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

Ladies and gentlemen, good day, and welcome to the J. Kumar Infraprojects Limited Q2 and H1 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. Before we begin, a brief disclaimer. The presentation which J. Kumar Infraprojects has uploaded on the stock exchange and their website, including the discussions during this call contains or may contain certain forward-looking statements concerning J. Kumar Infraprojects, business prospects and profitability, which are subject to several risks and uncertainties, and the actual results could materially differ from those in such forward-looking statements. I now hand the conference over to Mr. Kamal Gupta, Managing Director, J. Kumar Infraprojects Limited. Thank you, and over to you, sir.

Hi. Good afternoon, everyone. I'm Kamal Gupta. On behalf of J. Kumar Infraprojects, I welcome, everyone, to the Q2 and H1 FY '24 earnings conference call of the company. Joining me on this is Mr. Nalin Gupta, MD; Madan Biyani, 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. The company is at an inflection point in terms of its corporate personality, strengthening its capacity to sustain growth in terms of order book and overall performance. FY '24 has been historic for us so far in terms of order awarding. We have been awarded projects worth INR 7,188 crores in the current fiscal with 5 more months to go. And our currently L1 in projects worth INR 1,640 crores. We continue to grow in operational and financial capacities, backed by our powers in bidding eligibility have paved the way for securing these transformative projects, positioning us as a reliable partner in the industry. With the ability to induce larger projects, we have embarked on a venture that reshapes the landscape and elevate urban experiences. Our in-house equipment bank stands as a testament to our self-reliance, ensuring the swift progression of projects and efficient resource allocation. Timely completion, an attribute we hold dear, speaks volumes of our commitment to delivering results, exceeding expectations and honoring our promises. Our proficiency in executing complex and challenging infraprojects demonstrate our specialized capabilities and mark us as leaders in this intricate domain. Coming to the highlights, like we have been awarded Goregaon-Mulund Link Road project by BMC for a total project cost of INR 6,300 crores, wherein J. Kumar's share is INR 3,088 crores, excluding GST. The project is design, construction and operation of twin tunnel from Film City Goregaon to Mulund, including box tunnel that is cut and cover at Film City. We have also been awarded Chennai Elevated Corridor by NHAI for a total project cost of INR 3,570 crores excluding GST. The project includes construction of double-decker four-lane elevated corridor from Chennai Port to Maduravoyal in Tamil Nadu, total 4 packages on EPC mode under Bharatmala Pariyojana of NHAI. Coming to the performance highlights of Q2 FY '24. The revenue from operations for Q2 FY '24 has gone up by 9% to INR 1,104 crores as compared to INR 1,013 crores in Q2 of FY '23. The operating margin for Q2 has gone up by 10% to INR 160 crores as compared to the previous year, and the margin stands at 14.5% as compared to 14.4% in the previous quarter of the year. The PAT for Q2 FY '24 has gone up by 9% to INR 73 crores as compared to 68% in Q2 of FY '23, and the PAT margin stands at 6.7%. Coming to the highlights of H1 FY '24, the revenue from operations for H1 FY '24 has gone up by 11% to INR 2,236 crores, and the operating margin has gone up by 12% to INR 321 crores. And the PAT for H1 FY '24 has grown by 13% to INR 146 crores as compared to INR 129 crores in the preceding year. Our total order book as of 30th September '23 stood at INR 16,447 crores. The order book includes metro projects, elevated underground contributing 32%, elevated corridors, flyovers contributing to around 31%, road tunnel projects contributing around 27% and others, like buildings and all contributes around 10%. We also -- apart from this INR 16,447 crores, we got 2 orders amounting to INR 530 crores in Q3, and we also L1 in INR 1,640 crores as of now. We can now begin the question and answers. Thank you.

[Operator Instructions] The first question is from the line of Gunit Singh from CCIPL.

Our order book is around 4x our annual revenues currently. So -- I mean, looking at the current size of our order book, what kind of top line and bottom line can we expect for the second half of FY '24?

So for the H2, we expect the revenue guidance that we had made of around INR 4,800 crores with an EBITDA of around 14% to 15%. As the new order book that we are discussing about will start generating revenue from FY '25 and there will be a marginal contribution that would be coming up in Q4. So for the current year, there won't be any major difference in the guidance that we have been expecting. But yes, from FY '25, we are hopeful of having an improvement in the top line that we had guided for the financial year FY '25.

Sir, can you please repeat that guidance again for FY '25.

So FY '25, we had given an upward rise of around of around 15% in terms of the top line, and now we expect it should be around in the range of 16% to 17%.

So basically around 15% increment over INR 4,800 crores?

INR 4,800 crores.

All right. 15% improvement, I mean, growth over INR 4,800 crores, right?

Yes. So -- and you would appreciate that as the base keeps increasing, there would be the growth happening on the last year's top line, it increases substantially as compared to the lower top lines of the company, which happened in the previous years.

Right, right. That is great. So what is the execution period of our entire INR 16,000 crores, order book?

So it ranges from 3 to 5 years period. Some projects are 3 years, some are 4 years, some are 5 years. But on an average, as we are an urban player, we can consider 4 to 5 years as an average time period for the entire order book.

All right. That is great. And looking at the current pipeline, what kind of order book would be closed towards the end of FY '24? What do you anticipate?

So we had given an order book guidance of around INR 12,000 to INR 13,000 crores by the end of fiscal year FY '24, which we would like to revise it to around INR 16,000 crores, which is -- as we are already L1 in good value of order books that we have seen. So there would be an upward guidance rise to the tune of around 1/3, that is 30% increase in the order book that we had anticipated. We should be closing at FY '25 close to around INR 16,000 crores is what we expect.

All right. That is great.

By FY '24, yes.

The next question is from the line of Shravan Shah from Dolat Capital.

Congratulations on strong order inflows. Sir, just to clarify, this two L1 order of INR 1,640-odd crores, can you help us which are these 2 projects?

These are not 2 projects, these are 4 projects. And like one is like of MMRDA, which is a flyover from Andheri West to JVLR, costing around INR 346 crores. And the second project is at Delhi of NBCC, that's like a multi-transport corporation depot, costing INR 270 crores and another one, again, is of Hari Nagar Colony of DTC of NBCC, costing INR 521 crores. There's some disturbance. Hello?

Yes, sir.

And the fourth project is of an elevated corridor from Grand Southern Trunk to Saidapet at Chennai. So that is costing INR 500 crores. So, it's...

Sir, the third one, Hari Nagar building, you said INR 521 crores?

Yes, yes, yes.

Okay. Got it. So now -- so considering -- so if I look at -- so INR 7,188 crores, we have received, plus this INR 1,600 crores. So INR 8,800-odd crores inflow is already there. So how much more are we now looking at to bag by end of March?

So like first of all, this INR 1,650 crores -- INR 1640 crores has to be converted to orders. So this will be done in coming time. And like, we have bidded -- we'll be bidding for around INR 25,000 crores to INR 30,000 crores of projects in coming in 6 to 9 months. So let us hope what will come. So like we are expecting it, as Nalin also told, by closing FY '24, INR 16,000 crores of order inflow by the end of FY '24.

INR 16,000 crores of order inflow?

So it's order book. Order books, I'm so sorry.

So again, just to clarify, so in terms of -- I'm particularly asking on the inflow front. So how much more -- so yes, as you mentioned INR 25,000 crores to INR 30,000 crores are we -- we are planning to bid in 6 to 9 months. So roughly, can we assume INR 4,000 crores, INR 5,000 crores, is this one can assume to be received by end of March?

So Shravan, what we are trying to say is that we should be surely closing close to INR 16,000 crores by end of FY '24, and the pipelines and the projects will be bidding on different dates. Again, the tender needs to be opened. If we are L1, again, the process -- so it's a long process. So for FY '24, we give a target now of a revised order book, which is on the upside by around 30%, which is INR 16,000 crores as against INR 12,000 crores what we had anticipated and we had given a guidance for. So these order books are subject to, when the tenders are submitted, you should be L1. So committing right now on those numbers, we are not adding on to the order book guidance as of now. So this is with the current order book that we have bagged and we are L1 into where we anticipate to stand at an order book of INR 16,000 crores by end of FY '24. I hope this is clear now.

Got it, sir. And then broadly, this INR 25,000 crores, INR 30,000 crores that we are planning to bid, broadly, if you can break it up into segment of flyover, building, metro, road, water, broader number would help.

So it's basically around major order book. This bidding would be in the process of the express highways, your metro projects that we have been bidding in Bhopal, in Kanpur and some indoor tenders are there. Bombay Metro is what we are expecting to bid in this coming 6 months' time. So -- and also some of these projects for building sectors.

And also roads and tunnels.

Okay. Okay. Got it. Second, sir, when we say that 15% revenue growth for this year and next year, we are just saying a 16% to 17% kind of revenue growth for FY '25. So even one can assume because last time we have talked about 18% to 20% kind of a growth for '25 and '26 also. So how one can look at? Is it a much lower number that conservatively we are looking at 16%, 17%? But one can, practically, if everything goes well, we can see a closer to 20% kind of revenue growth for even '25, '26?

So that's Shravan, like we are already maintaining what we are saying. And like, we believe in surpassing what we say or what we give the guidance. So this year again from INR 4,200 crores to INR 4,500 crores, we are -- INR 4,200 crore to INR 4,800 crores, we'll be doing by FY '24. And as Nalin told, like instead of 15%, we are targeting 16% to 17% of growth in FY '25. So let's see as the time goes, like in a couple of quarters, we'll see what is the ramp-up in the execution and hope for the best.

And then on the margin front, when we are seeing, what we said, definitely 14%, 15%. So one, it's already 14.4%. But last time also we said we will be likely to see 150 bps improvement in EBITDA margin in over 2 years. So can we start seeing that improvements in FY '25 itself, maybe 50, 70 bps improvement in EBITDA margin FY '25?

Yes. So like right now, what we're doing is 14.4%, 14.5%. And like as rightly told, we are also targeting a 1% increase in coming 8 quarters -- so 7 to 8 quarters and let's -- you should see some impact in the coming years, yes.

Okay. Second on -- broadly on the debt front and working capital. So this quarter, we have seen the working capital has increased, particularly, the payables actually has reduced INR 200-odd crores and that's why the working capital increase and the debt has also increased close to [ INR 127-odd ] crores. So how one can look at -- so what's the revised guidance on these numbers? Because on the debt front, we were looking at INR 550 crores, INR 600 crores. So currently, INR 643 crore debt?

Mr. Madan Biyani will reply to this.

Shravan, on working capital, see on quarter-on-quarter, there will be a little bit of 8, 9 number of days up and down or so. But, trade payable, as you see in our Q1, these were a little higher that time. But Q2 last year, if you see, it was only INR 550 crores. So vis-a-vis that, we are at INR 425 crores. So we have been able to reduce INR 125 crores by some innovative methods of bill discounting, payables and all and helping our suppliers and vendors to complete project faster and all. Trade receivables also, we have been able to reduce by INR 80 crores from June '24. And then inventory, we have been able to reduce by INR 40 -- INR 30-odd crores. So these are like -- see, we are playing with such a large order book and some projects, some numbers, some payables, some results go here and there. So working capital on a larger target is to bring it down to 120 days.

Okay. And on the debt front, sir?

Sorry?

On the debt, INR 643 crores gross debt that we have currently. So at the same time, GMLR, the tunnel CapEx of INR 300 crores to INR 350-odd crores, we will have to spend. So how we look at this debt level by end of this year and FY '25 and '26? Broadly, how one can look at the debt level?

The debt of GMLR, we will not come in this year, first of all. The machine will take a long time to get manufactured and delivered and all. So it will come somewhere around, not even in FY '25, maybe FY '25 -- end of FY '25 or so. But seeing our debt-equity ratio currently, even at 0.27, we were at 0.22 at June quarter and even after having this PSL exposure, and Kamalji will come back to on that. And we are quite comfortable, 0.27 debt-equity ratio in an EPC company is very healthy, and business grow, debt will grow. So we are comfortable on that.

So we are not expecting a reduction at least by March, this number is fine?

Yes. So March '24, we are looking for a debt of around INR 650 crores only.

Okay. Okay. Got it. Got it. And just 3 numbers on mobilization, advance, retention money and unbilled revenue as on September?

Mobilization and advance stands at INR 445 crores as of Q2, and we are happy to inform you, that reduced from INR 532 crores to INR 445 crores. We have been able to settle some of our liability against revenue bills and security deposit receivable is at INR 254 crores, security deposit payable is at INR 234 crores. Anything else you have?

Sorry, sir, retention money, you said INR 254 crores?

Security deposit same name retention money, INR 274 crores and INR 234 crores is payable.

The next question is from the line of Prem Khurana from Anand Rathi Shares.

Congratulations on strong orders added during the year. Sir, just want to understand, I mean, given the fact that it's been fairly strong quarter in terms of new order additions and we are targeting to a take order backlog to almost on INR 16,000-odd crores by this year. And would that need you to go and seek more fund-based or nonfund-based limits? Because, I mean, you would have to extend guarantees plus next year. I think -- I mean you would have to incur CapEx for GMLR as well. So would you need to kind of go and see more limits from your consortium lenders?

Well, so they -- we will be surely needing more limits to be sanctioned for bank guarantees, LCs, working capital, et cetera, as well as term loans. So for the Chennai project, elevated corridor, already, we have closed the bank closure with SBI. And SBI was very keen on this -- closing the entire limit on a stand-alone basis, which has been done. For GMLR, again, we have received a sanction of already the 50% of the requirement that we need for the project. So we'll be surely needing that. And as and when the project is proceeding, we'll be taking the limits. But for GMLR, the CapEx requirement or working capital requirement to the bigger extent would not be coming up in this fiscal year. And as Mr. Madan has already informed that we will be -- the machine will be coming somewhere by after 15 to 16 months from now. So the CapEx and term loan that's required for TBM would be happening only after that. And so the limits, it will be increased, and we are very comfortable in managing the sales. With the current debt-equity ratio of just 0.27 where the company stands, I think we get a good financial deal from most of the bankers as we have never let them down.

Sure. And sir, on the GMLR, given the fact that you're saying tunneling machines would be required 15, 16 months hence. So fair to assume that a large part of revenue recognition would start once we have tunnels in place till then you would have to make sure that you do your groundwork and then have shafts in place and then once the TBMs are lowered, which is when we get to have a significant ramp-up in the revenue contribution from this project?

Yes. So Prem, you rightly mentioned that in this entire project of GMLR, which is around INR 6,300 crores. Around 70%, close to like 65%, 70%, comes in from the tunnel because out of the entire length of around 7 kilometers, around 5-kilometer -- close to around 5 kilometers is the tunneling work. So this revenue recognition will only start for the 70% of the component after like 20, 21 months from now. And that's why we are giving -- we are not very -- we are not giving a guidance of 20%, 25% growth. That's the reason because even the base is increasing and these works will start contributing after like 20, 21 months from now in a sizable manner, though we would be booking some revenues by the end of the year or in the -- in FY '25, I would say.

Sure, and how about Chennai, the 4 NHAI EPC package. When do we expect to start booking numbers from those 4 packages? Because when I look at the order background, it's a flat on a sequential basis, so we will still not start booking numbers from that. So when do we expect to see these 4 projects start contributing?

Yes. So we are expecting the appointed date by mid of November coming so -- when the meter starts. And like Q4, we'll see some revenue because it's in the mobilization stage as of now. And we'll be incurring some CapEx towards that as well. And -- so major revenue will start by FY '24 -- '25. So work will be started from next month only.in terms of mobilizing, not the actual work because survey and soil investigation work is already on. So Q4, we'll see a little contribution from Chennai project.

Sure. And sir, would you be able to share the land status with these 4 packages? I mean, where are we in terms of how much ROW is already made available to you and how much more is required to be able to kind of go and seek AD? I mean, generally, you get to have AD once we have 80% ROW. So where are we today, I mean, in terms of right of way as of today?

So you're talking about the Chennai project, there are 4 packages and in fact, 3 packages already have more than 90% of the land so that's why we are taking the appointed date for mid of November. So 1 package is having like 86% of the land. So by another couple of months, I think by December, we should get appointed date for that as well.

Sir, this 90 and 80, these are 3Ds or 3G or 3H?

What do you mean by that? Sorry.

So 3D is eventually wherein a notification is given the land is yet to be acquired. 3G is when, I mean, OIE send the letter, and 3H is when the payment is made. So...

Okay. Okay. So I won't be able to give the exact update on that, my dear, now very much. But the land for like this -- out of 3, 2 packages are having 100% of the land. So one is having 95-90 something. So one is -- the other one is 86. So land-wise, there is no issue in Chennai. So it should not be a problem at all.

[Foreign Language] I'm not sure if you gave that number earlier in the call.

INR 97 crores.

And how about unbilled and also if you could help me, unbilled revenue [Foreign Language] as of Q2 end?

INR 555 crores.

And any change in CapEx guidance? I think we would look in -- so we spent around INR 33 crores in first quarter. How much did we spend in Q2? And how much are we expecting for the balance of the year?

INR 62 crores we have spent in H1. And we think that will be around INR 150 crores total for the year, including our incremental CapEx and some CapEx will come for Chennai project.

Okay. But this INR 150 crores would include Chennai or Chennai would be over and above this?

So it can be like INR 150 crores to another INR 30 crore, INR 40 crores plus for this year, so not more.

The next question is from the line of Nikhil Kanodia from HDFC Securities.

Congratulations on strong order inflows. A few of my questions have been answered. So on the basis of the orders that we have received, so what would be the current fund-based and nonfund-based limits that we have with us and the utilization of those limits?

We had a fund-based limit of around -- sanction limit of INR 967 crores and utilized is INR 436 crores, that is around 45% fund-based has been increased. And for nonfund-based, we have a limit of around INR 3,600 crores, where around INR 2,500 crores has been utilized. So Nikhil, it would be around 71% and total utilization is 67% on an average basis.

Okay, okay. And as on date the total order book that you have mentioned, what would be the percentage of the order book, which is under execution?

Which is under?