PSP Projects Limited (PSPPROJECT) Earnings Call Transcript & Summary

Sorry, sorry, your voice is seriously not coming that well.

Okay, sir. I'll just try again.

[Operator Instructions] The next question is from the line of Vishal Periwal from PL Capital.

Just a few data points. Sir, the order book that is there with us, INR 13,000-odd crore, what is coming from Dharavi side in this order book, proportionally?

I don't have the exact figure what is coming from Dharavi side, but I think there are 2 projects of Dharavi which is contributing to this order book. It is about INR 3,000 crore, right?

INR 3,000 crore, okay, okay. And then overall, I think -- I mean, in this Adani meet, which happened a couple of months back, when we attended and then there was like a big opportunity that we could see they were projecting. So for us, what could be probably a number that one can look at because the size is pretty big? Probably what is -- what we are eyeing from this opportunity? Any ballpark number that can be shared?

You are talking about Dharavi?

Dharavi, sir.

So, Dharavi is a development -- the first part is redevelopment and then second part is the development of Dharavi land once it is vacated. So as far as redevelopment is concerned, it is going to go for at least 4 to 5 years, maybe 6 years. And after 6 years, the whole redevelopment is completed, then that land will be vacated and the fresh development of those land will be coming after 6 to 7 years. Today, out of the first two large project, which is being announced for Dharavi, rehabilitation, that we are doing. But since these 2 lakh houses has to be made within a period of 5 years, I think by the time we are through with some of the project, we can further get an opportunity of the same size later on after 2 years. So presently, we are the first person to right of rejection, if we can build up our capabilities in Mumbai, then we will be getting more and more chances. But they have a fixed time line of making 2 lakh houses, there can be few other players also who can be participating for Dharavi redevelopment project.

Okay. So, if I -- just to, I mean, like, probably what you have said, just to repeat, the new opportunity for Dharavi will come only once we deliver these 2 projects? Is that -- or even before that?

No, no, no, not only 2 projects, it is going to be -- the whole Dharavi redevelopment is requiring 2 lakh houses to be built first. Once those 2 lakh houses are built in phases, after 3 years, if we are able to deliver 40,000, 50,000 houses, those 40,000 or 50,000 houses will be shifted from Dharavi to this new location of development -- redevelopment. And later on, those lands will be vacated and then only this new development of Dharavi will start.

Okay. Okay. Got it. Got it. And then maybe in terms of like your presentation mentioned, we have deployed almost like 16,000-plus laborers across the project site. So just to understand the intensity of it. So historically, I mean, how this number has been and it is becoming 16,000-odd crores (sic) [ 16,000 ], just to get a perspective, can you share the previous numbers what it used to be like?

It is very difficult to mention this previous number because it depends on the typography of the work going on each project. So presently, my requirement is in the range of 16,000 to 17,000 and we are almost through with the requirement of all the projects. So in PSP Projects, you can say still 3,000 to 4,000 number will still be added in next 1 or 2 quarters because more and more activity started in each project. Some of the projects are in foundation, some of the projects are in finishing, some of the projects are in MEP. So, it depends on what type of activity is going on. If it is purely core and shell then the requirement is little bit less. But when this project core and shell is over and all finishing and MEP and everything is going on, there will be a requirement from different trades also.

The next question is from the line of Jainam Jain from DAM Capital.

Sir, my first question is, I wanted to understand what sort of impact we have seen on the cost front because of the war escalation. And out of the total order book, what is the percentage of the order book, which is fixed price in nature?

See as we have been telling you every time that most of the projects are -- all Adani projects are pass-through costs. So there is not much impact on any of the projects of Adani and 30% order book which is consisting of our order book, which was in the tune of INR 5,500 crores to INR 6,000 crores, large projects are almost under completion. RVNL, we've already said that it is going to get completed by October. SMC Tower, we are going to complete by next June 2027. Dharoi Package-1 is completed, Package-2 is going on. Ambaji is my fresh order. So, it has no much impact because now the things are little bit improving. But we can say that a few of the activities at SMC and RVNL were impacted because of the cost of aluminum and copper going a little bit high.

Okay, sir. Sir, my second question is, are there any new segments which we are planning to enter, post the acquisition of the new parent?

Are we -- what you said, pardon me, again, repeat your question?

Sir, are we planning to enter any new segment which -- after like Adani is acquired, are we planning to enter a new segment in terms of the...

No, no. As far as our expertise is concerned and as far as what infrastructure we have created, we try to remain in building only, but building anything, right from industry, data center, commercial, hotel, hospital anything, but not out of any project which is not related to buildings.

The next question is from the line of Rushabh from RBSA Investment.

Am I audible now?

Yes.

Just wanted to clarify on the order book [Technical Difficulty]. What could be this number at the March end? Is there anything that we can share on this side?

I think as we have already told you that we'll be focused -- we'll be expecting some INR 5,000 crores to INR 6,000 crores of order book. And if we complete that, that we are able to execute more than INR 4,000 crores, you can calculate what will be the outstanding order book. It'll be in the same range, plus INR 1,000 crores.

Okay. And sir [Technical Difficulty] in the northern side of the state -- in Gujarat and Maharashtra, any major projects are we looking out for [indiscernible] projects?

No, presently we are focusing on our own projects and Adani project and we try to make our order book between 75 to 25, 25 non-Adani, 70 to 75 is Adani. As far as visibility is concerned and the order is concerned, we have sufficient visibility for next 2 years. So we are not going to enter into different region as of now. We'll be focusing on Gujarat and Mumbai only.

Okay. In terms of the Dharavi work that you mentioned, out of the total pool of order that Adani Group is trying to execute, what is the PSP share of that -- building in whatever Dharavi project has to be done? Is there any...

To mention what will be the share is difficult as I answered in the -- before 2 minutes, that this is a long 5-years project and they have to deliver 2 lakh houses. So probably if we are able to perform well in next 1, 1.5 or 2 years, we will get the first right of refusal as far as Dharavi is concerned, but to complete the project before -- within 5 years to make 2 lakh houses so that the residents can be shifted to their new houses and the development of the Dharavi land can be taken up after 5 to 6 years, they can give it to some other contractors also, but PSP will always have a better edge as far as it being a part of this Adani Group company.

From the capability side, so that we are in the first -- in the first two ventures, we have the right of first refusal. What all things have been done in the last 6 months or 9 months like to ensure that execution side we don't falter or we are able to at least exceed the expectation, sir?

Yes, that's what we have -- I said that, this month, employee expenses have gone little bit high because we are building up the team. We are building up the team to multiply ourselves to 1.5x to 2x from last year. So we are in the process of standing ourselves so that we can get more and more orders from Adani Group and deliver their projects on that.

The next question is from the line of Jainam Shah from Equirus Securities.

Sir, just one question, while you were mentioning the building segment, you mentioned the data center part as well. So just wanted to check, do we have any specific order from the data center, maybe just the EPC work of the building? And are we planning to enter into it, what kind of size we would be looking at? Because this is a segment which can drive our order book going forward to a larger extent, so what is your view on that particular segment? Is it going to be built, let's say, 10%, 20% of our order book, or it is just something that we are starting as of now?

See, presently, we are focusing in Gujarat and Mumbai and specifically Mumbai, as we already declared, will be a major part of the [ hiring ] only. As far as data centers are concerned in Mumbai and the new data center, which are coming up in Visakhapatnam, I think we are not a part as of now. But later on, we don't know because it's again a part of a building only, so that can come to our order book. But the things which we are going to develop in Gujarat, like Dholera, there are two lines, one is for the data center and the second is for defense. So those types of work can come in future. But as of now, we'll be focusing on airports -- city-side airports, realty, their own requirement of [indiscernible] at Mundra, and Medicity. Medicity, both the projects -- data can come later. First, we already started in Ahmedabad, and Mumbai it will come after 3 to 4 months, so probably, these two projects you can consider it'll be part of PSP. One is already a part of PSP, second can be a part of PSP in future.

The next question is from the line of [ Urdeevan Patel ] from [ Infinite Wealth Advisors ].

I want to know, sir, what is the revenue in this quarter from precast side?

See, I think we don't have a separate revenue from precast side because the projects which are we doing is a part of the precast also, so we do not have a separate entity, but I think we are doing better and better. So throughout the year it will -- what precast plant capacity is will be in the range of INR 200 crores. So we'll be executing about INR 150 crores to INR 200 crores throughout the year, whatever may be the project, but getting exact revenue what precast did, I don't have the figure, but in general we can understand that the precast can generate revenue of INR 200 crore from the plant side.

Okay, sir. Okay. And approximate precast margin sir?

See, it is again a part of the business, so it remains in the same margin because we are working -- today, we are not working for any other projects except Adani. We have been previously working on some infrastructure work of bullet train for L&T, but now we are purely focusing on buildings and that buildings are also related to Adani Group only.

The next question is from the line of Shravan Shah from Dolat Capital.

Sir, just to get a clarity on Dharavi 1, so INR 3,000 crores order book that we have, so which if we translate in terms of the number of houses, so is it the entire 45,000, 50,000 houses that we want to build, that is a part of this INR 3,000 crore order book, or this will be even lesser number?

No, no, no. It will be little bit lesser number, but you -- see, INR 3,000 crores, each housing in the range of INR 10 lakh to INR 12 lakhs. If we consider 350 square feet and INR 3,500 per square feet as cost of the house, it is about INR 10 lakh to INR 12 lakh per house. So INR 3,000 crores means 30,000 houses we are presently building, the total is 2 lakh houses. So, what we can consider is total Dharavi development, it is 2 lakh houses, out of which we are making 30,000 to 32,000 houses today by doing these 2 projects.

Okay. So once these 2 projects will be over, then only we can take the new, or it can be even the mid of the -- this ongoing, we can also take other Dharavi projects also?

See, Shravan, we should understand most of the companies when they are in certain project and it is going after -- beyond basement and from first to second floor, all the other floors are typical. The complexity is more at the foundation level. And once any good site is settled, you can always start a new site. But that depends on how we are establishing in Mumbai and how we are performing on these 2 projects. So once we are stable in these 2 projects, we can always take up third or fourth project in Dharavi.

Okay. Got it. And Hetalben, this quarter, the tax rate was 35%. So for full year, can we have this normal 25% tax rate, or it would be one on the higher side?

No, it will be slightly on the higher side because there are certain expenses which are not deductible in taxes. So it's a permanent difference. So for the year, it will be slightly on a higher side.

Okay. And if you have to look at in terms of the cash balance versus what we report. So as on March, let's say, we were having around close to INR 413 crore, INR 415-odd crore cash. So against that, as on June, the cash level would be similar, INR 400-odd crore?

Cash, you mean to say...

Cash in bank, what we reported, as you said.

Yes, yes. It will be on the same level. It will be slightly higher.

The next question is from the line of Sanjay Kohli from Goldstone Capital.

Good evening and congratulations on a very good sales growth this quarter and especially with better working capital. So that is very encouraging. Now Prahaladbhai, you mentioned this pass-through cost of the projects. What are the margin we are keeping in them?

See, it is more about cost plus percentage on overall cost of the project. It is not about what is the margin on pass-through. Most of the -- all the materials, whatever we are buying, it is always a pass-through. So once we understand the cost part, we basically put one base as a cost -- when we are calculating cost plus percentage, we are putting [ 1x ] cost. And when we buy, there is a difference and that difference is already paid in the running bill.

Yes, yes. Okay. I haven't fully understood, but...

See, when we talk about cost plus percentage, it is on the overall cost of the project. So that whatever cost which we have decided as overhead profit and profit on material and profit on labor, it comes as a consolidated figure, which is in the range of 20% to 25%, which usually it is going to be. So when we talk about each of the material, there is not a separate percentage for each of the material. That's what I'm trying to...

Okay, okay. So, the margin will be decided and as and when the material is utilized, it's all inbuilt into the material and ongoing -- into the ongoing building, it's all inbuilt.

Yes, yes. So it is an item rate contract where the materials which you are utilizing comes at a base rate when you quote it. But when you buy, there is a difference on plus or minus, that difference is again paid in the bills.

Okay. So what is the range, low and high range, on these projects -- on the cost-plus projects?

It is never -- you mean to say the inflation part of the material, which is going...

No, no, no. No, no. The predecided cost-plus. On the pass-through, you had mentioned that most of the Adani projects were cost-plus. So what would be the range, 10% to 20%, something like that?

We have already said the total EBITDA level when we talk about Adani project, it comes in the range of 6% to 7%. And we talk about projects which are with PSP, we always -- we have been doing at a range of 8% to 9%. So at EBITDA level, you can consider cost-plus formula, that's 7% at EBITDA.

So it's very, very tightly controlled. There's not much of a -- it's not a large range. It's a very small range from project to project?

There is always a gap of 1%, 2% in terms of execution. These are standardized base for each type of project. If I'm working in Mumbai, there will be a difference of 3%. If I'm working in Mundra, there will be a difference of 1.5%. So it depends on what type of project you are doing. And sometimes whatever the overhead which we are considering the type of project [Foreign Language] so then we can have a saving on 1%, 1.5% on the overhead side also. So this is one of the examples. Once we go through with 1 or 2 years, we will get a clear idea how does this cost-plus formula comes in but mathematically it's coming at 7%.

Ladies and gentlemen, we take that as the last question of the day. I would now like to hand the conference over to the management for closing comments.

Yes. Thank you all for joining us today and for your active participation in the earning conference call. We sincerely appreciate the continued trust, confidence and support of all shareholders, investors, analysts and all stakeholders. We hope we have been able to address your key questions and provide a clear perspective on PSP's performance growth plan and outlook for FY '27. Should you have any further queries, please feel free to reach out to our Investor Relationship adviser, EY, who will be happy to coordinate with us and assist you offline. Thank you.

Thank you, everyone.

Thank you.

On behalf of Ernst & Young, that concludes this conference. Thank you for joining us, and you may now disconnect your line.