PSP Projects Limited (PSPPROJECT.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the PSP Projects Limited Q1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I would now hand the conference over to Ms. Pooja Dhruve, Company Secretary, PSP Projects, for the cautionary statements. Thank you, and over to you, ma'am.

Thank you, and good evening, everyone. I am pleased to welcome you all to PSP Projects Limited earnings call for analysts and institutional investors to discuss quarter 1 financial results. Please note, a copy of disclosure is available in the Investors section of website, as well Stock Exchange. Anything said on this call, which reflects the outlook for the future or which could be constructed as a forward-looking statement must be reviewed in conjunction with the risks that the company faces. Now I shall hand over the call to Chairman sir for opening remarks. Over to you, sir.

Thank you, Pooja. Good evening, everyone. On behalf of the management of PSP Projects Limited, I welcome everyone to the earnings conference call to discuss on quarter 1 FY '26 -- FY '26 quarter performance. We concluded the Board meeting this afternoon and uploaded the necessary collaterals on the stock exchange and the company website. Please note the transcript of this call will also be made available on the [ portal ]. During quarter 1 FY '26, the construction industry was suffered by labor shortage, and PSP Projects were no different. During the quarter, we faced labor shortage in the month of April-May 2025. And during FY '26, there was 37% shortfall in labor. Now, the good part, at present, we are at 19% labor shortfall. The minor impact of this and monsoon will come in quarter 2 FY '26 also, but I am confident of the shortfall further reduces starting August '25. During the quarter, the employee cost spiraled to 6.8%, which is usually in the range of 4% to 5%. Because of new order wins from Adani, the company has hired employees at various levels, whose impact can be seen in the employee cost. Secondly, majority of the newly awarded projects worth INR 1,600 crores that started after March 2025, they're all under initial stage of construction. That is foundation stage. During this construction stage, the deployment of labor is always on the higher side, while the labor availability was less during the same period. Hence, we faced a negative impact on our profitability. Another minor impact was on account of monsoon. In Gujarat, the monsoon season comparatively began early this year, hence almost -- hence, we saw some impact of the same in the month of June 2025. During this quarter, the company has also had booked -- during this quarter, the company has also had to book additional expense worth INR 4.5 crore on account of UP projects also. Company has reported an outstanding order book worth INR 6,514 crore as year-on-year growth at 11% as on 30th June 2025. The order inflow reported was INR 107 crore excluding GST of the current outstanding order book of Adani project comprising of 27%, and balance are non-Adani projects. With regards to order inflow for FY '26, we expect new projects to be confirmed and service orders to be received from August 2025 onwards. At present, we are in various stages of discussion, and project workings are going on. We expect this to conclude soon. During quarter 1 FY '26, company has successfully completed 8 projects, construction of residential project of Oyster at Adani Shantigram, precast elements of compound wall and [indiscernible] to Larsen & Toubro [indiscernible] project, Nestle Phase 2 field structural work and project, Ocean Phase 2 at [indiscernible] project, precast plant of Deepak Chem Tech Limited, precast plant of Kutch Copper Limited at Mundra, design and construction of school building in Jodhpur, Rajasthan in [ precast ]. During the last con call, I mentioned certain projects which did not take off as per our planning. I would like to share updates on each of those. Fintech Building at GIFT City, the client-side delays are now over. The shortfall in revenue for the quarter was due -- or was due purely because of unavailability of -- less availability of labor. GBRC has received client's approval, and the project work is going on well. Science City, the project work is going on well. In this quarter, we made a decision to move from conventional format to modular format system, that is [5:03]. Due to this, now, work happened in quarter '26 on the project. But eventually, due to this technology change, I am confident to see the closure of this project as per plan. [5:14], the problems still persist. Work is on hold due to land acquisition. SMC, there has been considerable delay in the receipt of [5:23] from the client side, and hence, work is [5:26] -- the finishing has not been able to start. There are no ongoing delays in land acquisition [5:34] today. Regarding the definitive agreement, the Adani Infra Limited, acquirer, has acquired 44,86,193 equity shares pursuant to the open offer, representing 11.32% of the paid-up equity share capital of the company. The settlement of open offer was completed on June 11, 2025, and all subscribing shareholders were duly paid against the shares tendered by them in open offer. Now, let me talk about some of the project updates like Coca-Cola. I think the project started last August, and presently, we are in a good shape and size as most of the structure part is over. We are purely [6:16] working now on the finishing part on the general development of the project. Gati Shakti Vidyalaya, yes, we had a -- last year only, we started that project. And during last monsoon, we suffered a lot of delay, and some delay to date this year also in April-May. But overall, the buildings are out of [6:34] at the level of first and second floor. So probably, now, the finishing activity and MEP will gear up on Gati Shakti Vidyalaya project at Baroda. Palladium Mall, yes, there was also -- this was the same project which we started last year in the season of April-May, and we suffered a lot of delay last monsoon also. And this year also, we suffered a little, but now, all the drawings are in place, and most of the activities in the buildings are on track now. The project should move on from here on a regular basis without any much failure from August onwards. With this, I conclude my remarks. And now, I would like to hand over the call to Ms. Hetal Patel to take through the financials in detail.

Thank you, sir. Good afternoon, everyone. The financial performance during the quarter ended June 30, 2025 is as below, quarter 1 FY '26 versus quarter 1 FY '25: revenue from operations for the quarter is at INR 513 crores versus INR 612 crores, which has decreased by 16% on Y-o-Y basis. EBITDA for the quarter is at INR 24 crores versus INR 73 crores, decreased by 67% on Y-o-Y basis. EBITDA margin is at 4.77% versus 12%. Net profit for the quarter is minimal, that is INR 13 lakhs versus INR 34 crores, reduced by 100% almost on Y-o-Y basis. Decline in revenue from operations is mainly attributable to labor shortage, which has been explained by P.S. sir in his speech. During the quarter under review, company had to incur additional expenses for UP project to the extent of INR 4.5 crores. And other expenses include ECL provisions made to the extent of INR 8.68 crores, which was INR 4 crores in quarter 1 FY '25. During quarter 1 FY '26, company has incurred CapEx of INR 32 crores. Gross block as on 30th June '25 is INR 627 crores, and net block is INR 322 crores. I would like to mention a few of the important balance sheet numbers as on 30th June '25. Long-term borrowing, INR 44 crores, including short-term maturities of INR 25 crores. Short-term borrowing is INR 338 crores, excluding short-term maturities of INR 25 crores. Net unbilled revenue is at INR 556 crores. Retention is INR 137 crores. Mobilization advance is INR 326 crores. Inventory is INR 344 crores, which comprises of INR 158 crores of construction materials, INR 161 crores of work in progress and INR 25 crores of finished goods. Out of total sanctioned credit facilities of INR 1,497 crores, company utilized INR 864 crores, including fund-based utilization of -- excluding fund-based utilization of INR 202 crores, and INR 431 crores is available for utilization. As on June 30, '25, the company has total fixed deposit of INR 268 crores, out of which lien free deposits are INR 74 crores. FD worth INR 169 crores are under lien with the bank for credit facilities, and FD worth INR 25 crores are given as a security deposit to the client. Work on hand as on 30th June '25 is INR 6,514 crores. Detailed bifurcation is available in the uploaded presentation. That concludes the updates on the financials, and we are now open for the question-and-answer session.

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

Sir, a couple of questions. So just first one on the [ Adani's ] front, and then, we'll come on the detailed question. So now, in terms of the revenue, EBITDA margin and order inflow for FY '26, what's the revised guidance?

Order inflow?

For FY '26, what is the order inflow that we are looking at, revenue and EBITDA margin?

See, order inflow as far as the growth component is concerned, we are in the -- presently in talks with Adani Group for projects worth INR 8,000 crores to INR 9,000 corers. So, there can be chances that probably that order inflow for this year could be in the range of about – already, if I say, it will be in the range of INR 7,500 crores to INR 8,000 crores from the [indiscernible], even with guidelines we laid out, because as we have faced a big problem in the first quarter and as most people go through with the second quarter -- last time also, I told that let me -- we will give you revenue guidelines after completion of first 2 quarters because all these projects which we are going to get from the group company also, they are going to start somewhere in the second quarter or maybe third quarter. So better we give revenue guidelines on the verge of second quarter completion. And EBITDA margins, yes, still we are in the range of the same thing what we have been telling, in the range of 8% to 9%.

Okay. So from the Q2 itself, whatever the challenges are, the labor shortage and plus extra provision, everything, given now, as you're saying that the labor shortage now has reduced, so from Q2 itself, can we start seeing 8%, 9% kind of a margin? Or it would be mostly in the third and fourth quarter we can start seeing? And is there any further provisioning for any of the UP or any other project is still pending?

No, no. Nothing is pending [indiscernible] actually. And this time also, [indiscernible] because most of the projects are in the phase of handover. And since the hospitals are not operating, people are not taking care about the project -- department is not looking after the project in a very efficient way. So the cost which we are incurring today is mostly because of the defect being not well maintained by them. So we are not sure, but they are not more than INR 5 crores, and it can be within INR 5 crores. There can be some cost which can come still in the second quarter, looking to my first quarter's experience, why this expense came at UP side because I was aware that the projects have already been handed over, why this cost is coming up. But the problem is with the department. Since the closure of the project has not happened, they are taking undue advantage of the contactor, and that's how it has happened.

So, sir, from the Q2 itself, can we start seeing 8%, 9% kind of EBITDA margin?

Yes, it should be Q2 or Q3, but probably, I would expect also in the Q2 part only.

And apart from Adani, we are not looking at any other order inflow now, the INR 7,000 crores, INR 7,500 crores?

Yes, as we said last time also, if there are prestigious projects, there we can bid. So one of the large projects of Gujarat, which is this Ambaji Corridor development has come, the tender has been rejected as single tender came up. So now the tender will come in this month only. So probably, we get qualified. We will be bidding for such types of projects. But mostly, it will be from Adani, mostly you're right.

And given that now -- so let's see even if whatever the similar run rate we can do, INR 500 crores or maybe INR 600 crores, or maybe lesser than that in Q2. So second half, how one can look at? Because whatever the new orders that we are looking at, INR 7,000 cores, INR 7,500 crores, from where -- when one can start seeing the execution to coming in? And for next year, let's say, if this comes by, let's say, December, so next year, out of this INR 7,000 crores, INR 7,500 crores, how much one can look at in terms of the revenue for next year?

Yes, if you consider this as an order inflow of INR 7,000 crores, INR 7,500 crores, probably that will come starting in the month of -- third quarter. And I say this, most of the projects are in basement as we are doing most of the projects for real estate. So probably, we can expect that revenue to come to the extent in the last quarter only. So, as our guidance for the project, the revenue will stabilize in second quarter also. But whatever new orders which are coming in the second quarter will get closed in terms of going through with the work in the third quarter. So probably, basement part can start after -- in the fourth quarter only.

Okay. No, no, I'm just trying to understand, so currently, we have the existing order book of INR 6,100 crores and plus what we additionally get, INR 7,000 crores, INR 7,500-odd crores, so this would be close to INR 13,000 crores, INR 14,000 crores and plus whatever we will be doing, let's say, maybe INR 2,500-odd crores. So INR 11,000, INR 12,000 crores would be there by end of this. So next year, how one can look at -- can easily, one can do INR 4,500 crores kind of a revenue? That's the fair way one can look at?

Yes, INR 4,500 crores we can easily say because now the order will be in multiple of 2x to 3x, we will be easily able to do a revenue of INR 4,500 crores next year.

And then, in terms of the working capital for doing this, so 2 aspects: one is the employee cost of whatever we have currently this quarter, INR 35-odd crores. So additionally, how much more one can look at in terms of absolute level? Still we need to hire as we are still to get the more orders. So, that is one. And second, on the working capital front, how much more because of this, the working capital can go up or can come down? And then, as a resultant in terms of the debt level, how one can look at the gross debt level?

See, as far as working capital or debt is concerned, we should be in a better position by end of second quarter and maybe maximum by end of third quarter because whatever orders which we are getting from the Adani Group, it is considering 5% to 10%. So initially, once you start the project, it is 5% mobilization. And once the mobilization is over, it is further 5%. So even if we are considering INR 7,500 crore, whatever, inflow from the group only, we will be getting minimum INR 750 crores as an advance. So probably, working capital should not be issue. And whatever working capital which we are using today from the banks as fund base can get reduced to a drastic level by end of third quarter.

And last, just for clarity, sir, order book project-wise, whatever we've given in the presentation, all the numbers are same as it was in the FY '25. So is it a printing mistake or nothing -- there is no execution in any of the projects?

No, there is no printing mistake. It cannot be like all the numbers are same. That can be the total value of the project, but remaining work to be executed must have changed.

No, that's the same. That's what I'm asking...

Okay. Again, we'll recheck. Shravan, let us -- let me recheck.

Okay. No issues, sir.

[Operator Instructions] The next question is from the line of Vaibhav Shah from JM Financial.

Ma'am mentioned that there is an ECL provision of INR 8.7 crores. And last year also, it was INR 4.5 crores in Q1, regarding to which project?

The ECL provision we are doing based on the calculation for the tenure of the receivables means all new receivables bracket that we provide on a higher side. So one provision is that. And regarding Pandharpur, we have provided in full now. So out of INR 8.68 crores, we have provided around INR 4 crores for Pandharpur project. So, as of now, all INR 17 crores, which were receivable from Pandharpur, that has been provided for.

Okay. So do we expect some number in Q2 as well on the ECL side? Or everything is largely done for the existing book?

Q2, it can be because see, it's purely based on the formula, ECL formula, which we put on the receivable numbers. So, that can -- there can be some amount of provision in Q2 also, depending on the receivable.

Bhiwandi and Pandharpur is over.

Bhiwandi, Pandharpur, we have already provided.

And what is the receivable number as of June?

Yes, it is INR 525 crores as on 30th June.

Okay. So we have seen a sharp increase in debt as well on a Q-o-Q basis, around INR 100-odd crores increase. So this is due to rise in working capital?

You are talking about -- sorry?

Gross debt has increased from INR 270 crores to INR 382 crores on a Q-o-Q basis.

So, that is -- yes, that is mainly because of some of the CapEx acquisition. We have already -- as I already mentioned, INR 32 crores of CapEx we have incurred. So some of the CapEx, we have to pay 100% advance. So because of that, it has increased. And to some extent, yes, because of this increase in working capital requirement, we had to borrow debt.

Okay. And secondly, we had won a project of Ahmedabad Airport city side development of around INR 600-odd crores in last year in Q4. So I was not able to see the project in the order book sheet that we have in the PPT. So have we missed putting it in the PPT? Or there's some cancellation or change in scope?

Maybe that we will check. We'll check it.

No, no, I think the project is there, but I think they must have missed it. We'll check it.

Okay. Sir, secondly, if you look at the order book movement over a Q-o-Q basis, there's a difference of some INR 300-odd crores. So have we canceled any order in the quarter?

Yes. To some extent, a few projects – one project, we have short closed. So still that project is running, but the execution amount has been reduced. That is SRFDCL. And that might have given the effect in the work on end.

Okay. Sir, what is our CapEx guidance for FY '26 and '27?

It will be in the same range of 3% to 4% because these -- all projects from Adani Group is on large scale, can go [ 0.5% ] plus or minus. Otherwise, it will be in the same range.

And sir, last year, you mentioned that there are some delays in payments from SMC. So you have not done any work in Q1? Was it correct?

No, no, no. There is nothing like delay in payment and we have not worked. It is absolutely because payments are coming on. But the only thing was the labor issue before which we were not able to execute majorly because -- in the first quarter.

So what was the targeted revenue from the SMC project for FY '26? And earlier, we were targeting to compute revenue in FY '27. So still we hold that? Or it will spill over to '28?

No, no. It can't go beyond '27 because it has to be completed, and we are on [indiscernible] because all the finishing activities are now in the -- currently started. They just concluded before March, even before this quarter. And even the facade is also now approved, and the materials have been ordered from our side also. So probably, after 1.5 or 2 months, during this second quarter end or third quarter start, we'll be in a better position to work on all the activities related to MEP, civil, finish, interior and facade.

So, as of now, only 30% work is done, right? [indiscernible] is the original value and [ INR 960 crores ] is the outstanding order book.

You mean that the work done value is only 30%, right?

Yes.