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

Ladies and gentlemen, good day, and welcome to the PSP Projects Limited Q4 FY '25 and FY '25 Post Results Conference Call hosted by SMIFS Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Lokesh Kashikar. Thank you, and over to you, sir.

Yes. Thank you. Good afternoon, ladies and gentlemen.

Sir, sorry to interrupt, but the line for the management has been disconnected. Ladies and gentlemen, please hold while we connect them again. Ladies and gentlemen, thank you for holding. We have the management back with us. Mr. Lokesh, you can go ahead now.

Yes. Thank you. Good afternoon, ladies and gentlemen. On behalf of SMIFS Limited, I am pleased to welcome you all on the PSP Projects' Q4 FY '25 and FY '25 Earnings Conference Call. From the management side, we have Mr. P.S. Patel, Chairman, Managing Director and CEO; and Ms. Hetal Patel, CFO of the company. I will now hand over the floor to Ms. Pooja Dhruve, Company Secretary, for the disclaimer, and then the management will have the opening remarks. This will be followed by interactive Q&A. Thank you, and over to you ma'am.

Thank you, and good evening, everyone. I'm pleased to welcome you all to the PSP Projects Limited Earnings Call for the analysts and institutional investors to discuss financial results for the quarter and year ended March 31, 2025. Please note a copy of the disclosure is available in the Investors section of the website as well as stock exchange. Anything said on this call, which reflects the outlook for the future or which could be constructed (sic) [ considered ] as a forward-looking statement must be reviewed in the conjunction with the risk that the company faces. Now I shall hand over to -- the call to our Chairman, sir, for his opening remarks. Over to you, sir.

Thank you, Pooja. Good evening, everyone. On behalf of the management of PSP Projects, I welcome one and all the earnings conference call to discuss the quarter and full year performance of the company. We concluded the Board meeting this afternoon. To sum up the financial year 2025, I would say the year has been a difficult year for PSP Projects Limited, while the company closed with the highest ever outstanding order book of INR 7,266 crores as a year-on-year growth of 20% and highest ever order inflow to the tune of INR 3,506 crores, excluding GST. The same has got -- the same has not got translated into numbers and growth during the year of the current outstanding order book. Adani projects comprises of 25% and balance are non-Adani projects. The company closed FY '25 with a revenue from operation of INR 2,468 crores of similar level of -- almost similar level to FY '24. Company could not meet the desired growth guidance. The muted revenue growth has been because certain new projects of Dharoi Dam, Fintech Building at GIFT City, GBRC, SRFDCL, GDC, SMC, Science City EPC did not take off as per our planning, and there were delays in the receipt of drawings in land acquisition and land development delayed in client clearances EPC. The total revenue impact of all these projects put together is in excess of INR 300 crores. Profitability update. In FY '25, the company reported an EBITDA of INR 178 crores compared to INR 260 crores in FY '24. The decline in EBITDA was primarily due to the expenses associated with the 7 UP projects. FY '25 marked the closure and handover phase of these projects, leading to concentration of additional costs within this year. A total additional expense of INR 62 crores was incurred towards these UP projects. Excluding these onetime expenses, the adjusted EBITDA margin for FY '25 stands at 9.7%, reflecting the underlying operational strength of our core business and in line with our profitability guidance on consolidated basis. Regarding this definitive agreement with Adani Infra, SEBI approval received for the open offer and its stage of tendering period, which has started from May 22, 2025 up till June 4, 2025. Post the tendering period, the acquisition will become effective from June 2025. Now let me share certain operational highlights of the quarter and the year. Till date, the company has completed 235 projects in total since inception with 83% private projects and balance is government projects. As on March 31, 2025, there are 58 ongoing projects, 91% of projects are based in Gujarat, 5% in Karnataka, 2% in UP and 2% in Rajasthan. During FY '25, the company completed 13 projects. The major projects completed were SVKM NMIMS Institute at Sanand, Ahmedabad, 7 medical colleges and hospitals completed in UP, 2 precast project completed other than National High Speed project, residential building for project Ekaansh, Ahmedabad. During the year, the company was awarded 22 projects, the major projects awarded were airport development and city side development, work containing 5-star and 4-star hotel, Coca-Cola project at Sanand, Medicity and Research Center at Ahmedabad, 2 commercial and 1 hotel building in Bangalore, biggest residential project of SIBAN at GIFT City Gandhinagar. After successful completion of Palladium Mall Ahmedabad, repeated order from client from Palladium Mall in Surat, leadership guesthouse and training center with precast technology in Shantigram, residential project at Vaishnodevi, Ahmedabad and residential project of R5 in Shantigram. Now let me share the project level updates. One of the largest projects which we are going on a fast track is Coca-Cola project. A few days back, I was on the site and I saw almost the structure is over. Infra work is also going on and the finishing work is going on. So probably that project is almost on time line, and we are doing a much faster project for the Coca-Cola Company. Surat Municipal Corporation, Highrise Building at Surat, we have reached to 14th storey as of now, finishing work has been approved. Facade work agency is onboard. And so the building is going parallelly from 14th floor onwards on the structure side and rest of the year on the finishing side. Sports complex, the main work is over and ready for any time opening soon and some additional work of about INR 20 crores for warmup pool is going on at sports complex. Gati Shakti Vishwavidhyalaya, we have almost come out of the basement for all the buildings which are supposed to be done for the university. And now the major merger works are going in the superstructure. We are also there on track a little bit slippage of about 1.5 to 2 months just because of the seasonal deficiency of labor in April and May. Outlook for FY '26. We believe that FY '26 holds strong potential for PSU projects. The company enters the new financial year with healthy order book, laying a solid foundation for growth. Our primary focus will be on execution. The entire team of that PSU projects is aligned towards delivering high-quality outcome and ensuring timely completion across all projects. Looking ahead, we recognize that our future success will be driven by our ability to execute efficiently and scale up our operations across increasing number of projects. We are confident in our team's capability and are fully committed to achieving these goals. Regarding remaining guidelines, we expect more than INR 3,000 crores, but I will be in a better position to give you a close figure by end of this quarter as most of the Adani projects which we have started are at the stage of diaphragm walls or excavations. So going from 2 months from here, we'll be in a better position to give you a clear guideline what it will be beyond INR 3,000 crores. 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 financial in detail. Hetal, ma'am.

Thank you, sir. Good afternoon, everyone. The financial performance during the quarter ended on March 31, 2025 are as below. Quarter 4 FY '25 versus quarter 4 FY '24. Revenue from operations for the quarter is at INR 655 crores versus INR 649 crores, which is marginally increased by 1% on Y-o-Y basis. EBITDA for the quarter is at INR 30 crores versus INR 52 crores, which is decreased by 41% on Y-o-Y basis. EBITDA margin is at 4.65% versus 7.98%. Net profit for the quarter is at INR 4.8 crores versus INR 15 crores, which is reduced by 68% on Y-o-Y basis. PAT margin is at 0.7% versus 2%. During the quarter under review, company had to incur additional expenses in UP projects to the extent of INR 9 crores. Other expenses include asset written off to the extent of INR 2 crores and ECL provision created for retention receivable from Badau projects, which is one of the UP projects that is INR 1.87 crores. During the quarter, Badau project performance bank guarantee of INR 8.02 crores was invoked and the same is expensed off to the P&L account. During quarter 4 FY '25, company has incurred CapEx of INR 16 crores and in totality for FY '24-'25, the CapEx incurred is INR 61 crores. Gross block is at INR 599 crores as on March 31, '25 and net block is INR 307 crores. I would like to mention a few of the important balance sheet numbers as on March 31, '25. Long-term borrowings, INR 52 crores, including short-term maturity of INR 34 crores; short-term borrowings, INR 219 crores, excluding short-term maturity of INR 34 crores; net unbilled INR 522 crores, retention INR 175 crores. Mobilization advance is INR 335 crores. Inventory is INR 322 crores, which comprises of INR 145 crores of construction materials, INR 156 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 1,001 crores, including fund-based utilization of INR 122 crores and INR 496 crores facilities available for utilization. As on March 31, '25, the company has total fixed deposit of INR 265 crores, out of which lien-free deposits are of INR 60 crores. FDs worth INR 180 crores are under lien with a bank for credit facilities and FD worth INR 25 crores are given as security deposit to the client. Work on hand as on March 31, '25 is INR 7,266 crores. Detailed bifurcation is available in the uploaded presentation. This 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 Navid Virani from Bastion Research.

Sir, I have a few questions. So first one is regarding the entire year of FY '25 and now FY '256 going forward. So now...

Can you speak little loudly? Can you speak little loudly?

Is this better now, sir?

Yes. Yes.

Yes. So my first question is regarding how we look at FY '26. So FY '25 was a washout year, we all understand that. But can you paint a picture of how drastically different can FY '26 look like in terms of scale, growth as well as profitability? How should we look at FY '26? And how do you think it will pan out?

See, I have already mentioned that we'll be in a better position in FY '26 because whatever things which went wrong for a company, it was more related to UP and UP projects. If you see the total revenue and the total other projects, we have already done to what we have been claiming or what we have been given guidelines for other projects. But the only thing which went wrong is for the UP, and that's the reason that we were not able to make up. And if you see the total expense which we made throughout the year in UP was about in the tune of INR 60 crores. So if we put it together into the EBITDA, it will be in the same margin to the last year of FY '24. Going from here now, we are not having that much pressure of government projects. We are now dealing with most of the projects of Adani Group, where we are only focusing on the construction part. So I personally see that we'll be in a better position to execute the project because now we are solely dependent on the management of the Adani Group, who also wish that their project should move on a fast track without any hinderance.

Next up, what I want to understand was regarding the UP projects. So for the entire year of FY '25, the EBITDA margin pressure falls majorly due to UP projects as we mentioned. So now, I mean, going forward, let's say, a couple of more quarters, do you still feel some pressure coming from these projects? And are we not in a position to just take it once and for all -- take all the pain in one go and just get done with those projects? Is that something which is not possible?

See, it is actually the major projects or the greenfield projects of the medical college and hospital were over and handed over since last 6 to 9 months. It is more about the renovation of the existing hospital, which was a part of this contract and getting these hospitals work on time from the government is making these things delayed both from our side and their side. So whatever things are now, I personally see that most of the things are over, only 2 medical college is now going on. So probably we'll be in a better position from here on. But every now and then I say -- last quarter also, I was saying about INR 5 crores, but I ended up with INR 9 crores. So probably, we still feel that in the next quarter also, we should be in a better position not to spending too much on that side. So it is now almost over as far as UP chapter is concerned.

Sure, sir. Helpful. Sir, last question is regarding the working capital days. So if I look at the trend for the last few years, we have been in the range of 30, 35 days, but this time around in FY '25, the number has come to around 65 days. And it looks like the receivables and majorly the inventory has been slightly higher in FY '24 as well as FY '25, if I look at compared to the history. So what is driving these numbers? If you can just give some understanding there.

So basically, this receivables, if you see, it has -- compared to last year, it has increased. It was INR 335 crores, whereas this time it is more than INR 500 crores.

Government projects.

Yes. So this is mainly from the government projects and even some of the UP payment is also outstanding and other government projects are there. SDB is also included, whereas last year, it was not there in receivables. So because of that, that receivable has increased.

And regarding inventory, ma'am?

Inventory, I think it is at par. Last year also, it was around INR 300 crores. And this year also, there is not much increase.

I mean are we not -- I mean, just wanted to understand, is there any precast element involved in this inventory jump because if I look at for FY '24 and '25, the inventory number has inched up slightly. So is there any precast element involved there?

No. See, if you see, I have mentioned the bifurcation. So around INR 21 crores of finished goods is there in inventory amount. So there is -- that pertains to the precast finished goods.

Perfect. And last one again on receivables. So out of the total receivables that are outstanding on our books right now, are there any slow-moving receivables in your understanding? And if there is, can you quantify?

See, if we consider slow moving, that will be Pandharpur out of which we have made -- there is INR 17 crores, and we have already provided for INR 13 crores out of it. And we have SDB receivable, so that is INR 90 crores. But actually, that will be due by this October '25 as per the agreement. Yes, first installment is due, but that will be receivable, means we are following up for that. And mostly by October '25, we will be receiving it.

UP payment.

And yes, we have INR 40 crores receivable from UP also that is included in receivables.

Perfect. Wish you all the best.

[Operator Instructions] The next question is from the line of Vaibhav Shah from JM Financial Limited.

No, the receivables part, you mentioned that SDB and UP are INR 9 crores and INR 40 crores. What about -- you mentioned Pandharpur, right? I missed the number for Pandharpur.

Yes. That is INR 17 crores, INR 17 crores.

INR 17 crores. And apart from that which are those...

Yes, we have a receivable of INR 98 crores from Ahmedabad Municipal Corporation, that is Naranpura Sports Complex.

So is that slow moving?

Not slow moving, but we have last 2 months payment is still pending, 3 months invoicing. Yes. So that will be processed.

So what can we expect some normalization in terms of working capital?

Now more or less see, if this -- if we exclude this SDB and other slow-moving items, it will be like INR 450 crores or so that -- it will end up at around INR 400 crores. So that should be the normal receivables at this level of turnover.

So INR 400 crores should be the number by March '26?

Hopefully, yes.

Okay. And for the SDB receivable of INR 90 crores, the entire amount is due in October?

Yes. By October '25, they should be paying us as per the agreement entered.

Okay. Okay. And secondly, on the guidance front, so previously, we had mentioned that we are targeting a revenue of INR 4,000 crores for FY '26. So where are we on that front?

I just said that it will be in the range of beyond INR 3,000 crores, but after this -- once this first quarter is over and our all projects of Adani Group is streamlined because it is at the stage of diaphragm wall or excavation stage, and we are also heading towards monsoon. So we'll be in a better position to give you a clear guideline after first quarter.

So it should be any between INR 3,000 crores to INR 4,000 crores.

Can be.

Okay. And anything on the margin side?

Margin will be stabilized to the extent of whatever I have been saying since now that it will be in the range of 8% to 9%.

So earlier we had said 9% to 10%. So we are lowering the guidance?

What we have said?

Earlier, we had guided for 9% to 10% margins. So we are lowering it to 8% to 9%?

Yes. Looking to the situation of the project and the way we have been able to perform in last 1 year, we are just keeping ourselves a little bit safer on giving you the margin guideline.

Okay. Okay. And lastly, on the CapEx side, what will be your CapEx for FY '26?

I think there is no exact projection about CapEx. But as I always said that it will be in the range of 3% to 4% of the revenue, and that's what we have done in this year also. So probably it will be in the same range or maybe a little more than 4% because most of the Adani projects are on a large volume. So there can be a little more CapEx, but it cannot be more than 5% maximum.

And what would be your order inflow guidance for FY '26?

Order inflow will be staying in the range of INR 4,000 crores to INR 5,000 crores.

Okay. Okay. Those were my questions.

The next question is from the line of Prachi Kadam from Dolat Capital.

Sir, I just wanted to ask of this INR 4,000 crores to INR 5,000 crores of order inflow that we are looking for in FY '26, how much would be from the Adani Group?

I think probably maximum will be from Adani Group, it will be in the range of 80% to 90% from Adani Group only.

80% to 90% from Adani Group only.

Yes.

Okay. Okay, sir. And sir, what would be the adjusted margin for Q4 '25? I think for FY '25, you have mentioned the adjusted margin of around 9%, so what will be for Q4?

Yes. See, if we look at the expenses we have booked for this Q4, which are not routine nature, our is INR 8 crores of this PBG invoked and we have provided for this ECL provision also that is INR 2 crores. So that is there. And further, we have written off certain assets, which is a process of the whole year. So more or less around INR 20 crores, we can say we have incurred like additional expenditure. So on an average, it is -- EBITDA is INR 30 crores, which will be around INR 50 crores if we exclude the effects of these expenses. So it is in the range of last year's EBITDA margin.

Okay, ma'am. That's helpful.

Okay.

[Operator Instructions] The next question is from the line of Deval Shah from RBSA Investment Managers.

Hello? Hello?

Yes.

Yes, sir. Please go ahead.

Yes, so my question pertains to the recent personnel changes. We have observed that there is simultaneous departure of several long-standing key managerial personnel. So can you please elaborate on the reason behind this? And what measures are we taking to ensure that these do not have any material impact on our project commitments and timely completion? And are we seeing the same -- similar kind of attrition at the mid-level as well? Just wanted your thoughts on this, sir.

See, the release of these 2 people who have been associated with my organization since last 15 years, it was more voluntary because after this agreement with the Adani Group, they were feeling a little bit pressure of the order book and maybe on the execution part. And since last 1 year, they have seen that pressure in terms of getting the labor on time and everything. So this was their personal thought to leave the company as a workload, nothing to impact on the company's role because most of the people are still on track. And if you have seen since they have decided to leave in January, and since January till now, we have been performing at the same pace without their presence.

Okay. And sir, my second question pertains to Adani Group only. So I -- we understand that probably some of the order coming from Adani Group will be more of a construction rather than the EPC. Is my understanding correct, sir?