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

Ladies and gentlemen, good day, and welcome to Ahluwalia Contracts (India) Limited Q4 and FY '24 Earnings Conference Call, hosted by AMBIT Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Viraj Sanghvi from AMBIT Capital. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone. Welcome to the Q4 and FY '24 Earnings Conference 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 will now hand over the conference to the management team for their opening remarks, after which, we shall open the floor for Q&A. Thank you, and over to you, sir.

Ahluwalia Contracts (India) Limited, an EPC company, has announced financial results for Q4 FY '24. During Q4 FY '24, the company has achieved a turnover of INR 11,63.66 crores and a PAT of INR 199.85 crores in comparison to a turnover of INR 863.05 crores and a PAT of INR 72.21 crores during Q4 FY '23. The company has registered a growth of 34.83% and 176.76% in turnover impact, respectively, during Q4 FY '24 as in comparison to Q4 FY '23. EPS of the company for Q4 FY '24 is INR 29.83 as compared to INR 10.78 in Q4 FY '23. During Q4 FY '24, the company's EBITDA margin is 8.96%, as compared to 12.77% and a PAT margin of 17.17% as compared to 8.37% in the corresponding period. During FY '24, the company has achieved a turnover of INR 3,855.29 crores and a PAT of INR 375.55 crores in comparison to a turnover of INR 2,838.39 crores and a PAT of INR 194.16 crores during FY '23. EPS of the company for 9 months FY '24 is INR 56.06, as compared to INR 28.98 during FY '24. During FY '24, the company's EBITDA margin is 10.48% as compared to 10.72% and a PAT margin of 9.74% as compared to 6.84% in the corresponding period. Net order book of the company is INR 11,179.93 crores to be executed in the next 2 to 2.5 years. Total order inflow during FY '24 till date stands at INR 65,36.81 crores. At present, we are L1 in 4 projects amounting to INR 3,914.28 crores. Sorry, there was an error in one of my earlier statements. EPS of the company for FY '24 is 56.06, as compared to INR 28.98 during the last year. Yes, that's all. So we are ready to take questions now, thank you.

[Operator Instructions] The first question is from the line of Shravan Shah from Dolat Capital.

Sir, first is on the margin front. So this quarter, we have seen a 9% EBITDA margin. In the last con-call, we were confident that we can do for more than what we reported in the third quarter, that is 10.9%. So any specific reason? And now how do we see the margin for FY '25 and possible for FY '26?

Look, the last quarter, there has been -- there was this -- in the last month of the year the slow down had started on account of the impending elections. So that has impacted. Plus in March, there was -- March and then subsequently in April and May, there was a huge scarcity of labor. So that has impacted our productivity. So that has led to reduced margins while our turnover has grown, but it could have been more if the labor scarcity was not there. Going forward, what we had projected. What I said in the last call that FY '25, the margins will grow up because our order book is healthy. And with the new government also coming in now, I think the pace of projects, even execution will pick up. And traditionally come May, the labor also starts coming back. At the moment, we are operating at about 60% to 70% on our project side over the last 3 months or so. So all these things when we take into account these have impacted our margins. So going forward, whatever guidance I'd given for FY '25 last time, we are confident it will be a double digit, more than 10%. Yes. Did you hear my -- whatever I said.

Yes, sir. Yes, sir. Definitely, sir. Sir, I was saying last time, we have spoke about more than 11% EBITDA margin for '25, '26, but now we are saying more than 10%?

We are confident. As I said, it all depends on how quickly -- we are hearing various things about what's going to happen. So your guess is as good as mine as far as the new government is concerned. So on 4th of June, I think things will be clear how quickly the new government takes charge and how quickly the pace of work gets back to what it was 3 to 4 months ago. That is why I'm being a little conservative, but we are -- I think we are better placed because a lot of our contracts are central government contracts. I don't think 80% or 75% of the contracts are free from escalation worries. They are not fixed price contracts. So while I'm also qualifying that we will stick to the guidance that I had given than just being a little conservative.

Okay. And on the order inflow and revenue growth for FY '25 '26, how now we are looking at?

15% to 20%. And these orders, we are L1 in approximately INR 4,000 crores worth of projects. These are 4 projects. So I think this will also happen in June or July. We were only held up because of election [indiscernible]. So this should also happen. And going forward, we feel the order pipeline is also healthy.

So additionally apart from this INR 3,949 crores, L1 4 projects, how much more are we looking at to bag in FY '25?

Another INR 2,500 crores to INR 3,000 crores.

Okay. And so considering the bid pipeline now stands at what?

It's at about INR 4,000 crores.

Okay. It is just a INR 4,000-odd crore bid pipeline, but -- and also when we are saying 15% to 20% revenue growth, does that mean that in FY '26, then we can have even more than 20% kind of growth?

I did say 15% to 20%. So FY '26, let's see.

Okay. And a couple of, sir, just the balance sheet data points, mobilization advance, retention money, unbilled revenue?

Shravan, [ mobilization advance ] is INR 528 crores. Retention money, INR 322 crores. Unbilled revenue, INR 395 crores.

And working capital day, sir, has increased, particularly debtor has increased and payable has decreased. So closer to 38 days core working capital days. From the last quarter, it was around 25 days. So how do we see -- will it come back or will it sustain at these levels?

Actually, working capital days has increased due to debtors. We have to receive the funds from the EMAAR MGF. That is a major money of around INR 125 crores. That's why working capital days has increased. Otherwise, you will see inventory days has been reduced and also WIP days has been reduced. So all has been reduced.

Okay. And then the CapEx guidance will remain the same, INR 100 crores, INR 120-odd crores for FY '25?

This year, we had basically, INR 110 crores.

For FY '25, INR 110 crores, you are saying?

Correct, approximately.

Okay. And sir, Gems and Jewelery, anything in terms of the scope reduction, has it got finalized?

As I said, this will get finalized in June or July. It will end up on account of -- since the land is allotted by the government, there were certain formalities, which were not completed on account of the election time. So it should happen now.

The next question is from the line of [ Samrat Sarkar ], an individual investor.

Sir, I just want to know the reason behind the high subcontracting charges. I guess it's about 2% higher than the last quarter?

Basically, this is a subcontracting, which just includes manpower supply subcontracting and labor work subcontracting and is not specific to work back to back with material subcontracting. That's why basically I feel that is very high.

Okay. And going forward, this will come down in line with our earlier guidance?

So if you see -- yes, yes, it's one -- this along with the next listing, employee benefit costs, these have to be read in conjunction, right. It would be about a percentage point higher. And this also did get impacted due to an extended NGT period in January, February this year.

Okay. Okay. Okay. And sir, I want to know also about the breakup of the government and the private orders in your entire order book. What is the ratio of government orders as well as private?

This is private, 34.85%, rest are government.

The next question is from the line of Mohit Kumar from ICICI Securities Limited.

Sir, my first question is on the -- can you please help us with the status of the Chhatrapati Shivaji Maharaj Terminus redevelopment project at Mumbai? And what is the kind of execution you can expect in FY '25 and FY '26 from this particular project?

So this project now is starting off now. There were certain issues with growing accruals because there has been -- there have been some changes from the initial tender drawing provided to us, necessitated by the client requirements and local authorities. So all that is behind us now. So we have broken ground, and construction has begun. So going forward, we are looking at -- in the rest of the year, we are looking at doing a turnover about INR 800 crores in this financial year, which is FY '25. And in FY '26, it will be to the tune of about INR 1,200 crores.

So are there any other slow-moving orders in the order book right now?

There are a couple of slow-moving orders in Bihar, which we expect, which are near in completion, actually, the last 30% in [ 2 ] medical colleges is left, which we feel that post-election, the pace will pick up. They are held up on account of funding issues.

And is it possible to share the L1 position? I'm talking about the details of the L1 order position.

Yes, we are L1 in INR 3,914.28 crores, 4 projects.

Is it in the -- from the government side or private side, if you can just...

These are all -- 3 are government sites, and Gems and Jewelery Park that can be classified as a private contract.

Understood, sir. Understood. And my last question, sir, as the order plus for FY '25, where do you see the new government -- post the new government formation, do you think that there will be more opportunity? If you can throw some color on that.

I think it is -- it's all a matter of conjecture, but general consensus seems to be there that the NDA will come back to power and the infrastructure growth will continue. Having said that, we are relatively secure because we have a healthy order book and with these INR 4,000 crores worth of projects coming in, which we expect to come between June and July. We would have achieved 70% of inflow what we achieved in FY '24, which was, as it is very healthy. So as far as the order book is concerned, we are relatively secure.

The next question is from the line of Vaibhav Shah from JM Financials.

Sir, apart from Bihar, in any other states you are facing some payment issues.

No. Bengal, all our projects are over, except for one, which also will be completed in the next 2 months. So other than that, we don't have any major issues.

So we have slowed down the execution for Bihar and Bengal projects given the payment issues?

As I mentioned earlier, 2 projects in Bihar -- actually, it's a problem with one particular department. We are majorly executing projects for 2 departments there. One is they are building a construction division, where this veterinary hospital is going on, that's going on fine. And there's a residential housing project for senior officers, which is also nearing completion. It's the hospitals that we are doing for the Bihar Medical Services Cooperation, where the projects are stalled virtually on account of funds. And these are 2 projects where 70%, 75% work is already done. So we are hoping that once the political combine comes to power, NDA comes to power, I think funds will start flowing in. But at the moment, the project has stalled.

Okay. Okay. And sir, what about the Mumbai Sewage Disposal Project? And the -- how do you see the execution because in Q4, we have seen a strong execution. So we expect the momentum to continue?

Yes, it will.

Few odd-crores per quarter?

It will. The first quarter, again, of FY '25 because of elections, as I mentioned earlier. May -- the results may be a little sluggish, but -- and then this is the monsoon season also. But FY '25 overall should be good.

Okay. And sir, what about Bihar Animal Science University project?

That's going on.

So what is our targeted revenue for '25, '26, ballpark?

So out of the total value of that job is about INR 890 crores. And we have executed -- till day, we have executed about 100 -- unexecuted is INR 680 crores.

INR 680 crores.

Around INR 1,680 crores.

Around INR 680 crores is unexecuted. So there was -- as I had mentioned in my last call that for building -- old buildings were being demolished there to make view for -- to make space for the new one. So all those are handed over to us, barring one. So the pace now is moving on at high speed.

So earlier, we had guided, we are targeted to complete it in '25. So will it be...

Over the next 15 months.

Okay. And sir, lastly, for the Gems and Jewelery Park, what is the amount that we have considered in the INR 4,000 crores L1 position?

INR 2,350 crores.

The next question is from the line of [ Hiten Jain ] from Avendus Spark.

Sir, my first question is on -- sir, if you can share us the adjusted PAT number for FY '24 and quarter?

Adjusted PAT number he is asking.

Please, repeat your question. What you were saying?

Adjusted PAT.

Adjusted PAT without the exceptional item.

Exceptional item, that is basically settlement with EMAAR MGF. This is INR 197 crores. This is -- as we have shown here. Total INR 218 crores, including GST. And out of this, we have received INR 90 crores...

He is asking adjusted PAT without these exceptional items. He is asking that. That's INR 140 crores.

That's INR 140 crores.

[ INR 144 ] crores. Basically, the tax amount 25.1% tax.

Okay. Okay. Okay. 25.1%. Okay, sir. My next question is, sir, as per your strategy where you want to increase the composition of private orders, what type of developers -- which developers are you looking to work with? Or do we have any agreements with developers?

There are no agreements per se. But as you can see from the order book, we are working with DLF now, we are working with -- on the private side, we are working with Puri. We have bid for Godrej. We have bid for Birla, Century Real Estate, Bharti, we are already working with. So certain clients of certain pedigree, right, and with deep pockets, we want to work with them. And then there are a few clients who are longstanding clients, or we are their longstanding contractors, like Amity, Bennett Coleman, who we've been working with for a number of years. Then some hotel chains. We are doing a JW Marriott. So we're not working with -- and Brookfield is a client. So such private sector clients we want to work with. And our order book, as we have mentioned earlier, is at 65%, 35% approximately. So in the long run, we want to make it 50-50.

Understood. And also, sir, how are these contracts? Are these privately negotiated? Or they...

We are also working with Foxconn on their plant. And we're working with Adani. So, you know, pedigree client, private sector clients.

Understood. Understood. Sir, these are privately negotiated contracts, right?

These are privately negotiated. Yes.

Okay. Just one last question on depreciation. Sir, why has depreciation increased, high depreciation in the quarter?

Basically, this quarter, we had impaired Kota Mall with INR 14.91 crores. That's why there is...

Around INR 15 crores. Okay. INR 15 crores, right? Am I right?

Yes, INR 15 crores.

The next question is from the line of Uttam Srimal from Axis Securities.

Sir, how do you see the opportunity in data center creation?

I think I did -- I was asked this question during the last call also. It is not something that excites us.

Okay. So one question in regard to what is our cash and cash position, including FDR currently?

Cash and cash equivalent is INR 334 crores. And basically bank position in INR 445 crores.