Engineers India Limited (ENGINERSIN) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Engineers India Limited Q2 FY '25 Earnings Conference Call hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Bhoomika Nair from DAM Capital Advisors Limited. Thank you, and over to you, ma'am.

Yes. Thanks, Neha. Good afternoon, everyone, and a warm welcome on behalf of DAM Capital to the 2Q FY '25 Earnings Call of Engineers India Limited. We have the management today being represented by Mr. Sanjay Jindal, Director of Finance; Mr. Suvendu Padhi, Company Secretary and Investor Relations; Mr. R.P. Batra, Executive Director of Finance and Accounts and Investor Relations; Mr. Sunil Saxena, Executive Director of Technical and Investor Relations; Mr. Amanpreet Singh Chopra, Senior General Manager, C&MD Office and Investor Relations; Mr. Vivek Midha, Senior General Manager, Marketing, Business Development and IR; and Ms. Neha Narula, Senior Manager, Company Secretary and IR. At this point, I will hand over the floor to Mr. Sanjay Jindal for his initial remarks, post which we'll open up the floor for Q&A. Thank you, and over to you, sir.

Thank you, Ms. Bhoomika. Good afternoon, everybody, and very happy Diwali to all of you. A warm welcome to Engineers earnings call of quarter 2 for financial year '24/'25. During the first half of financial year '24/'25, the order inflow in the company amounted to INR 5,137 crores vis-a-vis order inflow of INR 3,400 crores in financial year '23/'24. The order inflow in Consultancy and Engineering segment amounting to INR 2,863 crores and INR 2,274 crores in Consultancy segment. This was the order inflow up to 30th September. And in case, we consider the order inflow in the month of October also, then our total order inflow is INR 6,866 crores. This company has order book worth of INR 11,155 crores comprising under Consultancy segment of INR 6,496 crores and under LSTK segment of INR 4,650 crores as on 30th September 2024. However, if we consider the order inflow for the October month also, then our company is having an order book of approximately INR 12,000 crores. We have declared results of quarter and half year ended September '24 on 29 October 2024. As regards to financial performance for 3 months ended September '24, the company has registered an amount of INR 676 crores vis-a-vis figure of INR 611 crores during the first quarter of financial year '24/'25. The turnover from Consultancy and Engineering segment stood at INR 383 crores and from Turnkey segment at INR 293 crores. Other income during quarter ended September '24 is INR 53 crores as compared to 38 crores during first quarter of the current financial year. During these times [indiscernible] company has recorded profit before tax of INR 100 crores and PAT of INR [ 79 ] crores in comparison to figure out INR 74 crores and INR 55 crores, respectively. During the first quarter of current financial year showing an increase of 36% in profit before tax and 44% in profit after tax. Notably, EPS for the quarter ended September '24 is INR 1.41 vis-a-vis June quarter '24, it is INR 0.97. That's all, Bhoomika Ji.

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

Congratulations on a very good order inflow. Sir, my first question is on the -- I think you mentioned that received the order in October, right? Can you quantify the quantum? And can you just let us know whether it is for Consultancy or Turnkey? And if you can just throw some light on the kind of on the exact order received -- the nature of order received?

In the October month, quantum is INR 1,729 crores, and most of the orders are towards [indiscernible] and rest are the Consultancy's.

Understood, sir. My second question is, sir, on the BPCL refinery, I think the uplift has taken off. My question is, has all the packages for Consultancy been decided? Or do you still think there are still some packages are still to be tendered out?

No, all the packages have been awarded, work is already [indiscernible].

Understood. My last question is on the IOCL. I think Paradip, the petrochemical, has the tender been floated? Can we expect the tenders to finalize in the second half? Or do you think this will spill over to F'26?

No. The tender has already been floated, opened. We have bidded for that, and we have become [indiscernible] both of their packages. So we are the L1, and we are likely to get this out in short time after their internal approvals.

Is it 2 or 3 packages or it's the only single package for the Consultancy, sir? Or the IOCL Paradip?

There were 2 packages, only 2 tenders are given. So both of them have been -- would be coming to us -- on Consultancy.

The next question is from the line of Aditi Naval from RSPN Ventures.

So I have a few questions around the top line. So sir, you had guided for about INR 5,500 crores of revenue for FY '25. And looking at the current run rate, we are around INR 1,300 crores on the first half. So how are we looking for the remaining 2 quarters? How should we factor in to the journey? That is one. Second is, essentially in terms of Turnkey revenue, how are we -- are we looking for revenue orders getting concluded in the next 2 quarters, which would be contributing to the top line? These are the questions on revenue. I have 2 other questions, which I will be taking after your answer.

Can you repeat the last one, please? What you said? Your voice is not very clear.

So, yes, so my question was, are we -- so the Turnkey revenue seems a little subdued in the first half of the year. So how are we looking at the Turnkey revenue for the next 2 quarters, and are there any big contracts that are going to get concluded that could add to the top line, and so that you could meet that guidance of INR 3,500 crores of top line?

Okay. Let me answer point wise. First of all, let us discuss about the [indiscernible]. Turnover, as you know, we are getting business revenue from the 2 business sections. One is Consultancy segment and the second is Turnkey segment. In the Consultancy segment, there is increase of revenue of about 3%, but there is a down of around 19% in the Turnkey segment -- 37% in Turnkey segment. This downfall was there because some of the major LSTK/OBE jobs were completed during the first and second quarter of this financial year. But on the other hand, we have also received some OBE/LSTK projects also which are under progress, and we expected that in the coming quarters, whatever is the shortfall of turnover, that will be compensated by the existing jobs which are in progress as well as new jobs, which you have received in the first half of the financial year. And this is the turnover side.

So again, I just wanted to clarify. So you had mentioned that you'd be targeting about INR 3,500 crores of revenue. So are we on track to achieving that?

We are targeting around this figure.

Okay. Secondly, sir, I was just doing this calculation for Turnkey. So this order book -- just a second -- so just to give you an example, let's say, at the beginning of quarter 2 FY '25, the Turnkey order book is about INR 3,364 crores and the new orders that we received were around INR 107 crores. And these 2 numbers, when you [indiscernible].

Let me correct. On 30th September 2024, my order book is INR 11,155 crores, and out of this, Turnkey segment is INR 4,660 crores, balance is Consultancy segment. So I was saying this INR 4,600 crores will contribute to [indiscernible] in the coming 6 months.

No, I understand that. I was just doing the calculation of adding opening order book as on the beginning of the quarter, adding the new orders that you received during the quarter and subtracting my revenue that has recognized in the quarter. So I should be getting the closing order book for Turnkey, which should be around INR 3,178 crores. But the Turnkey cumulative figure as of 30th September is around INR 4,600 crores. So I just wanted to understand why is this different? I mean, is there some -- is it -- that I'm doing wrong somewhere?

No, no. There is nothing wrong in that. Basically, you just go for the opening order book of the Turnkey segment at the end of the last financial year, add the new order, and then deduct the [indiscernible] during the half year. You will be getting almost whatever we have [indiscernible]. Only the difference is basically the [indiscernible] GST component. Only difference is GST component.

Got it. So essentially from FY '24, I should be taking that number -- opening number. And sir, one last question in terms of RFCL. So again, I think previous calls, we had mentioned that we'll be receiving about INR 100 crores plus kind of a number or share of income from RFCL. So this quarter, it was a little subdued. So is there something that I should be reading into it or the run rate of around INR 33 crores is maintained?

In this quarter, we have received -- our profit share in INR 22 crores, and up to half year it's around INR 55 crores. So going forward also, we expect that we'll be able to get same share as a profit from the -- more than INR 100 crores.

The next question is from the line of Amit Anwani from Prabhudas Lilladher Capital.

Yes. Sir first thing I wanted to understand, you did highlight that the order book now is about INR 12,000 crores, and we have received one more order. Just wanted to understand from you, what is the total L1 pipeline? If you could highlight the project and values? And apart from L1 pipeline, what is the prospective pipeline project-wise and value-wise for FY '25 and '26, next 18 months?

With respect to the orders, which we have told you that different business intake is already reached INR 6,800 crores. So it's just a half year and we are very much hopeful that we'll be able to add about INR 1,000 crores or INR 2,000 crores further. Let's say, around INR 8,000 crores, INR 8,500 crores it should be reached -- should be able to reach with respect to the business intake.

All right. Any notable projects you would like to highlight?

Sorry, what?

Any notable project names you would like to highlight?

Number of projects are in the bidding process, and we have [indiscernible] talking about that might come. There are some other projects in OBE segment which we are [indiscernible]. So those can be finalized. Telling the names would be difficult at this point of time because [indiscernible] So there are certain [indiscernible] are there in the pipeline and this could be realized.

And now with respect to the business performance, since there's so much order book buildup is happening, what is our internal assessment or ambition, what kind of annual peak revenue we can do in next 3 years? Any number you have because we have been seeing the previous years, the revenue has been kind of flat, but now past 2 years, the order book has built up significantly? Just wanted to understand, can we expect INR 4,000 crores, INR 5,000 crores kind of revenue in FY '27? Any thought you would like to give? And same question on the margin. We have been seeing Consulting margin has been low. So any assessment on the new orders and the EBIT margin for [indiscernible] Electrician and Consulting? And what kind of margins we can do in the next 2, 3 years? Because in the previous cycle, we did 20%-plus margins also and very good growth also 10 years back. So just a thought what is a 2-, 3-year view since the order book has now built up?

First of all, let us discuss about the margin. And in the Consultancy segment, we are maintaining our segment profit of 20% to 25% on regular basis. And in the [indiscernible] Electrical business, it is around 5%. And we are sure to maintain in the coming years also this kind of margin. We are targeting this margin.

Right. And top line, sir?

And top line, as you've seen, our order book is all time high, and we are expecting more orders to come and we have [indiscernible] target of INR 5,000 crores [indiscernible] within the next 2 to 3 years.

INR 5,000 crores turnover within the next 2 years. So, is it FY '27?

2 years -- around 2 years. It will take 2 years.

Annual turnover of INR 5,000 crores, right?

Annual turnover of INR 5,000 crores. In fact, with the good order inflow.

Right. Sir, one more thought on the -- there has been a lot of talks and you have been also highlighting in the PPT about the new initiatives like green hydrogen, coal gasification and biofuel. And there has been talks and policies from government also on various bioenergy related stuff. So just wanted to understand, obviously, you have been highlighting over past 1 year, any meaningful development there? Any orders on the annual in this phase? Anything which has developed in this area?

One of the recent achievement in this case was the biofuel refinery, biofuel project [indiscernible] which we have got it on OBE, which is around INR 300 crores [indiscernible] there. Apart form that we have done a number of studies and kind of engineering -- usual engineering assignments for that. Nothing major implementation things has come as of now. But there are a lot of things in pipeline and in discussion. So we are hoping to get them realized. For this -- for the last 2 quarters, the major achievement is the bio refinery [indiscernible].

Sir, lastly, sir, just a clarification, all these orders, which are in the pipeline and which have been won in the past 24 months, so largely, all these orders are nominated. Any ballpark you can suggest that -- is it cost plus certain percentage? And what is the percentage? Anything you would like to highlight there, with respect to orders...

[indiscernible] the same profitability what we received. There is nothing specific we can highlight on [indiscernible] percentages there. That's a competitive market. So we will not try to comment on that. But as we are maintaining the Consultancy profitability of 20%, that would be the 20% to 25%, that would be the target. And [indiscernible] 5% to 6% [indiscernible] remain the target as whatever assignment we get, we'll aim to it, that's it.

The next question is from the line of Shirom Kapur from Prabhudas Lilladher.

And, a lot of my questions have been answered, but one thing I wanted to ask is on your international business. You spoke about pickup in opportunities in Africa, specifically Nigeria and Algeria and as well as Middle East and some in Latin America as well. So could you highlight any developments in your international business [indiscernible]?

[indiscernible] Abu Dhabi, our middle east office, basically the Abu Dhabi office is doing very well. We have received this year highest order bookings from that place. Because it's holiday [indiscernible] INR 180 crores. We have already reached from that office that has ever been received. So that office is on the tune, and we'll be further progressing and we are working with all the [indiscernible] oil company. With respect to the Nigeria, Nigeria, we're still working [indiscernible] project and first phase is already on. But the second phase is expected to come towards the end of this year. So if all goes well, then it will come our way. An then, in Algeria also, we are bidding for a number of projects. So those are in the bidding process, let's hope for the best. They will get realized and could be adding to our portfolio. So that's the whole thing which we are working. International is one of the focused areas for us. So we are working on that.

And just another question now moving to the domestic side. And you know with all the upcoming refinery and petrochemical CapEx that we have over the next 4, 5 years. So do you have a -- what kind of projects are you continuing to bidding for in the pipeline? For example, IOCL -- of course, Paradip mentioned, but any other ongoing projects such as the Panipat expansion and Barauni, et cetera with HPCL?

Panipat expansion is already we are executing. So that would be some [indiscernible] year or so. So other [indiscernible] which we are -- the information -- the projects which are in market, we are already on the toes of it, and we are bidding for it. Apart from that, there are a number of [indiscernible] which we are discussing with some private investors. So, those are also there on the end list. So let's hope for the best.

Right. Okay. So yes, just to clarify that even the ongoing expansions that are going, most -- all those packages have already been bid out. There's no further packages potentially right now to capture, right, in the ongoing expansion project?

There's no package to be awarded. It is basically the physical progress of the [indiscernible]. Most of the packages are awarded by [indiscernible] when they are in the construction phase.

Okay. Understood. And if you could highlight anything on -- I know you mentioned that you received the biofuel biorefinery order for now [indiscernible] anything on green hydrogen or coal gasification that you could mention? Any projects that you have been bidding for or what projects are in the pipeline? And if you could quantify them?

Many of the companies have noted these tenders for [indiscernible]. Actually, we don't do that. So we prefer to go for the Consultancy. So we are working on few of the projects, one is of NRL, one is of NLCL [indiscernible] to the green hydrogen on the initial study phases. So we are working on those kind of projects.

The next question is from the line of Nidhi Shah from ICICI Securities Limited.

I had a couple of questions on your full year margin. So last year, we saw margins at 8.8%, this is EBITDA margin. So this year, the first 2 quarters have been lower than that. Are we expecting margins to improve, that is on the entire sales? Are we expecting them to improve in the rest of the year?

Yes, we are expecting that the margin will be in the in line as last year over a period of time for the financial year.

Okay. Also the new orders that you have secured this quarter, is there potentially a higher upside on those orders than we have orders that are currently sitting in the order book that we're executing at this point in time?

Yes, over a period of time, definitely there will be some improvement in the margin due to operational efficiency as well as new mega jobs [indiscernible] during the current financial year.

Okay. And given that order inflow is really very good this year and the outlook for the next 1 to 2 years is also good, do we expect that given how much order flow is there in the market that margins would improve on these orders based on that itself?

Yes, margin will definitely improve on the basis of the operational efficiency as well as [indiscernible] order we have received during the current financial year. In this [indiscernible] order, the margins were low in comparision to the small order [indiscernible] competition - in comparision to the [indiscernible].

And lastly, just a couple of questions on RFCL. What is the revenue and the EBITDA for H1 for RFCL and numeric value as well?

Profit after tax for our share is around INR 55 crores for the half year.

Okay. And RFCL revenues for the first half?

Our revenue for the current half year for our share, so 46% share is INR [indiscernible] crores.

Okay. And the same question would be for Numaligarh and as well as also in Q4 you had mentioned that Numaligarh is undergoing an expansion to be [indiscernible] MMTPA. So how is the expansion progressing at this point in time?

Expansion is going on, but the revenue will be coming only after the expansion is completed. Right now, we are capitalizing whatever [indiscernible] So over a period of time, they will be like [indiscernible] revenue as well as the profitability, that will be coming in the form of dividend to the [indiscernible].

Okay. But when can we expect the expansion to be completed?

Right now, I don't have the status for that particular thing. Maybe by the middle of the next year or the end of the next year.

The next question is from the line of Sanjay Shah from [indiscernible].

I hope you can hear me?

Yes, good afternoon.

Sir, just one question. In your annual report, you had mentioned about the opportunities which might come up in the nuclear sector, and there were some discussions going on with NTPC and NPCIL. So is there any progress on that?

Yes, certain discussions are on -- in the initial stages of it. So we are anticipating NTPC [indiscernible] times to come. So we are working with them, and we are planning to approach them so that we get involved in this [indiscernible] early stages, but nothing concrete has taken place as of now.

Got it. Sir, and then in the blueprint for the nuclear sector, would it be just a larger nuclear power plant? Or are you also possibly or likely to get involved in the initiative for the Bharat Nuclear Reactors also?

In fact, earlier [indiscernible] that we do is mostly on the [indiscernible] type of things. Because of old nuclear reactors, we are not involving [indiscernible] in the future.

The next question is from the line of Shirom Kapur from Prabhudas Lilladher Capital.

I just had a quick question on some of the projects that have recently been announced by some of the major oil and gas players. So, for example, Gail has announced a INR 60,000 crores project to set up an ethane gas cracker. Similarly, BPCL and ONGC are also announced proposed major projects for 10 to 12 million metric tonnes refinery capacity with investments of up to INR 1.5 lakh crores. So what is your view on these projects? When do you expect that some of these projects to come in the Consultancy and the tenders are open for such project?

So all these projects are still in the feasibility stage right now. They have indicated the CapEx investment, but we -- right now, these are in the study phase. After the study phase is done, they will go for their investment approval from the board. And then only anything concrete will come out on this ladder because what way they will go, which location they are going to have. The main work will start only after their initial board approvals and these are initially in the feasibility stages and these were involved in [indiscernible].

So you are already participated in the feasibility or this potential feasibility study orders to come in from these projects?

Tomorrow if it comes and which way it will go, we will definitely participate. [indiscernible]

The next question is from the line of Manoj Shah from [indiscernible] Investments.

I have some basic questions, like if you can explain to me regarding the revenue booking factors, so the Consultancy project and Turnkey project. Like initially, what happens for the Consultancy, you've got more of expenses because you are in the designing stage and so on kind of phase, and then later part the revenue picks up. If you can explain this for the Consultancy as well as for the Turnkey project, that will be very helpful.

Yes, basically, revenue recognizes for the -- basically we are having a loan gas station project in the Consultancy as well as the Turnkey segment. For the major project, the contract period is around 4 year. So revenue recognition is not [indiscernible] during the initial phases, maybe for the first 1.5 years. We are able to [indiscernible] only around 12%. After that, in the second year and third year, it will be around between 30% to 35% and then revenue is recognized over the next year, 4th year or so on. So that is the revenue [indiscernible] cycle for the [indiscernible] contracts.

And for the Turnkey?

Similar for the Turnkey segment also. We are involving the [indiscernible] construction activity for the project, so this span over a period of 4 years for the long project.

So what you're saying is, whether it's a Consultancy project or it's a Turnkey project, your revenue cycles more or less remains the same [indiscernible] half year, it will be 12%. Then next 3 to 4 years, it could be like 30%, 35% of the revenues [indiscernible] and balance [indiscernible]. So it remains same for both Turnkey as well as for the Consultancy?

[indiscernible].

[indiscernible] This will help us understanding how the margins will -- like you will have some expenses in that particular quarter. So margins will be lower in that particular quarter. But if you look at 6 months ago, we are -- then we will be able to have a better [indiscernible].

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

I have 2 simple questions. One is relating to Guyana. There was an article in which our company has been awarded the PMC services for power generation, first of its kind, to be done by natural gas. So far, they were doing it apparently by burning diesel. So I'm supremely confident that you would execute it in the most competitive way. What is the possibility of getting more work from this oil-rich country, which is quite favorable to our country nowadays? So one of that, more power generating capacities to come there or -- and also in the consultancy in oil refinery offshore? And the second question which I have is, again, relates to future possible work is offshore wind energy. Typically, they are much bigger than what is there on the land. So what is the expectation which the company has in these 2 respects? Your take on that?

[indiscernible] this is a project, which includes the natural gas liquid project as well as power plants [indiscernible] 400 megawatt power plant is there. So right now, we have the project management consultants were there [indiscernible] coming from the ExxonMobil, who will be actually operator of the oil fields there and supplying the gas [indiscernible] pipeline to the facility. We are working as a project management consulting, managing and [indiscernible] contractor, who has been appointed by the [indiscernible] and we have also been appointed by the government. So we are managing their projects and trying to get it commissioned at the earliest because that is a major need for them. With respect to the anticipation in the future because they have [indiscernible]. Right now, it's mostly being governed by the ExxonMobil. We are anticipating an oil refinery there. And they are also anticipating a fertilizer project in the country. But it's going to take some time because actually, what they want is they don't wish to invest. They want -- they are looking for the investor to invest in that project. So that is the pitch right now because it's quite delayed [indiscernible] government would have invested, it could happen faster. So they are looking for the parties to invest in all these projects. That is the current situation of these projects. And we also anticipate there will be an expansion in the existing power facility in times to come because they intend to supply that power across the country -- in neighborhood countries also. So that is also the future [indiscernible]. So -- and we are very much well placed working with the government. So let's hope for the best. But actually, this job which we have worked was under the competition. So there will be competition in the future.

Yes. And how about this offshore wind energy possibility?

The offshore wind [indiscernible] the thing is like offshore is very close to our heart because we have our own offshore team working on this because we have been working for all the ONGC projects and [indiscernible] in offshore fields since we have done more than 248 offshore platform. [indiscernible], we are in the offshore engineering platform designing and all. We have not done any [indiscernible] right now getting involved in some of these projects. And as soon as these -- there are a lot of opportunity comes, we will definitely like to target the offshore wind project. Because we are looking into [indiscernible] all the time. So because we have good strength of offshore designing, basically platform designing, so it very well gels with our capabilities. But all these are basically the wind [indiscernible] as a package because we have not much to do in that one because those are OEM supplied items. Our primary focus will be only the offshore facility wherein we have [indiscernible].

[indiscernible] but since it's on a much bigger scale than what is there on the land, and this would be perhaps among the first one. So the possibility is even of this being the bigger, larger chunk of this and our expertise in the offshore, what could be the possible market size in case if India is to achieve renewable this thing of certain percentage by 2030, which is not very far away? So government's focus on that? And what is your strength?

I have already told you, strength wise we have no issue with that. We can do those projects. Basically in all these projects, we have HVDC on the offshore platform and the [indiscernible] would be separate [indiscernible] and there will be an integration involved between all these facilities. So we are a very good integrator as well as designer of the offshore facility. We are very well equipped with all kind of skills [indiscernible] come in the market, we'll definitely be bidding for that. And that's [indiscernible] and we are developing our skills and asking our teams to be exposed with [indiscernible] offshore developments and all. So we are getting ready for all these kinds of opportunities in times to come.

As there are no further questions from the participants, I now hand the conference over to Ms. Bhoomika Nair for closing comments.

Thank you very much for giving us an opportunity to host the call and wishing you all the very best and a very happy Diwali to you and also all the participants. Thank you very much, sir.

Thank you very much. Thank you, Bhoomika. Happy Diwali to all of you.

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