Kore Digital Limited (KDL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q4 and FY '24 Earnings Conference Call of Kore Digital Limited, organized by Kirin Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ganesh Nalawade from Kirin Advisors. Thank you, and over to you, sir.

Thank you. On behalf of Kirin Advisors, I welcome you all to the conference call of Kore Digital Limited. From management side, we have Mr. Ravindra Doshi, sir, Managing Director; and [ Mr. Ashutosh Biyani ]. Now I hand over the call to Mr. Ravindra Doshi. Over to you, sir.

Good afternoon, esteemed participants. Welcome, everyone, to conference call of Kore Digital Limited. We are delighted to have you all here as we reflect on our outstanding performance throughout quarter 4 of financial year '24 and entire financial -- fiscal year. Before we dive into the detailed financial analysis, I would like to offer a brief overview of our company and the remarkable journey we have embarked upon. Since our inception in 2009, Kore Digital Limited has been leading the charge in telecommunication and infrastructure department, offering state-of-the-art solutions, services, licensed by Department of Telecommunications. Our unwavering commitment to meeting the communication needs of Maharashtra and around. Through the deployment of number of cell sites, establishment of robust optic fiber network, cable infrastructure backbone, we have strived to ensure seamless connectivity across the region. Participating with the esteemed clients such as Vodafone, Bharati, Reliance, Tata Teleservices, BSNL and we have been instrumental in shaping the telecommunication landscape of Maharashtra. Together, we have pioneered innovative solution and technologies that have not only enhanced connectivity, but also improved the lives of millions of people in the region, especially during the COVID. As we continue our journey, our focus remains on innovation, reliability and customer satisfaction. We are committed to pushing the boundaries of what possible -- whatever is possible in telecom -- telecommunication infrastructure, and we look forward to shaping the future of communications in Maharashtra. I would like to share operational performance during quarter 4 financial year '24. Firstly, I'm delighted to announce that Kore Digital has been awarded substantial work orders and extension value INR 21 crores by Navayuga Engineering Limited. We anticipate completing this work by June '24. Furthermore, our collaborative efforts with OSR Teleservices have been resulted in securing a prestigious contract to lay optic fiber cable ducts. This is concession, not contract, and cable ducts and other telecom infrastructure along with Mumbai-Nagpur Samruddhi Highway. This project not only highlights our expertise in infrastructure development, but also demonstrate our ability to secure significant concessional contracts through strategic partnerships. The operational highlights underscore our commitment to excellence, innovation and strategic growth initiatives. I'm confident that through our continued dedication and collaborative efforts, Kore Digital will continue to thrive and make significant contributions to telecommunication and infrastructure landscape. Kore Digital is poised for significant expansion and development in coming years with an impressive pipeline of projects totaling INR 400 crores for '24-'25, with a strategic focus on enhancing connectivity through fiber optic along expressway and communication corridors alongside specialized infrastructure construction. Kore Digital Limited is set to play a crucial role in driving innovation and progress. Forthcoming projects, particularly concerned to Samruddhi and Mumbai Metro lines underscore KDL's, Kore Digital Limited's commitment to shaping the future of transportation and communication in India. Anticipating even better growth ahead, Kore Digital Limited envisions an estimated INR 1,000 crores from similar ventures in 2026. This makes an exciting chapter for Kore Digital Limited as it continues to spearhead a transformative initiative and infrastructure sector. Commenting on financial performance, quarter 4 financial year '24. We achieved remarkable financial milestones with our total income soaring to INR 36.11 crores, making an outstanding year-on-year growth of 289.66%. Our robust performance continued with EBITDA reaching INR 7.28 crores, showcasing substantial year-on-year growth of 254.47%, an impressive EBITDA margin of 20.16%. Additionally, our profit after tax stood at INR 4.49 crores, demonstrating significant year-on-year growth of 253.37% with PAT margin of 12.43%. Looking at the broader picture. Financial year '24 was an year of exceptional growth for us, evidenced by our total income attending to milestone of INR 125.08 crores, reflecting an extraordinary year-on-year growth of 393.93%. Our financial year '24 EBITDA surged to INR 17.07 crores, showcasing notable year-on-year growth of 259.84% alongside a commendable EBITDA margin of 16.25%. Moreover, financial year '24 profit after tax witnessed a substantial increase to INR 11.49 crores, representing remarkable year-on-year growth of 256.72% with a profit after tax margin of 10.94%. These outstanding financial results underscore Kore Digital's robust growth trajectory underlined by strategic initiatives, operational excellence and unwavering commitment to customer satisfaction. The rising communication needs and our strategic positioning will continue to lead us to achieve new heights and enhance our market share. Before we dwell into question-and-answer session, I want to express my sincere gratitude to all stakeholders for being integral part of our growth journey. Your support and involvement have played a crucial role in our success, and we genuinely appreciate your valuable contribution. With this, I would like to open the floor for questions and answers. Thank you once again for your presence and continued support.

[Operator Instructions] We have our first question from the line of Krishna Kumar, a shareholder.

Can you hear me, sir?

Yes.

Sir, my question is related to regarding the prestigious award, which we got from Sukanya Samriddhi scheme. So may I know when the work is going to start? Is there any progress in that? I just wanted to know about that?

See, unfortunately, the moment we got the award, after 3 or 4 days, this election code of conduct started. So the board official who is having the signing authority has been deputed to election duty, expected to come back and join on 21st. So you have fairly within 21st to 25th, we'll get all the papers signed and we'll start the work. We need 3 to 4 days for the officer to come back because the MSRDC works on a board structure. So all 4 board members, IAS officers are required for this type of big approvals.

Okay, sir. And related to the same question. So there is some misconception in the media. Some people are telling, even if you start this project work, the revenue will be generated only after 2 years. Is that right?

No. I have already explained this point earlier also. Okay. I'll do it once again. See, this is milestone-based. So it is not that we have to complete the entire 700 kilometers into 2. Once we complete 100, we get our revenue starting. Every 100 kilometers we are handing over to the telecom company and we are getting paid. So at the end of 2 years, our regular revenue should start. Construction will be completed in 2 years and then regular revenue will start here. We will get revenue by milestones we complete.

Okay. So you mean to say, this 2024 also we can generate some revenue from this project?

Yes, some. Not very big. But then at least, we will be able to cover our costs.

Okay, sir. Other than that, sir, may I know the present order book other than this Sukanya-Samriddhi package?

No, no, no. I think I need to educate our -- all investors in detail. This is not order book. This is project in hand, the concession. It is a different model. There's no general order book. Yes, order book we have is Navayuga, and that will be also a big chunk.

Yes. Actually, that was my question, sir. Other than this concession part, what is our current order book like Navayuga? And we also did joint venture with RailTel?

RailTel until now, we have not awarded any tender because we have to participate and then there is a big competition. So sometimes we get, sometimes we don't get. So RailTel, there is one big tender coming. It is under preparation. So it will be another 2 months or so. Some revenue is possible from there also. Some revenue means INR 20 crores, INR 30 crores. But see, these are all -- sorry, one moment, Krishna Kumar. We deal we deal mostly with the government department. So those tenders and things take some time. It is not -- nothing happens instantly, and you might be aware of that a bit.

Yes, sir. That's correct. And may I know, sir, the ballpark number, like how much revenue can be generated with this present prestigious award, the concession award?

Sir, I have already given -- I have issued the guidance. Please read that. And whatever we are talking, it is already there in it.

Okay, okay. We just get the information from you directly.

We have our next question from the line of Yashwanti from Kojin.

Congratulations for the good set of numbers. Sir, we have seen the EBITDA margin of around 20% in Q4 and 16% for the overall FY '24. So just wanted to understand, with this kind of a project in hand and we are progressing with very good work in a couple of telecommunication infrastructure. So what kind of margin guidance or what kind of a margin sustainability you would want to guide us?

I think my chartered accountant will answer this. Please connect Ashutoshji. Ganesh, please connect Ashutoshji.

Sir, Ashutosh sir is connected with us.

Ashutoshji, please answer the question.

Sir, meanwhile Ashutoshji takes my question, can I go for the next one, which you can answer.

Yes, please go ahead.

Yes. So as you said that we mainly cater to the government and that the process happens with the tendering. So just wanted to understand what kind of a qualification, the technical qualification we need to maintain or we need to satisfy to bid for the tender? And what is the minimum size of a tender, which we can, in a sole capacity, we can apply to?

See, normally, we can go to tenders 3x of our turnover. So it is INR 105 crores, so it can go up to INR 300 crores. And when we don't, even if we are not qualifying, we have the partners like RailTel. So there is no size limitation. We generally see what is our capacity, and accordingly, we do.

Yes. Because we want to understand in like sole capacity, how much you can package?

I can now do up to INR 300 crores.

So that is normally a qualification, like always 3x of our...

Yes. The qualification norms differs organization to organization. This is the normal standard.

Okay, okay. And is Ashutoshji available?

Yes, I'm available. I am.

She's asking about margin, and I'm not sure which margin she is asking. Please answer that.

Actually, she is asking for last year margin. Last year, turnover is INR 21.27 crores, our profit is INR 4.31 crores. So that our margin is 20%. This year, our turnover is INR 105.08 crores, and our margin is INR 16.30 crores. So margin is 15%. So margin depends on project to project, Navayuga project as well as other projects.

Yes, my question was that in the last quarter of the FY '24, we reported the margin of around 20%. For the full year, we reported the margin of around 16%. So on FY '25 or FY '26, I just wanted to understand when we are progressing on the large size of the orders, what kind of margin we can expect from the company? Will we be able to maintain 16% or we will be able to maintain 20% or there is an upward bias? I just want to understand margin guidance from you.

We will be able to attain what we have attained last year and we will definitely improve. But you have to understand, this is basically infrastructure work. And there are times when we are not able to complete it in time. And although it does not -- I mean, this work is not bound in the quarterly cycles, which normally exchanges and the stock market is following. Yes, I'll explain further. Normally, first quarter is good. Second quarter, there is a monsoon season, and it is a complete dip because no infrastructure work can take place. Then again, third quarter and fourth quarter. So when you average out 3 quarters, first 3 quarters and fourth quarter, so there is always fluctuation in revenue and performance.

Sir, I just want it on a yearly basis only, so I was expecting...

Yearly is fine. Yearly, whatever.

The 16% plus, we can always expect from the company?

Yes. We'll try to improve it. But infrastructure, you never know.

At least you will be able to maintain it, right?

Yes.

Yes. Sir, my third book-keeping question, what I wanted to understand is that we have gone through your balance sheet, and we have seen that there's a reduction in the long term as well as the short term. But if you see your interest expenses, which has been reported for FY '24, there is an increase. So just wanted to understand what has -- when you have reduced our debt, why our interest rate is still high or this debt repayment has happened in the last quarter of the current -- reported year?

Ashutoshji?

Yes. So interest is -- cost is increased due to -- for full year, we have paid interest. In the last month in March, we completed our preferential. And from preferential, we have surplus money at the time. So we have paid our loan amount. So that reason that there is short-term borrowing, long term borrowing is showing very reducing, but our net rate is -- interest amount is same. In next quarter and next year, our interest portion, I think, very low. It depends on project you got and so we have to take loans. Yes, we have external funding. At time maybe finance cost may come, but there's the reason interest could same for financial year '24. But loan amount is very reduced compared to last year.

Sir, I'll ask one more question. Just wanted to understand, that in June, we came out with the IPO, and IPO issued price was around INR 190. The last month of the current -- the reported financial year, that is in March '24, you have allotted preferential -- equity shares on a preferential basis as well as the warrant and the preferential basis. While the price is around -- it's quite high, INR 795, around INR 790. So what has substantially -- increased so substantially from the issue price of INR 190 we are making a second offer at such a high price?

This price is decided by NSE, that there are rules to finalize preferential price which we don't do that, right, Ashutoshji?

The price is based on valuation report.

That is done by our merchant banker. Who does that?

Sir, that is what I want to understand, what the valuation has impacted from the issue price of INR 190. Now we are hearing the another offers at around INR 790?

Who will answer this? Ashutoshji? No, either Rajan is to answer this or this one, our merchant banker.

There is rule, independent valuer take valuation in last...

Because I was told that there is a rule.

Sir, no problem sir. I will take this question on one-on-one basis. I will connect to you separately.

Okay. I will rather connect you to the right person.

No problem, sir. I will connect to you on a one-on-one basis.

Yes. See, what my adviser is telling is, it is done by the exchange NSE, exchange relation. So I'll keep the supporting ready.

We have our next question from the line of [ Nitin Shetty from Equirus. ] Mr. Nitin, are you there? As we are unable to get to Mr. Nitin, we will move on to the next participant. We have our next question from the line of Sandeep Singh, a shareholder.

First of all, congratulations for very good year. I have 3 questions. We start with, what will be expected breakup of EPC work and telecom rental in the guidance which you are providing? So you, at the start of the call, you said INR 400 crores. So what is the likely breakup of assuming we achieve that?

So as of now, our projection is INR 250 crores from EPC, INR 130 crores from the project, the Samruddhi project and INR 20 crores from our lease revenue because we construct and lease it out. So we already have optic fiber lines and things. So that generates INR 20 crores for this year.

That's wonderful, sir. Second question is, in coming years, revival of Vodafone or potentially BSNL help getting better rental yield on Mumbai-Nagpur Expressway?

Yes, sir. Yes, sir. Yes, sir. We will be doing much better.

Does Kore have existing relationships with Vodafone or BSNL?

All, we have already explored and we were -- earlier, we were told that the funds are not there. Now funds are there. So deployment will be there on Mumbai Nagpur. So our margin will increase. Number of lines, which we are putting, we will be able to rent out more. So we will make more money. And this particular -- this revenue will continue for first 15 years and after 10 years extension. So 25 years guaranteed revenues is there.

Good to know, sir. And then one more small point. Shareholding pattern, which we call also call SHP, is not updated as of March '24. It looks like a slippage from CS or Statutory Auditor. Just advise them to update it like on a timely basis. So that's a useful information for all investors.

Yes, sir. I have noted, I will see that it is complied with.

Okay. And then one follow-up question, which I think was also the query from the previous caller is that some of your balance sheet component, what you have updated on exchange is probably not, I will say, coherent or complete. So my request is without extending too much discussion on this forum is that request your CA to have a hard look at the different section of balance sheet and see whether those are adequately updated, et cetera.

So our CA is on, available in this conference. I'll also see that he follows it.

Sure. Perfect. And one last question, sir. You have already followed a very good practice of quarterly results, very good to see that you're coming on con-call. Even if you are not coming regularly on con-call, some kind of a one pager breakup of 2, 3 things will really help your investors. One, typically like what is the seasonality of your revenue because if we talk within the investor community about Kore Digital, I mean, you understand, it's a very small community and everyone keeps on talking about certain stocks. There is a lot of confusion, a range of expectations of what typically is the breakup of revenue across 4 quarters, that's one. Second is also on the margin profile. So I understand why no one can give a guidance in this kind of business where raw material costs can go up, execution cycles can change, but it's still within 3 components like you gave the revenue breakup. If you can maybe, next quarter, need not to be right now, as a company, if you can give some kind of a guidance, what is the typical margin profile for one EPC; second, rental; and third, you talked about revenue from that particular concession agreement, right? That will help educate investors to do some kind of a margin profile expectations also. And that will be very helpful also. So that's it from my side.

Sandeepji, we are waiting for go ahead from of MSRDC because some offices are -- signing authorities are not present, and they'll be joining only after 28th. So project side this quarter revenue, I expect nil, this quarter, current quarter. Because we'll start work, but then finishing 100 kilometers, it will take time and then monsoon will come in. So this quarter, most of the income will be from EPC because that work is going on full scale. And lease revenue comes in March only. Lease is always because all agreements are March to March with all telecom companies. So you will always see that Kore Digital is having very good results in the last quarter because all lease revenue comes. So that is the very fat margin is there in it. Profit margin is very high in lease, others are having a different levels.

Okay. Understood the point, sir. I wasn't necessarily focusing on the next 2 quarters, but it's good to know, sir.

We have our next question from the line of Manoj Kulchandani, a shareholder.

A big congratulations to you for the very good set of numbers. I think most of the questions have already been asked by many people and you also answered. I had the query about how the margin of the fourth quarter is actually high as compared to the top line. But you mentioned that the lease revenues coming in the last quarter. So you mean to say, the whole income from the lease comes only in March or you get paid every quarter as well, some amount? Or it's only in March, the full amount for the whole year?

No, no. So very small stream of lease revenue comes on quarterly basis, very small. And the major chunk comes in the March because all our agreements are March to March. Telecom companies are also happy to make payment in March, I don't why.

Also, I've seen the results. There is a jump in the receivables reported. So is it because of a March effect?

No, no, no. What has happened is because of this election announcement and code of conduct, some of our small, small, small permissions are pending. So whatever is built, but still minor clearances and a sign off is pending. That is why it is pending.

Understood. Also, is this the reason for the cash flow being negative?

So this -- I have INR 40 crores balance.

No, I'm just understanding, I'm just asking the question, which I see from your balance sheet. Maybe you can answer them better. I mean, rather than people speculating on social media, if you can come in with your CA online and they ask those questions out loud, it's better.

I'll ask him. Mr. Ganesh? Mr. Ganesh?

Yes, sir?

Ashutoshji?

Yes, that's the same question. Cash flow, the operating cash flow is negative INR 6.83 crores. And for investing, we have just purchase of INR 7.52 crores. And our financing activity cash flow is positive INR 156 crores. And cash is available, INR 40 crores. And operating cash flow is negative to high, investing purchase stock and also trade receivable, which has explained. And we have advances given for purchase of goods in advances. So due to this negative operating activity and all amount is recoverable in next quarter, so positive -- this expects positively.

Yes, most of it is already recovered, [ 27 and 15 ] and this one.

I just wanted to ask whether it will turn positive in the next quarter.

Yes, it will be positive.

All right. Also, sir, we have seen a 4x jump in top line in profits. I think so nearly 5x also. So will we see a similar jump going ahead? Or will we expect a little lower growth?

Sir, it is not possible to grow at this speed. It will be 2x to 3x of current, not 5x.

All right. And we just hope to see the Bhumi Poojan takes off of the Samruddhi work as soon as possible.

Sir, I am also waiting for it because it will be mostly next week sometime.

We have our next question from the line of Jay Trivedi, an individual investor.

You have really nice numbers, so many congratulations for that. I have a question regarding -- you just mentioned about the lease revenue coming up in the last quarter. So I just wanted to ask your CA that whether it can be accrued over 4 quarters or not?

No, no, it is not like that. It is not like that. Let me explain. We normally have, whenever we are leasing our lines, we have agreements for 6 years, 12 years, 15 years like that, and revenue comes every 3 years. Billing is done every 3 years. But then we have multiple lines. So this year, this INR 20 crores -- about INR 20 crores is coming due in March. It is not quarterly revenue. It is 3 years. We get 3 years rent in advance every time.

Okay, okay. The next question is regarding the loans and advances. Is it because you have paid advance to your vendors to procure material?

No, no. This is a work in progress. Right now, we have material and what we are doing is the EPC contract, which is material is issued by the principal vendor. So we -- this is purely labor work and then it is already milestone achieved by our vendors. So we release some payment, but final measurements and other certification could not be done in March. That is why it is showing advance. It is already completed, billing is done. So this quarter, you will not see any of the existing one, and there is no loan. It is only advances to our vendors.

All right. And one last question regarding the next quarter. Basically, you said that the work could not be started.

No, no, no. Sir, we are doing multiple. We are doing multiple. This is -- we are talking about a specific project, which is supposed to be started, but because of clearances and permissions, it is held up due to code of conduct because no board meeting can take place during this time. So once board meeting takes place, immediately, we'll start work. We have paid all the fees and everything. Bank guarantees given, all formalities are completed from our side. We are just waiting for officer to join and sign.

Yes, sir, I understand. So on the same line, I just wanted to ask, like you have other streams of revenue apart from that main project. So can we expect slightly lower numbers for revenue next quarter or it will keep on continuing with the overall expectation of INR 250 crores?

Actually, what has happened, some revenue and billing from March has overflown to April. So this time also, you can expect good one. I am expecting a good quarter.

We have our next question from the line of Preet Shah, an individual investor.

Am I audible, sir?

Yes, you are audible.

My question was that, could you give the revenue breakup quarterly-wise that what could be achieved from that? For example, in Q1, in Q2 and Q3, not number terms, but what could we then achieve? Just for an example, that in Q1 it will be high, in Q2 it will be low, in Q3 it will be high.