Rail Vikas Nigam Limited (RVNL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Rail Vikas Nigam Limited Post Results Earnings Conference Call. Kindly note that the conference call is for 45 minutes. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vishal Periwal from IDBI Capital. Thank you, and over to you, sir.

Yes. Thanks, Sejal. Good afternoon, everyone, and I mean, extreme apology for the delay in the call. There were certain technical issues. We're just trying to sort it out. And so without wasting much of time from the RVNL management side that we have with us, Mr. Rajesh Prasadji, who is Director of Operations; and Mr. Sanjeeb Kumarji, Director, Finance and CFO. We'll just have a brief on the gone by results, and then we'll open the line for Q&A. Yes, thank you, and over to you, sir.

Yes. So as you all know, at this particular company is not very old. It is a 21-year old company, and we have been given the status of Navratna. And I would like to highlight a few things for the year 2023-'24 before we go to the numbers. So if you see in FY '23, '24, this was the all-time high top line, all-time high bottom line. Top line has grown by 7.15%, bottom line has grown by 17.94%. The first project in India, which we secured through bidding was the Indore Metro project and the first overseas project, the Maldives, which we had taken through the bidding process. These 2 projects have given an earning of -- the Maldives project was 11%, Indore project was 10.66% margin. And the turnover from these 2 projects were INR 986 crores, which is approximately 45% of the INR 2,255 crores of turnover in the bidding projects. So there is a quantum jump in the turnover of the bidding projects. We started 2 years back. And the earnings from these 2 projects were more than 10% in total CapEx, which were more than the earnings and the margins which we used to get from the nomination basis. During this financial year, we had commissioned the rail over rail bridge at Indore Yard, the first of its kind metro station at Majerhat. And in FY '23-'24, we have completed 12 number of projects and the cumulative projects now which we have completed is 152 numbers as on 31/3/2024. Then commissioning part, the number of railway projects are getting reduced. But in 1 month, in the month of March 2024, we could commission 243 kilometers, which is again a record. And on a single day in the month of March, we could commission 100 kilometers. That is again a big achievement for RVNL. In Rishikesh-Karnaprayag project, along with the Bhanupali-Bilaspur-Beri project, these are the national projects being implemented by RVNL. And in Rishikesh-Karnaprayag project, we had executed 60 kilometers of tunneling in 1 year. In the metro section, in Kolkata, we have got commissioned 3 more sections inaugurated by the Honorable Prime Minister. And I have got a few statistics. If you permit me, then I can tell you that in last 10 years, the turnover in FY 2013-'14 was INR 2,492 crores, and this year, it is INR 21,732 crores. So you can calculate how many times it has gone up. The bottom line in the 2013-'14 was INR 157 crores. This year, it was INR 1,463 crores. The project expenditure on March 31, 2014 is INR 15,600 crores and up to 2024 March, it is INR 155,000 crores. The turnkey projects, which is basically leaned for the manufacturer maintenance of all kinds of rolling stock, we have done 2 numbers. Now up to March 2024, it is 19 numbers. And total railway infrastructure developed as on 31st March was -- 2014 was 5,100. Now it is 16,300. And so there is a quantum jump, and the performance during the financial year has been extraordinary. And the Bohe workshop, which we have completed and commissioned during this financial year, again, is basically state-of-art kind of factory and has been appreciated by all. So RVNL has been moving forward. And I will say a few things about the business development. Give me a second. Yes. So in the FY '23-'24, we have participated in 142 number of bids. And the total bids cumulative up to March, we have submitted 286. So you can see that in last -- we started the bidding in the second part of FY '21-'22. And in last 2 years and only a few months, we have participated in 286 bids, costing more than INR 150,000 crores, and we have bagged so many projects. The success rate is more than 20%. We have also submitted bids in the international market, Bangladesh, Maldives, Srilanka, UAE, Oman and Rwanda, Uzbekistan, Saudi Arabia, Nepal. So we are trying to increase our footprint. We have also submitted the expression of interest in Botswana Railways, then Namibia Trans Kalahari project team. So what I want to tell you is that we are trying to increase our footprint. We have already opened international offices in South Africa, Oman, UAE, Maldives. So what I wanted to just tell you is that in time to come, we want to increase our footprint. And we really are very keen to increase the order book. Presently, the order book is around INR 85,000 crores. And earlier during the investors meet, I had said that in FY '23-'24, we are trying to get INR 21,000 crores plus the top line and the bottom line, I had said INR 1,400 crores plus, both of things have happened. And I had also said that we are focusing more on the bottom line. And that is why the growth rate of the bottom line is 15%? Bottom line, it has increased by 15.38%. Regarding the SPVs, there has been a turnaround in Krishnapatnam Rail Company Limited. The traffic in terms of the loading million tonnes and the rates have increased by 25% with respect to the previous financial year. And previous to previous financial year, it is more than 100%. So what I wanted to tell you is that Krishnapatnam -- and the debt of the Krishnapatnam has also gone down to INR 663 crores, which has been taken from the financial institutions. The trade receivable is also improving. We are awaiting for the arbitration award and everything is online and we have got the efficiency of the private sector and the authority and the trustworthiness of government sector. With this move, we have been working. And now I have given the enough [ feelers ] for the questions.

[Operator Instructions] The first question is from the line of Ranodeep from MAS Capital.

Sir, wanted to check any update on the Kyrgyzstan deal of INR 18,000 crores.

See, we had earlier signed an MoU. Then what has happened is that we were given the assignment of preparation of the DPR, then tying up with the financial institutions. So we have prepared the DPR, the tying up, et cetera, has been done. And now the government of Kyrgyzstan is working on this. And see, the project life cycle has got different stages. So in that particular project, nothing was available. So the initial stage, the concept, the alignment, the DPR, et cetera, has been done. The discussions have also been made with the financial institutions for the financing part. The project is very much viable. And we had signed MoU for 4 projects, and we are very keenly waiting for the approval of the DPR and also the approval for the project implementation.

Noted. Sir, a question on the overall macro, sir, like if I see like 2019, our sales used to be around INR 10,000 crores and 5 years down the line, we are talking about INR 21,000 crores. Similarly, I think in terms of profits also, 2019, our profit used to be around INR 680 crores -- INR 700 crores, and now we are at around almost touching INR 1,500 crores. So both the sales and profit has been doubling over a scale of 5 years. Now in the backdrop of we having an order book of almost INR 85,000 crores, do you foresee the same trends continue in the next 5 years to come?

Okay. So let us -- you have asked about the numbers. So the PAT has increased, it is 2.4x in last 6 years. This year, it is INR 1,463 crores and 6 years back, it was only INR 600 crores. In terms of the top line, if you see previously, it was INR 20,281 crores. So there is an increase of 7%. But previous to previous year, it was INR 19,381 crores. So that increase was roughly 5%. So -- but previous to previous year that was in the year 2021, it was INR 15,710 crores, So we are coming on the track. There is an increase in the -- basically top line by around 7%. The bottom line is increasing by 17.94%. We have all the time saying that -- we have been saying that we are more focused towards the bottom line. We want to get better margins, and we want to grow with this tradition that the top line may increase by 5%, the bottom line growth, which is roughly 15% should continue over the next 5 years.

Very heartening to know that, sir. Sir, my last question. When it comes to the margins, for our nominated railway projects, if I'm not wrong, we work at an 8.5% model. Now if I combine this with the projects that you're bagging from the market, what is our aspiration in the coming years in terms of margins, sir? What kind of numbers are we looking there?

See, earlier, we were executing the projects on the nomination basis where the margins were fixed as per the revenue stream fixed by the Ministry of Railways. Now we are in the market, so there would be some projects where the margin will be less. There will be some projects where the margins will be very good. So I will cite first example -- first project, which we took through the bidding in Indore Metro. In the FY '23-'24, it has given the margin of 10.66%. And the first overseas project of Maldives, it has resulted into a margin of 11%. And the total turnover in these 2 projects is roughly INR 1,000 crores with a margin of 10% plus. So what I want to tell you is that it depends upon the -- your ability to execute the projects, what kind of value engineering you want to take and what kind of basically planning, et cetera, the procurement and then timely delivery, everything is basically required to be considered, and then we have proved that, yes, from the market, also we can earn. And these 2 first projects in India, first project overseas have resulted into a margin of more than 10%.

The next question is from the line of Shreyans Mehta from Equirus Securities.

So my first question is pertaining to the Vande Bharat train set, the order which we had won. So sir, just wanted to understand in terms of CapEx in case if we have to invest anything. And secondly, do we get any mobilization advances to start this project?

May you please again repeat the question because your voice was not at all clear.

Sure, sure. So sir, my question is pertaining to the Vande Bharat train set order, which we had won last year. Sorry?

You speak slowly.

Sure, sure. Sir, my first question is pertaining to the Vande Bharat train set order, which we had won under the JV. So in that, have we -- do we need to invest in terms of CapEx, if at all, number one? Number two, do we get any advances before we start work? And third, just related to it, will we stop here or keep on building under the JV for this project?

Okay. I could not follow the question.

I guess I'll join back in the queue.

Mr. Periwal, can you repeat the question because the audio is not clear from his side.

Sure, sure, sure. So sir, my first question is towards Vande Bharat. Do we need to incur any CapEx for starting this project, number one? Number two, will we get any advances from the one of the party who has awarded this project? And -- so this would be the first question, I guess.

Okay. So let me answer a few things. Let me give you some background about the status of the project. As you know that we have been awarded a contract for manufacture of 120 train sets. This will be manufactured at Latur. So as per the contract, we have got a shareholding in the SPV where RVNL is having a share of 25%. The agreement was signed in the month of September 2023. Equity injection till date by RVNL is INR 151.7 crores. See, the layout and the coloring scheme of the train sets is under approval with the ministry, and we have provided the different options. Then the mockup for the purpose of mockup, we have already awarded a border contract to a company called M/s. Kineco, a Goa-based company. And we have submitted the color scheme. mockup is under in advanced phase of product basically completion. And the schedule of manufacturing is that we have to start from the November, December '24 and the first prototype supply is likely to be completed by September '25. And then in first year, 12 numbers, second year 18 numbers, third year onwards, 25 numbers. So -- and along with this manufacturing, we are supposed to maintain. So there are 3 maintenance depot. One is near Jodhpur, one is in Delhi and the third one is near Bangalore. So the layout, et cetera, have been approved in Bangalore, so it is under finalization. And then these 3 maintenance depots are required to be upgraded. So the current status is that Latur workshop is fully ready. Mockup is likely to be completed and concluded. The proposed color scheme and the options which we have submitted to the Ministry of Railways is likely to be approved very shortly. And regarding your infusion about the equity, we have already injected around INR 151.7 crores for this particular project.

And how much -- will we be investing more? Or this is the max we have to invest?

As the project keeps on moving forward, we may have to infuse more.

Got it. Got it. Sir, just extending the question. So now once we deliver -- once they approve the design and stuff and once we deliver the 4 set of trains, post that, can you bid on ourselves? Or will be dependent till the time we deliver the entire project to the railways?

And again, your voice is not very clear. So Mr. Periwal, you please again tell.

Sir, I'm going back in the queue.

Sir, actually the question was that once we have delivered this project and -- so can we build on our own going ahead for Vande Bharat opportunity? Or the tie-up that is there with the Russian...

It depends upon the client. The client's requirement of eligibility criteria varies from one client to other clients. RVNL is a big company. It is a Navratna company. We have got all kinds of exposure and experience. So depending upon the client's eligibility criteria, if it fulfills, then we will go alone. See, we have made a policy even for the different kinds of infrastructure projects, that if we are having the credentials, we are going alone, we are not tying up with anybody. And here is also the case that if some client misses the eligibility criteria, we will be able to satisfy, then we will go alone. There is no point to go with anybody else.

Got it. Got it. Got it. And sir, one last question. How much have you invested in different JVs till date and how much we do need to invest?

In this Vande Bharat project?

No, no. In the roads and the other SPVs which we have?

So what exactly you want to know?

Sir, investment. How much have we invested?

How much we have invested in the various SPVs?

Right.

Around INR 1,500 crores. INR 1,600-plus crores we have invested in the various SPVs, which includes the 5 number of special-purpose vehicles of the -- basically typical railway infrastructures, then we have got the MMLPs, the multi-model logistics, which are coming up at Chennai, Bangalore, Indore and Pune. Then we have got some companies like the Chatra Expressway Limited, where we have got a share of around 50%, then we have got -- there is a Chandikhole-Paradip, where we have got the 100%, that is a 100% subsidiary. So altogether, you can say that around INR 1,600 crores plus we have invested in the various subsidiaries and JVs and then other companies.

And in next 1, 2 years, how much do we need to invest, if any, incremental investment?

See, we are -- we have got a turnover of around INR 21,000 crores, order book of INR 85,000 crores. We want to grow the top line at a rate of around 5% to 7%. And in order to grow like this, we -- all the time, we want to maintain an order book of around INR 75,000 crores to INR 1 lakh crores. INR 1 lakh crore is an aspirational target. And whatever opportunities come, we will try to infuse equity, but we are also guided by the Ministry of Railways -- Government of India, where there is a restriction that beyond certain limit, we'll have to go to the ministry for the approval. So what we understand is around 30% of the net worth that we can infuse, which is around -- this time, net worth is INR 7,000 crores?

Net worth is around INR 7,000...

So 30% of the net worth, we can infuse. And beyond that, if you want to invest, then you'll have to go to the Ministry of Railways and Ministry of Finance. So what I am saying is that with our objective whatever opportunities come, either we will be able to approve it ourselves. The net worth is around INR 7,867 crores. So roughly INR 8,000 crores.

Upto INR 2,200 crores.

So up to INR 2,200 crores, we can infuse equity.

INR 2,200 crores. So sir, I'll put the question in a different way. This INR 1,600 crores is the 100% what we have to invest or that is already we have -- is there any incremental investment in these SPVs, which we need to do for the next 1 or 2 years? Only from this project?

The biggest problem today is that the voice is getting cut. I do not know what is the problem. So somebody can speak slowly and then I'll be able to listen. Mr. Periwal, you please tell what exactly is the question. You repeat the question, please.

Sure. Sir, my question is...

Don't speak near to the mic, just keep slightly away and then speak slowly.

Okay. Sure, sir. My question is, we have invested INR 1,600-odd crores in this SPV, be it MMLP and other stuff. Now do we need to invest anything additional beyond this in these projects only?

Yes, depending upon the requirement, we may have to invest.

Yes. So I want that amount over 2 next years.

The amount is again, it depends upon the situation and the different conditions. And we cannot foresee at this very moment. What I can tell you is that if it is beneficial, everything has got the financial assessment. And if it is in the interest of the project, if it is in the interest of RVNL, certainly, we will invest. There is absolutely no doubt about it. But if our investment is going to give some negative results running into the losses, then why to invest. So we will work out if it is financially viable, good for the health of the company, we will definitely invest even in the existing companies.

The next question is from the line of Tushar Sagade from Kamakhya Wealth Management Private Limited.

Sir, I just wanted to know do we have any...

Sorry to interrupt you, sir. May I request you to use your handset, please?

Sir, I just wanted to know like what percentage of our order book is the high-speed railway tracking?

See, high speed, we have got mill worth order book. And we have got the basically metros -- railway projects, metro segment is the preferred segments. We are executing metros in 7 cities. And high speed -- your question is what is the percentage in the high speed. Presently, it is 0, but we are very keen. And if you go through the draft vision, which is for the Viksit Bharat 2047, huge plan is there for infrastructure building in the high-speed corridors and RVNL is technically very competent and proven to having proven track records. So we would like to have good order for the high-speed network as well.

And sir, can you just give me the range of the margin profile in that orders?

Margin in what projects?

Like any high-speed pipeline orders...

We don't have any order for the high speed. And the margin for the nomination projects is fixed, which is 8.5%. And for the products which we are taking for bidding, the margins will vary from the project to project because every project's nature is different. No 2 projects are identical, number one. Number two, all are having different kinds of financial risk. We are doing some value additions. We are allocating risk. But at the same time, we are also eyeing for the margins. So I have cited 2 examples of the Indore Metro and The Maldives project, which are our first projects in India and first project overseas, which we have secured through the bidding. They are the margins which have come for the year '23, '24 is more than 10%.

The next question is from the line of Vishal Periwal from IDBI Capital.

Sir, you did mention that our current order book is INR 85,000 odd crores. Can you give a break up in this nomination and bidded, what is the amount?

See, around INR 36,000 crores exactly -- exact numbers I may not be having. But you can say INR 40,000 crores, INR 45,000 crores kind of breakup.

Okay. So INR 40,000 crores is now -- I mean, we are moving to bidding now, remaining...

Yes. Bidding, bidding, bidding.

Okay. Okay. And in this, will you -- I mean, can you -- any color on major orders that we have or if it is -- I mean, readily available with you?

What order you want to know?

Maybe key orders that we are executing and the size of it?

Okay. So let me -- I had already spoken that in '23, '24, we have articulated 142 bids, total 286 bids. And the success rate is more than 23%. International market, I have already cited some of the tenders. EOI submission, that I have said. The offices which we are opening, that I have said. And then, we have got this -- so you want to know some projects there -- new projects, you want to know?

So basically, the INR 85,000-odd crore order that is there, maybe like key 4, 5 orders and the size of it, if it is available.

Let me talk about the signaling system. So this is a new vertical. So we have got order worth more than INR 700 crores. In that particular INR 700 crores in Southern Railway, we have ABS, provision of ABS in Jolarpettai road junction of Salem division. That particular project is costing more than INR 239 crores, roughly INR 250 crores. So this is a big project. And we have got plenty of scope for the S&T works. Then if you want to know the electrical works, we are executing all kinds of works, which includes the electrical system, metro system. So we have got the different verticals. We have started executing the metro segments like we are excluding depot, we are executing track work, we are executing electrical and S&T system, we are executing civil engineering works, station works, underground metro packages. So we have got the complete segment. In the electrical portion, we have got plenty of projects even in the state government projects and metros and the railways, 2 into 25 KVA. So we have got a large number of projects. It is very difficult to tell the details about the project, but I can tell you that the company has been growing. 2 years back, we had 0 project through the bidding and all of a sudden, you have about these huge numbers.

Sure, sir. And then in the 20% success rate in orders that you mentioned, what is the order inflow in FY '24 in rupees, crore or anything that you can share, quantum?

[Foreign Language] Please tell me again.

Sorry, sir. Sir, I was saying our success rate is roughly 20-odd percent...

More than 50%, yes. More than 20%, sorry.

So in order inflow in rupees crore, can you mention what is our inflow in FY '24?

Inflow in FY '24, okay? So '23, '24, we had participated 142 bids costing around INR 65,000 crores. Out of that, 76 were civil engineering, 36 were electrical, S&T was 29. And success rate in the civil engineering was 23.24% -- 21.91%. Electrical, the success rate was much more. It was 35.78%, and S&T was 14.27%.

So order inflow in FY '24 will be like INR 65,000 crores, can you do like 20% of that? So that is inflow?

Exact number, I do not have. But yes, you can imagine that whatever bids we are submitting. And roughly, the success rate is around 20% plus. So you can calculate that how much is the orders which we have bagged from the market.

The next question is from the line of Ranodeep from MAS Capital.

Sir, I wanted to understand have quantified the opportunity that we have for the IMEEEC, the corridor that the government of India has planned?

Tell me again, which corridor?

India, Middle East.

Okay. So yes, this is -- this was announced in G20 and see, it has got a big opportunity for RVNL. It has got the -- basically railway segment. It has got the Marine segment. We were working in the marine work for The Maldives projects. Earlier, we had executed bridges in the back water. So we have got the exposure of executing the marine works. We have got plenty of exposure of Indian railway track works. We have commissioned more than 16,000 kilometers of railway infrastructure. So as far as the capabilities is concerned, we are fully capable. We have got the proven track record. In the last 13 years, we have been rated excellent by the Department of Public Enterprises. See, this particular project, it is still under the constructive phase, a lot of things are happening and the moment the DPR, et cetera, are prepared, the contracts, the tenders are called, we would be very keen to enter into this. And it is our strong forte, and we are 100% confident that if we get the opportunity, we will be able to deliver the projects with the best quality possible following the highest safety standards. And it is going to be very big opportunities for all kinds of infrastructure companies, and RVNL is certainly going to get the benefit out of this.

My last question, in terms of railway electrification, which used to be a major component of our order book, and I believe, if I'm not wrong, I think more than 90% of our country is already railway electrified. Are we still looking at this opportunity in the years to come?

See, this railway electrification in terms of the quantum, the kilometer-wise, it may be -- it looks big. But in terms of the value, it used to be very less. I can cite the example that for our doubling of the third line project, suppose it is around INR 15 crores to INR 20 crores per kilometer, the railway electrification costs around INR 1 crore per kilometer. So the railway electrification in terms of the money was not very high. Whatever assignment was given to RVNL, more than 99% has been done. We are not looking for that particular opportunity in India because more than 95%, 98% electrification has already been done and the scope is not available. So if you see the aim of the government of India, what were the aims? The number one was that the green transportation system, which includes the railway electrification, then connecting the unconnected area where -- which is good for the economic and social growth of the country. So we are again looking for that. Then the -- basically capacity augmentation project, there are some routes which are highly congested. Presently, the traffic loading is around 1,500 million tonnes. They are planning 2,000 -- by 2030, 3,000 million tonnes. For that, the capacity augmentation projects, there are a large number of projects which will come up. We are keen for that. Then the turnkey projects, then in the manufacturing process, safety, quality, safety, S&T work, signaling and telecommunication work. So we are very -- station development work. But we are basically interested more and more interest in capacity augmentation projects because that is the kind of projects which we have handled in the past. We have got the expertise in execution of this typical railway infrastructure projects.

Sure. So my last question, sir, if I'm not wrong, we did a JV with a South African company, Jakson Green, which was in the solar space. So I wanted to understand what is our aspirations of getting into solar? Like what are we seeing?

See, we are looking for the opportunities, all kinds of opportunities. We have got a very beautiful tagline from local rail infra to global all intra. So earlier, we were executing -- we used to have only one client that is the Ministry of Railways, and we were executing all the railway infrastructure. Now we have entered into the international market and it is not limited to the railway infrastructure. So we are very keen for these kind of projects where the plenty of scope is available worldwide. So in that initiative, we have entered into that. And we are 100% confident and sure that we will be able to deliver those projects with very good margin in time to come.

The next question is from the line of Ketan Jain from Avendus Spark.

Sorry if my question is repeated. My question was on order inflow guidance for FY '25. What is the order inflow guidance for FY '25 and revenue guidance for FY '25?

You were basically...

Order inflow guidance for FY '25.

See, I have given you the numbers that in FY '23, '24, we have participated in 142 number of bids, costing around INR 65,000 crores. For FY '24, '25, we will definitely be participating in more than 150 bids, costing more than INR 75,000 crores. Success rate is INR 20,000 crores, so you can calculate the kind of into which we are expecting. All the time, we want to have the order book to be 3 to 4x. So if our order book -- if our turnover this year was INR 21,700 crores and next year, we plan for INR 23,000 crores. So the order book all the time should be available INR 92,000 crores to INR 1 lakh crores. So the basic parameters which we want to monitor is that we should have the order book all the time 3 to 4x and roughly INR 1 lakh crores. And accordingly, whatever we are participating in the market nomination has been totally stopped. So whatever order book inflow will be there, it will be through the bidding only. So we would like to have the inflow of approximately INR 20,000 crores to INR 25,000 crores in a year.

Thank you. Ladies and gentlemen, due to time constraint, we will take that as the last question. We would conclude the conference now. On behalf of Rail Vikas Nigam Limited, thank you for joining us, and you may now disconnect your lines.