Dilip Buildcon Limited (DBL.BO) Earnings Call Transcript & Summary

So my first question is on debt. So I think Rohan spoke about this formation of InvIT. So if you can help us understand what is the total breakup of the HAM debt, asset debt, stand-alone debt, asset debt and outside debt, which is the assets, DB assets. So if you can help us and how does it move on the InvIT formation happens?

Basically, there are 9 assets basically planned to be transferred to InvIT assets of DBL and 1 asset of the third party. The total debt to be transferred is close to INR 3,850 crores to the InvIT.

So how much is the current debt for total stand-alone do we have? So if you can help us understand stand-alone then asset debt and the third-party debt and then how it will come down after the formation of them. So I know stand-alone will be net cash in 2 years, but I just want to understand how is the consol look?

So let me tell you on quarter 1 ending, my net debt is INR 8,266 crores. Basically, out of that, around INR 3,850 crores debt will move out of these 9 assets. So assets INR 3,850 crores.

And stand-alone debt is about INR 1,700 crores, right? How much is the stand-alone debt?

Crores INR 1,661 crores. So out of that, I explained the INR 500 crores reduction will be done by 31st March 2026, which we guided in last call.

So out of the total debt of INR 26 crores, INR 50 crores. So what will be the residual debt on the asset side after this? And how do we intend to lock it?

If we project the consol debt as of 31st March 2026, so INR 3,850 crores will go. But under construction date, which is INR 218 crores, which will increase by at least INR 1,000 crores because the projects are under construction. So there, we will draw the debt. So net-net, around INR 3,000 crores debt will go from here.

Okay. And when all these assets are completed, then what will be the debt after the peak debt on the consol basis? And what's the plan for monetizing the balance?

The plan is already updated like we have already agreed with long-term plan with Alpha, 10 assets, 26% will go. And basically, eventually the 10 assets entirely will be transferred to shrimorry,la DBL InvIT. So during FY '27, I believe '27 and I believe entire debt of HAM, the existing HAM projects will be shifted to the InvIT. After remaining debt will be stand-alone debt and the coal CRL debt. That's it.

Okay. So coal CR, how much is the debt right now?

It is INR 420 crores as of 30th June 2025.

Will go as the CapEx Okay. Second question is on the ordering. So I think [indiscernible] was mentioning about the ordering this year from NHAI. So sir, I mean, has all the issues like earlier, there were issues of now any project NHAI had the authority will move to the cabinet committee for approval. So now has that been sorted or still that is -- that same way it will be done? And secondly, the house, what is the status of the land acquisition for this INR 3 trillion, which you spoke about in terms of ordering? And beyond roads, what are the other segments you are exploring given that in 2 years, we expect to be free -- net cash. So what are the other segments you are evaluating, especially on the renewable side, if you can highlight anything on battery storage, some of your peers have been getting orders there, solar and other segments?

Sir, in terms of the new areas or the areas that we're already working in, we mentioned all the 8, 9 verticals that we do in all those areas we're looking at, whether it's water, whether it's metro, whether it's specialized bridges, tunnel, all those areas we're looking at. But besides that, we're also looking at energy sector, renewable sources and all. So we're also looking at those kind of projects. Mining continues to be a large focus for us. Those are the areas that we are looking at for new orders. And the first question that you wanted to on the land acquisition status all of them, they are in different stages, but the government, given that there was lower ordering activity in the last 2 years, there is -- and because these projects have also been further delayed, the land acquisition, while it is a project to project specific thing, but it is definitely in a decent shape than what it was earlier when the government started ordering in a larger pace. What has happened is because there has been, like I said, in the last 2 years, muted order activity, while the government was intending to push out more projects, they were not able to. So the land acquisition has obviously improved as an overall percentage.

And just lastly, any signs of revival on the state CapEx earlier when we have seen at least in Maharashtra and kind of projects now we're talking about Cx Gujarat is talking about big plant. So anything on the ground which has taking shape up so where we can participate and to us near...

State matters are extremely unique to each different state given their own sort of consideration at that time and which state is going into elections or not. During around elections, they start focusing more on social rollouts. And after that, there is a bigger focus on CapEx and whether it's state or national, that kind of trend does repeat. So instead of diving into specific states, that is basically the larger sort of strategy that they do adopt. More and more states have started doing CapEx on specialized projects, whether it's large expressways or unique or sort of large infrastructure project. And we'll have to go into each state by state. While we do look at different state government orders, it is a more measured approach looking at what is the financial tie-up for such projects and then only as a company do we bid for that.

Okay. Just lastly on the margins and EBITDA margins, I mean, our size has decreased because of the order slowdown, but some of our peers are still doing better margins like 13% to 14%. So directionally, I mean now this is the bottom of the margin or this is for us like a new normal? Or do you think with the mix changing, the margins can again go back to that 13% to 14% EBITDA range?

I might not be able to sort of comment on specific peers that you may be referring to, but each of us are working in different areas and sectors and different government authorities and agencies with very different competitive intensity. Part of our business strategy for the last decade plus has been our own CapEx, which is where we had higher fixed cost, but that translated into better sort of margins when we had a larger order book and good visibility. Obviously, in a scenario where the order book scenario was depleted, that our fixed costs will remain and which is where we have addressed that and reduced all of those also on a considerable front, which is why we were able to protect our margins even right now. Now going forward, as the new orders come in, what and we anticipate as a company that once you have enough orders and once this fixed cost that the company has gets absorbed even better, there will be an improvement in margins. But different verticals will have different margin profile. So for me to say where we are right now, I definitely think this 10%, 11% is probably at the lower end of the margin profile that we are at. Our anticipation, at least when we hope once things are on a regular kind of basis and the order book is fine and we are targeting what we're doing, we're able to fully utilize all our assets. It should be at least a 300 to 400 basis point improvement in an ideal scenario, where I will also look at early completion and all of those things as well. All of that has not kind of happened. So let's see how it goes. And once we have more orders, new orders, what profile we win, we'll be able to give you a better guidance. But this you should definitely consider that 10%, 11% is bottom level of the margin profile.

The next question is from the line of Parekh from Investment Managers.

I just wanted to know you're planning the listing for InvIT. So what is the indicative valuation and your stake in it, if you have any thoughts on that?

Basically, the -- if you can refer to Rohan's opening remarks, wherein he said the BSE, NSE and SEBI in principle approval is received. We are basically updating our offer document. So we believe this will be somewhere in September. So September month, the InvIT listing will happen. Valuation, I can't comment now because that is going on with the investment bankers. And I said we are transferring 8 assets. asset is third party. So our stake would be 74% from the 8 assets, but asset basically dilute my shareholding. So would be closer to 70% or so subject to the equity raise in InvIT. So basically, will be in the range of 70%...

Okay. Got it. And on the order book, right, we understand on the margin front, but given you are already at like the bottom of the margin and many players across different segments, they are showing growth. It is not like they're not showing. Even larger players, they are showing growth in order book across different segments. So are we being overly conservative? Or what is it that we are not able to win orders because it's been obviously a secular decline. And if you remove MBO, we are like this INR 10,000 crore order book?

Sir, again, I would not be able to comment on which specific peers that you might be referring to. But largely, the industry, if I talk about, let's say, specifically road-focused EPC players from the national government, 90% plus HAM projects have gone to unrecognized players. And I would say the EPC front has been almost 95% to smaller unrecognized players, which are not listed. So there has been a significant. So if they are showing order inflow, that is maybe in separate sectors that you may be referring to, but the road sector from the national government has definitely been muted for all of us -- for all of our players. And that data at least I know. So what new sectors -- now let's be clear, when they have taken order book -- we mentioned very clearly that we have a very specific focus. We have a very specific goal. We don't want to take new orders at the cost of our profitability, at the cost of hitting our return ratios or just for the sake of taking orders. We are happy with what we are currently executing. We have stable cash flows which are already coming in and which are very sort of -- which is giving us a good sort of visibility into what we are kind of doing currently. Some of these orders that people may have won, and I can send you data if you want specific, as low as even INR 1,000 crores projects, people have been minus 35% for 20 bidders in that. Do I want to bid an order at that price? No, I don't. Because I know that project will not be completed or if it will be completed, it will be of a very terrible quality. I'm sure you would have noticed there has been a high incidences of people posting videos and pictures on social media of roads getting and public infrastructure assets getting washed out after rain. And these are even like good national highways and expressways, which are facing those troubles of poor quality issues. That is -- that whole issue has only started and happened because NHAI and the national authority decided to reduce criteria because of which people bid stupidly because of which you can't make an asset worth INR 1,000 crores and INR 700 crores and say it will be of the same quality of INR 1,000 crores. And -- we don't want to get into that. We take a lot of pride in our construction quality. We have till now bid about and about INR 45,000 crores plus of HAM assets, which is the largest for any construction company in India. The biggest sort of state of pride for us is not the size of what we've done, the fact that all our projects that we've done, all have been done with exceptional quality, and we have not faced challenger issues of any reduction in annuity in any places. Even [indiscernible] when it's running its own InvIT, they are relying now Shrem has 24 plus, I think, 35 assets that we have given to them. All of those assets receive annuity before. the quality report of any quality. So as a company, if you want that will I be changing my policy towards the quality work I'm doing, I won't be. We don't want to get into a situation where not only does it impact our name and reputation, but also our finances, so to say. So which is why we have provided sectors. And even if you look at our road sector order book right now, it's a smaller part years ago, it was 80%, 90% of our order book. Right now it's 20%. So we don't want to be -- the fact that we have built capabilities over 8, 9 sectors in the last decade was precisely why we are able to do that. A lot of players in our sector are diversifying into other areas. Now they won the orders. The performance of it will only come in the next 1, 2 years that you'll be able to see. Even the orders that you have won, while there might be some decent performance right now for the orders that we already had. But going forward, performance will only come that in the years to come. So that is basically -- if I talk about the coal MDO, the size of in terms of size, it's possibly one of the largest order book overall that any company has. And it is not just largest in terms of like the size that is there for any player, but it is also giving us visibility for the next 40 to 55 years. So even like a nuclear situation, if I have not received any orders in my other businesses, I still have a continuous revenue stream going forward for the next 40 to 55 years. And with our reducing sort of debt, improving ROEs and clear visibility of revenue, do you -- would I want to trade off that for a short-term revenue, which is at a loss? No, I will not. That is the long and short of it, sir.

That's very helpful. Just one follow-up. You mentioned that you're seeing obviously H2 to be better -- so one, just from H2 and maybe next year perspective, what kind of visibility or any indication that you have from an order book perspective? And second, other than road, like you mentioned, since you've got into other sectors, can't we use other sectors like irrigation, water, et cetera, to win orders so that it will also overall improve not just the revenues, but like you said, which scale even your margins. So you just throw some light on those 2?

Sir, order project like INR12,000 crores to INR 1,000 crores and all these other sectors are already. We're looking at water. We're looking at tunnel. We're looking at bridges, we're looking at metros, mining, all these sectors we're looking at. the most important thing, I think, takeaway, which I think the larger market is probably not taken. We were growing at a very high pace from 2014 -- '15 onwards, and we were growing Y-o-Y 20%, 30% at least. Our order books were growing very robustly. But also realized so was our debt at that time. Now at its peak, our debt was INR 3,500 crores Imagine in the last 2 years, now that is why I think that turnaround the company is probably not -- in the last 2 years, we have not won orders that we wanted to. We have had a depleting order book. Because of depleting order book, we would have had pressures on our cost structures, all of those things. Our margins have not been yet we have consistently managed to reduce debt, bring it down. So even in a bad external environment, what I've tried to say, look at our revenues are down furthermore, our order book may be down. But our net debt is at INR 1,500 crores, INR 1,600 crores right now, even though temporary this thing. But we are talking about a reduced net debt of about INR 1,000 crores by the end of this financial year, even in this kind of scenario. And I think that is the largest takeaway that wherever -- and not only the stand-alone, even on the consol level, other sort of CPI loan that we had, we are reducing it even with all these external challenges. So the turnaround in terms of strategy of the company, the focus that I've mentioned that we are kind of doing, we are not chasing just large order book sizes or more and more growth. We are chasing sustainable revenues and better ROE that listing with that goal, we are looking at projects across the board. And we are fairly confident that in this financial year, INR 12,000 crores or INR 10-odd crores of new orders, we will win. There are a bunch of orders that we have already bid for, and we're looking at opening new areas as well. So the conf for this year is fairly, fairly high.

The next question is from the line of Deepak from Investments.

Just wanted to check it out 2 things. Firstly, you mentioned about the listing of the we mentioned we would be transferring the assets. Are broader thought process on the project which are moving [indiscernible]

Rohan, assets in first phase. Second phase is we have filed assets. So now the next asset will go in next phase. So 3 assets we already completed 7 out of 7, 4 assets will be completed this year. So this financial year, we will have 7 assets completed. And now to transfer InvIT, we should have NHI NOC. So once the asset complete, we apply for NOC. So it is a time taking process. So after completion, it is 6 to 12 months where we can transfer to InvIT. So the assets, I have said we will transfer in FY '27 entirely.

Okay. And also second part of the question, I think if you can also give a broader clarity at the holdco of these assets where all these SPVs are, what is the current debt we have for these HAM projects? And CP repayment which we have done, that was a part of that debt? And how much is the remaining outstanding as of now?

So let me give you the breakup of the consol debt. I said the consol debt is INR 8,266 crores as on 30th June 2025. Out of that, my net debt at stand-alone level is INR 1,661 crores. The balance is from the SPVs completed 3. So the completed asset is total around INR 4,550 crores. Out of that INR 3,850 crores will move assets balance will remain against 3 assets completed the asset which is under construction, the current debt as of 30th June is INR 2,418 crores which will increase by INR 1,000-odd crores by 31st March 2026. So net-net basis, what we are reducing is INR 3,850 crores from the completed asset which is going 0st-nNR3,00 crores will be reduced because of the transfer to InvIT number one. Number two, we have INR 285 crores outstanding debt as of 30th June from CPI. This debt we can prepay because this debt is to be paid in months. there is a window after August 2025, we can prepay early as we wish. So this is the plan.

Okay. So would it be fair to say even on the consolidated basis by end of FY '27, we will have...

No debt. I said consol basis, there will be 2 types of debt. One, stand-alone debt. So FY '26, we are reducing INR 500 crores further. So you can say around INR 1,000-odd crores debt will remain in stand-alone. The balance debt from the coal segment will remain and coal will remain is the project requirement. So after 2027 also, there will be some debt of stand-alone and the coal business. And if we win further HAM assets, then we will take further project debt that will remain in 2027. So it is not only 0 debt at [indiscernible]

The next question is from the line of Bhavin from Anand Rathi.

So my question pertains to the cash flow, sir. So when I see the cash flow in the present, so there has been a INR 1,000 crores of cash flow coming in through multiple sources bw,NR40roITNR INR 60 crores from the defer under mentioned purchase of investment of around INR 20 crores in current and noncurrent asset of around INR 540 crores in current of INR 143 crores. So can you just help me with the [indiscernible]

So if you can refer my Page 18 of the investor presentation, that is stand-alone cash flow, there are 3 buckets, cash from operating activities, cash from investing activity and cash from financing activity. So as far as operating activities, I have made INR 224 crores of cash, number one, before working capital adjustments. After working capital adjustment, my net cash flow invested in the operating activities is INR 491 crores. So in this quarter, my generated cash flow, INR 224 crores is invested and further I have invested around INR 500 crores. So total INR 700 crores cash flow is invested in operating activities, okay? Now come to the right side, the investing activities, you can see the purchase of invest INR19edIPLI. -- we have invested around INR 30 crores DIP.,2%.-net, INR crores sale, INR 254 crores came from basically fixed asset sold and basically INR 26 crores received from the -- so basically, if you see, I have invested INR 491 crores in the operating activities. I have got INR 84 crores from my investing activity. And similarly, in the financing activity, my net cash positive is INR 346 crores. If I add up all 3, then you can see INR 61 crores is net invested in this quarter either in operating activities and from the other 2 act received. So basically, net-net only adjustment is INR 61 crores.

I got it, sir. Just wanted to understand when you say working capital investment of around INR 700 crores. So what is it in the form of unbilled revenue is the major component of that [indiscernible]

So there are 3 items. One item is you rightly said unbilled revenue, unbilled revenue specifically for the JM projects, where basically the last -- the milestone is hydro testing, wherein we should receive 10%. And that 10% is already due once hydro testing is done because I already invested. There is no expense to be done. So once hydro test is done, I can receive the 10% out of these 3 projects, which is primarily for INR 50 crores, number one. Number two, my basically debt has increased marginally. Thirdly, I have reduced my creditors by INR 140 crores. So these 3 items together is more or less basically cash negative for this quarter.

After that hydro testing is done from the project. So when can we expect that cash flow to come in? -- and sir, with respect to the HAM assets divested around 26% stake. So sir, where does it stand currently in the balance sheet? Like does it stand in the noncurrent investment does it stand on the asset sale? So where does it stand?

So first of all, assets it is held for sale because we have already completed those assets. So it is in the held for sale, you can see INR 397 crores -- so this is about the asset block number one. Number two...

74% stake, right?

74% stake in the asset which will go in first phase. The second phase will be under the investment. So investment in the noncurrent invest.

The next question is from the line of Shravan Shah from Dolat Capital.

Sir, just a couple of clarification. This INR 3 lakh crores the pipeline that we have talked about, this is only for NHAI that we are looking at that they will be awarding this year?

Yes, sir, NHAI and both. NHAI and put together INR 3 lakh crore pipeline

Okay. Got it. And second, you also mentioned that we have also bid for a couple of projects can highlight that we have already bidded and where the outcome is yet to come? Are you talking about projects where we bid and outcome is likely to come?

Yes, sir. Kind of INR 200 crores we have bid for right now.

Got it. And second, sir, in other income this quarter, how much was the InvIT distribution for standalone?

Tell you the total other income InvITistribNR crores INR 14 crores from INR 9 crores from the -- basically the total income. So the total let me just give you [indiscernible]

Okay. Got it. And just a last clar8fervIT. So we will get the 100% that we will get the units obviously we will have [indiscernible] .

I'm replying to your question. If it is not, then please repeat your question. First of all, assets are going into InvIT. 26% assets we have already divested 74% with DBL. So basically, the 100% is transferred to InvIT. So we will be receiving units against 74% of [indiscernible].

The next question is from the line of Gaurav Gandhi from Gail Capital Management.

As you said, Minister of Transport has also highlighted and accepted this massive of loosening rules for bidding, which has led to entry of a lot of small unorganized players, which has affected the quality of construction. In his recent comments, we have seen that the ministry is willing to correct this thing. So any action or tightening of rules? Have you observed any such things?

Sir, we already mentioned earlier as well on this call that there have taken a bunch of steps around tightening of criteria networks. So those have already happened. We mentioned that earlier in the call as well.

As there are no further questions from the participants, I would now like to hand the conference over to Mr. Rohan Suryavanshi for closing comments. Over to you, sir.

I'd like to thank all the participants for coming for our conference call. And in case we were unable to answer some questions or if anybody has required more clarifications around anything, please feel free to reach out to our team, and we'd be happy to answer any queries you may have. I look forward to seeing all of you guys on our next call. And from everyone here at DBL, I wish you a great quarter ahead.

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