High Ground Enterprise will commence commercial mining operations in Haryana in two weeks time, after it got the necessary environment clearance, says Sandeep Arora, Chairman and Managing Director of High Ground Enterprise.
Arora expects around 25-30 percent EBITDA margins from the new project. He says the company’s overall margins may also rise to 15-18 percent in FY17 as compared to 6.8 percent in FY16.
He hopes for Rs 90-100 crore in revenues from the mining project in FY17.
Below is the verbatim transcript of Sandeep Arora’s interview with Reema Tendulkar and Mangalam Maloo on CNBC-TV18.
Mangalam: First up could you confirm that if you are starting commercial mining in Haryana in the next two weeks and what kind of revenue, can this add to the company’s numbers.
A: This would be adding up nearly Rs 90-100 crore of revenue this being the first mine which is getting into production since the ban was abolished and through e-bid we acquired this mine.
Mangalam: So Rs 95-100 crore in this year?
A: Rs 90-100 crore in next two years the average of per year Rs 90-100 crore, so overall Rs 180-200 crore in next two years.
Reema: And what will this do to your operating leverage FY16 standalone margins were at 6.8 percent with incremental revenues of Rs 90-100 crore, what should your FY17 margins look like?
A: This mining being substantially quite higher margins which is 25-30 percent, talking conservatively so overall it will balance out and give us overall margins of 15-18 percent.
Reema: What will be the cost in restarting this mining project and how will you fund it?
A: This is basically the lease which is 10 years lease which we have signed and the yearly lease cost is around Rs 11 crore per year and the mining cost is contractual, so per tonne it comes to Rs 100 per tonne is the mining cost which comes overall and 1.5 million tonnes per year which we have targeted to achieve.
Mangalam: At the same could you also tell us that you recently won some orders coming in from HP as well as BP at the same time you have some association with IOC as well. What’s the kind of revenue that brings to the company?
A: See IOCL we have already working from last four years and HPCL is something which we have done this year and we are looking at the consultancy work, which is coming which is the audit and third party certification we will be covering 46,000 pumps with HPCL in next two years time, so overall in this consultancy it will be raising it, overall consultancy will be around Rs 70-80 crore we will be looking at this year FY17.
Mangalam: Does all of that go into bottom line considering its consultancy fee?
A: No, overall if you look at it there is a lot of manpower cost come into it and if you take it comes to 18-20 percent is what you end up generally. There is a lot of management and manpower cost which comes into it. It is not a pure consultancy fee.