Ahluwalia Contracts (India) Limited (AHLUCONT.BO) Earnings Call Transcript & Summary

The next question is from the line of Lakshminarayanan from Tunga Investments.

Sir, just want to understand that there is -- we read a lot of slowness in demand for residential projects offtake, especially on -- in NCR and especially on the high end, right? Now I just want to understand how are we derisking ourselves if there is some kind of an issue in the residential because our mix is now tilting more towards residential. I just want to understand what is the derisking thought you have or whether my commentary seems to be right or wrong.

Look, while there is talk of slowdown, but we have not seen this on the ground as far as our interaction with our clients, primarily the developers for whom we are doing residential projects is concerned, right? Having said that, we are at about 40% of our total order book, which is residential at the moment. We are -- we have slowed down in our intake of projects in this sector. As far as slowdown is concerned, we are actually -- there are a lot of clients existing or otherwise who are after us to take up their jobs, and we are virtually refusing a job a week. So if projects are being launched, slowdown, maybe there is a slowdown in the pricing in the sense that pricing is not nosedived or come down. It's plateaued off. But there doesn't seem to be any slowdown on the projects being executed on the ground. That's one. Just to clarify again, we, at the moment, are not looking to add to the residential portfolio. We are now looking at commercial, retail, institutional, which has always been our forte, and also looking at bidding for marquee large government jobs.

Got it. Got it. And if I look at your order book, right, I mean, what is the mix of item rate and what is this -- how much is EPC? And particularly in CSMT, what is the mix we have?

So what's happened is that due to our focus now or we've refocused on the private sector for the last 1, 1.5 years, which is primarily item rate. Today, now 55% of our order book is item rate, right, and 45% is EPC.

Got it. So if I look at last year, whatever you have concluded, what is your revenues, which was a mix of item rate and EPC?

Yes, it was. So you're asking me the percentage?

Yes. Last year -- see, the reason is that I believe that the item rate gives you higher margins. And if so, whether are we -- is that mix changing with respect to the last year full revenues?

It's flipped. If you see now the exposure of our private sector versus public sector -- yes, so if you see -- if you do a comparison with last year, it's flipped both in terms of item rate versus EPC and public sector versus private sector. Today, nearly 63% of our order book comes from the private sector. And this has been a conscious effort. If you've attended some of our previous investor calls, which I think you have, we've had some interaction with you, and we've been maintaining this. This is a conscious direction that we took about 2 years ago to start moving from public sector to private sector because we foresaw that there would be increased competition in the public sector. And so now today, 63% of our order book comes from the private sector. And as I said, 55% is item rate.

And typically, between the item rate and the EPC, rate, what is -- if you take 100 of an index of EPC, how much is usually the item rate from a margin point of view?

As compared to EPC, is that what you're asking?

Yes. I mean, with respect to -- if item rate is 100% -- 100 as a margin, how much would EPC be? Like what is the...

So you're saying how much would EPC be lower by?

Yes, lower by, that's right.

I think it would not be, again, prudent for me to put a general number that way. I'll give you an example. On the private sector side, we are doing 2 EPC contracts for a health care company, right, where our margins are at par with item rate margins on some of our private sector clients. So it is only on government contracts that EPC margins are lower. That also because there is intense competition. Government now, the qualification criteria in their wisdom, various government departments have diluted the qualification criteria. So what happens is, say, for a INR 500 crore contract on the private sector side, there would be -- the client would be hard-pressed to find 3 large bidders, qualified bidders to bid, good bidders to bid, whereas on a similar sized contract on the public sector side, there'd be 15 bidders.

[Operator Instructions] The next question is from the line of Abhinav from ICICI Securities. As there is no response from the current participant, moving to the -- the next question is from the line of Shravan Shah from Dolat Capital.

A couple of things to clarify. Before that, just a request, sir, every time for this con call, I have to ask for the DiamondPass link. So I don't want to waste the time in that. It actually saves the time of all the investors, so it's better if you can upload the same on the BSE exchanges with the DiamondPass would be better. Now moving to the question. So in terms of the EBITDA margin front, do we expect from Q2 itself, can we start seeing a 10% EBITDA margin? Or maybe a third and fourth quarter can see 11% plus, then that's why we are confident to have a 10% at a blended level for full year?

Yes. Third and fourth quarter, as I said earlier, would be the ones where we'd really be taking off. Q2 would be similar to Q1 because rains have been unusually heavy this time, especially in NCR. So that has impacted our performance, especially in the month of July and August.

Got it. And second, then, is it still fair that we will still -- even for next year also, we can be expecting the double digit or it can be 11% kind of a margin EBITDA level is possible in FY '27?

Shravan, you asked me that question every time we talk. So we are -- we feel confident we'll be able to do double digit margins.

Got it. And sir, currently, the bid pipeline is how much and how much value of orders we have bidded where bid is yet to open?

As I told you, on the government sector side, we are -- there is -- our focus is diluted. So there are no really -- from the top of my head, I don't think there are any unopened bids on the government sector side. On the private sector side, there are -- there is negotiation happening on contracts to the tune of about INR 1,000 crores and the bid pipeline is to the tune of about INR 5,000 crores.

Got it. And second, sir, a couple of balance sheet data points, inventory, trade receivables, trade payable, mobilization advance, retention and unbilled revenue.

Retention is INR 390 crores and debtors are INR 623 crores. Mobilization INR 675 crores, trade payables INR 821 crores and inventory INR 380 crores, unbilled revenue INR 557 crores.

Okay. And in mobilization, how much is interest-bearing, sir?

This is 35%.

Okay. And for full year, how much CapEx we are looking at? And is there a similar run rate will be there for next year also? Or will it be lower?

So this year, the CapEx is going to be higher. It's going to be about INR 500 crores. Next year, it will be lower.

Will it be around closer to INR 200 crores or...

Yes, it will be about INR 200 crores next year.

Okay. So in terms of depreciation, can we start seeing the uptick in the depreciation from third and fourth quarter itself for this extra INR 500 crores?

Because this quarter, we have spent around INR 62 crores, and -- but rest quarters we are expecting rest of the amount. So that definitely depletion will go above from that level from third quarter and fourth quarter.

Okay. And sir, this CSMT, though we are saying that INR 400-odd crores plus revenue we will be doing this. So next year also similar INR 400 crores, INR 500 crores or is there a possibility that we can do even INR 650-plus crores kind of revenue?

It will increase next year, Shravan because work done and next year, the higher value items will kick in, so the billing will increase.

Okay. Got it. Shobhit sir, is there a possibility that for next year also, we will be on the top line front at a blended level, similar 15% kind of a growth is possible?

Yes, yes, definitely it's possible. The order book is healthy. It's about INR 18,000 crores. So we -- and this is to be executed over the next 2.5 years and the order pipeline is good. Yes, there will be a 15% to 20% growth next year also.

The next question is from the line of Salil Desai from Marcellus Investment Managers.

So first of all, clarification. In the presentation you have uploaded, the unexecuted order book says it's from 31st March '25. So should we read this as 30th June? Or is the number different?

That is correct. That number is [indiscernible]. So there's one table, right, that gives the unexecuted level for annually. So what number you need to be reading actually -- if you go on page -- on the presentation, Slide #3, you will have the unexecuted order book as INR 3,582 crores. And then when you go into the -- the segmental-wise as well as segment for the type, the client profiling-wise, state-wise. So everywhere, the number of INR 16,582 crores will appear. Yes, those are all till June. If you -- what you are referring to actually Slide #13, right? Why there has been an order inflow of INR 2,089 crores. So you can add that to the figure of INR 16,582 crores, you will get the unexecuted order value till end of July. So the one you are referring on the Slide 13, I think that's what you're referring to whether it's March '25?

Slide [indiscernible]...

Sorry to interrupt. Mr. Salil, may we request you use the headset to ask a question. Sir you are not audible.

Referring to the number on Slide 3, you're saying that is not the number to look at. I should add the INR 2,089 crores to this number to get the...

As of the present day that we are talking about. So as of the present day. That is as on 30th of June '25 because this is the quarter presentation for that quarter.

I get it. Because if I try to do some math, what the backlog was at the end of March and the order inflows what you have got for this quarter and then the revenues, then the number comes to a slightly higher number. So I was just figuring out -- trying to figure out if there is an order cancellation or something that's been done.

Absolutely. So what you need to do is that you have to -- what you are doing, you're seeing the Slide #13, right, where -- I mean this is order book of 157,751, right?

Let me just clarify. There has been no order cancellation. And our order book till date stands at INR 18,671 crores. Did you get that?

Yes.

[Operator Instructions] The next question is from the line of Lakshminarayanan from Tunga Investments.

Sir, one question. So we got this Birla Trimaya in Bangalore, which is a INR 325 crore project or something, right? So is the -- are we developing for all the towers? Or how is it? And secondly, how does it work? Because, let's say, there are multiple Birla projects that are going on across the country, whether we are in a better position to actually bid for those things? Just want to understand your point of view there.

Yes, we have, in the past, bid for their projects in different parts of the country. We are doing Phase 1 and Phase 2 here on this particular project, which is Trimaya. At the moment, as I mentioned in response to one of the earlier questions, which were asked is that we have taken a step back from residential construction. So we -- that's why we have not -- we have sort of refused a job in Gurgaon with Birla. So going forward, once this project reaches a substantial completion stage or an advanced stage, then we look at other projects with them.

The next question is from the line of Parvez Qazi from Nuvama Group.

So just wanted to get your views on the competitive intensity. I mean you're saying that maybe we are refocusing towards retail, institutional commercial side. So how is the competitive intensity there? And also the difference between public and private sector projects in terms of competition?

So Parvez, as I said earlier, public sector continues to be extremely competitive. And we are -- our bidding on jobs in the public sector has reduced substantially. Having said that, we are still looking to bid at marquee -- large marquee projects where we feel the competitive intensity would not be as high. As far as the private sector is concerned, there are only a handful of players who large private developers are calling to bid, be it for their residential projects or their commercial projects or their hotel projects, hospitality projects. So that is where our focus continues to be there.

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for closing comments.

Thank you so much, everybody, and AMBIT Capital for joining in and look forward to seeing you 3 months down the line. Thank you so much.

Thank you. On behalf of Ahluwalia Contracts, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.