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

Ladies and gentlemen, good day, and welcome to J. Kumar Infraprojects Limited Q3 and 9 months FY '24 Result Conference Call. [Operator Instructions] Please note that this conference is being recorded. Before we begin, a brief disclaimer, the presentation with J. Kumar Infraprojects has been uploaded on the stock exchange and their website, including the discussion during this call contain 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, MD, J. Kumar Infraprojects Limited. Thank you, and over to you, sir.

Good morning, everybody. I'm Kamal Gupta. On behalf of J. Kumar Infraprojects, I welcome, everyone, to the Q3 and 9 months FY '24 earnings conference call of the company. Joining me on this is Mr. Nalin Gupta, MD; Mr. Madan Biyani, our 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. We are delighted to announce another quarter of strong and all-round performance for Q3 FY '24, including top line growth of 15%, improvement in our PAT margins to 6.8% as well as further strengthening of balance sheet, including moderation in our working capital cycle days to 130 days as compared to 138 days in Q2 FY '24. In fact, FY '24 has been a historic year for us so far in terms of order awarding. The company achieved the largest accretion in its order book and witnessed substantial revenue growth during 9 months FY '24. We have already been awarded projects worth INR 8,061 crores in current fiscal with robust bid pipeline suggesting further awards in the current fiscal year. We believe that India will emerge as one of the fastest growing infrastructure drivers in the world. Marked by an unprecedented investment going into virtually every part of its transforming infrastructure story, whether it is for airports, ports, railway stations, metros, expressway, water treatment projects or ropeways. On the other hand, we believe that a sectoral shakeout, higher construction benchmarks and rising prequalification standards have led to an industry-wide consolidation. These strengths favors larger companies with robust balance sheet, enabling them to address even bigger opportunities and strengthen their market position. Coming to the performance highlights for Q3 FY '24. J. Kumar's revenue from operations for Q3 FY '24 grew by 15% to INR 1,219 crores as compared to INR 1,062 crores in Q3 FY '23. The operating margin for Q3 FY '24 grew by 18% to INR 179 crores as compared to INR 152 crores in the preceding year. The PAT for Q3 FY '24 grew by 16% to INR 83 crores as compared to INR 71 crores in the previous year. Coming to performance highlights for 9 months FY '24. The revenue from operations for 9 months FY '24 grew by 13% to INR 3,454 crores as compared to INR 3,069 crores in 9 months of FY '23. The operating margin for 9 months FY '24 grew by 14% to INR 501 crores and the PAT for 9 months FY '24 grew by 14% to INR 229 crores as compared to INR 201 crores in 9 months of FY '23. Even the PAT margins have gone up as compared to previous year and stands at 6.6%. The operating EBITDA margin also stands at 14.5% for 9 months as compared to 14.3%. And for Q3, the EBITDA margin stands at 14.7% as compared to 14.3% of the preceding year. Our total order book as on 31st December '23 stands at INR 16,744 crores. The order book includes metro projects contributing around 30%, elevated flyovers, corridors contributing around 34%, roads and tunnels contributing around 25% and other contributing 12%. We now begin with the questions and answers. Thank you.

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

Sir, before asking a question, just a clarification and also a request. So the clarification is order book in presentation, Page 13, we have mentioned INR 16,774 crores, but in the press release, it is INR 16,744 crores order book. So what's the right number of order book?

So it's INR 16,744 crores is the right figure, Shravan.

Okay. Okay. Second is, sir, this time, we have removed a project-wise order booking from our presentation. If you can continue the previous policy, it would be better for all the investors and analysts in terms of the project-wise forecasting the revenue. So that's the request.

Yes. Shravan, this time like we have given it segment-wise because it has been decided in the Board that it should be given segment wise since the projects are increasing. Looking to everything else, also we decided giving it segment wise. And if anything in particular you require project wise, you can get in touch with our finance team, they will give you whatever details are required, sure, no worry.

Okay. Okay. Now coming to the -- in terms of the -- just wanted to check on the guidance. So for this year, we previously had said INR 4,800 crores revenue and 14%, 15% EBITDA margin. And for FY '25, 16% to 17% revenue growth and 15% to 16% EBITDA margin. So what's the revised number?

Well. So we stick to the guidance given by us of around 15% growth for the FY '24 wherein we should be around INR 4,800 crores is the top line with a 14%, 15% EBITDA margin. If you look at the EBITDA margin of the current quarter of Q3 also, you will find it is at 14.7%. And so we are working hard towards achieving this margin, and we are very confident with the current order book for this year, we'll be able to maintain EBITDA of 14% to 15%. And in the coming 6 to 8 quarters, we will be trying our best to take this EBITDA margin from 14%, 15% to 15%, 16%. And with the order books that we have bagged, we are quite -- expecting that we'll be able to achieve this 15% to 16% EBITDA in this coming 6 to 8 quarters. And for FY '25, again, I think, this is too early for us to comment on this number as of now because the new orders that have come will take some time to get materialized in terms of revenue. So I think Q1 will be the right time to really talk in terms of the exact numbers where we'll be achieving for FY '25. But yes, 15% is surely what we are -- 15% plus on the higher side, we should be expecting top line.

Okay. Got it. And on the order inflow, so already received this number is INR 8,061 crores. But in terms of how much is L1. So I think Harinagar and Delhi Transport. So what's the value? How much is the L1 projects?

So we are L1 in projects worth around INR 3,024 crores, wherein there are 2 projects of Harinagar building projects for NBCC. There is a coastal road project that we are L1 into, the Mumbai coastal road from Versova to Dahisar, which is from BMC. And the other coastal road project that we have bagged is from CIDCO, which is for the Navi Mumbai side coastal area. So all these 4 projects put together would be around INR 3,024 crores, where we are L1 and we expect a substantial order out of this to be converted into the order book within this quarter itself.

Okay. So CIDCO value is how much?

INR 915 crores.

INR 915 crores for CIDCO and Harinagar is INR 270 crores and Delhi Transport -- sorry, sir.

Harinagar is like, there are 2 projects. Both the projects put together is around INR 830 crores plus GST -- without GST, yes.

Okay, INR 830 crores. And then Delhi Transport that is already converted into LOA?

No, this is L1 position, Shravan.

That is the...

Okay. So now how much more we can look at in terms of bagging in next 2 months and how much value of projects that we have already bidded where the bid is yet to open and how much are we planning to bid?

We have already bidded for projects worth around INR 3,100 crores in different parts of the country. So that are there. And within these 2 months, we expect further around -- projects of around INR 5,000 crores to INR 10,000 crores in these 2 to 3 months is what we are expecting. So these projects will be depending upon when is the final date of submission, but there are some MSRDC jobs, some BMC jobs and other jobs that we are in the process of bidding.

Okay. Okay. Got it. Now a couple of balance sheet items, if you can help me. So for inventory, absolute inventory, trade receivables, trade payable, mobilization advance, retention money and unbilled revenue.

Inventory, Shravan, is almost INR 998 crores both put together, raw material and WIP. You can get -- you can hear me, Shravan?

Yes, yes, INR 998 crores. So in September, it was INR 367 crores. So against that, what's the number of inventory?

I told you, stores is almost INR 447 crores and work in progress which we call unearned revenue also that is around INR 550 crores. So this put together is INR 998 crores, trade receivables is INR 1,200 crores or so.

Trade payable?

INR 500 crores of trade payable. And you talked about mobilization advance, I believe, so INR 380 crores or so.

Okay. And retention money?

Retention money on the receivable side is INR 219 crores.

Okay. And in terms of CapEx, till date how much we have done and how much more we are looking at and for FY '25 GMLR now if anything has been kind of finalized, so how much we can do? Last time you said INR 350, INR 400-odd crores can be done for FY '25?

For GMLR, basically this CapEx is not yet finalized the order, but the CapEx would happen in 1 to 2 years' time spread around -- to INR 400 crores.

Okay. In 9 months how much we have done and how much is left for the fourth quarter?

[ INR 33 crores ] is what we have done in 9 months and INR 11 crores in Q3.

Okay. So in the fourth quarter, how much more we will be doing?

We have given guidance of INR 150 crores, Shravan, for FY '24 for the fourth quarter -- till the fourth quarter. But I think, it will be slightly reduced. So let's see, how much -- so maybe something will spill over to the next year.

The next question is from the line of Parikshit Kandpal from HDFC Securities.

So my first question is on the total bid pipeline so over the next 6 months. So we are entering an election season. So how do you see the bid pipeline, total profit pipeline?

So we're looking to a bid pipeline of around INR 30 crores, INR 35 crores -- INR 30,000 crores, INR 35,000 crores in coming 6 to 9 months.

And what would be the guidance like for this year, sir now, any revised guidance for the order inflow for FY '24? And how much you're expecting growth on that in FY '25?

So yes, we have already secured projects worth INR 8,000 crores in FY '23, '24. And like we are expecting by the year ending closing by FY '24, it should be INR 10,000 crores to INR 11,000 crores of order inflow, taking our order book to around INR 17,000 crores to INR 18,000 crores. And for the coming years, we are expecting around INR 6,000 crores to INR 7,000 crores of additional inflow on a conservative side. So let's see how it comes and what are the opportunities coming after the elections.

Okay. And then the last question, I think, in the past few quarters, we had embarked on transforming our audit processes and you had hired internal auditors, I think, Big 4. And we had started the journey of moving towards the Big 4 auditor in our company listed entity. So how is the journey where we are in the transformation now? So when do you expect any decision being taken on that?

So with auditors appointment, you must be aware that as per the rotation policy as per the Companies Act. So the existing auditor, I just checked, very soon would be completing his -- that rotation cycle. And you're right, we are already in our process to access as per the company is growing and all. So we are waiting for that rotation of the last auditor to complete, after which the Board and the management will take an appropriate call.

In fact, we have already taken Deloitte as our -- for internal auditors, for management audit. so for the transition, Parikshit, we are having that flavor and like the transition should be smooth. So that is already on both internal management reviews -- audits. It should be done soon, yes.

Okay. And just the last question, sir. Sir, how has been the payment cycle? If you can give some color on what kind of debt numbers you're looking at year-end and on the working capital side, do you see any challenges are there? Or everything is smooth now in terms of collections, payments on time?

So the debt for the year-end, should be around INR 650 crores. And the working capital cycle in fact has been reduced from 138 days to 130 days now, Parikshit. And like payments are coming smooth. The payments -- doesn't look to be any issues in any of the departments that we are working.

The next question is from the line of [ Vivek Gautam ] from [ GS Investments ].

Sir, first of all, I just wanted to know what is the impact just having state government -- same state government of double engine governments in both at center and state is having on our order book. And especially in states we are in and what about the state where the government is of different party other than BJP in center? So what is the impact it is having? And sir, second thing is about the receivable and concerns, which are there in this particular sector, on write-off, receivables, debtor days, how are we planning to tackle that, sir? And how good is this double engine government for us, sir, in our business, sir?

Well, Vivek, I think more than what we would say, what we've seen in the industry is quite obvious that all the political parties coming, they have to push the Indian infrastructure which is the main sector from where the entire focus and the vote bank comes in from. So if you look at the entire last 10 years, there has been a good growth overall in terms of infrastructure segment and the government is infusing more and more money into this sector, because that is the only sector through which the employment generation and a chain impact of giving business to the entire industries comes in from. And if you look at our order book itself and overall in terms of other competitors, then you see that the orders are going high for most of the companies. So political party is changing. I think this is my personal view that there is not going to be any impact whether BJP comes or any other government for that matter. Because everybody has to show a growth in the infrastructure segment wherein we will get a chance for the next term. And it's our -- as far as J. Kumar is concerned, we have been having decent relation with all political parties in terms of doing a good work with good speed and quality. So we don't see any reason where in the coming -- this financial year also, there will be an impact on the order books or revenues.

What about the receivable issues, debtor days and other concerns plaguing the sector of infrastructure?

Actually, I didn't get your point, like what issue are you trying to address?

Our company sector is in the infrastructure, wherein delayed payments, high debtor days, receivables, write-offs have been an issue, sir, in the past, sir.

If you talk about the government sector, Gautam, you will not find any write-off or any write-off of receivables happening or something like that. It's -- 43 years we have been working in the government sector. And there are not -- there have not been any abnormal delays in payment or any bad debt sort of situation, which has ever been seen. Sometimes it happens if there are some mediations or any sort of change of scope that happens. In that condition, there are some payments being delayed due to the finalization of rates or something like that. But otherwise, on a monthly basis, the routine billing cycle is going on and the receipt is also happening in a comfortable way.

And the consolidation in the sector is helping our company also, sir?

Yes, absolutely, absolutely.

And sir, one more thing, sir, in the past, if I go to because I recently started tracking the company, so you can pardon me for the same. In the past, there were some serious issues on the -- SEBI and other people had raised that query. So all those have been sorted out, sir? And what was the issue? And how did we sort it out, sir? So just to give a comfort on the...

Mr. Vivek, this is a very old issue of 2015, '16, where all this BMC black listing or of the SEBI's misunderstandings whatever were there. Those all are well sorted and the black listing has been completed in 2019, and we have bagged orders from the same department of around more than INR 6,000 crores, INR 7,000 crores. So there is no reason of being worried about the BMC issue because it's a well -- it's deep into the grave, and the problems have well been sorted. There were issues which has already been sorted. And SEBI also, there is no issue, and it has been already closed from all the ends.

Excellent, sir. And if you can just highlight our -- some USP of our company. So for example, the experience and the infrastructure we have for the tunnel boring machine, I believe, others are not having. If you can just highlight the differentiating factor and the USP. And in the Delhi region where I say, I believe the project execution work has been done at a very good pace and is it true that Dwarka Expressway what we had taken over from a big competition and still we have been able to execute it on time, sir?

Yes, Mr. Vivek. So what you're rightly saying, J. Kumar was in a very niche area. We don't do normal conventional roadwork. So we are only into structures and complicated projects, very prestigious projects. If you see all our projects, whether it's the Dwarka Expressway, whether it's like it's one of its kind of projects wherein one civil engineers will see all sort of structures in one particular project. So we believe in latest technology, novel ideas, first-of-its-kind work. We are doing the first ever shallow tunnel of 3.5 kilometer in the Dwarka Expressway Delhi. So like this GMLR project of Mumbai is the first biggest ever tunnel boring machine in India, which we bought like 14.5 meter [ diameter ]. so this is again with J. Kumar. We have been doing like these metro stations, which was first done by us with complete precast technology. Again, this was repeated by other peer competitors and departments. Chennai project is like again a 20-kilometer elevated double-decker flyover elevated corridor along the Cooum river. We believe in doing all these complicated and technically challenging projects. So like this is what -- this is what you're asking, right?

And also we would like to mention that for tunneling, we are among the only 2 companies in India who has a huge fleet of tunnel boring machines. And J. Kumar is one of the only companies, I would say, who's doing this the smallest diameter of tunnel boring machine jobs in India to the largest diameter of tunnel ever been constructed in India of 14.5 meters. Even the coastal road project, which is already the tunnel work is executed and the other tunnel works, which are going on pan-India, including Mumbai or Thane, Borivali or Orange Gate or any other project at around 10 to 11 meters. And this is a 14.5-meter huge diameter tunnel, which has never been ever constructed in India, and we have taken up this job. So we've -- as Mr. Kamal has already mentioned, we take up only niche complicated jobs wherein we are able to do these jobs in a much better way and make good EBITDA margins of what we have been doing.

The next question is from the line of Mohit Kumar from ICICI Securities.

Yes. So my first question is on the bid pipeline. You said that you're looking at INR 30,000 crore, INR 35,000 crore worth of projects. Is it possible to give some granular details about this bid pipeline segment-wise, which are orders I think, which is sizeable, which you think it will get closed? Because we understand that given the election, most of the companies are saying that there's a delay in the close of work, there's a delay in finalization and this delay can sustain for the next 8 to 9 months.

So as rightly told by you, Mr. Mohit, because of the election, there's 2 months that is April and May -- March and April maybe cooling period, wherein they cannot award any new contracts or they cannot come out with any new contracts. But of course, the project which has been in pipeline and the process will go on. That is one. So what we have been seeing in the coming 9 months, we'll be bidding for around INR 30,000 crores, INR 35,000 crores of projects. So like that includes a lot of verticals, whether it's metros, elevated corridors, tunnels, buildings. So MMR region itself has a lot of projects coming up, my dear. The metro itself is like MMR is coming up with new metro lines, Agra is coming up with new metro lines, Delhi Metro is coming up with new metro lines. The bigger ones only I'm talking. And Mumbai MMR region, Pune Metro is coming, Nagpur -- Nagpur is coming and MMR, I mean, you must be aware of this multimodal corridor, that is from Virar to Alibaug, there's Pune ring road, these projects worth are around like INR 30,000 crores, this itself. So we have already been qualified in these and the bidding will be started. So this will be the bigger one. We will be also quoting for some elevated stretches in Mumbai of BMC and MMRDA. Also, we'll be quoting for some tunnel project of MoRTH and [ MSRDL ], which are in pipeline. So -- and there are some building projects of like railway stations and hospital buildings. So these are the projects what we are intending to bid in the coming 9 months, Mr. Mohit.

Sir, is there's a pipeline of railway station development? And are we bidding for it?

Sorry. Can you come back?

Is there a significant pipeline of railway station redevelopment?

Yes. So Delhi Railway...

And are we bidding for it, yes?

Yes, Delhi, we are trying. There are some qualification issues, but we are trying for that, Mr. Mohit.

One last question on the CapEx side. I think you mentioned, just I'm clarifying this, INR 150 crores this year, what is the number next year, sir, INR 200 crore, is the right number?

CapEx.

Yes. CapEx, yes.

We were looking for around in coming like an additional -- apart from our routine maintenance CapEx of INR 150 crores, we are looking for around INR 250 crores to INR 400 crores in coming 2 years. So next year, may see around INR 250 crores of CapEx, you're right.

And that is mainly because of the GMLR project, where we have to purchase the tunnel boring machines. So that's going to again add a -- because that's a unique type of machine, and we have to buy for this specific project.

The next question is from the line of Vasudev from Nuvama.

Yes. So I was saying that just two questions on my side. Firstly, what is the status of the appointed date for our Chennai NHAI order that we got?

So it's 23rd November '23.

So we received all the 4 orders?

Sorry.

All the 4 projects on the same day, you're right. All the 4 packages on the same day.

And sir, just out of the total order book, what is our current order book under execution?

For total -- your -- company level, you're saying, right?

I would say this coastal road and GMLR where the work has been recently awarded. Chennai also we have started the work. I would say out of the 17,000 less -- yes, so around 17. So 17 minus, I would say around 7. So around -- this Chennai has also started. So GMLR will only start -- the preparatory work has started, but all other works, so around INR 13,000 crores.

All INR 16,744 crores projects have started. Of course, as what Mr. Nalin is saying, some of the new projects of GMLR and CIDCO Coastal the projects have started. So the revenue generation will be after 2, 3 months, but the projects are all started. All the projects what we are talking about started, INR 16,744 crores.

The next question is from the line of Rehan from Equitree.

Just a quick question on Page 13 of the presentation. I can see that the segment-wise breakup metro cumulatively is 29%. It's slightly lower than our average because we are stronger in the metro segment. Any reason for the same? Or do you see any projects coming up or orders that are coming up, which will take this number to higher of the entire pie?

So Mr. Rehan, it's about -- it's not only about metro, see, it's all about the opportunity and our spend in the particular sector. So as we told, we work in a very niche area where there is some engineering required. So when we got this opportunity of 2 or 3 bigger projects of like the INR 3,700 crores of elevated corridor of double decker at Chennai and this biggest tunnel project of India, that is GMLR project, so we grabbed this opportunity. So it's not -- whenever we get this good opportunity, the mix will keep changing. Metro of course we are strong. Metro flyovers are similarly -- similar -- big similar projects in terms of equipments and technology. So these are similar sectors.

Okay. Second question would be the -- on the part of the execution, how does the company of such a high caliber scale up the execution? Like we see a robust order book and we see the order inflows repeatedly increasing. So can -- how do we see faster execution? What are the bottlenecks that J. Kumar would have to clear for faster execution?

I think, Mr. Rehan, we are already on a very fast track execution. We are urban contractors. If you feel like we are not working much in greenfield. So in urban contractors, we do quantify this time lines before bidding only and well versed with this. And that's why if you see our margins are better because we utilize our resources much better as compared to the peers. And like the pace of execution is also going very well and very fast paced, according to us, Mr. Rehan.

And all this work that we have taken up, the new projects also, like the Dwarka project has almost been completed. It's just some handing over things are going on. So for our Chennai project also, we have already mobilized the same team, has started mobilizing and executing the work at Chennai. For GMLR also, which is the same tunneling job like an underground metro. At J. Kumar, we have been quite experienced contractors into this metro sector for more than -- around 12 years now. So all these works are the routine work that we have been doing at a bigger scale. So and the -- all the key position -- team has already been appointed on these projects and has taken up well properly with setting up of casting yards and all activities have started. So there is no reason why we should be concerned about the progress or about the scaling up of this execution. We are quite confident to take it up very comfortably.

Got it. And out of this current order book, as someone asked in the queue earlier as well that the executable orders, like out of the entire order book of INR 16,000 crore, close to INR 17,000-odd crores, there are no blocks in any of them? Like have we started foundation or any like basic and all the basic structure in all of the projects? Is there some bottlenecks, some premissions left in part of the order book?

All are into execution. So there is no bottleneck. All projects at all. So 1 project of coastal CIDCO was waiting for the permission for like 6 to 8 months before, but even that was achieved 2 weeks back. So even that has started. All the preparatory works of the new projects have started and where the project was like 4, 5 months back, the foundation has also started.

The next question is from the line of Jinesh from Niveshaay.

Is my voice audible?

Yes, sir. You're audible.

So I just wanted to get a view on competitive scenario in underground and elevated metro projects. This is my first question.

Yes, what exactly do you want?

So Jinesh, in terms of competition, I would say competition is there everywhere. And no sector is such that there is no competition, I would say. But when it comes to larger projects, I think, the area of competition into the larger projects is competitively less, I would say, or more reasonable, I would say. Because the qualification to, I would say, J. Kumar and L&T, we are among the 2 companies who have such larger certificates in single ticket size of having previously executed work where the amount of contractors bidding for such type of work is quite rational bidders and not erratic bidding that you see or unreasonable bidding. So competition is there, but metro sector and the areas where J. Kumar's expertise into. Like I would say, the elevated corridors, expressways or where more structures are involved, tunneling is involved, these areas are expertise areas of J. Kumar. So there, there is a fair competition, I would say, and not unreasonable as compared to the road sectors that you can see.

Correct. And could you please elaborate on the margin difference in underground as well as elevated metro projects?

So, well, if you see Mr. Jinesh, at J. Kumar, we work with an average EBITDA margin of around 14%, 15%, which we are further trying to scale up. And that is a margin that's an average margin that we make on this overall work. So some projects would also give you 18%, some would give you 12%. So as a specific, we cannot say that what is the difference between underground and elevated. On an average, we can say around 14% to 15% is the bidding range through which we bid for, and that's how we have been able to sustain. And again, there are economy of scale, better -- optimum utilization of your resources. So all this put together is what we make this margin of 14%, 15%.

It is also about like what opportunity is there to optimize the designs and do some value additions. So that may be also in underground or maybe also in elevated corridors, Mr. Jinesh.

Okay. And the last question, how do you see this metro division going ahead in your order book in a couple of years further?

So there is a lot of opportunities all across the country. Even if you talk about Bombay, Bombay is coming up with new metro lines, metro line 10, 11, 12. Pune Metro is further growing up for the next phases. One of the tenders we will be submitting in a week's time, actually, the submission was tomorrow, but it's been shifted by around a week. Again, we are bidding for Bhopal, Agra, Patna. So metro work you can see all across, and I think for another 10 years down the line, this sector is going to keep booming because it's not restricted to Tier 1 or Tier 2 cities anymore. And again, for these opportunities, it is at a national level, there are so much of infrastructure works all over that the percentage that you see that has been dropped at 29% is because of the other bigger ticket size order books that we have bagged. So that doesn't mean that the metro sector is going down or something. It's basically the type of work that we have bagged like this tunneling job of GMLR and the Chennai elevated corridor, the ticket sizes are so big that, that constitute -- these 2 works constitute around INR 7,000 crores. So that's how the percentage metric seems to be that metro is going down, but that's not so.