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

Ladies and gentlemen, good day, and welcome to the Q3 FY '22 Earnings Conference Call of PSP Projects Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Krishna Patel from Christensen Advisory. Thank you, and over to you, ma'am.

Thank you, Margaret. Good evening, everyone. On behalf of Christensen, I welcome all participants on the Q3 FY 2020 (sic) [ 2022 ] Earnings Conference Call of PSP Projects Limited. We have with us today Mr. Prahaladbhai Patel, Chairman, MD and CEO, and Ms. Hetal Patel, the Chief Financial Officer of PSP Projects Limited. Without further ado, I would like to hand over to the management for their opening remarks. Thank you.

Thank you, Krishna. Good afternoon, everyone. We are pleased to welcome you to our earnings call for quarter 3 FY '22. Please note that a copy of our disclosures is available on the Investors section of our website as well as the stock exchanges. Please do note that anything said on this call with respect to our outlook towards future or which could be construed as a forward-looking statement must be reviewed in conjunction with the risk that the company faces. With that, I would like to hand over the floor to our MD, Mr. Prahaladbhai Patel for his opening statement.

Thank you, Hetal. Good afternoon, everyone. We welcome you all to the earnings call of PSP Projects Limited. I trust everyone is keeping safe and healthy. During the third quarter at even returns, we recorded 24% growth on a year-on-year basis and EBITDA growth of 58%. The EBITDA margin expansion is largely attributed to near completion of major projects at PSP Projects Limited. Orders on hand stands at INR 4,008 crores as on 31 December 2021. All the projects are fully mobilized other than EWS housing projects in Maharashtra. These 2 projects together contribute only 18% of total order book. Despite the festivity of Diwali during the quarter, the projects are operating at the optimum capacity, which has led to faster execution of projects and resulted in a better revenue transition of INR 485 crores. During 9 months FY '22, we have almost reached to the revenue of the whole of the last financial year FY '21 and recorded a growth of 74% on a 9-month basis. In terms of profitability, on a 9-month basis, we have recorded a higher profit of 152%. During the quarter, we have completed 5 projects out of which 3 major projects completed includes INR 130 crore, villa hotel interiors Gandhinagar INR 50 crore; interior for is INR 40 crore. Total projects completed by PSP Projects till date totals 279. Our project, the Kashi Vishwanath corridor was integrated on 13th of December 2021 by our Honorable Prime Minister, Mr. Narendra Modi. This project was our first project in the state of UP, and we have completed in record time of 20 months despite of some any challenges like material and logistic restricts and pilgrim movements and 2 major COVID waves. We are thankful to the government for providing necessary support to the project on time-to-time basis. During this quarter, we added of the new projects mainly construction of residential buildings of PAC Mahila Battalion in UP for INR 239 crores, Gujarat Metro Rail work of INR 50 crore, MRF Dahej Plant repeat order of INR 27.5 crore. In November 2021, we have submitted qualifying bid for the executive conclave as a part of Central Vista, the announcement of which is still awaited. Our order inflow during the 9 months for financial year 2022 are INR 978 crore, which includes a major order from multinational company to build steel plant at Hazira and residential building of PAC Battalion in UP. Going forward, we have a big pipeline of approximately INR 3,500 crore, of which 49% is from private projects and around 60% is from state of Gujarat. During the quarter, we have successfully commissioned the precast factory of which the total investment of INR 109 crore. We have received orders from L&T to the value of INR 51 crore and booked revenue during this quarter to the tune of INR 4.4 crore. The timeline is complete -- the project in 30 June 2022. We are happy to announce that December 2021, we have successfully exited our investment in both our U.S. subsidiary by selling the stake of PSP premium at USD 10,000. Also, the entire loan amount has been duly listed along with interest. Now update about a few of our large projects. First, which we always wants to hear about the Surat Diamond Bourse. Yes, it is almost at the verge of completion. We have started commissioning of Part 1, that is 3 towers, which is going to be completed by 5th of February. Second phase, that is the second look, which is Tower, which is going to go from 5 February to 15th of February, until last month of February, we intend to complete the whole of the project and hand over to association to start their interior works. An update on medical college and hospitals. Yes, all the projects have been mobilized and all the projects have started initially on the foundational level. We have already said in the last quarter also, the revenue generation has already been started in UP medical college and hospital projects. So all the projects are going on smoothly. Bhiwandi and Pandharpur project. Yes, Bhiwandi project is the status quo, the matter is in the court. And in Pandharpur, we have just received a letter from Pandharpur council saying that they are going to pay a INR 6 crores out of INR 20 crore outstanding, for which we are replying to them if they are going to give conditional or without condition. So that is the status about Bhiwandi and Pandharpur. With this, I conclude my remarks, and now I would like to hand over the call to Ms. Hetal Patel to take us through the financials.

Thank you, sir. The financial performance during the quarter and 9 months ended December 2021 is as below. Quarter 3 FY '22 versus quarter 3 FY '21. Revenue from operations for the quarter INR 486 crores versus INR 390 crores in quarter 3 FY '21, which is higher by 24% on a Y-o-Y basis. EBITDA for quarter is at INR 74 crore versus INR 47 crore in quarter 3 FY '21, which is higher by 58% on Y-o-Y basis. EBITDA margin is at 15% versus 12% in quarter 3 FY '21. Net profit for the quarter is at INR 47 crore versus INR 28 crore in quarter 3 FY '21, which is higher by 68% on a Y-o-Y basis. PAT margin is at 9.5% versus 7% in Q3 FY '21. On 9 months basis, revenue from operations during the 9 months is INR 1,193 crores versus INR 740 crores in 9 months FY '21, which is higher by 61% on Y-o-Y basis. EBITDA during the 9 months is at INR 168 crores versus INR 73 crores in 9 months FY '21, which is higher by 131% on Y-o-Y basis. EBITDA margin is at 14% versus 10% in 9 months FY '21. Net profit during the 9 months is at INR 109 crores versus INR 40 crores in 9 months FY '21, which is higher by 172% of Y-o-Y basis. PAT margin is at 9% versus 5% in 9 months FY '21. The revenue generated from Surat Diamond Bourse project was INR 93 crores during quarter 3 FY '22. Cumulative revenue till December 31, 2021, is INR 1,657 crores for Surat project. U.K. project's revenue during the quarter was INR 38 crores and revenue booked till December 31 is INR 64 crores in total. During the quarter, company has commissioned its precast facility and completed the capitalization of the assets. Total assets for precast facilities in INR 109 crores, including land of INR 20 crores. Revenue booked for the precast for this quarter is INR 4.57 crores. During the quarter, company has divested 100% stake that is 10,000 equity shares in its wholly owned subsidiary, U.S. subsidiary, that is PSP Projects INC for a consideration of USD 10,000. Prior to the divestment, outstanding loan and interest due from the EWS was received in full, totaling USD 50 lakhs during this quarter. Considering the full recovery of loans, the provision made in earlier years for impairment of loan to the extent of INR 2.14 crores has been reversed during this quarter and the same has been included under the head other income. Regarding Bhiwandi project expenses. Out of total expenditure of INR 9 crores, which is shown as WIP in the financials, we have made provisions for expenses of INR 3.16 crores during this quarter and INR 6.06 crores in total. The same is included in other expenses. Finance costs during the quarter has increased, which has an impact INR 4 crores over interest on mobilization advance for the UP projects and INR 1.5 crores due to increasing utilization of working capital facilities and interest on precast machinery loans. During the quarter, the company has received recoverability of loans given to its wholly owned Indian subsidiary, which is PSP Projects and Proactive Constructions Private Limited and made a provision for impairment of loan to the extent of INR 2 crores, which is included in other expenses. Working capital days are as follow. Debtor days are 71, creditor days are 46, inventory days at 17 and total working capital days at 43. Out of total credit facility of INR 1,047 crores, utilization -- utilized limit is INR 543 crores, of which INR 84 crores are fund-based utilization and INR 459 crores is nonfund-based utilization. As on 31 December 2021, the company has total fixed deposit of INR 215 crores, out of which 3 deposits was INR 43 crores, FD was INR 166 crores are under lien with banks for credit facilities and FD given to the clients as security deposits amounts to INR 6 crores. Work on hand as on 31st December '21 is INR 4,008 crores, which comprises INR 117 crores for Surat Diamond Bourse project. That concludes the update on financials. And we are now open for the question-and-answers. Thank you.

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

Congratulations on good performance, particularly on margin and profitability front. Sir, the first basic question, please, on -- in terms of the guidance on order inflow, revenue because last time we were talking about 22%, 25% revenue growth for full year. So now definitely, it will be much higher. And how do we now look at FY '23 in terms of the growth on revenue front?

Thank you, Shravan. See, this is really -- again, I'm saying that the revenue growth, what we have expected -- sorry, the order inflow growth what we have expected will be in the range of the revenue which we are going to generate that can be in the range of INR 1,700 crores to INR 1,800 crores or INR 1,650 crores to INR 1,700 crores. And we always expected that growth of our orders should also be inflated to 20%, 25% to the extend what we have growth in the revenue. So still, I'm saying that we'll be in the range of INR 1,600 crore to INR 1,700 crore inflow or maybe a little bit more in some of the orders which we are expecting gets converted, which is there in the pipeline. So I'm still sticking to the figure of INR 1,600 crore plus in terms of order inflow.

Okay. So -- and revenue you are saying it would be INR 1,700 crore to INR 1,800 crore revenue we can look at for this year. So next year, how do we look at now in terms of the growth on our revenue? And also in terms of the margins, so definitely, it is whether what we were expecting 12% to 13%. So any upward reason margin guidance for this year and next year?

See, this is an exceptional case when we are thinking about even profit growth or EBITDA growth because this is something which is related in which quarter what type of work is done and I already explained in my first comment that this is because of the completion of some of the projects at the end stage and some of the deals are booked at the last stage, which are pending in terms of discussions with the client and all those issues. So probably still we stick to that EBITDA should be in the range of 12% and 13%, 15% is an exceptional case as and when such types of projects or such type of quarter and what type of work is being executed. So -- and as far as your growth in terms of 2023, I'm still saying that we always believe in making -- reaching to 20%-plus, maybe 25% or 30%, but let us confirm, let us focus on minimum 20% from what revenue which we are going to generate in this year.

So that's a great thing to look at. Sir, now if you can help us in terms of the bid pipeline that you said INR 3,500 crores, 60% in Gujarat, so if you can mention some of the projects? And also now as you said, it will be over in this February. So now the availability, previously we are seeing INR 2,000 crore and INR 2,500 crore -- or INR 2,500 crore, INR 3,000 crore-plus, so are we looking at any of such large projects or are planning to be -- including even the Central Vista?

Yes. See, still that opportunity is still remaining because as you are knowing that nothing has happened in last -- from last quarter to this quarter in terms of Central Vista, the total orders, which were finalized before September, the figure remains the same. So the chances for PSP getting qualified in future after February for this type of project remains there. But it is not only about the Central Vista that PSP is aiming at. It is -- it can be so many other opportunities, which I have been always saying that there are few such types of projects like Vishwanath Temple is going to come all over India. And any other such project, which is in the value -- which values more than INR 1,000 crore. So we should focus on any type of projects, not only the Central Vista. And yes, about the INR 3,500 crore order book, I will not name the client's name, but I will give you some of the examples that the sports complex in Ahmedabad is INR 600 crore. There is a residential project in Mumbai that is INR 300 crore. There is 1 corporate office corporate -- 1 corporate office -- head office in Ahmedabad is INR 200 crore. There is a pharma company's expansion of factory is INR 200 crore. One commercial mall at Ahmedabad is INR 200 crore. One factory project in -- near Surat is INR 150 crore. Steel plant expansion is INR 150 crore. Phase 2 of one of our existing clients, which is coming up soon, that is INR 100 crore. And yes, any for GMRC is something in the range of INR 100 crore. A temple project in Ahmedabad is about INR 80 crores. So this all totals to INR 3,500 crores, including that project of Central Vista, INR 1,171 crore.

Okay. But currently, we are not having anything INR 500 crore-plus kind of a project, which is under the bid pipeline at present?

I already mentioned INR 600 crore project, which is the -- which is going to be the sport's complex at Ahmedabad. And INR 300 crore residential projects in -- INR 300 crore residential project in Mumbai. And INR 200 crore, INR 200 crore projects both of corporate companies, corporate office and the corporate -- that company's pharmaceutical plant.

Okay. Okay. And lastly, Hetal, retention money, unbilled revenue and mobilization advance, if you can give?

See, Shravan, it is in line with the last quarter only, where we have not finalized the balance sheet number. But yes, there is no significant difference compared to previous quarter. So whatever routine billings are done, so to that extent, retention money has been reduced.

The next question is from the line of Dhananjay Mishra from Sunidhi Securities and Finance Limited.

Yes. Congratulation on very strong numbers, sir. In terms of execution also this quarter has been one of the best, I think, in terms of everything. So my question is regarding like we have -- if we exclude GMC order, we are at INR 3,400 crores -- INR 3,500 crore order -- INR 3,400 crore order book. And so -- what is the realistic number in terms of order inflow? Because this year, I think we are already at the end of the financial year. So you said INR 1,600 crore to INR 1,700 crore is still possible in the order inflow. So next year, if we look at for the next 2 years, what could be the order inflow size, to grow at 25% to 30% level, which we have been guiding for the -- in terms of long-term growth?

See INR 3,500 crore, excluding this Bhiwandi, you're absolutely right, and that we -- today also, if we will see the maximum revenue which we can generate next quarter is INR 600 crore. If we exclude that INR 600 crore, still we are expecting between INR 600 crore to INR 700 crore inflow. So probably at the outstanding of March 2023, we'll have a clear outstanding order book of again INR 3,500 crore. So which is -- I personally see, is sufficient for next year's 20% growth. But it is not about only the INR 600 crore or INR 700 crore, depending upon the opportunity that can go beyond INR 700 crore also, but keeping the limited little figures on a conservative side, I would say it will be in the range of INR 600 crore to INR 700 crore addition from here. And that will give an order book -- outstanding order book in March 2023 as INR 3,500 crore-plus.

Okay. And sir, this remaining INR 10,000 crore, which is from Central Vista, can we expect these orders will be finalized in FY '23 itself or it will take longer?

Probably it should get concluded by FY '23, that's leased. So let us see how it works, but probably it should be concluded before FY '23. And it is not only INR 10,000 crore, it is still INR 15,000 crores of product to come from Central Vista.

Okay. So after INR 15,000 crores already awarded, we still have INR 15,000 crore of...

No, no. It is only about INR 5,000 crore, which is being awarded out of INR 20,000 crore, which is being announced.

Okay. Okay. The INR 15,000 crores is still opportunity in...

Yes, yes. Still there is a scope where we can be a participant in future.

And the orders we have already bid is what could be size of those order? If it is INR 1,000 crores or something like that?

INR 1,172 crores.

Okay. Okay, sir. And this still the hurdle of this qualification is connected to this Surat Diamond or it is already we have got certification to bid for INR 2,000 crores in that order?

Yes. We have got certification, but still let us hope once we have get qualified once in Central Vista, then we are through or by end of February, it will be under construction.

[Operator Instructions] The next question is from the line of Parikshit Kandpal from HDFC Securities.

Many congratulations on a good set of numbers.

Thank you, Parikshit.

Sir, my question is...

I'm sorry to interrupt you, Mr. Kandpal, your audio is sounding a bit distant. Can you please come on the handset mode? I think you're on speaker.

Yes, sir, so congratulations on getting the first order on the precast facility. So just wanted more sense from you, sir, given that L&T has got the major chunk of these packages. So this -- is this a test order from L&T wherein once you deliver and then they will significantly ramp up the ordering. So how do you see the loading or utilization improving for this facility? Can you give some sense there?

See that actually, you can consider a test order, but that was the only order which they could finalize because of the -- looking to the phase of construction, which is going on at the ground level. So the requirement of the track, so track was just started before few months only. So the major precast which is to be fixed on the track that is going to be required by them in the next year. So probably the first portion of substations where they require precast, they have finalized with and we are the only contractor who are supplying precast for that type of work. And on the track side, the requirement will be more than INR 700 crores, but they may be going for 2 agency or maybe 3 agency, so of course, the delivery and the performance of this project is going to play a key role for giving us the next order.

So annually, how much you can get on peak utilization near 100% to how much can you -- revenue can be your order book -- revenue can catered from this facility?

See that depends on what type of work we are going ahead. So now presently, we have entered in the infrastructure. Majorly, this plant has been done -- built for the part of building. But if we go on continuing with getting the orders on the building side as well as the infrastructure side, probably maximum INR 300 crore revenue we can generate.

Okay. So that could be a recurring order book annually and with the current capacity of 1 million square feet, right?

Yes, that is the maximum, which you can see on the addition of some of the things on the plant side, we can still add on, but that depends on the order requirement because we have that facility of a huge land. So we can expand on a little side at the machinery level, we're going to cater some more orders, so.

Okay. So just one more question on the -- you said there were some gains during this quarter one offs, so if you can just quantify how much of the amount in the EBITDA was attributable to this one-off kind of like projects nearing completion and gains on account of that?

Sorry, Parikshitji, I could not get your question, can you please repeat?

Ma'am, P. S., sir, earlier said in the call that the margin this quarter of 15%, 15.3% has been a little higher and sustainable margin will be 12%, 13%, there were some projects which were nearing completion and we got some benefit because of reversals of provisions. So if you can quantify that amount, how much would be the reversal? So that...

Parikshit, she has already given in her comments related to the what the value of work which we have done in Surat and Kashi Vishwanath and Bombay Stock Exchange Forum, I think these are the 2 major projects. And BSE is the minor project. So these are the 3 projects which is getting completed. A figure, I think she mentioned...

The increase in EBITDA that we cannot work out, but the BSE items, which was carried out for this project were with higher margin. So that is the reason for this increased EBITDA margin because almost we have INR 93 crores for SDB and even Kashi also around -- for this quarter, INR 125 crores work were done.

Okay. And ma'am, this working capital numbers, if you can just repeat the days, I just missed that number of days that you mentioned that working of debtors of 71 days, creditors was 46 and inventory was 17, right?

Yes, right. And debtors were 71.

Debtors 71 and creditors 46 and inventory 17, right?

17, yes. In total, 43 days.

Yes. And just lastly, on the U.S. subsidiary. Sir, now we have nothing to do in U.S., right? Everything is now we have exited the U.S. market, no exposure to U.S. now? And if you can just -- and this project is now with the promoter that individual capacity and it will be sold to third party?

No, no. We have -- it's the local U.S. partner to whom we have sold. Local person has purchased this company.

So we don't have any exposure in the U.S. now? We are out of the U.S. market.

No. Yes.

[Operator Instructions] The next question is from the line of Jiten Rushi from Axis Capital.

Congratulation on good set of numbers. Sir, on the UP projects, so I'm assuming we have taken the 10% mobilization advance we were supposed to receive, right, sir?

Yes.

So almost INR 140 crores, INR 145 crores?

We have received only 5%. We are entitled to receive 10%. But yes, we have received 5% only.

So 5% when are we expected to take, sir?

See, it depends on the requirement as and when if you refer for different projects, we can take.

Okay. So basically, right now, only INR 80 crores we have taken?

Yes.

Okay. Okay. And sir, on the UP project, again, sir, last call also, you were talking about that in Q3, you were expected to have a good execution of probably INR 30 crore, INR 40 crore per month. But yes, we have seen a lower execution of around INR 38 crore in Q3, the UP project. But sir, going forward, as all the projects are now operational, what kind of run rate we can see per month in the UP project, sir?

See, there were 2 things, the prolonged monsoon and some of the projects in the water table was so high. So there were a few issues related to foundation work. Otherwise, the projects are fully mobilized and that expectation of getting a good revenue every month to extent of INR 50 crores from here is possible.

So INR 50 crore per month, right, sir?

Yes. INR 50 crores till March, we are expecting that revenue to come from UP.

Okay. INR 50 crore in Q4 total. Okay. Okay.

INR 50 crore per month for the quarter.

Okay. Sorry, my bad. So sir, you said some revenue -- madam said in the opening remark some INR 64 crore booked in December. So that is booked, but that is not part of the revenue, right, UP?

It is part of revenue. It is with revenue.

See, what we were expecting is INR 50 crore per month that is per quarter, INR 150 crore instead of INR 150 crore, we booked INR 64 crore this quarter. So that's the...

INR 38 crores for this quarter.

Presentation shows INR 38 crores. So that is what I'm saying. So INR 64 crore is -- what is INR 64 crore?

INR 64 crore in total, cumulative.

INR 64 crore is total in cumulative.

Total, total. Total. My bad. My bad. Okay. So ma'am, the interest run rate of high interest rates will continue now because of the mobilization advance and more mobilization advance expected to come. So this INR 10 crore run rate would be the new normal for us in terms of interest?

No, no, it will be on a lower side because this quarter's interest was on higher side, which included even some part of a previous quarter also because they have guided, means, how this interest recovery will be done. So that has been included in this quarter.

Okay. So that is like 12% you're paying, right?

Yes.

9% or 10%.

It is 10%, but it is -- some part of previous quarter interest has been induced. So on an average, INR 80 crores 10%, we can say. So every quarter INR 2 crores will be on part of mobilization advance of UP.

Okay. INR 2 crore in mobilization also. Okay. And this depreciation also will be the same now because of capitalization of the precast facility, the depreciation of INR 9.5 crore, probably INR 9 crore, INR 9.5 crore will continue, right, ma'am?

Yes. That will be same. So out of INR 9 crores, INR 2 crores is towards precast facility.

How much? INR 2 crores?

Yes. So if you see previous quarter, depreciation was around INR 7 crores. So INR 2 crore increase is attributable to precast.

Okay. Okay. And sir, on the order, like you have said new projects likely on the opening -- currently in the opening remarks. So just wanted to understand, sir, last time also, we had updated on many projects like IIT projects and -- so when are these projects expected to be bidded out and when we can expect the inflow from these projects of INR 3,500 crore?

That was the general guidance of IIT as a name , that depends on type of project coming in that quarter or that half quarter. So if you see that since last 4 or 6 months, we have never seen any good projects in nearby Gujarat or that the company is growing or we are doing work, there any project announced for IIT or AIIMs. So we did not -- that statement was in general that we can bid for such large-sized projects once we are through the people criteria.

So Gandhi Ashram also was the last time...

Yes, that I didn't say about the -- in the bill book. It is not the project which is announced. I said the projects which are announced. So that can come in the near future on a larger volume of more than INR 1,000 crore.

[Operator Instructions] The next question is from the line of Ankit Babel from Subhkam Ventures.

Sir, my question, first, is on the Pandharpur project. Sir, what is the total size of the project? And what is the current unexecuted part of the project?

You're talking about Pandharpur?