J. Kumar Infraprojects Limited (JKIL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the J. Kumar Infraprojects Q3 and 9 Months FY '21 Earnings Conference Call, hosted by Anand Rathi Share & Stock Brokers. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rachit R. Kamath from Anand Rathi Share & Stock Brokers. Thank you, and over to you, sir.

Thank you, Faizan. Good afternoon to all the participants for the Q3 and 9 months FY '21 earnings conference call of J. Kumar Infraprojects. Today, we shall start with a brief commentary from the management on the past quarter and then proceed to a Q&A session. From the management today, we have Mr. Kamal J. Gupta, Managing Director; Mr. Nalin J. Gupta, Managing Director; and Mr. Arvind Gupta, Chief Financial Officer. Without any further delays, I would like to hand over the call to the management. Thank you, and over to you, sir.

Okay. Hello? Good afternoon. This is Jagdish Gupta, Chairman, J. Kumar. Hello? [Foreign Language] Kamal Gupta [Foreign Language], Managing Director.

Good afternoon, everyone. A warm welcome to our Q3 FY '21 Earnings Conference Call. I hope you all are staying safe and healthy through these unusual and challenging times. Along with me, I have Nalin Gupta; and Arvind Gupta, CFO; and our IR team. I hope everyone had an opportunity to look at our results. The presentation and press release have been uploaded on the stock exchanges and our company's website. Some of our key developments are: we were awarded projects totaling INR 2,260 crores in FY '21 till now despite pandemic. Out of this, one project is Sewri-Worli elevated connector, which is an extension of MTHL, Mass Transharbor Link, costing INR 1,052 crores. We were also awarded this project of Surat Metro work, which is underground tunnel and station work of Gujrat Metro Rail Corporation costing INR 942 crores. Now allow me to give you an overview of our operational performance during the quarter. Revenue from operations for Q3 FY '21 grew by 3% to INR 816 crores as compared to INR 793 crores in Q3 of preceding year FY 2020. And revenue from operations for 9 months of FY '21 stood at INR 1,579 crores. Our operating margin EBITDA for Q3 FY '21 stood at INR 116 crores as compared to INR 118 crores in Q3 of preceding year. And EBITDA for 9 months FY '21 stood at INR 207 crores. PAT for Q3 FY '21 stood at INR 45 crores as compared to INR 56 crores in Q3 of preceding year, and PAT for 9 months FY '21 stood at INR 31 crores. We expect further ramp-up in execution and revenue recognition in Q4 FY '21. The company continued its focus on working capital management and quality of order book. Our total order book as on December 31, 2020, stood at INR 10,917 crores. The order book includes metro projects contributing around 50% and 50% is flyover, bridges and road projects. With this, now I leave the floor open for questions. Thank you.

[Operator Instructions] The first question is from the line of Shravan Shah from Dolat Capital Markets.

Yes. Sir, first of all, congratulations on beating the numbers what you guided last quarter, particularly on the execution front. So now first, on the broad numbers. So we have already done INR 816-odd crores revenue in this quarter. And last time, we guided that in the fourth quarter, we can do INR 800 crores. So -- and for the full year, INR 2,200-odd crores. So I think -- wanted your revised number. Is it -- I think INR 1,000-odd crores execution in the fourth quarter, is it fair that, that can be done? And at the same time, how we look at now the next year FY '22, as we have already INR 11,000-odd crore order book?

Shravan, hello?

Yes, sir.

Yes. So we are looking for -- like we have given a guidance of INR 2,000 crores for the year ending FY '21. But now we are foreseeing we'll be able to do INR 2,400 crores to INR 2,500 crores of work by the year-end '21. Also for '22, our guidance is INR 3,500 crores.

Okay. And in terms of the margin for this year, sir, you last time guided 14% and then 15% to 17% for FY '22. So will it remain the same?

Yes. So margin for this year will be slightly lower because of this COVID, of course, around 14%. And next year onwards, it will be 15% to 16%.

Okay. Sir, now coming back to the main order inflow front, a couple of clarifications needed. First is that are we L1 in Mumbai D.N. Nagar-Mandale Line 2B of around INR 1,300 crores -- INR 1,400-odd crores?

Yes, Shravan, you're right. We are L1 in that, but work order is yet expected. We are awaiting that.

So will we get in this month?

Yes, it should come in a month's time from now.

Okay. So apart from this, what else in terms of the opportunities are we looking at in metro? And apart from metro, in flyover, what kind of opportunities? So have we bidded? Or are we planning to bid by March?

Yes. So there are a lot of works in pipeline. We are -- we'll be tendering for a lot of NHAI work since we are doing already Dwarka projects costing INR 3,000-plus crores. So there are some INR 4,000 crores of NHAI projects adjoining that. So we'll be bidding for that. Also, there are a lot of metro projects coming in and around Mumbai, also other cities like Gujrat, Surat, Pune, Nasik, Nagpur. So we'll be targeting this as well. So as you are aware, like metro for the second-tier cities has been with us now. So -- and there are a lot of around INR 3,000 crores of flyover projects in urban areas of MMR region. We are targeting that as well. So whether it's metro, whether it's flyover bridges or NHAI, we are, like, fully prepared for this now. And we are so happy that government has given this push toward infra, such -- to revive the economy since infrastructure is the second largest employment generation in the country. And I think we will be really benefited, and we want to take this opportunity, and we are fully prepared for that, Shravan.

Yes. So the value that you said NHAI, INR 4,000 crore and flyover in MMR, INR 3,000 crore. So this all would be -- we would be like to bid by March. And in terms of the metro broadly, including MMR, Surat, Nasik and other, what kind of likely -- we are targeting in terms of the -- to be bidding by March? And what would be likely to bid in the next FY '22?

So see March is only 1 month away from now, Shravan. So if these projects, like, they get extended because of whatever reasons, so it's not that March all these projects will be bidded. I say these are the pipeline projects, these will be bidded -- we will be bidding in the coming year. As you must be aware, we already secured INR 2,250 crores of projects till now in FY '21 and as given guidance by us that we'll be securing around INR 4,000 crores of projects. So we are sure by March end of FY '21, we'll be able to secure around INR 4,000 crores of projects. And also our targets for FY '22 is around INR 4,000-plus crore projects of inflow.

Okay. That's very good. Sir, I need a couple of the data points in terms of the gross debt, cash, inventory, debtors, creditors and how much CapEx we have done and how much is left for fourth quarter, and what would be for FY '22.

Well, we are happy to share that, like, our gross debt has gone down by almost INR 100 crores, which was INR 674 crores as on March '20, has come down to INR 574 crores as on December '20. So gross debt has gone down. Our, yes, inventory is INR 808 crores, which was INR 860 crores as on March '20, so now it is INR 808 crores. And also, the debtor is -- the debtors are INR 630 crores, which is almost the same. And the creditor also has gone down to INR 409 crores as compared to INR 460 crores of March '20 figure.

Okay. Sir, cash and -- total cash, including the money we kept via the margin?

Yes. So that -- so we have an FDR of around INR 370 crores plus bank balance of INR 460 crores. So around INR 430 crores is the cash balance.

Okay. And the CapEx, how much we have done for 9 months? And how much left for this year and the next year?

So we had done a CapEx for this year, like we already done a CapEx of INR 60 crores in 9 months. And we are expecting, like the CapEx by the year-end to be around INR 80 crores to INR 100 crores based on our new project additions. And our guidance for CapEx for the coming year will be around INR 70 crores to INR 80 crores.

Okay. Okay. And in terms of the mobilization advance, retention money and unbilled revenue, what are the numbers as of December?

The mobilization advance is...

Mobilization advance is of INR 400 crores. And retention money as on 31st December is INR 246 crores. And unbilled revenues, INR 513 crores, 5-1-3.

Part of the inventory.

This is part of the -- this is inventory.

Yes, yes, yes. I understand, sir. Sir, is there any couple of change in terms of the increase in the scope of work? Because if I look at the order book, for Line 7, CA-91, it has increased from INR 165-odd crores to INR 184 crores and For JNPT from INR 35-odd crores to INR 105-odd crores. So is there increase in scope during the quarter?

Yes. So there was some increase in JNPT project. There was marginal increase in Line 7 of, like, what I think, INR 15 crores, INR 20 crores. But JNPT, we had an increase of around INR 100-plus crores.

Okay, INR 100-plus crore. Okay, okay, okay.

[indiscernible].

The next question is from the line of Mohit Kumar from DAM Capital.

Congratulations on good set of number. Sir, I have 2 questions. Primarily, sir, which are the projects where we expect the execution to pick up in Q -- especially in FY '22? And it looks like the work on the Dwarka Expressway is moving pretty slow. Can I expect it to pick up in the next FY '22?

Yes, Mohit. So Dwarka project, of course, was slow because of some tree permissions and other things, which everything is in place now. So it has already started in full swing. And of course, we'll see good numbers in the coming quarters from Dwarka Expressway. There will be a ramp-up in the execution. Also from -- in the coming quarter, we'll get good revenues from our Mumbai Metro projects elevated, which is Line 9, Line 6 and the other, I think, around Line 3. So there will be a good ramp-up in all these executions because all the projects have started well. The -- our new 2 projects of Worli-Sewri and one which we are L1 in -- sorry, we've got Surat Metro, we'll be able to see the revenue after 1 quarter, it is first quarter of '22 where revenue will start flowing in.

Understood, sir. Sir, is there something in the L1, which is still pending, which has not been converted (sic) [ covered ] into order apart from Mumbai and the Surat?

No. Everything is covered and only one project of CIDCO Coastal Road, which has not yet started because of some environmental issues, like the forest clearance is not in place. So that project will take another 4, 5 months to start. It's costing around INR 400 crores, our part of J. Kumar.

And sir, broadly, what are the opportunities we are seeing in the Mumbai-Worli region, which are large and which can be tendered out in FY '22?

Yes. So Mumbai, as I told you, there are a lot of metro lines coming in. So we will be, of course, targeting that. There are a lot of elevated projects planned in Mumbai, in and around MMR. So we are targeting that as well. Also, there are some HSR projects, which are not yet tendered or awarded. And so that's one station, INR 2,000 crore project at BKC. Some -- also we're seeing some elevated lines, which are pending, so we'll be quoting for that also. We were not lucky to get the project of this HSR, which L&T took. We've bidded for that, we were second lowest. So we'll be targeting further projects of that as well, Mohit.

The next question is from the line of Anoop Nambiath (sic) [ Porinju Veliyath ] from Equity Intelligence India Private Limited.

I'm Porinju Veliyath from Equity Intelligence. We're holding some -- around 5% -- 6% in the company on a long-term investment basis. In fact, I was really happy to listen to Jagdish bhai. I think he rarely appears and talk to investors. And he is, of course, as everyone knows, he's a legend in India's infra space, who has built this company, which I would say is something like a mini L&T by all aspects today, even though the perception in the market may be something different, which may be a wrong perception also about various aspects of the company. So once I think, Jagdish bhai, takes an interest to directly interact with the investing community, that may make a huge change is what I believe. Everything is going very well. There is no doubt, promoters and management is doing a great job in execution and operations of the company and they're building up a world-class infrastructure company, I would say. And with a great balance sheet, one of the strongest balance sheets in the infra space in India, among the listed companies. However, Jagdish bhai, I would like to put forward the feel that the minority shareholders have been missing that [indiscernible] of the -- of whatever is happening in the company. Even we are significantly lower than the IPO price as on today in spite of the fact that we have done a wonderful job in execution and keeping the balance sheet healthy, everything is done fundamentally. And there is so much order book, that's also very high-margin order book and very prestigious orders and that kind of large sum. So I feel what the promoters, the management should -- one aspect they should look at this, how to create wealth for all the shareholders, how to unlock the value if there is a hidden value in the company, I think how to remove the negative perception about the company and the promoters. I think this is very important at this point of time, and we are at the inflection point of becoming a much larger company with higher growth prospects and maybe going really national about it. So I would like to listen to Jagdish bhai, please, if he's around about this, the missing part for the shareholders.

Yes, hi, Mr. Porinju, this is Kamal Gupta, here. You want to listen to Mr. Jagdish Gupta?

Means if he's still there in the conference.

Yes, he's with us only. I think he started. I don't know whether you were there, but he started the con call.

Yes, I was there. I was blessed to and I was really happy to directly listen from him. He's a legend in the industry. And it's a great news that he addressed the clients, the investing community today. I'm really thankful for that.

Hello, hello? [Foreign Language] Jagdish Gupta here. [Foreign Language]

Jagdish bhai, my one aspect was...

[Foreign Language]

[Operator Instructions] The next question is from the line of Viral Shah from Prabhudas Lilladher.

Congratulations on a great set of numbers. Sir, my first question is that when you look at the margins, both at the PAT level as well as EBITDA. Sir, other expense for the quarter has shot up significantly. So any particular reasons for that? And do we see this coming off going forward? That is first. And our PAT margins stand at around 5.7%. So what is the take on that? Do we see that expanding going forward? These are the 2 questions firstly.

Viral, so as you are all aware, this slight increase in expenses are basically because of the COVID impact, which was for everybody. And our margins PAT, that is 5.7% now, so going forward, we'll be able to maintain 7% of PAT margins, 6% to 7% of PAT margins as committed -- as guided before also.

Fair enough, sir. Sir, secondly, a clarification, does our order book includes the L1 project, which we are there, INR 1,240 crores or no?

No. That does not include, Viral.

That doesn't include. And barring the project, which is Coastal Road, all our projects on ground have commissioned? Or there are still some projects, which are yet to start of the INR 11,000 crores order book?

Barring Coastal Road of INR 400 crores, all the projects have taken up very well and are in full swing. Only Surat Metro, as we told, which is yet to start, okay, which will be like even that order we have got, so even that will be taken up very fast now in a couple of months.

Sir, our debt has reduced by INR 100 crores, but our interest cost continues to remain high at INR 24-odd crores for the quarter. So any particular reason for that? And second, your view on working capital in terms of days and the payment from states and centers, both, sir?

It is basically because of the BG and LC commissions, Viral. It's not -- of course, the debt has gone down. The interest cost has come down, but the INR 24 crores includes your BG Commission and LC commission also.

Fair enough, sir. Sir, and lastly, on the working capital front, how has that been? And what is the status on payment from both from center and states?

Sorry?

Working capital, sir, working capital, how...

Working capital, as we have guided before also, we are able to maintain, like, we will be maintaining 120 days.

Okay. And sir, payments have been receiving from state and center, both?

Very well. There's no issues in the payment from state and center, both.

And sir, lastly, budget has talked about a lot of projects on irrigation as well and building segments as well, institution buildings, schools and all. So are we looking at bidding for those areas as well? Because of late, we have been bidding for road, metro, you could say high-speed rail kind of projects. So are we getting into that irrigation space as well if...

So Viral, as you must be aware, we are already in these 2 spaces. Of course, irrigation, we do work, but not in a big way. So if we get some good opportunity, of course, we're in for that. Also for the building line, as you must be aware, we already constructed INR 830 crores of single projects in Rajasthan of building. And also, we are right now also doing 2 projects of building in Lucknow. So we are, of course, looking for this opportunity. We have a full setup, team and required resources for that. Any good opportunity in this line also, we'll, of course, bid, and we'll go ahead.

Fair enough. Sir, basically 4 -- 3, 4 segments which we are focusing on, one is building, one is road, one is metro and high-speed rail. Is the understanding correct for time being? And then maybe we will look at other segments as well? Because irrigation, I'm sure we would have some technical complications for a past record of the work done in irrigation as well.

You are right, Viral. We are targeting these 5 segments plus railways and also some waterline projects, we are foreseeing. If at all we get a good opportunity, we will tap that as well.

The next question is from the line of Parvez Akhtar Qazi from Edelweiss Securities.

Congratulations for a good set of numbers. Couple of questions from my side. First, just wanted to get an update on what is the status on various metro projects that we are doing in Mumbai? And second, I mean, we believe we are L1 in INR 1,389 crore orders from Mumbai Metro. Now in that project, I guess, there's a fair bit of difference between what was the cost estimate by the authority and our bid. So I mean what is the status? Do we expect there is going to be some negotiation about order or we think we will get it soon? Just wanted to get your views on it.

So Nalin will answer this.

So for this -- that is the project of Mumbai Metro Line 2B. So we are L1 in it, and the negotiations are on. So I think it should be concluded in this month's time.

Sure. And about the status of the various lines that we are doing, Line 3, Line 7, Line 9, et cetera?

What do you want to know about Line 9, in the sense?

Status, status.

Status, yes.

Yes. So we have already completed projects of Line 7 and -- 7, there was an old project, which was CA-02, which is completed 100% from our side. And the additional scope, which was being given to us, which was the leftover work of Simplex is in full swing. So we expect it to complete before May to -- around May, we should complete that project. And for Metro Line 9, the work has fully started for the elevated section from Dahisar to Bhayandar, we are doing the work in full swing and almost like for 6 stations, the foundations are completed and direction has also been started in Line 9.

Sir. And sir, for Line 3, I mean, what is the status on the tunneling work? And by when do we expect to complete the project?

So Line 3, the tunneling work, like we have a final and last breakthrough tomorrow. So the 100% tunnel will be completed by tomorrow in Line 3. We have completed around 68% to 70% of projects, including tunneling and stations of Line 3. We expect this project to get completed by '22 October, year end of '22.

Sure, sir. You said October '22, right?

Yes.

The next question is from the line of Sachin Kasera from Svan Investments.

Can you give us the breakup of the interest and financials in terms of for the 9 months, how much this was towards interest cost and how much was BG in commissions?

The breakup of interest costs? So it's INR 18 crores of interest and INR 7 crores of BG commissions and LC charges, totaling to around INR 24 crores.

That is for the quarter?

For the quarter.

Yes, that's for the quarter. And for the 9 months, it is INR 47 crores for the interest cost, INR 28 crores for the banking charges, that's total INR 75 crores.

Okay. And what would be your average rate of interest on the debt that we are carrying?

10.5%.

10.5% to 11%, you can say.

Okay. How do we see this? I think you mentioned a gross debt of around INR 670 crores as on December?

Gross debt of INR 574 crores.

How are we seeing this number going into FY '22? By next year, do you see this coming down quite a bit?

Yes. So this will slightly go up to...

Come down. Means we have already reduced the debt by around INR 40 crores...

INR 100 crores has been reduced.

INR 100 crores.

Okay. And how much do you think you can reduce in the next 12 to 15 months more?

So I think, like, going forward in the coming year, this debt will remain almost the same. It won't go up or it won't come down as well.

We have bagged new projects as well. So means because of that, like we have bagged Surat Metro also, which has already been declared. So there are other new projects also starting. So it will not increase, but we'll be able to maintain that.

Okay. So you're expecting some increase in CapEx towards the new project or it's maybe for the higher working capital for these projects? What exactly are you looking when you're saying you don't expect the debt to go down further from here?

It would be basically for higher working capital requirements. New projects have started, like Line 9 has started. We are about to start our Worli-Sewri connector. Surat Metro work, we have already mobilized. So because of that, the requirement would be there.

So what is our current net working capital, sir, in terms of number of days?

120 days. And I think you'll appreciate that the turnover going up and we are able to maintain the same debt. So I think that is itself an achievement to not increase the debt, even with the increasing number of -- amount of turnover.

Yes. But sir, the thing is that while we're getting good profits, we are not able reduce debt substantially nor are we able to reward shareholders in terms of either a dividend or a buybacks. I would seriously suggest that one of the things we could look is in terms of somewhere you may either look in terms of reducing the growth a little bit and then use the cash flows to repay debt as well as go for dividend or buybacks. it will help you into the perception of the stocks in the eyes of shareholders.

Yes, Mr. Sachin, as you must be aware, we are very lucky to see that the government has given such a great push in infra lines. So we want to make sure that we are fully prepared, and we want to conserve cash for this growth opportunity. And we don't want to miss it, Mr. Sachin. [indiscernible] this budget was for infra, okay? So like, we want to capitalize on this budget.

The next question is from the line of Vipul Shah, individual investor.

Yes, sir, I just want to know why our interest rate, we are paying 10.5%? Why it is so high? Because in a falling interest rate environment, we see a lot of companies raising money at very attractive rates. So just wondering why we are paying such a high rate of interest? And second question that SEBI inquiry is done with? Means has final chapter, has it been over? Or still is it pending at any level?

We have already received -- it's been closed now. And with respect to interest cost that you think -- I think it's a reasonable market trend of having an interest rate of 10.5% to 11%.

And Mr. Vipul, these are some old sanctions. We're already getting our WCDL at lower rate of around 8%, and the overall cost is 10.5%. And we already applied to all the banks to reduce the interest cost. And so the process is already on. So we're expecting in a couple of months that this will reduce the interest cost further.

So what you are trying to convey is new loans are at around 8%. Is that understanding correct?

So WCDL -- like out of 100%, 40% is WCDL, okay? So this is 60%, so 40% that's giving at a lesser rate, all right? So we have put the sanctions for reducing the overall rate of the interest also. So we are sure that going forward, in a couple of months, the interest rate should further come down.

The next question is from the line of Jiten Rushi from Axis Capital.

Congratulations on goot set of numbers. Sir, a few questions from my side.