Ahluwalia Contracts (India) Limited (532811) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the Q1 FY '24 Earnings Conference Call of Ahluwalia Contracts (India) Limited hosted by AMBIT Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Amar Kedia from AMBIT Capital. Thank you and over to you, Mr. Kedia.

Thank you, Michelle, and good afternoon, everyone. Welcome to the Q1 FY '24 earnings call of Ahluwalia Contracts (India) Limited. From the management, today we have with us Mr. Shobhit Uppal, Deputy Managing Director; and Mr. Satbeer Singh, CFO of the company. I now hand over the conference to the management team for their opening remarks. Post which, we'll open up the floor for Q&A. Thank you and over to you, sir.

Thank you. So welcome, everybody. Ahluwalia Contracts (India) Limited has announced their financial results for Q1 FY '24. During Q1 FY '24, the company has achieved a turnover of INR 763.61 crores and a PAT of INR 49.73 crores in comparison to a turnover of INR 609.24 crores and a PAT of INR 37.78 crores in the corresponding quarter of the last financial year. The company has registered a growth of 25.34% and 31.63% in turnover and PAT respectively during Q1 FY '24 in comparison to Q1 FY '23. EPS of the company for Q1 FY '24 is INR 7.42 as compared to INR 5.64 in Q1 FY '23. During Q1 FY '24, the company's EBITDA margin was 10.83% as compared to 9.94% and a PAT margin of 6.51% as compared to 6.20% in the corresponding period of the last financial year. Net order book of the company is INR 11,779.64 crores to be executed in the next 24 to 30 months. Total order inflow during FY '24 till date stands at INR 4,377.41 crores. At present, we are L1 in 1 project amounting to INR 2,840 crores. Thank you. We are ready for the Q&A.

[Operator Instructions] We'll take the first question from the line of Shravan Shah from Dolat Capital.

Congratulations on good set of numbers and particularly on the order inflow. So just to clarify. You mentioned you are in L1 in INR 2,840 crores, this is which project?

This is the International Jewelry Park in Mumbai.

Okay. And where the [ LOA ] and work ought to start in next 2, 3 months.

Sorry to interrupt, Mr. Shah. There is a background disturbance in your line, sir. Can you go to a quieter place and talk, please?

Is it better now?

Yes, sir. Please continue.

Likely 2 to 3 months, yes.

So now including this, we are having INR 7,217 crore order inflow. So how much more now we are looking at?

How much more we are looking at? Maybe another INR 2,000 crores, INR 2,500 crores in this year. Look, the tendering activity is beginning to slow down a bit as the general elections come closer. So yes, another INR 2,000 crores.

Okay. So in terms of the revenue that we were looking at 20% plus for this year and for even couple of years 20% kind of. So are we now revising upwards to kind of 30%?

No, at the moment we are sticking to that. There are expected to be -- as I said in our last call the same point; as elections come closer, there is a degree of slowdown. So we are sticking to our original guidance on the revenue.

Okay. And then on the margin front, sir, 2 things wanted to understand. So on Q-o-Q basis though it is not a pure comparison, but still from last quarter we had a 12.8% margin which is now 10.8%. So we are looking at 11% kind of margin. So there is 1 aspect in that is the employee cost which has increased Q-o-Q significantly to INR 66 odd crores. So is there any managerial remuneration onetime that is part of it and also this INR 66 crores quarterly run rate is now the new run rate that one should factor?

So this is the new run rate that one should factor, one. Secondly, we have announced increments so that payout has happened, that is why this figure is higher. Thirdly, because of the large orders that have come in, we have also beefed up or increased our staff strength. That impact is seen in this. The execution on these projects will now happen over the subsequent quarters. So as a percentage, this figure will come down. But as an absolute number, this is the run rate or this is the quantum that we should be looking at now.

So at EBITDA margin level excluding other income, we should only look at 11%. So is there a -- once we are scaling up in terms of the execution, will this 11% EBITDA margin next year can one look at 11.5%, 12%?

Yes, we can. I had mentioned that last time, we can.

Okay. And couple of balance sheet item, Satbeer sir, inventory, trade receivables?

Actually I am handing over to Satbeer. He will take you and everybody through the balance sheet or the financial numbers. And if you still have any questions after that, he will answer that. Over to you, Satbeer.

Sir, inventory, trade receivables, trade payables, mobilization, retention money and unbilled revenue?

All I will tell you. Just inventory INR 322 crores and debtors INR 552 crores, retention INR 244 crores, mobilization INR 309 crore, unbilled revenue INR 379 crore, there is mobilization advance of 44% and gross debt is INR 7.42 crores. Here are the segment-wise order growth: commercial 8.69%, infrastructure 31.56%, institutional 24.69%, residential 13.61%, hospital 21.01%. And sector-wise: private 25.35%, rest is Government. And region-wise: east 25.29%, north 30.69%, west 37.72%, south 2.76% and overseas 3.54%. And besides that, working capital days is 95 days and [indiscernible] contract is 30%.

Okay. And trade payable is how much, sir?

Trade payable is INR 638 crores and tax provision INR 266 crores, bank provision INR 280 crores including non-finance.

Sorry, bank is to INR 280 crores.

Yes, yes.

[Operator Instructions] We take the next question from the line of Gunit Singh from CCIPL.

Most of my questions have been asked. Who are our main competitors in this space?

L&T, Shapoorji Pallonji, Nagarjuna Construction, Kalpataru.

[Operator Instructions] We'll take the next question from the line of Ashish Narendra Shah from JM Financial.

Sir, first of all, I may have missed the initial guidance you gave I think on the revenue growth, et cetera. I'm not sure, the line wasn't very clear. So if you could just please repeat that?

So I gave no fresh guidance. This was the carry forward from my last call, of which I think you were a part. I maintain the guidance, which was given last time around of 20% growth.

Okay. Also sir, if you can just update the status of maybe the Top 4 or 5 projects. Some of the projects for example especially on the station redevelopment now, what is the progress? When do we expect to start booking the first revenue out of that project? As well as some of the older projects that we had, for example the AIIMS project and the Bihar Animal Science University, et cetera?

So the AIIMS Jammu project is slated for completion towards the end of this year last quarter, November, December. So we are on track for that. As far as the Bihar Animal Science and Husbandry project is concerned, there construction is happening, it's picked up pace now. So we have about -- the total value is about INR 890 crores. We have executed about INR 75 crores, INR 80 crores there and I think we expect to log a run rate of about anywhere between INR 10 crores to INR 15 crores every month. In Bihar the NIT project since this was also a design-build project, the designing phase is almost over and we are now logging there a monthly run rate of about INR 15 crores to INR 20 crores there also. The 2 hospital projects, the Rahui or Nalanda dental project in the Chief Minister's constituency, that will be completed in the next 3 months and the Chapra hospital project will be completed in the next 5 months in December in this calendar year. As far as the station redevelopment projects are concerned, we have now started. The revenue earnings have started from this quarter, say, July quarter for the Chandigarh project. As far as the CSTM is concerned, the revenue booking will start in about 2 months from now. Any other specific project that you have in mind?

Yes, sir. Just had the Sion Hospital one in mind because that was kind of an elongated construction duration. So just wondering.

It is moving at its pace, the projected pace. We are logging a billing of about INR 4 crores to INR 5 crores there.

So INR 4 crores to INR 5 crores per month kind of a bill. Right? Just to further dwell on the CST station redevelopment. At what rate we expect we will commence the booking? I mean what kind of a buildup we should assume maybe this year, next year? If you could guide in terms of a monthly run rate, it will just help us to be a little more scientific in our estimation.

So I think it will pick up pace in the last quarter of this financial year that is January, February, March. By then, we should be hitting a run rate of about INR 30 crores to INR 40 crores a month. Prior to that since this involves intricate design work as also traffic management and other such issues; this quarter, as I said, billing is going to be weaker. Last quarter of the calendar year; that is October, November, December; we should be billing about INR 10 crores to INR 15 crores a month. Major billing will start happening in the last quarter and which will pick up in the next financial year.

Right. And would it be at peak in the next financial year and what would be that peak rate?

In the first half of the next financial year, we should be looking to bill at about anywhere close to INR 60 crores to INR 70 crores a month.

We'll take the next question from the line of Kishan Tosniwal from Polar Ventures LLP.

Congratulations on a good set of numbers. First of all, I have 2 to 3 questions. Basically you said that the unexecuted order book that you have is likely to get executed in the next 2 to 3 years, right, if I've heard it correctly?

Yes.

The second question is most of our projects basically from state government and central government or we are basically doing work with the government entities only?

No. So we straddle both the sectors, the public sector as well as the private sector. The breakup of the public sector and private sector is 75%, 25%. And we work with both central as well as state governments.

So 75% is towards government and 25% is towards private, right?

Private, yes.

Another question that I have. When you have such a healthy order book and you're expecting that we are going to grow by 20% year-on-year, should I assume that due to the election that is due in 2024, you are guiding on a very conservative basis or is it something else that I'm missing in the space?

No, no. Our guidance has always been conservative. If you attended our earlier call, that is how we've -- we are conservative in our guidance and we try and achieve what we target.

So what is the difference that you see? Just being an election year, what is the difference that you see from the other years or what is your expectation? Just being the election year, what could be the difference that you think?

There is a bit of a slowdown especially. But since our order book is healthy and a lot of these projects the state and the central governments are looking to showcase. So that is why we feel that the guidance that we've given we'll be able to match.

Okay. And what is the average EBITDA margin that we should assume in the business that you are? Does it have some cyclicality in this business? There's some quarter cyclical in nature as such?

Look, infrastructure like other industries is always cyclical, but we seem to be riding a wave upward trend. And we feel because of our order book and because of the general state of the economy of the country, we feel that the next 4 or 5 years the growth should be good and we should be able to meet our target. So that is where we are at.

And what is the EBITDA margin that we as an investor should look at?

EBITDA, we've given a guidance of 11%-plus. We should be able to match that.

[Operator Instructions] We'll take the next question from the line of Vasudev from Nuvama.

So if you can tell us what is the bid pipeline currently and are there any projects where we've already bidded and awaiting results?

The bid pipeline is about INR 2,500 crores. We have bid for a few projects. We bid for a couple of private hospitals. We have bid for a couple of data centers. We have bid for a couple of residential projects in the private sector.

Okay, sir. And next question is what is the CapEx that we've done in Q1 and our target for the entire year?

CapEx for Q1, this is INR 24 crores.

Okay. And sir, what are we looking for the full year?

The rate will remain the same for the subsequent quarters also because we are now looking at adding to our machinery bank and shuttering for the projects which we've been awarded in the last 3 months.

Okay. Got it. And sir, next what are your views on the competitive intensity right now?

The competitive intensity remains high, but we are -- as I mentioned earlier, there is a bit of a slowdown expected in the fresh tenders which are going to come out with this being the election year. Because we have a healthy order book, we are in a position to pick and choose.

Okay. And sir, lastly, if you can quantify that what is our total share of order book from the state governments and are we facing any issues in regards to payments from them?

This is central government approximately 45% and state government 32%.

Since there is -- as far as we are facing a bit of an issue in Bihar. But that as I mentioned in response to an earlier question, both our Bihar medical hospital projects, they are slated to -- since they come in the Chief Minister and Deputy Chief Minister's constituency, they are looking to complete them in this financial year. So we are expecting that our payments will also come through there. Otherwise for the Bihar animal husbandry project, university project; that the payments are now happening on time.

[Operator Instructions] We'll take the next question from the line of Jiten Rushi from Axis Capital.

Sir, I have a question on this Tata Memorial project. So it is in the order backlog, how about the execution? When do we start the execution?

The execution on Tata Memorial will begin in this quarter. We've actually broken ground there and we should be starting to generate substantial revenue in this quarter.

We can safely assume around how much?

It's difficult. What I'm saying is that we'll start generating revenue. But in the third quarter of the financial year, we should be logging a run rate of about INR 10 crores plus every month.

Sir, and the other projects order backlog as the Arbour Project Gurgaon, the DLF one and the Dharavi Wastewater project. So these are also like new project, but any execution we are expecting from Q3 or how are we placed now?

It's already Q2. Arbour, Q2 revenue generation in fact has started. Similarly from Puri, The Aravallis, so that also. In fact Puri, we have already billed for 2 months. Which was the other projects that you mentioned?

The Dharavi Wastewater Treatment.

Dharavi Wastewater Treatment, also Q2 revenue generation will start.

And sir, in terms of the execution, have you faced any issues because of the heavy monsoon this year? So we see that the execution can get impacted or got impacted in July and Q2 can be a tough quarter. Any view on that sir?

Actually if you see if you've done a peer comparison, Q1 has been slightly slow for all construction companies. Monsoon is 1 factor, yes, but majorly the factor has been a slew of festivals, especially festivals which have affected the Muslim community. There were 2 Eids, which were there in the first quarter and since today 60% of our workforce is from the Muslim community, that has slowed down progress across the construction sector. As far as the impact of monsoon in the second quarter is concerned, yes, in July we have been impacted virtually across the country so that will show. But Q2 I expect will definitely be better than Q1.

Got it. Sir, just last thing for Satbeer sir. Sir, the cash you said INR 266 crores and bank is INR 280 crores, right sir?

I said INR 266 crore cash position and INR 280 crores bank position.

Is the bank position. And sir, fund-based and nonfund-based limit and utilization?

This is just around -- limit is INR 1,940 crores including fund-based and non-fund-based and out of which, around INR 200 crores is unutilized.

Okay. I think fund-based will be hardly utilized, but your nonfund-based must have got utilized.

Yes, hardly -- is INR 7 crores just as I mentioned.

Got it. So basically INR 200 crores is unutilized from the nonfund-based.

Yes. And we are also looking for enhancement of the limit that will be around might be INR 2,100 crores, INR 2,200 crores. That is in process.

[Operator Instructions] We'll take the next question from the line of Ashish Narendra Shah from JM Financial.

Sir, I just wanted to come back to the gems and jewelry park L1 position that we have. So what is the kind of payment mechanism that we have? How sort of secure we are in terms of getting timely payments? What kind of BG's et cetera we need to give because this is a large project and tends to have different set of conditions? What's the time period of execution, et cetera? Any more details you can share, it would be really helpful, sir.

Ashish, since this is a project which is yet not been awarded and it's sort of a private project, I would be averse to sharing details about this project as things stand today. Once the project is awarded, it's not purely -- it's not a project though the government is involved in this project to the extent that they have allotted the land, but it's not purely an L1 project. So I would be averse to sharing details till such time that the project is awarded to us. I hope that's okay.

No. That's very fair. That's understood. Maybe we'll touch base on this next quarter.

Yes. Let it be awarded, we'll be open to answering all questions.

We'll take the next question is from the line of Deepika Bhandari from PhillipCapital.

Sir, as you had mentioned in this call earlier that station redevelopment project, the Chandigarh project, Tata Memorial Hospital and Dharavi project have not been contributing in revenue in quarter 1. Is my understanding, correct?

Yes, it is.

Apart from this, any other projects on which the designing work was going on and they were not contributing in our revenue?

I mentioned that NIT Patna.

NTI Patna. Altogether of these 5 projects, what would be the combined value if you can share?

The combined values. Okay. So INR 2,450 crores is the CSTM project, approximately INR 500 crores is the Chandigarh railway station project, INR 530 crores is the NIT Patna project. Any project that I missed out?

Just the Dharavi project, what's the value?

Tata Memorial INR 750 crores and Dharavi Memorial INR 550 crores. So that's [ 13, 18, 23 ], approximately INR 4,800 crores.

Okay, sir. Got it. Just 1 more last question, sir. You said that our CapEx would be as per our usual range, but this year our order book is very strong and in next coming quarters we'll be starting work on very big projects. So don't we see our CapEx to go up?

So part of that CapEx we've already started building capacity as far as all these projects -- some of these projects are concerned. And as the designing starts getting completed, we'll add to it. So the rate of the CapEx will remain as it was in this quarter, around that.

Sir, around INR 100 crores for the FY '24?

No. We've done I think about INR 25 crores. Yes, about INR 100 crore.

[Operator Instructions] We'll take the next question from the line of Shravan Shah from Dolat Capital.

Sir, anything on the land monetization of West Bengal? So we were previously looking at to jointly develop. So any update can need to happen this year?

No. I don't think, Shravan, anything will happen this year. While doing our base work, I think whatever steps we take will be in the next financial year.

But mostly we will be doing in JV, we will be developing?

I can't really say. I mentioned last time around that if we get a good price which we should, we are not averse to disposing it off also. But whatever we do, we'll let the general elections get over and after that we'll take a step on that. But we are in no hurry to sell it also.

Okay. Got it. And just though you have mentioned that you will share details in next call on gems and jewelry. But broadly in terms of the timeline this will be a 3-year execution period?

It's a 3-year project, yes.

Okay. And then is there a renegotiation or any scope on that front and that's what we are slightly hesitant to share in terms of to start the project? Is there any scope in terms of renegotiation or something like that?

Look, this is on the lines of the Surat Diamond Bourse or the diamond Bourse in Bombay where a group of jewelers have come together and they are pooling in the money for the construction. So that's why I said it's not strictly L1, but there has been a stringent. There is a QCBS criteria also. They've evaluated each bidder's technical bid as well as financial bid. And so chances are that we will get this job, but I don't want to say too much till such time that we are announced as the successful bidder.

[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the management for closing comments. Over to you.

Thank you, everybody. So we look forward to talking with you again post the second quarter Q2. Thank you once again.

Thank you, members of the management. Ladies and gentlemen, on behalf of AMBIT Capital, that concludes this conference. We thank you for joining us and you may now disconnect your lines. Thank you.