Rites Aims To Retain Margins At Current Level Despite Competition

Rites' Q2 operating margin narrowed to 27.5% from 29.6% in the preceding quarter.

<div class="paragraphs"><p>(Source: Rites' Facebook page)</p></div>
(Source: Rites' Facebook page)

Rites Ltd. aims to maintain the current margin level, despite increasing competition in the consultancy business.

The railways' engineering consultant's second quarter operating margin fell to 27.5% from 29.6% in the preceding quarter.

The target is to keep the margin of about 25% intact, said Rahul Mithal, chairman and managing director at Rites.

Rites Q2 Highlights (Consolidated, QoQ)

  • Revenue rose 9% to Rs 659 crore.

  • Operating profit up 1% at Rs 181.2 crore.

  • Net profit fell 3% at Rs 140.2 crore.

Of the Rs 5,000 crore order book, Rs 2,400 crore is for consultancy projects, Rs 2,000 crore are for turnkey projects, and Rs 300 crore is through exports. The balance includes leasing and other areas.

While the value of each consultancy order isn't "very high" and turnkey orders are considered high-value orders in comparison, their margins are lower.

"We maintain this strategically that we are a consultancy firm and turnkey would be about 25% of our top line. So, the order of growth has to be strategically between a mix of turnkey and consultancy (projects)," he said.

Mithal expects REMCL Ltd., a subsidiary of Rites, to achieve double-digit growth aided by electrification in Indian railways and growing traffic.

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