Painting a grim picture of the infrastructure space, Hindustan Construction Company has clocked rather tepid fourth-quarter results. While the turnover has been flat, the company managed to garner handsome profit margins. Speaking to Bloomberg TV India , HCC Chairman and Managing Director Ajit Gulabchand says improved efficiency and favourable claims have kept profit margins at about 20 per cent.

Can you take us through Q4 performance and outlook for FY17?

The fourth quarter turnover stands at about ₹1,196 crore, which is more or less flat and marginally better than ₹1,175 crore in the same quarter previous year. The Ebitda margin was about 19.81 per cent, which is giving a net profit of ₹19.1 crore during the quarter. The whole year’s turnover is about ₹4,190 crore, again broadly flat and slightly less. But, the Ebitda margins here again are good at 19.98 per cent giving a net profit of ₹84.9 crore and the profit before taxes of ₹159 crore in FY16. These profitability rates are high not only because of improved operational efficiency, but also due to arbitration claims that are coming in our favour. Since the costs were registered elsewhere in earlier years, it tends to give you a higher margin. The current order book is about ₹18,123 crore. And with the orders in which we are L1 or at the lowest, if they are added once received, the order book will climb to ₹22,000 crore, which is the highest in the last few years. During the year, about ₹5,764 crore of orders were received, which were the best in the last several years. So fundamentally, we are standing now at a position, which I cannot say is robust, but in my opinion, quite well considering the stress that we are in. We have received ₹646 crore worth of new awards in our favour. Awards that are in our favour of about ₹3,041 crore are yet to be paid by the client and which is the main reason for our distress, our high interest burden and the reason we’re not able to pay our banks. Therefore, we had to opt for corporate debt restructuring. In short, under the circumstances, given the atmosphere of still slow growth in terms of infrastructure except the transportation sector, not much is picking up in the country.

What are you attributing this shift to, where the top line is not as impressive but the margins is starting to improve quite significantly?

Because of the claims whose costs were booked earlier, we tend to get it increased in the rate of the margin. And that would continue as long as claims come. As long as we get more claims, which we hope we will, we get paid. Our problem is the payment. So we can pare off the debt and then we become profitable. As the turnover rises with more orders coming in or more tenders coming in, then the percentage of interest cost of the total revenue comes down considerably. So this is what we are aiming for —getting more claims back and increasing our turnover so that we can lower the interest rate, giving us more margins to repay the debt.

Can you share the details of the arbitration?

About ₹11,000 crore is in arbitration, of which ₹3,500-3,600 crore is awarded to us and of which ₹300-400 crore has been paid to us. The rest is still to be paid.

What is the debt at this point?

The standalone debt is about ₹4,900 crore. The consolidated debt of all the companies is approximately ₹11,000 crore.

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