The Hindu Business Line : Exports, new capacity drive Praj numbers

Praj Industries has reported an impressive set of numbers for the year-ended March 2008. Exceeding market expectations, the company’s net profit has grown by over 77 per cent to Rs 153 crore.

This assumes more significance since the growth in profits came more on the back of improved operational efficiencies; revenues grew by only 15 per cent during this period. Expansion in operating margins, increased export contribution and lower tax outgo can be credited for the substantial growth in profits.

Growth drivers

On a full-year basis, the company has reported a significant expansion in operating margins, by 7 percentage points to about 26 per cent. This was mainly due to the commencement in production from Praj’s Kandla SEZ facility.

Besides scaling up capacity, the Kandla facility has also helped Praj bring down its transportation cost. The facility reported an utilisation level of over 60 per cent. In addition to this, the various value engineering initiatives undertaken by the company also helped lower overall cost. Increased contribution from exports, which typically enjoy higher margins, also helped Praj boost its profits. Exports as a percentage of the sales, increased to over 50 per cent in FY-08 (this was only 30 per cent in FY-07). Lower tax incidence, 12 per cent compared 21 per cent last year, also helped improve bottomline.

Buoyant order flow

Praj currently has an order pipeline of Rs 950 crore, with an average execution period of over a year. This is divided equally between both overseas and domestic markets. Further, the forthcoming year may also see Praj’s overseas subsidiaries and joint ventures beginning to contribute.

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