Patel Engineering - Huge Land Bank

Expect 25% Growth In Topline:- Patel Engg

Patel Engineering did an FPO in the first quarter of this financial year. Rupen Patel, MD of the company speaks about its business fundamentals. According to Rupen Patel, the current land bank stands at 500 acres and the order book is at Rs 5000 crore. Patel expects 25% growth in the topline. He also expects margins to improve, going forward.

Excerpts of CNBC-TV18's exclusive interview with Rupen Patel:

Q: You have got quite a land bank that you are sitting on at this point and plan to develop it as well. Could you tell us a little bit about that?

A: Right now, the land bank exists in various metros, primarily Bombay, Hyderabad, Bangalore and Chennai. We are planning to now encash or monetize the value of this land bank. The board is looking at various options as to how to monetize it.

Q: How much of it would you sell and how much of it would you seek to develop? Could you give us some of the details of the development plans and break it up into what kind of sq ft, it may actually generate for you saleable?

A: It will be a little premature for me to give you the size of how much we will sell and how much we will develop. The board is looking at various options; not of selling as such, but on debt of developing the entire land bank. It is under consideration right now and we should come up with the details very shortly.

Q: Can you give us a rough idea of what the current market value of the land bank would be?

A: The size of the land bank will probably be an excess of 500 acres held in the balancesheet at historical values. The market value of the land bank, about five years ago, was about Rs 250 crore.

Q: So where would you valuate that at today’s market price then?

A: It would be difficult to evaluate at today’s market price because we have not evaluated today’s market price because it is in a different stage. But I am sure that it is substantially high.

Q: Have you worked out any rough idea of this 500 acre, how much do you want to develop and what sort of development plans do you have?

A: The development plans would primarily be into commercial and residential spaces in some areas and in some areas, it will be in joint venture with other estate developers. But we have not worked out our exact figure. It is probably premature for me to give out the figure before the board finally discuss it and let it out.

Q: Whatever the board decides, by when do you see work progressing on this?

A: In about a month’s time, in which I think we should come out with the concrete numbers.

Q: For any of these development plans, will they all be routed through the listed entity of Patel Engineering or will you float a new subsidiary? What is the game plan as you see it?

A: Right now, the game plan is that the lands have been held up by Patel Engineering. So everything will be done in Patel Engineering itself. In the separate subsidiaries, right now, we do not intend to float a separate subsidy for this.

Q: As regards to your core business, how is the orderbook shaping up there and how much of it do you see executing by the end of FY08 fiscal?

A: The orderbook right now is close to about Rs 5000 crore, of which 50% is in the hydro sector, 35% in the irrigation sector and 15% would translate into miscellaneous and the transportation sector. In terms of the execution period, on an average, it is about four-five years.

So what you will see based on this orderbook, minimum growth of 25% in topline as guarantee. Even the company does not take any more work, which is highly unlikely. So you will atleast see YoY of about minimum 25%.

-Moneycontrol