Pratibha Industries, a flagship firm of Pratibha Group, is searching for buyers for its SAW pipe manufacturing business as it plans to reduce costs and improve net profit margin. The company had witnessed a reduction in net profit margin to 5.02% in the first half of this fiscal against 5.1% a year ago.
One of the main reasons for the fall in net profit margin is increasing costs. The total expenditure increased close to 20% from R515.30 crore in April-September 2010 to R614.65 crore in the corresponding period of 2011. Pratibha Industries has identified SAW pipe manufacturing business as a key driver of expenditure.
?We are in a competitive business of construction and water management. SAW pipe manufacturing takes away the competitive edge. We will save 5-7% in cost if we source saw pipes instead of manufacturing them. However, this is not a distress sale,? Pratibha Industries group director and head marketing Yogen Lal told FE.
Lal said the company is talking to some entities but refused to name them saying ?we are not at liberty to name them at the moment?.
Pratibha Industries has valued its SAW pipe business at more than R110 crore. ?The SAW pipe manufacturing plant has machines and equipment worth R50-60 crore and is working on orders worth the equivalent number. So, we are looking at a little over R110 crore,? Lal said.
The company has received orders worth R3,350 crore so far in 2011-12, taking the order book to R6,568 crore. The company is also planning to expand overseas portfolio in its order book. At present, 5% of total orders constitute of contracts received from Dubai and Bangladesh. ?We are looking for opportunities in more regions of West Asia and Sri Lanka,? Lal said. Its scrip closed at R39.95 on Tuesday, 0.63% up from Monday?s level.
During the first half of this fiscal, Pratibha Industries earned net profit of R34.98 crore, a 17% increase against R29.86 crore in the same period last financial year. It expects to end the year with an increase of close to 20% in net profit y-o-y. Net profit margin will be between 5% and 6%.
It is also working towards bagging road projects on build, operate and transfer basis, but will bid cautiously.
