Emissions rise from an oil refinery in Texas City, TX, United States. (Photographer: Luke Sharrett/Bloomberg)

Engineers India Bags Rs 5,000 Crore Project Of HPCL Rajasthan Refinery

State-owned Engineers India Ltd Saturday said it bagged a Rs 5,000 crore project execution order from HPCL Rajasthan Refinery Ltd. to build a greenfield refinery and petrochemical complex in Barmer, Rajasthan.

“The company will execute this project under two separate contracts, namely PMC services for execution of RRP and Execution of Residual Utilities and Offsite for RRP on Open Book Estimate basis,” the firm said in a regulatory filing on stock exchanges.

The engineering company will have to complete the project by October 31, 2022. Its order book now stands at over Rs 12,000 crore

Prime Minister Narendra Modi, earlier this year, laid the foundation stone for the 9-million tonne greenfield refinery at Pachpadra village in Barmer district of Rajasthan. The project is being developed by a joint venture between Hindustan Petroleum Corporation Limited. and the Government of Rajasthan. The total cost of this project is Rs 43,129 crore as per the Rajasthan government.

The order of PMC would be Rs 1,100 crore and the turnkey part would be Rs 4300 crore, according to brokerage Phillip Capital, which believes the company will get higher margins from the project.

Analyst Jonas Bhutta — who spoke with the management of Engineers India — said the consultancy part of the order will have margins of 30-35 percent and the turnkey portion would be 5-6 percent. Historical margins for the consultancy business have been in the range of 20-25 percent, as per the company filings.

Moreover, the order value of Rs 5,400 crore is materially higher than street estimates of Rs 3,200 crore, Bhutta said. "The stock has underperformed in the recent past and given increased earnings visibility, we expect the stock to re‐rate from the current 17 times price-to-earnings for FY20 to 21 times."