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

Ladies and gentlemen, good day, and welcome to the P.S.P Projects Limited Q1 FY '21 Earnings Conference Call, hosted by Asian Market Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Amber Singhania of Asian Markets Securities Limited. Thank you, and over to you, sir.

Thank you, Aiysha. Good afternoon, everyone. On behalf of Asian Markets Securities, we welcome you all for Q1 FY '21 Earnings Conference Call of P.S.P Projects Limited. We have with us today Mr. P.S. Patel, Chairman and Managing Director of the company; and Ms. Hetal Patel, CFO of the company, along with their team supporting them. I would now like to hand it over to Mr. Patel for their opening remarks, and then we can proceed to the question-and-answer session. Over to you, sir.

Thank you, Amber. Good evening, ladies and gentlemen. This is P.S. Patel, Chairman, Managing Director and CEO of P.S.P Projects Limited, along with Ms. Hetal Patel, CFO of our company. We welcome you all on this earnings conference call, which is focusing on our company's performance in quarter 1 FY 2021. Before we move to the financials of last quarter by Ms. Hetal Patel, I would like to throw light on a few of the updates and developments of the business in this quarter. As you all know that this quarter has been the worst quarter of any business other than essential goods and services. And like others, construction industry is also one of the most impacted industry due to the COVID-19. As a part of the process and compliance, we are presenting the results. However, we believe that the results of this quarter cannot be compared to year-on-year or month-on-month because it doesn't reflect the company's real picture performance or capability. Due to lockdown by March end, followed by migration of workers, there were issues that we couldn't manage to perform at site. Simultaneously, the company had to manage the regular operation for salaries, rent, C.P.C., along with additional expenses like facilitating food essential, masks, sanitizers to the workers at all projects during the initial lockdown period. Plus an expense to arrange the buses, trains and post that access to arrange the buses, trains and ticket for the workers to send them to their hometown, and now the same expense to bring them back. In this period of hardship, company has managed to work -- book revenue from operation of INR 106.89 crores with a net loss of INR 3.54 crores and INR 2.21 crores on standard earning basis. Easing behind this situation, now the positive part is that the utilization of the workers has been faster than expected, and we have achieved almost 75% to 80% of labor sent back at the projects. Similarly, we are not facing much issues with regards to availability of construction material. Company stands with a robust order book of INR 2,964 crores as of June 30, 2020. Out of that total order book, about 75% projects are from Gujarat, Rajasthan, Karnataka and UP. There we have resumed operations smoothly except a couple of projects. Remaining 25% projects are from Bhiwandi and Pandharpur, which is in Maharashtra, where I'm not subject to resume operations due to clearance issues by authority [ MI ] highly affected, also it is highly affected in COVID area. We are glad to announce that we are setting up a state-of-the-art manufacturing plant [ for ] building analysis element structures in [ near-term ] in Gujarat, which we are in our annual production facility of the plant is expected to be 3 million [ now that's ] once fully operational. However, initially, we are setting a plant with production capacity of 1 million square feet of Phase 1. We are targeting that the Phase 1 will be operational by May 2021 to achieve seamless quality and speed in delivery, larger volumes in controlled environment and minimum dependency on labors as the objectives targeted from the plant. It's [ still depositioned ] and which is about the proposed one is at separately uploaded on BSE and NSE portal, which you all must have already gone through. Presently, the bid book is about INR 3,000 crores, which majorly includes new Parliament building, INR 889 crores, which is pre-eligibility presently for pre-qualification only; Welspun warehouses at Bhiwandi is about INR 400 crores; Brigade Hyderabad is about INR 300 crores; GIDC, which we have already been declared L1, but [ still get through this the order ] is INR 275 crores; Torrent House in Ahmedabad is about INR 100 crores; and there is one project of Reliance in Jamnagar, which is about INR 100 crores. So these are the key highlights from my side. For detailed financial disclosures, I will request our CFO, Ms. Hetal Patel, to take it forward. Thank you, everyone, to be a part of this call. Thanks.

Thank you, sir. Good afternoon, everyone. And welcome you on the call. Let me first give you the highlights of stand-alone financial results for the quarter ended on 30th June 2020. As all of us are aware, the lockdown imposed is to contain the spread of COVID-19 pandemic have adversely affected company's operations and financial results for the quarter ended June 30, 2020. Hence, the results for this quarter are, therefore, not comparable with those for previous quarters or comparative quarter of previous year. Company has booked revenue from operations of INR 106.89 crores for quarter 1. The revenue generated from Surat project was INR 45.61 crores during this quarter. Total revenue booked for Surat project till 30th June '20 is INR 1,002 crores. Even under such adverse circumstances, company was able to maintain positive EBITDA at INR 1.29 crores for the quarter. Net loss, including other comprehensive income was recorded at INR 2.25 crores for the quarter. If we look at the consolidated numbers, the group has booked net loss of INR 3.54 crores for the quarter, which includes the loss incurred on the sale of one unit of residential property by the U.S. entity. As on 30th June 2020, the company has total fixed deposit of INR 212 crores, out of which 3 deposits of INR 49 crores, [ estimate ] worth INR 148 crores are under lien with bank for credit facilities and estimates given to clients as security deposits before this amount to [ INR 15 crores. ] Work on hand as on 30th June 2020 is INR 2,963 crores, which comprises of INR 573 crores for Surat Diamond Bourse projects, and [ out of this ] INR 2,390 crores for other projects. With this, I end up giving key highlights on the company's financial performance. And now we are open for the question-and-answer session, to request the moderator to take it forward. Thank you.

[Operator Instructions] The first question is from the line of Mohit Kumar from IDFC Securities. [Operator Instructions] The next question is from the line of Shravan Shah from Dolat Capital.

Sir, now as you said that 75% to 80% lever is back. So first, I wanted to know, now are we in a position to give a guidance of revenue inflow and EBITDA margin for this year? Or maybe we will wait for the second quarter to give a guidance?

I personally think it's still we are not able to give you the prospective details about the guidance. So let us wait for at least mid-quarter, yes.

Okay. But broadly, sir, still we feel that the second quarter will be a degrowth or will be around flat because last year, we did INR 312 crores. So any broad idea in terms of the second quarter, at least?

We have retained the labor force of [ 25% ] and 75% operation has already started at most of the [ sites, it -- ] sites. But still, we are falling short of 25% people. So let us hope, previously, we were thinking that by end of August -- first week of August, we should be able to -- we'll be able to go through all the labors at site. But still there is a lockdown in UP and Bihar was prolonged so that means that people coming from Chhattisgarh get stopped for [ congregation. ] So still, we are waiting for some people to come. So probably by end of this month, we'll be clear in our mind that now how should we move for this quarter.

Okay. And sir, regarding this setting up of the complete plant, I just wanted to understand, this INR 75 crores is for the 3 million tonne, and we will be setting up in corporate 1 million tonne. So how much will be spending for 1 million? And by -- because this is coming up in the next May. So by this March and how much we will be spending? And when will we coming up the -- from 1 million to the 3 million tonnes?

See, 1 million square feet, not tonne, first thing. And the facility which we have created, the land, which we have bought, the building which we are going to construct, we'll keep only for 3 million square feet only. The machine availability we are ordering is left out -- is limited to 1 million square feet. So as and when we thought or think that there is a good order, or there is a space wherein we can pass, so the foundations are already there. So we just have to order in too some machinery, and then we can go through 3-lakh square feet. But the overall facilities, which we are constructing as of now will be for 3-lakh square feet, only the machinery part will be of 1 million square feet.

So sir, how much we will be spending out of INR 75 crores for 1 million square feet? And how much in FY '21?

It is 1 million square feet and 3 million square feet of the building and the total land, which we have already mentioned in the letter, the whole facility will get [ INR 1,875 crores. ] And the money will be spent within this period from March to date, to March 2021 or maybe [ last week ] 2021.

Okay. Okay. Sir, just wanted a few balance sheet numbers in terms of the inventory number, debtor number, [ creditor, ] and retention and mobilization advance? Hetal ma'am, you can help me.

Yes. See, this time, this -- means, as this quarter, so it will not be -- that number will not be comparable to previous quarters because even March outstanding also that some portion has still to be collected. So that numbers we haven't worked out because the number of sales is lower compared to previous period. So it will be stretched. The numbers are stretched.

So that's what I wanted to understand how much of a broader number, ballpark number, definitely you will see having.

I can give you the debtors -- total debtors value. Compared to previous year figure of INR 224 crores, the debtors are INR 165 crores.

INR 165 crores?

Yes. Yes.

Okay. Your inventory?

And inventory is INR 91 crores.

Okay. And creditors?

Creditors, INR 145 crores.

INR 145 crores. And how much is the retention money and the mobilization advance?

Retention money around INR 70 crores we are having. And mobilization, there is not much difference.

So last time, it was INR 114 crores. In last call, we have total INR 114 crores. So are you saying it will be in the same range?

Yes, it is around INR 100 crores.

Okay. And last time, ma'am, we have talked about the unbilled revenue of, I think, INR 100 crore-odd, something. So how much would be there now?

It is INR 84 crores unbilled revenue.

The next question is from the line of Chintan Sheth from Sameeksha Capital.

On the U.S. property, you did mention something in our opening remarks. I missed that. Can you repeat that, please?

Hello?

Hello. Am I audible?

Regarding U.S. properties...

Yes, yes. You mentioned something about the sale of property.

One of the house, those -- 2 houses are constructed, ready for sale. So one of the houses is sold. So we have booked the loss in this consolidated financials.

How much is that?

That amount is around 8-0, INR 80 lakhs.

INR 80 lakhs. Okay. Okay. And the second one is unsold as of now?

It's not yet sold.

Okay. Right. And how come we made a loss because the property prices has reduced compared to what we had expected?

See, these 2 houses, we build to adjust from first prototype project, and this project was only 2 houses. And if you could remember the construction period when these 2 houses were bought, really the construction materials was quite high ones in the U.S. at that time. And the sale of this property because it is in the downtown, it took too much time. And when by the time, we have to sell it, this COVID started somewhere in the month of January, February. So then that impact also gave us when we wanted to get out of the project. Otherwise, it may get [ to around 3 to ] 6 to 8 months. So [ I'd say that ] loss has been done. And overall, you should understand that this money, loss is on the books. At least, as a company, P.S.P has already earned INR 5.68 crores as an interest income, which we have already shown throughout this -- past 3 years in each quarter.

And action gain also.

Sorry?

We are booking expense gain also from this...

So apart from interest income expense gain, this is a loss. This is your loss for the building sale.

Sure. Second part of the question was, you said that 75% of the project work has been started and 25%, which is Pandharpur and other regions, the project has not yet come into operation. So within the 75% order book, how much you'll see in terms of at what level their education is taking place right now compared to pre-COVID levels, say...

Your question is not clear there.

So -- sorry, I was saying that 75% of the order book, you mentioned that execution has started, except for that 25% project, which is Pandharpur and other regions where COVID is still there. So out of the 75%, what is the execution level right now compared to pre-COVID levels?

The execution level, how can I define? What exactly you mean by that? Execution level in terms of -- what is the status of the building or what is the status of the [ real project... ]

Yes. So status of the projects, say. Say we were booking, say, INR 100 crores of revenue or INR 100 crores of building material pre-COVID. How much of that we've started billing to the clients now?

You mean to say at what capacity we are running those projects?

Correct. Correct. Correct.

See, you can very well understand. See [ you will then ] -- we very well understand [ see but from each year ] which we are being short of as of now is basically for [ capacity ] sector. Of those projects, which are in the finishing stage, they [indiscernible]. And say, most of the activities in the finishing stage has already started for almost all the projects, which we have mentioned at 75%. And in that 75% project was the labor is 75%, still we have not reached to 100%. So that projects are going on, on finishing the level, not on the structure part. All those projects, which are on the structure part, still we are seeking for few more people to come to start.

The next question is from the line of [ Avinash Sharma ] from [ Spark Capital. ]

Yes. Sir, my first question is on this affordable housing projects, what is the status there? And also any pending clearances from any of the government projects that we currently have?

For which quarter you are asking?

Sir, as all the affordable housing projects, is the order book moving?

Yes. We have only 2 affordable housing projects. One is in Pandharpur, and the second project is in Bhiwandi. So present Pandharpur project, we have already started with less labor. And there is no permission or anything hurdle in that project as of now. But Bhiwandi project, yes, still we are waiting for RERA. So registration we are waiting for the government to give us some of the papers, for which we are doing the communications. [ You see we already is ] and based on RERA, we are going to get the construction permission. So probably by this month or maybe next month, next 15th September, we should be through with RERA and construction permission.

Sir, on this deposit pledge for credit specialties, can we get this number as on March 20 and now?

Sorry, deposits for?

For credit facilities?

What is it credit facility...

Okay. I have given as on 30th June, so you require for March?

Yes. Yes. Yes.

Just a minute. See, yes, we were having [ INR 166 crores here ] for...

Sorry?

[ INR 166 crores here main -- for bank ] deposits placed against the credit facilities. And [ pre and these, they're ] around [ INR 50 crores. ]

[ INR 50 crores. ] Okay. Okay. And what is the progress of this Diamond Bourse, like any change in the completion date we last -- from last quarter that we discussed?

This we had previously [ said ] those [ waivers ] to complete by March 2021. [ But plus ] with an interest of maybe 1 or 2 months maximum.

1 or 2 months beyond March '21?

Yes.

Right. Okay. Sir, one last question is on this -- what is our CapEx and equity requirement that we are looking at for FY '21 and '22, based on current order book and any expected order inflow?

Presently, company is having sufficient CapEx to handle large-size projects. So maybe may not be -- in regular basis, it was around 3% or 4% of our sale in each year. But once the CapEx from Surat is getting free, most of the projects are getting completed from a structure point of view. So I think there won't be too much requirement of CapEx as of the regular operations [ expected. ]

The next question is from the line of Mohit Kumar from IDFC Securities.

Sir, 2 questions. The first is on the [ construction ] side, the execution, you did mention that 85% level you've achieved. But what was the number in July? And is this 85% is happening in August? Or is this number not quite your real number for the last 1.5 months?

You mean -- we are asking that number [ releasing from the ] earnings?

Hello?

You're asking numbers in terms of revenue?

No, sir, in terms of availability of labor and also how -- how they ramped up, how the sizes have ramped up? And is there any difference between, let's say, Gujarat, Maharashtra or let's say, in UP, do you see different kind of schemes...

As I have already told you that the people which is required for the finishing activities like plaster flooring, most of the people have regained. But the basic RCC subsidiaries, which is [ foreign share ] where the people are coming from Jharkhand, UP, Bihar and Bengal, those people are still feeling short, and there was further lockdown in UP. That has extended some of the people. And then this festival of Raksha Bandhan and all that. So we are still expecting 30% to 40% people to come from Jharkhand and [ Bihar and Bengal. ] Therefore, the people, 75% to -- 75% people have already regained on all the sites, which is more related to finishing.

Okay. Sir, good to hear that. Sir, the second question is on the order prospect side, how are you looking at the rest of the year? Are you seeing some more tendering? Or you think it will be a bit slower this year?

Yes. Actually, the company is still having an order book of INR 2,960 crores. So we are still going to go conservative till we get a right opportunity or the right project. Otherwise, we should consult it more on these next 2 to 3 months period until we have to compare more on the present operation.

But how are the prospects looking, sir, in the sense in tendering in the sector?

Tendering, I have already said that we are having a bid book of INR 3,000 crores, which I've already told you that we have bidded for 2 projects, which I already mentioned, a new Parliament building in Delhi -- Welspun warehouses in Bhiwandi. There is one project for Brigade in Hyderabad. There is one project of Foreign House in Ahmedabad. There is one project Reliance in Jamnagar. We have an order bid book of INR 3,000 crores. But you see, we are not doing dynamically. We'll be going a bit conservative and we have the good opportunities that we have at those projects.

Is there any preference to the government project or the private one sir, at this point of time?

As such, there is, no. It still depends on what type of private project it is and what type of government project it is.

The next question is from the line of [ Jason Stone ] from [ Monarch Network. ]

I just want some color. I mean, sorry for making you repeat, but would want some color on this facility which you were developing for INR 75 crores, which you mentioned in your initial comments. Could you just throw some more color on it?

See, this is a [ pre-cast building ] construction plant, which wherein we will be making [ the installer markers, RCC ] everything at the factory, and we'll be installing at site. Previously, I was thinking on these projects since last 4, 5 years. But previously, the portal provisions in India were not so strong. But now the portal provisions are so strong, and there are so many construction works who have been doing these types of work in America and Europe. They've also started designing the projects in India. And also, this technology is being accepted for so many types of buildings. So you must have seen so many projects going in Hyderabad, which is up to 30 story. Now looking to the present scenario of COVID, looking to the present scarcity of labor, looking to the demand of the client in terms of time and quality, I think these types of projects or these types of factories would give you a better quality, better timelines, and we will not be forced to stop the work. So we will not be more dependent on labor. Because labor, when we talk about regular conventional RCC, it's a purely labor-intensive work. And when we talk about pre-cut concrete, it is the very mode of automation, which is being done at the factory level, and only the erection plant and some of the things which you record at the factory site. The labor requirement is almost 10% to what we require for regular concrete building.

Okay. So sir, this facility will require a CapEx, an investment of INR 75 crores. Is that right?

Yes, that includes land and everything. The land we have bought we keep it larger because [ the past too ] you never know whenever you may get larger-size project, you then go up the size of the land. And if we are getting a larger size of block in one place, it is rather better rather than creating 2 facilities for future expansion. So we have got this [ plan ] land in multiple of 3x. So that basically if there is a requirement in future, we won't have to be grown [ by ] [indiscernible] at the same time, the radius that the [ leased ] land is available, it is about 35 kilometers from Ahmedabad. It is located almost in Sanand which is about 34 or 40 kilometers from [ local Changodar. ] So these are the industrial areas, which we can get there at the same time we can get the real estate projects whatever is required and when it is accepted in the market from Ahmedabad. Otherwise, we can do the precast work typically up to 200 kilometers. But largely, if we say, lesser distance, better is the liability. So that's why we have selected this land.

Right. Right. And this will help you use more of automation and less of labor, especially in this current COVID environment, right? This will help you, [ these 2 factors will be... ]

It is not only about the COVID impact. Even if you see the hierarchy, mason labor -- mason's son will not never become a mason. Laborer's son will never become a laborer. So more and more exhibition coming up in all the states of India, there are going to be scarcity of labor in may be in next 4, 5 years. And more or less, this business has become seasonal. So whenever there is a shortage of labor, there is -- when there is a monsoon, there is a shortage of labor. When there is a holy, there is a shortage of labor. When there is a Diwali, again, there is a shortage of labor. So [ total to ] all these things and some [indiscernible] consistent, I mean, these types of [ activities ] will always help the company to go on a consistent way, so that the overall project timelines are not affected.

Right. Okay. And this CapEx of INR 75 crores, it will be spread over 2 years or 3 years or [ I mean, it is... ]

No, no, no. It is going to be spent within next 6 to 9 months. So probably by March 2021 or April 2021, we have to spend this. We have already spent [ one land. ] Already we have been [indiscernible] [ land ] also.

The next question is from the line of [ Jiten Doshi ] from [ Axis Capital. ]

Sir, a few questions on my side, from my side. Sir, in terms of fixed costs, so what fixed costs you have incurred this quarter? And probably the similar run rate we can expect in Q2?

Yes. We can see it on our P&L statement only, fixed costs mainly consist of this finance cost and price benefit as well. So all this based on [ fixed order and ] fixed overhead that we have already incurred for the quarter.

So because we have seen significant fall in the employee cost, like from INR 16 crores to almost INR 10 crores this quarter. So my only point was whether this INR 10 crores will remain INR 10 crores or it will go up in Q2?