In conversation with Rajneesh Chopra, Global Head-Business Development, VA Tech Wabag Ltd

We are confident of achieving profitable growth in FY23, going forward, asserts Rajneesh Chopra, Global Head-Business Development, VA Tech Wabag Ltd

What is your outlook on the global & domestic water treatment industry? What are the emerging macro trends that you are witnessing?   

Water has become a prime focus area for governments as well as industries, owing to the climate change that’s being witnessed globally. This has led to the creation of 17 sustainable development goals (SDGs) by United Nations with 193 counties signatory to it. SDG 6 focusses on ‘Clean Water and Sanitation for all by 2030’, which has become the prime driver for governments as well as the urban local bodies for allowing higher allocation to the sector and ensure faster implementation. In addition, I would like to bring to your attention that SDG 6 is directly or indirectly related to all 17 SDGs. The major ones are depicted below. The image depcist the association of SDG – 6 with other UNSDGs. 

While SDGs are driving sustainable & resilient growth of water and wastewater infra, the industries have also realised the scarcity as well as the importance of water and are implementing ESG for sustainability. This has led to significant traction in: 

• Water treatment projects in developing and underdeveloped countries are projected to grow at a CAGR of 5.4 per cent over the next decade. 
• The enhanced water supply is leading to a higher generation of wastewater and its treatment as per environmental norms plus the existing gap of wastewater generated has to be bridged. 
• Scarcity of water is driving the recycling & reuse of water in agriculture, horticulture, industries, and recharging of aquifers.  
• In the coastal regions, desalination emerges as an affordable, reliable & sustainable alternative source of water for both municipal (potable water supply) and industrial segments (captive desalination). 

VA Tech Wabag’s consolidated EBITDA and PAT for FY22 demonstrated strong YoY growth of 13.5 per cent & 20 per cent, respectively. What factors are responsible for your outperformance?   

Definitely, FY22 was a year of growth for us in spite of all challenges. After being affected by the global pandemic for the past few years, our projects witnessed an execution in full swing, which contributed positively to our top line. Nevertheless, it could have been better if our Russian order was not on hold.   

Our focus was more on the execution of our EP projects, which is our core strength i.e. design engineering and process optimisation. These projects contributed to our revenue by ensuring better margins and good cash flow with a faster turnaround time. The factors contributing to better margin are the project mix of Indian & overseas projects as well as the EP & EPC project mix. We are confident of achieving profitable growth in FY23, going forward.  

VA Tech Wabag has witnessed robust order inflows over the last few months. Can you share an overview of the overall order book and execution?    

Having orders worth over Rs 10,107 crore, our current order book is very healthy with the right mix of projects and 3X visibility. Most of our recent orders are international and high-technology EP orders. A few of our recent orders include:  

• New EP order from Daelim Korea worth EUR 18 million (Rs 149 crore) for Brine Water Treatment from EuroChem Methanol Facility in Russia.
• The DBO order from SONES, Senegal for a 50 MLD (expandable to 100 MLD) SWRO Plant, which again is a high-technology order worth EUR 146 million funded by JICA. 
• 40 MLD TTRO plant from Ghaziabad Nagar Nigam under hybrid annuity model. 

On the execution part, we have a successful track record of executing challenging projects in various geographies. Backed by 98 years of execution experience, our major focus would be completing the projects on time to sustain our profitable growth.  

Also with a share of 35 per cent in our order book, our operation & maintenance business will have a significant contribution to our revenue growth with a long-term annuity, better margins, and predictability.  

Can you highlight your key growth triggers?   

• With a rising demand in the coastal regions, the desalination industry is projected to grow at a CAGR of 8.8 per cent over the next five years globally. 
• Recycle & reuse are going to be another growth driver, which is projected to grow at a CAGR of 8.7 per cent over the next five years globally. 
• Investment in the hybrid annuity model (HAM) project is expanding beyond the NamamiGange projects with an innovative approach towards private investment in the water sector with a 15-year long-term O&M attached. 
• Massive outlay by government initiatives under AMRUT – 2.0 (Rs 2.7 lakh crore) and JalJeevan Mission (Rs 2.8 lakh crore) for a period of five years. 
• Focus on the Middle East (KSA, GCC) and African nations, which are expected to drive the growth in desalination, wastewater treatment, and recycling.  
• Also, we see more opportunities in the greenfield as well as brownfield projects in industrial segments from Russia & CIS nations. 

Currently, what are your top three strategic objectives?   

• At the time being, we are actively looking to secure more EP & high-technology orders in new and overseas geographies where Wabag, as a pure-play water technology company, can leverage its core strengths. 
• As evident from our recent orders, we are working towards securing more international orders with a view to expanding Wabag’s geographical presence thereby, ensuring growth. 
• We are also planning to increase the contribution of our service business up to 20 per cent of our topline to enhance the margins.  

What is your earnings outlook for FY23?   

Going forward, we foresee a strong outlook in terms of new orders as well as growth for FY23. We are already actively working on several target orders both domestically and internationally. We are confident that our order book at the end of FY23 will strengthen further. We are looking forward to profitable growth, where our margins in the bottomline will grow much better than the topline.