SPML Infra Limited (SPMLINFRA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to SPML Infra Limited Q1 FY '27 Earnings Conference Call hosted by Arihant Capital Markets Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand over the conference to Mr. Rohan Baranwal from Arihant Capital Markets Limited. Thank you, and over to you, sir.

Hello, everyone. A very good afternoon, and welcome to SPML Infra Limited Quarter 1 FY '27 Earnings Conference Call hosted by Arihant Capital. From the senior management, we have with us on the call today, Mr. Manoj Digga, Executive Director and CFO of the company. Mr. Malay Chakraborti, EVP Projects; Mr. Samir Patel, Chief Operating and Technical Officer, BESS; and Mr. Arun Agarwal, Vice President, Finance and Accounts. Before we begin the earnings call, we must remind you that the discussions on today's call may include certain forward-looking statements and must be, therefore, moved in conjunction with the risks that the company faces. I would now like to hand over the call to the management, Mr. Arun Agarwal for his opening remarks. Thank you, and over to you, sir.

Good afternoon, everyone, and thank you for joining us for the SPML Infra's Q1 FY '27 Earnings Conference Call. We sincerely appreciate your continued trust and interest in our company. So to begin with, as we begin FY '27, India's infrastructure sector continues to evolve from capacity creation towards capability building, with water security, grid modernization, renewable energy integration and energy storage emerging as fundamental pillars of the company's development goals. For SPML Infra, this evolution aligns closely with our long-standing strengths. Over 4 decades, we have built deep execution capabilities across water and power infrastructure. And over the past 2 years, we have transformed the company through disciplined bidding, balance sheet strengthening and strategic investments into emerging segments. Investment now beginning to translate into execution and scale. Now let me briefly touch upon the industry environment. India's energy transition presents an equally compelling opportunity. The Union Budget 2026-'27 allocated INR 109,029 crores to the energy sector, driving investments in transmission and grid modernization as renewable energy capacity expands. Over 100 gigawatts of these tenders have already been floated against a projected requirement of 236 gigawatt by 2031-'22, one of the most significant infrastructure opportunities of the next decade. Water remains one of the India's most critical infrastructure priorities. With over 81% of rural household now covered under the Jal Jeevan Mission, the government has extended the mission to 2028 with INR 67,670 crores Union Budget allocation and restructured it into JJM 2.0 with a total outlay of INR 8.69 lakh crores. Alongside AMRUT 2.0, Namami Gange and River linking programs, nearly INR 17 lakh crores of planned government investments across water infrastructure is expected to create a robust pipeline over the medium term. Against this backdrop, SPML continued to make meaningful strategic progress during this quarter. Our order book today stands at approximately INR 5,100 crores, providing healthy medium-term revenue visibility. More importantly, the quality of order book continues to improve significantly, only around INR 1,251 crores order related to legacy projects, while the balance consists predominantly of projects carrying expected operating margins of 10% or higher. A sizable volume of business has started coming in from drinking water, irrigation, river linking, sewerage, power substation and base. And the company is hopeful of surpassing its guidance of more than INR 5,000 crores in order intake in the current financial year, against which we have taken INR 1,293 crores order in Q1 and are [ L1 ] in INR 265 crores of orders. On the manufacturing front, we continue to make encouraging progress at our battery energy storage manufacturing facility at Supa MIDC, Pune. The first phase of our 2.5 gigawatt assembly line is fully ready. The company has also started obtaining various certification from IEC/UL for its battery pack, which are required for supplying the container to NTPC against its current order. And we are targeting to build the NTPC in Q4, subject to requisite approvals. The line will subsequently be scaled [ 2.5 ] gigawatt together with an annual manufacturing capacity of 600 container units to cater to future orders for battery packs and containers, for which the company is continuously bidding and approaching various EPC contractors as an OEM player. We expect the capacity enhancement from 2.5 gigawatt to 5 gigawatt along with the container facility expansion to be completed in the first half of 2028 -- FY 2028, along with the order for the associate facility, which addresses a market potential of 208 gigawatt by 2030, up from 34.72 gigawatts in FY '27. Tender in this space are coming in continuously, and the company participates on a regular basis based on its selected criteria. The company holds a competitive advantage over other base players on account of its manufacturing facility and exclusive technology partnership with [ Energy World ] U.S. This facility positions SPML as one of the early movers to manufacture advanced grid scale battery energy storage system under the government's Make in India initiative. Turning to the status of our NTPC order, the advantage has already been received from NTPC. Design and drawing approvals are expected to be completed by Q3 FY '27. We anticipate the sample containers being approved by NTPC by December. And subject to their approval, we will commence supply of containers to NTPC in Q4 and the same will be completed within their contractual time lines of FY '28. On the water and power front, we track a pipeline of about 134 upcoming projects, worth close to INR 98,725 crores across 11 states, with irrigation and water supply making up over 80% of this value, reinforcing water infrastructure as the biggest growth driver in the public CapEx cycle. Key projects include the Wainganga-Nalganga River Link of around INR 1 lakh crores; Marathwada Water Grid, INR 37,600 crores; Ken-Betwa Links [ MP ] component of INR 24,300 crores and Tapi Basin Mega Recharge scheme of INR 90,200. Additional tenders are progressing in Bihar, Orissa, Rajasthan, Gujarat, Kerala and the Northeast, along with the PSUs like Steel Authority and NMDC. We have significantly improved our financial position through disciplined deleveraging and strong promoter support. Our promoters have infused approx INR 400 crores during the last 3 years, helping our net worth double from approximately INR 500 crores to over INR 1,000 crores, while our debt-to-equity ratio has improved from 1.1x to 0.4x now. Our legacy debt position also continues to improve. Of the total outstanding obligation of around INR 700 crores, we have already repaid around INR 325 crores, with the balance INR 375 crores fully backed by an arbitration award of approximately INR 678 crores along with accrued interest. In addition, the company had arbitration claims of around INR 4,526 crores with nearly 40% accepted to convert into awards over time as per the past experience and records. Reflecting this transformation, ICRA has upgraded our long-term rating to BBB Stable. Simultaneously, CRISIL has also assigned a BBB Stable on our credit facilities. We have also enhanced our credit facility of INR 505 crores to INR 860 crores from reputed PSU bank, the documentation of which is under process and approx INR 300 crores COT bond line, ensuring adequate liquidity and sufficient banking limits to support our growing order book and larger project opportunities. Coming to our financial performance, revenue grew 74% Y-o-Y to INR 286 crores. EBITDA increased 81% to INR 28 crores, and PAT increased 87% to 22.7 crores. EBITDA margin improved to 10% in Q1 FY '27 from 9% in the corresponding quarter last year. On a Q-on-Q basis, revenue remained largely flat, while EBITDA improved 17% over Q4 FY '26. PAT declined 20% Q-on-Q largely on account of a onetime tax reversal in Q4 FY '26 numbers. The company has made a jump of around 74% on a Y-o-Y on turnover, mainly on account of execution of new orders obtained in SPML 2.0 . The company is maintaining the turnover of the preceding quarter as the turnover is mainly related to orders, which was taken in the last 2 years, for which all the design and drawing approval have already been obtained, which shows consistency in the project execution. With the allotment of new orders and the expected orders that we are targeting in water, power and base, whose impact will reflect mainly from Q4 of '26-'27; by this, the company is maintaining its guidance of an increase in turnover of more than 25% compared to the corresponding period in the last financial year. The company has made a similar percentage improvement in the profitability of around 87% on a Y-on-Y basis. The percentage of profit compared to the last quarter has also improved slightly because of a higher contribution from the new orders. The company maintained its guidance of growth of more than 25% in the profit compared to the last financial year. There is a reduction in other expenses mainly on account of reduction in legal and professional charges. The company realization from various projects is reasonably healthy, due to which company was able to manage a healthy position of around INR 150 crores as on 30th of June. The company will continue to manage its working capital requirement through an escrow mechanism in the water sector with the suppliers, which reduces the working capital requirement substantially. However, the company is very comfortable regarding realization from all its projects, due to which sufficient liquidity is there in the banks by way of 50 project. The employee cost has increased due to the recruitment of new employees for the water power and base operations. The finance cost includes interest on mobilization advance of INR 3.5 crores, INR 63 lakhs on account of BG commission and INR 27 lakhs towards Ind AS adjustment on ROE assets. The mobilization advance gives the company additional COT and the realization from the projects rather than the funding requirement as the company is having sufficient FD balance in the bank account. With a stronger balance sheet, a significantly improved order book, expanding capabilities across water, power transmission and battery energy storage system and a clear execution road map; we are well positioned to participate in India's next phase of infrastructure development. With that, I would now like to open the floor for the questions.

[Operator Instructions] The first question comes from the line of [ Shri ] Gupta from [indiscernible] Asset Manager.

Sir, my first question is that our order book, which is about -- for new orders is about INR 3,843 crores. So I want to understand this is excluding our JV partners?

No. This is basically our share in the JV orders. This includes there.

So how much is excluding their share?

So all the JV because it's a different JV and a different percentage. So some are 26%, some are 51%, 49%. So our share we have included in this INR 3,800 crores.

So this is just our share. This does not include the JVs share. Yes. Also, sir, since we're looking at -- margins are improving and about 9.9 right now. So am I right to believe that in coming time, we'll be targeting 12% of margins as the new orders increase?

As we explained into our previous con call that as a strategy, at this moment, we don't take any order less than 10%. So it is always more than 10%. Like at the moment, the 3 orders which we have taken, Kunar, [ Takeri ] and Indore; all are more than 10%. So you can jolly well estimate that any order which we win at this moment, the profit margin, EBITDA margin or the margin from the project will be more than 10%.

Sir, also, are we looking to execute our legacy orders? I think it's about INR [ 1,251 ] crores. I believe that we can execute this by FY '29.

This will be this year and next year, most of the legacy order will be executed.

Okay, sir. And sir, one more last question. So for our [ BESS ], sir, since you mentioned that for NTPC, are drawing approval and everything will be done by December this year, so what kind of numbers are we expecting to book in the revenue with respect to BESS? What is the gross amount?

Any of our orders, basically time -- mostly time is taken by the design. It's all our design drawing approvals orders when we take on to the EPC. So depending upon 3 to 8, 9 months, that's required for the approval of all the design and drawing. And then as per the schedule, we'll keep on delivering. So if everything goes right, then we can expect INR 200 crores to INR 300 crores of [ BESS ] order execution into this financial year.

The next question is from the line of Aditya Banerjee, an individual investor.

So my first question to you, sir, is that what is the FY '27 revenue target and quarterly run rate?

As Arun has already told and it is our previous -- all the con call, we are maintaining that we will have the revenue guidance more than 25% into the last year. It will be more than -- revenue may be more than 30%, will be from the last year or more than that. And corresponding, the profitability will also be. So every quarter with the new orders, we will keep on updating. But the revenue growth, both on the profitability and on the turnover, will be more than 25%.

Okay. Got it. And my next question is that how much of the INR 50 crores to INR 100 crores FY '26 spillover has already been billed in Q1?

It's a regular practice. If you see, that depends on basically with the -- it's a government order and there are various things linked based on the cash flow availability of that project. We keep on making the billing to the customer. So whatever INR 50 crores to INR 80 crores, which we missed in the last year, will be quarterly spread into this quarter and throughout the year.

Okay. Got it. And my another question is that how much BESS revenue will come in FY '27? And what will be the margin for it?

As I told you, any orders which we are taking, not less than 10% margin. And second question is the BESS, the design drawing approval is under process. We are submitting all the drawing. We are expecting all the approval to be obtained by -- from the NTPC by December. So in the Q4, we will have orders execution from the BESS unit. Maybe INR 200 crores to INR 300 crores is our targeted, subject to getting all the approval from NTPC.

The next question is from the line of Khushi Solanki from [ KA ] Securities.

So I wanted to ask, what is the current status of NTPC and when does the billing start?

Again, this is the design drawing approval. So NTPC, we have executed all the drawing -- all the documentation agreement. We have received the advance from the NTPC. We have given all the surety bond, which is required for the performance and for the advance guarantees. The approvals are started coming. We are expecting the approvals to be completed by December. Once the approval will come, we will start giving the delivery of the container. So we are expecting some revenue of the [ BESS ], INR 200 crores to INR 300 crores in the Q4, subject to approval of NTPC, all the design going and the draft container, which basically the -- model container, which we will show them. So that's our target into this financial year of the NTPC order.

Okay. Got it. And one more question. How much additional CapEx is required to execute the current order book and BESS expansion?

BESS, we have already informed that the total BESS 5 gigawatt and the 600 unit container, the total requirement is INR 236 crores, which we have already financed. We have raised the equity, and the equity money is lying into the bank account. We required the container INR 10 crore term loan that also we got the sanction. So all the requirement of the funding is there into the system, for which we don't require any further things into that. And for the BESS, all the LC limit and the working capital, we have already there in the sanction limit with the banks. So I don't have any issue into execution of that also.

Okay, sir. Got it. One last question I wanted to ask. What is the one constraint that could prevent SPML from achieving more than 25% growth in FY '27?

It's the same risk like we carry when we come out from the home and the road accident risk we have. At the moment, we have all the design drawing approvals are there for all the new orders which we have obtained. NTPC design drawing approval has started getting. My base container, this [ relining ] facility has already commissioned. So I don't have 2.5 gigawatt. I don't have any problem. So the logical -- we don't have any issue by which we will not have the 25% or more growth into the top line and bottom line. I'm not finding any reason of not having -- any logical reason. If anything happens, which is beyond anybody's imagination that I'm not able to predict.

The next question is from the line of [ Lashvi ], an individual investor.

My first question is how much of FY '27 revenue will come from the existing INR 5,000 crores order book?

As I told you, more than 25% growth will be there into the revenue. [ Base ] revenue will be roughly around INR 200 crores to INR 300 crores. Rest is into the water.

My next question is...

Existing order because this year, whatever order we will take, very limited revenue will -- you will reflect into the last quarter because now whenever -- whatever order we will take, it's required the design drawing approval. So you will get some revenue from the new order in the Q4. Rest will go to the next year.

And what is the actual FY '27 EBITDA margin target, excluding one-off?

'27, this year?

Yes.

This year, as I told you, it will be more than 25%, both -- in all the fields. In the turnover, in the EBITDA, in the PAT, it will be more than that. So based on the keep on order and execution, we will keep on updating in every con call.

[Operator Instructions] the next question is from the line of [ Utsa ], an individual investor.

I just wanted to know about the BESS project. Are we doing it exclusively for NTPC or -- I mean are there any other approvals in line as well?

No, BESS, we are taking -- this BESS, we are setting up the lining this manufacturing facility, which is for everyone, which will be fetch to our EPC requirement for the BESS order, which we will receive. It will give the OEM requirement of the other BESS contractor, who get the BESS order. So this will meet the both the requirement into that. Then the container facility which we are creating, that will be also for our BESS order or to the outsider. So this BESS manufacturing activity will contain both the facility. So the revenue stream will be from both the sides. One, as an EPC, whatever order we are getting like NTPC we have got in future, we will further get the order. As an EPC player, we will get our battery pack from -- it will be utilized for our EPC unit. And any other EPC contractor who get the BESS order, we will supply as an OEM to them also our battery pack. So there will be 2x revenue stream.

So sir, regarding this -- I mean regarding our BESS project, what you are saying is, so the battery that will be procured from Energy Vault and then we put it in the battery packs, our battery packs. Is that...

Technology is Energy Vault. And the cell we are importing from China, converting the cell to battery pack to our unit, that battery pack is utilizing into the container, which will be our order container or any other EPC order, which any other contractor are getting, the same battery pack can go there also. So that's the cell everybody is importing from China. So we will also import. But our container will be the Energy Vault technology.

Right, sir. And so probably we'll start having revenue from last quarter of this year. And next year, we might have -- we might be utilizing the full capacity that we have. So expansion plans would start then and there? Or how will it go about?