Interups Inc (ITUP)

[pennypauly]

MD’s STATEMENT
GAYATRI PROJECTS
Dear Shareholders,
FY20 has been an eventful year in many ways. The world is facing an unprecedented challenge in form of Covid -19, which has not spared any country globally and has put severe pressure on economies. This crisis is still unabated, and our thoughts are with all those who are impacted by it.
FY20 was also an eventful year for our company. During the year, we made significant progress towards our stated objective of de-leveraging and balance sheet improvement.In the 2nd half of FY20, we successfully concluded the sale of 5.95% stake in the power assets of Sembcorp Energy India Ltd for cash proceeds of INR 4.1 billion plus an upside option. A significant portion of the proceeds were used towards repayment of long-term debt and towards working capital management. This strategic divestment was a critical milestone during this year as it eased the burden off our balance sheet through long term debt repayment of close to INR 2.3 billion.
We could have progressed further on our debt reduction exercise but were unable to do so as lot of our initiatives were delayed due to the situation on account of Covid – 19. Post an elongated monsoon, executions at our key sites had just started picking when a nation-wide lockdown was imposed from 25th March onwards. The lockdown hit us at a time when execution at our sites is usually at a peak level and we could partly resume operations only from 20th April onwards. As a result, our FY20 financial performance was impacted. However, our revenues in FY20 were just 1% lower at INR 3,427.33 crores and we maintained an EBITDA margin of 12.4%. Our EBITDA to FCF generation remained high at 65%.
The operations resumed in a staggered mannerat project sites, however execution is still sub optimal a 50-60% levels because of shortage of raw material and contract labour. We are hoping that the situation would ease from Q2 onwards and execution should pick up Q3 and Q4 of FY21. Despite massive Covid-19 related issues and delays, we are confident that our FY21 revenues will remain at par with FY20 revenues. We will be able to maintain our EBITDA margins in the 14%-15% range and a significant portion of our long-term debt should be repaid.
We are swiftly working towards ensuring that we are completely long-term debt free in the next 12-18 months. This would be achieved through a combination of internal accruals and through monetisation of various arbitrational claims and awards. Gayatri has INR over 7.5 bn of awards pending in different arbitration tribunals/courts and over 6 bn of outstanding claims. These claims and awards are at various stages of closure and we expect over INR 4-6 bn in the next 12-18 months from their monetisation. The proceeds from these settlements will be used towards long term debt payment, bringing it down to negligible levels.
Over the last few years, we have built a large EPC order book. We are one of the few players in the Industry with a pure EPC order book of INR 126bn+. We are well diversified geographically and segment wise, thereby de-risking our business model. A high book to bill of 4x provides us with high revenue visibility for next 3-4 years. Our Asset light business strategy is delivering desired results which are in line with our expectation and hence our entire focus is on this model. During the year, we also refrained from aggressive bidding to ensure stability of our margins. We want to maintain our focus on executing our existing order book to ensure improved cash flows.
Even thoughthe last few quarters have been difficult for the company, operationally and fundamentally our business has been performing well. All our projects are now on track after adjusting for Covid-19 related delays and our teams are working relentlessly to ensure their timely completion. After a temporary cash flows mismatch in Q2 and delayed interest payments, we are now regular on debt servicing and currently there is no default. The company has availed the moratorium announced by RBI to ease the stress of industries due to the COVID-19 pandemic.
We are confident that given our strategic initiatives, our company will emerge much stronger and resilient over the next few years. Gayatri has a long history and has been operating for the last 4 decades. We have always endeavoured to build a resilient organisation and have tweaked our business model at various stages to ensure the same. Our transition from an asset heavy BOT focussed business model to an EPC focussed asset light business model was the toughest and it took us almost 6 years to successfully achieve the same. Our relentless focus now is to strengthen our organisation further by improving our balance sheet and we are taking all the steps in that direction.
Our Journey of last 4 decades wouldn’t have been possible without the support of our committed management team and I would like to take this opportunity to thank them for their hard work and dedication. They have supported the company in its toughest time and have ensured long term sustainability of our organisation. I would also like to express my sincere gratitude to all our stakeholders who have shown immense patience and have supported the company in its transformative years. With your support, we are confident that we will build a sustainable organisation which provides superior shareholder returns

Annual 2019/2020 https://www.gayatri.co.in/pdf/yrly/AR%20GPL-2019-20.pdf