Comment

Higher other income has prevented Punj Lloyd from posting a loss for the second quarter of the current fiscal. The company posted a 21.4% growth in sales at Rs.2,376.9 crore as against Rs.1,958 crore a year ago, while operating profits rose by 21.5%, signalling stable margins for the company at 7.9%. Operating profit rose 21.54% at Rs.186.8 crore as against Rs.153.7 crore.
After providing for depreciation of Rs.78.1 crore and interest charge of Rs.130 crore, the company posted a loss of Rs.21.2 crore, which was taken care of by another income component of Rs.82.5 crore, details of which were not disclosed in the
results.

This helped Punj Lloyd post a profit before tax of Rs.61.3 crore. An unusually high effective tax rate of 51.55% resulted in the company posting a net profit of Rs.29.7 crore.

What the market was keenly waiting for in Punj Lloyd’s results was qualifications by its auditors. For the second quarter too, Punj Lloyd’s auditor has qualified the ONGC cost overrun for Heera Redevelopment Project worth Rs.243 crore and its exposure to Libya, with assets worth Rs.1,317 crore at the group level in the country and advances worth Rs.553 crore.

A 40% increase in the company’s interest outgo for the quarter compared to a 21% rise in sales highlights its tight financial position. Net debt-to-equity ratio (net of cash in hand) of the company has further gone down to 1.4 times as compared to 1.1 times in the previous fiscal.

An encouraging sign for the company is a steady inflow of orders. During the current fiscal, the company has received orders worth Rs.10,286 crore as compared to Rs.9,978 crore. Order book of the company stands at Rs.26,690 crore as of September 30, 2011.

Nearly a third of this order book is from the infrastructure sector, 20% each from pipelines and process, 15% from power and 11% from tankage and others.

In terms of geographies, South Asia accounts for 45% of the order book, Middle East and CIS countries are 22%, while Asia Pacific and Africa account for 33% of the book. Though visibility-wise Punj Lloyd is on a better wicket, investor interest in the company will not increase till the company comes clean on the various qualifications and the sword of write-off of doubtful receivables is removed.

Shishir Asthana (a_shishir@dnaindia.net)