Bartronics India - An Update (5000 Cr Order)

Bartronics India has bagged an order worth Rs 5000 crore from Delhi government for setting up kiosks. These kiosks will act as data bank of local customers, service providers and business. In addition to this, Bartronics has also bagged the radio frequency identification (RFID) project. Sudhir Rao, MD and COO of Bartronics India, said, "In the last quarter, we won few high profile assignments specifically in the Delhi area. We are looking at the next five years to be a rapid growth area for us specifically in the Indian government sector."

The accompanying video.

Q: If you can take us through what kind of fresh orders you have bagged in the last quarter. Has there been any move in terms of e-governance initiatives which has brought more orders your way?

A: I think in the last quarter or so we have been at the forefront of some of the key government initiatives and to that extent we have won few high profile assignments specifically in the Delhi area. Now that elections are over, we have a fairly stable government at the centre where we are really looking at the next five years to be a rapid growth area for us specifically in the Indian government sector.

To come to some specific initiatives of the government, we are looking forward to the national identity card programme, which is already on a rollout on pilot basis. But now that the new government is in place we should see this project really kicking off during this current financial year.

A couple of other initiatives which the government has taken during the last five year period is the financial inclusion projects. Many of them got held up mainly because of the election process and now that the election is over and we have continuity of the government. I think we will see many of these projects really moving fast.

Q: Just need to discuss one particular project that you recently got “AapKe Dwar” with Rs 5000 crore over nine years. So, I am assuming about Rs 500 crore every year but you expect a capex of Rs 750 crore just for the first year. So, in that sense how much debt are you planning to raise and I am assuming that this project will not be making money for you for the next two-three years?

A: As far as the “Aapke Dwar” project is concerned, we are looking at investment of around Rs 750 crore but this is spread out over a period of 18 months. In fact, the first phase of 300 out of the 2000 kiosks which have been planned is expected to be rolled out by October 2009. While the last few kiosks is expected to roll out by October 2010, we are talking about an 18 month period beginning April 2009 to really look at usage of those funds.

As far as the capabilities of Bartronics is concerned, in terms of raising this capital, I think we are already there. As far as financial closure is concerned, we are only looking at how to structure the entire capital expenditure in such a way that it does not strain the balance sheet.

Coming back to the point of profitability, the internal calculation of the project show that in our first case scenario; we should be able to breakeven by the end of two and a half years. So, it is not really a major challenge for us in terms of fund raising, operations or profitability. We are expecting this project to take us to the next growth phase.

Q: If you can give us an idea of what kind of run rate you are looking at in terms of revenue growth over this and the next year considering the orders that you are expecting and you have had a negative other income from mark to market (MTM) losses, how will they shape up in FY10 and FY11 as also your interest cost?

A: As far as the revenue run up is concerned, we have given the guidance for FY10. We have retained that guidance at around Rs 1000 crore for topline and bottomline of 15-18%. As far as the mark-to-market (MTM) losses are concerned, I guess it is just a function of time—part of them are related to MTM losses on the outstanding,foreign currency convertible bonds, part of them are related to MTM losses on foreign exchange losses. But this is a trend that is going to continue and as the dollar-rupee variation happens, we need to take care of the MTM as per the accounting guidelines.

Coming back to profitability and the interest costs, I think interest costs are significant during to the last quarter or for the last financial year and they are going to slightly increase during the current year as we draw down for the Aapke Dwar facility. But I guess as the operations grow the profitability on the Aapke Dwar project, it is also fairly good for us to easily take care of the increased interest burden.