Ircon International Limited (IRCON) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to the Q4 and FY '25 Post Results Earnings Call of Ircon International Limited. I am Steve, the moderator for this conference call. From the management side, we have with us Mr. Hari Mohan Gupta, CMD; Srimati Ragini Advani, Director Finance; Mr. Alin Roy Choudhury, CGM Finance and CFO, Mr. Ram Kumar Goyal, GM Finance; and Sachin Garg, CGM Investor Relations. Please note that this conference call is being recorded. [Operator Instructions]. I would like to remind you that some of the statements that will be made in today's discussion may be forward-looking in nature. It is subject to several risks and uncertainties, and the actual results could materially differ. I would now like to hand the conference over to Mr. Hari Mohan Gupta, CMD, for the opening remarks; after which, we will have the forum open for interactive Q&A session. Thank you, and over to you, sir.

Thank you, Mr. Steve. Good afternoon, everyone. I'm Hari Mohan Gupta, Chairman and Managing Director of Ircon International Limited. On behalf of my team, I extend a warm welcome to you all and thank you very much for your gracious present today at the Ircon's Earnings Call for Q4 and FY '25. Operationally, this year has been a little bit challenging for the company due to increased competition in the sector. However, we are hopeful to be back on the track and improve the performance going forward. Now I request my Director of Finance to give brief about the financial performance of the company.

Thank you, CMD sir. Good afternoon, everyone. Financial results as well as presentation has been uploaded on the stock exchanges, and I'm sure that all of you've had the opportunity to review these documents. Just a little brief of the financial performance of the company. In Q4 and FY '25, the operational performance is subdued as we had also stated in our last investor call. This is because of completion of some major cost-plus jobs, reduced order book and some one-off entries that we had to put in certain projects on account of provisions or losses. On consolidated basis, the company has had a provisioning of major maintenance in one of the subsidiary company, again, a one-off item. The company has reported total revenue of INR 11,131 crore in FY '25. The corresponding PAT stood at INR 728 crore and core EBITDA at INR 905 crore in FY '25. Earnings per share is at INR 7.73 per equity share in FY '25 on a face value of INR 2 per share. The order book of the company as at 31st March 2025 stood at INR 20,347 crores. This comprises 58% on a competitive bidding basis and the rest of the orders on nomination basis. In terms of domestic versus international split, almost 90% of our order book is from domestic business and the balance from international. Board of Directors, along with the accounts, have also recommended a final dividend of INR 1 per equity share on a face value of INR 2 per share. This is subject to shareholder approval in the ensuing AGM. This, along with an interim dividend of INR 1.65 per equity share, would tantamount to a total dividend of INR 2.65 per equity share for FY '25. Ircon has 11 subsidiaries and 7 joint ventures, including a renewable power company. Now without taking much time, I would like to open the floor for Q&A session. Thank you.

[Operator Instructions] The first question is from the line of Shreyans Mehta from Equirus.

Ma'am, could you quantify the one-off during the quarter, which led to the lower margins?

Yes. Two, 3 things. One, in stand-alone, we have -- provision that we have made for LD in case of our job on DFTC, that amounts to INR 108 crores. And apart from that, I had mentioned in the last quarter that we have taken certain losses on 1 or 2 of our jobs, one of them being Chennai Metro. So that also is about INR 40 crores. And on the consolidated side, we've had 1 issue in terms of one of our road SPVs where we've had a major maintenance, that is what we have taken into account. And in one of our coal connectivity projects, this is Chhattisgarh, CERL, there, the project has been incurring operational losses. Some part of the project is yet to be constructed. So once that is constructed and we have the full traffic there, then we shall probably not have losses going forward, maybe another 2 years down the line. So all these are one-off items because of which we've taken hit on our P&L.

Okay. Okay. Sure. Ma'am, second, from a medium-term perspective, how should one look at the growth from here on? Right now, we have an order book of, say, closer to INR 20,000-odd crores. So now should the focus move on building order inflows at lower margin or we'll still wait for orders to come in at the margins we want? How should one look at that? And secondly, how should one look at FY '26 standalone revenues and guidance -- margins?

Thank you very much for this nice question. Presently, we have the order book of around INR 20,500 crores. And you will be pleased to note that during 25 -- '24-'25, around INR 2,600 crores orders were received by the company, out of which around INR 1,650 crores, which were based on the bids which were submitted during the financial year and around INR 950 crores orders were received for which the bids were submitted earlier. And during '25-'26 also by now, I mean, within by the May -- 22nd May when we are talking, INR 1,150 crores orders already received. And also, we have entered into new verticals like Kavach, the train protection warning system, the iconic technology of the country. It's really a proud moment for the company that we have received the first Kavach order for Southwestern Railway, it's around INR 253 crores. And we have already bidded in some other Kavach project tenders as well, and we are very hopeful. Again, I would like to mention that you will all be pleased to note that the first Kavach tower tender we have won, it is around INR 194 crores, and the work is under execution in Central Railway. There, around so many towers are to be provided, which will be used for the Kavach, that is the second tender -- second contract for the Kavach. Similarly, we have entered into a new vertical of signaling diagnostic, which is the new field, and I'm pretty sure that it will be replicated in the entire country in Indian Railways. And what it does is that whatever the signaling and telecommunication gears are available in the railway network, you can remotely monitor their health that what is the condition, and you can predict their life just looking at the computer screen. So that is a new revolution, which we have brought. We have already got an order from Northwestern Railway and the Ministry of Railways has appreciated this to a great extent, and it will also be replicated in a big way. And now other zonal railways are preparing their tenders for floating in near future. In addition to above, yes, we have already bidded in various tenders, which are already under evaluation to give some of the examples are, and we are very, very hopeful because they are under evaluation, so I cannot be very specific with them. But we have bidded in 3 tenders in Metro in Mumbai. And we have also bidded 1 an electrical tender of UP. And we are already bidding, around 10 bids of around INR 2,000 crores have already been submitted during current '25-'26 up to this period, around 18 bids of INR 9,200 crores are yet to be submitted very shortly. And during '24-'25, we have submitted around 120 bids of INR 60,000 crores. So enough of scope is available to everybody. Infrastructure is booming, and we are bidding for big ticket size projects as well as middle-sized projects and by joint venture, by prebid, by bidding alone, depending upon the type of the project, the complexities involved, the competency available with each sector. And again, I forward one more thing that one more vertical we have opened in this company, and that is the hydropower. We have received an order of around INR 453 crores in Arunachal Pradesh. We have also received an order of secretariat building in North Frontier Railway in the joint venture with one company. And we have also bidded in various tenders of building works in North Frontier Railway, which are already under evaluation. And we also got one order of railway project of around INR 900 crores in -- I'm forgetting the name of the zonal railway but we have already received the order.

So from whatever CMD sir has given an update on the business development side as well as the orders, so as to answer your overall perspective: In FY '26-'27, while we are trying to get as many orders as we can but even after picking up orders, the execution and the conversion into revenue takes some time. So given our current order book position, we maintain that our turnover should be in a similar range going forward in '25-'26 at least. And the margins, as we had mentioned earlier also, yes, there is a strain -- slightly strain on the margins because of the increased competition and many of the bids being taken up at a very, very competitive rate. So there would be an overall decline, as I'd previously mentioned, it would be in the range of about 0.5% to 1% going forward.

Okay. Got it. Got it. Secondly, in terms of the strategic assets, the railways per se or even the roads assets, which we hold, so is there an intention to hold on to those assets? I can understand we have DIPAM who will be taking a final call. But from our perspective, what is your thought process? Do we intend to hold those or once they mature, probably we are looking to monetize those and come out of those?

Our objective would be to monetize as quickly as possible once the project is completed and we are -- we have already started process in that direction and I hope 2 proposals are already...

Yes. So yes, you're absolutely right. Railway and DIPAM will ultimately give a go-ahead. It is a longish process but the intent is to monetize PPP projects, which are operational.

Even the mining projects, right?

See, in mining, we are a minority partner. So there, that discussion will happen with coal companies and they would be in a better position to take it. But wherever these are 100% subsidiaries, I've already gone ahead and we've taken this decision to move ahead for monetizing them. For there, they have obviously coal mines as their ownership, so they may not like to monetize it eventually.

Got it. Got it. And lastly, in terms of -- coming back to the same point in terms of order inflows, assuming even if you get, say, closer to INR 10,000-odd crores this year, as a shareholder, what might happen is FY '27 again looks bleak because even at INR 10,000-odd crores, we'll end up at, say, INR 30,000 crores and we'll be doing, say, INR 10,000-odd crores for next 2 years, so I mean unless and until we scale up in that manner, significantly like INR 20,000 crores-plus, how do you intend to take it from the degrowth phase to growth phase over, say, '27-'28?

So currently, I think we would like to stick to our forecast or what we assume to be a reasonable prediction for FY '26. For FY '27, you're absolutely right for us to come back to make going into a growth phase, definitely, we have to pick up more orders. But having said that, since the market has been tough, and we've recently diversified into certain areas, as CMD sir also mentioned, I think we will be in a better position to tell you maybe a few months down the line. So we do not want to commit something which is just theoretical right now, but yes, efforts are fully on to make the order book grow at a faster pace.

To add further what my Director of Finance madam has said: Rest assured, we are working very hard, bidding aggressively and with full focus what is to be bid. We will not be bidding under losses at all. And we will be attacking more and more verticals in which we feel very, very confident. We are already working, and we would be bidding very, very shortly in some new verticals as well. And I'm pretty sure that we should be successful in those efforts. So future is bright. I do not see any negativity in the market because it's a huge market. And only thing what I can say presently, and you all will appreciate, that around 24 bids are coming in railway tenders. Per tender, 17 number of bidders are there in road projects tenders and 19 numbers bidders are there in building bids. So it's a tough competition and really very tough competition. But the only answer lies in opening up the new verticals and entering into joint venture, prebid tie-ups, bidding in those area independently where the ticket size is big, and we feel very confident where like the railways, the highways. So it would be a combination of all these strategies but we will be successful.

Got it. Got it. And one last, if I can. Just wanted some data point, one...

Sir, I would request you to please -- the next question is from the line of Rau Thakur from NVS Brokerage. As there's no response, we'll move on to the next question, it's from the line of Vishal Periwal from Antique Stockbroking.

Thanks, like, for outlining a picture like how things could be for our company in time to come. So on this front, I have a couple of questions. One, you did mention like new opportunities like signaling, Diagnostics, Kavach, so will that be -- I mean, like would you have that data or anything ready, how big is the opportunity in these segments? And any color that can be provided, sir?

Yes. I will -- if you see, I don't have the numerical number for the country size but I hope you will be satisfied with my reply. The entire country, more than 1 lakh kilometer of Indian railways is to be covered under Kavach. It's a train protection warning system so that 2 trains may not collide and any driver inadvertently may not exceed the speed. It will be automatic brake application in the locomotives. So the entire country is to be covered and a huge -- I mean, more than INR 1 lakh crore business is available in this sector, what I have come to know but I'm not very sure about the numerical numbers at this stage, but the entire country is being covered through Kavach. Diagnostic, entire Indian railways would get covered progressively because it's the new thing, which is coming up in the country, and it has started. One more field, elephant passes, wherever the elephants do cross the railway track, so Indian railways is now coming up with fresh tenders for electronic systems in such a way so that these animals when they cross the track, it gets noticed in advance, and they may not get hit by the moving train, so which will be win-win situation both for the railway as well as for the animal. So it's a huge business opportunity, I will only say this.

Okay, sir. Sir, in terms of tenders, which are open right now, maybe, say, Kavach and the Diagnostic, what could be the size of it?

Yes, every Kavach tender is of the order of INR 250 crores to INR 300 crores, every Kavach tender. Whatever we got, it is INR 253 crores, we got the order for SWR. And we have already bidded in 3 more tenders. They are under evaluation. And the next phase of tendering would be available, whatever is known to me, by July or August, next wave of tendering again for Kavach will come. So it's an ongoing process and whatever tenders are getting finalized, the execution is taking place. It's a Government of India prime project because they want this Kavach to be installed as quickly as possible to enhance the safety of the moving trains and the passengers.

Okay. Sure, sir. Maybe one last question from my side, and then I'll come back in the queue. Ma'am, you mentioned probably there will be a pressure on the margins in FY '26 also. So on a stand-alone, we have done almost like a 4.7% sort of margin. So one is like there is a continuing losses in certain projects, so this 4.7% probably ballpark projected could be how much based on whatever pending loss-making orders here?

So if I was to exclude out of 4.7%, the one-off items, it should be in the region of about 5.7%, 5.75%. So yes, we are expecting the margins to be in the range of 5%. Core EBITDA to be in the region of 5% to 5.25%.

This includes our losses, which were...

Other than the onetime losses, which is very difficult to predict. And hopefully, we should not have more in the coming year but that is something as and when it comes, we'll keep you informed. The typical margins of core EBITDA should be in the range of 5% to 5.25%.

[Operator Instructions] The next question is from the line of Shreyans Mehta from Equirus.

A few data points. One, in terms of inflow number for FY '25? And secondly, what are our investments, if you could broadly split it into roads and the other assets?

So -- sorry, what was your first question?

Inflows for this year, FY '25?

Inflows as in the order book?

Order inflows, order inflows.

Yes, yes. So order inflow, we mentioned to you that we have currently an order book of about INR 20,000 crores. And in the month of April and May, we have had order wins closely to the extent of about, I think, INR 1,100 crores.

So for '24-'25, we got order of INR 2,600 crores. And in '25-'26, up to this month, we have got INR 1,150 crores.

And in terms of the investments, we have made in road projects an investment of about INR 1,500 crores. We still have to invest another INR 400 crores, INR 500 crores. In coal connectivity, we have made investments of about INR 1,000 crores. We still have to invest another INR 500 crores. And in renewables, we have mostly done all the investments. But yes, there is a close amount of about INR 30 crores to INR 50 crores that we still need to put in, in this current year. So overall, you can say that we have invested about INR 2,300 crores in all our SPVs. And we have another INR 1,000 crores that we need to put, out of which in this financial year, we should be investing in the region of about INR 500 crores.

Sure. So one clarification. So renewables, we've invested closer to INR 300-odd crores?

Yes, that's right. INR 200-odd crores, we have already done.

INR 200-odd crores?

Yes.

Sure. And ma'am, just on dwelling more on margins, since we've entered new segments like Kavach, which I'm presuming would be margin-accretive compared to our current EPC. So still, why are we guiding for a lower margin for, say, probably FY '26? Because once those...

That's because Kavach is going to play a role in our order book but we will still continue to have dominance of EPC orders. And EPC projects, in both rails and road, as sir also mentioned, has many, many players and the margins and the competition is intense. There, our margins will take a squeeze. So overall perspective would be the guidance that we've given, please.

We are also trying to get more orders from overseas. Presently, we are working in Algeria, we are working in Myanmar. Recently, we have completed the project in Sri Lanka, Bangladesh, Nepal. Recently also completed the doubling project of Indian Railways, Kiul-Gaya 128 route kilometer, doubling project from Katni to Singrauli 261 kilometer, except the Snajay Tiger Reserve portion where the alignment is being bypassed. So -- and the USBRL project, which was a big, huge project completed and handed over to the Indian Railways also around 190 kilometers. So these huge projects we have completed during these 9 months. So we are working very hard to get the orders both from India as well as abroad.

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for their closing comments.

Thank you, Steve, for moderating the call. And I would like to thank all our shareholders, business partners, analysts, investor friends, who have shown continued support and faith on us. We would be happy to connect with you on a one-to-one basis as well as and when required and for any further queries that you all may have. I conclude today's con-call and thank CMD sir for being here. Thank you all for the active participation, and thank you once again.

Thank you. Thank you, my dear shareholders. Thank you very much.

Thank you all for being part of this conference call. If you need any further information or clarification, you may contact to Mr. Sachin Garg or e-mail at [email protected]. Thank you for joining us.