PNC Infratech Limited (PNCINFRA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to PNC Infratech Limited Q1 FY '22 Earnings Conference Call hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anupam Gupta from IIFL Securities. Thank you, and over to you, sir.

Thanks, Anil, and welcome, everyone, to the results conference call for PNC Infratech Limited. From the management, I'd like to welcome Mr. Yogesh Kumar Jain, Managing Director; Mr. B. Sawhney, Chief Financial Officer; and Mr. D.K. Maheshwari, Vice President Finance. I'll hand over to Mr. Yogesh Kumar Jain for the opening remarks, post which we can take the Q&A. Over to you, sir.

Yes. Good afternoon, friends, and a very warm welcome to all of you again on the call to discuss our financial year for Q1 financial year '22. Today, along with me, I have Mr. T.R. Rao, Director of Infra; Dr. Bhupinder Sawhney, CFO; Mr. D.K. Maheshwari, Vice President, Finance; and Strategic Growth Advisors, our Investor Relations Advisor. I hope all of you and loved ones are healthy and safe. I would like to discuss the sector highlights costs followed by financial and operational highlights of the company. The government continues to focus on the infrastructure development across sectors and higher sectors will always extend in forefront of such element, though there has not been significant increase in highway project award activity in quarter 1 of financial year '22 in comparison to quarter 1 of financial year '21. Awarding activity is expected to pick up from quarter 3 onwards. To control the more aggressive second wave of pandemic COVID-19, several restrictions including lockdowns were imposed by the state during the peak periods though the restrictions were not severe this time and the construction activities were largely allowed to continue. Still, progress was affected in the first quarter across the industry. As the monsoon already gets underway, has been very active across the region, based off a [indiscernible] expected to increase from September onwards. As the economy activities started picking up the pace in July '21, [indiscernible] reselling of COVID cases and increasing manufacturing output, full selection, though faster, was around 15% during July year as compared to June '21. Total collections are expected to grow further as monsoon will [indiscernible] onwards. Now coming to see updates of the company. In line with our risk mitigation policy, the company continues to focus on optimal mix of funds based on nonfund-based project development with very calibrated divergence to rural drinking water supply center, which would help the company to maintain growth momentum without assuming this concentration. As was given the strong pipeline of upcoming projects from NHAI and MoRTH, our focus area would continue to be low sector. Though just given [indiscernible] is picking up the momentum recently, a strong pipeline of projects from [indiscernible] is expected. Going forward, the company will focus on consolidation of already secured water sector projects. As again, the company had a total of 18 projects on PPP format, compromising 4 [indiscernible] project to BOP annuity projects, 1 OMT project and 11 HAM projects. Out of the 18 projects, 11 projects are operational and the remaining 7 projects are in construction state. Out of the total equity requirement of these 11 HAM projects totaling to INR 1,468 crores. We have already improved with INR 632 crores in June 30, '21. The various equity that is INR 846 crores will progressively be infused over a period of 2 to 3 years, and will be funded through internal accruals generated during the same period. Now moving to our order book. As mentioned earlier, the company has secured few orders from non-road segments that is drinking water and education segment, which led to diversification of the order book. During the quarter, the company received supported date for our 2 EPC projects and 1 HAM projects. NHAI delay has appointed date on 17 [indiscernible], 1 of them deliver over section of [indiscernible] with the EPC project. Appointed date for other EPC projects was declared 18 of May '21. For a [indiscernible] project, NHAI declared the appointed date on 19 May '21. Our intangible date order book on 30th June '21 was INR 12,095 crores. Apart from these we have 4 water supply projects aggregating to INR 3,425 crores whose appointed dates are [indiscernible]. Including these 4 projects, our contract under revision is over INR 15,500 crores, the sold revenue visibility over the next 2 to 3 years. Out of the total order book of INR 12,095 crores, the whole EPC contract contributed around 33%, and project contributor around 57% and water and [indiscernible] sector projects contributed around 105%. I am also pleased to say that during the quarter 1 we received [indiscernible] for 3 HAM projects for a little comfort projects [indiscernible] on 12 June for [indiscernible] on 21st June. And for [indiscernible] on 24 June '21. Now, [indiscernible] quarter end June 30, '21. Revenue for first quarter of financial at '22 is INR 1,251 crores, which is higher by 38% as compared to the INR 905 crores in first quarter of financial '21. The EBITDA of our first quarter is INR 175 crores, which is higher by 46% as compared to INR 120 crores in quarter 1 of financial year '21. The EBITDA margin for first quarter is 14%. The profit for the first quarter of INR 522 crores is INR 93 crores as compared to INR 60 crores in the first quarter of financial year '21, a growth of 55% on a year-to-year basis. I will now take you through consolidated financials for quarter ended 30th June 21. Consider revenue of quarter 1 financial at '22 is INR 1,463 crores as compared to INR 1,093 crores in quarter 1 '21, with a growth of 34%. The console EBITDA for first quarter of financial year '22 is INR 363 crores, which grew by 26% as compared to [indiscernible] for first quarter of the corresponding quarter last year. The EBITDA margin for first year quarter 1 financial '22 came in at 24.8%. The consolidated debt for quarter 1 funds at '22 is INR 118 crores as compared to INR 92 crores in quarter 1 financial '21. On this turnaround basis variancy. And on 30th June '21, our net working cycle is 103 days as compared to 84 days as on 30th June '20. Our net worth on a stand-alone basis is INR 3,002 crores. As on 30 June '21, we had a total standalone debt is INR 400 crores and all of which is equipment funds in debt. As on 30th June, we do not have any working capital loan. The total cash and [indiscernible] as on 30 June '21 is INR 699 crores, we have a net cash of INR 300 crores. On consolidated basis, our net worth is INR 3,171 crores, whereas total debt is INR 4,324 crores as on 30th June '21. The total cash and bank [indiscernible] including current investment is INR 1,370 crores. This target to net debt-to-equity of 1.37x. That is -- we now open the floor for question and answer.

[Operator Instructions] First question is from the line of Mohit Kumar from DAM Capital.

Congratulations on good set of numbers in a very challenging environment. My first question is, sir, last quarter, we had given the order inflow guidance of $20 billion to $90 billion and revenue guidance of 20%. Are you maintaining those numbers? Or do you think there is any upside or downside to the numbers? That's our first question.

No, we are maintaining the same guidance. See, post this second quarter, I mean, we'll review it and then we'll let you know during the third quarter, in case of any change.

Okay. And secondly on this, sir, on the couple of -- there was 1 project from [indiscernible] the head regulator. Have you received the appointment date? Has the work started on the [indiscernible] project?

Yes, we have received and work has started.

And lastly, on the, set of, on the UP regulations team, I think what's the -- when do you expect the work to start, has the DPR be submitted? Or is there an issue?

We have total 3,430 villages out of that, we have already submitted BPR for 900 villages. So this as such, largely approved. And yesterday, we executed construction agreement for 3 -- 1 of our districts of mainly [indiscernible], and this week also will be executing this tripartite agreement. So what would be coming from September onwards.

So will it become part of our order book from 3 Q2?

Yes. This is a part of our order book. Agenda is now this [indiscernible] quarter related roughly translates to similar cost. This is the part of our order book, and this, sort of part of that will be executed within the current financial year.

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

Sir, first is in terms of the EBITDA margin, I hope we are maintaining the same 13.5% to 14% number?

Yes. Yes, yes.

Yes. And just a clarification on this water projects. So out of INR 3,000 crore [indiscernible] by September, how much value we are going to start work and the entire when will you start the work?

See, September and the first week of September, we expect to commence the physical execution, but we don't expect any significant work done during the month of September because it will be the initial enabling work and other things. So in the second, third and fourth quarter, there will be [indiscernible] will be attributable.

So in terms of the value, are we going to start to work on INR 1,000-odd crores by September? And in the ballpark number also would be fine?

Ballpark number would be between INR 600 crores to INR 800 crores. [indiscernible] we will be commented by September.

And by December, we will be starting work on entire INR 3,400-odd crores?

No, actually, this depends because the government of India has to give 50% subsidiary, 50% funding for this project and the state government has to put the remaining matching amount. See, they also want to [indiscernible] kind of progressively. So out of INR 3,400 [indiscernible], we expect that DPR [indiscernible] Then going forward, we'll be [indiscernible].

Sir, a couple of the numbers of mobilization advance, retention money even the inventory and payable also, sir?

Mobilize [indiscernible] INR 557 crores as of 30th June.

Okay. Against some money?

[indiscernible]

Return some inventory in payable?

Return some INR 140 crore and inventory INR 405 crores.

[indiscernible] payable? Payable, sir?

[indiscernible] INR 534 crore.

INR 534 crore. Okay. And the order book for the remaining projects which are not in the presentation. So starting with Nagina-Kashipur then Varanasi-Gorakphur?

It's again about INR 635 crores at [indiscernible] file. Nagina-Kashipur, [indiscernible].

Absolutely, sir. But personally [indiscernible]

INR 253 crores.

Okay. Varanasi-Gorakphur, sir?

And Varanasi-Gorakphur, INR 332 crores.

[indiscernible]

[indiscernible]

[indiscernible] Okay. [indiscernible]

[indiscernible]

[indiscernible]

[indiscernible]

INR 23 crores? [indiscernible]

Yes.

Okay. And [indiscernible]

[indiscernible] INR 16 crore to INR 116 crore. [indiscernible] INR 252 crores.

And [indiscernible] of INR 450 crore.

Yes. INR 435 crores.

INR 475 crores. Okay. And [indiscernible] package too?

Almost completed.

Okay. Just a second, sir. Let me please -- and in terms of the leads, any idea how much base we have submitted and are still not open or -- and then secondly, how are you planning to build in the next 3 to 4 months.

So far, there are 10 EPCs, which are under evaluation and 6 HAM [indiscernible] the aggregate cost of removal. And there are around 35 to 40 weeks are in the pipeline and entered [indiscernible]. And we are [indiscernible], we'll be submitting, which for say, around INR 30,000 crores in the next 2 to 3 months.

Okay. And the CapEx, INR 125 crores, last time you said. Remains the same.

It should be the same, yes.

The next question is from the line of Vibhor Singhal from PhilipCapital.

And congrats on great execution today. So I just wanted to understand a little bit on the UP water projects. So you mentioned that work on 600 water [indiscernible] positions from September. And after that, as really [indiscernible] submitting the DPR market rational [indiscernible] sustain. Is that right, sir?

Yes, you're right. We're expecting around 1,000 rebates, they want us to complete the DPR and commence the work. And then further, we'll be submitting DPR concurrently and as we attribute the first 2,000 villages and then as we [indiscernible] get approved. So we'll, again, commencing work on those sections. Then we have for [indiscernible].

Sure, sir. And then this will be more modest open for all the projects of this sort, right? That wherever these projects are going to come, initially 5, 6 months, we will have to prepare and with the DPR and [indiscernible]. Am I right, sir?

Yes, yes, yes. [indiscernible] to conduct the service, then design and the submission of DPR. The DPR also approved at 3 different levels, district levels. And again, at SW at some level, [indiscernible] and there is a finance committee approval company. So once the company approves the DPR, we'll be putting a tripartite agreement with district water and sanitation major and with [indiscernible] quarter on sanitation mission, and accordingly, these comments over.

Got it, sir. Got it. Are there any similar kind of projects do you think they are upcoming, in either in the state of UP or living states of MP, Rajasthan, we are, where we might be interested in taking these kind of projects?

Yes, our MBS just mentioned. So we want to consolidate because 3,413 million discount, so it's a significant size of number. So to this water sector for the patent. So we want to consolidate our position in this UP. So going quarter, we see similar kind of projects are coming in other states, we'll definitely amend the opportunity.

Right. And sir, are we also looking to -- in the past, that we had bid for airport projects. Recently, we also had bid for BOT projects from NHAI also. So what is our stance on that? Are we looking to bid for airport road projects on BOT basis? Or was that just testing waters and we remain focused on EPC. What is our company stand on that, sir?

We don't have any plans to prepare for projects on [indiscernible]. But suddenly, we'll be for [indiscernible] sales for projects are coming on EPC mode, as the cost cash contract will certainly be for those projects. And in case of NHAI, our focus will continue to be on hand and EPC. So what we will see in the BOP project, like project-specific basis, we'll evaluate that, and then we'll take it on accordingly. We have a very clear focus on [indiscernible] for this.

Right. Got it. It's great to hear that. So as you [indiscernible], the current balance sheet is good enough and the equity requirement for the HAM projects [indiscernible] by the internal accruals. Sir, how many more HAM projects can -- do you and do you think that we can take so long as our balance sheet will not deteriorate? And there could be basically funded. I mean, so what is our target as that we are looking at right now that our portfolio of HAM projects? How many more are you going to take before you say that, okay, is this too much, and this is now straining my balance sheet?

We can take comfortably 3, 4 projects of this size of the HAM project, because the equity part, we got a radio bolt-on, because we require exactly INR 840 crores equity in next year, where the generation year round more than INR 2,300 crores. So equity part, we don't have any problem and EPCS part 3, 4 big projects we can think of HAN projects.

[Operator Instructions] The next question from the line of Rita Tahilramani from [ Spotcap ].

Sir, what is the equity inflation that you -- in the HAM projects do you see in FY '22 around and FY '23, if you can give a split, that will be helpful.

Actually, in FY '22, we require around INR 350 crores equity, and FY '23 we require INR 319 crores, [indiscernible] because it depends on that taking [indiscernible] because it rightly in a few days it could be at the time of the technical divestment just to maintain the debt equity.

Okay. Okay. And what is the CapEx that you expect to invest this -- particularly this year, FY '22?

Around INR 100 crore, INR 125 crores.

INR 125 crores. Okay. And from a long-term perspective, I just want to understand what [indiscernible] when do you expect to -- I mean, do you expect -- and how do you expect to actually monetize these HAM attention [indiscernible]. What is the time span for various monetization? Do you have any vision as opposed for all these HAM effects?

We are expecting this in the financial year because the valuation part, we are discussing with the 2, 3 investor, it is in final stage. So we may spot the [indiscernible] that is why we have expected that by end of the financial year, this should be finalized.

The next question is from the line of Kalpit Narvekar from Allianz Global Investors.

Congratulations on a good quarter, sir. So I had 2 questions. So firstly, on the road side, the -- when you're bidding, how does the competition scenario look in this quarter while building for these projects in EPC as well as HAM, versus the last year? Has that -- has there been any major changes on the comprehensive front? And also the Volta projects in UP that you're bidding for, how is the competition and margin profile of those projects?

In the road sector, the competition is clear. The reason is that NHAI and MOT both diluted phase of qualification criteria. And also, there is no entry barrier or entry harder like [indiscernible] security and other things. But with competition is more in the projects of ranging INR 1,000 crores. There are a lot of players out there in that particular segment. But projects upside, more than INR 1,000 crores. And also even in case of HAM, more than INR 1,500 crores, we don't foresee such kind of severe competition there. In the first quarter, the large number of process [indiscernible] a small price, less than INR 1,000 crores set of things. So naturally, competition was there. In the water sector, there also, there is a competition. We got through a competition this day. But we should have a similar kind of EBITDA there also. What we are getting in growth sector.

Sir, sorry, but -- sorry for the repetition, but EBITDA margins, what is the exact number you said? My line was [indiscernible] back then.

Okay, no problem. We see growth sector as my colleague mentioned, EBITDA will be around 13.5% to 14%. In fact, Q1 we maintain that 14% EBITDA. So in the water sector also that we expect the same level of EBITDA in water sector projects also.

This will be around [indiscernible].

And in the water segment, these -- so how do you expect the receivables or the working capital to play out in the world of projects? As 50% is coming from the trades, right?

The sales comment there says they have adequate amount of money to fund these projects and to make the bill. The billings [indiscernible] 1 month, only whatever is due in the 1 month will be needing from working capital, that we should be able to meet whatever the fund limits we are having.

Okay, sir. And one last question from my side, sir. This -- I was looking at the debtor days in your presentation have gone up to 100 days from 70 last quarter. So any particular reasons for that?

I think the debt-to-debt increase of INR 62 to INR 76, mainly because of the payment within the first week of April, July. That was mainly [ NAtuBumbai ], INR 132 crores, then Purvanchal INR 47 crores and [indiscernible] INR 24 crores. Earlier in the month of March, we have received the payment in the end of the March. But this time, the June payment we have received in the first week of July, getting right to the next year, it has increased, from 62 days to 76 days.

Sir, and on the net working capital, the increase from INR 51 crore to INR 103 crore, any particular year?

Also mainly because of 1 data debt increase. And secondly, we have made the payment of the credit around INR 185 crores. If you will see the table, as we do from INR 719 crores to INR 534 crore, that [indiscernible] repayment base of INR 185 crore during this quarter. That is why mainly because of these 2 debt of imperial created reduction, working capital increase, otherwise, it should be 60 to 70 days.

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

[indiscernible] the following. So my first question is on the mega project, [indiscernible] projects. So just give an update there in terms of approvals and payments. By when can we expect the payments to come in?

Yes, we have already received the [indiscernible] from all the bankers. And the NOC block NHI has under [indiscernible] finally stayed at NHAI level. Because the change in the Chairman of NHAI from today was certainly there, but we are expecting that by end of this month, we should expect and deals should be finalized by this quarter end.

Any final consideration, how much among the [indiscernible] will be coming in as we finance on that?

That will depend at the time of the closing dates around. So a certain payment, we have always made during this period. So everything will be defined at the time of closing gate. Moreover, there will not be any requirement of the provision.

About INR 300 crores around above that much as something may come. Told last time [indiscernible] indicated to be around in that range?

So we have included [indiscernible] loans, there are [indiscernible] and equity in [indiscernible]. So we are expecting that there should not be a requirement of the provision in the books after receiving debt payment.

Okay. So no loss provision may not be required?

I think so.

Okay. Second question is about asset monetization, where you said that we are stopping and something will get finalized [indiscernible]. So are we talking about selective projects, are you talking about anything [indiscernible] only on HAM projects. So if you can just at least quantify in terms of the projects which have been evaluated in terms of equity invested, how those projects are, and in terms of these projects which are being [indiscernible].

Actually, we are talking on the end project, of which we have received a theory. Secondly, one annuity project of NHAI, yet this discussion on [indiscernible] made on these projects only, sir. We have been in [indiscernible] and projects and on NHAI and those projects.

[indiscernible] these HAM projects.

In these projects, around 4,700 debt is there, and around 940 equity we have infused in these projects.

So next question is, new onetime price to book even if we get some INR 942,000 crores, anything can happen by next year, even those through at least minimum that much going to come?

We are expecting that it should be clear by financial year end.

Okay, sir. Sir, last question on [indiscernible] have been there. Is that bid happening now? Or is it now going to go after elections next year?

No, [indiscernible] let's say, many of the business has raised some observations and some bring [indiscernible] and that becomes [indiscernible] including increase in the concession period and [indiscernible]. Now you could have to take the approval of the cabinet. Then accordingly, we day will be a norm. So some [indiscernible] in the top end of [indiscernible] in that month [indiscernible] will be there. So [indiscernible] how to [indiscernible] going forward.

This is [indiscernible] license. That's now a thing?

Yes, but this is [indiscernible].

[indiscernible]

But we are if anything will not be creating calls [indiscernible].

So once [indiscernible] and everything's completed when we get into [indiscernible] in portion to the time.

Because [indiscernible] project operations here. So any clarity on NHAI because I think we are at times, these understand this SWS always under surveillance a little bit. They want clarity and proceeding on deals and closing and buying on [indiscernible]. They want clarity on [indiscernible] devotions [indiscernible] on 1 notification is accepted. [indiscernible] GST clarification from NHAI, so [indiscernible] when is it expected, on behalf of annuity component. But our new projects, a post niche DST content supplying [indiscernible] on the applicability of the annuity on the -- it will not be [indiscernible] on the annuity payment. But the annual projects, NHAI [indiscernible] paying that, [indiscernible] reimbursing the DST, both for the construction phase payments as well as we do and the operation price payments. So the bids which have been without -- before the [indiscernible] BSC 2017 July. Those will be more electives, reimbursing the DST more. And the big change in law over the P contracts.

Okay. So for all the projects, it's under changing now and funding project is already included, so you are accordingly bidding?

Yes.

Any clarity on the interest portion, the financial in [indiscernible] on that also?

That how -- what should be the applicable kind of a thing -- So if it is structurally applicable and existing the manager will pay, because [indiscernible] entire BSP would be better. [indiscernible].

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

Sir, can you give a total collection number for the project, sir?

Sure. The NPI, INR 12.6 crores. [indiscernible] INR 24 crores. [indiscernible] INR 10.6 crores. And Jaguar is INR 51.3 crores.

And on the -- I just need an outstanding order backlog for the irrigation project, which is under execution and the deliverable project for which, both the packages?

It is reported in this quarter [indiscernible]. We just started execution in the month of April.

Okay, 31, package 31 [indiscernible] Okay. So any [indiscernible]?

There are so [indiscernible] so the -- mostly of standing [indiscernible]. In all 3 projects in [indiscernible] but are both [indiscernible].

So they are part of the 100 crores.

Almost same of the contract value.

Okay. Okay. Got it. And sir, [indiscernible] what is the outstanding order backlog?

INR 67 crores.

So the guidance of the taxation part. So obviously, we have shifted to the new tax regime now. So what will be the tax rate for the next 9 months and the full year guidance, sir?