Alstom T&D India on Thursday reported its first loss in a decade as sales fell and clients delayed payments, highlighting the challenges faced by transmission & distribution equipment makers in the slowing power sector.
The company posted a Rs1.8 crore loss for the September quarter as against Rs40 crore profit a year as it made a onetime provisioning of Rs30 crore towards doubtful receivables.
The only notable factor in the quarter for Alstom T&D was a Rs2,500 crore High Voltage Direct Current (HVDC) order it bagged from Power Grid Corp.
Rathindra Nath Basu, managing director, said on an analyst concall that poor financials of clients and bottlenecks faced by them led to drop in sales.
“Customers were not ready to accept our products due to their weak financial position,” he said.
Basu said delay in equipment procurement by clients led to a 34% rise in order backlog for the September quarter at Rs6,100 crore over the year-ago period.
Current order backlog gives a revenue visibility for next 17 months, he said.
Basu said the company would have clocked profit if customers would have paid on time.
“If situation with our customers changes and they take deliveries of equipment and services they have ordered on us then we would be able to increase our sales as we do not have any constraint in our factory or in our engineering capabilities to do so,” he said.
The company also disappointed the street on year-on-year sales and operating income front where it showed a decline of 8.4% and 10.5% respectively. Sales stood at Rs740 crore.
With the demand staying weak, Basu sees double-digit growth for T&D equipment manufacturers a distant reality.
“When the country is expected to grow at 5.5%, then how can you expect the electricity sector to grow in double digits,” he asked.
However, everything is not bad for Alstom T&D.
The company is set to get the chunk of orders from the Rs1 lakh crore capex planned by Power Grid for the current Five Year Plan that runs till 2017. Majority of the orders would be for high-end products that will help companies like Alstom T&D that has technological advantage, said an analyst with a local brokerage.
Winning of HVDC project from Champa to Kurukshetra that would carry 3,000 mw of bulk power again reiterates the company’s dominant position in high-end product chain that has already executed 3 HVDC project, he said.
Around 43% of the project will be done locally and the company is expanding localisation capacities.
Also, transmission is the only segment in the power sector where investment is happening as electricity from the new generation capacities needs to be evacuated and carried across regions.
“Alstom T&D’s strategy is to capture the higher end of the market such as HVDC 765 kv, GIS and add to this basket,” the analyst said.