Cemindia Projects Limited (509496) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the ITD Cementation India Limited Q4 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 from ICICI Securities Limited. Thank you, and over to you, sir.

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

Thank you, Adhidev. Good morning, everyone, and thank you for joining us on the Q4 FY '21 earnings call. Trust everyone is doing well and are safe and healthy. We had our Board meeting last week, and we have announced the results for Q4 FY '21 and year-end as well on the same date. I will take you briefly through the highlights of our financial performance, and then we can proceed with the con call. Our turnover for the quarter ending March '21 was INR 984 crores, which is a growth of about 24% on a Q-on-Q basis and roughly 33% on a Y-on-Y basis. EBITDA is at about INR 126 crores, which again represents a healthy growth of 35% on a Q-on-Q basis and 33% on a Y-on-Y basis. EBITDA margins have improved by about 100 basis points to about 12.5% as compared to 11.5% earlier. Profit after tax is at INR 53 crores, which represents a growth of 77% on a quarter-on-quarter basis and about 60% on a year-on-year basis. We have been able to manage our debt levels pretty well during the year, and actually, the gross debt level has dropped by about INR 100 crores during the year and a very healthy debt-to-equity ratio of 0.3x. In terms of our order book, we ended the year with an order book of about INR 11,730 crores. During the year, we secured new orders worth about INR 2,800 crores, and during the quarter ending March '21, we have secured new orders worth about INR 530 crores. In fact, after the end of the quarter, we have received further orders worth about INR 950 crores, and we are L1 on orders and projects worth about INR 360 crores. That is all that I would like to state at this stage. I will hand over to Mr. Basu, our MD, for his initial comments, and then we'll take your questions. Thank you.

Good morning to all, and thanks to Prasad. Thanks to everybody for joining this con call. As you have seen and heard from Prasad that we have done pretty well in quarter 4. In fact, our -- we have bounced back well from quarter 3 itself. Q1 and Q2 was not good because of COVID, but as I said, we have bounced back well from quarter 3. As you can see that from Q2 to Q3, we have increased our revenue by 38% and thereafter 43% and 24%, finally. I must say -- as Prasad has already shared the numbers, I must say that the quarterly revenue and PAT, what we have achieved in quarter 4 is the second highest in the history of the company, which is a remarkable achievement despite of all the odds. We have good work in hand around INR 12,000 crores. Debt-to-equity ratio is under control. CapEx expenditure also last year is under control. And employee costs, we are trying to minimize, as you can see in the result. Before going to the operation, specifically for the project-wise, I'd like to highlight some significant event which has happened recently. As all of us know that we had big problem in underground metro at Kolkata I'm very happy to say that the entire tunneling work at Kolkata has been completed. As we had predicted, it was done in May this year. This was a remarkable achievement despite of all odds, and we had to do tunnels below the buildings which are 250 years of age old and a lot of other difficulties as well. So I'd like to convey this message to all the stakeholders that the threat what we had, now we are beyond that, and we are coming out -- we have already come out of this difficult situation at Kolkata. Another one event in Bangalore Metro underground. We have already lowered our tunnel boring machine this month. So the tunneling work will start from June onwards -- June or July onwards. This is also our -- one of the highlighted milestones we had predicted last con call. And as you all know that Mumbai Metro tunnel has already been completed a long time back. Similarly, in marine front, the job we are doing in Myanmar despite of some issues related to locals and pandemic, but job is progressing very well. So these are the significant events apart from some other jobs which we have secured during this time, which will come through later on. Now coming to the operational performance, as I have said, underground metro Kolkata, Mumbai and Bangalore, I have just briefed you, and these are all under control. And Mumbai, we have to now only complete the finishing activity. Bangalore is just we have started. So it will go for another 2 or 3 years. And Kolkata also is in the verge of completion in terms of the major structure work. Elevated metro. Bangalore Metro, I must say that we have done pretty well last year by able to refund the loan what we have secured from the Bank of Baroda. When we started this year, the loan amount was around INR 200 crores, now it has come down to around INR 10 crores, which is a significant achievement. And most of the loans we have -- we could able to refund on the project itself by taking security deposit back, advance payment, et cetera. Other elevated metro that is at Nagpur mostly completed. So there is no issue in that Nagpur Metro. Coming to marine. As you already know, we are doing 3 or 4 big marine jobs, starting from Udangudi, Myanmar, Andaman, Vizhinjam, and we have secured one big job at Sea Bird and Pamban Bridge at Tamil Nadu. So all the jobs are going on, and it is under control. We don't see any issues. Particularly, Udangudi is doing pretty well. One of the activities in Udangudi is Breakwater, which we are doing 8 kilometers from the shore, first time probably in Asia, of course, in India, and it was a very challenging job. I must say today that we have done pretty well. We have come up to the water level. The job is going very well. Similarly, the other sectors like airport, Trichy and Pune Airport, a little bit hit because of recent COVID, but otherwise, it is so far on the schedule. In building sector, CPWD, Delhi, the High Court building at Jalpaiguri, these are all started recently, and we hope that it will -- they will do better. We have secured some new jobs. I must say that we have secured 2 big jobs in Sea Bird. One you know that for marine, which was a couple of months back. We have secured 1 more job at Sea Bird, which is around INR 900 crores. So we have just got the LOI last month. Similarly, we got one piling job at Paradip. We've got the development of riverfront site of Sabarmati last week, INR 100 crore job. And we are L1 in a job in Palam, Delhi. That is a museum for the Defense. So we are expecting the order anytime. So as I have said, the work in hand is good, and there are a plenty of jobs under tender stage. We have just seen during our budget exercise that there are around INR 88,000 crore jobs we can target this year. Out of INR 88,000 today, it is around INR 25,000 crores, which are in a various stages of pursuance, either prequalification or bid submitted or bidding under process. And majority of them are from the good sectors like underground metro, marine and airport. So if you see the job mix today we have, majority of the work is from marine, around 33%; underground metro will be around 25%. So that gives us a lot of confidence that the mixture of job is pretty good, and we should do better going forward. What else? I think there is one concern we have like all the contractors, like, the hike in steel and commodity price, particularly steel and cement. We have done detailed analysis of that. As we go forward with this con call, any questions, I will be happy to answer them. So that is, in a nutshell, about the progress and operational performance. I would now request you to ask questions, and we'll be happy to answer them.

[Operator Instructions] The first question is from the line of Mohit Kumar from DAM Capital.

Yes. Congratulations on a good set of numbers. Sir, my first question is, how do you see the FY '22 panning out? And are we facing any major issue in execution in Q1 FY '22, given the fact that we have -- most of the works is in metro cities? And how much of the -- how much of the Bangalore legacy project left in the order book as of now? And that's my first question.

Okay. I think I'll start answering your first question with the Q1. Of course, the second wave of COVID will have some effect on the progress. There is no doubt about that. And though we are much better prepared this time, and the migration of labor, it is less compared to last year, but still, there is effect. It is -- more than migration, it is affected people because the COVID-affected people are more than last year. And as you have seen, the mood is pretty down, not like last year. So there is a psychological effect. So with all these and the majority of the problem we are facing to get the oxygen supply, as you know, construction industry depends a lot on oxygen supply because we have to do a lot of welding and gas cutting and oxygen supplies are in problem. Now to mitigate all these, I'll say one by one that we are trying to procure some oxygen manufacturing machine at site. So it will take some time. So that is something we are trying to do. We have gone to plasma-cutting technology, by which we can minimize the oxygen requirement. So all those things takes time. We have to buy and implement that. Apart from that, from the social side, we are trying to do our best to minimize the effect of COVID and to keep the people in a good mood so that the effect of COVID is minimized. But still, I must say that there will be some effect of COVID in progress of work. And how long it will continue we don't know. We hope by June, it should be okay. So first quarter, yes, there will be some effect. Coming to Bangalore Metro, as I've just told you that there are 4 jobs. Out of 4 jobs, 3 jobs substantially completed, and we are in the handing over phase. Only the last job that is done around 80%. So in total, I think we have almost done around -- balance work is around, say, INR 280 crores to INR 300 crores out of INR 2,500 crores. So that is the work pending at Bangalore Metro. Yes. So I think that's all. Any other question you had?

Yes. Secondly, sir, of course, you did mention that your EBITDA margins, that there is some impact. I understand there is some impact given the huge spike in raw material prices. I want to understand how much is the fixed-price contract in the entire order book? And if you can throw some color on that, the impact of the spike.

Okay. Fine. So if you see our order book pattern, we have got around 41% from government -- pure government, 46% from PSU, which contains around 87%. And as you can see that most of the government tenders, they cover the escalation. But there are some exceptions. So I have checked it. Around 80% of our jobs are under -- covered under escalation. But I also must say that escalation clause does not cover the entire cost hike what is happening today. So there will be some effect. Ballpark in steel, it is around 0.2% to 0.4%. And structural steel will be around 0.3%, 0.4%, put together close to 1%, and some effect from the cement. So 1% to 1.5% effect from this hike in commodity prices will be there, which should be mitigated by the contingency provision what we have. So we'll do our proper analysis during next CTC. But so far, whatever has been done, we have already taken care in our, I mean, result. Yes.

So it means that you don't see any major impact of the raw material prices going forward in your margin. Am I right in saying that?

You're right. We have to -- only thing, we have to take our contingency utilized to mitigate this cost hike on the steel and cement price. Yes.

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

So to begin with, I think, if you could share your thoughts on the margin. I mean this quarter, the margin has been fairly good, I mean, way better than our expectation or the guidance that we generally gave. And this has come at a time when steel and cement were moving up. So does it mean, I mean, there were some products which were nearing completion and there have been some cost readjustment, which is why we've been able to deliver this margin? And whether these margins are sustainable in the coming years or quarters, I mean, based on the order backlog mix that you have? Because essentially, marine and MRTS are still very high in our order backlog wherein we do margins which are better than some of these other segments.

Yes. I think some of the jobs, which are in the verge of completion, like Kolkata Metro and some of the marine jobs, so we could take the contingency utilized in our margin. That is number one. Number two, the job mix what I have -- what I said now are pretty good. The difficult job like elevated metros are hardly any left out now. So most of the jobs are from underground sector and marine sector, and that is the reflection in our margin. Going forward, it should continue to be in the same run rate, but there will be some effect of COVID, and we don't know the steel price hike, how much it will affect. So these things are not in our control. Otherwise, operation-wise, I don't see any challenge to maintain the margin.

Sure. And sir, second question was eventually, I think, given the fact that the Kolkata tunneling is done now and even your Bangalore elevated is on the verge of completion, at least 3 [indiscernible]. And we -- I mean, when we spoke the last time, the idea was to kind of file for claims once we have finished these projects. So we are nearing completion. So given the fact that we are almost there in terms of finishing these 2 projects, have we started engaging with the clients for claims at Bangalore elevated as well as Kolkata Metro?

Yes. Both the jobs, we have submitted our variations and expenditure what we incurred and what we think is payable under the contract agreement. So discussions are going on with the clients in terms of elevated Bangalore Metro and underground Kolkata Metro, both.

Sure. Possible to share the numbers, I mean, the kind of variance -- variation that you would have filed with these clients?

It's too early. I think once it goes couple of months having discussed with them, then we'll realize how much we will be able to achieve in an amicable manner and how much still has to go for arbitration.

Sure. And just an update on your IRCON tunnel. I think you spoke about all the other projects. I mean IRCON tunneling was not there in your opening remarks. If you could share your thoughts. I mean you were supposed to make substantial progress by May on these tunneling projects. And also, I mean, if you could share your thoughts on Bangalore underground metro. I think last time we spoke, I mean, you were supposed to lower our TBMs by April. And you said, I mean, we are in the process of lowering it now, June, so which is a 2-month delay. So was there any delay in terms of getting work front in place and which is why there's 2 months' delay? And how are the things progressing at underground metro now in Bangalore?

Okay. I'll answer your last question first. This Bangalore Metro I have already told that it has been lowered already. TBM is already in position. We have to now start tunneling anytime. So that is done. And I'm sorry that I missed out that Sivok jobs. Yes, there are 3 jobs going on there. And fortunately for us, all the fronts, each job is having to 3 to 4 fronts. That means 3, 4 machines are working at different locations of the tunnel, each job. All the locations, the machines are mobilized and tunneling is in progress. But unfortunately, there is a total lockdown in West Bengal since last maybe 2 to 3 weeks' time. And unlike Mumbai, where the constructions are allowed in a restricted manner, in West Bengal, even no construction is allowed. That is why for the last 2, 3 weeks, the work is not going on. Otherwise, prior to that, it was going on full swing.

[Operator Instructions] The next question is from the line of Vibhor Singhal from PhillipCapital.

Congrats on a great execution in this quarter. Sir, 2 questions from my side. As you mentioned that at this point of time, the execution is, to some extent, impacted by the second wave of COVID. Could you give us a ballpark number as to what level of execution would we be looking at right now? So let's say, are working at 70%, 80%? What kinds of number are we looking at this point of time?

Well, what we have seen in the month of April and May just concluded, from our expectations, the progress is less by around 15%.

Okay. So it's down only 15%. So that probably means that your supply chain and -- raw material supply chain and labor and all, they are pretty much intact. They are impacted but not very badly as it was last year.

Yes. Actually, 3 issues are bothering us: one is, of course, the less supply of oxygen; second is total lockdown in West Bengal; and third is, of course, some affected labor and workforce. So as you know, in the month of April, it was 15%. May will be a little bit more. I don't know how [ much it would be ] in the month of June. So around that.

Sure, sir. Good to hear that. Secondly, on the Kolkata Metro, just wanted to understand what is the process. So as we understand that because of the entire COVID as far as the problems that we faced, I think we had mentioned before that there are also claims with the insurance companies that we would be looking to file. So the process, is this that we will first go to the client, that is, the West Bengal government, and then try to settle with them. And we don't get -- whatever we don't get with them, that we go to the insurance company. How do these 2 entities work in terms of relieving us of our cost or time overrun?

Well, as far as Kolkata underground is concerned, we are straightforward. Variation was done because of this incident, which, we think, is payable by the clients. So that is one element, which has nothing to do with the insurance. But another element is the insurance claims. And as you know, insurance claim has got 2 components again: one is contractors' all risk policy and another is third-party liability. In this case, third-party liability is jointly with the client. So whatever compensation we had to pay to the locality, to the society, that we believe will be reimbursed by the insurance company. And meetings are going on. We are yet to know the numbers. We'll let you know once it is completed.

And that claim, the third-party liability that has been filed with the insurance company, that claim will have to be ratified by the clients because we are both together in that region of claim, right, sir?

See, jointly, we are the -- I mean, jointly with the clients, we are fighting with the insurance company, but the expenditure is done by us. So whatever money comes to us, it will be credited to...

Filed by us.

Yes.

Right. So sir, as of today, as of March 31, what would be the outstanding receivables from the Kolkata Metro project?

See, generally, whatever payments were due to us are being released based on the contractual timelines for payment. So there is nothing extraordinary which is outstanding from the client, which is due to us.

Okay. So it's not just a running kind of receivable that we have?

That's correct. The running bill and maybe the retention or whatever is contractually held back by them. Other than that, there's nothing that is overdue.

Sure, sir. Great. Since you've touched upon it, Prasad sir, just one question if I could ask you. Our debt has come down quite substantially in this year, and balance sheet is also kind of moving down, what would be our outlook for this year, I mean, given the strong order book that we have and we would probably be looking at good execution. But do you believe the debt to remain stable at this number or it might inch up a bit in this year?

Well, I think it will inch up a bit because infrastructure is a working capital-intensive business. And initial funding for all the new orders that we get has to come from our side till the billing process commences with the client. So there will be some working capital that will need to be infused into the projects. So we might see some increase in the debt level, but we don't expect any significant upward movement in the debt.

Sure, sir. Sir, lastly, if I could just squeeze in one more question, Jayanta sir. Sir, I know it's difficult circumstances to operate in, but are we kind of giving any guidance? What is the kind of top line or execution that we might be looking in FY '22?

Well, based on the whatever work in hand, we'll definitely expect there will be a close to 15% to 20% increase in top line.

Right, sir. And that will be subject to COVID, of course, and if the COVID situation remains stable and doesn't deteriorate much further from here?

Yes. Yes.

[Operator Instructions] The next question is from the line Shreyans from Equirus Securities.

Congratulations on a very strong performance, operating performance. Sir, my question pertains to the JV share of profit. It seems to have cooled off a bit during this quarter. So any particular reason for it?

Yes. Well, no, there's been no change as such. But if you see in the previous quarter, we had recognized a good amount of margin on the JV projects. So it is derived from the CTC that we have and based on the percentage completion, we are recognizing the margin. So in fact, last quarter, if you recollect, there was some margin recognition because we completed the tunneling work in the Mumbai Metro project. There's nothing extraordinary or different that we have done this time. But based on the progress and based on the milestones achieved, we are recognizing the margins.

Got it. Got it. Okay. Sir, secondly, our other income this quarter is higher than as reported. So any particular reason? Is there any one-off?

Nothing extraordinary. These were some write-backs, et cetera, that we have done during the quarter. When we review our provisions and accruals at the end of the financial year, if there is something that we find that is more or in excess of what is really required to be kept in the books, then that gets written back. So this is arising from that.

Got it. Got it. Sir, then lastly, on the CapEx guidance. What would be our CapEx number for this year?

Well, we don't expect any major variation from the CapEx. I think last year, in 2021, we spent about INR 80 crores, INR 90 crores on CapEx. And this year, we expect it to be a similar number.

[Operator Instructions] The next question is from the line of [ Vipul Shah ] from Sumangal Investments.

Sir, the order book, which you have mentioned in the presentation, is at the consol level, right?

Yes, that's correct. It includes our share in the joint ventures.

Okay. And what should be the stand-alone order book, sir?

Stand-alone order book is about INR 9,800 crores?

9,000?

INR 9,800 crores.

INR 9,800 crores. And sir, what should be the debt trajectory one year going forward?