Cemindia Projects Limited (509496) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the ITD Cementation India Limited Q1 FY '21 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Adhidev Chattopadhyay from ICICI Securities. Thank you. And over to you, sir.

Yes. Good morning, everyone, and thanks for joining us on the call today. Today, from the management of ITD Cementation India, we have with us Mr. Jayanta Basu, the Managing Director; and Mr. Prasad Patwardhan, the Chief Financial Officer. I'd now like to hand it over to the management for their opening remarks. Over to you.

Thank you, Adhidev. Very good morning to all of you, and thank you for joining us on this con call for the Q1 results of FY '21. I will briefly touch upon the results and the numbers, and then hand over to Mr. Basu for his comments, and then we'll take your questions. As you are all aware, this quarter has been significantly impacted by COVID. April was a month of complete lockdown. And in May as well, we saw an exodus of labor from various places. And that has had an impact on our operations in the quarter ending June. On a consolidated basis, we have reported a revenue of about INR 400 crores for this quarter as compared to INR 740 crores in the quarter ending March '20. And a year back, we had a top line of about INR 700 crores. So you can see the significant impact on our revenues in this quarter, and that has impacted the operating margins as well. So that has resulted in profit after tax. At the PAT level, we have reported a loss of about INR 17 crores. As far as our debt is concerned, the gross debt as of 30 June is about INR 450 crores and net debt is about INR 300 crores. The silver lining is our order book. Our order book stands at about INR 11,335 crores. In addition to that, the new orders that we have secured in this quarter are just about INR 80 crores. But the good news is that, after the end of this quarter, we have secured good orders worth about INR 1,200 crores so far. These are likely in the Marine segment and the Metro segment as well. And in addition to that, we are lowest on orders worth another about INR 1,500 crores. This is, again, one more marine order and one high court building order from the Northeast in Bengal. So that is as far as our order book situation is concerned. I will now hand over to Mr. Basu for his comments, and then we'll take your questions.

Good morning to you all. This is Jayanta Basu. My colleague, Mr. Prasad, has briefed you just briefly about our quarter results up to June 2020, 2021. I'd like to touch upon -- in continuation, I'd like to touch upon some key aspects of our operation and the challenges that we have, we are facing and what are the opportunities lying ahead. If you see, our revenue is down by around 44% during first quarter as compared to same quarter last year. And that is almost like an industrial -- we are as part of the industry. If you see the other companies also, they are in that range, 55% to 60%. And -- but our collection was good. That is one good thing. Though the revenue is down by 44%, but we could -- our collection is around 90% of similar quarter last year, which is something that's helping us in liquidity. The basic issue of COVID which the construction company is largely affected because of the nonavailability of the labor force. Today, when we work in a normal situation, we have around 18,000 to 20,000 labor at any given point of time. During the COVID, in the first quarter, it came down to 8,000 to 9,000. But I'm happy that, gradually, things are changing, and now we are almost having 70% to 78% labor force, as it should be the normal case at site now. I'll touch upon a couple of key projects and our performance thereof. And I'll start with the Mumbai Metro. Mumbai Metro, so far, we could do around 60% of the total progress. And by end of this year, we believe that our tunneling will be completed. There are 3 tunnel boring machine. Now 2 are working, and all these 3 will be completed by end of this year. Second, underground metro is at Calcutta, we call it Underground UG2. And UG2, as all of you know that we had some challenges we faced last year, but we could work on them very -- I mean quite okay. Today, we have got another 1.5 month to go to complete the tunnel in the Phase 1. So by end of October, we hope the tunnel, which is going on now, will be completed. Work is going on. But later on, the same tunnel boring machine will start from other direction that will take us to end of March next year. So we hope that by March next year, our tunneling at Calcutta Metro will be over. Apart from this Calcutta Metro, we have got another one underground work in Bangalore Metro, where work has just started. Unfortunately, the commencement of the work and COVID hit simultaneously, so we could not do much. But we have just started our temporary setup, permanent work will start from end of this month. And as you know, we have got 2 elevated jobs. One is Bangalore Metro, one is Nagpur Metro. Both are in the verge of completion. Bangalore Metro progress is around 82%, 83% overall, and Nagpur is around 90%. Apart from the MRTS, we have got a couple of big marine jobs. Udangudi progress is around 40% so far. Haldia is on the verge of completion. Andaman, we could do around 40%. And we are having an overseas job at Myanmar, which is progressing as per our expectation. The major activity, which is called piling in the marine conditions, have started for the last -- since last 1 month, 1.5 months. And then if we take it to the other sector like airport, Trichy and Pune. Despite of the COVID effect, still, we could do some progress. And our, so far, progress is around 25% overall. We have got another big chunk of job in drilling and blasting sector that is in IRCON at Sikkim, where the progress is really affected because of COVID situation and due to lockdown, so we could not do much. Now coming to the work-in-hand position, as Mr. Prasad has said, that our work-in-hand position is still very healthy, which will be around INR 12,000 crore plus as on date. And in last quarter or till date, YTD till date, we have secured around 1,300 -- INR 1,300 crore or INR 1,400 crore of job already secured. And I'm glad to say that we have got the LOI for a bridge to be constructed over River Ganga in Allahabad, a INR 500 crore job. This should be a signature project for us. We secured one contract from Adani Group, the construction of breakwater, which is going on for quite some time, around INR 400 crore job. We have also secured one metro job in Calcutta under RVNL and a small marine job for Adani in Krishnapatnam. In addition to these jobs, we have got another 3 jobs, which we are in L1 position. I'm also glad to say that there is a job in Project Seabird, INR 1,200 crore where we are L1 bidder, tough competition. And the Phase 1 was done by us. This is Phase 3, so we are expecting LOI sometime during October or November, which should be a good job for us. In addition, there is a small -- not small, around INR 300 crore job of construction of high court building in West Bengal. We're waiting for the LOI. See all these, I must say that the future, there are a lot of -- plenty of opportunities we have with the existing jobs and jobs which are L1. And one thing I want to touch upon here, if you see our financial result last month -- I mean last quarter, though we have got around 1,200 -- INR 12,000 crore work in hand, most of them, around INR 5,000-odd crore, have just started. So I'll repeat my comment what I had last time. They haven't crossed the threshold limit of declining margin. A job like Delhi, we have got a building job from CPWD, IRCON jobs and some other jobs in Myanmar also. So though their progress is happening, but we are recognizing only revenue, we are not able to recognize the margin because they have not crossed the threshold limit as per our company's norms. So I hope during this quarter, a little bit, maybe third quarter, we'll see that this helps us in increasing our margin. And I'll touch upon some other jobs which are in pipeline. Naturally, this question will come, probably around INR 17,000 crore jobs we are pursuing. Those who are in various stages now, some under tender, some pre-qualification stages and bulk of them are from marine. So this is the -- in nutshell, our operational performance, a little bit I have touched on future. I'll now hand over to Prasad for any further comments from him or we can start your question-answer session.

[Operator Instructions] The first question is from the line of Mohit Kumar from IDFC Securities.

Congratulation on a good set of results given the COVID situation. So my first question, sir, can you please comment on the labor availability across size? Are you facing any challenges? And what kind of challenges? And do you see this revenue ramp up to INR 1,000 crore, which you have guided earlier, is it possible during Q3? Or has the milestone shifted?

Yes. Thank you, Mr. Mohit. I have just touched upon the labor situation. During normal situation, we manage the projects with around 18,000 to 20,000 labors. During the COVID or during March, April, it came down to 8,000. But now from mid of the August, it is gradually becoming more and more. Today, we have got at site around 14,000 labor, ballpark, which is close to 70% to 78% of the normal situation. But one more challenge we have, it is only the number, but when the labor comes back to site, to keep there, we have to keep them under quarantine, sometime 14 days, even sometime 21 days as well. So it is not there the number of labor. We have to also deal with the quarantine situation. But things are improving because our progress is directly proportional to the availability of the labor force. Apart from labor force, the other things which affect our progress like liquidity and supply chain, those are more or less under control, I must say. And as far as your -- I don't want to give any guidance on our revenue. But as you see that this time, it was 56%, I think quarter 2 will be a little better than that, maybe around 65% to 78%, 70% of last year, and it should gradually increase quarter 3 and quarter 4.

And sir, has the situation eased out across sites, or you're still facing some of the other issues in some of the metros or in Sivok-Rangpo or in CPWD Delhi? Can you just comment on all these -- especially on all these 4, 5 projects which are likely to contribute and major share of revenue going forward?

Yes. We have -- see CPWD problem is a little unique. It is not related to COVID, partly related to COVID, but it is more related to the availability of the front, because they have to give us some front by dismantling existing buildings, which is still going very slow. So that is why there is the effect of COVID, plus front availability as well. Sivok-Rangpo, it is also a little delicate, I mean sensitive area. So the people are very much concerned that the railway people are coming from outside as they are spreading COVID. So they are very conservative, so we have to go very slow on that. And now and then, there is a lockdown some 1 or 2 days, 5 days, 6 days, go slow. So these 2 projects have -- is going slow because of all these 2 -- all these issues, but other projects, apart from labor, I don't see much of a problem.

Okay. Last question, sir, what is the average life cycle of our entire order book? And have you got any extension from the clients for the COVID situation?

Yes. If you see our order book is now around 1,200 crore plus -- INR 12,000 crore plus, which should be around 3.5 years based on today's rate of progress of what we do. And you asked me about the extension of time line as well, isn't it?

Yes, yes, yes.

Yes. From the client side, there are several issues. One of them is extension of time. And if you know that there is general guideline by MHA that at least 5 months extension of time, normally, they are granting to the -- most of the contractor because of this COVID situation. So we don't see much of an issue on that, getting extension of time from the client.

The next question is from the line of Vibhor Singhal from PhillipCapital.

Yes. Sir, 2 questions from my side. One is, sir, just wanted to check, is there any update on the bullet train project? And also regarding the Central Vista project, the parliament building, are we basically looking to bid for that?

Yes. I think you have asked for 2 projects. One is bullet train, one is Central Vista, isn't it?

Yes, sir. Yes, sir.

Bullet project, it is going really slow because of whatever maybe the reason, maybe the budget, so what was projected earlier, now reality is not like that, becoming very costly. So things like that. It is going slow, and we really don't know when it will likely to take up. But we are there, of course. We are there. And somehow rather, we'll get into that. And regarding Central Vista, it is also a very big concept and project. And as you always know, the Parliament building has already been -- probably will be awarded to Tata Projects, they became lowest day before yesterday. But that is not the end of that. There some other structures will come. So let us see how it goes.

Sir, would we be interested in bidding that -- bidding for that? The new project that will come in Central Vista.

Of course, we are interested. But as you know, it will have its own prequalification criteria. We have to see whether we get qualified or not. So that will be the prime challenge we have.

Fair enough, sir. And sir, my second question was to Prasad sir, just small clarification and accounting kind of a question I just wanted to ask you. Sir, in the Q1 results, we -- if I look at the gross margin, so that is basically just the -- if I take the cost of goods consumed as a percentage of sales, that has come down significantly. So generally, it used to be around 35%, 40%. In this quarter, it's just around 21%. So any reason that the COGS were so low in this quarter, any because of either revenue booking or whatever might that be the reason?

No, no. It is just an impact of the lockdown. Nothing different has changed. We would have procured the material, but because of the availability of labor, the type of work that was carried out, probably the material consumption was lower in this quarter as compared to the earlier quarter. So there's no other reason for it. This was an exceptional quarter in that sense because of COVID. And that is why the numbers are looking the way they are.

Right, right. So other than that, there is no any change in accounting policy or any other external thing that, nothing like that?

No change in the accounting policy.

[Operator Instructions] The next question is from the line of Aman Sonthalia from AK Securities.

Sir, my question is, what is the threshold limit when we recognize the business?

Sorry. I didn't get your question. Can you come again?

Sir, we -- there is a policy of the company that after this much of work, you recognize the business. So what is that limit, sir?

Generally, it is 10% of the order size, order value.

And sir, what type of EBITDA margin you can expect from the orders which we are getting?

Well, the EBITDA margins vary from segment to segment. We won't be able to comment on individual projects. But typically, the Marine segment tends to give us better margin. Marine segment, the Underground Metro segment, the Tunneling segment, the margins are better as compared to an elevated metro project or a building project, something like that. So the margin varies on different projects.

So on an average, you can expect around 13% to 14% margin?

It will depend on the mix of projects that are getting executed. So it will not be possible to put a general number on the EBITDA margin. It is a mix of which segment is contributing how much to each quarter of revenue. But broadly, as I indicated that these 2 or 3 segments tend to give us better margins as compared to an elevated metro project, for example.

Okay, sir. And what type of run rate we can expect from Q3 onwards every quarter?

Well, as Mr. Basu mentioned, we have seen the numbers that we have reported in Q1 and Q2 is likely to be better than what we have done in Q1. The COVID situation is still unfolding. So we are hopeful that from next quarter onwards, Q3 onwards, we'll see an improvement in the country in the execution of projects because the labor is available now. It is only the COVID situation that we need to get on top of. So we are hopeful, every month-by-month and quarter-by-quarter, we are expecting an improvement in our operating -- level of operations, basically.

And sir, already, we have around INR 12,000 crores worth order in hand, and we are already bidding for a lot of more orders. So whether we have so much of manpower to handle all these orders?

Well, see that there are a lot of jobs in pipeline, as you rightly said. But I don't think there is the issue in the resources. We have got engineers, those who are getting free from the project like Bangalore, Nagpur and Haldia, Mumbai Metro. So many of the projects are also going to be getting completed. So those engineers will be free, and we'll utilize them. And definitely, there will be some recruitment as well, which is a continuous process. So I don't see that's a big challenge here.

And sir, one last question. How big this marine business is going forward? What type of orders we can expect in this segment in future? And what type of competition we can face in this segment?

Competition is -- it has come down from what it was 2, 3 years back. Because a couple of companies, those who are there, they are no more there in this business. So it is limited to only 3 or 4 company like us. And as I've told you that there are around INR 8,000 crore jobs in pipeline in marine, so we have to see how much of them we get. Out of INR 8,000 crore, around INR 1,600 crore already we are L1. One of them is the Project Seabird, INR 1,200 crore. And another is -- which one? Vizhinjam. So this is a broadly picture about marine business.

Okay, sir. So if we got all these orders, so the -- if suppose the order which is right now INR 12,000 crores and if it crosses INR 15,000 crores or INR 16,000 crores, whether the time line is 3.5 years of the whole order or it will take some extra more time for complete that -- those orders?

No. It depends upon when this project comes. Typically, marine job, it depends upon the weather condition, as you know. If you get a job now, then you have got another 6, 7 months good time to execute. But if you get a job in the month of April, that will lead to a problem. So it is very difficult to predict in that way how much time it will take. But normally, typically, a marine job, it takes around 2 years, 2 to 3 years' time to complete.

The next question is from the line of Prem Khurana from Anand Rathi.

So sir, 3 questions from my side...

Mr. Khurana, can you speak closer to the handset, please?

Yes. One second. Am I audible now?

Yes, sir.

Yes.

Sir, I think -- Jayanta sir, I mean in your opening remarks, you spoke about some INR 17,000-odd crore of opportunity landscape that you see. Would you be able to break it down into segments? I think -- I mean you said it will be largely in Marine, but if you could help us understand how much of this is essentially metro, elevated or underground or how much of it is Marine?

Yes. Broadly, I can tell you, Marine, as I told you, around INR 8,000 crore, out of which, around INR 1,500 crore, INR 1,600 crore already we are L1. Metro will be around INR 3,000 crore. Bridge and sewer project in Mumbai will be around INR 3,500 crore. And for the building in the airport sector, another INR 3,000 crore. So put together INR 16,000 crores to INR 17,000 crores, which is ...

Sir, any preference given the fact that I mean your urban is now a very large part of the order bag also, does it mean you would look for more of marine now because you would want to have a balance between urban and marine, which is where you get a good margin as well as growth? Or -- yes, we are agnostic in terms of the project that comes to us?

If you see our philosophy-wise, we continuously focus on marine and underground metro and airport. These 3 sector definitely we'll be trying our best.

Sure, sir. Sure. And sir, on our Bangalore elevated, I think we were facing issues with some work front over the last package? Has that commenced now? Or is it still to come to us?

There are 4 packages. Each package is ranging from INR 400 crore to INR 600 crore. Out of that, 3 packages are through, through in the sense that we know that when it will be completed. Because of COVID, it got delayed by 3, 4 months. So hopefully, by first quarter of next year, it will be completed. But the 1 project, we still do not have enough for front, around 30% to 35% of front still not available. So we are talking to the client and see how this can be done on that.

Okay. Could there be a case where, I mean, you would finish whatever is available and exit the project? Or you would have to wait for them to kind of give the entire...

Normally, no because that doesn't help because we have to complete the job. Leaving job doesn't help. Only thing you have to deal with the client how to handle the commercial issues.

Okay, okay. Sure. And sir, underground metro, we were supposed to have 2 TBMs, I mean the old TBMs that you were supposed to refurbish and then get them to the site. So what is the status there now?

{}TBMs should have been there by this time, but because of COVID, places where it is getting repaired also under shutdown. It has just started. And it should be ready by November, so that we can commence the TBM work some time during first quarter of next year.

Sure. And, sir, 2 questions from my side. So one was on P&L. So when I look at our employee cost this quarter, sequentially, this is up, given the fact that I mean there was -- we were under the impression that there could be some reduction. So how do we explain this? Because March was significantly lower, I mean from INR 90-odd crores of run rate that we used to have, it went down to 90 -- INR 70-odd crore. And then suddenly, it's back around INR 85 crore. And in continuation to this, when I look at our presentation, so you give us number of permanent employees. And there appears to be a sharp reduction on a sequential basis. I think the presentation says -- the March presentation says it was around 2,900-odd people, and it is at around 2,100 now. So how do I reconcile these 2 wherein the number of employees have come down but my employee bill is up?

I'll answer your question. On the manpower cost, see, the March number, the number that we had reported in the March quarter, there was some write-backs of excess provisions. So because of that, that number was depressed in the month of March. Whereas in the June quarter, although the labor -- there was an exodus of labor, we have been continuing to pay the wages and the salaries in full. So it is the normal labor cost. I mean there's no additional costs that have been considered in the labor cost here.

Okay. And the run rate would remain the same or it will go up because we are yet to have another around 22-odd-percent of labor come back to us?

No. It should be more or less at the same level. I don't see no major variation in the labor cost. Your second question was regarding...

Reporting of manpower.

Yes, the manpower reporting.

The number of employees are down.