PNC Infratech Limited (PNCINFRA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to PNC Infratech Limited Q1 FY '27 Earnings Conference Call hosted by IIFL Capital Services Limited. [Operator Instructions] Please note that this conference is being recorded. 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. I now hand the conference over to Mr. Mudit Bhandari from IIFL Capital. Thank you, and over to you.

Thank you so much, Nirad. Good afternoon, ladies and gentlemen. On behalf of IIFL Capital, I'm pleased to welcome you all on the PNC Infratech Limited First Quarter FY '27 Earnings Conference Call. We have with us the Managing Director of the company, Mr. Yogesh Jain, along with the senior management team. We'll begin with the opening remarks from the management, followed by a question-and-answer session. Thank you, and over to you, sir.

Good afternoon, everyone. On behalf of PNC Infratech Limited, I extend a very warm welcome to everyone for joining us today on this call. Today I have with me Mr. T.R. Rao, Director, Infra; Mr. Pankaj Agarwal, Vice President, Finance and Accounts; and Strategic Growth Advisors, our Investor Relations advisers. The financial results and investor presentation have been up on the stock exchange and the company's website for your reference. I would first like to share the key development across the industry with you, followed by operational updates of the company and highlights of the financial performance during the quarter ended 30 June '26, post which we will be happy to answer your questions. In the highway sector, NHAI project awarding activity remained subdued in quarter 1 financial year '27 also. With all the 107 kilometers awarded [indiscernible] also moderated to approximately 640 kilometers. This slowdown was primarily driven by a weak award pipeline and continued geopolitical tensions. However, we expect the pace of awarding to improve going forward, supported by a healthy pipeline of projects. Recently, NHAI launched 54 highway and [indiscernible] projects for an estimated aggregate value of around INR 1.8 lakh crores, for bidding over the coming 2 to 3 months. The identified pipeline comprise 26 EPC projects, 21 HAM projects and 7 [ DBFOT ] toll-based projects across the states. A balanced mix of projects with sizable value is expected to create opportunities across different implementation formats for both fund-based and nonfund-based highway developers. The government also continued to make steady progress in expanding India's high-speed highway network and other sector also. A cumulative 10,389 kilometers of national highway speed corridor have been launched across the country, out of which 4,809 kilometers have already been completed, while 5,580 kilometers are currently under bidding and implementation. Beyond highways, we are seeing significant opportunities emerging across other sectors. Continued government focus on highways, railways, metro rail, [ flight ] corridors, power transmissions, renewable energy and storage, mining, airports, water resource developments, including drinking water supply, and urban developments, provides confidence in the sustained growth opportunities for well-stabilized infrastructure companies with strong execution capabilities, proven expertise and financial credibility. Railway continue to robust project pipeline as the government endeavors to strengthen railway infrastructure through both budgetary support and investments in capacity expansion, station redevelopment and price connectivity. The proposed expansion of PPP-led rail projects, including HAM-based development akin to highway development is expected to create broader opportunities for experienced highway infrastructure developers. Similarly, the power transmission sector is expected to [indiscernible] capital expenditure to the tune of INR 6 lakh crores over the next financial year, driven by the government's plan to extend [indiscernible] transmission network and facilitate [ evacuation ] from over 900 gigawatts of [indiscernible] fuel capacity, including solar, wind and hydro by financial year '35 to '36. This is expected to drive significant investment across transmission, energy storage and associated infrastructure, robust long-term opportunities for infrastructure developers. Water infrastructure continues to offer significant medium-term opportunities [indiscernible] already achieved remarkable progress with functional drinking water [indiscernible] connections reaching 82% of rural households as of July '26, up from just 17% in 2019. While highways remain the primary focus, we continue to identify and pursue increasing opportunities across the above-mentioned sectors to expand our business landscape for driving sustainable growth going forward, with the objective of building a more diversified and sustainable order book. Now coming to recent updates on the company. In May 2026, the company received letter of award from Lucknow Development Authority, Uttar Pradesh for construction of 4-lane flyover on EPC basis. The projected value INR 194 crores and scheduled to be completed within 24 months. In May 2026, PNC Infratech JV received the letter of acceptance from [ UP State Bridge ] Corporation Limited for construction of 4-lane major bridge over Ganga River connective [indiscernible] Ganga City to Kanpur City on EPC basis. The project is valued at INR 559.5 crores and is scheduled to be completed within 36 months, with a 50-50 participation ratio between the JV partners. In May '26, the company received INR 234.99 crores from NHAI in terms of the onetime settlement agreement executed by the NHAI regarding Agra Bypass EPC project arbitration award, under the [indiscernible] scheme [indiscernible]. In '26, the completion certificate was received for a HAM project Prayagraj Kaushambi Package 3, with effect from 20 June '26. Concession agreement signed with NHAI on 16 July '26 by 2 new SPV incorporated by the company, namely Barabanki Mustafabad Highway Private Limited and Mustafabad Biswariya Highway Private Limited, for implementation of 2 new HAM projects secured by company in the first quarter of current financial year. In July '26, company received letter of intent from Airports Authority of India for EPC of Pantnagar Airport in Uttarakhand. The project is valued at INR 302 crores [indiscernible] executed in 24 months. On 25 July '26, an arbitration award INR 244 crores was published in favor of company in connection with an EPC project, upgradation of [ Sonadi to Burapur ] [indiscernible] on [ MS-29E ], executed for [ UP Prita Guri ]. Now moving on to the operational and financial performance of the company. Company's 17 fund-based project portfolio comprised 1 BOT toll project, 2 BOT [ NOP ] project and 14 HAM projects. Aggregate [indiscernible] project cost of 14 HAM projects is over INR 17,200 crores. Out of total 14 HAM projects, 6 projects achieved [indiscernible] 5 projects are under construction, 1 project [indiscernible] for which financial project [indiscernible] 2 project concession agreements [indiscernible] and process of financial project gets underway. Total equity investment requirement for the HAM project is INR 1,623, excluding 2 newly awarded HAM projects for which financial [indiscernible] to be achieved. Till June '26, company already includes INR 1,187 crores and the remaining equity of INR [indiscernible] to be invested over the next 2 years. The internal accruals that would be generated over the next 2 to 3 years should be adequate to give the [indiscernible] equity investment requirement. Company's [indiscernible] order book stands at over INR 19,100 crores, providing a healthy revenue visibility, which includes redo of 2 new HAM projects including [indiscernible] 2026. So 1 major bridge project and 1 flyover project in May '26 and 1 airport project in July '26. Highways contracts contribute 64% of total unexecuted order book, while water canal, railway and airport contracts contribute around 21% and coal mining contract contributes about 15%. Now I would present the results for quarter ended 30 June '26. Standalone revenue for the first quarter of financial year '27 is INR 1,518 crores, which is higher by 34% as compared to INR 1,136 in the first quarter of financial year '26. Standalone EBITDA for the first quarter of financial year 27 is INR 375 crores, which is higher by 167% as compared to INR 141 crores in the first quarter of financial year '26. Standalone EBITDA margin for the quarter is 24.7%. Standalone profit for the first quarter of financial year '27 is INR 271 crores, which is higher by 235% as compared to INR 81 in the first quarter of financial year '26. Standalone PAT margin for the quarter 1 of financial year '27 is [ 17.3% ]. Now moving on to the consolidated results. Consolidated revenue for the first quarter of financial year '27 is INR 1,688, which is higher by 19% compared with INR 1,423 crores in the first quarter of financial year '26. Consol EBITDA for the first quarter of financial year '27 stood at INR 524 crores, which is higher by 42% as compared to INR 367 crores in the first quarter of '26. The EBITDA margin for quarter 1 of financial year '27 is 31%. Consol PAT is INR 332 crores. The PAT margin for quarter 1 financial year '27 is 19.7%. On a standalone basis, our net worth as on 30 June 2026 is [ INR 6,084 crores ] whereas the standalone debt from banks, financial institutions is INR 428 excluding [ ICD]. This translates to debt-to-equity of 1.07x excluding [ ICD]. Total cash and bank [indiscernible] including cash investment is INR 1,046. Thus, we have a net cash surplus of INR 133 crores as on 30th June '26. Our consol net worth as on 30 June 2026 is INR 7,147 crores, whereas total debt is INR 5,448 crores. This debt-to-equity of 1.76x. The total cash and [indiscernible] including current investment, is INR 2,870 crores. With this, we now open the floor for question-and-answer.

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

Sir, before asking the question, just to get a clarification, though we have announced on the exchanges. But for the benefit of everybody, just wanted to clarify again a couple of things there. So is there any time line in terms of the Lucknow Kanpur? When can we have an idea whether will there be any kind of a nonperformer, we will be declared a nonperformer or are we going to be banned for bidding? And if, first is the time line. And let's say, if, in the worst case, if the nonperformer or ban comes, will it be for 1 month, 3 months or 4 months? Any indication on that? That is one. Second, if it is the case, will it also lead to a kind of a bidding ban at the UP state level, because what we understand there are close to INR 10,000 crores kind of projects will be there before the election. So that will be a case for us or not? And lastly, in terms of how much cost that we have to incur to repair this thing? And will it be at a standalone level or at a subsidiary level? And is this only the repair for the toll loss? So net-net in terms of the financial impact as on today, how much one can see the financial impact? And will it be at a standalone or at a subsidiary level?

Okay, Mr. Shah. Now, at this stage, whatever we had informed to the exchanges, we [ don't ] want to say any further material thing because the issue is still under consideration by NHAI and we are also submitting our reply to the notices issued by NHAI. Anything about the -- whether they will pass any order of nonperformer or otherwise disbarment is completely speculative and hypothetical at this stage. So once we submit our reply to them and follow the due process, the decision will be taken by NHAI, which we cannot speculate as of now whether any action will be taken against the concession. So given the fluidity of the situation, so we don't want to comment anything saying that -- regarding our bidding and also whether we will be able to bid for the future projects, including projects in Uttar Pradesh, being [indiscernible] by that. I hope that you understand the sensitivity of the matter and we don't want to share anything beyond what we informed to the exchanges.

Got it, sir. Now in terms of the guidance that we have last time given the kind of INR 6,000 crores revenue for this year FY '27 and INR 7,500-odd crores for next year FY '28, and also on the margin, 12-odd percent and the order inflow of INR 15,000-odd crores, against I think close to INR 5,900 crores already received. So any change in the guidance?

No. As of now, we are not contemplating any change in the guidance what we had given during the last con call. So we are meeting the same guidance. So we received 5 new projects during the current financial year. So we expected to secure a total new business worth of [indiscernible] INR 15,000 crores in FY '27. On the guidance of INR 6, 000 for FY '27, on the guidance of INR 7,500 in FY '28, and we want to maintain the same.

Okay. Great. And in terms of the 2 new projects, particularly Barabanki-Mustafabad, when can we see the appointed date for that? And broadly in terms of the equity, it would be close to INR 490-odd crores that we would be investing in there?

See, the concession agreements for [indiscernible] the projects we executed with NHAI on 16 of July. Post that, we [indiscernible] 5 months, 150 days' time to achieve the financial closure. And parallelly [indiscernible] fulfill their contractual obligations and conditions precedent of providing 90% of the land. So post that, the appointed date will be declared. So we expect timely achievement of financial closure. And also we expect timely provision of the vacant land for construction within the respective time lines, and appointed [indiscernible] will be declared timely and we will commence the [indiscernible]. With regard to investment of equity, so once we achieve the financial closure, so we'll be able to know the exact figure of the equity amount. But it would be around the same amount what you have mentioned, in the similar vein.

And the Pantnagar Airport and Bopal Bypass [indiscernible] that will be there by this quarter, Q2 itself or?

Pantnagar Airport, we expect this will be done during the current quarter, that is before end of September 2026. But whereas in the case of Bhopal, now there is some changes in the scope. So that we expect the quarter 3, third quarter before the end of current calendar year.

Okay. And lastly, sir, balance sheet items, if you can help us, inventory, trade payable and debt?

[indiscernible] inventory is INR 147 crores. [indiscernible] is INR 1,900 crores.

INR 1,900 crores, okay. And trade payable?

Trade payable is INR 680 crores. And mobilization and [indiscernible] retention.

Mobilization advances, INR 170 crores. And retention is INR 295 crores. And the total unbilled as on 30 June is INR 436 crores -- sorry, INR 462 crores.

Okay. And HAM letter and water letter [indiscernible]?

Please note, HAM letter is 479. Water letter is 925.

Our next question is from the line of [ Bhanna Subramanian ] from [ Marihand ] Capital.

Water order book is around INR 2,310 crores. I think the progressing appears slowly around 66% completion. Can you provide more granular time line for the completion and recognition of these projects?

The [indiscernible] of rural drinking water supply, see, at the beginning of the current financial year. The opening order book, unexecuted order book was INR 2,310 crores. Out of that, we have executed INR 136 crores worth of value of the work during the first quarter. So remaining around INR 2,180 crores balance is there, so which we expect to execute next 2 financial years as the government of India has extended the implementation of [indiscernible] 2.0 till December 2028. And also because there has been a [indiscernible] of funds at the state level as well as the government delay in the release of funds by the central government, so around INR 741 crores, excluding GST, has to be related from the government as of date. So we expect these funds will be realized in the coming months because the state government is actively pursuing release of 50% subsidy from the government of India. So we expect release of these funds and be able to realize the substantial amount of [ INR 741 crores ]. Then accordingly, we will expedite the books.

Okay. Sir, this net working capital of sort of 110 days [indiscernible] because of JJM, like when we can expect significant improvement on net working capital? And secondly, what is the current receivable for the Uttar Pradesh irrigation projects?

Uttar Pradesh irrigation project, we have executed and done [indiscernible] invoicing for INR 416 crores excluding [ DSC]. Out of INR 416 crores, we have received INR 263 crores excluding DSC. As of now [indiscernible] will be INR 153 crores. So the budget for INR 94 crores has been released by the state government last month. We expect release [indiscernible] within next 1 week to 10 days. Then the receivable will further come down. It will come down to somewhere around INR 60 crores.

Okay, sir. And the net working capital days, sir?

Net working capital days as on 30 June is 110 days. And definitely, if we receive the fund from water and the canal project, definitely, it will be reduced significantly.

Okay, sir. Sir, my last question, we are diversifying into solar [indiscernible] and mining side. Earlier also, we have guided INR 1,000 crores revenue target by FY '27 or '28, and followed by INR 2,000 crores revenue. So how do you look at our strategic -- like strategic point of view on the diversification? And how do you look at revenue mix in the next 3 to 5 years timeframe?

In case of solar project, the project [indiscernible] the EPC component would be around INR 2,000 crores. The land we have identified in the State of [ Andhra Pradesh ] and around more than 300 acres of land has already been finalized and these have been finalized. And we are in active mode of acquiring [indiscernible] lease on the remaining land, which we expect to be completed in the next 4 to 5 months. Simultaneously, we also taken up with the potential buyers of the power with the 2 states. And we expect these PSA, power sale agreements, will be executed between NHPC and the buyers. And subsequently [indiscernible]. And then post that, the detailed engineering based on the land configuration and layout, then followed by the procurement and execution. So we expect in the fourth quarter some revenue from this particular project.

Next question is from the line of Vaibhav Shah from JM Financial Services.

Firstly, on the consol [indiscernible]?

Pardon?

Have we received the [indiscernible] notice from NHAI?

Yes, yes. The [indiscernible].

Okay [indiscernible].

[indiscernible].

Sir, secondly, what would be the cash in PNC Infra Holdings as of June?

The cash and bank balance as of -- in the stand-alone balance sheet -- Infra Holdings -- around INR 1,100 crores.

Okay. And sir, out of the debt of INR 900-odd crores, what would be the ICD portion?

ICD is INR 485 crores.

Sir, why has the debt increased so much in 1Q?

Actually, the debt has increased due to the -- we have taken the term loan for machine financing. That's why the term loan has increased.

So we have so much amount of cash, and why are we taking term loan for machinery?

Actually, this is a strategic decision. The loan is to be repaid in the next 4 to 5 years. And we have maintained the liquidity in our company.

Okay. Sir, we saw that interest costs have significantly come down in Q1 to almost INR 20-odd crores from INR 30 crores in Q4. So incrementally, what would be the quarterly run rate?

The quarterly run rate will be in the range of INR 20 crores.

Okay. So we expect the debt to come down from INR 900 crores?

Yes, definitely, that will be come down.

Sir, secondly, on the -- if you look at the equity infusion, what would be the amount in '27 and '28? And the amount -- the number I missed for 2 new HAM [indiscernible] INR 490 crores equity requirement?

Equity requirement is INR 436 crores, excluding the solar and the 2 new HAM projects. Out of that, we intend to invest in financial '27 is INR 226 crores, and the balance will be in next year.

And the amount for 2 new HAM would be around INR 490 crores?

INR 490 crores.

Sorry?

It will be around INR 400 crores, because 2 HAM projects put together is INR 3,483 crores. So it will be around INR 400 crores.

And the [indiscernible] will happen sometime in '28 and '29?

Mostly in '27, we will [indiscernible] marginally. But majorly, it will be invested in financial year '28 and '29.

Okay. Sir, what revenue are we targeting from the [ AGM ] and irrigation individually for '27 and '28?

So irrigation project, we are planning to complete the irrigation project in FY '28. That is our plan, that is our target, provided we get the timely [indiscernible] from the government of Andhra Pradesh.

Okay. So what will be the revenue in FY '27?

We target for '27 is INR 150 crores, for [indiscernible] project.

We should be able to achieve the same because...

So remainder INR 600 crores in FY '28 if the payments are in place?

Yes.

Okay. And sir, on JJM?

JJM, we are expecting around INR 700 crores to INR 800 crores in the current financial year and FY '27, and around INR 1,000 crores in FY '28. And any residual amount will be there, that will be like [indiscernible] commissioning and testing kind of thing that will be -- we'll get it in FY '29. But the whole project will be completed before end of FY -- calendar year '28. '28, because government extended it to December 2028.

Okay. And sir, lastly, on the tax rate, it was on a higher end at 27% in Q1. So for the entire year, what could be the number?

The number will be in the range of 25% to 27%.

Okay. And sir, CapEx number for Q1 and entire year?