RITES Limited (RITES) Earnings Call Transcript & Summary

[Operator Instructions] We'll take the next question from the line of Mr. Mudit Kabra from Elara Securities.

Recently, we had the team or from the patient the development program of 12 center station has an outlook of INR 40,000 crores. Should we know the percent scope of work rights could have or could achieve in this program?

Yes. In fact, you see that is the advantage of our various teams of business with it. And since we do both portion of our revenue as Turnkey EPC and portion as consultancy, we can tap this opportunity in a big way. So in terms of the Turnkey contribution, we are already doing 3 major stations. We are doing Varanasi, we are doing Iota. We are doing -- recently, we got the column station order. And in terms of parallelly, we have now started targeting the P&C also for the consultancy, project management consultancy for the station development work. So recently, we got an order for [ Somnatation ] or in fact, it was in competitive bidding mode, which was a PMC for the Soma station development. So that the -- again, the strength of ours that based on one particular sector itself, and as you correctly said, it is a very high priority sector with a lot of high budget grant allocation in that. We are targeting both EPC mode also in certain stations and [ Pelco ] alterative station.

We'll take the next question from the line of Pankaj Bobade from Axis Securities.

Sir, how about CapEx as you have incurred in the first 9 months and in the third quarter?

You see CapEx, the total 9 months, we have reached a figure of INR 106 crores, which is in line with our broad projections of about INR 125-odd crores. We are primarily a low CapEx company. A trend of CapEx has always been in the range of 100, 125 max about INR 140-odd crores. And I think this trend would continue in the coming quarters.

[Operator Instructions] On to the next question from the line of Parimal Mithani, an Individual Investor.

So I just wanted to know, can you elevate on the non-part of the business because in the last few calls, you've been particularly focusing on the non-IR side of the business? And how do you see it going forward for exactly better than you are in your core?

Yes. In fact, we, as I mentioned, we have 9 different verticals. And for example, these are highway buildings, metros, city planning, airports, ports and rail, Infra is one of them and ports waterways, et cetera. So real Infra, besides rail infras. You see, we are touching nearly every sector of infra. So even as you see the trend of recent orders which we have got in Q3 itself, that will give you a flavor of why I say that we have a varied presence. We got 65 orders totaling to about INR 1,200 crores. Now just to give you a few examples of orders, which will show you the wide spread. We got a building order from IT Delhi. We got a metro deporter from in Bangalore. We got a tunnel order in [ Abu Tarana Hill ]. We got leasing order from NTPC. We got the PMC for railway sidings across 3, 4 major players. We've got an order for bridges on the for coverage. We got an order from Paradip port. And we've got recently about 10 orders in the last 1 month in highways across Northeast. So you see -- I just mentioned a few. Now across sectors, you see we are getting orders. So that's what gives us the strength and that's the core strength of our company that we can tap all possible sectors. And we can -- as I said, we started with sustainability a few quarters back. So moving forward, I'm sure we're going to get orders in the sustainability sector also.

And sir, the revenue from this to be margin accretive to us, sir?

The revenue spread across all these sectors. These are all consultancy, primarily consultancy order and are good margin orders.

[Operator Instructions] We take the next question from the line of Harshit Kapadia from Elara Securities.

I just wanted to check, sir, there has been a change in the bidding procedures for the turn construction. But the first half, we have seen a very lower amount of influence coming in. We have seen some not construction. So how has been the competitive intensity in this construction project because...

So you see one major change that happened in the Turnkey segment a few months back, early part of last year was that I went in from the cost-plus model to EPC models. And the subsequent tenders, which have come out in the last 8, 9, 10 months are all in the EPC mode. So we have been now bidding in them in the EPC mode and we're getting orders in the EPC mode. So that -- which was there in the non-IR sector is now in IR sector also where the tenders are in EPC mode. What we have also done is that we have very intensive monitoring of our Turnkey projects where always these are lower margin segment of revenue. Normally, it used to be in the range of about maximum 2% to 3%. If you see, the margins have been -- we've been able to touch about 4.5% margins in the Turnkey segment. So that's a constant effort by effective monitoring faster execution. And as I mentioned some time back, effective utilization of the resources deployed there, whether it is the man or material we want to pull as much possible to bring up the Turnkey segment margins also to an appreciable level. So Q3 margins in Turnkey segment of revenue are as good as about 5%. If you compare year-on-year, Q3 last year was literally about 0%. If you compare 9 months to 9 months, the last year, it was 1.3%, and we are 4.2% now in the Turnkey segment.

How is the competitive intensity now with private players also bidding at the same one you are? And secondly, is this 5% now more sustainable number? Or it can again revert back to 3?

So competition is tough. Yes, now it's an open field in all our segments of revenue. And that is a challenge and that is what we have taken it head on. But all my 4 streams of revenue in the last quarters have been opened up to all competitive bidding. And we are very, very well equate compared to a number of sister competitors and sister companies where we have been bidding competitively getting orders, as you see the trend of orders. And in terms of maintaining these Turnkey margins in the range of 4%, 5%, it's a tough exercise, as you would appreciate, normally, it's very difficult to bring up turnkey margins above 2%, 3%. But our efforts would be on to keep it as high as possible.

[Operator Instructions] We'll take the next follow-up question from the line of Pankaj Bobade from Axis Securities.

Sir, can you give me a figure for cash and cash equivalent at the 9 months?

Yes. Our cash as of now, I have my Director of Finance, Mr. Nayak, we have about INR 800 crores. He'll give you more details.

See, we have around INR 42 crores, which is the right pond. Besides on behalf of the clients, we are holding around INR 2,500 crores, which actually belongs to the client, which are the advances received for the project questions.

[Operator Instructions] We'll take the next question from the line of Vishal Periwal from IDBI Capital.

Sir, on our revenue guidance, I think last 2 quarters in terms of revenue, we are seeing probably muted numbers. So what the full year basis earlier we were targeting a double-digit kind of revenue growth. So how exactly are we seeing things now?

Vishal, let me again reiterate. We have been targeting a healthy growth in the PAT and the core EBITDA. We have never said that we are targeting a double-digit growth in the revenue. We are very, very clear that our taking of orders and our revenue will all stem from our core strategy and vision of having a healthy growth in the profits, the healthy growth in the EBITDA and maintaining a margin -- a steady core EBITDA margin in spite of the changed ecosystem of competition in all our 4 segments of revenue. And if you see why I'm saying this that we are on the right track, we promise as we deliver, I mean and we deliver what we promise is that in 9-month figures, if you see, we have seen a 9% growth in the pack. We have seen a 7% growth in the core EBITDA. Our core EBITDA margins are in about 28%. Our PAT margin is 21%. So we are on track. Our total PAT is about INR 432 crores in 9 months as against INR 539 crores in last FY complete. So we are definitely on track as per our promises that we will continue to give a growth -- steady growth in the profit and the core EBITDA while maintaining our margins.

Sure, sir. And just to continue with this. Maybe for EBITDA impact, can you seem like maybe like single-digit maybe high double digit? Or maybe like what project you will guide for yourself or maybe for the market to look at?

You see, as I said, to speculate a number will not be fair. But continuously, whether you see sequentially, whether you see 9 months to 9 months, there has been a growth in the EBITDA and the profit, and we will continue to do that. Even if you see sequentially, the core EBITDA grew by 8%. The -- so that's what I say, a minimum. We are aiming for that kind of range. Yes, obviously, the aim would be to maximize it as much to reach double digit, cross double digit. But the aim and the continuous effort is to try and see a healthy growth in the core EBITDA.

[Operator Instructions] We'll take the next question from the line of Mr. Harshit from Elara Securities.

Sir, would you throw some light on prospects from REMCL and the nodal agency for emission policy? Like apart from electrification, what other kind of projects can we get into.

Yes. REMCL has now been mandated for last about a year, 1.5 years for the net zero mission and a lot of various initiatives, various tenders and RFPs, RFQs have been floated for development in this area, in the RTC mode in the developer mode. And then moving forward, whether it is solar energy, wind energy and a combination of these, these will fructify, I'm sure, in the coming months. And REMCL has the nodal agency as the consultant for that initiative will definitely gain.

Sir, can I have one more question?

Yes, go ahead.

So like now the exports are soften, but could we have some inquiry pipeline like across geographies? Like are we having any inquiries?

Yes. As I mentioned, we are -- we have bid also, we are bidding also and we are tapping the non-bidding LOC kind of opportunities also across countries in Southeast Asia and Africa, and the start has been made. We got an order, as I said, a small order for 2 local motor, but we are tying up with a number of prospective clients. And I'm sure, yes, if you see export order by nature, by the time -- because all these countries have to arrange funding, whether under the line of credit mode or by the internal resources, whether they are Southeast Asian countries, Bangladesh, Sri Lanka or African countries, the Cape gauge countries. So they are also all recovering from the economic setback of COVID, and in most of the cases, the negotiations are at sale where the final stages of trying to get funding or bidding and things like that are. So I'm sure in the coming months, we should be able to definitely convert it into a finite order.

[Operator Instructions] We take the next question from the line of Prasanth Gopal from Spark Asia Impact Managers.

Can you give some color on execution time lines or margins under Turnkey segment for IR and non-IR projects?

Yes, you see Turnkey projects per se, our experience shows that it takes anything from about 3 to 4 years. And that's the reason why even if we limit or we have been aiming and that will be a constant endeavor to continue to have about roughly in the range of about not more than on a steady basis, 25% contribution of revenue from the Turnkey segment. It may vary from quarter-to-quarter, some ups and down on a steady basis on an average basis. But because these take about 3 to 4 years, they require a larger order book. And that's why if you see the order of the portion of the content of the order book on Turnkey will always be more vis-a-vis consultancy. As far as margins are concerned, key contracts by nature has low margin I mentioned sometime a little -- a few months back, that they are normally in the range of 2% to 3%. We have with a lot of effort of effective execution, timely execution. We have pulled up the margin in 9 months to 9 months. We have gone up from about 1.3% in last 9 months to about 4.2%. And that be our endeavor to pull up these margins as much as possible so that our overall margins, which are our company vision is to have safe, good margins, the impact of the Turnkey segment is also satisfactory.

[Operator Instructions] We'll take the next mention from the line of Harshit Kapadia from Elara Securities.

Just wanted to check you on the consultancy side, if you can share any large projects which we are eyeing or we have bidded because Indian Railway is coming out with a very large size of project which hasn't announced in last multiple years. So any pipeline or any color on any project where we are there would be really helpful.

Yes. So you see in terms of the trust from our company seeing the allocations in the budget also. You see real Infra is an important -- it's one of the highest locations, INR 2.4 lakh crores. And we trust on rail connectivity, whether it is coal fields or ports or power plants, we have got a good number of orders in Q3 itself. And we are pitching both in the competitive as well as the nomination basis in IR rail connectivity, both at IR and non-IR times. Many of these clients are non-IR client. They could be coal India in the subsidiaries, it could be NTPC, it could be ports. So we are -- and there are some private clients also. So we are pitching cement plants, et cetera. So rail connectivity is an area where we are going to pitch very aggressively. Highway, you see, again, a very high allocation of INR 2.7 lakh crores. Again, recently, as I mentioned, we got about 10 orders itself in a span of few days if you have hardly less than a month in the Northeast totaling to about INR 23 crores. So highway is again an area where you're going to pitch very aggressively, again, both on bidding model as independent engineers for various. We are doing a lot of work in -- across highways across states, whether it is UP, whether we are doing a lot of work in Kerala, across it. I mean in Kanata, as I said, Northeast, across states, we have got a number of highway orders Similarly, in the metro sector. You see the metro sector is growing so rapidly across cities, whether it is Tier 2, Tier 1, Tier 3 cities, we have been pitching for a number of bids in metros. And I'm sure metro is another area, city planning. We recently got the logistic plan. We've got it for AoA. We've got the Pilgrim management plan order from Iota. We've got a number of city plans. We've got -- most recently, we got the mobility plan for [ Talkata ]. And then moving forward, we are airports, again, airport, the aviation growth, such a large allocation in airports, we are doing a lot of work in airports also. So across sectors, we are bidding for these areas as well as pitching to get them on a nomination basis also.

Anything on DFC or any high-speed train project where things are moving and we are getting some words there?

DFC, we are already a partner. We are a performant consultant partner for DFC. And for high-speed rail, we keep doing a lot of surveys and consultancy work. We have been doing it. We keep doing it as the requirement comes up, whether it is for FLS, EPR, any particular bridge or any particular tunnel, any particular design. So we are the -- whether it is from communication work, some signaling work for high speed. So you see we have got strength in each of these areas. And whether it is the existing company it is the high-speed railway or even now most many semi high feed corridors are being identified. We have already been associated for making some SLS and PFR and DPRs for that.

[Operator Instructions] I would now like to hand the conference over to Mr. Harshit Kapadia from Elara Securities Private Limited for closing comments.

Thank you, Seema. We would like to thank Rahul Mithal, Chairman and Managing Director; Bibhu Nayak, Director, Finance; Mr. AK Singh; and Joshit Sikidar, Company Secretary, for giving us an opportunity to host this call. We would like to all thank investors and analysts for joining for this call. Any closing remarks on, sir?

I just want to reiterate that our company is, as I said, we deliver what we promise, and we are right, each of our employees, 2,600-plus employees are very excited by this amazing push in CapEx for Infra. And moving forward, this is our core strength, this is our core strength. We are a consultancy company. This is our core strength, and we will leverage this to our advantage, to tap all possible structure sectors of Infra. Our commitment to our shareholders with this third interim dividend of INR 6 a share, taking it to a total of already 14.5% for the cumulative of 3 interim dividends for this FY vis-a-vis a total of INR 17 a share for the last FY, we are on track to do our best for our shareholders also. Thank you.

Thank you, sir. Ladies and gentlemen, on behalf of Elara Securities Private Limited, that concludes the conference call. Thank you for joining us, and you may now disconnect your lines.