GPT Infraprojects Limited (533761) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the GPT Infraprojects Limited Q3 and 9 months FY '20 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Atul Tantia, Executive Director. Thank you, and over to you, sir.

Thank you. Good morning, everyone, and a warm welcome to the GPT Infraprojects' earnings conference call for the quarter and 9 months ended December 31, 2019. I have with me on call representatives from Stellar IR Advisors, our Investor Relations adviser. I hope you all have received an updated investor presentation and the press note on the same and have gone through the same. We have also uploaded the same on our website and the website of the stock exchanges for your reference. We will begin the call with a brief summary on the financial performance of the company during the quarter and the 9 months under review, that is Q3 and 9 months FY '20 and follow it up with an update on the recent happenings in the business. Lastly, we will move on to question and answers. So to begin with, for the third quarter of FY '20, we have reported a consolidated revenue from operations of INR 157.9 crores, which is higher by 14% compared to INR 138.1 crores reported in the same period of last year. Of this, the infrastructure segment contributed about 86%, and the balance 14% came in from the concrete sleeper business. During the 9 months of FY '20, the consolidated revenue from operations was at INR 430.8 crores that is 7% higher than the INR 401.5 crores reported in the corresponding period of last fiscal. Of the total 9-month FY '20 revenues, infrastructure segment contributed about 82%, and the balance 18% came in from the sleeper division. Despite the continual challenging business environment in terms of liquidity situation, payment related delays and project ordering activity in India, we are happy to share that we have successfully maintained or rather improved derivation run rate of the existing order book, leading to a growth in the top line. This growth was largely led by our infrastructure segment, wherein revenue growth -- wherein revenue grew by almost 30% year-on-year in Q3 FY '20 and around 21% year-on-year in 9 months FY '20. In August 2018, we had bagged the largest single order from RVNL for INR 378 crores for bridge -- rail cum road bridge works at Ghazipur, near Varanasi. And the work on this project is going on smoothly with a quarterly run rate of approximately INR 25 crores. The completion of this order, which is planned over the next 18 months would enable us to bid for single orders of INR 1,000 crores. The unexecuted book -- order book of our infrastructure segment as on December 2019 stands at healthy INR 14 billion approximately, forming almost 3x FY '19 infrastructure revenue. While the infra segment is poised for growth, the Africa business has shown slowdown in the concrete sleeper segment in the first half due to elections in the country. However, the business has picked up since then, and we expect the business to meet the earlier run rate of revenue in the coming quarters. We are also expecting new orders from customers of both South Africa and Namibia in the next few months. On the Indian sleeper front in one of our key orders, which is from the GMR Infra for the DFC project, due to the slowdown in the offtake from GMR, the first 9 months have been slow compared to earlier. However, the track-linking works of GMR has started in full speed since then in the -- since the middle of January of this year, and we expect significant offtake in the next 2 quarters. Consequently, the concrete sleeper division revenue for Q3 FY '20 was lower than the previous quarters. That was largely on the infrastructure -- on the execution front. Now in terms of order intake, while the macro weak -- macro environment has been weak and that's aftermarket realizations has had an impact on the overall ordering activity, especially in the infrastructure space, we are happy to share that GPT Infraprojects was able to secure a few orders, although small size, and we currently have an healthy order book of almost INR 16.6 billion, which is almost 2.9x our FY '19 revenues. Additionally, we are L1 in orders worth almost INR 6 billion. Going forward, we expect revival in ordering activity stemming primarily from government's focus on infrastructure and improving connectivity. The recent proposed budgetary allocation of almost INR 700 billion for financial year 2021 towards railways is quite encouraging, especially the increase in allocation towards construction of bridges, doubling of tracks and construction of new lines, and we are hopeful that the combination of the government trust coupled with RBI's policy should help ease the credit availability for businesses like us. Now coming to the profitability. Our continued focus on cost efficiency and disciplined bidding practice has led to consistency in profit margins. The EBITDA for Q3 FY '20 grew by almost 19% year-on-year to INR 24.4 crores and by 11% year-on-year to INR 67.9 crores for 9 months FY '20. The EBITDA margins have remained steady in the range of 15% to 16% for the period under review, despite lower profitability in the concrete sleeper business due to the aforementioned reasons. The net profit came in at INR 7 crores, up significantly by 246% year-on-year in Q3 FY '20 and showed a 53% improvement for the 9 months ended December 31, 2019 at INR 13.9 crores in comparison to the same period of last year. Quarterly PAT margin improved to around 4.4% in Q3 FY '20 and to 3.2% in 9-month FY '20. The consolidated profit after tax and share of minorities for Q3 FY '20 came in at INR 6.3 crores compared to INR 3.7 crores in Q3 FY '19 and INR 14.1 crores for 9 months ended FY '20 as compared to INR 10.2 crores for 9 months FY '19 and INR 11.8 crores in full year FY '19. Further, we would like to highlight that over the period, we have been able to derecognize and receive some of the old outstanding dues, which now stand at INR 27.4 crores as on December 2019, which is significantly lower than INR 9.1 crores as on March 2019. In Q3 FY '20 alone, the amount was -- has reduced by INR 7.7 crores. These dues were qualified by the auditors on account of old receivables from contracts or of unbilled revenue, accrued price escalation and trade receivables for certain contracts, which have been outstanding for more than 3 years. We are quite hopeful to recover the -- more of the same amounts in the coming quarters, and which will help our liquidity position. Now coming to the industry scenario for project ordering and financial liquidity. The challenges in the banking sector continue to drive our ability to bid for new projects. However, overall activity in our segments have started seeing some green shoots of recovery, and we are hopeful that these factors will provide a fill up to the overall project bidding activity. The Honorable Finance Minister in her speech articulated the government's infrastructure-focused spending plan, areas like construction of new lines, track renewals, road safety, ROBs, RUBs, bridge works, doubling of plants and road safety, level crossings have received an estimated outlay of almost INR 30,000 crores, which is 33% increase from previous year. These areas are likely to provide us with opportunities in the coming quarters. And with our strong project execution capability, the healthy financial base and enviable growth prospects across our areas of operations, we believe that GPT Infraprojects Limited is well positioned to continue on its growth trajectory. That is all from my side. I would now request the moderator to open the floor for any question and answers.

[Operator Instructions] We take the first question from the line of Rohit Natarajan from Antique Stockbroking.

Sir, as you mentioned in your opening remarks that the segments attributable for you or your company in the railway infrastructure budget have seen some 33% kind of a growth. My question is, in terms of -- there is also a change in policy that is notified in the month of December from RVNL and other rail PSU companies, this is more confined to how the nature of bidding that will happen from Ministry of Railways to these companies. If I put these 2 things together, one is the increased infrastructure spending and second thing is the change in competitive landscape between these companies, IRCON, RVNL and so on. How does that impact to you in future for all the orders to come?

Well, the change in the competitive landscape in terms of RVNL, IRCON writes the notification that you're referring to in December. Earlier, these companies used to get the orders on a cost-plus basis from the Ministry of Railways. Now they have been told that they would also be participating in the -- they would have to also bid and get the contracts. However, when they give the orders to the likes of us to the private customers, then they have their own bidding process. So we participate in the biding process and get the orders out of the bidding process. So per se, we don't see much of a change in the process or any sort of change in the margins because that would be -- that's through a competitive bidding process earlier also and it will continue to be in the same process.

No sir, my point here is more on the scope of PVC, that price variation clause or where the fixed component will be involved. Will there be any tinkering around those aspects?

No, even railway departments or -- give the PVC too in terms of the direct contracts that they give to us and other PSUs. And the PSUs give PVC also, so that should not change. It will not be a contract without PVC per se.

If I understand it correctly, this is for the prospective orders, whatever MOR is going to give it to them?

Yes, but not -- but for the prospective also, so the -- it's not a fixed price contract, it's a -- the contracts are with PVC.

The reason why I asked you is that both IRCON and RVNL has got a very strong order backlog what they have right now in hand. So these incremental policy impact will be for the new orders that Ministry gives it to them and not on the existing order backlog?

Yes, but the Ministry has not said that it will be a fixed-price contract for them.

True, true, true. I understand. I understand. And my second question is on what is the situation with your L1 position? When do you expect that to be a part of the order backlog? And when do we see this commencing of construction beginning?

So the L1 of almost INR 600 crores has been for almost 30-odd days, and we expect it to be awarded in the next -- in this financial year. Our construction typically nowadays takes about 3 to 4 months. So post monsoon only, construction for that would start.

Okay. Sir, if I can ask you some questions on -- for the next year, FY '21, what would be your execution that you have built in for Mathura-Jhansi project?

Next year, Mathura-Jhansi would see an execution of almost INR 75 crores to INR 80 crores minimum.

Okay. And for that level crossing in West Bengal, which currently you have INR 2.1 billion order backlog?

Level crossing for -- that would see almost INR 40-odd crores, INR 40 crores to INR 45 crores because there are 2 bridges in that, one -- for one bridge the land has been handed over, for second bridge the land is still yet to be handed over.

Okay. And in Nimitita project?

Nimitita, we don't have the -- I don't have the number off hand right now. We can get back to you on that.

Yes, yes. And in GMR DFC, how much would it look like?

GMR DFC, like I said in my opening remarks, it depends on the offtake from them. The factories get up to do almost 8 to 9 floors each, every month. So the next 2 quarters, we have indicated at a very senior level last week that they would see in the next 2 quarters, a significant offtake. So if that does happen, then obviously, we would see almost -- the 2 factories combined we would see close to INR 100 crores. But it is subject to the offtake happening from GMR.

Okay. And you touched upon the opening remarks that Ghazipur project is a 18-month project. So how much is the billing that you expect in FY '21 to happen in?

So like I said in my opening remarks, the current quarterly run rate is about INR 25 crores. So we expect that to be maintained.

[Operator Instructions] We take the next question from the line of [ Shruti Sharma ], individual investor.

Sir, I have one bookkeeping question that what is the working capital cycle for Q3 FY '20 and 9 months FY '20?

We don't check the balance sheet for the quarter, but it's...

So any ballpark number, if you can give?

It's close to 130-odd days.

Okay, sir. And sir, in going forward, do we see any -- seeing any improvement in the working capital cycle?

Like I said in my opening remarks, the old receivables are coming, so we would see liquidity position to improve. So that will obviously improve the working capital cycle. And with the offtake from GMR that would also improve the -- our working capital cycle.

Okay, sir. And sir, my second question is that any development on NHAI arbitration order of INR 62 crores?

Pardon?

Any development on the NHAI arbitration order of INR 62 crores?

It's still sub judice in Delhi High Court, NHAI lawyers have not been present in the last couple of hearings, so that case have been deferred. There is no update, per se.

Okay. Okay. So we don't have any update on the same? And we don't have any time line like when it can happen?

You cannot predict anything. It's -- matter is sub judice with Delhi High Court.

Okay, okay, sir. And sir, one more thing I wanted to ask on the infra segment side, the execution of infra segment seems very strong. So what is the outlook on the same?

Like I said in the opening remarks, even the budget provides there almost a 33% enhanced outlay for this -- for the portion of the railway contracts that we do it for. So we expect the growth to be strong in the coming years also.

So sir, what kind of percentage, I mean, do we expect? Like, what kind of order book should we expect in the next 2 years? Any number which we have?

We don't give our quarterly in terms of our future guidance. Normally, quarterly, we do it annually, so we'll do that for the March.

[Operator Instructions] We take the next question from the line of [ Mohit Bansal ] from [ Ajinkya MPL ].

Sir, I had a question on the NHAI arbitration. There was a recent cabinet note, which mentioned some changes in the arbitration process. Any changes which applies to us post that?

No, they are -- none of them impact to us.

It doesn't impact. So it says that the new arbitration will have to go through AG opinion and then go into arbitration. Does that apply to old arbitration cases as well?

No. Only for new.

Okay. And sir, last time, you had mentioned about some new bank lines getting sanctioned. So just wanted an update on that.

We have been sanctioned.

Okay. So can you please help us with the total sanction of limit, sir, for the entity?

Total sanction limit is -- I think its INR 210 crores fund-based limit and INR 343 crores nonfund-based.

INR 3.3 crores nonfund based?

INR 343 crores.

Okay. Okay. And sir, you've already guided for a flat kind of a growth for next year.

I did not guide for flat growth for next year.

Correct?

I did not guide for -- anything for next year.

Okay. So can you please give an outlook for the next year?

Like I said, for the previous question, normally, we you don't give a quarterly -- in the quarterly update, we don't give our future guidance. We do that in the annual call. So in the May call for the March results, we'll do that.

[Operator Instructions] Next question is from the line of [ Mihir Desai ] from [ Desai Investment ].

Sir, I had couple of questions on concrete sleepers. So sir, we have seen that the performance of our concrete sleepers has been a bit sluggish. So I just wanted to understand the key concerns in this business, sir.

So like I said, the key concern is primarily with respect to the African business in the first half of this year being slow due to the elections in the -- in both South Africa as well as Namibia. However, like I said, South Africa, the offtake has picked up, and we should see the earlier run rate coming back to South Africa in the coming quarters. In terms of the Indian sleeper business, the larger contract is with GMR Infra. So they had some issues with respect to the offtake of sleepers in the first 9 months. However, some funds have been tied up by them, and we expect them to have increased offtake, the track laying works that they have committed and the coming 2 couple of quarters should actually be good with them.

Okay, sure. And sir, do we expect any renewal orders from Africa, like, from the existing...

Like I said in my opening remarks, both in South Africa and Namibia, in the coming months, we will see new orders from both the countries.

All right. Understood, sir. And sir, just wanted to understand the order book breakup between our concrete sleepers and infrastructure business.

It's INR 14 billion approximately for the infrastructure business and INR 2.6 billion approximately for the concrete sleeper business.

[Operator Instructions] Next question is from the line of Ritesh Parikh from Barclays.

Sir, can you guide me on the order inflow for both the concrete and the infrastructure segment for us?

Order inflow as in, you mean balance order book or...

This already we have received the order. No, the current order we got in the current year.

In the current year? Yes, just a moment. I have the current order book outstanding, which is INR 16.6 billion combined. This year, the orders were slightly small. So I don't have the total in front of me right now. But for the -- in concrete sleeper business it will be approximately INR 100 crores and infrastructure would be almost -- another INR 150 crores, INR 180 crores.

INR 150 crores to INR 180 crores, okay. Secondly, can you help me on the utilization levels for the concrete business on the India and the South Africa side?

Pardon?

Utilization levels for our concrete business, sleeper business in India and South Africa?

So in India, the utilization level for GMR has been low because of the offtake, like I said in my earlier remarks. For Panagarh, the utilization has been almost 75%. For the South African business, the first 6 months the utilization was less. Again, like I said in my opening remarks, due to the elections there. Now the utilization currently in South Africa is almost 70%, 75%.

Okay. And last, what is the current debt levels for us, short term and long term?

On a consolidated basis, the debt -- I mean, the fund-based of them is almost INR 220 crores, I mean, both in India as well as the African business combined.

[Operator Instructions] We take the next question from the line of Jiten Rushi from BOB Capital Markets.

Sir, my question would be on the order bid pipelines in next couple of months, what kind of orders and which projects you're mainly targeting as an inflow? Can you just highlight on that?

Sure. So our core confidence has always been construction of large bridges for railways, railway track works. And so the target would be towards that. Like I said in my opening remarks, this budget has made an outlay of almost INR 30,000 crores for this segment of the business, which is an increase of almost 33% from the last year.

I appreciate that, but any specific projects, which you are -- which you have bidded and you're expecting the bid to open soon or you're planning to bid like where...

We already -- L1 is INR 600 crores of orders. So that is something that we have already bid in the L1 in.

And when is this as we are expected?

It should be in this financial year.

Okay. And any further bids in next couple of months, like in terms of value you're targeting?

It's very difficult to give a number to that.

Okay, sir. Okay. So sir, so far, can you just tell me the order inflow, I missed on it, sorry?

So the order book currently is INR 16.6 billion, which is INR 1,660 crores.

Sir, order inflow so far year-to-date?

Total order book, net order book, net unexecuted order book is about INR 1,660 crores.

Well, ladies and gentlemen, that is the last question for today. I would now like to hand the conference over to Mr. Atul Tantia for closing comments. Over to you, sir.

Thank you. Thank you, everyone, for your participation in our Q3 and 9 months FY '20 earnings call. Like I said earlier, we have uploaded the investor presentation on our website, and the website of the stock exchanges. In case you have any further queries, you may get in touch with us or with Stellar Investor Relations. Thank you, and have a good day.

Thank you. On behalf of GPT Infraprojects, that concludes this conference. Thank you for joining us. You may now disconnect your lines.