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

Ladies and gentlemen, good day, and welcome to the PSP Projects Limited Q3 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Kenan Patel. Thank you, and over to you, sir.

Thank you, and good evening, everyone. I'm pleased to welcome you all to the PSP Projects Limited Earnings Conference Call to discuss the Q3 FY '25 and 9M and FY '25 Financial Results. Please note, a copy of the disclosures and the investor presentation is available on the Investors section of our website as well as on the stock exchange. Anything said on this call, which reflects the outlook for the future, or which could be construed as a forward-looking statement must be reviewed in conjunction with the risks that the company faces. Now I shall hand over the call to our Chairman sir for his opening remarks. Over to you, sir.

Thank you, Kenan. Good evening, everyone, and a warm welcome to the Earnings Conference Call of PSP Projects Limited to discuss the unaudited financial results of the third quarter and 9 months ended 31st December 2024. We concluded the board meeting in the morning. First, let me share the financial numbers for the quarter and 9 months. During quarter 3 FY '25, the revenue declined year-on-year by 11% and increased quarter to quarter by 8%. As on 9 months FY '25, the company registered a revenue of INR 1,813 crores, the revenue achieved is similar to 9 months FY '24 levels. FY '25 has been a lukewarm year for the company in terms of performance. As mentioned during the last quarter, the [ subdued ] performance during this year is largely because certain projects such as Fintech building at GIFT city, Human and Biological Science Gallery, GBRC, etc. were awarded during quarter 4 FY '24 are progressing not as per our planning and expectation. However, during quarter 3 FY '25, the work has begun at these projects and the revenue has been booked. The profitability has delicned during the quarter due to additional expenses booked on UP projects. During quarter 3, 9 months FY '25, the company was awarded 3 projects and 10 projects respectively. During the quarter, key projects awarded are largest residential project at GIFT City for about [indiscernible], School & Hotel Project in Lakshweep, Vishram Gruh at Civil Campus. During 9 months FY '25, the order inflow was to the extent of INR 1,983 crores. As you all are aware during this quarter, the company entered into an arrangement with Adani Infra wherein Adani Infra to acquire up to 30.07% stake from the founder promoter. With this partnership, we foresee larger visibility in terms of construction orders from Adani portfolio of companies. The current business of the company to continue under the current management regime. The arrangement has taken place with the objective of long-term growth opportunity for the company. As on 9 months FY '25, the outstanding order book was to the extent of INR 6,417 crores, a year-on-year growth of 44%. Out of the outstanding order book, the private projects comprises of 45% while Government projects comprises of 55%. As on 31st December 2024, there are 58 on-going projects, 87% projects are based in Gujarat, 6% in Karnataka, 4% in UP and 2% in Lakshadweep. Till date, the company has completed 233 projects in total since the inception with 82% private projects and balance were Government projects. With regards to the litigation, the Company has filed a Section 9 Petition before the Honorable Commercial Court, Lucknow, in which the Company has requested the Honorable Court to maintain the status quo of the contract terms and grant interim relief against the termination of the contract. The matter is currently sub-judice. While the hearing and judgment in the aforesaid matter are pending, the respondents have encashed the Mobilization Bank Guarantees amounting to INR 24.6 crores and the Performance Bank Guarantee amounting to INR 8.02 crores. This encashment occurred after the quarter ended on December 31, 2024, but before the publication of these financial results. Some of the project [indiscernible] Surat Municipal Corporation project, we have completed almost all four basements and ground plus 4 podiums. We have already started [indiscernible] we are at the level of second floor. The whole RCC work will be completed by September this year. Gati Shakti University project started in March-April and we had a very heavy monsoon in Baroda and at the same time there is a water level very high in Baroda. The projects have almost come out of the basement. [indiscernible] Overall we see it is 45 days delay from the scheduled timeline of the project. The other project is also on track and the projects of Himalaya, which is for Coca-Cola that is also on track. This with I request Ms. Hetal to continue with the financials.

Thank you sir. Good afternoon everyone. The financial performance during the quarter ended December 31, 2024 is as below. Quarter 3 FY '25 versus quarter 3 FY '24. Revenue from operations for the quarter is at INR 623 crores veruss INR 697 crores, decreased by 10.5% on year-on-year basis. EBITDA for the quarter is at INR 35 crores versus INR 71 crores, decreased by 50.5% on year-on-year basis. EBITDA Margin is at 5.67% versus 10.25%. Net profit for the quarter is at [ INR 6 crores ] versus INR 33 crores, reduced by 81% on year-on-year basis. PAT Margin is at 1% versus 4.6%. During the quarter under review, company had to incur additional expenses in UP projects to the extent of INR 18 crores [indiscernible]. Other expenses include Assets written off to the extent of INR 1.8 crores and loss book from GDCL JV to the extent of INR 1.5 crores. Employee cost has also increased by INR 3 crores compared to previous quarter of -- from the financial year as a result of annual appraisals. During quarter 3 FY '25, company has incurred CapEx of INR 16 crores. Gross block as on December 31 '24 is INR 591 crores and net block is INR 315 crores. Would like to mention few of the important balance sheet numbers as on December 31, '24. Long term borrowing [Technical Difficulty] it includes short term maturities of INR 36 crores. Short term borrowings is INR 237 crores excluding short term maturities of INR 36 crores. Net Unbilled Revenue is INR 556 crores. Retention is INR 163 crores. Mobilization Advance stands at INR 267 crores. Inventories amounts to INR 312 crores, which comprises of INR 125 crores of construction materials, INR 166 crores of work in progress and INR 21 crores of Finished goods. Out of total sanctioned credit facilities of INR 1,497 crores, company utilized INR 1,027 crores including fund based utilization of INR 182 crores and INR 470 crores is available for utilization. As on December 31 2024, the company has total fixed deposits of INR 214 crores, out of which lien free FDs are Rs 27 crores. FDs worth INR 179 crores are under lien with Banks for credit facilities and FD worth INR 8 crores are given as a security deposit to clients. Work on hand as on December 31, 2024 is INR 6,417 crores. And detailed bifurcation is available on the uploaded presentation. That concludes the update on financials, and we are now open for the question-and-answer session. Thank you.

[Operator Instructions] The first question is from the line of Jainam Jain from ICICI Securities.

Thank you for the opportunity. So, sir, my first question is what is the order pipeline for the balance Q4 FY '25 and FY '26?

See, FY '25 was given the guideline of [ INR 3,500 crore ]. I think we have already crossed to INR 1,800 crore [indiscernible] we are discussing with Adani Group will be [indiscernible] more than INR 2,000 crores within this range until March. The guideline will be maintained [indiscernible]. And for FY '26, we are in long discussion with Adani Group on juvenile projects we are envisaging for the next 1 year, that will be again in the range of more than INR 5000 crores.

And sir, are we changing any guidance here of order inflow, given the fact that in 9 months FY '25, we have received order worth only INR 2,000 crores? Are we looking to change the order inflow guidance for this year, like we have initially guided for INR 3,500 crores of order. And right now, we have received only INR 2,000 crores of order. So are we confident that we will be achieving...

That's what I said that the orders, which we are discussing with the group will be declared before March and that will be in the tune of INR 2,000 crores plus. So the orders which we have already received INR 2,000 crores plus the [ remaining ] INR 2,000 crores orders to come from Adani, that will end up in the total of our guideline of INR 4,000 crore for this year end.

Okay, sir. And sir, what are the major tenders, which we are expecting to be floated in the near term, let's say, in quarter 4 or FY '26 -- in the first half of FY '26?

You mean to say out of group or out of Adani group or you are saying in general?

In general, in which we will be participating?

Presently, we have a big pipeline of about INR 1,800 crores, which is almost, all the projects are in Ahmedabad. There is Riverfront project of INR 400 crores in Ahmedabad. There is Residential project of INR 350 crores. There is Commercial project of INR 200 crores in Student campus development in Ahmedabad and the high-rise commercial project [indiscernible] INR 25 crores. And government projects [indiscernible] Gandhinagar INR 320 crores. So in total [indiscernible] out of Adani Group.

Next question is from Rushabh from RBSA Investment Managers.

Hi, sir. So, just firstly, one clarification on the Adani deal. Just want to understand, did Adani approach us first or we approached them initially? How did the conversations play out? If you could just share some light here.

See, we haven't approached Adani. We were already working with them since last 3 years. Looking to their CapEx and looking to the projects which they have in work out for the next 5 to 7 years, they approached us for this partnership.

Okay. And secondly, you mentioned that you are in talks with Adnani Group for around INR 2,000 crores orders, which will get materialized before March. So, you will be maintaining a double-digit margin in these orders?

You are talking about the overall margins that they will be [ turning over ]?

No, I am asking about the Adani orders, specifically. You mentioned about Adnani orders INR 2,000 crores by March.

Yes, they will be in the same guideline what we have [indiscernible] .

No, I'm -- the margins will be double-digit in these orders also, Adnani orders? That's what I am just confirming from your side.

Yes. [indiscernible] I think double-digit.

Next question is from Navid Virani from Bastion Research.

Thank you for the opportunity. So, sir, I had a broader question first. So, if I look at the past, more than a year, the business has been slightly muted due to multiple reasons. It can be because of project overruns or cases, etc. And I am sure you must have seen this kind of slowdown in the past as well because you have a huge experience in the industry. So, sir, I just wanted to understand slightly from a long-term point of view that, A, from a revenue group point of view and B, from a margin point of view, where do we go from here, sir? So, can you just give us a sense?

See, there are 2 ways to understand. After this partnership with Adani Group, they are buying the stake of 30% and most of the orders coming from their side. I think revenue growth should not be a question as far as PSP is concerned as Adani is already having -- and we are already in talks of projects worth more than INR 15,000 crore plus. So, whenever those project [indiscernible] during the next 1 year, that will be a part of the revenue growth in the next 2 to 3 years. And as far as the second question which is related to the risk parameters, as we have faced more 3 risks in our past. One was at Surat, which was a private organization. Second was at UP, that was a project overrun. And third was at Kashi also, where some of the money is still yet to come. So, those types of things, as we are more focused towards the groups which are already a partner in the company, that risk is also now eliminated as far as PSP Projects.

Understood. And sir, on the UP project, all the impact is now done and dusted or do we still foresee some impact?

In last quarter also, we were expecting this is almost done and dusted. But the problem is that when you are entering into the final completion of the project between the lines [indiscernible] all the projects were having some renovations in the existing hospitals. And those renovations were not calculated perfectly at the government level and also at our level also. So, that has been INR 15 crores plus in this quarter. But probably from now onward, I don't see any, but let's not -- consider that to be zero. So, it can be within the range of INR 2 crores to INR3 crores maximum.

Next question is from Vaibhav Shah from JM Financial Limited.

Sir, what will be our revenue guidance for FY '25 and FY '26?

The projects which we are envisaging for the group and the projects which we have already had, if we consider next year's revenue, it will be about INR 3,000 crore from the group, existing order book and the new order book from Adani, probably we should be in the range of INR 2,500 crores plus.

Sir, I mean, revenue. So, revenue for FY '25 should be around INR 2,600 crores.

POh, this year you are saying?

Yes.

This year you're saying?

Yes, for FY '25.

Yes, it will be in the range of - it will be little less to our [Technical Difficulty] So, it will be in the range of INR 2,600 crores.

And next year for FY '26 you are saying, what is the FY '26 revenue guidance for FY '26?

It should be in the range of INR 4,000 crores.

So, we are envisaging a growth of 50 odd percent in FY '26?

That is just because of the large order book to come from Adani, and most of the projects starting somewhere in the month of April, May, June. So, that is the reason I am saying, even if we target for INR 1,500 crores of revenue to come from Adani group next year, I think we can have that INR 3,000 crores plus INR 1,500 crores -- INR 2,500 crores plus INR 1,500 crores [indiscernible]

So, those are very short gestation orders that we are expecting from Adani. So, if we get around INR 2,000 crore orders, so INR1,500 crores revenue would come in FY '26?

No, we are expecting orders which we are under discussion, will be in the range of more than INR 10,000 crores. These orders can continue till December 2025, but the revenue which we are expecting out of these orders which will be concluded till December 2025, we are expecting about INR 1,500 crores revenue to come from next year.

And sir, for this quarter also if we remove the impact of UP, so margin is around 8.6% if I remove that INR 18 crores impact. So what would be a sustainable margin for Q4 and FY '26 and FY '27?

See, yes, but we have already now been telling that as we go on increasing our revenue side and the project side, these margins are going up. With the margin level what we are now envisaging will be in the range of 9%-10%. And probably next quarter also we should expect it should be in the near range, provided we don't have much more impact from UP.

And for FY '26-'27 also, it will be in the 9%-10% range?

Yes.

Okay. And sir, lastly any update on PAC Mahila UP project? So their they have encashed the performance guarantee and bank guarantee?

That I have already discussed in my speech. They have already filed a case as section 19 in Sessions Court and we have asked for status quo and do not to terminate the contract. They have already encashed the bank guarantee, but if they try to maintain the status quo the bank guarantee will be released back to us and they can initiate to start the project again.

Sir, lastly our tax rate for the quarter was 40%. So, any particular reason why it is so high?

Yes. So, basically as I have already mentioned in my speech that we have written off certain assets, which are not income tax deductible so that amounts to around INR 2 crores and we have also accounted for GDCL loss of INR 1.5 crores. So, more or less around INR 4 crores expenses are such wherein we are not getting any income tax benefit because of that, it has happened. And at the same time on addition of new assets the depreciation rate difference is there between income tax and company tax.

But going forward the rate should be 25% on annual basis?

Yes. It should be 25%, 26%. On annual basis it should be that, but if -- the written off -- write off of assets which are not deductible and at the same time, the CSR is also such expense, which will not be eligible for income tax deductions, that also increases...

So apart from INR 18 crores write-off debt, cost overrun we mentioned for the UP, is there any one off in that numbers?

Sorry. Repeat the question.

Apart from INR 18 crores of cost overrun we mentioned for the UP, is there any other cost over run, any other one-off in the numbers?

No. Only additional expense we had to incur for which we did not book any revenue in this quarter. So, that impacted directly on the performance.

[Operator Instructions] Next question is from Sarvesh Gupta from Maximal Capital.

So, just for clarification. So from the original contracts that you had with various UP bodies, how much of the work is pending to be done as per the original contract? I am asking this because in case the courts decide to enforce that the remaining part of the work has to be finished, I would want to know how much of the work is still pending?

I think that project was INR 260 crores?

No. So actually 35% we completed and the remaining was pending.

So how much is that, sir, in value terms?

INR 340 crores with GST. So it is INR 260 crores minus almost INR 60 crores [indiscernible] So it will be in the range of INR 190 crores.

Around INR 200 crores is pending. Okay. And secondly is that apart from the bank guarantee, so how much of our receivables are stuck as of now? So, how much money is stuck in UP with various government authorities as of now, which we have not realized, but we have booked already?

So, there are 2 bifurcations in UP projects. So, 7 UP projects which we have already completed and only 1 handover of hospital that is coming, that's a different one and Badaun is a different one. So, if we talk about Badaun first, we do not have any receivable outstanding, rather we have mobilization advance of the party and that amounts to around INR 20 crores, which includes mobilization advance as well as [ SMA ]. So, that they have encashed the bank guarantee and there are no other receivables from their side because they have already paid the bills, which we have executed. And if we talk about the 7 UP projects, INR 40 crores is the GST receivable and around INR 65 crores is in the unbilled. Since that INR 40 crores they have not paid us, we haven't billed further because it will unnecessarily be a burden of GST.

Understood. And so going forward till this matter is decided by the court, we will not be doing any further work in the UP. So, for some time it will not occur in your P&L, but as and when some settlement is decided, you will have to do the remaining INR 200 odd crores of work, right?

Yes. If it is terminated totally and it just goes against us, then we will not be operating on any of the things. They have already encashed bank guarantee. So, we have to just vacate the site. They can go for re-tendering. If the court decides that the contractor should continue on the project, then we have to continue on the project accordingly.

Okay. Just a clarification so what I understood because your voice was not very clear, but you are saying that from Q4 onwards you should be hitting 10% EBITDA margin, which was our usual sort of run rate and in FY '26 when you are expecting to get around INR 1500 crores of Adani work, so that will also -- since that will come at similar 10% margin. So overall in FY '26 also our guidance is 10% EBITDA margin with INR 4,000 crores revenue. Is that right?

Right.

Okay. And finally on the open offer, sir, so where are we right now and how much more time will it take for the open offer to conclude?

There were a few questions from SEBI, which we are trying to resolve. So probably that has been delayed by more than 30-35 days based on our actual schedule of the open offer. But probably before March, it should get concluded.

[Operator Instructions] Next question is from Vaibhav Shah from JM Financial.

Thanks for the follow-up. Sir what is the gross debt number? I missed the number. Short term plus long term?

Yes, I will just tell you. Short term debt is INR 237 crores and long term borrowing is INR 56 crores.

So it is largely flattish on a Q-o-Q level around INR 280 crores, INR 290 odd crores.

Yes right [indiscernible].

Any update on SDB? So when are we expecting to receive the balance amount?

The second tranche of the money, which was agreed to be released by at least in February, so we have already written a letter [indiscernible] confirmation has been received from them because we have wrote the letter 2 days back only, so we will start following from next week onwards.

So what is the amount we expect in February?

They have paid INR 35 crores including GST. INR 26 crores gross value plus GST. So now remaining amount is INR 90 crores.

So again [Technical Difficulty] installment of INR 26 crores.

Sir, sound is not clear. So out of INR 90 crores...

This -- again, the second installment also will be in the range of INR 26 crores plus GST.

And after that, the remainder amount would be INR 90 crores.

So then after this the second [Technical Difficulty]

And that would come by October?