Dilip Buildcon Limited (DBL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Dilip Buildcon Q4 and FY '24 Conference Call, hosted by S-Ancial Technologies Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Jill Chandrani from S-Ancial Technologies. Thank you, and over to you, ma'am.

Thank you, [ Sagar ] Good evening, everyone. Welcome to Dilip Buildcon Q4 and FY '24 Earnings Con Call. From the management, we have with us today, Mr. Devendra Jain, Managing Director and CEO; Mr. Rohan Suryavanshi, Head, Strategy and Planning; and Mr. Sanjay Kumar Bansal, CFO. Before we give proceed with the call, let me mention the standard disclaimer. The presentation that we have uploaded on the stock exchange, including the interaction in this call contains or may contain certain forward-looking statements concerning our business prospects and profitability, which are subject to certain uncertainties, and the actual results could differ from this. Now I request the management to take us to the key remarks. After which, we can open the floor for question-answer. Now I hand over the floor to Mr. Rohan Suryavanshi for his opening remarks. Thank you, and over to you, sir.

Thank you, Jill. On behalf of the whole DBL family, I'd like to welcome all our partners here, who have come here for our hearing call on this auspicious occasion of Akshaya Tritiya. The results and the presentation have been uploaded on the stock exchange, and I hope all of you had a chance to look at it. So today, I'd like to start with some data on the industry, just getting straight into business. So for FY '23, '24, as the government data, MORTH has constructed 12,339 kilometers of roads, registering growth of 20% year-on-year. This [Audio Gap] into 34 kilometers per day of road construction. While the execution was decent, the -- on the awarding front, there was a major fall this year, and it stood at a total of 8,581 kilometers. This slow awarding was primarily because of this being an election year. And as we have seen in all the election years preceding this, the last -- if you look at the trend for the last 5 elections, it's been the same trend that the election year has a flow awarding. But we expect this scenario to now improve significantly in this financial year and expect the second half of FY '24, '25 will be quite heavy in terms of ordering from all sectors of the government. Now coming to the company in FY '23, '24, the company won orders worth INR 3,602 crores, which obviously was lower than expected for the reasons that I mentioned. Of this total of [Audio Gap] 42% of the projects are in irrigation, 35% in water supply, 15% in roads and 8% in urban development. Now over the years, as part of our risk mitigation strategy, we have reduced [Audio Gap] sector to a great extent. In the pre-COVID year [Audio Gap] 65%. In the current year, it's at 37%. How we have prioritized on [Audio Gap] and expanded our business vertical from purely the growth segment to other business verticals, such as irrigation, water supply, urban development, metro, special bulges, mining, tunnels, et cetera All these diversification strategies that we have done, sectorally and geographically have provided DBL a strong footing in all these areas. And as ordering has kept on increasing all these sectors, we are very optimistic of accomplishing targets that we're setting out for ourselves this year. I'm very happy to report that when we spoke last year at the end of last financial year, I said that we are looking to reduce our debt by INR 800 crores to INR 1,000 crores. So I'm very happy to say that we have reduced our debt this year by the peak INR 861 crores through our various initiatives. This I'm talking about the stand-alone level. What this translates into is now the net debt-to-equity ratio stands at 0.29x. [Audio Gap] This, in the COVID year was at almost 0.8x and then COVID had hit. And if I talk to you in terms of net debt to EBITDA, now we are almost at 1.15x net debt to EBITDA. This obviously shows our company's commitment in fulfilling our promises. And our focus, as I mentioned, on debt reduction. I'm happy to report that in this financial year in FY '25, we are targeting to further reduce the net debt by at least INR 500 crores plus. Now as the year goes, we will keep on seeing in how we need to [Audio Gap] more look at our target or reaffirm, but we can safely say this is a [ family ] that we are putting. Now moving on, let me also update you on some of the other deals in the company. Let me start with the Alpha deal. In this year, the company issued warrants worth INR 533 crores to Alpha Alternatives, out of which Alpha has taken 25% as the rules for the warrant and the company has received INR 133 crores. The rest of the money as per the guideline, and rules provided by SEBI, we'll need to come into the company by June 2025. In the same deal, in terms of diversification and a divestment, the company has divested 26% including HAM assets to Alpha in which we have received about INR 130 crores. In this financial year, we will be divesting [ 23% ] in balance 5 HAM assets through which we are expecting INR 508 crores as money to come. This money is expected in the first half of the financial year. Now let me focus on our coal business. In Siarmal coal mine. In the financial year, the company has overachieved its target by more than 40% by extracting over 7 million tonnes compared to our target [Audio Gap] of 5 million tonnes. For the next year, we are planning to achieve production of 15 million tonnes compared to the scheduled target of 10 million tonnes. So we are expecting almost 50% of over achievement in next year as based on the current run rate. In that mine, in the next 4 years, the total extraction will be about 80 million tonnes cumulatively. And from the 6 year onwards of this mine, we will be expecting 50 million metric ton of coal per year. On the other Coal India in the Pachhwara mine, we have delivered 4.6 million tonnes in this financial year as per the agreed terms as based on when we started this mine. The net sales target of 7 million tonnes, which is a full clear target, and we are on term 2 -- we are on target to deliver that too. So friends, when I spoke to you at the end [ for operations ], I had mentioned earlier in this financial mentioned, we are now gearing up for DBL 2.0. And I explained DBL 2.0 is how we have in the post-COVID era aligned our company strategy, our focus towards us building a stronger and more stronger DBL, which can withstand any kind of external unseen problems such as what we faced in COVID. The 2 parts through that was, a, we will have our short-term business, and then there is the long-term revenue business. In the short-term business will be our EPC business that we continue to do. In the long-term strategy, there are 2 things that the company is focusing on the asset business where one is the core MDO assets; and the second is the InvIT assets. There'll be, in 3 years from now, there'll be 3 different power out of for DBL, one will be the EPC company, one will be the coal MDOs power house, and then there'll be a InvIT power house. The InvIT and the Coal will assure long-term revenue visibility for DBL. In 2 years, Coal and InvIT gets completed, we are expecting INR 400 crores to INR 500 crores of free cash flow coming from the InvIT as dividends and principal repayment back. Besides that, the coal business is also providing a good cash flow and a visible cash flow, which gives us visibility from current to the next 25 to [ 55 ] years. And the EPC business will be our short-term business, which will keep on giving revenue on a regular basis. Our aim is to become a net debt-free company on a standard basis within the next 2 years. So FY '25 and FY '26, we will be an index company. Our focus is on generating free cash flow, which is what we are doing and reducing our debt through that. Our focus is on improving our return on equity and our return on capital employed. I'm very happy to report that if we look at our return on equity, where we -- on a core basis, where we mine our investments into our assets, it has jumped from 6.9% of last year's ROE to 13.8% ROE this year. Our focus is to keep on enhancing this and same goes for return on capital employed. Our total is also to mitigate concentration risk across sectors, across lines and across geographies. So we are also reading our order book accordingly. All these different actions that we are doing have also facilitated in the enhancement of the company's credit rating. We're happy to report that CRISIL has reaffirmed its rating for the company and also improved its outlook to positive. So we are also hoping for an increase in rating for the company in this financial year. And that trend should continue in the next year as our debt keeps on getting paid down. And as our cash flow keeps getting stronger. Friends, now I'd like to hand over the call to our CFO for the financial overview.

Thank you, Rohanji. Good evening, everyone. I welcome all our stakeholders to our earnings call. Let me present the results for Dilip Buildcon Limited for quarter ended 31st March 2024 and financial year '23, '24. During quarter 4, the company has completed 4 projects and on yearly basis, the company has completed 9 projects worth INR 7,400 crores. During FY '24 the company has company won total projects 6 projects worth INR 3,602 crores. And during last quarter, company has -- company won 2 projects worth INR 961 crores. Now moving from business through financial performance. Quarterly performance quarter 4 FY '24 versus quarter 4 FY '23 Y-o-Y basis. The company's revenue increased by 2.5% in quarter 4, '24 versus quarter 3 -- quarter 4 FY '23. This is due to better execution of the projects. The EBITDA increased by 29.56% in quarter 4 FY '24 on Y-o-Y basis from INR 272 crores in quarter 4 '23 to INR 352 crores in quarter 4 '24. The EBITDA margin witnessed a significant increase by 250 basis points. The EBITDA margin increased on account of higher revenue and reduction in construction material costs. In terms of profit after tax, the profit after tax increased by 112% in quarter 4 FY '24 on Y-o-Y basis from INR 58 crores to INR 124 crores in quarter 4 '24. The paid margin also witnessed a significant increase by 218 basis points. This is mainly on account of better EBITDA margin and reduction in expenses. On yearly performance, FY '24 versus FY '23, the revenue increased by 4% in FY '24 on Y-o-Y basis from INR 10,119 crores in FY '23 versus [ INR 10,537 crores ] in FY '24 this is due to the better execution of the projects. And EBITDA has been increased by 31.44% in FY '24 on Y-o-Y basis from INR 988 crores in FY '23 versus INR 1,299 crores in FY '24. The EBITDA margin witnessed a significant increase by 256 basis points. The EBITDA margin increased on account of better execution of the projects and reduction in cost, cost of construction material. Profit after tax also increased 90% in FY '24 on Y-o-Y basis from INR 222 crores to INR 422 crores in FY '24. The PAT margin witnessed a significant increase by 181 bps. This is mainly on account of EBITDA margin and the reduction in expenses. Let me take you through the -- some important items of the balance sheet. During FY '24, the company surpassed INR 5,000 crores net worth, and it reduced INR 861 crores of the debt. Due to the reduction in net debt and increase in net worth, the company's net debt-equity ratio improved to 29 basis points as of 31st March '24 versus 52 basis points at the end of March '23. In terms of debt has also, on 31st March '24, the debt has reduced to INR 1,392 crores versus INR 1,606 crores at the end of March '23. Working capital days also improved by 5 days from 70 days to 65 days from FY '23 to FY '24. Thank you all. And now we can open the floor for the questions and answers. Thank you, once again.

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

Congratulations on the INR 800 crores plus debt reduction. Sir, a couple of broader questions on the guidance front, First on the revenue. So what kind of growth are we looking at in FY '25 and if possible, if you can guide for FY '26? .

Shravanji, thank you very much. So Shravanji, as we mentioned earlier, the order book this year, as we had expected, has not come because of the ordering. But as the elections get over, we're expecting a flurry of orders. So in terms of order -- full year guidance for revenue, I think it'd be a little early to give you what kind of growth because we're all seeing what kind of orders. But even if you want to create -- take a bet is like this revenue that we are doing this year, easily, we should be able to do that kind of revenue next year as well. Now how much increase of what growth will come will all depend on how the ordering opens up and how much we win and at what times. So allow us time and as we move on through the quarters, it would be much better to do it. Right now, you can like I mentioned, you can take a similar number as we have done in terms of revenue for this year. But as it opens up, we'll give you more clarity on that.

Okay. So -- and so in terms of now order inflow, so obviously, we have received much less number in terms of the inflow in FY '24. So in FY '25, now, how much order inflow are we looking at? And if you can help us broadly how much are we looking at from the road and -- that too in a HAM? So -- and so based on that, let's say, whatever the number you will say. So out of that, how much revenue can be expected from that in FY '25?

Shravanji this year, the total order inflow that we're looking at is to INR 10,000 crores to 12,000 crores at least that is the kind of range that we're looking for. And this is across all sectors that we work in. So on the conservative business, it's easy to take can take that kind of number. That -- those are the kind of orders that we are kind of looking at. It would be very difficult to give you a split on the different, different sectors than it would also not be prudent on our part to be disclosing how much we are targeting risk. But we can assure it will be in all the different sectors we work in, and it will also be a mix of both EPC and HAM. So let's see how the orders come, what we end up bidding. But broadly, that's the strategy that has been in the past as well. We will be following a similar kind of strategy.

Okay. But let's say, if you get a INR 10,000 crore and broadly, let's say, HAM, obviously, the revenue will come in FY '26 as the appointed date will take time. So let's say, if you get a INR 4,000 crores, INR 5,000 crores EPC, can we expect some revenue from that? Just to trying to understand what extra growth can come on the revenue in FY '25?

Shravanji as we win more EPC contracts, you will see revenue coming from there. Also, we've -- we very recently won another INR 1,000 crore contract in the rail segment railways. So that is also not visible here. so like that will start. So there are different sectors and orders that we are targeting. And based on which ones open up at what time, it will definitely have an impact on the revenue.

Okay. And in terms of the EBITDA margin, CapEx, how much are we looking at for this year? .

So EBITDA, like we have given you a target of last time as well. We are looking at that same 12% to 14% kind of EBITDA targets, that I mentioned earlier as well. In terms of CapEx, the same INR 50 crores to INR 70-odd crores of CapEx is what we will be looking at. I'm also very happy to report on the same time that, currently, our equipment debt stands at about INR 180-odd crores -- 170-odd crores, like I said, somewhere in that range is where we are standing, which -- almost 80% of which we will be paying down in this financial year anyways. That is a scheduled repayment. So our equipment debt is almost completely off, and we are on target to like I said, already given you the kind of target we're looking. So by the end of this financial year, our net debt will be less than INR 1,000 crores.

Okay. And then so the -- our net debt, you are saying will be less than INR 1,000 crores -- so at the gross level, we are looking at a INR 500 crore debt reduction?

Yes, INR 500 crore plus.

And so next year would be a significant reduction will be there close to kind of a INR 1,500 crore, INR 1,000 crores of number will be there in the next year.

The INR 1,000 crore number for debt, you said?

Net debt.

Net debt?

Yes. Yes, net debt reduction. so...

It will be less than 1,000 from where we are targeting.

Okay. Okay. Got it. And on the working capital front, any further improvement from current 66 days. So particularly on the inventory front that we are not seeing as such, not much improvement so...

So Shravanji, basically, we are working towards reduction in overall working capital days. What I briefed in the beginning, 5 days improvement from 70 days to 65 days. Yes, on inventory side, more or less, it is looking like the same. So the inventory levels are same, but overall basis, 5 days increment. But individual item wise, we're working on. So there will be improvement quarter-on-quarter every time. So yes, we are doing that. But it is looking -- it is basically coming in the results also.

Okay. And sir, now on other income and finance costs. So how do we now look at the finance cost for this year FY '25, and if possible for FY '26 and other income? Why I'm asking other income is the Shrem InvIT, we have received, I think, close to INR 106 crores as a distribution. So also help me. Out of that, how much will be coming at the stand-alone level? And now with the Alpha, whatever the distribution we will be receiving? The entire will be coming at standalone or how it will be?

In terms of finance cost, the finance cost this year reduced marginally because the debt reduction was significantly happened in Q4. But the -- for FY '24, '25, the targeted finance cost is INR 350 crores against the INR 500-plus crores finance costs. In terms of the other income, total from the existing set of Shrem InvIT units, we have already detailed out in the investor presentation, we will be receiving around INR 94 crores total distribution. And generally, the distribution is a principal is around 30% of the total distribution. So yes, you can say around INR 65 crores, INR 70 crores from the dividend and interest and balance 30% from the principal returns.

And this entire will be shown in the stand-alone other income?

No. Basically, the limits -- the units are held in DBL and DIAPL. So I gave the number on the console basis.

So at stand-alone level, anything will flow as other income or whatever the dividend we will be getting from the InvIT?

Sharvanji the numbers DBL level and DIAPL level is not ready with me currently. You can connect with us separately, we will give you the breakups also.

Okay. And on the DBL Infra date, it is the same INR 675 crores or has the number changed?

So INR 675 crores as on today is, yes, we have already started prepayment of around INR 30 crores. So by next month, this will be reduced by INR 30 crores.

Got it. And just a clarification on the presentation the 16 HAM projects that we are showing. So currently, right now, we have 18 HAM projects, and I think the one new that we have received. So Alpha Alternatives, we will be transferring the 18 HAM projects, 26% equity stakes. So in the presentation why we are mentioning the 16 HAM projects and not the 18. So we will keep owning the 74% stake in 18 HAM projects.

So you can basically see the breakup is mentioned in the HAM portfolio. You can see the -- there basically total 18 projects were targeted to be given to Alpha 26% stakes and just a second.

So I was referring to the Slide 24 where we have mentioned equity and divestment tracker.

So basically, total 19 projects what we have today. 19 Breakup is 18 of Alpha and 1 project we won last quarter, okay? So out of the total 19 projects, 3 projects, 26% already given to Alpha after completion. So total 16 projects as of 31st March 16 projects were under construction. Out of 16 projects also, 5 projects out of the first bucket [ 8 ] bucket is remaining. So out of 5 same projects, 2 projects, the COD is received, 2 projects COD will be received in June and 1 in May and 1 in June. So out of 16 also, 11 projects will remain after you can say June, under construction. So with -- after this quarter, only 11 projects will continue and 5 projects, 26% will be divested between quarter 1 and quarter 2 of FY '25.

Yes. I got it. I got the point. What I was trying to understand is actual invested equity as on March '24 is INR 1,265-odd crores. So this is only for 16 projects or it is for 18 projects?

It is 16 projects only. And out of 16 projects, I said 5 projects, 2 projects we already received the -- so. So basically, you are basically saying the actual invested equity. So it is all 16 projects.

So it should be 18 projects because we also own the 74% in the 2 projects that we are not mentioning here.

Sharvanji, this INR 1,265 crore is 11 to 16 projects only. So whatever projects we already completed is removed from this sheet.

Okay. Got it. Got it. I understood. Just a clarification, sir, whatever the remaining 10 projects that the Alpha Alternatives will be taking a 26% stake. So there, once we complete the entire project and we will put 100% and then they will invest 26%, and we will get back that 26% cash. That's the way it will work or we will come -- we will invest 74% and then 26% invested by them.

We are in -- we are putting our capital only. And while we have the option. But once the [ PCOD ] is done, then we will get Alpha capital into those assets.

So initially, we will put the entire 100%. And once we get the PCOD, then we will get back the 26% from Alpha.

Then we'll flip and do that. But like I said, Here again I'll repeat that while we have the optionality to pull that money earlier, but we will see -- we'll take a call on it as our strategy goes.

The next question is from the line of Narendra from Robo Capital.