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

Ladies and gentlemen, good day, and welcome to the PSP Projects Q4 FY '22 Conference Call, hosted by Ambit Capital. [Operator Instructions] Please note that this conference is being recorded. Please note that a copy of our disclosure is available on the Investors section of our website as well as the stock exchanges. Please do note that anything said on this call, which reflects our outlook towards the 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 opening remarks.

Thank you, moderator. Good evening to all analysts and investors who have logged and be on our earnings call. To begin with, I would like to summarize the macroeconomic situation of India. Indian economy appears to have got back to normal again, beginning 2022-2023, after an unfortunate effect of COVID-19, which directly and indirectly consumed nearly almost 2 years of '21 and '22. India's policy metrics are now faced with the task of merging the economic source to accelerate growth, while restoring future consolidation. For this purpose, it is appreciated to start with the Union Government's 2022, '23 budget. We believe the union budget was very supportive for the long-term growth of the infrastructures [ upcoming ] in India, though it focus on urban infrastructure and the digital economy. The budget is focused on high-impact areas and accelerating the capital expenditures cycle by broadening for sharp increase in CapEx outlay by 35.4%, which is likely to strongly augment infrastructure spend. In May 2022, in an attempt to improve the domestic steel availability and drain the steel prices, the Indian government imposed 15% export beyond, paying the finished steel products, which is accounted for almost 95% of Indian overall finished steel exports in FY '21 and FY '22. Following the Russia-Ukraine war, global and domestic steel prices has risen sharply amid rising energy prices leading to global inflation. Export duty on steel is likely to result in a higher domestic supply, thereby exerting the downward pressure on the prices of steel. Now I would like to highlight the key developments that took place in the company during the quarter and the full year. As you may be aware, the presentation has been uploaded on the stock exchange and our website. I hope you had a chance to take a quick look on the numbers. As usual, instead of going through the entire presentation, I will walk through the key highlights of the quarter. We are very happy to announce that PSP Projects Limited has recorded highest order book till date of INR 4,324 cores. On the financial side, FY '22 has been the best performing year with revenue growth of 41%, recording a higher ever revenue of INR 1,749 crores. EBITDA grew by 90% during FY '22 at INR 257 crores. EBITDA margin of 15% on a full year basis. On the project side, one of the big achievements during the year were successfully executing Kashi Vishwanath Dham, which is negated by our honorable Prime Minister, Shri Narendra Modiji in December 2021, one of the most challenging projects which is finished in record time of '29. During the year, we successfully completed 17 projects. All the projects are completed in time. Total projects competed till date totals to 183 projects at the company level. Few of the noted projects of this year are; Noodle Factory project in Gujarat of $350 billion multinational Nestle; Sports Complex for Ahmedabad University; Construction of Second Diary project at Karnataka; Hospital Project in Udaipur, Rajasthan; Interior Fit-Out of 300 Rooms at Leela Hotel, Gandhinagar; Zydus Hospital at Baroda; Auda Library at Ahmedabad. As on 31 March, 2022, the government residential and government projects comprises of 68% out of all the business verticals. As on date, we have 43 ongoing projects, of which 37% is based in Gujarat, 45% is based in UP, 17% in Maharashtra. In our portfolio, EPC and turnkey projects comprises almost 92% and civil projects are about 8%. EPC projects include planning, designing, construction and post-construction activities which has opened horizons of growth for our company since the past few years. During the year, the order inflow stood at INR 1,802 crores as compared to INR 2,441 crores during FY '21. The de-growth in the order inflow in FY '22 is largely because of the delay in awarding of the many projects and also because we have been selecting in the opportunity that we are targeting for FY '23. Please note that quarter one FY '23, we already have an order addition of the extent of INR 500 crores which we have already announced. The major projects awarded during the year are; Sports Complex of Ahmedabad INR 556 crores, ArcelorMittal Steel Plant worth INR 256 crores at Hazira, a repeat order from MRF Group in Gujarat, Affordable Housing project in UP worth INR 238 crores, and E&M Works for Gujarat Metro at Surat. During the year, the key government projects awarded are as being; new Sports Complex of INR 503 crores, government residential UP which is INR 238 crores and E&M works for Gujarat Metro at Surat. Precast order inflow during the year was at INR 59 crores from infrastructure, residential and industrial projects, out of which, INR 34 crores is the outstanding order book. Bid pipeline. Going forward, we have a bid pipeline of approximately INR 4,500 crores, of which 52% is from private projects and around 61% from the State of Gujarat. An update about Surat Diamond Bourse. Almost the project is in the phase of handover. We have already handed over the towers, we have already handed over the spine, probably the most of the buildings part is [indiscernible] which is related to infrastructure can be completed by 15th of June. So we are in the -- at the verge of completion of Surat Diamond Bourse. An update on UP Medical College & Hospital. There are 7 projects in all total. All projects are mobilized and started. All projects are moving smoothly. We have 2 slow-moving projects that is Bhiwandi and Pandharpur, which together contribute to 17% of our total order books. Rest of all projects are fully mobilized. Regarding Bhiwandi project, we are in the discussion with Bhiwandi Nizampur Municipal Corporation about revival of the project with an estimated project cost of INR 1,050 crores. We are hopeful about the fruitful outcome of the discussion and revival of the project in the near future. Pandharpur also, the project is at stand-still here, not able to pay the amount till now. So we are still struggling for getting the members. So we are hoping that that can be a reason that we may have to go for legal. But as of now, we are still discussing with the Pandharpur Municipal Corporation. 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. And one more request. As I have completed meeting at 5:45, so I'll be leaving the meeting by 5:45. So I will request all the analysts, anybody wanted to talk to me should caution me before 5:45 -- 4:45, sorry.

Thank you, sir. Good afternoon, everyone. The financial performance during the quarter and year ended March 2022 is as below. Quarter 4 FY '22 versus quarter 4 FY '21, revenue from operations for the quarter is at INR 555 crores versus INR 501 crores in quarter 4 FY '21, which is higher by 11% on Y-o-Y basis. EBITDA for the quarter is at INR 88 crores versus INR 62 crores in quarter 4 FY '21, which is higher by 42% on Y-o-Y basis. EBITDA margin is at 15.87% versus 12.39% in quarter 4 FY '21. Net profit for the quarter is at INR 52 crores versus INR 41 crores in quarter 4 FY '21, which is higher by 28% on Y-o-Y basis. PAT margin is at 9.36% versus 8.1% in quarter 4 FY '21. Key highlights for FY '22. Revenue from operations for the year was INR 1,739 crores, which is higher by 41% compared to previous year. EBITDA for the year was INR 257 crores, which is higher by 90%. Net profit for the year was INR 161 crores, which is higher by 99%. EBITDA margin for the year was at 14.67% versus 10.86% in FY '21. PAT margin at 9.1% versus 6.4% in FY '21. The revenue generated from Surat Diamond Bourse project was INR 146 crores during quarter 4 FY '22. Cumulative revenue till March 31, 2022 is INR 1,803 crores out of total revised order value of INR 1,850 crores. UP project revenue during the quarter was INR 85 crores and revenue booked till March '22 is 149 crores. Revenue from precast facilities was INR 15 crores during the quarter. Regarding Bhiwandi projects, we have made provision for total expenses incurred of INR 9.64 crores during the year. The same is included in other expenses. There is no significant change in revenue for the year on consolidated basis. If we look at the balance sheet number, the increase in property, plant and equipment is mainly due to precast factory installation and commissioning during the year. Total capital expenditures over precast is INR 110 crores. Capital WIP of previous year has been capitalized during the year, which was mainly towards precast factory. Decreasing non-current investment and non-current loans is mainly attributable to investment in U.S. entity that is INR 6.69 lakhs and repayment of outstanding loans of INR 26 crores by this entity. Increase in non-current other financial assets is mainly attributable to an increase of INR 114 crores in fixed deposits with maturity more than 12 months and increase of INR 14 crores in long-term retention money. Decrease in other non-current asset is due to reduction in capital advances compared to previous year. Increase in other current financial asset is mainly due to increase in amount due from customers by INR 22 crores as compared to previous year. Increase in other current asset is attributable to increase in advances to vendors by INR 58 crores. Non-current borrowings has increased as a result of disbursement of loans against precast machinery up to INR 25 crores, out of which, current outstanding as on 31 March, '22 is INR 20 crores. Increase in other current liability is due to increase in mobilization advance by INR 105 crores, which mainly consists of UP project advances. I would also like to mention few of the important balance sheet numbers as on 31 March, '22. Gross block of assets, INR 342 crores, amount due from customers that is unbilled revenue INR 99 crores, retention non-current INR 81 crores, retention current INR 33 crores, long-term borrowing INR 34 crores, short-term borrowing INR 66 crores, mobilization advance INR 137 crores. Working capital base based on annual numbers are as follows. Debtor days are 65, creditor days are 54, inventory days are 70 and total working capital days are 28. Out of total credit facility of INR 1,047 crores, utilized limited INR 549 crores, out of which INR 66 crores as fund-based utilization and INR 483 crores is non-fund-based utilization. As on 31 March, '22, the company has total fixed deposits of INR 318 crores, out of which INR 144 crores are of 3 deposit, FD worth INR 168 crores are under lien with bank for credit facilities and FDs given to clients as security deferments amounts to INR 6 crores. That concludes the update on the financials, and we are now open for the question and answer session. Thank you.

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

First of all, congratulations on a good set of numbers for the quarter and for the full year. Sir, the first question is on the guidance front. So revenue, EBITDA margin, order inflow and the CapEx. Sir, I wanted your guidance for this year for revenue, EBITDA margin, order inflow and CapEx?

See everything will be in line with the same what we have been doing till now. So order inflow will be in the range of 20% to 25% growth from whatever inflows we are sharing this year. At the same time, revenue growth will be in the range of 20% to 25% plus within the same as we have been doing since last 4, 5 years. And as far as CapEx is concerned, no more further CapEx till the further orders, but we adjusted on an average, we have been putting 3% to 4% capex every year which will be within that range only. And as far as EBITDA is concerned, I always say, it will be in the range of 11% to 12%. It will be depend on quarter-to-quarter and year-on-year or on the verge of completion of the project, it may vary. But we assure you sir, 11% to 12%.

So sir, on the margin, previously we were saying 12% to 13%. So this year also we did 14.7%. So the recent increase in the commodity prices, that's the reason we are lowering the number or this is on the conservative side, still we can manage 13%, 14%?

You can consider both way. It will be some pressure in the consult rate also and there can be some pressure in terms of completion of the project. So see the margin may vary from -- depending on the situation. But now the good news is that steel prices are going down. We are much happy that it will be within the expectation which the company has been doing, and I'm trying to be a little bit conservative also. So keeping 11% to 12% is as per that pressure only.

Secondly, sir, in terms of the bid pipeline. So correct me if I heard wrong. You said INR 4,500 crores. What's the number in the Gujarat and out of Gujarat? And if you can help in terms of the couple of projects out of that?

See, the bid pipeline what we have told you is there are a few projects on private sector, it is 52% and on the government sector it is 48% out of this INR 4,500 crores. And if you want from the state side, there are 22% project is from Delhi and 51% project from Gujarat and Tamil Nadu there is one project of 4%. So total into INR 4,250 crores, which we are bidding as on date.

And sir, lastly on the recent Central Vista, the project which is going to re-tendered, Enclave project. So are we eligible? And still in terms of our liability, have we got the SDB completion certificate? So now what's our eligibility? And are we going to participate there?

Yes, we are going to participate. The bid book which we have shown is on the -- the Delhi side is not for that project. But of course, you are right that the tender has been reverted and we are going to bid this time. And we have already received the certificate duly signed by the client in whatever format it was required. That certificate was available to us just before the end of the closure the last time. So we could not bid that time. So we were disqualified. But that certificate we received just after the closure of the tender and all.

So now our ability is now INR 3,000 crores in terms of the standalone level?

No, as of now we can think there won't be any problem as far as the project -- the 10 projects [indiscernible] the same, there won't be any problem.

Sir, lastly on the UP college. Sir, last time you said that we can see the INR 50 crores monthly run rate, but it has not reached. So what's the now status? So broadly because that's the major name project. So just trying to understand out of INR 1,350-odd crores, how much we can look in terms of the revenue for this year?

See, probably we are tying to the targets which we see are going that we would like to finish up the project by March 2023. So whatever revenue which has been left for the UP projects, our target and planning should be to complete the project by '23. But due to some reasons related to the excavation and foundations, there were one or 2 projects which were much more delayed because of the foundations that are not as per the thought process which we had and that took a little bit time whether to go for [ pile ] foundation or whether to go for [ raft ] foundation. Also, there were few decisions related to this year going for raft foundation should we wait for decision and that. So there were some changes in terms of design also. So for that 2 projects, it could not give us that much revenue, but still the performance was a little bit on lower side because of the work activity which is going on, which is known on a structure side and the finishing stage has just been started and been approved from the client related to clearing some other finishing materials. Rest of the MEP material, the orders have been placed. So probably we would be able to generate more revenue this year.

Lastly, Hetal ma'am...

Mr. Shah, I would request to you that please return to the question queue because there are more people in line to ask the questions. Next question is from the line of -- just give you a moment. Next question is from the line of Mr. Ravi Naredi with Naredi Investors.

Prahaladbhai, first, congratulations for completing Kashi Vishwanath Dham SDB prestigious projects in PSP company. Sir, you have mentioned order inflow of 20% to 25% possible this year. So can you give INR 4,324 crores order as on 31 March or as on today?

That is on 31 March. INR 4,324 crores is the orders on hand.

See, Ravi, what we have declared is the outstanding order book is INR 4,340 for which we have to do for next years. The question was -- which was asked by Shravan was the inflow of order for which we say since we have received last year INR 1,800 crores, so we'll be having about 25%, you can say maybe more than INR 2,000 crores order inflow next year. This is what I mean to say by order inflow.

Understand that. Sir, SDB is hand over to their parties or still some work is pending?

No, no. As far as office and towers are concerned, it has been handed over since last 25 days back and we are just in the verge of finishing the spine part, which is connecting all the 9 towers, which we'll be concluding by the end of this month. But the offices light in these towers base has been given to them and most of the offices are under construction. And you must have seen the news also in the newspaper that 4,200 people are going to make a Ganpati Puja on 5th of June.

Sir, precast, how it's going and when it will cross VP level?

See, precast, this is a new business. We are hoping too much on this precast. And now after seeing the plant and after attending one or 2 seminars, now people are coming back for inquiry related to precast. So presently, we are having so many inquiries from Reliance side. There are few parties from other industries also, warehousing and all those high-tech sectors. There are a few inquiries of redevelopment in the city areas like commercial buildings. At the same time, the L&T order which we have been disclosing for the infrastructure project of bulletin train, that is still on. Probably this should be included in near future.

[Operator Instructions] Next question is from the line of Mr. Chintan Sheth from Sameeksha Capital.

Congratulations on very good set of numbers. Sir, on the subsidiary funds we received, INR 26 crores in the cash flows, there was an outflow of INR 8 crores in the first half and the previous year's closing was around INR 26 crores. So -- and we did some servicing last year. Have we reversed the provision this year or it's still pending?

Yes, we have already reversed. It was mentioned in the last quarter's call itself that we made a provision of INR 2.14 crores last year. So that has already been reversed and we have received the full amount in totality, the loan is received. And your question about outflow of INR 8 crores, that was in -- I think earlier quarter we paid that. And again, that has been received by.

So now there is no provisioning outstanding as well, right?

Yes. Investments has also been nullified now.

Recovered. Okay. And second was on the Pandharpur Bhiwandi provisioning of INR 9-odd crores which we did this year. How much provisioning has happened in 4Q?

Your question again? For Bhiwandi what you want to answer -- what is your question?

INR 9 crores of provisioning we did for the cost to be incurred over there. How much we have provided in fourth quarter?

That is around INR 3 crores. Up to March -- this December quarter, we provided INR 6 crores. So now additional INR 3 crores were provided during quarter 4. And in totality, now that expenses has been provided.

And it's really great to see the bid pipeline moving upward from INR 2,500 crores, INR 3,000 crores a few quarters back to now INR 4,500 crores. You mentioned that we have received the completion certificate from SDB, right, which enabled us to bid for Central Vista.

Yes.

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

Congratulation on good set of number. Sir, my first question on the eligibility on the Central Vista. So you said now you will be eligible for projects over INR 2,500 crores standalone projects. Am I correct?

Yes.

So sir, this INR 3,000 crores which you are targeting will happen only after the final completion of Surat project or we are already through it now?

No, no. The final completion certificate from Surat we have already received and whatever value we reached till that time, it was INR 1,575 crores. So based on INR 1,575 crores certificate, the project will lend in more than INR 1,850, but the INR 1,575 crores completion of the original order, we can bid for Central Vista or we can qualify for those projects up to INR 2,000 crores.

Now with this final -- INR 1,850 crores you can bid for INR 2,500 crores also now -- as of now?

No, up to INR 2,000 crores. And if we get the final certificate of INR 1,850 then we'll be able to bid for more than INR 2,000 crores.

INR 2,500 crores, okay. So that's when will we get, final certificate?

Probably maximum by end of June.

So basically, end of June we should be getting the SBD [ clarity ]. Sir, one more thing on the P&L side, we saw increase in employee costs in this quarter. So assuming this should be the new run rate of employee cost or we had some payments of bonuses or increment this quarter, sir?

See, actually, there is an increment also included.

Sorry, what ma'am?

Yes. There is employee increment also included an increasing managerial remuneration also.

So this run rate of INR 25 crores we should expect going forward broadly per quarter?

Yes, this will be -- going forward, it will be maintained.

And ma'am, on the -- sir, on the Bhiwandi project. So last quarter obviously you were talking about ongoing litigation for the increase in the project cost because of the cost escalation, land issue and we had no provision. You completely made a provision of INR 9.6 crores so far. So now what's next like? Because it's still not moving and you were talking about the legal process or we will not do the project and we'll come out of it. But still, we are in the project, both even Bhiwandi as well as Pandharpur. So what can we assume going forward in these projects or it is just -- because our order backlog is not moving because of that deal and it's a large project. So any thought you have given to it?

Yes, just a minute. I have -- I think sir have one urgent call he need to attend. Regarding Bhiwandi, it is -- whatever expenses we have incurred that we have provided and there is one bank guarantee outstanding. So that is shown -- that will be shown in the contingent liability and that amounts to around INR 6.73 crores. So other than that, we do not have any further liabilities for this project. As sir already mentioned that we are in the process of talks with Bhiwandi Municipal Corporation. So we'll see how that...

When can we see the conclusion, ma'am? When can we see the ray of hope, a conclusion for this project, because it's now almost more than one and a half year now? So any conclusion you are...

See, it is the court pattern. We are -- we have filed arbitration. So I think in next June, there is a date. So there must be some conclusion on that date.