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

Ladies and gentlemen, good day, and welcome to PSP Projects Limited Q4 FY '21 Earnings Conference Call hosted by Dolat Capital Markets Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Shravan Shah from Dolat Capital. Thank you, and over to you, sir.

Thank you, Ayesha. Good afternoon, everyone. I would like to welcome you all for Q4 FY '21 results conference call of PSP Projects Limited. We thank the management for giving us the opportunity to host the call. From the management we have Mr. P. S. Patel, Managing Director; and Mrs. Hetal Patel, CFO. Without wasting much time, I would now hand over the floor to the management for their open remarks, and then we can have a Q&A. Over to you, P. S. sir.

Thank you, Shravan. Good evening ladies and gentlemen. This is P. S. Patel, Chairman, Managing Director and CEO of PSP Projects Limited, along with Mrs. Hetal Patel, CFO. Welcomes you all on this earnings conference call, which is focusing on our company's performance in quarter 4 of FY 2021 and probably FY '21 also I would say. First of all, hope you all are safe at your place and do take care of yourselves. Before we move to the financial statistics and performance of last quarter and financial year, I would like to throw light on few of the key developments of this quarter and the whole year. From the revenue side company has booked revenue from operation of INR 1,240.86 crores which is about 17% less compared to year-on-year. Simultaneously, we compared the working environment year-on-year we all know this year has been the peak challenge to all industries throughout the nation and throughout the world. And construction industry was also 1 of the major impacts. At the start of the COVID last year, the first quarter miserably impacted in operation, and we could hardly achieve some numbers. At the end of the first quarter, we were expecting flat revenue debt as the work would assumed by July or August was practically prolonged till end of second quarter. Also, our expectations of some of the slow-moving projects to resume just at the end of the August, which could not happen in projects like -- which could not happen for projects like Bhiwandi, IIM, Old Campus, Affordable Farming Lands, which eventually got canceled at the later stage because of the death of the swami. These all 3 projects amounting to about INR 900 crores, which made us our revenue fall short to flat, which we were expecting. But still looking to INR 1,240 crores revenue. We believe that our company has still done better at the time of loss due to corona is almost 50%, but revenue loss compared to the last year is only 70% which itself speaks about company strong management, growth sustainability in the hard times and giving us the confidence to do better and better. About PAT guidance, debt has reduced as we could not -- we could control our over debt almost half the quarter -- half in the first quarter. But first 2 quarters, no big revenue was booked as impacted the bottom line by about 1.5% as there were several expenses to maintain labor for the first 2 months before migration and later to get them back from their home state and after COVID also to regain work fast, we have to manage transport and all which costs in total to the company was about INR 4 crores, impacting on the bottom line. Also, this year, we have booked some losses by subsidiaries to extent of INR 6 crores. Putting all this together, total unmatched expenses was about INR 10 crores, which has impacted for the overall PAT lending at 6.4%, which is about 1.5% less to the previous year. Order book. At the end of FY '21, company stands with robust and highest ever order book of INR 4,120.97 crores. I would like to admit here that out of this order book, there is a portion of 17%, that is about INR 730 crores, plus the work is not progressing due to clearance issues and other inventories. Remaining 83% of the order book is fully mobilized and work has started. Regarding precast factory. Our precast plant, we have spent about INR 59 crores till now, and the plant is almost ready and probably sales has commissioned the same in the first week of July, which was expected to commission by May end, but due to the second wave of COVID, it has got prolonged a bit. About U.S. subsidiary, this has extended -- this have also extended beyond expectations due to COVID and strict guidelines of real estate commissions, but slowly now things are shaping up and we have got the main approval from the city to which it took a very long time, but now things are getting shaped up in getting the further approval. Surat Diamond Bourse. Surat Diamond Bourse project is on the verge of completion, and we have already built more than INR 1,400 crores on the project. In fact, clients have also started giving positions to end users in some of the towers for the fit-out and as for power including civil energy and façade work has completed and some portion of façade work is completed. Only a few were slight, clubhouse compound wall and ground floor lobby interiors, that's where there, we are waiting for some clearances from the client side. So it has got delayed to an extent of about 2 months. UP Medical College and Hospital. About UP projects were all designs are submitted and are getting approved one-by-one. We have also mobilized plant machinery and manpower at the site during this challenging kind of second wave. We shall be in position to start by 1st week of July onwards on all projects, one by one has design tech approved. There is really a good intention and even the client also to complete the projects in time and more good thing in that -- in this is that the client has already granted the start date of the project as June 1, 2021 instead of March 1st week as second wave of COVID which has hit UP on a larger extent. So practically, this time has been well utilized by PSP in design and mobilization and getting almost all tender time, real time for execution only. Last -- Bhiwandi project in Mumbai, last but not least about Bhiwandi project as we have submitted bidding on stock exchange that we were compared to go to what the project was got delayed too much out any report of us against due course not which I'm happy to say, we towards the end subtracted our BG of INR 6.75 crores. On this project is about -- there is a loss of about INR 60 crores in cement and steel. And other escalation putting us tactically during the whole project with out profit. So we requested to give escalation of or terminate the contract as per close 3, which is our right as per contract, has delays not at all on our part. We hope as court has given us stay some positive solutions may come out in the next few days or few weeks. So these were the key highlights from my side. For detailed financial disclosures, I will request our CFO, Mrs. Hetal Patel to take it forward. Thank you, everyone, to be a part of this call.

Thank you, sir. Good afternoon, everyone, and welcome you all on the call. Let me first give you highlights on the stand-alone financial results for the quarter ended on 31st March 2021. Company has booked revenue from operations of INR 500.72 crores for quarter 4. The revenue generated from Surat project was INR 190 crores during this quarter. Total revenue booked for Surat projects for the year is INR 436 crores and cumulative revenue till 31st March '21 for this project was INR 1,393 crores. Company has booked EBITDA of INR 62 crores, which is 12.39% of the revenue from the operations for this quarter. Net profit for the quarter is INR 40.88 crores, which is 8.10% of the total revenue. Revenue for the year ended on 31st March '21 is arrived at INR 1,240.86 crores and EBITDA for the year is INR 134.81 crores, which is 10.86% on revenues from operations. Net profit for the year is arrived at INR 80.88 crores, which is 6.43% of the total revenue. This year, we have incurred some expenses which are of nonrecurring nature. As P. S. Patel has already mentioned that INR 10 crores were such expenses, which includes INR 4 crores for COVID and INR 6 crores for impairment of losses in subsidiaries, global -- Indian and foreign subsidiaries. We have also booked INR 1.33 crores of foreign exchange loss due to U.S. Ind AS fluctuation for the year. There is no change in revenue for the year on consolidated basis. Net profit as per consolidated financials is INR 81.94 crores, which is 6.44% of the total revenue. Gross drop of the company has increased from INR 197 crores to INR 227 crores, which mainly includes acquisition of INR 20 crores of land for precast unit and INR 9 crores of machinery for precast unit, which has been kept live. We have shown capital work in progress of INR 41 crores, which includes INR 30 crores for precast units, which will be capitalized on commissioning of the projects. And in total capital expenditure incurred for precast plant is INR 59 crores. Working capital days on standalone basis are as follows. Debtor days are 65, creditor days are 76 and inventory days are 26. Out of total credit facilities of INR 610 crores, our utilized limit as on 31st March '21 was INR 430 crores, of which INR 68 crores are fund based utilization and INR 362 crores is nonfund-based utilization. Work on hand as on 31st March 2021 is INR 4,121 crores, which comprises of INR 382 crores for Surat Diamond Bourse project and INR 3,739 crores for other projects. As on 31st March 2021, the company has total fixed deposits of INR 182 crores, out of which pre-deposit of INR 47 crores, equities worth INR 128 crores are under lien with bank for credit facility. And as we given to the clients as security deposits amounts to INR 7 crores. With this, I end up on giving key highlights on the company's financial performance. And now we are open for the question-and-answer session. So request the moderator to take it forward. Thank you.

[Operator Instructions] The first question is from the line of Chintan Sheth from Sameeksha Capital.

This performance given the circumstances. Sir, on the SDB part, you mentioned INR 190 crores booking this quarter, right? For Surat Diamond Bourse project, is it?

Yes.

Sir, but if we look at the outstanding order book at SDB sequentially it remains like increased by INR 10 crores. So is the scope of work got increased during the quarter, and we executed INR 100 crores, INR 180 crores this quarter?

Overall, there is an increase of INR 200 crores.

INR 200 crores. We have to consider the project valuate INR 1,775 crores.

Is that utilized...

Adjustment value has already been added and built to some extent because these are the variations in cement and steel at the same time, some extra work that has already been accrued up to the value of INR 200 crores. So we are considering Surat plant completion is INR 1,775 crores without debt.

Sure. And secondly, given the -- you mentioned the INR 6.7 crores you were able to get the treasury from the District Court. But you also mentioned INR 60 crores of steel and cement, which is related to the expenses and the cost of this raw material. So we have -- we are facing any absolute loss on the project. We have purchased raw material and that kind of time because of deal or how should we look at going forward?

See actually your question was not clear, but I think you are talking about Bhiwandi projects and any loss booked for the efforts. Still we haven't stated any billing for Bhiwandi project.

Yes. So if the project gets terminated, do we foresee any losses from the project because of the preliminary mobilization of resources that we have done at Bhiwandi site?

We have moved in Maharastra town maybe for your...

No. See, we have kept it in -- I mean whatever expenditures incurred we have kept it in WIP and still the decision is with -- we have just taken the pay and all so it's a pending decision. So we are at...

So what is the [Technical Difficulty] at Bhiwandi?

Sorry, your voice is not clear Chintan.

So what I was [Technical Difficulty] and Bhiwandi [Technical Difficulty]

No, your voice is not at all clear. Not at all clear. Your voice is not at all clear.

Mr. Chintan, your audio is not at all clear. We would request you to please come back in the question queue. The next question is from the line of Ashwin from DIS Investment.

Is my voice audible?

Yes.

Yes.

Okay. So my first question is that in nearly 13 years, you've built a company from scratch to nearly INR 1,300 crores turnover. I just wanted to understand, going from here to sort of like a INR 3,000 crores, INR 4,000 crores turnover, how do you view the challenges we could face and our plans for it? Primarily in terms of management of working capital and management bandwidth to sort of be able to execute multiple for the projects concurrently across multiple states. So I just want to understand how you may be past ahead for the next 3 to 5 years and how you are strategizing for it?

I think there is some problem in the call. Shravan, there is some problem in the call, each and every person who is speaking is not at all clear to us. It is something like the voice is getting faded. Hello?

Am I audible now? Shall I repeat my question?

Yes.

Yes.

Okay. So in nearly 13 years, you've built a company from scratch to nearly INR 1,300 crores turnover. I just wanted to understand, going from here to a INR 3,000 crore to INR 4,000 crore turnover, how do you view the challenges we could face and our plans for it? In terms of management of working capital and management bandwidth to be able to execute multiple projects concurrently across multiple states. I just wanted to understand how we view the path ahead for the next 3 to 5 years and how you're strategizing for it?

Yes, I got your question now. So see it is not about the INR 3,000 or INR 4,000 crores what we are expecting. It is all about what we -- what if we would like to grow. The pace with which we have grown, it depends on the management bandwidth. There is regular net-net which we can all expect is 25% to 30%. But we have always grown more than 30% to bring the bandwidth of the personal management goes on increasing in the pace of 20% to 25%. And if your credentials are good and if you are able to perform well on the execution side, I think whatever value we think about, about the INR 3,000 crores or INR 4,000 crores, I don't visualize in the next 3, 4 years. But at least I can say about next 2 years, we would be able to manage that in a proper way as far as our management strategy is good, and it is getting and then at the same time, our credit facilities are also getting increase. So from INR 610 crores to -- we have increased our credit facility, banking facility to INR 1,047 crores already. Now it's only about management bandwidth which we have been doing since last 3, 4 years, and we have been doing better and better as far as growth is concerned. So we can expect 20%, 25% growth. And regularly, we should at on people so that the culture remains the same and we can achieve the targets that we are expecting or what you are saying to reach up to INR 3,000 crores or INR 4,000 crores.

Okay. And also my second question is, how do you view the government and private clients order book mix shaping up? So we had already...

Again PSP -- again, we are never being client to any government or any private. It is all about building and wherever there is a substantial client in government or a substantial client in private, where the competition is healthy. We -- and as a construction company, we can't focus on any single identity, whether it is a private or a government. And as such, PSP has been able to do better in both the field. So whatever opportunities if it is within the limits of the expected profit, what we expect, we would always like to bid. So this may vary from time to time.

Okay. But do you see that the quality of receivables could be a concern going forward as the base of government revenues like increases?

No, I don't think so, because as far as PSP's order book is concerned and wherever, whatever projects which we are going ahead, supposing if you talk about the UP Medical College and Hospital, these are all the projects which are having financed. And usually, when we build for a government project, usually, it is some of the market projects of the government. So probably, we haven't faced till now, and we would expect it will not face too much problem in terms of finance receivables from government.

Okay. If I can just squeeze in 1 last question. In an earlier call, you had mentioned that about how like some of the larger players like L&T and Shapoorji are now bidding aggressively in the large projects. And how we are being cautious on maintaining our usual margins when you're bidding for projects. So any inputs on how the competition is bidding is turning out instant. And since we had a slew of order wins recently, any comments on the margin profile in these orders? Will this be in a usual sort of range?

No. What we usually did we have some criteria within the office and what type of conditions are there in the tender, what level of organization, it is whether it's government or private. If it is a government project, what are the liabilities, which is lying on the tender. So depending on that we to putting our margin at cost as percentage and that should be -- in return be somewhere in the range of to be converted at EBITDA level of 11%, 12%. At the EBIT, rest of the companies how they do it. I would say there can be a difference of overhead from different, different companies. Once we are still in -- we are able to manage our finance properly, we are still able to manage our overheads properly. I think we would still stand competitive with these companies even they've been a little bit aggressive.

We would request the current participant to please come back in the question queue for any follow-up question as we have several participants waiting for their turn. [Operator Instructions] The next question is from the line of Sitharaman from Spark Capital.

Sir, I would like to know on the big pipeline for PSP itself. And if you can split it and give it across various sectors and also across the state, it will be helpful?

You are talking about the bid pipeline?

Yes, bid pipeline. Correct.

So presently, we are having a bid pipeline of about INR 3,000 crores. We have not distributed within the states or the identity of the owners. But I would say presently, I can see you figure of INR 3,000 crores.

Okay. And across the states, how it is distributed?

It is mostly in Gujarat and some -- you can see about INR 700 crores, INR 800 crores out of Gujarat and rest of the projects are in Gujarat.

INR 700 crores, INR 800 crores?

Out of Gujarat and rest of the INR 3,000 crores, about INR 2,300 crores coming from Gujarat only, this pipeline.

So this total INR 3,000 crores is coming from Gujarat itself?

Total is INR 3,000 crores. Out of that, INR 700 crore to INR 800 crore, you can consider it out of Gujarat.

So out of Gujarat. Okay. Okay. Okay. And what is the status of the Central Vista project? Any update on that, sir?

Central Vista projects are still going on. Tenders are coming. There was one more tender of INR 3,400 crores. See, we are not able to qualify because of the Surat Diamond Bourse which is not getting completed. Once we get complete the project and get the work in completion certificate, I think we'll be in a position to bid projects at first.

Okay. Okay. And can you quantify the impact on 1Q FY '22 execution and on the labor availability because of this COVID second wave situation?

What you exactly asked?

On the current quarter, can you give a -- can you tell us about the labor availability and its impact on the productivity itself?

I think on current quarter, it would be better we talk later, please. You've already been talking to some of the investors on a con call related to current quarter. But I think these questions we should talk in person at later stage, if you don't mind.

Okay, sir. And what is the -- I mean the receivables including retention and unbilled revenues.

Hello?

Hello?

Yes. Yes. Receivables as you can see on the face of the balance sheet, it is INR 222 crores. And unbilled revenue, which is included in other assets is INR 77 crores, which was INR 115 crores last year, so it has reduced to INR 77 crores, which mainly includes the INR 25 crores from the project itself. And retention money that is included is segregated in current and noncurrent portion and included in other financial assets. So in total, the retention amount is around INR 90 crores.

Okay. Okay. And the inventory, including work in progress?

Yes, inventory -- work in progress and inventory are different, if you can see the work in progress is INR 27 crores.

We would request the current participant to please come back in the question queue for any follow-up questions. [Operator Instructions] The next question is from the line of Agam Shah from Raj Trading. Mr. Shah, you can go ahead, please. Request you to unmute yourself if muted from the handset. Due to no response I am disconnecting the line. The next question is from the line of Dhruv Bhimrajka of Monarch AIF.

Congratulations on a good set of numbers. Sir, I wanted to ask a question regarding the UP Medical Colleges and Hospital projects. So is these projects are on a fixed price basis or any raw material cost increases are a pass-through?

It is -- actually it's an EPC contract of each among fixed size total projects, but that is a close of variation in terms of cement, steel, labor, jewel and raw material, but that will be based on the RBI index.

Okay. Okay. So any -- so as per the formula, whatever price increases on volatilities there, you would be able to pass some or all of the things to the field?

So 70% it can be recovered because the RBI index follows the all over enterprise index. So on at what price you are getting in UP, the overall index may not have given that much impact. But in general, we can see when there is any price escalation adjustment as per RBI, at least 70%, 80% value will be recovered.

Okay. So 70% to 80% values recovered you said.

Or it can be vice versa also. Sometimes what you have spent in overall inflation in other states are more then that can be unplanned for us.

Okay. Okay. Okay. And my last question is, sir, on the consolidated EBITDA margin guidance for the coming 2, 3 years, what should be the EBITDA margin band that we can expect?

We have guidance since 2 years or 3 years, whatever the tendering process, which we do and the tendering targets with the selection of the client and the selection of the projects, we usually try to maintain, goes at the level of and 11% and 12% range.

11% to 12%, you said, right? Okay. But sir, in the past, the margins have been closer to 13%, 14%. And why are we giving the guidance for 11% to 12% then?

14% is, I think, very past beyond 2 years back. And I think that was 3 years back, and that was because of the projects were without cement, steel.

The next question is from the line of Kaushal Shah from Dhanki Securities.

Sir, if you can guide us the main projects that we have as of now, the UP projects, what is the time line, meaning these are 24 months projects, 18 months? What is roughly the execution time line?

You mean to say for the UP projects?

Yes, for UP project, even the residential project for the private developer, the...

Overall, what order book you are seeing now can be spread over about 24 to 30 months, and maximum we keep on talk about clear time line about the projects of UP which is 18 months. And as I already spoken in my initial statement, and I said that this has been -- we have been given started as June instead of March, what we will see at the stage of tenders because of the UP second wave. So probably you can -- we can consider from June 18.

Okay. So sir, just a ballpark, 18 months, would it mean that by next year, December, we are targeting to complete this. So roughly 18 months is basically 6 quarters. So is that correct?

Yes.

Okay. And the progress on the Maharashtra, the economically weaker section, the housing project. How is that? Because that also seems to be a little slow.

So I have already again mentioned in my initial statement about the Bhiwandi project, wherein we have not delayed the project delay has been done by the BMC and against the showcase that we've given by us at the commissioner to us, we went to court for a stay of our -- which we have bought yesterday only. So probably, we requested them to either because the project is now impacting us for an estimation of cement and steel is kind of INR 50 crores. And if we put in other escalation also that we can go up to INR 70 crores, the project is INR 600 crores and going ahead it's a clear loss of INR 50 crores. So we thought let us terminate the project for you pay as escalation. So on escalation part, they said there is no flow. So we have requested them to go for a termination of the contract. And to which the end is a showcase project, which was actually a bad intention from that side, their side. They should not do that. But in 1 office was issued, we have to go to court and luckily, we have got the stay order from the court, and there will be some news from their side within a week or so.

Okay. And you are saying the other projects are all working normally. So there is no delay in the other projects?

No, no, no. Only these -- that also I declared to you that about the total or outstanding order book of INR 4,300 crores, only 17% that is INR 750 crores of cement and steel after they're going slow, that all the projects are going on time.

The next question is from the line of Parth Sarthi, Chosen Bank Locking Services.

Sir, am I audible?

Yes.

Sir, what is the quantum of loans outstanding to PSP, Inc as of March '21?

Yes, it is INR 25 crores.

Okay. And sir, from external reports, it seems that housing demand and prices have both picked up significantly in the U.S. So why has the subsidiary reported a loss?

That is a loss which we've sold -- there's a small scheme, and that was sold, I think, 1.5 years back. And actually 1 year back, that was the start of the COVID. We sold those 2 properties in COVID time, that was the loss. Presently, you are right that a property real estate is going up as on date. When we sold, it was a loss.

So after COVID, we haven't sold any properties in the U.S.?

No, no.

Okay. Okay. And sir, regarding the Pandharpur project, it is going really slow as we can see that since many quarters, revenue booking has not exceeded INR 6 crores. So why is it running on a slow pace?

Because client was making the marketing for the sale of the houses. And now they have initiated in a larger scale, and they are expecting money from the tenants to come on accounts and then only they will be able to pay. So client is not able to pay us on time, that is why the project is going slow.

Okay. And sir, last question, sir. You have reported a new project to build residential project in Gujarat for a private developer. So can you disclose the name of this developer?

Okay. Necessary for us to a reason what view is concern because they are also a big identity. So we can't declare the name of the developer.

The next question is from the line of Debashish Mazumdar from Edelweiss.

Am I audible?

Yes.

Yes. Congratulations on a great set of numbers. Sir, I have some confusion around the order book that you have announced. So you are saying that your current order book is on a closing basis is INR 4,121 crores. But if I see your last quarter announced order book, which was INR 2,500 crores, you added around INR 2,400 crores of order book. So that comes to INR 4,900 crores. And if I remove INR 500 crores of execution, it should be coming around INR 4,400 crores, INR 4,500 crores, right? So I'm not getting that well...

After this, we have canceled 1 order of INR 100 crores, that INR 110 crores that was the Patna, which I think you have not got it. So presently, as I said, it is INR 4,302 -- 21. INR 4,120 crores. Sorry, INR 4-1-2-0, INR 4,120 crores. So it is the same what we have declared.

Okay. And among that you were saying around INR 700 crores is slow moving?

Yes. You can say it.

The next question is from the line of Jiten Rushi from Axis Capital.

Sir, a few questions on my side is, sir, what will be the CapEx guidance for next year, including the precast facility for next year, sir?

CapEx guidance, usually, we always say that it is within the range of 3% to 4% of the total revenue. But as for this year, we were not having too much CapEx on the side of the construction because we had plenty of material getting free from Surat. So we have invested additional 3PM majorly on precast plants. But on regular basis, if we consider that for a good construction company, inclusion of new machinery and shipping material and utilizing the materials, which we are already adding or the materials which are free ranges between 3% to 4% of the total revenue expected for that.

So for UP project, we don't need any CapEx, sir?

As such, we are not expecting too much CapEx because we are having some of the materials which we are asking from here. But then it is keeps -- indeed so then it will be in the range of -- it will be INR 10 crores to INR 15 crores.

And sir, this precast plant, any further CapEx of after INR 59 crores, and there is some working progress also WLP. So this year, we can see INR 30 crores of CapEx?

Initially also with -- initially also, we have always said that it's been in the range of INR 75 crores to INR 80 crores. So probably it will lead to INR 75 crores, INR 80 crores.

Okay. Okay. And sir, on the precast order backlog, any highlight like what from June 1 onwards obviously, we are going to start from July. So any orders we have right now where we can see some execution from the plant and kind of the revenue guidance from the precast plant for this year FY '22 and '23?

We haven't declared any of the precast order or we are not having presently any orders of precast. Yes, we are having some of the client with only we are discussing on some of the projects. Once we are through this quality and consistency of the contract in July, then onwards, we will explore what are the opportunities we can get in, obviously, we can convert it to precast.

Sir, on the bookkeeping side, can you give me the gross debt number and mobilization advances from clients? And order inflow guidance for next year?

How do keep the mobilization advance, is it the question you are asking?

You are asking the order inflow or mobilization?

I'll ask 3 questions. Order inflow guidance for next year, mobilization advances and gross debt number.

The order inflow, I always say it should be within the range of the whatever revenue you are going to expect the next year plus 20%, 25%. So we should expect minimum INR 2,000 crores next year.

And about the mobilization advance outside the project as in March?

Mobilization advance is not something which a company can predict that depends on projects of projects. Some of the projects may have mobilization advances, some of the projects may not have mobilization advance.