GPT Infraprojects Limited (533761) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to GPT Infraprojects Limited Q2 H1 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Atul Tantia, Executive Director and CFO, GPT Infraprojects Limited. Thank you, and over to you, sir.

Thank you. Good morning, everyone, and a warm welcome to GPT Infraprojects Limited earnings conference Call for the second quarter and half year ended 30th September 2020. I have with me on call Stellar IR advisers, our Investor Relations adviser. I hope you all have received the updated investor presentation that we have also updated on our website and the website of the stock exchanges for your ready reference. We hope that everyone on the call continues to remain safe and healthy. Post our last conference call where we discussed how the company was coping with the COVID-19-related disruptions in the business operations by implementing constructive measures to deal with the situation, we are happy to report today that not only have the insured continuity of operations, but in Q2 FY '21, we were also able to more than match the performance with that of the same quarter last year. Let me now share with you key highlights of the company's operational and financial performance during this challenging time and update on how things currently stand. On the execution front, the operations, which were impacted significantly in Q1 FY '21 have been improving month on month thereafter. And currently, we have achieved normalcy across all our infrastructure contracts with monthly envision rate back to pre-COVID levels. On the Concrete Sleeper side to all our manufacturing facilities in India and Africa are ramping up the capacity utilizations, which currently stand at approximately 75% levels. In fact, our consolidated revenues for the past quarter, that is Q2 FY '21, posted a growth of approximately 10% year-on-year and approximately 75% quarter-on-quarter to INR 146 crores. In terms of segmental breakup, the proportion of Concrete Sleepers increased from 18% to 20% to approximately 26% in Q2 FY '21 on account of higher deliveries, especially in the DFC contracts. On the ordering activity, the COVID-19 disruption, notwithstanding the company, has successfully bagged 4 new orders worth approximately INR 443 crores in YTD FY '21. In addition to the INR 115 crores order awarded by the NHIDCL for the widening of a section of National Highway 102B in the state of Manipur on EPC Mode in April 2020, we bagged a contiguous stretch of the same project for an additional INR 103 crores in July 2020. Another order worth INR 197 crores was awarded to us by RVNL in August 2020 for construction or Metro Railway wide out in connection with the Metro Railway project in Kolkata. And then we win for city 2 bagged orders recently for supply of Concrete Sleepers. Incrementally, we stand L1 in orders worth approximately INR 400 crores, which further strengthens our order pipeline for the current fiscal as against an advisable order inflow in FY '20. These orders are expected to be received in November 2020 itself. With this, our order book stands strong at INR 1,639 crores, forming approximately 2.75x FY '20 revenue. This excludes the L1 orders. Some of our key projects under execution include the Ghazipur order worth INR 378 crores by RVNL, which is back to running smoothly with a quarterly run rate of approximately INR 35 crores, and closure is expected over the next 20 months. This would enable us to bid for single orders worth INR 1,000 crores underscoring our execution abilities in the Infrastructure segment. In the Concrete Sleeper segment, the GMR order worth INR 246 crores continues to progress well, and the cash flow from the same are also easing the working capital requirements. On our margins and profitability, the company's ongoing cost optimization drive with the improved order execution and better liquidity, our limit has borne fruits and led to an increase in the profit margin slightly. While not all of the margin expansion may be sustainable, we believe that the cost saving of approximately INR 5 crores to INR 7 crores per annum is that should be recurring in nature over the long term. Our story are continuing because of bidding discipline where we ensure that our hurdle rate of 13% to 14% is met, while bidding for new contracts continue to be the primary factor for stability in the profitability. In Q2 FY '21, our EBITDA stood at INR 25 crores a growth of 17.5% year-on-year and 40% quarter-on-quarter, and EBITDA margin came in at 17.03% versus an average of 14% to 15%. In HY -- FY '21, while absolutely EBITDA declined by 2% due to COVID-19 impact, the EBITDA margin grew by 275 basis points year-on-year to 18.55% as against 15.8% in HY -- H1 FY '20. Profit after tax in Q2 FY '21 grew by robust 68% year-on-year to INR 5.5 crores as against INR 3.2 crores in Q2 FY '20. Profit after tax in HY -- FY '21 grew by 5.6% year-on-year to INR 7.32 crores as against INR 6.9 crores in HY -- H1 FY '20. In terms of the leverage and liquidity position, as mentioned in the previous 2 calls as well, we have been optimizing our working capital in addition to pairing our -- some of our high-cost debt. During the past fiscal and H1 of current fiscal, we managed an overall reduction of approximately INR 30 crores of long-term plus short-term debt. This, coupled with improved profitability, has helped us to improve our cash flow generation. We also expect a release of some old outstanding from various clients, which was INR 49 crores in March 2019 and reduced to INR 25 crores in March 2020. The same is reduced to approximately INR 22.8 crores as on September 2020 and is expected to reduce by a further INR 3 crores to INR 4 crores this year. In addition, outstanding tax reforms are also being processed by various departments and the same will ease out the cash flow for the company. Further, to strengthen the company's liquidity position during these challenging times, we are actively engaged with our working capital bankers to await the special liquidity scheme announced by the government of India. We have also applied for release of proportion bank guarantees from various clients in partly completed projects as allowed by the Ministry of Finance. And already, approximately this INR 50 crores bank guarantees have been released by various clients. Overall, we do not foresee any challenges in meeting our debt obligations or liquidity for the business. Going forward, with our strong project execution capabilities, a healthy financial base and enviable growth prospects across our areas of operation, we believe that GPT Infraprojects Limited is well positioned to continue its growth trajectory. That is all from my side. I would now request the moderator to open the call for any question and answers. Thank you.

[Operator Instructions] The first question is from the line of Rohit Natarajan from Antique Stockbroking.

Sir, I just had a small question on the numbers that you talked about in the L1 position. You are already at INR 400 crores of orders. And help me reconcile with the numbers that you talked about in the order inflow part, you already have one YTD INR 4 billion and INR 1.1 billion in the highway order. That means if I understand it correctly, INR 5 billion is already there and INR 4 billion is the additional L1 that is there in the pipeline.

No. The one that is already there is approximately INR 4.43 billion or INR 4.4 billion, not INR 5 billion, and the L1 in 4 billion.

Okay. Okay. And INR 4 billion, this L1 that we are talking about, what orders are they? I mean, would you want to give some qualitative or quantitative remarks on it?

They are orders for bridges, our large bridge contracts. Typically, 2 orders. One is about INR 160 crores, and other is about INR 250 crores, INR 245 crores.

Both are railway coverage and bridge-related orders?

Correct.

Okay. So no Concrete Sleeper orders that we have bagged in this year so far, right, if I understand it correctly?

We have bagged for the -- for our numbers. With entity, we have bagged, like I said in my opening remarks, but that being an associate doesn't get captured in the order book. For our South African entity, the tender was supposed to happen 2 months ago, but due to COVID is delayed. But we told it should happen in the next 1 month. So -- and for our Indian factories, we have orders for the next 2 years.

Okay. So if I just do a quick calculation. We have close to INR 1,300 crores of numbers in your infrastructure order backlog, and we have INR 2 billion in Sleeper segment. So Sleeper segment will do INR 100 crores per year execution. And the INR 1,300 crores will do roughly INR 400 crores to INR 500 crores kind of execution. Is that a fair understanding? I'm not saying it...

In a normalized base, Infrastructure segment would do about 5 to 5.25 and Sleeper would do about 100 -- 1.25 to 1.5.

Okay. Okay. Sir, one more thing that you talked about was the special equity scheme and then you've got even some release of bank guarantees of close to INR 50 crores. So if I understand -- can you just give us some picture on what exactly the non-fund base limits of the company look like? And what is the utilization of those things?

Non-fund, that is sanction that the consortium is INR 343 crores and utilization is about INR 200 crores.

Okay. That means we have a spare of INR 1.4 billion, which can actually be -- help you win maybe another INR 4.2 billion kind of ordering too, because roughly, you require 22 or maybe even more than that because anywhere, 20% of the nonfund-based leverage for every order that you win, right?

15% approximately.

Okay. Okay. And sir, finally, on the arbitration part. One, you had the Jogbani Highway that amount to INR 30 crores. But what exactly the situation is there? Is there any color on it?

Delhi High Court, there's supposed to be a hearing next week. So if the hearing happens, then there'd be some moment. If again, the hearing is deferred due to COVID or something, that means deferred. So it's just to sud judice, so we cannot comment on it further.

[Operator Instructions] The next question is from the line of Anurag Patil from Roha Asset Managers.

Sir, do you see this revenue traction continue in the second half? Or any kind of guidance you would like to give for this?

I think second half, we'll have a better revenue compared to the first half that always historically happens. So compared to last year, we expect a 5 to 7 -- 5% to 10% growth this year.

Okay. And sir, in terms of receivables, are you facing any pressure? How is the situation there?

The receivables, there's no pressure. If you see our balance sheet impact, receivables has come down by almost INR 42 crores -- INR 40 crores this year. So receivables, if we compare to March, September receivables have come down by approximately INR 40 crores.

Okay. And sir, in terms of debt levels, have you set any target debt levels over the next couple of years? How much you would like to bring it down?

Like I said in my opening remarks, over the last 18 months, it reduced by almost INR 30 crores. So we are reducing by almost, I would say, that almost INR 10 crores to INR 15 crores a year.

[Operator Instructions] The next question is from the line of [ Kunal Jabra ] an Individual Investor.

Hello. Yes, I wanted to know about the labor availability status. So are we facing the issue still? Or has it come to normalcy?

We're back to normal that's why revenue is also back to normal. So that is no longer an issue.

Okay. Okay. So by this year-end, everything will be completely normal, right?

It's already back to normal.

Yes, yes.

[Operator Instructions] The next question is from the line of [ Shruthi Sharma ], an Individual Investor.

Sir, so my question, I just wanted to understand that in this year in first half, we have seen an EBITDA improvement of around 275 basis points. So what is the lease for the same? And is it a sustainable EBITDA?

So like I said in my opening remarks, the increase in the EBITDA is mostly on account of some cost-saving measures, which are mostly strategic in nature. We expect that INR 5 crores to INR 7 crores would remain to be sustainable going forward in terms of cost savings. In terms of sustainability of the 18% EBITDA, obviously, this is not something that is sustainable in the long term or even in the second half, I would say. We are always indicating that our EBITDA would be in the range of 14% to 15%. And I think that would be -- it will be -- due to the cost savings, we would be closer to 15% rather than 14%.

Okay, sir. And sir, secondly, I wanted to understand what is the EBITDA contribution from Africa business and India business, if you could give us this mix.

So our -- so that's just a difference in the stand-alone and the consolidated EBITDA. So our stand-alone EBITDA for the first half was INR 36.5 crores and for the consolidated EBITDA was INR 42.64 crores. So it's approximately INR 6 crores from Africa and balance INR 36 crores from India.

Okay, sir. Okay, sir. Understood. And sir, on the debt front, I just wanted to understand like what is the average cost of debt.

It ranges from 9.5% to 11.5%.

Okay. And sir, do we expect it to come down further in near term?

We are always in negotiations with our working capital bankers to optimize the cost of debt. The...

Okay. Can we talk in advancement, like if we can, I mean, see the reduction, the cost of debt in your like 3, 4 or 6 months time?

So this is -- I think, second half, we should see a reduction in cost of debt. We should see something, some delta and the cost of debt reduction.

Okay, sir. Okay, sir. And sir, just one thing on the ordering part, I just wanted to understand. Like, I mean, seeing the government's impetus on the infrastructure sector. And I mean, they are talking about a lot of metro cities coming in different cities. So are we expecting more orders in this segment? And how big this segment could become for us going forward?

We are focusing on metros as well as bridge contracts. So railway is a convenient focus for us. Like I said, even the 2 L1 orders are from the bridge contracts, this would become -- it means railway would be 70% to 75% of ways of our order book.

[Operator Instructions] As there are no further questions, I now hand the conference over to Mr. Atul Tantia, Executive Director and CFO, for his closing comments.

Thank you, everyone, for your participation in our Q2 FY '21 earnings conference call. In case you have any further queries, you may get in touch with our IR team, Stellar Investor Relations, or feel free to get in touch with us directly. I wish that all of you take care and stay safe. Have a good day.

Thank you. Ladies and gentlemen, on behalf of GPT Infraprojects, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.