Cemindia Projects Limited (509496) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the ITD Cementation India Limited Q2 FY '21 Results 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. Thank you, and over to you, sir.

Yes. Good morning, everyone. On behalf of ICICI Securities, I'd like to welcome everyone today on the ITD Cementation Limited Q2 FY '21 Results Call. Today from the management, we have with us, Sir Jayanta Basu, the Managing Director; and Mr. Prasad Patwardhan, Chief Financial Officer. I'd now like to hand over the call to the management for their opening remarks. Over to you.

Thank you, Adhidev. Good morning, everyone, and thank you for joining us on this Q2 FY '21 earnings call. I will start with a brief commentary on the results for this quarter and then hand over to Mr. Basu for his comments. Our income from operations on a consolidated basis for this quarter came in at about INR 550 crores, which was nearly 40% higher as compared to the quarter ending June '20, the previous quarter. We are still not completely out of the impact of COVID. And during this quarter, we have reviewed the impact of COVID on our projects. There are obviously going to be -- we are going to take longer time to complete the projects because of the lockdown and the impact of the lockdown on our projects. So we have reassessed the costs and the recoverability of the additional cost that we have incurred on the project. And this is why, we have reported a loss for this quarter, which is coming at about INR 50 crores. Our gross debt as at September was INR 550 crores and net debt is about INR 335 crores. As far as order book is concerned, as of September, our order book is INR 11,915 crores, and it comprises mainly of urban infra projects, which is were at about 34%. Marine is about 26%. Hydro and irrigation is 20%. Buildings is about 8% and airports is about 6%. During this quarter, we have secured orders worth about 1,050 crore INR. And after the end of the quarter, we have secured one order from the Indian Navy. It's a marine order worth about INR 1,150 crores. And in addition to that, we are [indiscernible] on 1 order worth about INR 350 crores. So that's it from my side. I will now hand over to Mr. Basu for his comments, and then we'll take your questions.

Good morning to all of you. This is Jayanta Basu, and thank you, Prasad, for brief on our financial performance. I'll now quickly take you through our operational performance for the quarter ended September 2020. As you see that our -- this revenue has grown as expected by around 40% from last quarter, June to September, which is in line with our expectation. But still, that is not the normal revenue, what we get in the other years, last year during this time, our revenue was around 25% more than this quarter. So -- but I'm -- I strongly believe that things are back to normalcy. Coming quarters, it will be much better than this quarter. And hopefully, by end of this year, we'll be at the normal situation. Now, if I take through the major projects that we are executing, quickly, I'll run through them. Mumbai Metro, hopefully, by December this year, we'll be able to complete the entire tunnel, which is an 11 kilometers. So that will be a good achievement by us. Similarly, Kolkata Metro Underground, as you know that we have gone through some difficult times last year. But I'm glad to say that we have already completed one tunnel last month, which is a good achievement, and we have worked on all the technical challenges there. Bangalore Metro Underground just picking up and the progress will ramp up very soon from January onwards, you will see that the revenue is coming from that project because we will be completely starting the tunnel work during January or February next year. Similarly, we are doing a couple of elevated metro jobs, Bangalore, Nagpur and Kolkata. Bangalore Metro progresses around 86% to 87%, Nagpur is in large of completion and Kolkata Metro newly we have just started. In Marine, Udangudi remains the biggest amongst all the other marine job, doing okay. In addition to Udangudi, we have got Andaman. It is also almost 75% job has been completed. Myanmar is the overseas job, as you know. But unfortunately, due to strict lockdown imposed by Myanmar government, there was no progress in the month of September and part of August and even in the month of October. We have just resumed the work a couple of days back, and hopefully, that it will pick up from now onwards. There are a couple of new jobs in marine. The [ Marine India ] job we have just started. And as I have told you last time, we have got the award from Sea Bird for a project that is Indian Navy. It's a big job for us, around INR 1,140 crores job. It will be a good marine job for us in coming days. And the inauguration has already taken place. So that is a good news. In addition to Sea Bird, there is a small marine job at Krishnapatnam Port from Adani that also we have started. These are the main jobs and in addition to that, we have got airport Trichy and Pune jobs have picked up, [ and there ] the air force has come back. So things are back to normal in terms of execution. As you know that we had to take some hit in the bottom line due to the effect of COVID, and we have, as Mr. Prasad has said, that we did the detailed analysis of the cost, cost to completion, that has affected us, but that does not reflect our overall financial performance. As the jobs are picking up, definitely, we'll do much better in the coming quarters. I'd like to also highlight a little bit about on the job prospect we have. And if you see that today, around 20,000-odd crore jobs, under various stages, either prequalification or tender in progress or a tender submitted. Out of that, there are 2, 3 jobs here L1. One is [ PWD ] at North Bengal around 300 crores. And a marine job in Mumbai port, around 150 crores, these jobs are L1 and we are expected to get out of any time. And if you see the -- you see the bifurcation of the new expected job from metro, it is around 10,000 crores, from industrial project around 3,000 crores, from Marine around 6,000 crores. And other -- altogether, around 20,000, 21,000 crore jobs, we are now pursuing. With all these new jobs and good work in hand, things will definitely improve from next quarter onwards. And I strongly believe that it will be much better in next year or in the end of this year. So with this, I'll conclude the operational briefing, now I'd like to have questions from your end. So I hand over to Mr. Prasad.

Adhidev, I request you to start assembling the queue so that we can take the questions from the -- from the people on the call.

[Operator Instructions] The first question is from the line of Parikshit Kandpal from HDFC Securities.

So my first question is that you, Prasad, you had mentioned that about INR 50 crores of core provisioning has been done during this quarter. So if you can give us segment-wise like, which are the key segments were impacted and any 1 or 2 major projects where [ major hit ] has coming from.

Parikshit, what I have said is we have reported a loss of INR 50 crores in this quarter. And I haven't said that we have taken a hit of INR 50 crores. See the way the process works, we have assessed where we are on the various projects that are under execution. And what will be the additional time lines and the additional cost that we'll be incurring and whether that cost can be recovered from the customers or not. So based on that assessment, we have reviewed the project CTCs. And the outcome of that review is the numbers that you have seen that we have reported for this quarter. It will be difficult for me to give you a project size or a segment-wise number of the impact of COVID because these -- all these projects are at different stages of completion. So the impact on the numbers will vary from project to project.

But is there any like Bangalore elevated metro project because I think that was the pain point, that was a major pain point, so is it like we are seeing? So what would be the quantum, at least in that project?

Yes. In Bangalore, we have taken a hit of about INR 30 crores, INR 35 crores in this quarter. And there is an impact on the other projects as well. But yes, Bangalore has impacted us about INR 30-odd crores.

So and other projects should be like less an amount of INR 10 crores or INR 15 crores kind of one off. Because I just want to arrive at this assessment was not done, what would have been our normalized EBITDA, to get a sense on that.

Parikshit, it will be difficult to comment on that because we haven't done -- what we have done is what we need to do at the end of the quarter and reassess all our projects. So had we -- had the impact of COVID not been there, what would have been the numbers? I mean, it will be difficult to -- it will be a theoretical exercise, but it will be difficult to comment on that at this stage.

And are you taking on marine project?

Sorry?

And you have taken on the Marine project?

Well, we have reviewed the CTCs of all the projects. We have project contingencies or some provisions in the project, the recoverability of the additional cost that we have incurred, we have reviewed that as well. So again, Parikshit, it will be difficult to comment on this on a project-by-project or even a segment-size basis?

Do you think is that only -- I mean, are other companies also which have reported numbers. So we have -- I mean ITD is very conservative when it comes to provisioning of cost and your reviews as of probably not seeing any major kinds of booking or coordinated provision. But my sense is -- so I wanted to align that was that we have seen [ significant ] setbacks in the last 4, 5, 6 quarters when it has been happening on a whole regular basis rather than exceptional basis. So going ahead, I think Jayanta said that now from here on things are looking better. So as for damage, already like whatever escalations have already been done? Or is there something more to come from hereon if we are not having any second wave, given that if you don't have a second wave so how -- have you taken the hits on all the projects to the maximum extent or there's something left to the provisions?

Yes. Parikshit, this is Jayanta Basu. Let me answer this. See, there are a mix of the client. Some clients there is a provision that they reimburse part of the COVID-related cost, some client doesn't have any provision. And even in some client also they're reimbursed only for the lockdown period, not thereafter. So we have done a detailed analysis of the entire project, what we are executing. And only thing wherever we have got reimbursement, like some cost [ hinders ] by some metro job that you have taken as a pluses, but the minuses due to COVID is much more than the pluses. So I think we have done a detailed analysis, and we have taken a hit of that. Going forward onwards, unless there is a further stoppage of work due to COVID, I don't see that there will be any problem.

And the composition is now moving towards -- I mean, slightly moving towards marine jobs, which have been our like best segment in the entire order book with respect to margins and execution. So does it make a case around significant improvement in margins and profitability going ahead next year and the year after that? And these projects come into execution?

Yes. Actually, if you see, there are 2 big marine projects, and not only 2 big marine, but 1 of them is also underground job. One of them is [ Bangalore ] underground, which is around INR 1,700 crore. One is project Sea Bird, INR 1,200 crores and 1 is Myanmar INR 500 crores. These jobs are definitely going to do better in coming days. Maybe from end of this year or beginning of next year, you will see the result of that. And Udangudi the progress at the rate of what we is happening now, we are doing around INR 30-odd crores per month, which will immediately ramp up to INR 55 crores to INR 60 crores by another 2, 3 months' time. So once those four projects picked up, and then daily project starts, things will radically change, that I can tell you.

So on the Adani project in Sri Lanka, I think last time you had mentioned about that project. So the government has cleared -- the local government there has clear that project. Any thoughts or progress on us getting that project?

Very much there. In fact, we have submitted our technical, I mean, proposal to them. It is now a matter of -- it is G-to-G, basically, India government, Japan government and Sri Lanka government. We are doing the balance formalities, and we expect that from February onwards, the project will start. The tender process has already started. So we are there very much, yes.

And this will be like how much in size, how many we get?

This is the construction of new terminal, as we have done, we are doing at Myanmar.

Price wise. In total price wise how big this could be?

Yes. Around INR 1,500 crores.

Okay. And just lastly, on the high-speed rail, any role we have there to play, anything we're looking to build the coming -- any packages which will come up in the future?

High-speed rail, it was quite expected that what has happened, it was known to us, that this is to happen like that. Forthcoming packages where Japanese are involved, we have already tied up with them. I don't want to reveal the party. Once those packages come, we'll be definitely there.

And what -- can you reveal like what kind of packages you have tied this for what kind of expertise or what kind of packages also?

When the substructure completed, there will be tracklaying work, which is a very highly specialized job. And those tracklaying job will be done totally by Japanese company. So we have tied up with some of the company from Japan on that, yes.

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

Sir, just wanted to delve a bit further on the margins and the provisions that we have to fill. So I just wanted to understand we are -- improving your performance, whatever the nature of these provisions. So on 1 hand, I wanted to understand is that the provisions that we have taken are basically, as you mentioned, are the kind of cost that we believe will not be reimbursed by the client. And so net-net that we will have to take on our own expenses. So as of now, these are provisions. So is there any likelihood of them being reversed in the later quarters? Or do you believe this is a very good final assessment, and this is the cost that we will have to pay?

No, no, no. See what we have done is there are some costs that we have incurred. The project contribution time lines are getting extended, there will be additional costs that we may have to incur. Simultaneously, we are also discussing with the clients for reimbursement and recovery of the cost that we are incurring. So we have taken a view on what we expect will be the outcome on completion of the project. And based on that, we have accounted for the numbers which you are seeing in our results. But we are certainly hopeful of getting some more compensation from the client. And when that happens, you will see a reversal in some of these provisions. But that may not -- the time lines or the quantification of that number is uncertain at this stage. But I'm sure that will happen in the forthcoming months and quarters.

Perfect. Sir, that is what probably my thoughts on this also was. Also, sir, I just -- again, I know we had a conservative accounting policy but none of the companies or peers, who are the same clients in projects that we are working on have had these issues that they are not being reimbursed. I know your segment is one segment which is kind of different, but other than that, overhead, underground all these metro projects, I think the same clients and same projects are being taken up by the company. So these are some we can expect that they will come up with some loss of provisions maybe in the later quarters? Or is there something different in other contracts that we have signed? Is it more like a fixed-price contract that we have signed and they do not have those estimation or those time delay overrun provisions. What -- why is this [ different in time delay ] between what we are reporting and what all others are reporting?

Because my understanding is that the contracts that are executed between the client and the contractor, those are similar contracts. There is no change in the contract losses as such. But frankly, I would not like to comment on how the other companies are accounting or recognizing revenue. We have been transparent and really told you the process that we are following and how we have arrived at the numbers that we have reported.

Fair enough, sir. That's all on that. Sir, now that we have basically done almost INR 1,000 crores of revenue, just short of INR 1,000 crores in the revenue. Any likelihood or any guidance that you could provide us to what is the kind of top line we would be living to -- looking at for the full year?

Well, we have already spoken about that in our earlier calls. So we are hopeful that we'll be able to -- you have seen a 40% growth in our top line in this quarter as compared to the previous quarter. And we are certainly -- based on the order book and the orders that we have secured, we are hopeful that we'll substantially exceed this 40% growth in the next -- next 2, 3 quarters as well. So we are hopeful of a much better performance in the coming 2 quarters of this year.

But we wouldn't be able to do a better result of FY '20 what we will do in FY '21?

There we hope to do better than that actually. But this lockdown is something -- if there is a second wave of COVID, or like Mr. Basu mentioned, in Myanmar, we have lost nearly 1.5 or 2 months, because of the strict lockdown enforced in Myanmar. These things are not in our control. So we would rather prefer not to give any guidance. But based on the order book and what we are seeing actually on the ground, we are quite certain or quite hopeful that we'll have a better performance in this -- in Q3 and Q4 onwards.

Sir, as of now, what will be the labor availability at our site. And as a percentage, what will be your execution level, at the pre COVID level?

Yes. Now good news there, the labor availability is almost their pre-COVID level standard, I would think, so that is not the issue. And execution level also, we should achieve what we used to get at a pre-COVID level.

Do you expect that -- to reach that by, let's say, the end of this quarter? Or will it be Q4 before we reach those levels?

Q3 will be touch and go, but Q4 definitely we'll get.

And sir, even despite the labor availability, I believe, because of the social distancing norms and other precautions that we have to take, our execution probably would be impacted despite labor availability being back up to those levels.

You're absolutely right. See, it is not only the lockdown. It is a restricted way of working. And there are a lot of restrictions nowadays and which tantamounts to less productivity by labor. So all those costs, what you see today, we have taken that -- factored those issues also.

[Operator Instructions]. The next question is from the line of Manish Sonthalia from Motilal Oswal.

[indiscernible]

Manish, can you speak a bit louder? We are not able to hear you.

[indiscernible]

Mr. Manish, you are in the question queue, sir.

Yes.

Mr. Manish, we are not able to hear you. Can you speak a bit louder?

Yes. I'm saying that whether we are able to receive the insurance amount that was due to us for a Kolkata Metro?

Yes, discussions are going on. So far, we haven't received any amount, but discussions are going on. It is quite positive. Hopefully, something will happen by end of this year.

And how much of a percentage do you think will be realized? And how much of a haircut that will have to take?

I will not be able to comment on how much percentage we'll get but I don't think there will be any haircut because there are other provisions as well, which are…

How much was there a claim for this?

[indiscernible] how much? Around INR 200-odd crores was our claim.

Okay. So you expect this to be received by the end of this year?

Not all, not all, because it will take some time. Some part we may get, but will continue for some more time, yes.

The next question is from the line of [ Venkata Subramanian from Organic Capital ].

Predictably, actually, this question is also along the same lines as what other participants said. Is it our conservative approach that led us to provide this INR 50 odd crores? And what is the volatility of recovery out of that?

I wouldn't call it conservative. It is probably a realistic approach that we have taken and as I said, as I answered the previous person as well, we are hopeful of recovering larger amounts from the clients. On account of whatever cost we have incurred onto it, but it will -- I don't think it will be prudent for us to account for that or take that into consideration when we do the reporting of the results at this stage. We have certainly not -- as Mr. Basu mentioned, some of the clients are reimbursing at the cost. And there are discussions underway with the clients for the reimbursement of these costs that we have incurred or will be incurring. So we are certainly hopeful that we will recover some money from the clients, but we have not taken or factored that in our results for this quarter.

Sir, may I ask, if this is an act of God, either from the clients or some insurance companies, is there some scope?