Dilip Buildcon Limited (DBL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Dilip Buildcon Limited Q4 FY '20 Earnings Conference Call, hosted by Axis Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Jiten Rushi of Axis Capital. Thank you, and over to you, sir.

Thank you. On behalf of Axis Capital, I would like to welcome everyone for the earnings conference call for the fourth quarter fiscal 2020 of Dilip Buildcon. From the management of Dilip Buildcon, we have with us today, Mr. Devendra Jain, Executive Director and CEO; Mr. Rohan Suryavanshi, Head of Strategy and Planning; Mr. Radhey Shyam Garg, CFO; and Mr. Ronak Saraf, Investor Relations, S-Ancial. We thank the management for giving us this opportunity. Without much ado, now I would like to hand over the call to Mr. Rohan Suryavanshi for his opening remarks. Thank you, and over to you, sir.

Thank you, Jiten ji. And thank you, everyone, for joining us today. I hope all of you are keeping safe and sound in these extraordinary times. Obviously, it's an unprecedented situation, and I pray for all of your safety and your families' well-being as well. So first of all, I, along with whole Dilip family, would like to welcome all our investors and partners to this conference call for the quarter ending 31st March 2020. It is my great pleasure and honor to be able to host this call, as always, an update to all our partners of important milestone that we've achieved this year. While FY '20 was not exactly a fantastic year for the infrastructure sector, as last year recorded the highest and the most extended monsoon of recent times. On top of that, there were also delays in appointed date from the NHAI. And finally, I guess, corona came, which impacted the last few days of the financial year. So a lot of plans and everything that everyone in the industry had planned had obviously taken a hit. Nonetheless, we were able to do a decent job, I feel. Not exactly at the -- pretty much we did a fantastic job in the current situation. But more about that later. First, let me talk about the good part that has happened. The government has continuously come to support the infrastructure sector, not only the Honorable Prime Minister, but also the Honorable Finance Minister has announced the investment in the -- through the national infrastructure pipeline of more than INR 100 lakh crore over the next 5, 6 years to boost the infrastructure sector, to create jobs, to stimulate the economy. So we are all excited about how that will pan out and since they have given detailed breakup. Within that, the road sector has a high share, so -- which puts us and gives us good visibility into what will be coming in the future. Apart from that, the recently launched campaign of Aatmanirbhar Bharat has also brought in the same stress on road infra, mining and airport segments. So we continue to be very optimistic about things going forward and how the orders too will pan out. So how I do is, I would -- as usual, we will run through the presentation that we prepared for you. I am sure all of you must have had a chance to run through it. But what we'll do is quickly go through that, where I'll touch on all the key points for the year. So if I could direct your attention to Page #4 of the presentation, we will start from there. So I'm really happy and proud to say that in this financial year, we've completed 14 projects worth INR 10,000 crores. Now this is the highest delivery that the company has done in a single year. And as you can see in the chart, we have completed projects across all the different states, so they are states that we've completed projects in. And out of this, very important, that is, out of the total project that we completed, there is about INR 5,000-plus crores of road projects, which were completed before scheduled time. So the total portfolio, 66% projects were completed before the scheduled time, and we earned a bonus of INR 128 crores on those projects, and the rest projects were completed on time. And mining projects, as always, are only completed on time. So very, very proud to say that even though last 2 years, after everything through all the problems that I mentioned, we still did the projects much ahead of their completed time. And this track record of DBL, which is always early completion will continue in respect of whatever hardship we might face, but our focus on our operation capability has been helping us to do that year after year. If I move your attention to the next page, Page #5. Also very proud to say that we won new orders worth INR 6,700 crores plus in this financial year. And as you can see in the pie chart, they are spread across different sectors. It's 47% is road; mining is a portion; then we have airport sector, special bridge and irrigation. So as also promised to the market that we will be looking to continuously diversify our portfolio, we have very well demonstrated that. And we will continue to do that going in the future as well. Coming to next page, Page 6. Shrem deal, a lot has been asked, written about the Shrem deal. We are very, very proud to announce that we have finally committed and we've finally delivered the deal. Let me quickly give you a brief of what the deal was. We had 14 completed projects, 4 near completion projects, which are under construction and 6 HAM projects which are about to start. On all those projects, as you will see, out of the 14 completed projects, which were also done, all were done before time and we had one early completion bonuses. Out of the 14, in 11 we have transferred the completion date that we have not given, and the rest are in process, which we'll achieve. And the 4, which were nearing completion, we have, again, completed all those projects before time and owned a healthy bonus in all those. And in this, 1 SPV with the stake transfer has happened 49% as per the concession agreement, and the rest is in process. And in the 6 HAM projects as well, all of the projects were done before time. And in 3 -- the 4, the stake has been transferred as per concession agreement, and the 3 is in process. So again, all of it, the deal has been completed. And we recently -- for the pilot project, also, we just announced the completion date in this quarter after the finish of the last financial year. If I come to the next page, Page #7, again, a quick summary of those projects. If you look at it, all those projects that we did, we did them with an average of at least 200 days-plus of completion. So more than 6, 7 months of early competition in all the projects, and we won with healthy bonus that you can see on the other side. So as promised, we're able to do that. Next page, if I come to the Page #8. This is a snapshot of the money that we've received till now. So FY -- till FY '18, '19, we have received INR 1,100 crores from Shrem Group. In '19, '20, we received another about INR 271 crores. And finally, we will receive another INR 124 crores in this coming quarter of FY '21. Now the deal from the original envisaged amount has come down a little. This is because the equity required by the investor has reduced because of the project being completed before time, they have made savings on the IDC and all the contingencies. Coming to the next page, the results summary for the full year FY '20. As opposed to last year, we have seen the revenue be almost at the same level. From last year, INR 9,106 -- 44 -- INR 9,164 crores to this year of INR 9,015 crores. Again, the reduction or the original envisaged revenue that we have sought for this year, there is the -- divisions were there because of, like I said, extended monsoon, which continued for 5 months. Then we had the delay in appointed date. And finally, the COVID-19, which hit the last 15 days of performance. The EBITDA is in line with the revenue, same reason. And the profit after tax has been the trend in this year, it's lower from the last year because of the depreciation that has increased because of the finance cost and eventually, because of the tax expense. Because the tax expense, until last year, we were getting ATI benefits, which are no more available. So hence, because of that, this has come down. Next page is I want to talk about the quarter 4 from -- of FY '20, results summary. Again, the revenue, as we had expected, it's little down from there. Because the last 15 days were hit from -- because of the COVID outbreak, the EBITDA, we've seen a different trend, same reason because the revenue decreased, so the EBITDA, because of what we had already envisaged and planned and all our resources were mobilized. And finally, the PAT. We follow those 3 reasons that I mentioned earlier because of depreciation, finance costs and taxation. Next page is, again, just a detailed breakup of the stand-alone results. After that, the stand-alone payment on its annual profit-loss detail -- detailing it out for the end of the quarter, whole presentation stand-alone, again, detailing it out what we've already seen. Page 14, then we come to the stand-alone balance sheet. I am very, very happy and proud to announce that as we had promised, we have brought our net debt equity ratio down to 0.81 in FY '20 from 1.06 in FY '19. So even though the revenue and the other things took a hit, still, the promise that we had started and our agenda of improving more on the balance sheet has paid dividends and we have been able to bring this down. Now as we talk about the balance sheet, there is -- if I touch on some of the main things. The investments have increased on the call of investments in HAM projects. There is a decrease in the noncurrent assets, which is mainly due to utilization of MAT credit and reduction in capital advances. There is decrease in debtors on account of better collection. So we've got down the better results. There is a decrease in other current assets, which was mainly due to decrease in advanced supplies. And there is -- if I talk about the next page, where we talk about the liabilities, if I -- there is increase in noncurrent liabilities on account of increase in noncurrent portion of mobilization advances. And there is increase in financial liabilities, which is on account of increase in current maturities of long-term borrowings. And finally, on the point that I touch is, there is increase in other current liabilities, which is on account of increasing current portion of mobilization advances. These are the main points. If I come to next page, Page 16, the stand-alone cash flow. Again, very, very happy and proud to announce that we have generated a net cash from operations of INR 1,850 crores. This is as opposed to INR 750 crores last year. So very, very healthy generation of cash flow that has happened from the operations, very strong generation of net cash. If I come to the next page, Page 17, if you look at it, even after accounting for investment and financing activities, we still made a cash increase of INR 133 crores as opposed to INR 27 crores of last year. If I come to Page 18 now, the working capital. Again, we have brought the working capital by -- down by almost by 17 days from last quarter. So we brought it down to 90 days, which is in line with the same that we had in last financial year-end. And all the numbers are not in the same line, as we have said. We expect this going forward also to be around in the same range. Page 19. We touch sort of how the net working capital days has looked quarterly. So it has -- as you'll see, the trajectory has been downwards, and we expect it to be around the -- to come around. Page 20, net debt-to-equity ratio. The annual from 2.27x net debt equity to 0.81 from '16 to '20, as promised. This has continued this trajectory. Next, Page 21 is just a breakup between the working capital loan and the equipment loan and how they have looked, how they add up. As always, it's very important for me to point out that because the model is different where we use our own equipment and we do not -- and we have not been using this. Our only net debt equity would be about 0.45 for the whole company. And both -- you can see the trend, both of them have been on a decreasing trend. If I come to next page, Page 22. Net debt-to-equity ratio quarterly, as you can see, the trend is different. After that, Page 23, just our snapshot on the income tax. So while the effective rate for FY 2021 will be in the range of 30%, 32%, we do not envisage any additional payout towards that, which above -- over and above our available MAT credit and TDS. And the MAT credit that is unutilized for the company till as of now, as of March 31, is INR 353 crores. And the effective tax rate for the company is about 26%. And we have not gone for the concession tax rate because we have a lot of MAT credit and the taxation pipeline does not allow for older MAT credit. Next, if I move on, 24 and 25 with the consolidated profit and loss. Again, as we have continuously been selling our assets. This is a formality that we need to do, but it's just the numbers for everyone's purpose. You can look into it, these numbers going forward. If I move on, order book and project status, Page 27 and then 28, a quick snapshot of our different divisions. From being a primarily road company, now we are doing roads, irrigation, we're doing urban development, mining, metro, special bridges, airport, tunnels, it's all across the whole infrastructure space. We've been continuously expanding our footprint, and we will continue to do that going in the future as well. The next page is a quick snapshot of the total order book over the year, how it's looked. So while FY '20 seems -- has come down, it's also primarily because the ordering from the government, which is -- which happened mostly in the last quarter, and that, too, also is skewed towards March, what impacted because of the outbreak of corona. So a lot of orders, which were in the pipeline got pushed. So we expect this to be temporary. And now, in the coming quarters, we will see -- in this quarter and the next quarter, we will see a lot of orders from the government. And as been completed, they have been releasing. Page 30, how our order book has looked in terms of diversification over the last few years. From road being 87% of our order book in FY '18 to now only being 63% in FY '20, and how the other sectors have panned out and how they've increased. Next, Page 31 is a sector-wise breakup of the order book. If I move to the Page 32, it's client-wise. So almost 70% of our order book is from the central government. The rest 30%, which is on the state government. This is also because we won recently expressways from different state governments, whether it's UP and Maharashtra, which is why these numbers have gone. Otherwise, we're very careful about the -- and very particular about the states that we work, there the financing is already in place. Page 33 is just geography-wise breakup of the order book. How we are in different states. 34, the projects that we won during this financial year, snapshot of that. 35, if I come -- it's projects that we completed in FY '20, details of all of them and the bonuses that we have won on the project that we completed early. 36 is, the Cube deal where we have sold our 5 new HAM projects to Cube. This a snapshot of them, the deal is ongoing and in process. The milestones that we have to hit with Cube will be coming in this and the next quarter. So then we should see money coming in there as well. Going forward, 37 is the hybrid road projects, the progress of those projects, how it's been going. Frequently, all of them are running well before schedule. And we've seen an average of at least 35% to 45% progress in all of the projects. Next project -- next page is just a quick snapshot of the equity that is required in the HAM projects. What we already invested till now and in the going future, how much we will be investing. Going forward then, Page 39 is key outstanding EPC project. 40, after that is just a snapshot of airport and mining projects, then a snapshot of after that is irrigation and metro projects. So these are just for your information, so you can look at it. To end with, I would just like to say the outlook for FY '21. Right now, it is difficult to give any guidance, given this is a very dynamic situation with the corona still going on. And we have seen it on the supply chain as well as the labor. But the company has started work on all of its projects. While the work has been impacted and the progress is not as much as we would want because all of these impacts, the work is going on. So as we get more clarity going forward, we will be able to give you more clarity on how the year should pan out. But we expect even in such a tough situation, we have to be decent in terms of -- because of our own focus on execution and having our own equipment and manpower already on it. Now with that, I would open the floor for question and answers. Thank you.

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

Sir, 2 questions primarily. First on the -- of course you said that there is a -- in COVID situation, it is very difficult to give the guidance. But could you please tell us what's happening on the ground and what has happened in April in May? And has the situation improved? And has the supply chain improved? And on the labor, is there any issue, are you seeing these easing out with time?

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Sir, my last question. [Foreign Language]

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

Are you able to listen to me, sir?

Yes, Shravan. We can hear you.

Sir, just one thing in last 15 days of March, whatever the work of it, broadly, is it hard to assume INR 200 crores, INR 300 crores of revenue loss has happened because of the COVID? And just a broad idea, whatever -- I understand, it is difficult to give any number, but of a broad idea in last 2 months, April and May, how much work would have -- revenue loss we would have done because of the COVID?

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Okay, okay, okay. And sir, whatever -- in terms of the labor right now, as you said, it's 50%. So still in last 15 days odd, have -- the labors have still moving from your sites to the home or the -- or it has now stabilized?

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Okay. And in terms of the awarding, is it likely to happen -- to start happening from the June? Or will it take July or August, it will start happening or awarding from the NHAI and the authorities?

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Okay. Okay. And the last thing that definitely we -- it is a good thing that we have reduced the debt, and I hope that this will continue. But I just wanted to know in last 2 months from March to now, has the debt level remained the same or has it increased?

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The next question is from the line of Kalpit Narvekar from Allianz Global Investors.

Can you hear me?

We can hear you, sir.

Yes. So I have a couple of questions. Firstly, on the NHAI ordering side, what is the situation of -- on the competitive scenario, specifically in EPC and HAM? Because the competitive situation in the EPC has gotten much worse since last year. So what's the situation there now? And the second question is that have you seen any slowdown of payments on the NHAI orders or any orders on the road side?

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[Foreign Language] But I didn't -- I'm not seeing much impact on the profitability or other things due to the labor.

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Material cost is very low. We -- last 2 years [Foreign Language].

The next question is from the line of Alok Deora from Yes Securities.

So just a couple of questions. So one of them, sir, order book right now is around a INR 19,000 crore. And even in that, some of the projects were recently won to -- those would have not ramped up as of now. So what's the view now? I understand it's difficult to give guidance, but do you think the order book is slightly on the lower side considering the revenue run rate we are doing?

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Okay. Okay. [Foreign Language] So suppose, we don't win significant order in the first half then from that perspective...

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Okay. Okay. And sir, one more thing on the HAM projects, the bank rate has come significantly down, and the borrowing costs [Foreign Language]. So what's your view on the HAM projects? [Foreign Language] Would it be slightly difficult to sell HAM projects? And what would happen in the deal, which you have already stuck with 2 highways?

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Okay. But actually, sir [Foreign Language] actually. If you look at 4.25% plus 3%, 7.25% bank rate NHAI payment we are looking or finance -- borrowing costs [Foreign Language]. So from that reason, [Foreign Language] HAM projects would be difficult to sell it off, right?

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Okay. Okay. [Foreign Language] it will be applicable if it happens.

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[Operator Instructions] The next question is from the line of Gautam Trivedi from Nepean Capital.

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The next question is from the line of [ Padmanabh Surendran ] an individual shareholder.

My question is on the debt equity ratio. So a very good progress as compared to the last year. So can you give us a visibility for this year, what it should be looking like?

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The next question is from the line of Parikshit Kandpal from HDFC Securities.

Congrats on decent set of numbers. [Foreign Language]

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Okay. [Foreign Language]. Tell me update of that, in what state these projects are and it's monetization [Foreign Language].

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[Foreign Language] We have added equity consideration required for the new HAM project. [Foreign Language].

So this on-presentation whatever it could be contribution given is not taking into consideration the money coming out of DBL? [Foreign Language]

Yes, yes. We are not factoring that.

Yes. [Foreign Language] and then you have also added big funds of COVID related [Foreign Language] officially NHAI has approved this because I understand policy [Foreign Language] they officially also given this letter that now with PCOD you will get another 180 days of extension.

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Yes. Obviously, the inflation [Foreign Language]

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[Foreign Language] that will also get partly recovered because of the inflation?

100%.

Okay. Lastly, one last question, any site where work was going on pre-COVID, but has still not started or has stopped after COVID? Is there any site left? [Foreign Language]

[Foreign Language] 65% to 75% average progress [Foreign Language.

The next question is from the line of Vibhor Singhal from Phillip Capital.

I hope I'm audible.

Yes, you are audible.

Sure sir. I just had one question on the cash flow. Sir, as per the presentation, what we are looking at is to see FY '21 and FY '22. Our equity requirement was INR 427 crores and INR 151 crores. So total is around INR 578 crores. If we say, we expect INR 278 crores to come from Cube and around INR 120 crores to come -- INR 124 crores to come from the Shrem deal this year. Am I right in getting that?

Yes, sir. Yes, sir. So that's right, sir.

That's right. So [Foreign Language] that is INR 578 crores.

The set of business small change because, see, whatever equity that we are envisaging from the Cube deal. So that will come over a period of time till the completion of the project. So it did not hit the -- so the entire amount may not hit during the current financial year, sir. But some amount will spill over to the following financial year.

No, but cumulative mathematic is correct in that sense, right?

Yes, yes, cumulative mathematic.

Sure, sir. And also, sir, this year, we basically broke our earlier year's trend and we managed to run our operations without any CapEx, and CapEx was generally around INR 500 crores. I know it's difficult to forecast the revenue at this point of time. So that's why there's no guidance on that part. But do you believe that we would need to do any kind of CapEx this year? Or this year also, we should be able to manage without any CapEx?

We don't need any CapEx for this year. [Foreign Language].

So [Foreign Language] order book, we don't need any CapEx book here?

No. No.

[Operator Instructions] The next question is from the line of Jiten Rushi from Axis Capital.

Sir, just want to understand on the NCD, which we are planning to raise INR 100 crores at 8.75%. Sir, any reason for this because, sir, we are also getting monitoring extension from RBI. And also we're getting the debt from banks at 10% of working capital at a bank rate also, which is also lower compared to what we are raising in terms of NCD at 8.75%. So can you please throw some light on this, sir?

Yes. Definitely, Jiten. See what has happened is that, as we told at the beginning of the presentation itself, this is a totally unprecedented situation. And we are not sure that how the situation is going to spin out or unfold in the near future. So that is the reason like it is very important for the company to conserve the liquidity at this point of time. And to boost our liquidity, it is also important that we keep on looking out for the front at a competitive cost. So this NCD was available at a competitive cost to us, which we could crack. So that is why we have availed a little bit to conserve the liquidity for the near future as we told that despite the COVID, we are also going to hit the monsoon season, which is again going to last for another 3 to 4 months. So with all this part -- and we all this -- any time, like if the money is not required so we have -- we can always park this in our cash credit accounts. So the utilization will be accordingly get this.

But this is for how many, 3 years NCD sir, total?

Yes. Yes. Yes, this is for 3 years.

Okay. And payment is at the end of the due date, like last third year, right sir? Am I right?

Yes, payment is towards the end of the third year. Right.

And sir, just one thing, what was the bonus amount which we have recorded in revenue in this quarter, sir?

INR 128 crore, this quarter.

This quarter, I'm asking sir, Q4?

In this quarter, it's around INR 40 crores.

The next question is from the line of Mohit Kumar from IDFC Securities.

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Mohit, sorry, can you repeat the question?

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[Foreign Language] We don't need any CapEx for that.

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The next question is from the line of Parikshit Kandpal from HDFC Securities.

Sir, the 3 highways [Foreign Language]

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[Foreign Language] I mean have you started taking the money from Cube project?

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[Foreign Language] OCD, that is around 12%, sir.

Are you continuing with evaluating the money from them, you will take that contribution during this under-construction period?

Sir, it would depend, sir.

Because after borrowing costs is lower, so I was just wondering if that -- since the bank rate is going down lower, so you will also have to rethink [Foreign Language].

Yes, yes.

The next question is from the line of [ Biren Bam ], an individual investor.

I just wanted to ask 1 thing. During the recent announcement by the government, they mentioned about the partial release of bank guarantee. So how beneficial would that be for us?

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[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to Mr. Jiten Rushi for closing comments.

Yes, so just one question on the fund limited nonfund limit. What is our fund limit and nonfund limit utilization, sir?

Jiten, we can share that off-line.

Sorry. Thanks for giving us this opportunity. Any closing remarks from your side, sir?

Sure. Thank you, again, for all our partners and investors who came today to us and who looked at all our numbers and asked all these questions. I look forward to seeing you in the next quarter call. And on behalf of everyone at the Dilip Buildcon family, we wish all of you safe times ahead. Please take care, and keep yourself and your family safe and sound.

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