Vascon Engineers Ltd. is realigning its strategy to enhance its position in the real estate and EPC sectors following the sale of GMP Technical Solutions Pvt. The company expects real estate revenue to exceed INR 150 crore this year and double in the following year, driven by increased demand in urban infrastructure. Chairman R. Vasudevan mentioned that while a demerger of the real estate division is a possibility, it will only be considered for strategic reasons. The company aims to boost EBITDA margins from under 10% to 15-16%, with the real estate sector potentially achieving 25% margins. Vascon's order book has surged to INR 150-200 crore, with additional orders anticipated.
Vascon Engineers Ltd. is set to strengthen its position in the real estate sector, focusing primarily on this business as well as its engineering, procurement, and construction (EPC) operations. This shift comes after the recent sale of its subsidiary, GMP Technical Solutions Pvt., during the June quarter, allowing the company to redirect resources and attention towards more promising areas. The management is confident that this strategic pivot will help the company sustain robust financial performance over the next two years.
Chairperson R. Vasudevan highlighted that the real estate sector has shown promising growth within the company. Last year, the contribution from this sector increased significantly, and forecasts suggest that real estate revenue could reach over INR 150 crore this year, doubling in the subsequent year. This growth aligns with the rising demand in the real estate market, particularly in urban areas where infrastructure development is crucial.
Vasudevan also addressed speculation regarding the potential demerger of the real estate business, emphasising that while it remains a possibility, it would only be considered based on strategic reasons rather than the size of the sector alone. He stated that once they establish a strong growth trajectory, they will look at all options concerning business structure. This indicates that the company prefers to consolidate its operations for the time being to enhance efficiency and performance.
In addition to focusing on real estate, Vascon is optimistic about improving its earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins. Currently below 10%, the company aims to boost its margins to between 15% and 16% over the coming years. The EPC division is expected to contribute significantly to this goal, with projected margins of around 14%, while the real estate sector could achieve margins as high as 25%.
Vascon Engineers has also seen a remarkable increase in its order book, which has expanded from INR 50 crore to an impressive INR 150-200 crore range. This growth is a result of heightened demand and strategic efforts to secure new contracts. The company's overall revenue outlook for FY25 appears stable, even after divesting from GMP Technical Solutions. With a substantial order book around INR 3,500 crore from the EPC segment, the management is optimistic about the future. In the current quarter alone, Vascon has acquired orders worth INR 400 crore and anticipates further orders totaling INR 1,500 crore by the end of the third quarter.
As Vascon Engineers shifts its focus, industry analysts indicate that the company's proactive approach may position it well to capitalise on growth opportunities. This strategic focus on real estate and EPC could prove beneficial in a recovering economy, where construction and infrastructure projects are gaining momentum. The real estate market, particularly, is expected to grow, creating a favourable environment for companies like Vascon to thrive.
Overall, Vascon Engineers Ltd. stands at a pivotal moment, ready to reshape its business model to focus on profitable sectors while ensuring financial stability through strategic planning and effective execution. The steps the company takes in the coming years will be crucial in determining its success in both the real estate and engineering sectors.
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