Dhruv Consultancy Services Limited (541302) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Dhruv Consultancy Services Limited Q4 FY '24 Earnings Conference Call, hosted by Kirin Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Sarita Dube from Kirin Advisors. Thank you, and over to you, ma'am.

Good afternoon, everyone. Thank you. On behalf of Kirin Advisors, I welcome you all to the conference call of Dhruv Consultancy Services Limited. From the management side, we have Mr. Pandurang Dandawate, Chairman and Non-Executive Director; Mrs. Tanvi Auti, Managing Director; Mr. Snehal Patil, CFO. Now I hand over the call to Mrs. Tanvi Auti, Managing Director. Over to you, ma'am.

Good afternoon, esteemed ladies and gentlemen. I extend a hearty warm welcome to each one of you who has joined us today for Dhruv Consultancy's Investor Call, where we will delve into the financial results of the fourth quarter of financial year '24. Your participation and interest in our company's performance are highly valued. During this session, we'll offer a concise overview of our Q4 FY '24 financials, providing insights into our achievements, the challenges we faced and outlining our future strategies. But before we immerse ourselves in the numbers, let's take a moment to reflect on our journey so far. Dhruv Consultancy Services Private Limited was formed in 2003 and headquartered in Navi Mumbai. Dhruv Consultancy stands as a beacon of excellence in infrastructure consultancy. We are working in 6 sectors at present, the roads, bridges, tunnels, architecture, environmental and delivery. Our commitment to delivering comprehensive services, spanning design engineering, procurement, construction and project management has positioned us as a trusted partner in the realm of infrastructure development. Our diverse service portfolio includes preparation of detailed project reports, conducting feasibility studies, construction supervision and technological advisory services. So from project planning and designing to technical and structural audits, we emerge as a strategic ally for investors, navigating the intricacies of infrastructure projects. Let us now delve into prominent achievements or milestones achieved during Q4 FY '24. In the recent quarter, our company has demonstrated significant achievements with several key milestones. We have obtained an LOA for preparing the detailed projects report for highway projects under Maharashtra Road Improvement Phase III valued at INR 1.32 crore over -- for 12 months. Additionally, we secured another LOA for Bihar highway projects for preparation of DPI valued at INR 48.05 lakh over 36 months. Moreover, Mr. Sharadchandra Chaphalkar joined as a nonexecutive independent director, contributing over 30 years of expertise from leading defense entities in India. The company also completed project management services for rail overbridge projects in Ayodhya, Uttar Pradesh, and established a wholly owned subsidiary Dhruv International Private Limited in the U.K. We further secured an LOA for consultancy services as authorities engineers for projects under Bharatmala Pariyojna in Manipur, valued at INR 13.78 crore for 48 months -- for 84 months. We successfully converted 6.93 lakh equity shares against share warrants. Looking ahead, Dhruv is strategically shifting its focus from the domestic market to international markets for FY '25 and '26. Recently, we got shortlisted in -- for ADB projects in Manipur, then in Mozambique and Ghana. The company aims to target large-scale projects over INR 50 crores, such as coastal roads, expressways, iconic bridges and sealinks to significantly enhance its revenue growth. We also plan to venture into African countries, including Tanzania, Zambia, Uganda, Mozambique and Kenya, as well as Gulf countries like Saudi Arabia and Dubai. Dhruv has now positioned itself for substantial global expansion. As of 31st March 2024, the company's total order book stands at INR 627.89 crores with INR 345 crores of unexecuted orders, reflecting a strong pipeline and a promising future. I will now request our CFO, Mr. Snehal, to delve into the company's financial performance. Over to you, Snehal.

Good afternoon, everyone. So I will proceed with our quarter 4 financial highlights. In quarter 4 FY 2024, Dhruv Consultancy Services Limited reported notable financial growth, with a total income of INR 25 crores, reflecting a year-on-year increase of 15%. The EBITDA stood at INR 2.8 crores, making a year-on-year growth of 49% with an EBITDA margin of 11.15%, up by 257 basis points. The profit after tax was INR 43 lakhs, showing a significant year-on-year rise of 410% and a PAT margin of 1.73%, an increase of 134 basis points. The diluted earnings per share grew by 366% to INR 0.28. For the full fiscal year 2024, the company achieved a total income of INR 82.41 crores, a slight year-on-year growth of 0.13%. The EBITDA was INR 14.75 crores, up by 43% year-on-year with an EBITDA margin of 18%, an improvement of 540 basis points. The PAT reached INR 5.9 crores, a year-on-year growth of 22.77% with a PAT margin of 7.14%, an increase of 132 basis points. The diluted EPS, in this case, increased by 25% to INR 3.87. Further, the total expenses for the year 31st March '24 have decreased by 1%, that is INR 1 crores, mainly due to the decrease in administrative expenses, INR 7.95 crores, which was on account of decrease in professional fees, due to completion of our major sites, which is offset by increasing other admin costs of INR 4 crores. Employee benefit expenses have also increased by INR 3.6 crores. Finance costs have increased by INR 1.2 crores and amortization cost is also increased to INR 2 crores. So in this case, our -- as stated earlier, our EBITDA margin has grown by 18% year-on-year. Further moving to our quarter-to-quarter analysis, the total expenditure has increased by 21%, and our revenue has exhibited a 9% year-on-year growth. So this translates to an increase of net profit of INR 0.85 crores. So that is it from my side for -- about financial highlights.

So in both Q4 FY '24 and financial year 2024, the company has achieved remarkable financial milestones, attesting to our unwavering commitment to excellence. These achievements underscore our dedication to financial progress and sustained success in the dynamic landscape of infrastructure consultancy. Before we proceed to the interactive session, I would like to extend heartfelt appreciation to our esteemed stakeholders for being indefensible contributors to our journey of growth. Their unwavering support has been a cornerstone of our success, and we sincerely value their significant role in our achievements. I now invite you all to engage in a Q&A session. Your insights and inquiries are highly valuable to us. Thank you once more for your presence and ongoing support. Thank you.

[Operator Instructions] First question is from the line of [ Romil Gala ].

So my question is, have you done any employee addition to take the care of rising order book?

Yes. Employees -- just to answer your question, employees are being added by our HR and BD team, we have a very strong in-house recruitment team who does this work on a daily basis. So when it comes to recruitment, first, we have to take their consent while bidding. So during submission of bids itself, we have to take the consent and as and when the project is awarded, the employees are taken on the role. So this is a continuous process that goes on as far as government projects is concerned. For private assignments, we don't need any additional employees that needs to be recruited. We have a very strong in-house team to carry out any design or any detailed design projects in-house.

Okay, ma'am. So are we looking for any -- for office to invest in overseas market to handle the project there?

So whenever -- right now, we have opened a subsidiary in U.K. by the name of Dhruv International Private Limited. Definitely, there will be an office establishment in U.K. this year. So we are just expecting a few orders from Tanzania, then Ghana and Mozambique, where we are already shortlisted. And since the turnaround time is 8 to 9 months, it takes time to give us the work order. So whenever the work order is received, we will keep our investors informed. So all the -- in whichever country we get the order, we will have to establish an office there. And -- but the employees who would be working at that site are already submitted along with the bids. So we don't need to find any additional staff as such, support stuff would be needed, but the key professional or the main professionals who would be working -- the engineers who would be working at the site are already -- their consent has been taken by submitting the bids itself.

Next question is from the line of [ Mahesh Sheth ], an individual investor.

Yes, I just wanted to ask about the company's order book, it has crossed around INR 600 crores mark for the first time. I just -- what drove us for such high order inflow? And what is the execution period for such for the same?

Yes. Just to clarify, the total order book is INR 627 crores. Out of that, INR 350 crores is unexecuted. So the INR 350 crore unexecuted order book is to be executed in the next 3 years.

Okay.

Yes, 2.5 to 3 years.

Okay. Okay. Okay. And I also wanted to know about the export component of our order book. Can you brief us about the clients details or...?

Yes, sure. So right now, the export is zero, that is being done. We have already formed a subsidiary in U.K. and through that, we are going to execute all our international orders. We're just waiting for order to be issued to us. The clients there -- so we are working at -- we are looking at the private sector, as well as the government sector. I'll talk about the government sector first. So in government sector, we are looking at multilateral funded projects wherein Asian development -- by Asian Development Bank, World Bank, African Development Bank. So the projects who are funded by these multilateral development banks, we have bidded. We have submitted our financial proposals. In over 20 bids, we have been shortlisted, another 120 bids are yet to be evaluated. So there is a long list of projects that is there ahead of us in the coming years. Along with that, we are targeting a few private assignments in Saudi Arabia, in other Gulf countries like Dubai, wherein we will be working as a project management consultant or a retail design -- or a design consultant from the contractor's side who are working as a contractor, executing these projects. So there will be a mixture of private assignments, as well as government-funded assignments.

Okay. Okay. So you said we have a presence in U.K. and also in Saudi Arabia, right?

No. We have a subsidiary formed in U.K. In Saudi Arabia, we are in talks with a few companies for executing that.

Okay. Okay. And are there any other regions, are we present in or we have subsidiaries in?

Right now, yes internationally, we only have in U.K., no other country, only the U.K. establishment is there. But we had -- the projects that we would be executing through this U.K. company would be in Gulf, in African region that I mentioned and in Southeast Asia, Nepal, Bangladesh, Vietnam, Cambodia.

Next question is from the line of [ Kajal Pathak ], an individual investor.

First of all, ma'am, congratulations for your numbers, financial results.

Thank you so much.

My question was our revenue growth for '24 was flattish, but there was an impressive improvement in EBITDA and profit margins. So can you provide us detail for the improvement and the profit? And what was the reasons of flattish revenue?

Yes. So as we all know that the code of conduct is in place right now. And the last -- fourth quarter, especially starting from March, so March, April, May, June, the new orders that come in, they take a slightly delay. And since elections were already due, the orders that we receive usually in the quarter 4, we received a less number of orders due to this. This happens every 5 years, if you see every election. Secondly, why the bottom line has improved is, because the projects that were awarded to us, the NHAI projects, especially and the MoRTH projects that were awarded to us somewhere in 2018 and '19 also 2020, have come to an end. So all the profits have been realized for those projects and that is why there is an increase in the bottom line. So there were a few sites that were closed, and we received our final payments also.

Okay. Got it. And normally, we should consider Q4 better as compared to quarter 3, but quarter 3 was much better, right?

Yes. This -- as I said that this mainly happens due to the elections that were due at the central government level. And this is a trend that is there every 5 years. Hence, now with international orders coming up, we will be able to mitigate this sector. So that there is no dependency on the central government elections.

Okay. Yes. And my next question was what is the revenue and profit growth estimate for FY '25 and '26?

So as a company, I'm not allowed to disclose that, but definitely...

A range would be...

Yes, there would be -- it would be in the range of 10% to 20% growth.

Profit growth, right?

Profit -- overall growth. So the order book that we are submitting right now is over INR 1,000 crores. So the bidding that is happening for this year is INR 1,000 to INR 1,200 crores. So even if we consider -- so I'll talk in the terms of order book, in terms of order book, if I say INR 1,200 crores is being bidded, and even if we assume a success rate of 20% to 30%, we would definitely be able to double this order book.

Next question is from the line of [ Garvit ], an individual investor. As the line was on hold for the current participants -- [Operator Instructions] Next question is from the line of [ Chaitu Upadhyay from Gajanan Capital ].

A question of mine is, what is our working capital cycle, may I know more about it?

Yes. So at NHAI/MoRTH it is in the range of -- at NHAI it is 45 to 60 days. And for MoRTH, the Ministry of Road Transport and Highways, it is 90 to 120 days.

Okay. And the EBITDA margin for 2024, I mean, is 18% on [indiscernible], right? So do you think it is sustainable in the future?

Yes. That is why, in fact, we are hoping for this to grow more because we are adding in a lot of clients this time. We are -- not just in international, but in domestic market also we are now targeting a large ticket size projects wherein right now, we were getting orders of INR 5 crores, INR 10 crores, INR 15 crores, we will now be getting orders of INR 20 crores and above, INR 20 crores to INR 50 crores is what we are bidding right now. This -- the kind of work that we would be doing is same, but the profit margins will be better here. These are mainly the state government assignments. Maharashtra itself, INR 8 lakh crore projects have come up in the past few months. So we are actively pursuing those projects other than MSRDC, there is MSIDC. Then there is ADB-funded projects, HUDCO-funded projects and other state governments also -- in UP, that is UPEIDA, where we are already working on Ganga Expressway. So the profit margins are better there. So along with the international sector, where definitely the profit margins are good, we are targeting at the domestic market, but with a wider client base, where the -- we are envisioning an improvement in the working capital cycle as well as the bottom and the top line.

[Operator Instructions] Next question is from the line of [ Saloni Yadav from SK Analyst ].

So my question is, can you address me about any delay in payment receipts?

There are delays that happen sometimes, especially if it's a final bill. But now in the past few years, there has been very good changes, because everything is happening digitally. And even NHAI and Ministry of Road Transport, they have a portal in which we come to know that where our payment is, why it is being held. So we are able to address issues in a better way with things being digitalized, not just in our office, but in the clients' office as well. So -- but 45 to 60 days is still there for NHAI and 90 to 120 for MoRTH.

Okay. So how are our teams are in international market?

How are our?

How are our teams are working in the national market, like what is the status?

Yes, right now, we have just identified the manpower and we have taken their consent for a particular project. As and when the client asks us to mobilize or be at the site, our team will reach there.

Next question is from the line of Abhinav Bhandari from Sohum Asset Management Private Limited.

Congratulations Tanvi-ji for a phenomenal year FY '24. I just had one question. Just to understand from a quarter-on-quarter perspective, when I'm seeing December quarter and March quarter, there is a decline in profitability, which is mainly, I think, is because of increase in other expenses. So just to understand the reason for this increase, and the reason for this decline in profitability.

So ideally, this should have been more. But as I said previously that the revenues are flat for Q4 FY '24. If this would have been -- if there would have been no elections this year, then this would have gone further up. But -- and as well as, it would have impacted the profitability also. The profitability, why in Q3, it was better. Now Q3, some new works were awarded, which were executed in Q4. So initially, as I say that mobilization expenses for new projects are high. And hence, these mobilization expenses are there, then there are some provisions also being done in Q4, mainly due to the ECL and leave encashment, gratuity, so these also are being considered in Q4, and that is why the Q4 bottom line is not very high as compared to Q3. But with international orders and new larger ticket size projects coming up now, this will be improved further in the coming quarters.

Got it. So just a couple of follow-ups. One is, how much would be this ECL provision that you talked about, which would have been taken in quarter 4?

Yes. Snehal, can you answer this?

It will be approx INR 1.8 crores.

Okay. Okay. And the second parallel question was just to understand if things would have been normal, broadly, our top line would have -- broadly would have increased by how much, just to understand the actual spread...?

INR 90 crores to INR 95 crores.

[Operator Instructions] Next question is from the line of [ Rajnesh Bhel ], an individual investor. Sorry to interrupt [ Mr. Rajnesh ], your voice is very low.

Yes. As we discussed during the Q3 call that you are bidding for some international projects. So what is the status of those projects ma'am?

Yes. So there are 3 projects that we are due to receive our work order. 1 is the Tanzania, it is around INR 50 crore assignment. Then there is 1 project in Mozambique and 1 project in Ghana. So we are just expecting a work order any moment any time. And as and when it is there, we will be updating our investors and that is why the reason that the U.K. subsidiary was formed, because through the U.K. subsidiary, we would be executing this order.

Okay. And recently, you have announced a prequalification for Dhaka project. So what is that project and how much value is for that project?

So the financial is yet to be submitted for that project. This is just the shortlisting letter. And the -- it is definitely above INR 20 crores, but we are yet to submit our financial proposal for this.

Okay. And as I think you told that your other expenses in this quarter are mainly because of leave encashment and others, because I think other expenses are on very high side in this quarter?

Yes, yes, yes.

[Operator Instructions] As there are no further questions from the participants, I would now like to hand the conference over to Ms. Sarita Dube from Kirin Advisors for the closing comments.

Thank you, everyone, for joining the conference call of Dhruv Consultancy Service Limited. If you have any queries, you can write us at [email protected]. Once again, thank you, everyone, for joining the conference call.

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