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    Indian Hume Pipe's to benefit from government's focus on water situation

    Synopsis

    “Indian Hume pipe has a long and established track record in the water and irrigation infrastructure development sector."

    ET Bureau
    Indian Hume Pipe, which is present in almost all water supply-related activities and does turnkey jobs in water supply and sewage segments, could benefit the most from Modi government’s focus on water situation in the country. In the current fiscal till date, the company has already received an order of Rs 2,500 crore, which it will be executing over the next two years. Its turnover in FY14 was only Rs 814 crore. At present it has an order book of Rs 2,700 crore, which will result into sales over the next couple of years. The company is expecting more such orders in the coming months.

    “Unlike other infra companies which have diversified into several other businesses, we are committed only to water infrastructure, the benefits of which we have started to see now,” says MS Rajadhyaksha, CFO of the 90-year-old company.

    Indian Hume Pipes was primarily involved in manufacturing water pipes till the early 2000s and gradually took up contract projects. As a result, from FY02 to FY14, the company’s revenues have grown almost eight fold. Even during the slowdown over the past two years, its turnover grew by 27 per cent CAGR and its profits have more than doubled to Rs 24 crore. In comparison,, the turnover of its peers such as IVRCL, Pratibha Industries and NCC have remained flattish in the past two years.

    While the promoter holding in Indian Hume Pipe is 70 per cent, that of peers is in the range of 13-47 per cent. It also has the best credit rating of A+. “Indian Hume pipe has a long and established track record in the water and irrigation infrastructure development sector. It has a favourable capital structure and healthy order book position,” says Sneha Lohia of CARE Ratings.

    Although the company has better financials and a strong growth outlook, it has underperformed its peers over the past one year, which could change in the coming few months.

    With higher ratings and financials over peers and strong potential, the company has become a preferred contractor for several state governments. A few years ago, Andhra Pradesh accounted for 60-65 per cent of the company’s business, which has dipped to 30 per cent as the company has received orders from the Rajasthan, Maharasthra, Haryana, Tamil Nadu, Uttar Pradesh and Delhi governments.

    “This advantage has given us a choice to pick projects only with higher margins and where the cash flow visibility is higher,” said Rajadhyaksha. Although he did not give any guidance, he mentioned that the industry should log a 12-15 per cent growth in operating margins, going forward, following an improved outlook and a stable government at the Centre. At the same time, faster execution can improve return on investments for the company. Indian Hume Pipe has also got land parcels across the country, which do not show on its balance sheet as most of it was acquired before independence. “The gross block value of this land is in lakhs, but the current market value should be at least Rs 1,000 crore,” said Rajadyakhsa.

    The company has several acres of land in major cities which it plans to sell either through joint development or by outright sale over the next two to five years. For instance, it is doing a joint development for its Pune property, and for the Delhi property, it has already hired JLL, a leading real estate client to develop the land.



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    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

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