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Hindustan Dorr Oliver: Synergy improves scope of work
Hindustan Dorr Oliver, a subsidiary of IVRCL Infrastructure (55% stake), is engaged in the business of
providing EPC, manufacturing and engineering services, to various industry segments like mineral processing
and beneficiation, pulp and paper processing, fertiliser and environmental management. In order to increase its
product portfolio and to gain international presence, HDO, in 4QFY10, acquired Davy Markham, the Sheffield,
UK-based heavy engineering company which designs, manufactures and assembles large equipment used for
mining, nuclear, power generation, oil and gas exploration and tunnel boring. IVRCL Infrastructure was able to
get synergies post acquisition of HDO due to its expertise in designing and installing equipment, which helped
the company to improve margins and to bid for higher qualification engineering work.
HDO stock corrected by 80% on bleak order book
The company’s order book in 1QFY12 stood at Rs16bn (1.7x FY11 revenue.), dominated by the mineral
division (50%) followed by water and manufacturing divisions. The company witnessed a fall in revenue in
1QFY12 by 41% and profit also took a hit, declining by 64%, due to delay in billing as it did not get the design
and engineering clearances for projects of clients like GAIL (India) and Bharat Petroleum Corporation. During
the quarter, a positive factor was that the company won a project worth Rs3.8bn from Konkola Copper Mines
in Zambia and also bid for few other clients like Hutti Gold Mines and Uranium Corporation.
Going forward, we believe the pace of order inflow and increase in execution of lumpy orders would be the
main triggers, as in the last three-four quarters we have not seen any major pick-up in revenue and order book
despite repeated assurances given by the management.
Exhibit 14: Financial summary
Y/E March (Rsmn) FY08 FY09 FY10 FY11
Net sales 3,042 5,153 8,631 9,445
EBITDA 331 511 1,009 904
EBITDA margin (%) 10.9 9.9 11.7 9.6
PAT 226 302 555 538
Source: Company, Nirmal Bang Institutional Equities Research
Company background
IVRCL Infrastructures & Projects is one of the leading civil construction companies in India having a strong
presence in water, transportation and building projects business, industrial structures and also power
transmission projects. The company has created a niche for itself in project execution skills across the
segment and has a presence in most of the states in India. It has a well-diversified and de-risked business mix,
with a presence across various sectors and regions. The company has shown a 39% CAGR in terms of
revenue and 30% in terms of earnings over the past five years.
Source: Company, Nirmal Bang Institutional Equities Research
85 IVRCL