Despite possessing an expertise in the construction of high margin irrigation and hydropower projects, Patel Engineering’s fell foul of market players, with the stock tumbling over 80 per cent in the past year. A sector-wide infrastructure de-rating was partly to blame. A marked exposure of about 18 per cent of the order book to Andhra Pradesh meant that projects were held up on continued unrest in the state. A sluggish order inflow in its primary segments also did not help matters.
Patel branched out from its core competencies, into power generation and real estate development. While real estate has begun revenue generation, its two power projects are in nascent stages yet and call for high capital investment and long gestation periods. Its consolidated debt to equity is already high at 1.6 times at end-March ’10. In the nine months ending December ’10, interest costs have almost doubled. It is also yet to secure final clearances for one power project. The near-term prospects for the company therefore appear shadowed. Bad weather conditions, with prolonged monsoons in domestic projects and heavy snowfall in overseas projects, hindered execution, put stopper on growth. Revenues were flat for the April-Dec ’10 period while net profits fell 24 per cent.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.