Vascon Engineers, the leading real estate developer from Pune has reported its numbers for the third quarter ended December 2010. Net sales rose 45% from Rs. 214.73 Crore compared to Rs.148.1 Crore in the same period last year. Net profit, however, was down 60% to Rs 5.5 Crore compared to Rs 13.74 Crore a year ago.
In an interview with CNBC-TV18, R Vasudevan, MD, Vascon Engineers gave his perspective on the quarter gone by and the road ahead.
Below is a verbatim transcript. Click to watch the Video of this Interview.
Q: If you can take us through what happened in the last quarter and why margins came under pressure?
A: Last quarter's margin if you are comparing between 13.76% and 5.39%, the effect of that 13.76% was due to other income which we had recognized during that period in the last year which was amounting to about Rs 10.5 crore. So in effect if you subtract that there has been a jump.
This other income happens because of our real estate business bringing in revenues from quarter to quarter. We usually recognize at the time of final handing over or at the time of conveyance a 100% completion method, not a progressive method in real estate. Whereas in the EPC business of ours we follow the A7 principle. So that’s why on quarter on quarter there will be some aberrations.
Q: Can you take us through your EPC or your construction business? What is the kind of orders you have in hand, how many months will it see you through and what will you make in terms of net margin on those projects?
A: Our orderbook position is about Rs 4100 crore. Out of which uncompleted project order value if you calculate is about Rs 2700 crore. If you calculate approximately, if we do about Rs 1000 crore this year and all these projects are about year and two year projects, so we are booked till the next year, year and a half I would say. We are comfortable in terms of orderbook already in hand.
Q: You said you may implement about Rs 1000 crore of projects this year?
Q: What will that add to either your bottomline or your revenues?
A: Our bottomline has been varying between 6.5% to 8.5%, PAT, I am talking of those figures. I am sure we will be able to give those same figures this year as well.
Q: What about real estate? How much will that bring by way of revenues or profits?
A: It’s a consolidated balance sheet. We are not giving segment-wise at this point of time. So both put together is the figures which I am talking about.
Q: Basically if you can tell us the share of each of these segments? How much does your EPC contribute and how much does real estate contribute?
A: 80% of our contribution will come from EPC which is the construction business and only about 15-20% will real estate bring in, because real estate we recognize revenue as I was telling you on the completion method. Although we have launched projects and sold about Rs 450 crore worth of sale value this year, the recognition will only happen at the end of next year or beginning of 2013.
Q: In that case if you can tell us how much of income recognition or revenue recognition you expect in FY12?
A: In FY12 based on our 35% growth which we have been consistent we should go to about Rs 1400 crore.
Q: Do you expect any fall in realizations in the flats and the malls that you sell?
A: Traditionally we are on a joint venture model. Whatever landbanks which we have had, have all been old landbanks. We have not purchased any landbank in the recent past. So they are all traditional costs. So our margins are not really going to get affected by this although construction cost is slightly going up. But since the land cost which is a substantial portion, we expect that original cost. We are seeing better numbers in the years rather than this year.