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

Ladies and gentlemen, good day, and welcome to PSP Projects Limited Q2 FY '21 Earnings Conference Call hosted by Asian Markets Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Suraj from Asian Market Securities. Thank you, and over to you, sir.

Thank you, [ Reno ]. Good afternoon, everyone. On behalf of Asian Market Securities, we welcome you all to the Q2 FY '21 Earning Conference Call of PSP Projects Limited. We have with us today, Mr. P. S. Patel, Chairman and Managing Director of the company; versus Hetal Patel, CFO of the company. Now I would like to hand it over to Mr. P. Patel for their operating remarks, and then we can proceed to the Q&A session. Over to you, sir. Hello?

Mr. Patel, can you hear us?

Yes. I'm able to hear you.

Yes. Sir, go ahead.

Good evening, ladies and gentlemen. This is P. S. Patel, Chairman and Managing Director and CEO of PSP Projects Limited. Along with Ms. Hetal Patel, CFO, welcome to you all to this earning conference call, which is focusing on our company's performance in quarter 2 FY '21. Hope you are all fine and safe [indiscernible]. Before we move to the financial specifics of the last quarter by Ms. Hetal Patel, I would like to throw light on a few of the updates and development of this quarter. To start with, I am glad to share that in the second consecutive year, PSP Projects has been awarded as second fastest-growing construction company in below INR 2,000 crores category and also third year in a row company is fecilitated as India's top 10 challengers of 2019/'20 during Construction World Global Awards 2020 held on 16th of October 2020. After the challenges like lockdown, workers' migration in all the first quarter, we are happy to share that the quarter 2 outlook has significantly improved for the industry, and the remobilization of the workers have reached to 95% plus by August end. It was almost 50% till July. Work on all the projects are going on smoothly except 2 projects, which are EWS Housing project at Bhiwandi and [indiscernible] Sabha Hall project in Ahmedabad. The projects are following COVID guidelines as per their respective local authority. However, new normal working metrics and social distancing guidelines issued here in the 2 projects we are building here has significantly put some new challenge the construction industry is facing. With this, company has booked revenue from operations to INR 243.09 crores in quarter 2, which is 22% less if we compare year-on-year basis. But looking to the current situation, we believe that the number is good to start with [indiscernible] after lockdown on quarter-to-quarter basis, and this will improve further in the following quarters. Company has net orders of INR 92.70 crores in quarter 2 FY '21 and INR 107.58 crores in ongoing quarter, which comes up to the total order in FY '21 to INR 216.42 crores till date. We have successfully completed 5 projects in FY '21 for our recent clients like [indiscernible]. With these, total projects completed by PSP has reached to 147. At the end of quarter 2, company stands with a robust order book of INR 277.6 crores, including 47 projects. And also, company has booked of at least INR 3,000 crores at various stages. This book includes some government initiatives of INR 800 crores; government plaza development of INR 463 crores; private developer commercial Bangalore at -- commercial building in Bangalore, INR 250 crores; this commission project in Mumbai is INR 130 crores; logistics park project, INR 350 crores; IT company project, INR 850 crores. About precast plant. Civil work is full fledged going on, and we have received some of the machines also from the supplier, and the instrumentation has been also imported. And the total investment that is till what the public has planned is INR 20 crores in land and INR 6 crores in ongoing civic construction work. 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. Take care and stay safe, and wish you all a very healthy Diwali and a new year in advance. Ms. Hetal Patel?

Thank you, sir. Good evening, everyone, and I welcome you on the call. Let me first give you highlights on the stand-alone financial results for the quarter ended on 30 September 2020. Operations during the quarter continued to be impacted by measures to contain COVID-19 pandemic. Execution of projects gathered momentum, though recovery has been gradual and progressive. Accordingly, the results for the quarter are not comparable with those for the previous quarter and corresponding quarter of the previous year. Company has booked revenue from operations of INR 243.08 crores for quarter 2. The revenue generated from Surat project was INR 65 crores during this quarter, and total revenue booked for Surat project till 30 September '20 is INR 1,068 crores. Company has booked EBITDA of INR 24.52 crores, which is 10.09% of the revenue from operations. Company has spent around INR 2.5 crores for reverse migration of the laborers and COVID-19-related measures. Net profit, including other comprehensive income, was recorded at INR 14.37 crores for the quarter, which is 5.80% of the revenue from operations. The addition in assets during the quarter was INR 32 crores, which includes INR 20 crores for land acquisition for the proposed precast plant. During the quarter, we have also incurred expenses of around INR 6 crores for the precast plant, which is shown as capital WIP in the balance sheet. If we look at the working capital days, debtor days are 72. Creditor days are 68, and inventory days are 35 for the quarter. As a significant portion of the second quarter revenue was booked in September, the overall working capital days are stretched. If we review the consolidated numbers, the group has booked net profit of INR 14.01 crores for the quarter, which includes loss incurred on the sale of second units of a residential property by the U.S. entity. As on 30 September 2020, the company has total fixed deposit of INR 199 crores, out of which pre-deposits of INR 43 crores, at least both INR 149 crores are under lien with banks for credit facilities and actually given to clients as security deposits, amounts to INR 7 crores. Work on hand as of 30 September 2020 is INR 2,776 crores, which comprises of INR 507 crores for Surat Diamond Bourse project and INR 2,458 crores for other projects. With this, I end up giving key highlights of the company's financial performance. And now we are open for question-and-answer session. So I request the moderator to take it forward. Thank you.

[Operator Instructions] First question is from the line of Shravan Shah from Dolat Capital Market.

Yes. Sir, firstly, if I look at the SDB revenue of INR 65 crores, INR 66 crores, and if I just look at the first quarter revenue of INR 45 crores, INR 46 crores, so that is first quarter revenue is mostly, April was a lockdown till May and June, so 2 months revenue was there. Even if I multiply that monthly revenue for this quarter and also, at the same time, now we are having a much, much better labor, so in the first quarter, we were having 20%, 25% and now 80% plus kind of a labor must be there. Then also, the SDB revenue should be at INR 69 crores. And also, at the same time, we are doing a high-margin interior work. So first, trying to understand why so much less revenue. And what is the revenue that we have done in the October in SDB? And at the same time, the remaining INR 507 crores order, can we now expect a INR 60 crore kind of a monthly revenue, which we were earlier used to plan before the COVID? So that's the first thing I wanted to know.

Shravan, the revenue from Surat Diamond Bourse, I think, first -- I think, September -- August was INR 42 crores. Yes, August was INR 42 crores. And then September was -- this last month bill was about INR 54 crores, so -- as we see in October. So September was INR 42 crores and the next month, INR 32 crores, okay. So the total, he is saying, is INR 69 crores. So you mean to ask me a question that why is the revenue in first quarter was INR 49 crores? Why is the revenue in the second quarter is only INR 69 crores? How you're comparing just in terms of labor?

Yes. No, no, sir, I'm saying the second quarter revenue is INR 66 crores. And the first quarter revenue was INR 45 crores, INR 46 crores, where we were having much, much less labor. And now we are doing more of interior work. So this quarter, third quarter revenue, with a higher labor, it should have been much higher, at least INR 35 crores, INR 40 crores monthly run rate should be there. So that's what I wanted to understand. And how -- now we are looking, as you say -- you are saying that October monthly run rate is INR 54 crores. So if that is the case, so we can expect a INR 60 crore kind of a monthly run rate going forward?

Okay. So that means what you are trying to make me understand is that the number of laborers in the first quarter was so less, we have here conceded to deliver the net revenue earlier of INR 42 crores. And in the second quarter, the labors have resumed, but the revenue is only INR 69 crores. See, July and August, I always say July was 40% to 50% [indiscernible] people were there. And in August end, we could reach to 90%. So if you really compare this quarter, it's 1.5 months' revenue. It's not 3 months' revenue, what you are trying to make me understand. So the resuming of labor in July end till August end has almost given us a revenue of total INR 1.5 crores -- 1.5 months [indiscernible] average to the whole quarter. So then if you see the 2 months' revenue, last month also, we have a revenue of INR 40 crores, INR 50 crores. Before that, it was INR 42 crores -- before that, that was maybe about INR 30 crores. So actually, the revenue has increased substantially, and the labor spend has regained just at the end of August. So practically, we came for 1 month pool that is September.

Okay. So now we can expect at least INR 60 crore kind of a monthly run rate from November?

Yes. I'd say INR 55 crores to INR 60 crores, yes.

Okay. Okay. And then now if I come back to the broader numbers, so now how we look at in terms of the third and fourth quarter? I understand we haven't given the guidance last quarter. But now things are much, much clear. So how do we look at the third and fourth quarter? Can we combine together -- because if we take up SDB revenue, INR 60 crores into 6, then INR 360 crores should be there from SDB. So in totality, can we see INR 900 crore, INR 1,000 crore kind of a revenue in the second half?

So in total, I was saying that we would try to reach to near to the flat. If you consider INR 1,250 crores to INR 1,300 crores at the end of this year, I think we will be -- absolutely, we will reach to that level.

Okay. Okay. And secondly, on margin trends now [indiscernible] quarter, we are coming back to the normal level, 10%. So from third quarter onwards, can we come back to the 13% kind of a normal level of EBITDA margin?

See that, again, depends on what type of activity is going on and what level of revenue is considered in that quarter. I cannot share you about the percentage, but we always say, it will be in the range of 11%, 13%.

Okay. Okay. And on the inflow front, sir, that's the -- where we are missing because our GIDC L1 also got canceled. And now we have received only INR 216 crore inflow till now. So -- and at the same time, what is the status of the Central Vista prequalification? When can we expect the orders to come? And how are the tender sizes there? And because normally, we used to get INR 1,400 crore, INR 1,500 crore kind of a yearly inflow. But in the 7 months, we haven't actually done it. So because that is going to affect our FY '22 revenue. That's what I was trying to understand.

See, I said there is an inflow quarter. We always say that we have to be strict and to be more selective. We are not trying to jump into any type of order. And I have already declared that there is a pipeline bid book. There is a pipeline of -- what was that worth, INR 2,000 crores worth. So even if we are asking for 1 or 2 work where one is INR 850 crores and one is INR 450 crores, it is more than INR 1,300 crores also we reached to what is our expectation for the whole year. So we should not be worried about because of the 6 months gone, we are not having only -- or we are having only problem order worth, which is INR 240 crores, having -- making [indiscernible] beginning a negative inflation about the company that we are not going to bring any orders from here on. We have already declared a business of about INR 2,000 crores. There is -- are 2 large projects worth more than INR 800 crores.

Sir, which are these 2 projects?

What?

Which are these 2 projects that -- which are these 2 projects in bid pipeline that we are saying INR 2,000 crores?

[indiscernible] talk about the bid book, I already just said the government initiate of INR 800 crores; government plaza development of INR 463 crores; private developer commercial in Bangalore is -- commercial building in Bangalore is INR 250 crores; 1 institutional project in Mumbai, INR 130 crores; logistics park in Mumbai, INR 350 crores; and one IT company tender of INR 850 crores. These are all tenders which are still live, and it is at [indiscernible] project stage.

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

Good set of numbers, sir. If I look at your slow-moving projects in Bhiwandi and Sabha Hall, any indication when we can expect them to start contributing to revenue? That is one. Second is on the balance sheet side. When we see the other current liabilities has declined sharply from INR 191 crores to INR 97 crores, primarily one reason I can see is because of lower inflows of orders, then there's a lower customer advance. Any other particular reason for the sharp drop in other current liabilities? That is second. And third, if you can elaborate on the last industrial Livermore project.

I think you've asked the question about when will the revenue start from the Bhiwandi project, am I right?

Bhiwandi and Sabha Hall, yes, any indications that we can start building those projects?

See, Bhiwandi project, as I said, that it is still in the process of approvals and other. We had a meeting again last week with the commissioner. So probably now we have lined up everything. So if we can see that now the commissioner and even the state government is also serious to start this project as fast as possible, so some of the formalities related to RERA are pending. So probably, I'm hopeful that we can start somewhere then after Diwali.

After Diwali, okay. Sure. And some others, Sabha Hall order, it will take time or expect -- next quarter, we can expect them to start?

So Sabha Hall, also I will hand [indiscernible] -- we are not knowing anything about this project. There's still -- everything has to be confirmed client side. So we can't answer as of now that we can start. We are going to have a meeting with them, whether they are going ahead with this project or whether we have to put this project on hold. So we are not sure.

Sure. And on the [ overseas RERA ]?

Yes. Chintan, I'll answer regarding this question of changes in other current liabilities. See, that consists of mainly mobilizations from our customers. So that has reduced from INR 114 crores to INR 70 crores. So that is the major reason. And even if it includes advances from customer, so it has reduced from INR 64 crores to INR 22 crores. So because of that, there is a reduction in other current liabilities.

This is basically the executed order, and that is the reason why that portion of the execution that's reduced the labor advance and mobilization?

Yes. Yes, mainly, you can say, we have partially also -- as the project in which we have executed mobilization advance, due to the execution of [indiscernible] as well as the [indiscernible] that amount has reduced.

Sure. And lastly, on the Livermore, you mentioned something on the -- on your second unit. So what is that? And we noticed from the cash flow that we recovered some figure from the subsidiary this first half. So if you can update on that, on your subsidiary.

Yes. Regarding the loss of those 2 units, the first unit was sold during first quarter, and second is sold during this current quarter. And the cumulative loss was around INR 2 CR and that we have already booked. And we have made some impairment provision also in the stand-alone financials regarding this impairment in the loan and advances to the INC company.

How much have we impaired?

We have impaired around INR 70 lakhs, and further 2 times we will be impairing in the next 2 quarters. So that will conclude a loss incurred in the INC.

And how are we looking only the share of associate with -- just like the [indiscernible], right?

Yes. That will be share of associates only. Profits will be on the share of associates.

Sure. Sure. And...

And regarding cash flow from our subsidiary company, that amount we have received from INC company.

Okay. INR 50 crores you have received. What is the outstanding now?

Now it is INR 25 crores.

INR 25 crores. Any further investments here? Any further loans we are planning to provide to the subsidiary because of the upcoming new projects, larger ones?

No. In near future, we might not be needing because that other project, this is still under approval stage.

Next question is from the line of Jiten Rushi from Axis Capital.

A few bookkeeping questions on my side. So what would be the gross debt number, the unbilled revenue retention and outstanding mobilization as on September?

Sorry, first number you asked for, unbilled revenue, right?

Gross debt -- unbilled revenues, gross debt, mobilization advance and retention money outstanding as on September stand-alone.

Yes. Gross debt mainly consists of our short-term borrowings. So that is in front of balance sheet only. That is around INR 114 CR.

And your current maturities now?

Current maturity will be not that much. Sorry, it is INR 110 CR. Current maturity, overall, all long-term debt is around INR 4 crores. So that is split between other current liabilities and long-term borrowings.

So that is a total of INR 114 crores. Okay. Got it. Unbilled revenue and mobilization advance?

Unbilled revenue is INR 95 crores, and retention is INR 70 crores.

And mobilization advance, you said it was INR 70 crore, right?

Yes. That is INR 70 crores. It has reduced from INR 114 crores to INR 70 crores.

INR 104 crores to INR 70 crores, right?

INR 114 crores, it was in March. And as on 30 September, it is INR 70 crores.

And ma'am, on the bank limit, so what is the bank limit, fund-based, nonfund-based and utilization levels?

See, in overall limits, we have INR 610 crores of limit. And as on 30 September, outstanding limit is INR 172 crores, which we can utilize.

Any breakup on what is the nonfund limit, if you can give, if it is possible?

Yes. Nonfund, mostly, we are utilizing is around INR 100 crores.

Okay. Okay. And ma'am, on the guidance part for the CapEx, so obviously, we have done some INR 30 crore plus CapEx in the first half. So how much CapEx you are expecting in the balance period and FY '22, if possible?

See, regarding precast plant, as we already know that we will be incurring around INR 75 CR to INR 80 CR. So that may last up to next May, May or June '21. And so that can be split during that. And there won't be other much requirement of -- for routine machineries and all. In next June, we can say INR 5 crores can be the addition.

Okay. So out of the INR 75 crores, INR 80 crores, we have already done INR 26 crores CapEx, right, so far?

Yes.

So probably INR 50 crores additional you might do this year and then probably balance in next year for that precast plant, right, ma'am? Right, sir?

Yes. It is right, yes.

Okay. And sir, in terms of that IT park you were talking about, that is the Google head office, which we were talking about. So you are still in the discussion/presentation stage or the bids are likely to open soon like?

It is in the discussion phase, and the bids are not open. First, we have the hearing about the technical parameters with the company. So we and Prestige had bidded this project jointly. The discussions are going on, and the presentations are going at that level.

Okay. And sir, on this logistics park project also, it has been there for quite some time now. So any -- out of the outstanding bids which you said of around INR 2,000 crores, so any bids which are likely to open this month where we can see some traction in terms of order inflow?

See, we have [indiscernible] which government [indiscernible]... [Technical Difficulty]

Sir, are you aware, your voice is getting -- sorry, not able to hear you.

Government initiative HQ, which is INR 800 crores, we have already 6 companies that have bidded for that. So probably by end of this month, they will declare who are the qualified contractors. And probably by December end, we should be able to know more about the project. And the government plaza development, which is also one of the projects, which is, I think, 11 December is the last date.

That is for how much? You said INR 250 crores, sir?

INR 453 crores.

INR 453 crores.

Yes. So that is also in bidding. December is the bidding date. So there, because of the prequalification and the building -- between the 2 bids, probably by end of December, both these projects, we should be able to know something about better.

And the locations are -- which state these 2 projects, sir?

Government initiative is in Baroda, and government plaza development is in Delhi.

Delhi, okay. And sir, sorry, one last question, sir. The order inflow, which you said -- so we had 1 rehab project of INR 8 crores and then recently only the commercial building project in Ahmedabad of INR 119 crores. So INR 200 crores is the total order inflow so far, right, sir? Or there is a change in the order value, so you said INR 216 crores. So I was just asking if there is any change in the order value.

No. It is -- INR 216 crores is right.

The next question is from the line of [ Aditya Choksi ], an individual investor.

Sir, my question is, when can we expect the SDB project to be completed? Can we expect by the March end? And the rest of my question is already answered.

So March end, see, we are not able to confirm that this will be completed 100% by March end. But probably, the commissioning stage has -- will start further in the month of January, February. And 90% plus should be completed by March end. Probably, the whole of the project, including handover, should take further 1 or 2 months. So probably as of [indiscernible] April or May, we can expect that project to complete.

Right, sir. And just one more question. Projection for FY '21, as you said that it would be somewhere close to INR 1,300 crores. So can we expect to match for the same as FY '20, the revenues?

Can I expect what?

The revenues to be the same as FY '20 or INR 1,300 crores is the max that we can expect, sir?

For next year, you are saying?

I'm talking about the current financial year, sir. So the last financial year, we had done INR 1,500 crores revenues. So could we expect the same -- revenues in the same line, sir?

So I think we have -- as I already said, we will try to reach [ INR 2,000 crores ] flat, but it will be somewhere in the range of near [indiscernible].

The next question is from the line of Ravi Naredi from Naredi Investments.

Respected Prahaladbhai, you are doing very fine in this tough environment. I joined a little bit later. So just want to ask the Surat Diamond project, when it will complete?

See, the Surat Diamond Bourse, as I said, that it is our target to complete somewhere in the month of June. We are expecting the major revenue to be complete by March '21. But the final handover and some final commissioning, that portion will go up in April and May. But 95% of the project, we are expecting to get completed by March.

March. Okay. Okay. Because we are doing internal work, but in this quarter, we have booked only INR 65 crores. So any reason so low work we have done?

See, actually, Ravi, that is revenue, we can consider as a revenue of 1.5 months. This cannot to be considered for 3 months. In July, we were rejoining labor to 40% to 50%. August, we reached to 90%. And probably, September is the only month which therein we made the revenue with full force, with full people and everything streamlined. So that is the reason. That is the reason.

And now it is going on full fledged?

Yes. October month, we have booked a very good revenue. So it is going well.

[Operator Instructions] Next question is from the line of Rachit R. Kamath from Anand Rathi Shares and Stock Brokers.

Hello?

Sir, your voice is breaking.