Prabhudas Lilladher: Ahluwalia Contracts - Higher Provisions Dent Margins
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Prabhudas Lilladher Report
Ahluwalia Contracts (ACIL) posted a strong quarterly performance with execution rising 4.1% YoY (vs PLe 23% decline) led by rise in labour availability. Labour availability stands 80% pre-covid levels (up from 60% in Sep’20). Margins were weak despite healthy execution and several cost control measures primarily due to provision of Rs50 million towards receivables and similar trend is expected to continue in Q3 and Q4.
Considering uncertainty regarding pandemic, management cited caution on execution. However, management indicated that working capital has improved as disbursements have started from state authorities primarily in West Bengal and Bihar and expects normalcy by Dec ’20.
ACIL is among few EPC companies which have turned around with significant improvement in profitability through sound business strategy, focus on asset light business model, prudent selection of orders (state and central agencies) and better working capital management.
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