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

Ladies and gentlemen, good day, and welcome to the Rail Vikas Nigam Limited Earnings Conference Call hosted by Antique Stockbroking. Please note, this call is for 40 minutes. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Vishal Periwal from Antique Stockbroking. Thank you, and over to you, Mr. Periwal.

Yes. Thanks, Rio. And good afternoon, everyone, and welcome to the post results earnings call of Rail Vikas Nigam Limited. From the management side today we have with us Mr. Pradeep Gaurji, who is the Chairman and Managing Director; Mr. Sanjeeb Kumarji, who is Director Finance and CFO; and Mr. MP Singhji, who is Director Operations. So as usual, we will have maybe a brief from the management, and then we'll have lines open for Q&A. Yes, thank you, and over to you, sir.

Yes. Actually, what we'll do because the time is short, why don't we go ahead and take more and more questions. Will it -- I think that will be preferable?

Yes. Sure, sir. Sure.

[Operator Instructions]. The first question is from Rajesh Agarwal from Moneyore.

Sir, my question is to you on the guidance of INR 21,000 crore, Now in the 9 months, we have done INR 13,000 crores. So we can do INR 8,000 crore in the last quarter itself? This is my first question. And second, sir, the profits from JV, which has come at INR 56 crore this quarter, is that sustainable? And bidding intensity pipeline. 3 questions.

So as far as turnover is concerned, definitely INR 8,000 crore in last quarter is absolutely achievable because that is where the maximum turnover we get it historically also. So I think we are quite confident we are in line with that. And regarding this JV, INR 56 crore -- what is this INR 56 crores JV?

This is margins profit from JVs.

Profit from JVs. See, this is not only sustainable, this is going to, in fact, improve substantially because in this one we are showing minus INR 76 crores under Kinet. This is our joint venture for manufacturing. So there, the revenue stream is going to start maybe after a year-or-so. So this is a notional negative because manufacturing is still to start, and we have invested a lot of money. So this is going to get return. So not only it will be sustain -- it will sustain, but I think we'll get to see much improved figures in this case.

So any quantum or yearly, what can be the figure, sir, JV from associates next year?

Kindly repeat.

Yearly -- next year '26-27 profits from a JV on a yearly basis, how much it can be?

We'll assess and give it because it will be difficult because this -- if suppose this Kinet JV, minus 76 was not there, the profit itself should have been almost INR 130 crores of this.

Okay. Understood. So immediately, when the revenue starts, it will come into profit, the Kinet JV?

Yes, yes, definitely, definitely because that is the way it has been planned. I will give you some figures of this one that our manufacturing cost, what we have bid for this is INR 120 crores per train set. Of course, then there will be a price variation clause to it. I don't know if it may come to maybe 2%, 3% further or even 4%. And manufacturing cost as of by integral core factories come in INR 90 crores. So definitely it's a profitable venture. And when the production unit of Railways can do it at that cost, definitely in a joint venture with Russian and with a much improved working, it will improve.

And sir, now I'm talking about '26, '27 turnover, the base will be INR 21,000 crores from that, we will increase by how much next year revenue, overall revenue?

Okay. So let me be slightly be a bit upfront on this. We are undergoing the transition. See, as you are aware, we were an organization which was confined to doing work exclusively assigned to us by Ministry of Railways and that assignment pipeline has stopped. But we have navigated it through very -- I mean, adroitly and now I'll be happy to share with you that our -- out of our today's order book of around INR 97,000 crores, we have gone -- it is INR 49,000 crores from the bidding works and INR 47,000 crores something from the railway works. So this is a transition we are undergoing. When this assignment works were stopped, our value of order book from railways was almost INR 140,000 crores -- INR 140,000 crores, sorry. So this is some sort of this thing. So turnover either will maintain, maybe it may dip slightly but we are on a very sound trajectory now because we have got enough orders from the market by bidding. So I will not say this will be the base, but we will not be too much off the mark from this.

Any time frame? So the INR 95,000 crore order book has to be executed over 2 years or 3 years? Any time frame around that?

Yes. Typically, this is around INR 97,000 crores. So normal gestation period for all the projects is 3 to 4 years. So I think -- and plus orders will go on adding because even this year, as of now, we have got orders of almost INR 25,000 crores, exclusively this year itself.

Understood. But are the orders around that good margin, sir? Margin will be maintained?

The margins are -- I mean, the price is decided by the market, but because we will, of course, like to have more and more margins. But this organization, which has been one of the outlier in project execution with the kind of efficiency and all that. Definitely, we -- our margins will not take any beating from whatever we were getting from assigned and maybe in few cases will be even better than that.

So this means, we can do INR 30,000 crores? If we were to do over 3, 3.5 years, the average run rate should be INR 28,000 crores to INR 29,000 crores yearly.

I think that's a realistic figure. That's a realistic figure.

[Operator Instructions]. The next question is from Pranav Furia from Antique Stockbroking.

Sir, my question is, is there any update on the Vande Bharat order? When will we start executing?

As far as Vande Bharat is concerned, actually, we were on stream and everything was moving quite smoothly. But again, they wanted some change in configuration of the trains from 16 coaches to 24 coaches. So this decision was taken somewhere in June or July of 2024. So which led to a change in design and all those things. [indiscernible] gone back to again to original 16 coach train. So this has sort of put back the whole -- this initiative by around 8 to 9 months. And Railways have also given a currency extension for that. So next -- so the first prototype which was supposed to be in September-October 2025 will now take place somewhere in the first half of the next year. Otherwise, everything is in a very proper shape. The factory is completely ready to do manufacture. And now ministry has told that please go back to the original. And so that gives us another comfort that for whatever we are planning. So we are going ahead with that. So most probably, maybe first half of '26, the first prototype will be ready for the trials.

Okay, sir. And the INR 97,000-odd crore order book that you mentioned, so we've included the Vande Bharat order yet or it's yet to be included in the order book?

This is excluding Vande Bharat. This is excluding Vande Bharat because Vande Bharat we are not taking it in that sense because it is not -- it will start generating revenue after maybe a year-or-so, so we are keeping it slightly, as far as our calculation is concerned, we are not adding it for the time being.

Sir, what would be the broad order value based on the current currency base?

Sorry, slightly -- if you may kindly speak slightly louder.

Yes, sir, I was asking what would be the broad order value based on the current exchange rates?

It is in rupees only. The contract is in rupees. The total contract is around INR 30,000 crores, out of which our share is 25%, which comes to around INR 7,500 crores. I think it will come to around...

Total is INR 55,000, including the maintenance.

I'm sorry. I'm sorry, let me correct myself. The total order is INR 120 -- total order is around INR 32,000 crores. So around -- it is around INR 8,000 crores to INR 9,000 crores. But of course, there is a price variation to it. So some percentage may go up. Anyhow, it is not part of this INR 97,000 crores what I have shared. This is beyond that.

[Operator Instructions]. Next question is from [ Vivek Nayak ], who's an individual investor.

Sir, you said that there's a decommit from the Railways with respect to old legacy projects. But your Director of Finance yesterday on CNBC, he said that there is INR 40,000 crores of legacy orders. So just can you clarify what is this all about?

Yes. Because out of this INR 97,000 crores orders what we have told, the railway orders are around INR 47,600 crores. So these are the orders -- these are the balance works what we have on hand of the projects which were assigned to us by Ministry of Railways.

Okay. So are you saying going forward, we will not get any such orders?

No, policies may change. But as of now, this is the policy because we have seen a lot of policies changing, I mean, government -- it is up to the government, how it sees it because this organization was established exclusively for executing the railway projects assigned to it by Ministry. In fact, there was a time when we wanted to venture out for something else also beyond railways. So we were told, nothing doing, you have to confine to railway projects. So that was a policy once. Now policies, you please go to the market and get the works. Now depending on how the CapEx is spent by zonal railways, how it has performed, government is, I mean, free to take decisions. We -- it is quite possible they may go back to it or the other possibility of existing policy continues. So everything is on the table, nothing can be said for sure.

And sir, any color on the international projects? I think there was some -- apart from railways, there was something in Kazakhstan and other countries. So can you give us an update on that?

My colleague, Mr. MP Singh, will speak on this.

Yes. We have got already some foreign projects, which we are already got through bidding or through MOU. So some of them are solar projects in Uzbekistan and Kingdom of Saudi Arabia. And we've got a project in Congo also that is a transmission line projects, and we are actively bidding -- bidded for the railway and metro projects in Turkey. And simultaneously, we are exploring options for our railway projects in Peru through government to government contracting also. And already 1 international projects is execution in Maldives, that is a harbor project.

I will add to what Mr. MP Singh is telling. See, we are very, very keen to have a lot of our footprint in international market because that is absolutely important and necessary for the organization to go on even an exponential growth trajectory. So we are trying our best. See, kindly appreciate that we have started bidding in just last 2 to 3 years. So domestic was easy to get, international, I'm not saying it is difficult, but we were less exposed to that. Now we are getting into a lot of partnerships, a lot of this thing. Whatever projects we have taken like solar and all, we have entered into partnership. So we are finding our feet there. And definitely, this is one of the important areas for us to spread up.

I am an investor right from the IPO days, and I'll continue to hold my shares.

Thank you so much.

[Operator Instructions]. The next question is from Rajesh Agarwal from Moneyore.

Sir, how has been the cash flow? Do we need working capital? How is the working capital situation now? And what is the working capital days -- number of days now?

Working capital is not an issue at the moment. We have surpluses, interest and surplus with which we finance. And plus, in many of the projects acquired through bidding, they do mobilization advance without ticket, so which is used for working capital. And we have sufficient reserves with us. So that is not an issue at the moment.

So we don't have to borrow or no interest costs will come for that, no?

No interest. And I'll just add to what Director Finance has spoken, that even when we take mobilization advance based on the bank guarantee, so our finance team has done an excellent work, and we are getting it extremely competitive. I think it is 0.1% -- 0.08% is the premium what we pay as compared to many of the organizations paying even 2% to 3%, so credibility and creditworthiness of our organization is quite high with almost all the funds. So that is another happy situation. And the capital -- I mean, the money gets saved on even these type of expenditures.

Okay. And sir, for Kinet JV, you said we'll make a margin of INR 50 crores per train set or per coach for Vande train?

No. Yes, what I'm trying to say that our quote is INR 120 crores. Presently, it is getting manufactured in ICF in INR 90 crores, it can be INR 92 crores, it can be INR 97 crores, I'm not sure. So as of now, it is quite all right.

So our share will be 25% of that, our share, because we have 25% in the JV?

Yes. Our share is 25%.

So our profit may be around INR 7 crores to INR 8 crores per year.

Yes. If Russian share with us.

And 120 -- and we have to make 120.

120 sets we have to make.

Okay. And you're saying INR 30 crores -- INR 90 crores per set, INR 130 crores per set?

I did not say 90 exactly, I said it is in 90s.

And sir, when will the BharatNet order which we got, when the execution will begin?

BharatNet, we have recently got a letter of acceptance. So that value is around INR 13,200 crores. So now things we will -- I mean we have already deposited performance security and all those things. And all the groundwork has been done. So again, that is again a new area, which I mean, which we have put our -- this thing, we've traded on a slightly known territory, not fully because we have been doing a lot of communication works even in railways, but not to this extent.

This is also in JV? What is our share in the JV?

Yes, we are 100%. This is quote only by RVNL. We are 100%. And again, as Director of Finance mentioned in this thing, I think in the previous question of this one, this again provides a mobilization advance of almost INR 1,000 crores free of interest. So even the capital availability will be quite good. So we have to -- and we are making an SPV exclusively for this 100% owned by us, which we'll be executing this project so that we will have -- we'll fireball this balance sheet with RVNL's balance sheet and all that, so that accountability and all these things in the work. So we are quite excited about this. And we are looking at it as a -- not only as a big venture, it is almost INR 13,000 crores, which is expected to go to even INR 17,000 crores, INR 18,000 crores. But it opens up a huge vista of opportunities for us in telecom sector, which is a very, very sort of sunrise sector for the country.

It's a good margin order, sir? Margins are good in this?

Yes, yes. It's -- of course, the bidding was competitive, but we have done our calculations well. And even when BSNL wanted to do negotiations, we have stuck to our figures. And so we have not made any compromise on that.

And sir, any latest update on the Uzbekistan, what we have formed a company in Uzbekistan Railway, any update on that?

In Kyrgyzstan, we have formed a joint venture company that is with the Kyrgyzindustry. We are actually completing that project. The government of Kyrgyzstan is tying up for the financials for that project. We have already submitted the draft, DPR for that project and based on their evolution, there were certain issues with the lending rate from the foreign bankers, so that Government of Kyrgyzstan is trying to resolve it, and we hope to see this project will see light soon.

Next question is from Vishal Periwal from Antique Stockbroking.

Sir, the order book that we have INR 97,000-odd crores, can you give a break up like how is the [indiscernible] railways?

Railways, out of this assigned projects of railways is around -- is exactly INR 47,600 crores. And balance INR 49,000 crores is in various sectors, starting from metros, national highways, even some projects we have taken from railways on bidding also. And irrigation port, and this includes all domestic as well as international.

Okay. So between domestic and international, what would be the number of international, sir, maybe a ballpark number?

International as of now is around INR 4,500 crores. So as of now, it forms just almost 10%, but we are looking at it to go at least up to 40% to 50% in near future.

And from this, you mentioned Kyrgyzstan is one work that we are eyeing. And then further, there are a couple of Turkey, Peru, Congo in transmission distribution, these are the further projects which can build up the order book? Is that fair understanding?

Actually, we are looking -- I mean, we are -- this is one of our focus areas. And wherever opportunity is coming, we are definitely putting all our effort towards it. So this will be one of the areas which we are looking at it very, very -- I mean, strategically as well as commercially.

And then you mentioned total inflow in this year is INR 25,000-odd crores. So is this LOA plus L1 combined together or this is the LOA which is received?

This order book...

That is only by bidding, LOA.

LOAs only.

So INR 25,000 crores is the LOA that we have received for this year inflow?

Yes.

And then I think on this BharatNet, you did mention like we are the lead member and there are consortium members. So I mean, the full work...

There is no consortium member. I said RVNL has -- RVNL is the, I mean it is 100%, I mean, LOA to RVNL, there's no consortium.

Okay. Maybe I think I saw that in the press...

HFCL, we have just entered an MoU for the supply of element, but they are not part of this bidding.

Got it. And...

So that is a pre-bid arrangement with them, but the contract is to us, even whatever they are going to supply to us, RVNL will have a margin even on that.

And maybe, sir, from an industry perspective, can you give some color, like we do bidding in railways and a couple of others also, metro, highway and all. So where do you find the competitive intensity is higher, where do you find -- I mean probably like there are very less players and like we have a niche in that. So any industry-specific color if you can just provide, maybe qualitative aspect will be helpful.

Actually, I mean competition is becoming not only I should say more, it has gone to unhealthy levels. People are quoting very low, but there are some projects like HAM projects, BOT projects. These are the ones where competition is still not that much as EPC and other contracts. So that is one area which we are looking at. And government has also -- I mean, improve a lot of conditions for BOT projects. So we have bid 2, 3 big value BOT project, that is another area which we are looking at where the competition is less and the margins can be better. So that is one area. And second, which one you said? Metros, of course. Metros is another area where we are getting -- I mean, we are performing also well and margins are also good.

Sir, you mentioned BOT. So BOTs, which segment we are eyeing on margins in BOT?

Specifically national highway projects.

Maybe, sir, broadly, is it possible to share like because in BOT also, we have seen -- I think there are a lot of buzz that like government will be awarding work but somehow it has been kind of delayed and postponed, so anything on that? Is it the DPR work or maybe like some bit of documentation that is still pending that is delaying things or anything, just a procedural delay which is there?

At least 2 projects we have bid recently, which is 2 projects of INR 5,000 crores each. So I think things have started moving on that because this has come in last 1.5 to 2 months only. So I think things will move in the coming year. I think we'll see more and more because that is the preferred option for NHAI today because they have a lot of debt on their books. So they are also going for more and more BOT projects. I think their debt is almost in the range of INR 3 lakh crores, INR 3 lakh crores, the NHAI.

Maybe one last question from me. What could be our -- I mean like projects that -- where we are bidded and we are awaiting outcome, maybe a quantum if it is handy with you, sir?

Yes. We have built projects of around INR 80,000 crores this year. We have got orders of INR 23,000 crores. So maybe another INR 10,000 crores to INR 20,000 crores will be there bidding, which we have -- which we are awaiting the results of that. Maybe it will be in the range of around INR 20,000 crores. Around INR 20,000 crores is something which we are still awaiting the outcome of our bidding. But our strike rate generally has been varying from 30% to 40% in the different sectors. Like our electrical segment, the strike rate is almost 40% to 45%. Again, signaling telecom and all our strike rate is quite high. And in these EPC projects of civil infrastructure, our strike rate varies from 25% to 30%. So as of now, INR 28,000 crores is something which we have bid and it is under evaluation.

Maybe I'll just ask one last thing. Sir, in BharatNet, when we have bidded, sir, what will be the number of players who have bidded for the BharatNet according to you? Just to understand the competitive intensity. Is it similar to what the EPC highway or Indian Railway work that we have or it's a little less?

I think I will just confirm. My officer is there, he will come. I think mostly, there were 3 to 4 players in each bid. This is what I faintly remember, but I'll confirm it to you.

[Operator Instructions]. The next question is from Vivek Nayak, who is an individual investor.

Yes. Sir, any insight on the Mumbai-Dubai corridor, train corridor? And also I think it's linked to the India, Middle East, Europe rail connectivity.

You're talking of India-Middle East-Europe corridor?

Yes, yes.

So that is still something in making, let us see. I mean it will open huge opportunities, of course, as and when it happens. But as of now, I think a lot of geopolitical situation has to settle down before this takes some sort of right path, but as and when it happens, it will -- because that is one area which organization like RVNL will have a lot to -- I mean participate because it will be rail based. So -- and it will be, I mean, going long distances to Middle East and right up to Europe that will open huge opportunities. Even Israel metro also is another area which the team had come and they were very positive about RVNL's capability in metros. So that is another area of opportunity we're looking at. They are talking of next maybe 1 to 2 years before they start. And Indian Government is trying government-to-government arrangement, so that Indian companies can go and do the job there. So let us see. A lot of things are there, let us see how things move further.

Yes, one more question is, I understand there has been execution delays for the past 9 months, and we hope to catch up in Q4 of this year. So how confident is the management that we will touch the INR 22,000 crores revenue, which was communicated in the past con-calls?

No, I'll not say it is a delay in execution. I mean, delays, yes, delay to the extent, see monsoon is in between. That takes 3 to 4 months. Then there are festival season comes. And this time, even elections were there, which had taken because a lot of labor movement take place that time. They go to their native places for vote and all this thing and the way the present elections are held people stay for almost a month-or-so. So a lot of this thing was there, but still -- but this is the last quarter is something where we are out of all festivals and the weather is also most suitable for work and money also organizations want to spend the money. So I think very favorable, and we will achieve whatever we have planned to achieve.

Due to time constraints, we'll be able to take 1 last question. The last question is from [ Roshan Dihre ] from RVNL.

Sir, last quarter, the KRCL joint venture any issue? How long time to take it solve?

Can you clarify the question?

Kindly say it again.

Last quarter, December quarter, you reported in profit-loss statement, KRCL joint venture [Foreign Language] payment is delayed for INR 1,400,000 crores.

Okay. [Foreign Language] INR 1,400 crores. That is with the interest also. But they have started paying back, plus there is an arbitration award already there of around INR 584 crores, so that is in favor of KRCL. So next date is 20th February, let us hope or if that this gets executed, that order -- I mean that arbitration award, so I think that cash flow situation of Krishnapatnam and all will improve. And that will help us to get our money back. But in spite of that, KRCL is getting good traffic and they are able to pay almost at the range of INR 100 crores to INR 200 crores per year. I think last year, they gave INR 200 crores -- INR 150 crores. This year, it will be INR 200 crores. So I think we are getting our money back slowly. But if this arbitration award is executed, then it will become quite -- it will be -- it will give a good chunk to this thing.

I have 1 more last question, sir. How much your order book you have to complete it, time to take?

Present order book is around INR 97,000 crores. And most of the work take place over the next 3 years-or-so.

Thank you very much. We'll take that as the last question.

Thank you so much.

On behalf of Rail Vikas Nigam Limited, we thank you for joining the call, and you may now disconnect your lines.