Dilip Buildcon Limited (DBL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Dilip Buildcon Limited Q3 FY '23 Results Call hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Jiten Rushi from Axis Capital. Thank you. Over to you, sir.

Thank you, Darwin. Good evening, everyone. On behalf of Axis Capital, I would like to welcome you to Q3 FY '23 Earnings Conference Call of Dilip Buildcon. From the management, we have with us today Mr. Devendra Jain, Executive Director and CEO; Mr. Rohan Suryavanshi, Head, Strategy and Planning; Mr. Sanjay Kumar Bansal, CFO. We also have with us Investor Relations team from Accenture. We thank the management for giving us this opportunity. We shall begin the opening remarks on the management followed by Q&A session. I would like to hand over the call to the management for opening remarks. Thank you, and over to you, sir.

Thank you, Jiten-ji. Good evening, ladies and gentlemen. A very warm welcome to all of you to the third quarter FY '23 earnings call of the Dilip Buildcon Limited. It's my great pleasure to be able to present to you guys -- the earnings presentation was uploaded on the stock exchange. I hope you all had a chance to have a quick glance at the same. I'll take you through the key highlights for the quarter for the next 15 minutes or so. Post it, we will take Q&A. But before I begin, our standard disclaimer. The presentation that we have uploaded on the stock exchange today, including the interaction in this call contains or may contain certain forward-looking statements concerning our business prospects and profitability, which are subject to some uncertainties, and the actual results could differ from those in such forward-looking statements. So [indiscernible], let me begin. So first, let me talk about the Indian economy and the broader outlook. So Indian economy's pace of recovery has been better as compared to the global peers, despite headwinds such as high inflation, monetary policy tightening, rising interest rate and the Russia-Ukraine war. We continue to remain the fastest-growing economy among large economies. Reserve Bank of India and its latest remote has estimated GDP growth to continue to remain above 6% for the Indian [indiscernible]. So this is a very strong performance in our view, given everything that is happening globally. However, rising inflation, which has got factors also led RBI to increase benchmark interest rate cumulatively by about 250 basis points in the fiscal year 2023. So this obviously impacts the economy in general. Moving on. The big event that has happened recently is union budget. And the reason we announced Indian budget, Indian government has announced the highest ever capital outlay from infrastructure at INR 10 lakh crores. This is about 3.3% of GDP and is an increase of 33% versus the previous allocation in FY '22. We show the commitment and continuous focus of the government on the infrastructure sector. Ministry of Road Transport and Highways was allocated about INR 2.7 lakh crores, while railways got the highest ever outlay at INR 2.40 lakh crores. Defense and Infrastructure bought about INR 1.6 lakh crore each. And we will industry got about 1.6 for increased development for increase in trait development. While moderate at about INR 23,000 crores or so. So for railways, budget allocation has increased about 72% from the previous year. While for roads, they will jump up about 35% versus last year. An increase in the capital expenditure on the infrastructure investment, as announced by the finance investor in our budget speech, will go a long way in creating more opportunities for the sector across roads, bridges, houses, buildings and other infrastructure contracts. This, in our view, also paved way for a very strong order pipeline and awarding activity for many quarters. With all-time higher tax collections, stable fiscal deficit, credit rating, we believe that the government will find enough resources to invest into the infrastructure. Revenue-generating assets like FASTag collections have also been standing behind of the government. FASTag collections have consistently improved from about INR 7,500 crores in the first quarter of FY '22 to about INR 11,300 crore in the fourth quarter of FY '22. And in FY '23, we are seeing that the quarterly fastback collections have been more than INR 12,000 crores every quarter in the first 9 months of the fiscal year to improve toll collections, which are very critical for faster monetization of road assets by the road industry and are great for the government to shore up their finances. This is also helping the companies who are looking to monetize on their existing sole assets. Besides this, on the input prices, good news is that inflation has slightly subsided. While raw material prices have continued to soften, but still we are yet to see the normalized price levels across raw material prices. Aluminum price is now down 10% versus last year. Steel prices have remained stable in the third quarter versus second quarter. But overall steel prices are down 22% from April levels, but still up by 10% versus last year. Overall, cement prices have also been one of the highest in for many years. So while more contractors have seen a positive impact of reduction in input cost in the second half FY '23. We are all -- and we continue to wish for more reduction in input prices. On the project award momentum in the sector during the third quarter, project comporting NHI picked up speed as we saw more than 1,500 kilometers of work were awarded in the third quarter versus about 800 kilometers of work in the first 2 quarters of the financial year. this amounted to more than INR 43,000 crores loading the first 9 months of the fiscal year. However, there is a lot more that needs to be done because the government's target was about 6,500 kilometers of work. And so which means roughly about 4,000 kilometers of work to be awarded-- while there is a healthy pipeline of orders which have been voted by the government. Hopefully, a lot of them will see them materializing in this quarter. On the other hand, Ministry of Road Transport and Highways has also constructed about 5774 kilometer of national highways up to December '22, '23 as compared to 5835 kilometers constructed to December '21, '22. So construction there is while slightly lower than last year, but roughly about the same number. The awarded figure for mat is about 7,200 kilometers plus compared to about 600 kilometers during the same time in the previous year. Now let me talk about the performance for the third quarter of -- our order book has increased from INR [ 2,539 ] crores. We have increased INR 239 crores from INR [ 238 ] crores at the end of September quarter. We had received about INR 8 crores, INR 17 crores in a quarter in the first half of FY '23. We are happy to say that in the third quarter, we have received letters of acceptance for more than INR 7,500 crores of projects and bode well for our execution going forward. We are also happy to inform that we've been declared L1 bidder for Riva Jal Nigam Project worth was INR [indiscernible] crores in quarter 4. And we have received letter acceptance of Bengaluru-Vijayawada project was INR 1,373 crores -- this now takes us closer towards our full year target of INR 12,000 crores order to guidance that was given in FY '23. We look forward that our fourth quarter with very high optimism and feel comfortable with our order inflow guidance. Our execution strength was also reflected in the [indiscernible] project in Madhya Pradesh, where we rewarded early completion bonus. So all these details are available in our presentation and that happy for all us to look at it. Now let me please pass on to our CFO for comments on the financials.

Good evening, everyone. I welcome all our customers to the call for this quarter. So let me present the results for the quarter 3 of FY '23. Firstly, the revenue increased by 8% in quarter 3 FY '23 and 12% in 9 months FY '23 Y-o-Y basis. This is mainly due to better executions of projects. The EBITDA margin increased from 0.29% in Q3 FY '22 to 10.50% in Q3 FY '23. EBITDA increased by 39% in 9 months FY '23 in absolute terms on Y-o-Y side. Finance costs decreased by 14% in Q3 FY '23 and 18% in 9 months FY '23 on account of reduction in outstanding debentures, term loan and lower utilization of our in capital facilities. The company registered profit of INR 795 million in Q3 FY '23 vis-a-vis a loss of INR 967 million in Q3 FY '22. This 182% increase on Y-o-Y basis is on account of better EBITDA margins, lower finance costs and profit on account of divestment of 40 for the cement. On 9-month basis, [indiscernible] profit of INR 1,635 million, whether there's loss of $890 million in 9 months FY '22. This is on account of higher revenue, lower finance costs and profit on account of divestment to cube and tin in it. Now let me take you through some important items of the balance sheet. The -- the inventory as on 31st December 2020 to decrease by $112 million vis-a-vis 30 September 2022 and $753 million vis-a-vis 31st March 2022. Big Data as on 31 December increased by INR 3,063 million vis-a-vis 30th September 22, and sales will be realized. The increased debtors will be realized in quarter 4 FY '23. There is an increase of 10 days in working capital days visa-vis September 22. This is mainly due to increase in data days. However, it is at the same level of March 20. The net debt-to-equity ratio marginally decreased on 31st December 22 to 0.58x from 0.63x on 31st March 22. Here, I would like to highlight that the company is continuously on track of reducing debt on quarter-on-quarter basis since last 2 years. Case generated from operating activities stood at INR 2,285 million during Q3 FY '23 and INR 4,733 million during 9 months FY '23. Thank you once again. now -- now we can open the floor for the Q&A.

[Operator Instructions] The first question is from the line of Shravan Shah from Dolat Capital.

Sir, a couple of things for one of revenue front. So in terms of the INR 10,000 crore revenue that we were looking for the FY '23. So just wanted to recheck -- can we -- are we able to do that because we need close to INR 2,700 crores revenue in quarter 4. So just wanted to check on that first?

As guided in the past calls, we are very close to the guidance given. We are almost on the guidance given. So yes, you are right. We are around INR 10,000 crores revenue on a full year basis. Okay.

Second, sir, on the EBITDA margin front, so the -- from the last quarter, Q2, we had 1.6%. And now again, it has came down to 10.5%. So for 9 months, we are at 9.9%. We were looking at 12% to 13% for FY '23. So for that, we need a significant improvement in margin in Q4. So how much now are we looking at for the full year margin? And maybe you can help us with the fourth quarter how much we are looking at. And at the same time, in terms of the FY '24 because the past old projects last time you said that most of the projects is 90%, 95% is completed then in this quarter on Q-o-Q basis, there is a decline. So despite there is an improvement in the top line. So I just wanted to understand on that front.

So in terms of the EBITDA guidance, yes, we are a bit below the guidance even. But on a full year basis, we will be close or around 11% on full year basis. In terms of the FY '24 guidance, on revenue side, we expect around 10% to 15% increase. And EBITDA, we are basically targeting or will be around 12% EBITDA. So basically, this is our guidance is on today for FY '24. I think we have answered all your questions, the guidance part.

Yes. I just wanted to further understand is there any specific reason why now we are only looking at 12% or for the next year as a whole also because now the old projects would not be the issue and whatever the new project should be -- we should be able to get 13%. So just wanted to more clarity why we are now only looking at 12%?

So there are 2, 3 things. First thing is that as you know that now the Bonus got eliminated because now the time lines are for stringent that it is next to impossible to get the owner. So there is the first thing. Second thing, if you will see there the fuel price in and material prices is still not decrease at that level, which you were expecting. So right now, for the past guidance of the 12% and then we will come to the Q4, we will see that we can increase where we'll be reaching.

Third on the date front, it's good that at least on Q-o-Q front, we have been able to INR 136 crore reduction on the gross rate front, but we were looking at close to INR 400 crores to INR 500 crores reduction in this second half. So we need at least the same kind of a INR 300 crore kind of a reduction from here on in the fourth quarter. So can we do that?

So Shravan, you are correct. So we have given under guidance of the INR 400 crore reduction. So we are close to that, and we will be reducing about INR 200 crores in the FY '23 financial year. So around INR 200 crores we can be there and we will be the INR 2,400 crores net debt as on FY '23.

Okay. So INR 200 crores from the March '22 we will be reducing?

INR 400 crores from this level. So this level is INR 2,600 crores. From this level, we will raise further INR 200 crores. So cumulative, there will be a reduction of INR 350 crores vis-a-vis mark.

Second thing, just wanted to understand Surat Metro INR 5,061 crores project we received, but it is not part of the order book. Is there any specific reason for that?

Yes. So because this has been received in the JV or JV partner is executing that project. That is why you are not included in the order book, and we don't want to distort our order metro and Porter, which we have received and individually, we will be executing that. Okay. Got it. Got it. And on the working capital front, though definitely Q-o-Q it has increased, but 18 days, it is same as the March. So how much of more reduction. But you mentioned that the data we have received in January. So 80 days, we can look at by end of March.

Okay. Good. Lastly, on the CapEx front, definitely, it's not significant for us, INR 55-odd crores. So for full year, how much -- fourth quarter, how much more we are planning and for the next year, how much CapEx are we looking at?

So therefore, the Q4, we'll be doing around INR 10 crores to INR 15 crores CapEx. So it will pay to do around INR 70 crores. And for the next year, it will be around INR 50 crores CapEx, which will be there like kind of special equipment like for the metro and the [indiscernible] INR 50 crores.

Last on the bid pipeline front, sir. So how much more now are we looking at? And in terms of -- because this is one issue where all the players are facing are not able to get the orders, particularly from the NHAI front. So just wanted to understand the pipeline is there, but in terms of awarding it is not happening. Also, how many bids sort of value have we submitted or planning to submit how much are we looking from the tumor EPC or HAM or any other segments? It would be helpful.

So have we already submitted 10-15 bids and we're awaiting for the results.

The next question is from the line of Mohit Kumar from DAM Capital.