TEXRAILNSEQ2 FY'23November 09, 2022

Texmaco Rail & Engineering Limited

7,526words
70turns
12analyst exchanges
6executives
Management on call
Indrajit Mookerjee
EXECUTIVE VICE CHAIRMAN
A. K. Vijay
EXECUTIVE DIRECTOR
Hemant Bhuwania
VICE PRESIDENT
Ravi Varma
VICE PRESIDENT
Navin Agarwal
HEAD INSTITUTIONAL
Indrajit Mookerjee
Executive Vice Chairman along with his colleagues, Mr. A.K. Vijay - Executive
Key numbers — 40 extracted
rs,
an Railways to the wagon manufacturers. Also, there are lots of demands from the private customers, including exports. There seems to be a worldwide shortage, but there seems to be also many challen
Rs. 497 crore
, I would like to clarify for academic purpose, the gross revenue of the company for Quarter 2 is Rs. 497 crores as compared to Rs. 379 crores in the corresponding quarter of the previous year and Rs. 305 cror
Rs. 379 crore
academic purpose, the gross revenue of the company for Quarter 2 is Rs. 497 crores as compared to Rs. 379 crores in the corresponding quarter of the previous year and Rs. 305 crores in the previous quarter of
Rs. 305 crore
s. 497 crores as compared to Rs. 379 crores in the corresponding quarter of the previous year and Rs. 305 crores in the previous quarter of Quarter 1. The EBITDA and net Profit after Tax for the quarter are Rs
Rs. 55.21 crore
res in the previous quarter of Quarter 1. The EBITDA and net Profit after Tax for the quarter are Rs. 55.21 crore and Rs. 13.51 crore respectively, as against Rs. 44.04 crores and Rs. 5.85 crore respectively of
Rs. 13.51 crore
quarter of Quarter 1. The EBITDA and net Profit after Tax for the quarter are Rs. 55.21 crore and Rs. 13.51 crore respectively, as against Rs. 44.04 crores and Rs. 5.85 crore respectively of the corresponding
Rs. 44.04 crore
Profit after Tax for the quarter are Rs. 55.21 crore and Rs. 13.51 crore respectively, as against Rs. 44.04 crores and Rs. 5.85 crore respectively of the corresponding quarter, and negative of Rs. 3.62 crores an
Rs. 5.85 crore
the quarter are Rs. 55.21 crore and Rs. 13.51 crore respectively, as against Rs. 44.04 crores and Rs. 5.85 crore respectively of the corresponding quarter, and negative of Rs. 3.62 crores and negative that is t
Rs. 3.62 crore
st Rs. 44.04 crores and Rs. 5.85 crore respectively of the corresponding quarter, and negative of Rs. 3.62 crores and negative that is the loss of Rs. 22.53 crores in the Quarter 1. The gross revenu
Rs. 22.53 crore
ly of the corresponding quarter, and negative of Rs. 3.62 crores and negative that is the loss of Rs. 22.53 crores in the Quarter 1. The gross revenue for the half-year ended September is Rs. 802 cro
Rs. 802 crore
22.53 crores in the Quarter 1. The gross revenue for the half-year ended September is Rs. 802 crores compared to Rs. 716 crores in the corresponding quarter of the previous year. The EBITDA and Net
Rs. 716 crore
er 1. The gross revenue for the half-year ended September is Rs. 802 crores compared to Rs. 716 crores in the corresponding quarter of the previous year. The EBITDA and Net Profit Loss after tax for
Guidance — 20 items
Indrajit Mookerjee
opening
“So, we can't expect anything to come in one month.”
A.K. Vijay
opening
“And we expect to reach much higher levels in the coming month as was explained by Mr.”
A.K. Vijay
opening
“Since that happened, now we are gearing up the foundry production, and hope to expand the foundry production also substantially in line with the requirement for my wagon division.”
A.K. Vijay
qa
“2) where we are relatively certain, that the project will not be delayed beyond a limit, because we have seen in past that projects relating to the track work laying and all, they normally get delayed beyond limits and ultimately the companies have to lodge a large claim on the customer and the settlement in Indian condition takes really very long.”
A.K. Vijay
qa
“And we are very hopeful before the year ends, we will be able to book some orders for exports from African continent.”
A.K. Vijay
qa
“As far as the target for order book and all concern, we will be going cautious but then I can assure you, our target is to at least maintain the level of turnover which we have been achieving over the year which is Rs.”
A.K. Vijay
qa
“And that is going forward, order book also commensurate to meet this our achievements requirement.”
Nalin Shah
qa
“This will be implementable over what period of time?”
Nalin Shah
qa
“These two questions if you can just throw some light, it will be very good.”
A.K. Vijay
qa
“The railway order book basically is 39 months, and accordingly we target to achieve within that period.”
Risks & concerns — 5 flagged
As wagon production goes up, it also puts lots of pressure on to foundry, because most of the key components come from our own foundry, and there also we are very highly focused to improve efficiencies and productivity.
— Indrajit Mookerjee
As far as the target for order book and all concern, we will be going cautious but then I can assure you, our target is to at least maintain the level of turnover which we have been achieving over the year which is Rs.
— A.K. Vijay
Of course, there at times are bottlenecks like for wagon production, availability of wheel sets always remains a challenge.
— A.K. Vijay
So, that is basically the debt side story is concern.
— A.K. Vijay
The challenge remains where basically the payment terms are defined in a manner whereby you realize 70% on completion of the job 1st Stage, then also the 10% will realize on the preliminary acceptance stage, the 10% realize in the final acceptance stage and the 10% realized after completion of certain duration, there is a warranty period.
— A.K. Vijay
Q&A — 12 exchanges
Q
Yeah, I wanted to know the status of the Kalindee Rail. So, is it profitable now?
A.K. Vijay
I would like to answer you in affirmative. In the previous quarter Kalindee is on positive side. So, not the Rail EPC, only the Kalindee segment. Yeah, in Rail EPC we have two divisions, one is Kalindee and other one is Bright Power. Bright Power all along has been very positive. And that business is always growing fast. As far as Kalindee is concerned, we had certain setbacks, and that's the reason why we have not earned money during the few previous quarters, but this quarter, we are on positive side.
Q
So, I had a few questions. Firstly, you have hired a new professional. So, could you just speak a little bit about his qualifications? And very honestly wanted to ask how much role does the professional play in terms of decision making versus the core promoters? Could you speak a little bit about the culture of the company as to how much power would the promoters give the professional to run the company and make decision? And then the second question is, could you state your current Rail EPC order book, and just some ambitions and internal targets on where you would like to take that order boo
A.K. Vijay
Yeah, I would like to answer the second question first, regarding your Rail EPC order book, and where you would like to take it. Now, the present situation of Rail EPC order book is about Rs. 1,325 crores. Now, as far as the question that where you would like to see it over there, we explained in the last Investor conference also and even in this conference I mentioned briefly, our focus is only in areas where our 1) our core strength is there. 2) where we are relatively certain, that the project will not be delayed beyond a limit, because we have seen in past that projects relating to the tra
Q
Now, my questions are two very simple questions 1) You mentioned about that, both the plants were in the process of debottlenecking and trying to take the maximum out of it. So, just want to ask what is the, at the full level of 100% capacity utilization level, what is the maximum top- line which can be generated by the company because of these two plants without having fresh CAPEX? 2) You had I think order book of around Rs. 9,300 crore or so. This will be implementable over what period of time? These two questions if you can just throw some light, it will be very good.
A.K. Vijay
Now the full level of production basically for our plant size and all these things, depending upon what the batch mix of production is there, what types of wagons we have been producing, what kind of orders we are booking, we always have to step it up from the present level to the level of 8000 to 9000 wagons. In fact, the capacity which we have excess capacity value so, is in excess of 7800 numbers. So, that’s the capacity of our plant in respect of the wagons. Similarly, my other plant, which is foundry, the capacity is 42,000 tonnes per annum. So, these are the capacities and given the oppo
Q
Yes, a couple of questions. One is the inclusion of Rakesh Tripathi as a Director. So, what will be the role of him going forward? And any updates regarding 6500 wagons of Indian Railway? And what is the work in process, how much wagons we have produced till date? And the third one is, clarity for the future business and the revenue guideline?
A.K. Vijay
I will cover the point number second first. The number of wagons produced in the 1st Quarter was nearly 120 numbers. The reason being this thing that we didn't have any orders from the railways and whatever order from private were there, we have never been able to get the wheel sets from Rail Wheel Factory which we are giving priority only for railway orders and not for any private orders. So, that was a big suffering which we had in the 1st Quarter. Second quarter once we had our proto approved in the month of July, we started the production from the month of August only. And from roughly abo
Q
The order book mentioned around Rs. 9,300 crore, could you please give the breakup for that in terms of Heavy Engineering, Steel Foundry and Bright Water division? On last call you have mentioned this wheel sets are expected to come from November onwards so what is the status right now from China? These are the two questions.
A.K. Vijay
You wanted to know the order book position. I had mentioned about Rs. 9,300 crore, it compresses like Rs. 7,500 for Heavy Engineering division; Steel Foundry division is Rs. 260 crores. Of course, the order book of steel foundry will further swell, once the supply for the wagon start making, because this wagon includes a large number of order for the steel foundry division. As far as the Rail EPC division is concerned, I earlier also mentioned our order book is Rs. 1,325 crore. And others are roughly about Rs. 200 crores. So, this is how the complete order book of Rs. 9,300 crore comprises of.
Q
For this year's target of 3300 odd wagons since we have just done around 600 odd wagons in the first half, so we are targeting around 2500 to 2700 wagons for the remaining six months. Second is on the debt side. So, what are our plans in terms of debt reduction or interest cost reduction or any other plans on reduction of the debt that we are planning to pursue because we have a relatively high debt on the balance sheet. And my last question is, this quarter, so if we do the math, out of around Rs. 240 odd crores in the Heavy Engineering division around Rs. 160 crore to Rs. 170 crore is throug
A.K. Vijay
One, that you asked that, are we targeting -- 2500 number of wagons in the ruminant part of the year that is a Quarter 3 and Quarter 4. I explained in my opening remarks also that post approval of the prototype we have geared up the production lines. And we have been able to achieve close to 300 number of wagons in the month of September. Going forward, we will be only improving on this. So, even by that standard of what we have achieved in the month of September, which is 300 numbers, you can always understand that it is a numbers are anyways this is the within that range only. And since we a
Q
Just wanted to understand based on our opening remarks. You were saying that you want to shift your focus around building railway tracks towards signaling and other products. A) Why are you wanting to shift right now from the NPC side of railway tracks to signaling? B) And what is the opportunity size there that you are seeing? And second is like you said for FY'23 you are targeting 3300 wagon, what is the target for FY'24 and beyond?
A.K. Vijay
What we mentioned is very clear. In fact, rather let me again clarify you. We are not moving from one to other, signaling is the core of this company. The Rail EPC company which we are operating the core business of is signaling. So, that will be more focused now. We are only trying not to get into a long-term track laying projects, which are basically as explained in my statement also, 1) long time taking 2) there are a number of local situation which influences the project completion, including the land acquisition, the bridges construction, the land development. And for one of the litigatio
Q
In Heavy Engineering division, once our utilization touches optimum level, what kind of EBIT margins we can expect on a conservative basis?
A.K. Vijay
I would refrain from this answer because this is a very forward-looking statement. And I hope you will understand and appreciate my situation in this respect. Just from another perspective, so current margins, can we say further improvement is still possible across all three divisions? Normally, yes, because the reason this thing that’s very standard, if you go for improving your production and all this thing your overhead cost doesn't commensurate to that and automatically it reflects in your bottom-line. So, the answer is affirmative.
Q
My question is regarding this other current assets, can you throw some light and detail because nearly if I am not mistaken Rs. 1,000 crores are blocked. And when will they be released? And second thing is rational for continuing this Rail EPC like in spite of very poor return on capital ROC. And also, there are a large number of new players are entering this field, in the current interest rate scenario is this rational for continuing this segment?
A.K. Vijay
I will start by answering your question number two first, rational for continuing with the Rail EPC business being the large thing also. It's true that a large number of people are coming in all this thing, but your strengths also counts a lot. And fortunately for us, our both Kalindee division and Bright Power division have core strength in signaling and telecommunication and also in the Bright Power on the rail over electrification. So, this core strength certainly is critical for us. And we would like to capitalize to the maximum extent possible in this thing. As we explained earlier also,
Q
My question was on the margins only, so if you can indicate some, the major order that we have received from the railways, what kind of gross margins and EBITDA margins are we expecting from this project?
A.K. Vijay
I think Sarvesh you were there earlier also, and you have already raised certain questions. And some of the other shareholders questions, I have also said that I will refrain from coming across on the margin levels and all this thing since this is a very forward-looking statement, the company as a policy don't want to make. So, I certainly think you have to basically draw your own conclusion based on the results which have been published and provided to you.
Q
I want to understand about the payment cycle for general as well as specifically for EPC projects. Is there any challenges because of the new budget allocation in railways in this quarter?
A.K. Vijay
To answer your question in one line is that fortunately for us once we achieved the milestones, which are billable milestones, the payments in railway is normally fast, because budget allocation has been done on priority basis for this segment. The challenge remains where basically the payment terms are defined in a manner whereby you realize 70% on completion of the job 1st Stage, then also the 10% will realize on the preliminary acceptance stage, the 10% realize in the final acceptance stage and the 10% realized after completion of certain duration, there is a warranty period. So, that is ho
Q
Thank all the well-wishers as well as the investors for asking very constructive question. I think it has come up very clearly that we have a very sharp cut out strategy for the future. We know the market is very big, and like we discussed EPC many questions came up. But we don't want to go all over the business and spread ourselves like wall-to-wall carpet. We want to be very strategic. We have defined, we have done exercises to find out where our competencies lie, where we have credentials, which others don't have. And we only take those projects where we don't have the problems of getting s
Management
Speaking time
A.K. Vijay
25
Moderator
14
Balasubramanian
7
Indrajit Mookerjee
5
Pranav
3
Shambhu Rathod
2
Kaustav Bubna
2
Nalin Shah
2
Sarvesh Gupta
2
Hemant Bhuwania
2
Opening remarks
Navin Agarwal
Good afternoon ladies and gentlemen. It's my pleasure to welcome you to this earnings conference calls on behalf of Texmaco Rail and SKP Securities. We have with us Mr. Indrajit Mookerjee - Executive Vice Chairman along with his colleagues, Mr. A.K. Vijay - Executive Director; Mr. Hemant Bhuwania – VP (Corporate Finance); and Mr. Ravi Varma – VP (Corporate Affairs) and Company Secretary. We will have the opening remarks from Mr. Mookerjee followed by a Q&A session. Thank you, and over to you sir.
Indrajit Mookerjee
Good afternoon to all of you. And at the very outset, let me congratulate you for your patience and being present for this call. I also apologize for the delay, which happened because of technical reasons from the communication side. I also would like to wish you all the best, because we are talking after the period of celebrations in India, which includes both Durga Puja as well as Diwali, so my warm greetings to all of you. Just to give a little bit of overview of what's happening, you all are aware that the sector once again has come back to a very promising one, with orders already been awarded from Indian Railways to the wagon manufacturers. Also, there are lots of demands from the private customers, including exports. There seems to be a worldwide shortage, but there seems to be also many challenges because in order to gear up to higher volume, it requires lots of other inputs like components and people, etc. which take time to gear up. So, while it's a good problem to have, it a
A.K. Vijay
Thank you, sir. I must say you have summed it up so well, in such brief, covering the entire gamut of the operations also, and also how the outlook and other things are there. In briefly, I would like to just share with the shareholders that the company, as explained by Mr. Mookerjee is now turning the corner, which is very vital and important. And as Mr. Mookerjee pointed out, we are no more only a wagon company it is basically a rail solution provider. And fortunately for us, in all segments of railway, there is a robust demand coming both from rail segment and also from non-rail segment, which is a very good thing to happen, and we have been talking about this for quite some time. And all the vision documents of Government of India these we are focused upon, but somehow it was not acted upon by the government. This is the first time we are noticing that ‘yes’ the government is ‘walking the talk’ and also ensuring this thing that whatever is required to be done for this segment shoul
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