Pratibha Indsutries' latest order wins take its order book to over Rs 5,600 crore, which results in the order book growing a hefty 31 per cent over that in June last year.

The orders are for the Delhi Jal Board for reduction of pollution in the Yamuna River, with an execution period of 36 months. According to the company, the project is the first of its kind to be undertaken in India.

At Rs 693 crore and Rs 557 crore, the orders announced on Monday are also well above the average order size of Rs 250-350 crore that Pratibha has executed so far. The stock of the company jumped 4.6 per cent in the wake of the announcement.

The orders suggest that FY-11's tepid order season may be firmly put behind, with FY-12 so far seeing close to Rs 2,000 crore in new orders. The order book now stands at approximately 4.4 consolidated FY-11 revenues.

Working in consortium

The orders also help Pratibha increase geographical diversification away from Maharashtra.

The orders have been won in consortium with Mosinzhstroi Open Joint Stock Company, a Russian-based infrastructure firm. That the orders secured are the highest value won by Pratibha thus far indicates that Pratibha's strategy to move in partnerships to undertake complex projects is paying off.

The 60:40 joint venture will see Pratibha undertaking the construction of the project, with the partner providing the technical expertise.

Though such partnerships temper revenue in the near term, they will help the company build on its own technical expertise, eventually allowing Pratibha to qualify on a solo basis. A debt-equity ratio on the lower side at 1.06 times and an improving working capital period suggests that the company is not likely to be pressed for funds on account of this project alone.

Water segment stronghold

The orders pertain to the design and construction of interceptor sewerage system along major drains, diverting untreated waste to treatment plants. Pratibha's key expertise lies in water and sanitation projects, a segment that carries higher margins than other infrastructure segments such as roads.

With the new orders, the share of water and sanitation projects in the total order book is boosted to about 65 per cent. Consolidated operating margins for FY-11 stood at 14 per cent. According to Mr Yogen Lal, Director – Marketing, margins from this project could come in at 16 per cent.

With inclusion of operation and maintenance of the system for a period of 11 years, which makes up Rs 365 crore of the total project cost, Pratibha benefits from the steady revenue flow from this avenue.

(This article was published on July 18, 2011)
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