GPT Infraprojects Limited (533761) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the GPT Infraprojects Q3 FY '22 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 Third Quarter and Nine Months Ended 31st December 2021 Earnings Conference Call. The result presentation, along with our press release, has already been uploaded on the company's website and that of the stock exchanges. We hope you have had a chance to go through the same. Today on the call, we also have with us our Stellar IR, our Investor Relations Advisors. As you all are aware, the Indian economy continues to gain momentum to reach normalcy backed by successful mass vaccination campaigns and the focus of the Government of India to impetus GDP growth. The third wave of the pandemic has been efficiently managed in India, guarding material impact on the domestic business. Our GPT, we experienced a strong evolution momentum, with robust order inflow of INR 400 crores during 9 months ended FY '22. We have always rewarded our shareholders. And today, I'm happy to announce that the company has announced an interim dividend of INR 1.5 per share, which translates to 15% of the face value during the quarter. The union budget for 2022-'23 released yesterday, the 1st of February 2022, has put in focus with PM Gati Shakti Yojana. This plan lays for -- emphasis in both the areas of our operation that is roads and railways. The government is aiming at world-class modern infrastructure and logistic synergies. I'd like to highlight a few key points where this budget has focused for railways and roads. The budget allocation towards railways is INR 140,000 crores, whereas the budget allocation towards roads, transport and highways is approximately INR 199,000 crores, which is one of the highest ever budget allocations. Formulation of the master plan of 2,500 kilometers expressway or national highway will be completed by '22-'23. Four multi-modal logistics parks to be over in '22-'23. Integration of postal and railways network facilitating passing movement with focus on one station one product model to help the local business and supply chain progress. The government's focus on CapEx and new development in the Infrastructure segment, we expect the coming fiscal to open the door for new opportunities and growth for us. Now coming to our financial performance. During the 9 months ended FY '22, the company reported a standalone revenue of INR 405 crores against a revenue of INR 369 crores last year FY -- in 9 months ended FY '21, which is a growth of 9.6% year-on-year. This was backed by significant execution in the Infrastructure segment. The stand-alone EBITDA for 9 months ended FY '22 stood at INR 61.4 crores against INR 59.2 crores in 9 months ended FY '21. The EBITDA margins were 15.1%, well above our threshold -- our hurdle rate of EBITDA of 13% to 14%. The margins remain intact even after considering the pandemic disruptions. The company's focus to enhance cost efficiencies has enabled us to report a strong growth of 31% year-on-year and the reported PAT at INR 14.8 crores as against INR 11.3 crores in the previous 9 months. Coming to segmental performance. Our Infrastructure segment stood strong for the quarter and the 9 months ended December '21. During 9 months FY '21, the Infrastructure segment witnessed a growth of 13% year-on-year. Whereas in the Q3 FY '22, the segment saw a growth of 8% year-on-year and 45% growth sequentially, which was backed by a pickup in execution activities. The segment continues to be a part -- major part of the business contributing approximately 80% of the revenue -- EBITDA revenue in 9 months FY '22 and 95% of the total EBIT for 9 months FY '22. The revenue for 9 months FY '22 stood at INR 336.5 crores as against INR 297.5 crores in 9 months FY '21. The reported EBIT was at INR 54.3 crores as against INR 44.7 crores in 9 months FY '21. Coming to the Sleeper segment. The revenues from this segment stood at INR 68.4 crores as against INR 100.8 crores in 9 months FY '21. This was mainly -- mostly on account of COVID-related disruptions in the South African business, which has also resulted in impact on the margins as well. With normalcy returning, we expect the business to ramp up to the levels of the previous year in the coming quarters. The company is focused on strengthening its balance sheet and taking proactive efforts towards achieving the same. In terms of leverage and liquidity positions, both have shown significant improvement year-on-year. We have been optimizing our working capital, and in addition to paring old outstanding with various customers. We have been able to receive almost INR 6 crores of old receivables in 9 months FY '22, which is kind of well on target to achieve our target of INR 10 crores to INR 12 crores, which we had set out at the beginning of the year. In the last quarter, we expect to receive another INR 3 crores to INR 4 crores which will help us to meet the targets, which we have set out of INR 10 crores to INR 12 crores. In terms of the order book, as on December 31, 2021, we had a robust order inflow of INR 400 crores and which resulted in a net order book as on 1st January 2022 at INR 1,790 crores that is 3x of our FY '21 revenues. One of the major contracts that we were awarded in December was of INR 188 crores plus GST from Maharashtra Rail Infrastructure Development Corporation Limited for construction of cable-stayed road ROB at Byculla Railway Station. This is in line with our previous experience of similar contracts for construction of our cable-stayed ROB at Barddhaman Railway Station and goes on to show our core competence in this sector. Now let me share with you some key highlights and our key contracts for the current fiscal. We are exiting 2 major contracts for RVNL, which is a contract in Ghazipur and for Mathura-Jhansi third line for RVNL. These contracts, once completed, will take us to the next level of growth and it either has to bid for contracts up to INR 1,000 crores from the current size of INR 700-odd crores. Execution of Ghazipur order is running smoothly, and we expect the same to be completed by 2023. Similarly, Mathura-Jhansi is also running very smoothly, and we expect the same also to be completed by 2023. Both these contracts are running at an average quarterly run rate of INR 30-odd crores. As I said, the recently received contract for ROB on Byculla Railway Station was received only in December. However, the mobilization of the same has already started. And given our past experience in constructing similars cable-stayed ROBs in Barddhaman we expect the work to start soon. In the Concrete Sleeper segment, the GMR contract continues to progress well and which we expect the contract to complete over the next 6 months and the receivables will also contribute to a reduction in the working capital cycle. Our current order pipeline is INR 1,790 crores with L1 order amounted to approximate INR 250 crores and willing to the government's impetus on railways and enhancing our eligibility capability -- will enhance our eligibility capability and lead to companies for the growth trajectory. With the budget having a strong focus on public capital expenditures, especially towards our sector of operation and normalcy returning, we are confident enough to scale up our business going forward. We are continuously exploring new opportunities and aim to get projects keeping in mind the management's discipline of healthy margins in the range of 14%. This is all from my side. I will now ask the moderator to open the call for any question and answers. Thank you.

[Operator Instructions] We have the first question from the line of Monika Arora from Sharegiants Wealth Advisors.

So in line with yesterday's union budget, what is your view and what are the opportunities in the railway sector that will benefit our business?

Sure. So like I said in my opening remarks, the union budget allocates almost INR 140,000 crores towards the railways. This has opportunities for new lines. It has opportunities towards large business as well, which is our area of core competence. And obviously, the focus remains to complete the dedicated freight corridor and also the 3 new corridors that were announced previously, wherein the initial project surveys are going on, and they will continue to be our focus area going forward as well.

Okay. Okay. And we see that government is much more focused towards urban connectivity. So do you think that will benefit our company?

Yes, we are seeing a lot of focus from metro contracts. We have recently, like I said, bagged the contract in the heart of Bombay in Byculla. So a lot of focus is there in the urban connectivity. Metro projects in the country have also received a lot of funding in the budget announced yesterday. And there's an announcement also in terms of standardizing a lot of metro designs, which will lead to faster execution going forward as well.

Okay. And if you could give me the number for the order pipeline for Concrete Sleeper business?

So Concrete Sleeper has an order pipeline of approximately INR 200-odd crores, and the balance is from the Infrastructure segment. In addition to that, we expect in this quarter to get the contract in South Africa as well, which should again contribute healthily to the top line and bottom line as well.

And do you think we'll be able to maintain this order book going forward?

Yes, we have always had historically -- we have always had a strategy to maintain order book at 3x the trailing 12 months revenues, and that is what it is at current levels. And we are quite confident of maintaining that level as well.

[Operator Instructions] We have the next question from the line of Renuka Jadhav, an Individual Investor.

So my question is on the debt part. So what is the repayment target for the entire FY '22? And can you give a ballpark repayment targets for FY '23 and FY '24?

So we have mostly short-term debt. The long-term debt is quite less, it's not that huge number. So repayment -- for the working capital for cities that the company does enjoy with these banks, they are -- they don't have early repayment schedule per se. In terms of the long-term debt in FY '23, it will be early repayment of almost INR 12-odd crores. In addition to that, we expect to pay down some of our working capital facilities as well. So I think that overall, for FY '23, we expect debt repayment of almost INR 25 crores, which is approximately plus 13% of our limits.

Okay. So how much is the working capital requirement? And what are the steps initiated for an efficient working capital cycle going forward?

So like I said, with the GMR contract completing, a lot of the cash flows from there will get released, which will reduce our working capital cycle further. And we have always had a policy to maintain working capital cycle closer to 100-odd days, which is quite at par with the industry standard, and we expect it to further better going forward with the GMR contract getting closed in the -- getting finished in the next 6 to 8 months.

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

Congratulations on a good set of numbers once more. I have a couple of questions, if I may. First is, I think, on the Concrete Sleeper business, your consolidated profit is lower than your stand-alone property, is that because of the drag from South Africa?

Yes. That's a drag from South Africa is no other, what you call, consolidation happening or mostly South Africa and the Namibia comes below the line as share of profit from the associate at INR 2.5 crores, INR 2.6-odd crores.

Okay. And do you believe that those South African operations resume some level of normalcy or stability anytime soon? Or do you think there is still some uncertainty ahead?

So South Africa, like I said, we expect the order to come through in the next 1, 1.5 months. With that their operation should resume normally.

Okay. And then on the receivable days as well, I think what is the working capital is in days if you could tell me now?

So receivables, we expect, like I said, to come down to almost -- so receivables per se is at 52-odd days. Working capital cycle would be closer to 130-odd days. I'll have to check, subject to correction. I don't have the number off hand available right now with me. But receivable, we expect it to come down significantly with the completion of the GMR contract. With that lot of cash flow cycles will get -- cash flow will get released and the receivable cycle will come down closer to 100-odd days.

Okay. And the reason I asked this is because I think a lot of your business is also coming from the railways and the government, so is that a positive concern? Are you seeing any stretching of payments on government agencies?

No, we're not at all.

Okay. And sir, if I may ask 1 more question. I think on this -- on the announcement made in the budget yesterday, there is a significant amount of stress that is being given for infrastructure. So do you see yourselves as any direct beneficiary of some of the schemes that have been announced, especially the freight corridors and all which they planned to create, is there any incremental demand that you can see immediately? Or is this something that is going to happen only in the medium term?

No, freight corridor would obviously lead to a lot of the, what you call, impetus in terms of order pipeline, especially the last leg of the eastern corridor, which is from Son Nagar, Bihar to Haldia, that will lead to a lot of incremental demand. Our Concrete Sleeper factory is also located on the corridor. And there will be a lot of opportunities in terms of the new corridors, both in terms of the Concrete Sleeper business as well as the Infrastructure business. In both those segments, we have done work in the existing corridors, and we expect to be successful in bidding for similar projects going forward as well.

Correct. So because they had also announced 400 new Vande Bharat trains, so would that require any incremental infrastructure spending on the existing routes in terms of upgradation?

Obviously, they will need to be upgraded because these Vande Bharat are at 130, 140 kilometers per hour compared to the current speed of 70-odd kilometers per hour. So there will be some -- the infrastructure will need to be in line with -- to support these faster trains in some sense and which -- because Railway also has a policy of maintaining a 0-accident policy. So they will also need to update our existing network to ensure that these 400-odd trains which have announced yesterday need to be at par with the -- like, for example, there are ghani routes, which are significantly upgraded routes compared to what they were earlier.

Right. Right, sir. I think 1 last question, if I may. I know I've taken up some time, is on the guidance going forward. What -- could you give us some guidance on revenue and profitability for the next couple of quarters at least?

So guidance in terms of -- at EBITDA level, we have always had a hurdle rate of 14-odd percent, and we expect to be north of that. And obviously, with interest trend coming down and we expect PAT to be also closer -- between 4% to 5%, and we -- in the next maybe 1, 2 years, we expect to have a PAT level of almost 5%. Revenue as such would grew at a CAGR of 15% to 20%.

[Operator Instructions] We have the next question from the line of Suhas Naik from Creda Capital.

I have a couple of questions. The first question is in terms of the current order book, what is pre-decision cycle here? Or what period of time -- how would you likely to get executed?

So all our contracts are to be executed over next 2 to 2.5 years. So to say in current order book of INR 1,790-odd crores would be executed over 2, 2.5 years.

2, 2.5 years. Okay. Now as you're looking at your balance sheet, the existing balance sheet is capable of -- how much execution annualized basically?

So interest in companies really doesn't -- don't work on that in terms of how the balance sheet. It depends on your credentials in terms of having executed similar contracts? Like I said in my opening remarks, our current single ticket size is -- that we can bid for is about INR 700-odd crores. Two large contracts that we're doing in Ghazipur and in terms of third-line from Mathura-Jhansi lot of bridges that will -- once those are completed in the next 12 to 15 months, it will allow us to bid for INR 1,000 crores of new single ticket orders.

No, my point was because we have got debt on the book and we have working capital constraints. Considering the constraints of the balance sheet, how much execution we can do in a year?

So debt on the books is not quite stretched, I mean as per my statement, I would say. Our current ratio in terms of the balance sheet is almost 1.35 and which has improved significantly in the last couple of quarters. And with the existing resources and normalcy there'll be lot of internal accruals as well as we are exiting the contracts given the profitability -- profitable nature of the business. We will be able to easily go up to INR 1,000 crores with their existing balance sheet.

INR 1,000 crores of revenue.

Correct. Obviously.

Great. And any plans to generate equity -- there is any equity right now?

No, we don't. At the current levels, we have no plans to raise equity.

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

So my first question is, will the company be like able to maintain the number of order books as per the current 3x of revenue levels going forward?

I think similar question is asked by an earlier investor as well. So like I said, we have always historically maintained a 3x order book, and we expect to maintain that momentum going forward as well.

Okay, sir. Sir, my another question is, which are the new segments like the company is like planning to enter other than bridges?

So we are also doing metro contracts, we are doing contracts for roads as well. So we have 2 contracts in the Northeast, totaling to about INR 210-odd crores for roads. We are doing metro contracts in -- for -- in Calcutta for RVNL, we have all you done as well. So those are the new segments that we are entering into. We are also doing a lot of -- some waterways contracts as well.

[Operator Instructions] The next question is from the line of Harsh Bhatia from IDFC Mutual Fund.

I just had 1 question, sort of an extension of what the previous participant asked. The segments that you have highlighted, the presence That we have across these segments, waterways, roads, bridges, et cetera. What sort of competitive intensity are we seeing at present across these segments? And given the union budget that has come through, where do you see the competitive intensity increasing? Are there any regulatory changes on the big bond requirements sort of things? So if you could provide your perspective the ground level thinking that you guys are seeing, that would be very helpful from the competitive intensity front.

Sure. So competitive intensity was quite there till 31st December because the big bond requirements were quite minimal. Now the big bond requirements have gone up because they were temporarily relaxed due to COVID for up to 31st December '22 -- '21, sorry. So we expect the competitive intensity to somewhat subside. Having said that, the management has had a disciplined strategy 1 year as well and in this financial year as well, to bid for profitable contracts. So we did -- we are at a hurdle rate of 14-odd percent. And that is why our quarter-on-quarter numbers are in north of that. We believe that in the long-term, that is a good strategy. Sometimes when the competition is too high, you tend to not bag many contracts. But like I said, in the long-term, that -- I think that rewards the companies and the management as well because you are able to maintain -- we have maintained a healthy balance sheet and you do not have any stretch on the debt cycles and the working capital as well.

Okay. That's helpful. Just 1 last question from my side would be that in the last 6 months, given where we were and the strong order book and visibility that we have, which segments have we largely stayed away from the bidding perspective, given that we weren't seeing any profitability happening from those orders. So the last 6 months, which of these segments would be the ones where we were staying away? And in the coming 6 months, also, what would be your view that where would GPT be bidding more and more? So that would be my last question.

Sure. So we did mostly -- so we stay away from a lot of the state government contracts because there the payment cycles are quite stretched honestly. We did for mostly Central Government contracts. And sometimes 1 contract even for Central Government can have too much of competition, which leads to someone or the other giving a lower bid than either the estimate or generally what the competitors are bidding at. We always like to maintain our hurdle rate and maintain our profit margins. So we don't bid for contracts below that hurdle rate. It's a very disciplined strategy, which pays off good returns in the long-term. The segment, I would say that we stay away from is mostly state government and municipal contracts. We don't like to bid for those contracts.

Okay. Okay. So our bidding strategy is largely dependent on the agency and the payer rather than seeing it in the light of roads, waterways, et cetera, et cetera. So other than that, we...

So it is mostly, you're right, determined by the agency, especially and also depends and another segment or another geographical space, I would say that we stay away from is any segment in the country, which has -- which is disturbed socially or politically because we don't like -- we are quite careful and quite concerned with how our team and our assets are protected. So we don't like to bid for areas which I'd say, for example, affected by any insurgency or the likes.

Right. Right. Just 1 last question from my side, just to get a better understanding for on-the-ground view, large EPC player also declared their results, and we have been consistently highlighting that they have been having issues for payments from the railway side. So they have not been receiving payments from the railway agencies, especially RVNL and the likes. So what would be the situation for GPT, have we been receiving the payments on time? Or is there some delay from the railway segment specifically?

Fortunately, we have not faced any issues like that and we don't anticipate to face similar issues. Someone -- how a competitor has -- or which contract they have, I cannot comment on specific competition. But for us, as a company, we have not faced any payment issues as on date, and we don't anticipate that going forward as well. So we are quite -- we look at how railways has allocated funds for a particular project or a particular geography or even for that matter MORT which has allocated funds for that particular geography or particular project. And then only we decide our discipline -- bidding strategy. And then look on that basis, we do invest in contracts.

[Operator Instructions] As there are no further questions, I would like to hand the conference over to Mr. Atul Tantia for closing comments.

So thank you, everyone, for your participation in our Q3 FY '22 earnings conference call. I hope that all of you stay safe and whenever eligible take your precautionary doses. In case you have any further questions, you may get in touch with our IR team, Stellar Investor Relations or feel free to get in touch with us directly. Thank you, and have a good day.

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