Engineering and construction company Punj Lloyd will soon execute its legacy orders, its director of corporate affairs Luv Chhabra said on a conference call on Monday.
The legacy orders came into the Punj Lloyd fold when it acquired Singapore-based Sembawang Engineers & Constructors and the UK-based Simon Carves (SCL) in 2006.
Out of the company’s total order-book size of Rs 26,800 crore, legacy orders form about Rs 250 crore.
“A substantial portion of the legacy orders is already complete. Most of the projects will be executed in the next quarter while one or two could go into next fiscal,” Chhabra said.
Chhabra said that the £161 million (Rs 1,225 crore) bio-ethanol plant project SCL is doing for the Ensus Group in the UK will be completed on December 12, a delay of over 10 months.
For the quarter ended September 30, SCL had losses of about Rs 104 crore, which is due to the cost overruns on the project. “The cost overruns are due to the fall in productivity levels of our sub-contractors. At one point it fell to as low as 20%,” Chhabra said.
He said that the company has signed a production-sharing agreement with Ensus to recover the extra cost. “The final capacity is 15% more than the originally planned and for every extra litre of bio-ethanol produced we will be compensated,” Chhabra said.
Asked if the company would try to recover the cost from its sub-contractors, he said it would but the chances of recovery remote.
SCL is embroiled in a legal wrangle with Sabic Petrochemicals in the UK. The case relates to a contract awarded by Sabic to SCL in 2006 for designing and building a low-density polyethylene plant in the UK. Late last year, Sabic encashed SCL’s performance bond worth £28.5 million (about Rs 216 crore) citing delays in the completion of the project. Punj Lloyd wrote the amount off last fiscal and is in the process of restructuring SCL.
Punj Lloyd spent £1.2-1.4 million in the second quarter on the retrenchment of 80 SCL employees. “The current strength is about 79 and we would ideally like to bring it down to 50,” Chhabra said. Atul Punj, chairman, Punj Lloyd, had earlier said SCL would be given only minor work in the future.Punj Lloyd disappointed the market with a 2.7% and 63% fall in revenues and net profit at Rs 2,871.65 crore and Rs 52.85 crore respectively in the second quarter. The stock fell 16.5% on Monday to close at Rs 217.65 on the BSE.
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