PNC Infratech Limited (PNCINFRA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Business Update Call of PNC Infratech Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Jigar Kavaiya from Strategic Growth Advisors. Thank you, and over to you, Mr. Kavaiya.

Thank you, Runjhun. Good morning, ladies and gentlemen. On behalf of PNC Infratech Limited, I am pleased to welcome you all on this business update call. We have with us today, the Managing Director of the company, Mr. Yogesh Kumar Jain, along with the senior management team. We'll begin the call with the opening remarks from the management, followed by Q&A session. Thank you, and over to you Yogesh, sir.

Good morning, everyone. On behalf of PNC Infratech Limited, I thank you all for joining on this call today at a short notice. Today on the call, I have with me Mr. T. R. Rao, Director, Infra; Mr. D. K. Agarwal, CFO; Mr. D. K. Maheshwari, Senior Vice President, Finance; and the Strategic Growth Advisors, our Investor Relations advisers. The purpose of this call is to give an update on the recent key developments that include an order issued by Ministry of Road Transport & Highways, disqualifying the company and 2 of its SPV, namely PNC Bundelkhand Highways Private Limited and PNC Khajuraho Highways Private Limited from participating in any tender process of Ministry for a period of 1 year with effect of October 18, '24. It may please be appreciated that this call is essentially limited to the above key development only. As the company is yet to declare its financial results for the quarter and half year ended September 30, '24, we will not be able to share any details of or address any queries related to the financial results, which we hope the participants understand. As we have been intimated the stock exchange from time to time, you are aware that the matter relating to the CBI registering an FIR on June 8, '24 in the matter of alleged illegal gratification by the employee of company under certain provision of the PCS and IPC, filing of the chargesheet in the matter before the Honorable Court of Special Judge CBI Bhopal on August 8, '24 and released the employee of company who were under the judicial remand on August 9, '24 pursuant to the bail granted by the Honorable High Court of Madhya Pradesh, Jabalpur. As further intimated on October 19, '24, the MoRTH asked the company and its 2 subsidiary companies to appear before MoRTH on October 18, '24 along with all documents there support for personal hearing in the matters. Post hearing by its order dated October 18, '24, MoRTH has disqualified the company and 2 SPV from participating in any tender. Process of Ministry, tender process of Ministry for a period of 1 year with effect of October 18, '24. As we had already intimated to the exchanges on October 19, '24, there will not be any impact on the ongoing development, construction, operation and maintenance activities of the company and its subsidiaries, including the said 2 SPV on account of our said order. As the company has been disqualified from the tender process for a period of 1 year for the MoRTH only, the company is able to continue to pursue business opportunities with the other central ministries and various authorities, agencies or gazetted government and accordingly, should be able to participate in tender process. As we had intimated to the exchanges, the company has recently been awarded 3 new major projects for an aggregate contract value of INR 6,670 crores, 2 project by MSRDC and 1 project by CIDCO. Including the value of above 3 project, the company gross order book as on date is over INR 21,000 crores without deducting the value of execution done during the second quarter ending September 20, '24. The above robust unexecuted order book shows a tangible revenue visibility over the next 2 to 4.5 years. Nonetheless, we are evaluating all the resources available to the company, including legal actions that can be taken by the company to minimize the -- mitigate the impact of the said order on the company's performance going forward. We now open the floor for question/answer. Thank you.

Shall we open the line for questions?

Yes.

Before this thing, just would like to add, see we would not be in a position to disclose any material information, particularly price-sensitive information before informing to the exchanges. So we request the REMs, we request the participants to keep this in mind while seeking the queries or questions from us. Thank you.

[Operator Instructions] The first question comes from the line of Shravan Shah with Dolat Capital.

Sir, just a couple of clarifications. First, this order talks about not bidding in NHAI also or only in MoRTH?

NHAI is part of MoRTH. So this is for MoRTH, NHAI and NHIDCL.

Okay. And can we bid through any other company apart from the 3 company mentioned in NHAI and MoRTH or we cannot bid through any of our subsidiaries also?

We can bid.

No, the...

Sorry, sir?

Yes, all the 3 companies are disqualified.

So in MoRTH...

If PNC is qualified for the other project, then we can bid.

Okay. So in NHAI and MoRTH, we can bid through any other subsidiary?

Yes, if qualified.

Okay. Okay. And second, we have talked about the legal action. So just trying to understand, even if whatever we will take the legal action. So 2 aspect to understand likely to be the action and let's say, this 1 year if MoRTH decides to lower this timeframe in terms of the disqualification, by what time we will be able to know that this 1 year will be lower to, let's say, 6 months or 3 months or a complete removal, what minimum timeframe it will take to understand this?

First question, we want to try to answer. Lowering of this period from 1 year to now below this, it's a hypothetical. So we can't say anything about that because we need to evaluate. And second thing regarding the legal actions, we are contemplating the available legal actions. And we'll let you know once we take some kind of a tangible thing and -- after informing to the stock exchanges.

We hope that in 14, 20 days, you will get.

Okay. Okay. And will it also impact in terms of whatever we have till now bidded in NHAI and MoRTH and where the outcome has not come. So will it also impact that? And if possible, can you share how many projects and the value we have already bidded in MoRTH and NHAI where outcome has not come?

This call has to be taken by MoRTH and NHAI, whether this order would be made effective retrospectively and how -- what is their internal procedure. And regarding the bids we submitted, we submitted a couple of bids. We share it separately because readily, we don't have the information.

Okay. And sir, now in terms of the order inflow that we were looking at, sir, as further maybe of INR 7,000 crores, INR 8,000 crores, how we want to compensate, let's say, this order continues, from which segments or the other central and the state authorities from where we would like to achieve our order inflow? And what's the risk in terms of the not achieving this and what max we can achieve in terms of the order inflow for FY '25?

See, as our Managing Director has already said, we had already received orders first of INR 6,700 crores in this year. And there is a scope for seeing the opportunities at other ministries as well as at the state governments. So we'll continue to pursue those business opportunities and try to achieve the further business during the current financial year. So in case of any reduction in this thing, our order book is already robust and it is having more than INR 21,000 crores. We don't foresee there will be any major impact on the company's operations going forward.

[Operator Instructions] Next question comes from the line of Alok Deora with Motilal Oswal.

Just a couple of questions. So first is you mentioned that PNC Infratech can bid through its subsidiary because -- just wanted some clarity on that because eventually, it would come in PNC Infratech only, right? So are we sure we can bid via our subsidiary because then it would be like a no impact for us. We can like float a subsidiary and start bidding from -- via that subsidiary. Just if you could provide some clarity on that because if that happens, then there is really no impact on us.

Generally, what you are talking about, you are talking about SPVs?

Yes, SPV or a subsidiary we create and we bid via that.

No, we cannot bid through SPV.

Okay.

We have not bid any project through SPV because the SPV is the special purpose vehicle only for the said process only.

Right. So you -- in the earlier question, you mentioned you can bid through or create a subsidiary and bid. Is that possible?

We are evaluating the options. See we can't say anything right now. So we are evaluating the options.

Okay. Because what -- I mean, the basic understanding which we have is that, ultimately, that will come in PNC Infratech only, right? So that won't be kind of allowed if we create a subsidiary and bid through that?

Yes, yes, we appreciate that. So we are evaluating the options.

Sure. And also, I mean -- so we're already in October, if we take any legal course and will we -- it will take maybe a few months or so. So is it fair to assume that this year, it would be very difficult to kind of turn this order and get bidding because after March or April, we'll hardly see any bidding again coming through, then we'll again be eligible in October onwards, October '25. So realistically speaking, what's your thought process on this?

No. See, the legal course is one of the options available. But what would be the outcome of the legal course and how much time it will take, again, it's hypothetical as of now. We don't know the whatnot, it could take much lesser time also. It could take more time also. So as of now, we are hopeful of getting some kind of a remedy, evaluating something [ to reduce the ] impact, so we'll share as we progress, as we move ahead.

Sure. Sir, just last thing. So we had given this order inflow of nearly INR 8,000 crores for remaining part of the year. Sir, any change in that number now?

This is already awarded.

No, no, further...

The upcoming Q2 target.

No, no, no. Yes, yes, it's a further [ escrow ] as of now, we don't want to say or want to set any -- say any firm number. But in the month of November, when we meet again Q2 results, then we'll be able to tell some tangible things.

Next question comes from the line of Ashish Narendra Shah with HDFC AMC.

Sir, just a couple of things. One, does this order impact any of the projects where appointed date is awaited or that part will not get affected?

That part will not be affected.

So that part is clear. Secondly, in terms of the assets which are in the process of being sold to KKR. Now does this get into -- from approval from the government perspective, NHAI perspective, again, does that part get affected in our -- to the best of our understanding?

No, to our best of understanding, we don't think that it will get affected as seeking NOCs from the government as well as the -- since buyer is also aware of all these developments and which are in the public domain, we don't think any deviation would be there from the present course of action.

All right. And outside of NHAI, can you maybe indicate what's the kind of bidding that you have done at this point? And which are the top maybe 2 or 3 sectors where you think you can bid and compensate for this loss of opportunity that may happen?

As we said earlier also, because we have been bidding other sectors also, like arbitral corporation and also the water sector under Jal Jeevan Mission and other recently secured project from the Maharashtra and the railways are there. So we'll be pursuing those opportunities. We can't say anything concretely now. But we'll continue to pursue those opportunities, and we would be hopeful of getting -- securing some business from those sectors and those spaces.

Sure. But any indication of how much we might have bid at this point of time or outside of NHAI projects?

We'll share the details readily when available assuming this is not a regular kind of a thing, we'll share the details.

Next question comes from the line of Parikshit Kandpal with HDFC Securities.

Yes, sir my question is on the non-NHAI segment bidding. Sir, are there any conditions or stipulations that if central agency has barred then the bids cannot be submitted?

Can you come again, please?

Your voice is not clear, Parikshit.

Sir, [Foreign Language] is there any conditions in the non-NHAI segment if we are bidding? So any condition which mandates that if -- I mean agency has been barred from bidding in, say, central agency. So will still the bid be accepted by the non-NHAI entities?

So see, if you see -- go by the order, the order specifically says we are disqualified from the tender process of the ministry only. It is very specific. See, we hear that it will be something like a speculative thing what will happen if other companies -- other agencies are coming for bid. That will depend upon the RFP conditions of that particular bid. So we can't say anything now. But the order is very clear, we are disqualified only and only from the bidding process of ministry, which includes NHAI and NHIDCL.

Okay. The second question is the bar seems to be quite harsh because we have seen contractors, I mean, similar contractors in similar kind of getting barred between 1 month to 6 months. So what's your internal assessment? Why this -- such a harsh step was taken for a year kind of a ban so?

See, we don't want to comment on this because we are evaluating the thing. So we don't want to comment why such harsh. And we can't even assess also by that order was taken by the ministry.

Okay. Just the last question on these 2 SPVs, which are part of KKR. So we'll continue to receive annuities, right? I mean, over this 1-year period. So sir, any color on that?

Yes, absolutely, this thing, no issue. These SPVs will continue to receive annuities and O&M payments and other payments under the change in law. So there should not be an issue in receiving the payments from the other fee pertaining to SPVs.

[Operator Instructions] Next question comes from the line of Karan with Monarch AIF.

So you mentioned that you are kind of looking at other agencies and other sectors to kind of win projects. According to us, sir, according to our technical know-how and technical visibility, which other agencies or ministries that we can approach now to kind of reach around INR 13,000 crores, INR 15,000 crores of order inflows that we had previously guided. Or do you think now we'll have to work with a different number going forward in terms of order inflows?

As we said in the current financial year with the recently secured projects, our order book now already we secured around INR 7,000 crores of new projects already. So whatever is the remaining, we'll be pursuing in the next 5, 5.5 months from the other sectors and other ministries and including state governments. So as of now, we want to maintain the same order book guidance. Going forward in the month of November when we declare Q2 results and we'll have a con-call, then we'll be able to tell you more firm numbers and more kind of a concrete [indiscernible].

Understood, sir. Understood. And sir, in terms of revenue execution and our book to bill, what do you think we can achieve going forward in '26 and '27? If there is any broader guidance that you can give over there?

So this we don't want to discuss until and unless we declare our Q2 results and these things. So we want to limit this call only [indiscernible].

[Operator Instructions] Next question comes from the line of Parvez Qazi with Nuvama Group.

Sir, I have 1 question, does this development in any way, can it impact our potential asset monetization that we are trying?

It should not be because the -- our buyer is also quite aware of all these developments because we intimated to the exchanges, which are in public domain is aware of it. And also NHAI, this order is only limited to participation in the tender process we are supplying emphasis, only participation in the tender process is by the ministry. So we are not expecting any such kind of a thing as of now.

Mr. Parvez, are you done with your questions?

Yes, I'm done.

Next question comes from the line of Vaibhav Shah with JM Financial Limited.

Sir, firstly, for the 2 subsidiaries where the -- we have disqualified Khajuraho and Bundelkhand. So particularly for them, will the monetization be impacted or they also will not be impacted with respect the NOCs that we need to receive?

See, it would be too early to say something. So we are evaluating that. We're able to share in case of any further development in that aspect what you had asked.

Okay. And sir, secondly, for the 5 HAMs, where AD is awaited. So any impact on those, particularly those 5 projects? Or that also should not be impacted?

That also should not be impacted.

Next question comes from the line of Ronald Siyoni with Sharekhan Limited.

Sir, just 2 questions. Firstly, does this order puts the case behind us and -- or as the procedure continues and the investigations will continue against the senior management and the company as well. So is it done in the state case? Or there can be further actions from the ministry?

No, we don't thing there can be any further action from the ministry because these are the 2 different things. Ministry, whatever the actions taken in terms of the concession agreement as you could tell of this thing. And the case which is there going on at sessions court at this thing, that is [indiscernible]. And I also want to say that the designated court has not taken cognizance of the matter and also not paid the charges and try that [indiscernible].

Okay. And second one, in your knowledge in the past, have you seen such a clause in other government agencies that if you are debarred from some affiliated government agencies, then you cannot bid. In the past, in the history, have you seen such a clause?

No. Actually, this kind of condition differs from 1 ministry to another ministry and 1 project proponent to another proponent. And there is nothing -- any such kind of a rule in the government and a written kind of a thing that it will be particular -- firmly disqualified by a particular ministry, you can't bid for the another ministries or other agencies. There is no such rule. So it depends on that client and that authority.

[Operator Instructions] Next question comes from the line of Shravan Shah with Dolat Capital.

Sir, just wanted some update on the CBI case. So when the next hearing is there and is there -- in terms of any negative outcome can come there?

It's a too forward looking and a very hypothetical kind of a thing. Here just now we had mentioned the designated court has not taken cognizance of the matter at. So once the court has to take cognizance of the matter, followed by framing of charges and then the hearings comes. So it is too early to say, too early to talk about it. So anyhow, we'll keep informing the exchanges and through exchanges all the stakeholders. So any further development is happening in that direction.

Okay. And as such, it will not -- you already mentioned, just wanted further confirmation that it will not impact any payment which we are likely to get from NHAI or MoRTH for existing projects?

Yes, yes.

Next question comes from the line of Parikshit Kandpal with HDFC Securities.

Yes, sir, so my question is that these 2 entities, the SPVs, which are the part of KKR team. How much is the total invested equity? And what is the equity value of these assets?

The figure is not readily available because as I mentioned, that this -- we conveyed this call at a very short notice and we'll share with you separately offline.

Next question comes from the line of Vaibhav Shah with JM Financial Limited.

Sir, can we do subcontracting work for any of the other players pertaining to a MoRTH or a NHAI project?

That aspect we have not evaluated. We are not neither contemplating that one. So we'll share with you in case we have any that kind of ideas.

Sir, if we are allowed, then are we open to do that?

Again, it's a hypothetical.

[Operator Instructions] Next question comes from the line of Prem Khurana with Anand Rathi.

So most of my questions have already answered. Just 1 small clarification if you could help me with. So these 2 SPVs, I mean, do we have any payments due from NHAI towards this either grant or annuity, grant especially annuity revenues you are receiving on a frequent basis. Any payments which are still due with NHAI towards grant?

No, no. The -- see, there is no grants in these SPVs because the grant completions project is commissioned during the construction time, grant is pending. And as of now, no annuities are also pending. But there are certain payments and the change in law which we'll be getting.

Okay. So change in law is eventually -- I mean, the number is yet to be firmed up...?

And the GST payments.

GST payments.

Next question comes from the line of Ankita Shah with Elara Capital.

Sir, I didn't understand one thing why only 2 SPVs were barred for bidding? Why not other SPVs were mentioned in this order?

See, the case has been registered by CBI against PNC. In fact, the case has not been registered in the SPVs. But the project where this alleged incident has happened as alleged by CBI pertains to these SPVs. So then they included those SPVs also because integrity pact signed by these SPVs, so they combined PNC along with 2 SPVs, and none of the other SPVs has any kind of role in the whole thing connected to the matter.

The next question comes from the line of Niteen Dharmawat with Aurum Capital.

Just to reconfirm, sir. This order will not have any impact on the existing projects awarded by NHAI even if the work has not began over there?

Yes. This order will not have any effect.

Next question comes from the line of Bharanidhar Vijayakumar with Avendus Spark.

Yes. Can you throw some light on these recent MSRDC projects in terms of the land availability, when it will be starting?

See, Mr. Vijayakumar this call is particularly limited to the development as of happened on 18th and which we had intimated to 19th. And anyhow, we'll be meeting in the -- during the second week of November to discuss on our Q2 results. And certainly, we'll share all these things during that time. We don't want to extend the discussions beyond the matter in question.

[Operator Instructions] Ladies and gentlemen, as there are no further questions, we have reached the end of question-and-answer session. I would now like to hand the conference over to the management for closing comments.

And we want to inform to all of you and while extending our thanks, the PNC is a law-abiding corporation, as we had already shared. And also we'll not be sparing any efforts and we'll not be leaving any kind of a stone unturned to minimize and mitigate the adverse impacts that might be caused due to the order and we'll endeavor -- continue to endeavor to save the interest of all its stakeholders, including shareholders. Thank you.

Thank you. On behalf of PNC Infratech Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.