory of Singapore and Hong Kong.

Sembawang is likely to help Punj Lloyd turn profitable on profit after tax (PAT) basis by the end of this fiscal, said Raju Kaul, CFO of Punj Lloyd.

Sembawang has turned around well after three gruelling years starting fiscal 2009 and now has a healthy financial visibility for the next 2-2.5 years, said Kaul. “In the first half of this fiscal, there was a marginal loss on a consolidated basis at PAT level due to higher tax outgo of Sembawang. This will be offset by higher profits in the second half.”

For infra companies, the first half usually comprises 35-40% of PAT; hence, the second half usually has a major impact on the bottomline.

On a consolidated profit before tax (PBT) basis, Punj Lloyd had clocked `32 crore which shows signs that Sembawang was on a strong footing.

“Sembawang’s order book stands at S$850 million, or over Rs3,800 crore, which will be executed over 24-30 months and hence the visibility for the company is good,” said Kaul.

This is part of the $5.5 billion (or over Rs30,000 crore) order book of the group, out of which almost Rs9,000 crore came from the first half of the current fiscal, he said. Sembwang’s contribution to topline is 20% and bottomline 25%.

Analysts have been saying that since Sembawang was not doing well, the proposal for listing it on the Singapore Exchange had been deferred. But the company refuted the talk, blaming the current lacklustre market conditions for the deferral. After acquiring Sembawang in 2006, Punj Lloyd had shut down the former’s subsidiary in the UK after executing the two backlog orders. Sembawang’s UK unit, Kaul said, was a drag on the group’s financials, affecting profitability between fiscals 2009 and 2011.