RITES Limited (RITES) Earnings Call Transcript & Summary

Good morning, shareholders. I am Joshit Ranjan Sikidar, Company Secretary of your company, RITES Limited, welcome you all in this 47th Annual General Meeting of the company. I hope you are doing well and staying safe and healthy. This 47th Annual General Meeting of the company is being held through video conferencing and other audio visual means, in compliance with the notifications and guidelines issued by the Ministry of Corporate Affairs and Securities and Exchange Board of India. The facility for this meeting is being provided by Link Intime India Private Limited, our registrar and transfer agent. I would like to inform you regarding the participation process of this meeting. Facility of joining this meeting to video conferencing is being made available for members on first come, first serve basis. Since there is no physical attendance of the members, the requirement of appointing the proxy is not applicable. The register of Directors and key managerial personnel and their shareholding and register of contracts or arrangements in which directors are interested, open for inspection. Thus, the voting, as mentioned in the notice of AGM, has been conducted from Sunday 26 September, 2021, Tuesday, 28th September, 2021. In this regard, company has appointed Mr. Sachin Agarwal of Agarwal SN, Company Secretary, scrutinizer, to scrutinize the votes. Members who have not voted yet through remote e-voting can cast their vote through e-voting in the due course of the menu. All the members who have joined this meeting are by default put on mute mode by the host to avoid any disturbance and ensure smooth and seamless conduct of the meeting. Once the question and answer round starts, Company Secretary will announce the name of the shareholders who have registered as speaker shareholders one by one. Each speaker will get approximately 3 minutes to speak. The speaker shareholders will thereafter be unmuted by the host. Shareholders are requested click the video on button. If the shareholders are unable to join through video mode, shareholders can speak through audio mode. By speaking, shareholders are requested to use the [ microphones ] so that he or she is clearly audible. Also, it is requested to minimize any noises in their background, ensure that Wi-Fi is not connected to any other device, no other background applications are running, there is proper lighting to have a good video and audio experience. If there is connectivity problem at speakers side, we'll ask mute next speaker to join. Once the connectivity improves, the earlier speaker shareholder will be called again to speak. We'd like to request the shareholders to limit their questions up to 3. During the Annual General Meeting, if the shareholder faces any issues, he or she may contact on the helpline numbers mentioned in the notice of the AG. The dedicated toll-free number for investors regarding any queries or issues during the AGM is provided in the notice of the AGM. Thank you very much. Now I request our Chairman and Managing Director of the company, Shri V.G. Suresh Kumar, take the proceedings' spot.

Good morning, shareholders. I would like to welcome you all to the 47th Annual General Meeting of the company. I hope you and your family are keeping safe in these difficult times. This year also, the pandemic has forced us to keep this annual event online. As a requisite quorum for this meeting is present, I now call the meeting to order. All the directors of your company have joined the meeting. I'd like to introduce them. Shri Anil Vij, Director Technical.

[indiscernible]

Shri Bibhu Prasad Nayak, Director of Finance.

Good morning.

Shri Ashish Agarwal, adviser and additional member, Ian [indiscernible], [indiscernible] who has been nominated as President of India's nominee has also joined this meeting. Shri [ Anchimum ] Malik, statutory auditor from [indiscernible] and company, chartered accountants; and Shri Akhil [indiscernible], Secretary auditor from Akhil Rotary and Associates also joined this meeting. Scrutinizer Mr. Sachin Agarwal, practicing company secretary, is also present. I thank all the members for joining this meeting. Due to the ongoing COVID-19 concerns and social distancing norms, the meeting is being held through video conferencing. This follows a notification and guidelines issued by MCMCB. The live streaming of this Annual General Meeting is also being webcasted at registrar and transfer agent website that is Link Intime India Private Limited. The company has taken the requisite step to enable the members to participate and vote on the items being considered at this Annual General Meeting. I hope that all of you have received the annual report, which was attached with the notice of the meeting well in time, and I consider it as read. I would like to say that I am proud of the way our company has responded to the pandemic. It has been a testament to its resilience as an organization and as a family. Our responsibility to our clients, shareholders, employees and society has never been greater in the last 47 years, and we are taking these responsibilities earnestly. The business continuity plan we have implemented have made us a stronger and better organization. During the financial year 2021, we overcame pandemic-related impairments to keep our business running. And as a result, we were able to achieve a consolidated revenue and profit after tax of INR 2,005 crores and INR 444 crores, respectively, while sustaining our profit margin at 22.2%. RITES achieved total stand-alone revenue of INR 1,947 crores, and the operational revenue, excluding other income of INR 1,797 crores. Nevertheless, the pandemic did impact our stand-alone profit before tax and profit after tax in financial year 2021, which stands at INR 562 crores and INR 424 crores respectively, down by 31.6% and 28.8% over financial year '19/'20. The COVID-19 outbreak has significantly impacted overall infrastructure development in financial year 2021, especially in H1. The impact was felt on all segments of the business, consultancy and quality assurance getting impacted due to travel restrictions. However, consultancy business reached the pre-COVID level by the fourth quarter of financial year '21. Leasing business fell in H1 due to work getting stopped at various sites of operationals and reach the pre-COVID levels in H2. Due to supply chain disruption, export revenue spilled over to FY '22. Turnkey business revenue also softened due to restriction of movement of manpower and material. The unexecuted order book as on March 31, 2021, stood at INR 6,277 crores, which gives us strong revenue and margin visibility for the next 2 to 3 years. During the last financial year, your company has experienced delay in project initiation and tendering activities caused by COVID-19-related disruptions. However, your company still managed to consolidate its order book. The Board of Directors has recommended a final dividend of INR 4 per share, amounting to INR 96.12 crores for financial year 2021, and the resolution has been put up for your approval through electronic voting. This is in addition to the earlier 2 interim dividends of INR 5 per share and INR 4 per share, which were paid to our earnest shareholders in January 2021 and March 2021, respectively. This takes a dividend payout on accrual basis of the company to 73.6% on the stand-alone PAT of financial year 2021. Also during the year, your company returned INR 257 crores to shareholders in its [ maiden ] buyback. The key infrastructure sector where the company is actively pursuing business in India and abroad, may have taken a hit during this year. But as the restrictions are easing out, they are experiencing a rebound in growth with increasing investment from the government and private sectors. The National Infrastructure Pipeline, NIP, the National Rail Plan 2030 and various reforms in transport infrastructure sector define a part for providing world-class infrastructure across India. In the international business sphere, export and leasing of rolling stock and engineering consultancy are key domains. And your company is uniquely positioned to capture business opportunities in Africa, Middle East and Southeast Asia, where railway and road infrastructure is in urgent need for upgrade and interconnectivity. During the year, your company signed the contract for supplying 6 cape gauge AC-AC traction diesel loco electric locomotive and 90 cape gauge passenger coaches, including 5 sets of DMUs through CFM-Mozambique and was able to supply 2 locomotives despite supply chain disruptions. Export to Sri Lanka of 160 passenger coaches and 2 sets of fully air-conditioned DMUs has also started with the first lot of 10 coaches shipped. However, 30 coaches, which were at port as on 31st March, 2020 have already been shipped during the financial year 2020. Besides export of rolling stock, your company consolidated its position abroad in consultancy projects by taking up projects such as: project management consultancy for four lane national highway project in Bangladesh; construction operation service for Metro Express project in Mauritius; design and PMC service for development of infrastructure at the airport in Mauritius; design and PMC for development of integrated checkpost at Nepal Main in Nepal; consultancy for old runway rehabilitation at Gautam Buddha International Airport, Nepal. Your company on the turnkey front completed the electrification works between Sawai Madhopur Jaipur-Ringas section and Vijaypur-Maksi section and further secured work for electrification of around 489 kilometers. Doubling and third line work are substantially in completion stage. A few of the projects where your company is providing service are: PMC for rail infrastructure or DBC and PPC, CIL and others; PMC for construction of Western Dedicated Freight Corridor; construction operation for Srinagar Airport; independent engineer service for Paradip Port Trust; general consultancy for Metro Rail System of Ahmedabad, Nagpur, Pune and Delhi. Predevelopment work for Ayodhya and Varanasi railway stations are on track. RITES subsidiary company, REMCL Limited, which has been mandated to handle the power procurement under open access for Indian Railway has registered a revenue of INR 69 crores and a PAT of INR 24 crores in financial year 2021. This year, SRBWIPL, our wagon manufacturing joint venture with 438 new box NL wagons and 251 rehabilitation box NL wagons achieved revenue and profit of INR 161 crores and INR 2.5 crores, respectively. Besides, your company has acquired 24% stake in Indian Railway Station Development Corporation and nodal agency for developing station in the country. Your company is now striving towards expediting project execution and export supply amidst the COVID-induced uncertainties. Our healthy order book, recent project wins and successful project execution strengthened the position of your company as a total infrastructure solution provider. The market forecast for the large infrastructure project is promising, with expected economic stimulus package and an investment backlog within the infrastructure sector. Your company has positioned itself for securing meaningful consultancy role for complex, diverse, critical and mega infrastructure projects in India and abroad. RITES' focus on customization of meter and broad-gauge rolling stock and product diversification to cape and standard gauge rolling stock market creates large potential for exports. Your company accorded highest importance to transparency, affordability and equality in all facets of operation and is implementing the precept of corporate governance in letter and spirit. Your company has been proactively pursuing the Government of India initiatives such as Skill India, Make in India, Start Up India, Digital India, promotion of MSMEs, Swachh Bharat Mission and Solar Ecosystem by formulating its business or governance objective in line with the government plan. Your company has adopted a corporate social responsibility and sustainability policy to show its commitment towards operating in an economically, socially and environmentally sustainable manner. It has spent INR 13.41 crores on various CSR activities during financial year '21. I express my gratitude to our STM shareholders, my colleagues on the Board of Directors and to the CEO and Chairman, member and officials of Railway Board, for their valuable support, advice and cooperation. We are also grateful to the Ministry of Railways, road transport and highways, commerce, finance, external affairs, urban development, health and other departments, including [ Vipam ], regulatories, Indian embassies and missions abroad, foreign missions and embassies in India and Exim bank and other bankers for the company for their valuable support and guidance. We look forward for your continued encouragement and contribution. I have never felt as great a sense of purpose and pride in the organization as I do today. Your company is strong with deep relationships with clients and stakeholders. And I count on their continued support. Also, I'd like to thank Team RITES for its untiring effort, unflinching commitment to achieve the lofty goals it has set for itself. Given its demonstrated ability to execute on its strategy, your company is well poised to take advantage of growth opportunities, acquire new capabilities and rebound onto its growth and transformation journey. Now I request to begin the question-and-answer sessions. For this, I request moderator from Link Intime India Private Limited to take up the questions one by one. I request the company secretary to take the proceedings further.

Dear shareholders, there are many shareholders who have shown interest and registered their name as speaker shareholders, but due to time constraint we can accommodate only a few. I'm calling one by one, the name of shareholders can be accommodated for their inquiries. Number one, [indiscernible]. [indiscernible] Is there?

[indiscernible] is not present with us, sir.

Okay. Next, [ Mohit Ratik ]. [ Mohit Ratik ] is there?

Yes, sir.

Yes. Sir, my -- first of all, thank you for the opportunity to speak. And I mainly had 2 questions. One was regarding the export market, how it is looking and how this year we are in the export considering the supply chain disruption. And second was, last year, buyback was done at a very low price. So my own request to the management that if there is a buyback to give a good size for the shareholders because below market price buyback is no benefit to the shareholders. That's all.

Thank you. Export market, we had a good order book of INR 1,333 crores of export market, of which around 70% will be completed this financial year. We should have done something more in the previous financial year, but due to COVID disruptions, we could not do it. It has came through this financial year '21, '22. Around 70% would be done this financial year, and remaining will go on to the next financial year. However, I'd like to say that we have developed a prototype for standard gauge also. We have also opened up the KPH market for exports. So with these 2 additional diversification in the rolling stock, we're good expanding our geographical position in the Middle East also and African countries and Southeast Asia. So I feel that with this diversification, our export orders should grow at a good pace. Regarding buyback.

[ Mr. Ratik ], we have already done a buyback last year, and there is a mandatory time line gap of 1 year, which we are required to give, after which we can consider another buyback. So when the time comes, we'll keep your suggestions in mind.

Yes. Sir, thank you for the reply. Just to add on that, export order book has been flat. Can we see the export order book going up like in the future? The last year that is very flat here.

Definitely. We are discussing with different countries, and we are following up. The export order book should be adding up.

Next speaker, Mr. [ Harina ]. Are you there?

Yes, sir.

Good morning. For the way the company has performed in this tough time, I just wanted to know that what is the role RITES is playing in this Mauritius Metro Express project? And what are the companies where RITE S is currently working? And what -- where are the other avenues where RITES is exploring or maybe venturing in the near future?

Yes. Thank you, Mr. [ Harina ]. We are doing around 23 kilometers of metro and light metro in Mauritius, of which 12 kilometers are already commissioned and other 4 kilometers have commissioned recently. L&T is executing this project for us. And we have recently received a DPR assignment for another 10 kilometers of metro. Once we complete the DPR, we hope that we'll be able to continue further in Mauritius.

Next speaker, [ Anu Wahad ]?

[ Anu ] is not present with us, sir.

Okay. So next speaker, [ Mohinder Pal Bhutani ]?

[ Bhutani ], sir, is also not present, sir.

Mr. [ Anil Bansal ]?

Hello? [Foreign Language] So sir, my main question, [Foreign Language] your dividend policy against future cash, sir?

We are following the CB guidelines dividend policy. We'll be continuing to do the same.

Okay. [Foreign Language]

[ Bansal ] so the dividend policy is, as the Chairman, sir, have rightly said, it is governed by the government guidelines. As per the guidelines, we are supposed to give 30% of the profit or 5% of the network, our dividend. But you would have seen that last year, we have distributed 73% of that dividend. And if you go back and look at earlier years also, prior to that, we have distributed around 67% of that dividend. So -- and in the current year also, you would have seen that the INR 2 dividend we have distributed, the interim dividend we have distributed during the first quarter, which is roughly 70% of the -- of the past quarter. So this is an indication of what they have in store for the shareholders for future. I cannot comment anything else, but with these figures, you can judge yourself what is going to be the dividend.

Sir, interim [Foreign Language] regulatory standard?

You need to consult that.

Okay. Okay, sir. For second question, sir, buy back question, buyback related. [Foreign Language]?

Buyback is [indiscernible], we really cannot comment at this stage. But between 2 buybacks, there has to be a mandatory time gap of 1 year. So even if it comes, it will come sometimes in December, end of January. But we really cannot commit anything at this phase. As of now, we do not have any plan for a buyback. Only when that mandatory time line is robust, then this will be reviewed.

Next speaker [ Jaspal Chopra ].

[ Chopra ] is not present with us, sir.

Next, [ Mr. Ravi Kumon Naredi ].

[ Ravi ] is not present, sir.

Next, [ Mr. Shivat Mittal ].

[ Mittal ] is also not present, sir.

[ Mr. Balram Garun ].

A very good morning to all of you, sir. First of all, I would like to express that I'm very glad to be a part of such a company, which is growing and expanding its reach to new markets. Also, what I can see from the results is that RITES has shown significant growth in the export numbers. But in the year, which has recently been ended, there were very little exports. So sir, I would like to ask basically what all exports are lined up for this year? And do we see any push for growth in exports for this year, that is FY '21, '22?

Yes. [ Mr. Garun ], as already told, we had a good export order of around INR 1,333 crores, of which 70% of it will be getting executed this year and remainder will flow for the next financial year. We are actively pursuing with a few countries for the export of rolling stock. So you can expect growth in the export market continuously. And apart from that, we have taken a project export also very seriously. We have signed a railway contract for a railway in Bangladesh, a PMC contract. We are already executing a highway contract in Bangladesh. We are actively pursuing works in Mozambique and a few more countries. So our project, in terms of local export as well as project experts, is being focused, and we will be having that growth going on.

Next speaker, Mr. [ Hardy Jain ].

[ Mr. Jain ] is not present, sir.

[ Mr. Bhupendra Singh Din ].

So Chairman, [Foreign Language].

[Foreign Language]. Our radio business plan we have growth, 10% to 15% rise we are planning. So [Foreign Language]. The growth profile is nature to Koga. It will grow at 10% to 15% in the coming 3 years. [Foreign Language]. But they are mandate to produce or support vaccine manufacturing of [indiscernible] the suggestion of the [indiscernible] we will see if we get an opportunity so we can be and will try to be a part of this novel cause.

Just -- I'm calling again the absent speakers. [indiscernible]?

Not present.

[ Anu Mohan ].

Good morning, sir. First of all, congratulations for good number during this unprecedented situation. I must acknowledge RITES endeavor during this pandemic. Your CSR activities, efforts, including contribution towards PMCare have helped people at lower shelter in the long run, sir. Keep up the good work, sir. And as a shareholder, I would like to ask what are the growth prospects for this year, sir?

Thank you, [ Anu ]. As I told you, we'd cross past pre-COVID level this year. And we are anticipating a growth of 8% to 10%. Our order books are strong. Exports will give us some contribution, additional contribution. There will not be much contribution turnkey. Otherwise I can give you different numbers. But this growth of 10% -- 8% to 10% will be here this year. And subsequent years, we'll be taking off better growth rate of 10% to 15%.

Next, [ Mr. Mohinder Pal Bhutani ]?

Not available.

[ Mr. Jaspal Chopra? ]

Not available.

[ Mr. Ravi Kumar Naredi ]?

Not available.

[ Mr. Shivat Mittal ]?

Not available.

[ Mr. Hardy Jain ].

Not available.

So with this, we conclude the question-and-answer session. Our dear shareholders, since the notice was already supplemented to all the members, I take the notice convening this meeting is right. There is no qualification or adverse remarks on the accounts of the company for the year 2020, '21 by the statutory auditors in CNG. Since this meeting is held through video conference, the resolutions mentioned in the notice convening the AGM have been already put to vote through the multi-vote. There will be no proposing and seconding of the resolutions. I'll brief the members about the agenda items accounting the body. There are 5 agenda items in the notice of the 47th annual general meeting of the company. I'll now give the items in the ordinary business. Item number 1 to receive, consider and adopt the audited financial statements stand-alone and consolidation of the company for the financial year ended on 31st March, 2021, and of which reports of Board of Directors and auditors there. The resolution for Item #1 is provided in the notice, is proposed to be passed as an ordinary resolution. Item #2, to confirm the first and second interim dividends declared for the financial year 2020-2021 and to declare funded dividend on equity shares for the financial year ended 31st March, 2022. The resolution for Item #2, as provided in the notice, is proposed to be passed as an ordinary resolution. Item #3, to appoint a director in place of Shri Anil Vij, Director, Technical, who returns by rotation and being eligible offers himself for [ requirement ]. The resolution to item #3 as provided in the notice is proposed to be passed as an ordinary resolution. Item #4, to take note of appointment of statutory auditors and branch auditors as appointed by Controller and Auditor General of India and to fix the remuneration for audit and other services. The resolution for item #4 as provided in the notice is proposed to be passed as an ordinary resolution. The item under Special Business is to take note of appointment of Shri Gopi Sureshkumar Varadarajan Director, Projects of the company, as the Chairman and Managing Director, additional charge as appointed by Ministry of Treasuries with effect from 1 July, 2021 for a period of 3 months until further orders, whichever is early. The resolution for Item #5 is proposed to be passed as an ordinary resolution. The e-voting will remain open for 15 minutes after the closure of this meeting. Another -- those of the members who have not casted their vote earlier and would like to cast their vote now. The results of the voting will be announced on or before 1st October 2021, and the same would be delivered to the stock exchanges and uploaded on the website of the company, Link Intime India Private Limited. With this, I would like to thank all the shareholders for sending their support to the company, taking the company on. Now I request the Chairman and Managing Director to give his concluding remarks.

Dear shareholders, I express my heartiest gratitude to all of you for taking out time to join this meeting through video conferencing and being with us patiently. I'm very grateful and want to thank all the directors for attending the meeting. I now hereby declare this meeting has concluded. Thank you. Thank you so much.