Mold-Tek Technologies Limited (MOLDTECH.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Mold-Tek Technologies Limited Earnings Conference Call hosted by Emkay Global Financial Services Limited. [Operator Instructions] Please note this conference is being recorded. I now hand the conference over to sir, Abhishek Taparia, from Emkay Global Financial Services Limited. Thank you, and over to you, sir.

Good evening, everyone. I would like to welcome the management and thank them for this opportunity. We have with us today Mr. Lakshmana Janumahanti, Chairman and Managing Director; and Mr. Sarves, Chief Financial Officer. I shall now hand over the call to the management for the opening remarks. Over to you, gentlemen.

Yes. Good afternoon, everyone. On behalf of Mold-Tek Technologies Limited I extend a warm welcome to all the participants joining our earnings call today. I'm Sarves, CFO of Mold-Tek, and I'm pleased to present the financial performance of the company for the quarter and half year ended. Yes, to start with revenue, the sales have gone up by 20.85% from INR 33.29 crores to INR 40.23 crores, a significant increase by 20%. And the EBITDA was shot up by 144.5% from INR 2.44 crores to INR 5.96 crores and the profit after tax was shot up by 2% from INR 0.68 crores to INR 3.4 crores and we are able to perform significantly like we are able to maintain our traction compared to the Q1 -- in Q2. However, compared to the earlier year '24, '25, we are at a little lower side in the U.S. markets. And over to the operator.

Thank you very much, sir.

And over to chairman, may be you can stop, over to chairman.

Yes. In addition to improving performance in the Q2 compared to Q1, which is very heartening because the situation in the U.S. construction industry in general has been dampened with the new tariff situation and a lot of confusion among the -- about the future. But now things are getting clarified and that is reflecting in our considerable growth in Q2 performance. Now I want to add an important step that has taken place in the history of Mold-Tek, that is the acquisition of Beryl Project Engineering Company, a 40-member American company based in Tampa, Florida. This is promoted by professional engineer, Mr. Richard Leon Cannyn, who is young, around 45-year-old professional engineer who has established this company. And now currently, it has revenues of about $5.6 million in the last financial year with a profit close to $0.5 million. And we have paid a purchase consideration of 2.7 million plus other working capital adjustments well within the 3 million mark. So this is a very good purchase for Mold-Tek because it adds residential activities. Currently, Mold-Tek is only in mainly detailing of industrial and commercial buildings, that too with steel as a basic raw material. But now these are residential buildings wherein Beryl provides right from permits, approvals, inspections and additions, if any, which any decisions takes place in the 2 counties in Florida, and they will provide even on-site inspection support. So their 40-member team is well versed in these activities and their revenues are just coming from 2 counties. As you all know, U.S.A. has more than 3,000 counties. So the expansionability of the operations and widening the horizon of our revenues can be very considerably -- significantly big. And adding Mold-Tek's backup of designing services, AutoCAD and detailing services in this domain will enhance Beryl in U.S.A. to expand to more counties and double or triple the revenues in the coming years or it can be much bigger if you can provide a sustainable business model, offering outsourcing offshore services and on-site presence. So this brings Mold-Tek into a big area of civil engineering, similar in nature, but there will be a few techniques that are different, which will be taught by the team of Beryl, which is arriving in January for a couple of months to interact with our engineers. And we are also sending a couple of our senior engineers in December, this month itself, to Beryl, Florida so that they will be catching up with the ways and means and methods followed by Beryl in executing these projects. So these residential projects will yield much better profitability once the offshore model is adopted. And Beryl is also a technological savvy company that developed AI modeled plan review and permit processing procedure by AI model, which will enable Mold-Tek team to have enough deliveries and also ensure the quality inspection is done right here in India. So this synergy is going to take Mold-Tek into a much bigger leap in civil services in U.S.A. That is a very positive note on which I wish to conclude and we'll go for question and answers. Another news is that -- another positive is the consolidation of accounts will start from November 1. So for the Q3 itself, you will be seeing a meaningful contribution from Beryl in our performance. Over to the operator for question and answers.

[Operator Instructions] The first question comes from the line of [indiscernible] Capital.

Could you give more details on your acquisition cost for Beryl? How much of -- what multiples have you paid for it and the logic behind that -- the logic behind it? And how did this acquisition really come about?

Yes. This acquisition has come out with our more than last 1 year efforts. We have been searching the service, all our team is with the various brokers around U.S., we have been trying and one of them has suggested this company and then our management in U.S. met them and that's how it started. And if you look at the purchase price, it is 0.5x the revenue, which is fairly favorable to us. And it is about 7x the EBITDA, which is also an industry standard. So that way, one more positive development is Mr. Richard Leon is also willing to invest about $5.4 million -- $540,000 that is almost close to INR 5 crores in Mold-Tek's Technologies equity to show his commitment towards staying long term with Mold-Tek and grow along with it. So the subject to statutory clearances, we will be processing an equity participation for [ Mr. Lee ] in the next few months. So that way, the pricing and the commitments of continued employment and developing the combined entity had been well in place.

Also wanted to understand a little bit more about the civil space in the U.S. Who do we really compete with? And since we are -- I mean, who are the larger players? And what's -- do we really have a right to win? Why would a prospective client choose us over another? I mean what's our -- do we have a differentiation to which we go to the client?

See, these are -- basically I'll explain. When you want to construct a house or repair a house or add additional rooms to your house, you need to go to the municipality or a county with plans and submissions with a structural engineer certifying that safety and strength of the building you are proposing. So this starts right at the beginning of the permission to start construction. So these services of Beryl will start right at the beginning, right from making a plan, interacting with the architects and then those plans are made sectionally strong enough to sustain the soil wind conditions of the location. So all these designs have to be made and submitted to the county for approval. So once the county approves at different stages of the construction, our inspection teams go and certify that the building is being constructed in line with the approved plans. So the activity goes on for almost 6 to 9 months depending upon the building progress. And if in case of commercial buildings where there could be shopping malls, small shopping malls or small office areas or schools, it could even happen for over a period of a year, 1 year. And these fees are payable by the clients to us. And Leon and his team are authorized to work in 2 or 3 counties as of now in Florida. And they can expand that because of their past 13 years of experience and proven track record. They can expand not only in Atlanta, they can expand in Georgia and several other states and counties across U.S. And Mold-Tek can support right from beginning when the plans are made and standards are mentioned, our team can learn the standards of Florida and incorporate them in the drawings and make those right from our electrical switches and their height from the ground, distance from the wall, plumbing detail, even drainage detail, all that is required for a building apart from the structural design are in the scope of Beryl. So as the scope is increasing, their ability to take -- as the team is increasing their ability to take more projects will happen. And with 13 years of track record, they will be easily able to go across further where I think there are more than 20, 25 counties. So -- and then our team in Atlanta is already in touch with some of the counties and there is good response. You may ask why they should come to us. The reasons are the retiring manpower in U.S.A. who are mainly in inspections and this kind of permit services and there's not much of replacement happening. So there is a demand which is across the board being felt in these counties. And when there is an AI-based and offshore-based model, which enable faster clearances, faster submissions, obviously, the residents who want to consult would prefer Beryl and Mold-Tek combination. You were asking about the competition. There is one company, I just missed the name. They are having multibillion turnover in these permits and residential engineering services operating across more than 30 states in U.S.A. So that is the potential for the services.

What's the name of that company, sir?

I will provide you -- Sarves did you know that when Prasad was mentioning?

I think it is USB.

Yes.

USB?

B for Bombay, USB.

Okay. Okay. And just last question, sir, just last question. I see we have done strategic partnerships with companies in providing pre-engineered buildings and robotics, Interarch and Affordable Robotic. So just wanted to understand what is our -- I mean, what are we trying to achieve with that? Are we -- what's our future road map? And does the company have a 5-year vision down the line, how big the company wants to be, what type of different segments the company wants to be in and revenue profitability?

Actually, now I'm currently in U.S.A., attended a show, DBIA show along with Interarch team. And unfortunately, the tariff confusion has stopped, has not given us the kind of push, but a lot of people are interested to have even building systems supported with Mold-Tek design being supplied directly from India. It is happening from Vietnam, Thailand, even Japan and China, many buildings in knockdown condition, buildings means these are all basically PEBs, pre-engineered metal buildings, steel buildings. So these are brought in knockdown condition in ships and directed here in U.S.A. Though that costs at least 20% to 40% cheaper than manufacturing in U.S.A. But the problem is with the tariffs coming in and lack of clarity, whether it is 25% or 50%, we are not in a position to push it. But a lot of clients, a lot of contractors and builders are showing interest. We had very meaningful meetings here in U.S.A. And I think the Interarch work also will start once the clarity comes on tariffs. Mold-Tek will provide the field for -- right from designing, detailing, stamping and monitoring of the buildings, while Interarch will be the supplier of the buildings to the builder. So we play a role of facilitating the building erection, building drawings, designs and connection work.

[Operator Instructions] The next question is from the line of Madhur Rathi from Counter Cyclical Investments.

Sir, if you could just help us understand what is the mix between the client mix in our civil engineering services currently? And sir, how do you plan to -- sir, with this Beryl acquisition, sir, you mentioned that the residential segment would add on, sir, but it seems that this segment is much smaller in contract size versus our commercial segment. So if you could just help us understand on the both fronts?

No, no, no. The residential size is much bigger than commercial and industrial because each project may be bigger in commercial projects. But what Beryl does is not small. It is huge in numbers. Maybe each project will not be running into hundreds of thousands of dollars. Each project may be $20,000 to $50,000 depending upon the scope or sometimes even $5,000 if it is a small expansion of a house. But it happens across the country by several individual house builders, not necessarily residentials, but also semi-commercial establishments like schools, hostels, motels, 3-stored up to 5-stored buildings. So there are several of [Audio Gap] while industrial and commercial are a few hundreds that will happen a year. So these can run into lakhs of buildings. So the opportunity is humongous in residential and semi-commercial buildings. You can also notice if there is one high-rise building, there will be thousands of residences and commercial establishments. That way, the services are humongous. Size of the market is much bigger.

So sir, it's basically the volume that we are going after rather than the project size. Is that understanding correct?

That is one. And another thing is with the entry into commercial side, our projects of industrial nature, permit clearances and approvals can be taken by Beryl. And wherever Beryl has acquired or got the permits and approvals for a commercial establishment in their region, Mold-Tek can provide the connection design and detailing. So there is an excellent synergy that because permits and approvals are required for residential, commercial, industrial or even high-rise buildings. So the process of approval is well known to Beryl and well established with them. So what they are now currently doing is just getting the approval and permit for a big building and letting it go to somebody else for design. They restrict themselves to residential buildings. Now with Mold-Tek coming in, we will be in a position to take over the major steel buildings' designing and detailing also. So there is a very good complementary synergy. And when we get steel structures detailing and designing, we can pitch for approval and permit process also, which Beryl team can do. So that way, we can add strength to each other.

Got it. And sir, the permission and approvals for the commercial, sir, these are not bound by counties, right? They can acquire permission and approvals in whichever state or wherever there is opportunity. Is that understanding correct? Or is it bound towards the counties that they are in there presently?

No, no. On counties have the right to give the permits and approvals. For industrial structures, they may have additional requirements of clearances from the bodies, other statutory bodies. The basic approval, plans and layout has to be in the -- environmentally and socially and location-wise, all are to be approved by counties.

Got it. Sir, what is the current client mix in the civil engineering segment?

There are hundreds of clients for Mold-Tek across the 50 states of United States. But for the activity which has slowed down before the elections and soon after the elections due to this confusion of tariffs, there are a lot of withholding of the buildings, but it slowly started picking up and that is reflecting in our better improvement in Q2 and also work on hand is increasing. If you notice in MES, the work on hand was hardly $150,000 last quarter, is now around $600,000. So slowly, the traction is coming up and more clarity will come once the tariffs are cleared. More than tariffs, now we are excited about this association with Beryl, which will not only add a huge segment of residential and semicommercial, I mean designing opportunity for Mold-Tek, but also the permits and approval opportunity can be expanded to -- if you are capable, you can go all around with 3,000 counties across U.S.A. because the process is similar. Some small differences exists between state to state, but the process is similar and that requires skills which can be built up in Mold-Tek India within 3 to 6 months' time.

Got it. And sir, what is our current order book in the civil engineering segment, apart from the $7 million that we'll be doing in Beryl for the next year?