GPT Infraprojects Limited (533761) Earnings Call Transcript & Summary

Good day, and welcome to Q4 FY '22 Earnings Conference Call of GPT Infraprojects Limited. [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, Margaret. Good morning, everyone, and welcome -- and warm welcome to GPT Infraprojects Limited Q4 and Full Year ended March 31, 2022, Earnings Conference Call. The result presentation along with our press release has already been uploaded on our website and that of the stock exchanges as well. We hope that you have had a chance to go through the same over the weekend. Today on the call we also have with us Stellar IR, our Investor Relation advisers. At the outset, we are extremely happy to announce that the fourth quarter of fiscal 2022 has been one of the strongest quarters in the history of the company on the back of strong execution, healthy cash flow due to utilization from all receivables from customers, leading to improvement in return ratios. We have always rewarded our shareholders on the back of strong performance, and the Board of Directors have recommended to the shareholders a final dividend of INR 1.5 per share, which, taken along with the interim dividend announced in February of this year, works out to INR 3 per share for the full year 2022, which is one of the highest ever dividend that we have declared. Now coming to our financial performance during the full year ended FY 2022. Our revenue from operations came in at INR 669 crores as against INR 573 crores for the previous year due to the growth of almost 17% year-on-year. This was backed by a significant execution in the Infrastructure segment. The [ stand-alone ] EBITDA for the full year was stood at INR 88 crores as against INR 85 crores in FY '21. EBITDA margin remained stable at 13.2% despite the headwinds in raw material prices and the EBITDA has been north of the [ 13% ] hurdle rate that we have set historically for ourselves. For the past year, the company has not only focused on operations, but it also ensured that its cash management improves. And as a result, we are happy to report a much stronger 20.2% year-on-year growth in the PAT at INR 24.7 crores in FY'22, as against INR 20.6 crores in FY'21. Some of the key steps that have helped profitability were as follows: We have been optimizing our working capital. And in addition to paring old customers with -- old outstandings with various customers, we have been able to liquidate some of these old outstandings, and trade receivables have come down by almost INR 20-odd crores. Most of the old receivables which were PSC qualified by the auditors have been realized and a small part has also been written off, leading to an unqualified audit report by the auditors. One of the key highlights for the year has been a strong improvement in the cash flow from operations of INR 70.3 crores, that is almost more than 80% of the EBITDA for the year, driven by a reduction in trade receivables and realization of old outstandings. This has also translated into reduction in borrowings by almost INR 10 crores for the year. As a result of the strong -- as a result of this, our improving balance sheet leverage and generally strong outlook for the company, credit rating for the company has been recently upgraded to BBB+ by Crisil, which was informed in stock exchanges in April of this year. Coming to the segmental performance. Our Infrastructure segment displayed strong execution prowess for the full year 2022. During FY 2022, the Infrastructure segment witnessed a growth of 19.4% year-on-year to INR 573 crores. In the Q4 FY'22, the segments saw a growth of almost 29% year-on-year to INR 273 crores, which was backed by a strong pickup in execution activities. The segment continues to be a major part of the business, contributing almost 85% of the entire revenues in FY'22 and 95% of the EBIT for the year. The order book for the segment [ was ] stood at INR 15.9 crores. Now coming to the Sleeper segment. Revenues for this segment came in at INR 28 crores for Q4 FY'22 and INR 101 crores for the full year FY'22. The [ median ] performance of this segment can be attributed to the coal-related disruption in the South African business, which has also resulted in an impact on the margins as well. The normalcy returning in the next couple of months, we expect the business to ramp up to the level of the previous year in the coming quarters. The outlook in these segments were at INR 135 crores. In this segment, the company has also announced formation of a subsidiary in the Republic of Ghana to set up a concrete sleeper plant in that country. In fiscal FY'22, we have bagged orders of INR 531 crores, including incremented orders from the existing contracts. And as at March 31, 2022, we had a healthy order book of INR [ 16 84 ] crores, forming approximately [ 2.5x ] our FY '20 trailing 12 months' revenues, and which provides a good growth visibility for the company. Our current [ on review ] order pipeline is at, as I said, is at INR 16 84 crores, and we believe that the government [ has bet us ] on railways will enhance our liability capabilities and lead to companies' further growth with a good growth trajectory. Now let me share with you some key highlights and key contracts for the current fiscal. We are executing two major contracts for RVNL, so the contract in Ghazipur and for Motilal [ ketalvines ] for RVNL . These contracts once continued will take us through the next couple of [ crores ], and will enable us to bid for contracts of INR 2,000 crores from the current size of the INR 700-odd crores. The [ legation ] of Ghazipur order is running smoothly and we expect the sale to be completed by 2023. [ Somende Matrarjah ] is also running very smoothly, and we expect the sale to be completed in the next calendar year. Both these contracts are running at an average monthly -- a quarterly run rate of almost INR 30 crores to INR 40 crores. In fact, from the Ghazipur contract, we achieved revenue last year of almost INR 125 crores. and from the Mathura-Jhansi contract revenue [ last is ] almost INR 90 crores. Like I said, we recently received a contract for [ RB and bikeltration ] were received in December. However, operating [ upscale ] has already started and given our past experience in constructing similar [ pierletsay ] bridge in [ Badwar ], we expect the work to start soon. In the Concrete Sleeper segment, the GMR contract continues to progress well and we expect the contract to complete over the next 6 months, and we'll see [ what starts to continue option ] in the working capital cycle. 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 expect to get projects, keeping in mind the management disciplines of healthy margins in the range of 13% to 14%. Now before we move on to Q&A, let me take you through some key highlights for the sector. The CapEx for FY 2023 has been increased by 35% to INR [ 7.5 lakh ] which is 2x the FY 2020 budget and accounted for 3% of India's GDP. For railways, the budgets allocated INR 1,40,000 crores, which is the highest ever budgetary allocation for the sector. In the next 3 years, the government of India is planning to launch 400 plus Vande Bharat trains in India and around 2,000 kilometers of network, which we brought under the coverage program. Safety, of course, is one of the major focus areas for the railways. The [ railway ] is trying to construct new railway lines around 300 kilometers and doubling of 1,700 square meter of lines. In terms of statewide allocation for [ aura railways ] INR 12,110 crores have been allocated to [ Uttar Pradesh ] for ongoing projects into 35 new lines, gauge conversion, government projects covering 6,104 kilometers and costing INR 81,000 odd crores. INR [ 11,903 ] has been allocated to the state of Maharashtra, where ongoing projects to build 35 new lines [ gauge more than doubling ] projects covering 6,140 kilometers at a cost of INR 91,000 odd crores. INR 10,262 crores have been allocated to the State of West Bengal, where ongoing projects related to 53 new line [ gauge more than ] doubling projects, covering 4,400 [ odd some ] and costing INR 55,000 crores. Another INR 9,700 crores in the Indian State of Orissa where ongoing [ policy serve 7 new lines each one more than doubling ] projects covering [ 4,000 ], amounting to INR 65,000 odd crores. With this, I'll ask the moderator to open the floor to any question and answers. Thank you.

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

Sir, my first question is on the -- this is a very critical year for the 2 projects, the big projects, [ have here ] that we are concluding. I think both projects put together should probably contribute INR 150 odd crores to the revenue. Once that is done, you have addressed some big projects coming up in the pipeline, too. But if you could help us in terms of what is the near-term prospects of orders that you could build? Because last year, I understand that we had a dip in terms of order inflow in comparison to what we did in FY'21. Is there any thought given on what should be the order intake in this year? How is that execution going to see in FY'23 as well as in '24?

Sure. So our order book, like I said in my opening remarks, is at INR [ 16 84 crores ], the two contracts that you mentioned, Ghazipur and Mathura-Jhansi [ can be driven ] FY '22 at INR 200-odd crores, 210-odd crores [ to be precise ] in terms of their contribution to the revenue of INR 670-odd crores. Their [ RND ] portion for those 2 contracts are part of the INR 16 84 crores. Obviously, last year, there was a dip in terms of new order inflows from INR 932 crores in FY'21 to INR 531 crores in FY'22, a INR 400 crore dip. We expect to have a better strike rate in FY'23 because FY'22, the COVID sent the government to relax the earnest money [ throughout the ] year for most of the tenders and bids and we have withdrawn the earnest money [ throughout the year ], which led to an unhealthy bidding discipline. However, as we as a management have been always saying, we are very conscious of the [ orderly job ] that we bid for in terms of our contracts. And that is why we were happy to not get contracts which were below our hurdle rate in terms of EBITDA level. With this restriction now being -- with this easing up of restriction now being removed from January of this year, we are seeing a lot of the new tenders having lesser influence in competition. So we expect the tendering pipeline to be much better this year. In terms of target to get new orders, obviously, we expect to maintain the 2.5x FY'23 revenues when we close FY'23. That has always been historically what we do target at. So I think that FY '23, we should close with an order book of close to INR 2,300-odd crores, INR 2,200-odd crores. So I think that we are targeting a new order income of almost INR 1,000 crores to INR 1,200 crores this year. We are bidding for single orders of almost crores INR 300, INR 400 crore as we speak, often maybe are biddng for those large orders as well. So we will see how that converts.

Yes. Once these 2 critical projects is completed, you will be qualified to be the bigger ticket projects, right?

We're really qualified to do even 1,000 foot bridges, but now we are in joint venture, some we are actually bidding for 1,000 foot bridge, a INR 950 crore bridge. So it's -- we are bidding for larger [ bridge ] projects than that.

Okay, okay. The second question is on the margins part. I understand there is -- across the industry, there is this hardening of input prices which is denting into the margins. We could see that in Q4 FY'21 year results as well. Can you give us some color on how this will shape up in the future quarters to come by? And are we building in this kind of insulation mechanisms in the new order inflow?

Sure. So all of our contracts, whether it is in the [ intersegment ] or in the [ deeper segment ] have a price relation formula. Having said that, some of these indices, how they do move, I'm sure that you are aware, have some drag or lag in terms of the -- when the [ invest ] is actually translated into the actual numbers that are on the street. So that is why the margins are affecting the [ till ] because you're accruing as for the RBI and WPI or [ the R and I ] or whatever it is, [ recontracting or rolling back ]. So I think that in terms of contingency of building in terms of our new bidding discipline, we are definitely conscious of the fact that, due to this, the working capital cycles are stretched because the input prices have gone up. We are obviously tracking that in when we are bidding, and our bidding discipline has been quite strong, if you see where in the last 10 years, our EBITDA dipped below 13%. This year for the full year our EBITDA is north of 13%.

And finally, if I may ask you one more question to do with the South Africa business as such. Help us understand what those numbers would look like, especially on there as a share of associate profit, that number, sustainable number that could possibly be seen in FY'23.

South Africa does not [ claim a ] share of associate profit. South Africa is a subsidiary. You may be thinking of Namibia. Namibia comes as share of associate profit. So Namibia has done the highest level revenue in the history of that associate of almost ZAR 94 million, which translates to almost INR 50 crore apiece. This financial year also, we expect a similar performance from that associate. They probably will give dividends to the parent and the other shareholders as well. And they have been able to keep a check on the cost and perform, have a good EBITDA as well as profit margins.

Okay. So if I understand, they're doing concrete sleeper business and that this number, that is FICO contribution to this line item is sustainable and secular in nature. Is that -- my reading right?

INR 5 crores is actually net of the loss in South Africa. In regarding INR 5 crore a sustainable number, honestly, the sustainable number is about INR 3 odd crores. If you're talking about sustainable number, that's INR 3 crores. Having said that it was INR 3 crores, then obviously, the results above it include a loss for the operations in South Africa due to the COVID-related shutdown in South Africa. If I were to do only INR 3 crores from that associate in Namibia, then my number above it would be much higher.

[Operator Instructions] The next question is from the line of Mohit Kumar from DAM Capital.

My first question is on the ...

Sorry to interrupt you, Mr. Kumar, your audio is quite low. I would request you to come ...

Is it better now?

Yes, it is.

My first question is on the revenue guidance for the year FY'23 and the EBITDA margin. I joined the call late, so sorry if I'm repeating that.

Yes. So in terms of revenue guidance, we expect a revenue growth of almost 15% to 20% CAGR over the next 3 years. And EBITDA margin would be -- we have always maintained our EBITDA rate of 13%, so it will be north of 13% in terms of EBITDA.

So you think, sir, this EBITDA margin for this quarter was a blip, and it will get back to 13%?

If you recall the previous call -- or person who asked the question as well from Antique, I think that across the industry this quarter due to the commodity prices that have been dipping the margins because there is a -- [ our gains ] will not immediately translate in terms of the actual prices. It might be a 1-month or 2-month drag on the indices that are published. So that is why the margins for the quarter have been slightly dented. But overall, for the year, we are north of 13% [ in EBITDA ].

Sir, how much of cost inflation you've seen for your -- for the orders you are executing, in percentage terms?

Depends on when they were, so I mean if I were to compare it -- if the orders were bagged 3 years ago, then maybe today, it would be at 25% to 30% in terms of where the base price is.

And sir, coming out the order inflow, I think you're targeting INR 200 crores order inflow for FY'23. Is this primarily some railway? Or is this something we are looking for in the other sectors? If I remember correctly, I think you were targeting other sectors.

So we are doing railways, we also are doing more [ TH ] contracts. But primarily bridges, I would say, but primarily railway bridges, whether it's [ the Mar tri H ] railway, the NHAI and other PSUs or the [ Senvi ] governments, especially.

You mentioned about the bidding parameters, the guarantees and other things are going back to the original level -- is it true for across all these segments? Or is it easy if you're talking mainly about railways? And have you seen the competition going back to the earlier offer [ or prior ] level or you still think that the competition is slightly higher compared to, let's say, the...

I think that now the competition will ease out because earlier without the bidding earnest money deposit, there were a lot of competition you were seeing some [ tender having ] 30-odd bids, which is quite unhealthy, but now I think you go back to the 6, 7 bids that is normally there.

And when you say railways, do you mean only [ mystic railway ] or do you mean the -- all the RVNL, [ con ] orders, everything put together?

We do across the PSUs as well, including our [ minel recon ] rights, other [ advances ] of the business not just the Ministry of [ Railways ]

Okay. Lastly, sir, how do you are trying to build some more capabilities, so they enhance your EPC offering for in medium term?

So we are doing -- we have done recently a joint venture with the [ Klench ] company to -- we have either a bridge or being [ charter ] second [ a bridge ]. So we are exploring new offerings [ that are beyond bridges ], which are at INR 160 crore contract for us. We are also doing some other industrial work, water [ compensations ] and the likes which would improve our [ EPD ] offerings.

[Operator Instructions] The next question is from the line of [ Rinika Fandia ], an individual investor.

I just wanted to know, the presentation mentioned about debt reduction and a reduction in working capital days. Has there been any further improvement in this? And what will be the target [ do you think ]?

So last year, we have done a debt reduction of INR 10 crores in FY'22. And this year, the target is to reduce debt by [ around ] INR 16-odd crores.

Thank you and congratulations.

[Operator Instructions] The next question is from the line of [ Andit Shah ], an individual investor.

So your press release talks about setting up a subsidiary in Ghana. So can you please elaborate on like, what is this for and give some more details about this?

Sure. So along the lines of South Africa and Namibia, we are starting to set up a concrete plant in Ghana. And that is why the press has mentioned that the Board has approved a formation of a subsidiary in Ghana to set up a concrete sleeper plant. We are on the verge of finalizing the contract in Ghana. Once that is finalized, then we will obviously inform the stock exchanges and the public at large in terms of when the subsidiary will get the contract. And that would gain [ further of for concrete plant in Ghana ] along familiar lines that we have done in South Africa and Namibia.

Okay. So another question is that you witnessed highest ever kind of run rate in the infrastructure segment. So can we assume this run rate to continue in the coming quarters as well?

In fourth quarter of every financial year has some better run rate, given the government's focus on capital outlay, capital expenditure as well. The round for the fourth quarter cannot be assumed to be carried forward in Q1, Q2 and Q3. Having said that, like I said to one of the previous questions, in terms of guidance, I think that we expect a 15% to 20% CAGR in terms of growth. And that is something that we would expect across quite -- across all the 4 quarters, rather than just being bundled up in the last quarter as such.

[Operator Instructions] The next question is from the line of [ Kalpesh Parekh ] from [ GSM Advisory ].

Congratulations for a good set of numbers. I have a couple of questions. One, mainly on the business model, particularly on the Infra side. Are we working something on this bullet train project or something like that as well, apart from the [ Bharat Va line, PMD as well please ]

We're not having any contract for the bullet train that's [ been loud and clear ] in most of those contracts. The rail contracts for DCC, we are doing metro contracts, but not on the bullet train.

But is there any opportunity for us to do something on the...

We have bid for 1 or 2 contracts. We have not been successful, but we have bid for [ at least bridges ] contracts. We have not been successful.

Okay. And on the Sleeper segment side, is it very, very competitive among the peers aspect. Is there any opportunity for us to improve on the margins in that space?

Sleepers, actually, obviously, are how the margin is getting reported and how that's -- with that at EBIT level, the margin is lower, but sleeper segment due to the contracts in GMR, they carry a much higher depreciation because we [ generally ] that to depreciate the contract -- the [ still have the cost of the ] building over the life of that [ sidave the ] contract. So [ donning where ] the GMR contract is coming to a close in the next 6 to 8 months, that is carrying a higher depreciation. So the number that is being reported in terms of margin is a bit [ we see ] being charged or not on the sleeper contract. At the EBITDA level, the sleeper you're also having a margin of almost 13% -- 13.5%.

And all this lockdown in South Africa, which had impacted us in FY'22, all that thing is behind now probably [ the turmoil ] started unfolding for us in that...

In terms of lockdown it has eased out, but we are working with the South African [ railway which is their transit train ]. They have had their own share of their employees have unfortunately passed away from COVID. So there is some change in the leadership there. So that is why we are taking some time in terms of releasing of the orders. We expect them to also get stream that in the next couple of months and then the operations will resume.

And sir, what is the CapEx requirement for us for the next couple of years?

CapEx requirements other than [ for this ] Ghana, which I was answering to in an earlier question, would be in the range of INR 20 crores to INR 25 crores.

Okay. So that would be funded internally, right? I mean we don't need any money or I mean it could be working capital funding only.

We do take some equipment finance, but at a very small portion. I think total equipment finance as on 31st March is about INR 89 crores, not a very significant amount.

[Operator Instructions] The next question is from the line of Sadanand Shetty from TruEquity Advisors.

We have noticed in this particular month, there was [ huge ] volumes in the public market, but traded substantially [ less ] volumes. Many any strategic partners are coming that you are aware of it?

There is no strategic partner that is coming. The volume increase or decrease is how the market...

[ Did any ]...

Pardon?

[ We can't hear you ]...

I'm saying that there is no strategic partner that has come in into the business. The promoters continue to hold 75% shareholding and if the trading volumes increase or decrease depends on the market, how do you see this sector and the company as such.

No, not at all. This is pretty initial and very high. Almost half have almost [ 50% ] of the capital [ in a few days ]. If not strategy gain large industries, that's something you are aware of it?

There are no large investor company. It's a well-diversified holding, let's say, there are no large investor that is there.

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

Thank you, moderator, once again. So thank you, everyone, for participating in our Q4 FY'22 earnings conference call and for the full year ended 31 March, 2022. In case you have any further questions, you may get in touch with our IR team, Stellar IR Relations. Or if you can get in touch with us directly. I hope you are all staying safe, and thank you, and have a good day.

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