GPT Infraprojects Limited (533761) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to GPT Infraprojects Limited Q2 and H1 FY '25 conference call. [Operator Instructions] Before we begin, I would like to say that this conference call may contain forward-looking statements about the company, which are based completely on the company's beliefs, opinions and expectations as of today. The statements made in today's call are not a guarantee of future performance and involve risks and uncertainties that are difficult to predict. The company also undertakes no obligation to update any forward-looking statements to reflect development that occur after the statement is made. I now hand the conference over to Mr. Atul Tantia, Executive Director and CFO. Thank you, and over to you, sir.

Good morning, everyone, and a warm welcome to the GPT Infraprojects Limited Second Quarter ended September 30, 2024, Earnings Conference Call. I hope you all had the opportunity to review the financials as well as the presentation uploaded on the website of the stock exchanges as well as our website yesterday. I will briefly cover the key highlights for the quarter. Joining us on the call today is also Stellar IR, our Investor Relations advisers. Some of the key significant milestones during the quarter and the half year ended September 30, 2024. We successfully completed a fundraise through a QIP of INR 175 crores on August 29, 2024. This was done within 55 days of the Board approval by placement of shares to marquee investors, showing continuous interest in the company. The issue saw a demand of almost 2.5x from the investors. I want to extend my heartfelt thanks to our BRLNs, Motilal Oswal, Legal Counsels, Crawford Bayley, the stock exchanges and the investors who placed trust in us and contributed to the success of our QIP. I would also like to thank the entire team at GPT, who worked day and night to ensure the success of the QIP within 2 months. In the first week of July 2024, we completed our third bonus issue of 1:1 in the last 7 years, thus strengthening the capital base of the company and providing liquidity to the investors. As for the execution cycle, a continued execution of the order book witnessed a strong growth in top line numbers while also maintaining the EBITDA margin above our hurdle rate of 13%, and we are on track to achieve a 20% to 25% growth for the full year. We have substantially reduced our debt by almost INR 95 crores in this quarter. The first interim dividend of FY '24, '25 of INR 1 per share has also been announced by the Board thus rewarding the shareholders for the performance of the company, which is also in line with the dividend policy of the company. The net proceeds of INR 169.6 crores from the QIP have been fully utilized as per the shareholder approval without any deviations. A substantial portion of which was used to repay the outstanding borrowings, while the remaining portion has been used for general corporate purpose. This capital infusion has had a profound impact on our financial position. The company has been able to repay a major of its term loan and also free up its working capital limits, which will lead to the debt position reducing substantially. Our external credit rating is also on review by CRISIL, and we expect a positive movement. In addition, the consortium banks have agreed to part release of the pledge of the shares of the promoters for which documentation is under process. The reduction in debt will lead to substantial savings in the finance costs going forward and thus translate to higher margins and cash flows. With a strengthened balance sheet, leading to an increase in the net worth of the company, we are now eligible to bid for projects above INR 1,500 crores. Now getting into the details of our financial performance for the second quarter and the second -- and the half year ended for the fiscal 2025. Our revenues for Q2 FY '25 were at INR 280 crores on a stand-alone basis, which compared to INR 225 crores last year, representing a growth of 27% Y-o-Y. On a consolidated basis, the revenues stood at INR 288 crores compared to INR 234 crores for the last year, representing a growth of 23% Y-o-Y. On a half year basis, revenue were at INR 517 crores on a stand-alone basis, which were higher by 13.4% Y-o-Y as compared to INR 456 crores last year. And on a consolidated basis, the revenues stood at INR 529 crores compared to INR 470 crores last year, with a growth of 12.7% Y-o-Y. In both stand-alone and consolidated numbers, we have set a targeted growth of 20% to 25% for the current fiscal year. This growth will be majorly driven by significant execution in Infrastructure segment, which accounts for almost 90% of our revenues. Our stand-alone EBITDA for the quarter ended September 30, 2024, stood at INR 40 crores compared to INR 27 crores, representing a growth of 47% Y-o-Y. And EBITDA for the half year was INR 74 crores compared to INR 60 crores last year. That is a growth of 25%. The consolidated EBITDA was at INR 33 crores for the quarter compared to INR 32 crores last year, representing a growth of 2.8%. And EBITDA for the half year stood at INR 69 crores on a consolidated basis compared to INR 62 crores on a consolidated level last year, representing a growth of 7.9%. We are very confident of maintaining our long-term EBITDA margin at 13%, which we have also done historically from the operations. With the improvement in revenue, the operational efficiencies have helped us ensure long-term EBITDA, and we expect the same to maintain going forward as well. There has been an exceptional growth in profit after taxes. With consolidated PAT for Q2 at INR 18 crores, that is a growth of 30% compared to INR 14 crores last year. Stand-alone PAT was at INR 22 crores, which is a growth of 90% from INR 11 crores last year. In terms of our segmental performance, the Infrastructure segment continues to be the backbone of our business and reported revenue of INR 490 crores for the half year ended September 30, 2024. This segment continues to be -- contributes almost 93% of our total revenues for the period. The key contracts for the Infrastructure segment continue to perform well with contracts like NHAI Ganga Bridge Prayagraj, Mathura-Jhansi [indiscernible] and Byculla driving a major part of our revenues. The order backlog in this segment is INR 3,372 crores. The Sleeper segment has an order backlog of INR 238 crores and had -- is driven majorly by the performance of the domestic business in [indiscernible] also contribution of the South African subsidiary. In terms of the Ghana factory, we received the advance from the customer. And the raw materials have already been ordered. We expect to start the production in December 2024. With a thriving order book and reduce debt position, we are well positioned to navigate the dynamic landscape. As we move forward, we are confident in our ability to capitalize on the positive momentum generated by these factors. Our focus on maintaining a robust and healthy order book, coupled with continuous efforts to optimize our financial structure, lays the foundation for our future growth trajectory. In terms of our order book as of September 30, 2024, we have a net amazing order book of INR 3,610 crores, which represents almost 3.6x our FY '24 revenues, providing a strong visibility to the investors and to the management. The order inflow during the year was INR 1,040 crores. That is all from my side. Thank you, and I look forward to addressing any questions that we might have with respect to our financial performance and future prospects. I'll now request the moderator to open the floor for any question and answers.

[Operator Instructions] Our first question is from the line of Parth Kotak from Plus91 Asset Management.

Congratulations for a decent set of number for you and your teams. Sir, I have 2 questions, one on concrete Sleeper sales and Ghana factory operations. The year-over-year sales from concrete Sleeper segment have remained flat while you mentioned in the opening comments that the Ghana factory will be operational from December. Could you provide an update on the current production status and contribution from the Ghana Factory to Concrete Sleeper segment? Has there been some challenges, which we have encountered because I think from our last conversation, I remember we were expecting a decent increase in sales from this segment for the current year.

Sure. So this year, we expect this segment to do almost INR 140 crores of revenue, which will be a jump from INR 95 crores done last year, which is a significant jump in terms of the Ghana factory, like I said in my opening remarks, the December, we will start the production there and the revenue will start booking in Q4. We expect 25-odd crores revenue inflow from Ghana in Q4, INR 25 crores to INR 30 crores.

Okay. Perfect. That's helpful. Sir, second question is on the bid pipeline and capital utilization. Following the recent capital raise GPT Infra is now eligible to bid for larger projects. Could you share insights into the current bid pipeline, particularly regarding any larger projects that the company has pursued post the capital raise? Additionally, have there been any new orders secured in the last quarter? And how does the company plan to leverage its enhanced financial capacity to drive future growth?

So in terms of order bidding, we are continuously biding for new orders. We have bid for some large contracts, INR 1,000 crores plus each as well. There are some contracts where even the prices have not been opened. So we're not show what is the exact status. Once that is obviously done, we will announce it to the larger investor community. We -- post the QIP, obviously, there is a lot of depth available to management to do much more faster execution as well as to procure more contracts. Like I said in my opening remarks, with the improvement of the network, we are now eligible to bid for contracts up to INR 1,500 crores. This will allow us to address a much larger piece of the, what do you call, infrastructure investment in the country. We are -- the balance sheet being strengthened, obviously, will lead to much more better cash flows and savings on the interest cost as well.

Our next question is from the line of [ Kashwi ] from [indiscernible].

I'm audible?

Yes. Please go ahead.

I would like to congratulate the management on a great set of numbers. So my first question is that the consolidated order book was around INR 3,670 crore as on the previous quarter. However, we have seen that the order book as on this date state stands at INR 3,610 crores. So are we seeing any slowdown in order inflows, especially as government spending has slowed down?

So we -- in this quarter, we have done almost INR 290 crores of execution. And we would have -- we have got contracts of almost INR 240-odd crores. So that is why the net order book has come down by almost INR 60-odd crores. This is -- we have got 2 or 3 large contracts also in this quarter. It is not as if nothing has come through in this quarter. For the full year, like I said, we have got 1,000-plus crores of new orders. We expect to hit our number of INR 2,000 crores new order inflows for the year in the balance of 4.5 months that is there for the year.

Okay. And sir, my next question would be, sir, the consolidated EBITDA margin fell from 13.8% to 11.5%, almost 230 basis points. Going forward, do we have any chance in recovery of the EBITDA margin?

So the consolidated margin has fallen mostly on a consolidated basis in terms of the fluctuation in Ghana currency. The Ghana currency is quite volatile. Having said that, we are -- our contract in Ghana in euros, the payments to customers also in euros. So once the factory starts, we don't see much of a challenge in that as well. It's not a cash loss, it is a mark-to-market loss, [indiscernible]

[Operator Instructions] Our next question is from the line of [ Shivam Rivankar from VS Rivankar Holdings ]

Can you hear me?

Yes. Please go ahead.

Congratulations, Atul. Great, great quarter. My question was that now that with enhanced financial capacity and ability to bid for larger projects, you mentioned you bid for couple of thousand plus core projects. So what happens in case you like planned project somewhere around INR 1,300 crore to INR 1,500 crores of a single order. Does that mean we will stop bidding for more projects? Or would there be any alternative arrangements in place to expand the capacity, the bandwidth?

So honestly, we have enough bandwidth to build some more projects. Why we do set the target is of 2,000 crores is that we would always like to have a big pipeline on an order book outstanding of 3 to 3.5x our trailing 12-month numbers. With 2,000 crores, that can -- that number can be achieved. If the new contract that we're bidding for do meet our hurdle rate of 13% EBITDA, we would be happy to add on more contracts and take it up to INR 2,500 crores, INR 2,800 crores as well. We are not stopping in terms of bidding or bidding pipeline anytime in the near future.

Yes. Okay. Okay. That's great. And from the previous questions asked by the last 2 gentlemen, the factories that we have in the Africa region, what are the payment arrangements like then? Is it like do we get paid in like dollar terms? Or is it in local currency, and that's why we face the currency translation losses?

So South Africa and Namibia, we get paid in what you call in South African rand, and Ghana we get paid in euros South Africa, the currency is not that volatile. Ghana, since we are making the balance sheet in the local currency as per the laws in Ghana, there's a currency translation loss, which is the mark-to-market cost. But there is no cash loss because all our bank accounts also in the euros and payments receipts as well as expenditures also in euros.

Our next question is from the line of Palak, who's an Individual Investor.

Am I audible?

Yes. Please go ahead.

Yes. So congratulations for a really good set of numbers. Sir, you already answered on the EBITDA margin going forward. I also wanted you to understand whether in October and November of this financial year, are we doing a monthly run rate of over INR 100 crores?

Yes. We did. We did about INR 100 crores in a monsoon quarter for a construction company, which is the second quarter, we did about INR 280 crores, INR 285 crores, which is almost INR 100 crores kind of run rate.

Correct. So we are maintaining a similar run rate even in this quarter, right, for this financial year.

Slightly higher.

Okay, okay. And sir, regarding the finance cost, since we have repaid INR 95 crores in debt, what is the finance cost that we can expect for Q3 and Q4?

About INR 6 crores.

Okay. So INR 3 crores per quarter roughly around. Okay. And sir, in the previous con call, you had given...

Just to clarify, about INR 6 crores per quarter, I'm saying -- I'm not saying 6 crores in total.

Okay. Okay. And sir, we actually paid down the debt. So the debt comes -- so the finance cost comes down by only INR 2 crores per quarter?

The finance costs will come down by slightly more, but there are a lot of new equipment that we are taking in terms of for the new contracts. So there'll be some financing required for that as well.

Okay. And sir, my last question is for this year, you have guided for a 45% profit growth. So are we like guiding the same for this financial year?

Yes.

[Operator Instructions] Our next question is from the line of Nishant Gupta from Minerva Global Capital.

I have 2 broad-based questions to you. One is, what is your expectation or what is the vision to take this company forward, let's say, next 2, 3 years in terms of revenue, sir? What is your long-term vision?

So we should -- the target is to double the revenues to INR 2,000 crores in the next 3 years. So last year, we did revenue of almost INR 1,000 crores, INR 1,000 plus. And by FY '27, we should have a number of INR 2,000 crores.

Maintaining the same EBITDA margins, right, sir, around 13%, 14%.

13%, yes.

Okay. So second question is a bit broad. From a -- the company has been very well. I mean you are clocking numbers, you also did a fund raise at around INR 175 would be the share. Any particular reason why the Street is not valuing this company in a way the company is clocking the growth? I know you are accountable to the company and the business. But any idea around the market, what is happening around that?

I cannot and do not comment on the market.

Our next question is from the line of Ankit Shah, who's an Individual Investor.

So congrats on the successful fundraising of the QIP in record time. So I just wanted to know like what's your vision about the company in the long to medium term? And what's your -- like what CAGR of top line can we assume from here on? So I just want to know the broad numbers from here on that, how much growth are we expecting?

So in terms of revenue, like I just said earlier, I think the gentleman previous to you, is that in the next 3 years, we expect to double our revenues from INR 1,000 crores last year to INR 2,000 crores in FY '27. This would entail a CAGR of almost 24%, and this is quite a healthy growth number. This is in terms of revenues. EBITDA would remain at 13-odd percent. PAT would grow disproportionately given the finance cost coming down and the operating leverage kicking in.

Okay. I got it. And apart from that, I just wanted to know like this growth guidance what you're giving. So this growth will be mainly coming from your railway orders or some road also, how will the revenue mix look in the future?

It's a mix of railways and roads. Today, railway accounts for almost 40%, 45% of our infrastructure order book and balances from NHAI, MoRT, et cetera. So it's a mix of both. We are not dominant towards either. The Sleeper business obviously is only railways. So if you add that to the infrastructure business of railways, the majority of the revenues do come from railways. But for us, it will be a mix of both.

Okay. Great. So just one last question from my side. Just wanted to know how is the bid pipeline looking? And how is the order book? Like what are the order book guidance and also from here on? So I just wanted to know how is the industry doing? Any insights about the order pipeline and all as well?

So we have got almost INR 1,050 crores of orders in this financial year. We expect to bag about INR 2,000 crores plus for the full year. which means an order inflow of INR 1,000-plus crores for this year -- in the last next 4.5 months. The government spending on infrastructure is quite good and continued focus on the infrastructure. So we don't expect any challenges with respect to that as well.

[Operator Instructions] Next is a follow-up question from [ Shivam Rivankar from VS Rivankar Holdings ].

Atul, I think I might have joined a couple of minutes late and I sort of overhead that you mentioned something in lines of some positive developments around external commercial borrowing. Am I hearing it correct? Or was it something else?

No, I never mentioned that, I think you are mixing some other call.

[Operator Instructions] Our next question is from the line of Akhilesh Gandhi from PWC.

Mr. Tantia, congratulations for really stellar results on this quarter. I wanted to ask with regards to the promoter share pledging. What's your outlook for reducing the pledge over the next few quarters or by end of this financial year?

So like I said in my opening remarks, the consortium banks have already agreed to release part pledge of the promoters. The documentation is in process, and hopefully, it should be concluded next week. So that will reduce the promoter pledge from the current 51% of the company to almost 37 -- almost 34%, 35% of the company. So 14% to 15% of the pledge is released. And the balance also we expect by this time next year to also get released significantly as well. And this is, again, I would like to clarify is towards the working capital of the company and not for any other purpose.

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

Thank you, everyone, for your questions, and I hope I have suitably addressed the same. In case you have any further questions, please do get in touch with us. Thank you, and have a good day.

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