Ircon International Limited has informed the Exchange about the Transcript of post result conference call held on 9th February, 2024.
इरकॉन इंटरनेशनल (cid:871)ल(cid:871)मटेड (भारत सरकार का उप(cid:272)म) IRCON INTERNATIONAL LIMITED (A Govt. of India Undertaking)
An integrated Engineering and Construction Company
IRCON/SECY/STEX/124 15th February, 2024 National Stock Exchange of India Limited BSE Limited Listing Department Listing Dept./ Dept. of Corporate Services Exchange Plaza, Plot no. C/I, G Block Phiroze Jeejeebhoy Towers Bandra –Kurla Complex, Dalal Street Bandra (East) Mumbai – 400051 Mumbai – 400001 नेशनल (cid:720)ॉक ए(cid:411)च(cid:336)ज ऑफ इंिडया िलिमटेड बीएसई िलिमटेड िल(cid:304)(cid:720)ंग िवभाग िल(cid:304)(cid:720)ंग िवभाग / कॉप(cid:342)रे ट सेवा िवभाग ए(cid:411)च(cid:336)ज (cid:600)ाजा, (cid:600)ॉट नं. सी./ आई. जी. (cid:624)ॉक, पी. जे. टावस(cid:330), दलाल (cid:720)(cid:332) ीट, बां(cid:363)ा-कु ला(cid:330) कॉ(cid:817)(cid:600)े(cid:411), बां(cid:363)ा (पूव(cid:330)), मु मु Scrip Code: IRCON Scrip code / ID: 541956 / IRCON
ंबई– 400001
ंबई-400051
Sub: - Transcript of the Q3FY2024 Conference Call held on Friday, 9th February, 2024/ शु(cid:354)वार,
9 फ़रवरी, 2024 को आयोिजत Q3FY2024 कां(cid:367)(cid:336) स कॉल की (cid:366)ितलेख
Dear Sir/Madam,
Pursuant to Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations,
2015 and in continuation to our letter of even no. dated 1st February, 2024, please find enclosed the
transcript of the post result Conference Call held on Friday, 9th February, 2024 to discuss the financial
results of the Company for the quarter and nine months ended on 31st December, 2023.
In accordance with Regulation 46(2)(oa) of the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015, the Transcript of the Conference Call is also available on the
Company’s
website
at
the
link
https://www.ircon.org/index.php?option=com_content&view=article&id=226&Itemid=643&lang=en
which can also be accessed through below mentioned path:
www.ircon.org>> Investor Relations>> Presentation and Earning Calls>> Transcript of the Conference
Call held on 9th February, 2024 for financial results for the quarter and nine months ended on 31st
December, 2023.
कृ पया उपरो(cid:389) जानकारी को (cid:303)रकॉड(cid:330) पर ल(cid:336)।
ध(cid:586)वाद, भवदीय,
(अंिकत जैन)/ (Ankit Jain) अनुपालन अिधकारी/ Compliance Officer सद(cid:735)ता (cid:354)./ Membership No.: A35053
पंजीकृ त काया(cid:91)लय: सी -4, (cid:875)डि(cid:232)(cid:282)(cid:200)ट स(cid:581)टर, साके त, नई (cid:465)द(cid:227)ल(cid:547) - 110017, भारत Registered Office: C-4, District Centre, Saket, New Delhi - 110017, INDIA
Tel.: +91-11-26530266 Fax: +91-11-26854000, 26522000 | Email: info@ircon.org Web:www.ircon.org
CIN: L45203DL1976GOI008171
“Ircon International Limited Q3 & 9M FY'24 Analyst Conference Call” February 9, 2024
Management Ircon international limited
Mrs. Ragini Advani Mr. B. Mugunthan – Chief Financial Officer and ED
– Director Finance
Mr. Alin Roy Choudhury – CGM Finance
Finance
Page 1 of 28
Ircon International Limited February 9, 2024
Moderator:
Good afternoon, ladies and gentlemen. I am Dorwin the moderator for
this conference call. I thank everyone for joining us today for the Ircon
International Limited Q3 and 9 Month FY24 Analyst Conference Call.
At this moment, all participants are in listen-only mode later we will
conduct a question-and-answer session. At that time, if you have a
question please press “*” then “1” on your telephone keypad. Today we
have with us the senior management represented by Smt. Ragini
Advani – Director Finance, Shri. B. Mugunthan – Chief Financial Officer
and Executive Director Finance, Shri. Alin Roy Choudhury – CGM
Finance.
I would like to remind you that some of the statements that will be made
in today’s discussion maybe forward looking in nature. It is subject to
several risks and uncertainties and the actual results could materially
differ. I would now like to hand the conference over to Smt. Ragini
Advani – Director Finance for the opening remarks.
After which we will have the forum open for the interactive Q&A session.
Thank you and over to you, Madam.
Ragini Advani:
Thank you Dorwin. Good afternoon, everyone. I'm Ragini Advani –
Director Finance Ircon. On behalf of my team, I extend a warm welcome
to all of you and thank you for your presence today at the Ircon’s
earnings call for the third quarter and 9 Month period ended 31st
December 2023.
Let me introduce you to my team today. I have with me Shri. B.
Mugunthan – CFO and ED (Finance), Shri. Alin Roy Choudhury and
Shri. Sachin Garg – DGM (Finance). As you are aware in this quarter
DP Government of India has upgraded Ircon to Navratna status on 12th
October.
With the grant of Navratna status the company will be able to undertake
larger size PPP projects and there shall be market credibility
enhancement as well. We extend our heartfelt gratitude to all the
stakeholders for their continuous and unwavering support. I am pleased
Page 2 of 28
Ircon International Limited February 9, 2024
to once again convey that we have been reaching greater heights
quarter-on-quarter and recorded the highest ever third quarter turnover.
We hope to continue this growth story of ours. Financial results as well
as the presentation has already been uploaded on the stock exchanges
and I'm sure that all of you had the opportunity to review the same. Let
me take you through our financial performance of Q3 FY24. The
company has reported total revenue of 3,012 crores up by 24% as
compared to Rs.2,422 crore same period last year. PAT has increased
by 29% from Rs.190 crore in Q3 FY23 to Rs.245 crore in FY24 Q3
FY24.
Core EBITDA has also increased to Rs.296 crore vis-a-vis Rs.169
crore. It has increased to 10.3% in Q3 FY24 an improvement of 304 bps
over the last year. Earnings per share has gone up to Rs.2.60 per equity
share as against Rs.2 per equity share for the corresponding period in
Q3 FY24, this is on a face value of Rs.2 per share. The order book of
the company as at 31st December 2023 stood at Rs.29,436 crores
which includes 45% on nomination basis roughly and about 55% on
competition basis. The split between domestic and international is 91%
to 9%.
Ircon has 11 subsidiaries currently mainly into roads highways project
and one in renewable, and it has 7 joint venture companies again mainly
into coal connectivity products and roads and highways. Without taking
much time, I would now like to open the floor for Q&A session. Thank
you.
Moderator:
Thank you. We will now begin the question and answer session. The
first question is from the line of Sujit Jain from Bajaj Allianz Life
Insurance. Please go ahead.
Sujit Jain:
I wanted to know what is our scope in terms of project winning etcetera
and opportunity in the India Middle East Europe corridor and is it taking
shape it has been spoken about in GCC and even including in the
recent budget, but is there a traction in terms of laying it out?
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Ircon International Limited February 9, 2024
Ragini Advani:
As far as this corridor is concerned we are also aware as much as you
are based on the announcements that were made in GCC and recently
some activity is happening at a government level or at a ministry level,
but not something at which we would be aware at this stage. So, we will
not be able to comment on it any further till we get more details.
Sujit Jain:
Just to understand in this which Indian entity would be at the forefront?
Would it be RVNL or would it be Ircon or would it be some other railway
entity?
Ragini Advani:
Nothing has been so far discussed in those lines. I think it's still at a
preliminary stage. I don't think those discussions have right now been
done or deliberated.
Sujit Jain:
And ma’am just to understand the difference between us and RVNL, is
it safe to understand that we engage in material sourcing and
management of overall contracts as well and so therefore our staff is
much higher than let's say an RVNL?
Ragini Advani:
So, our model is that we actually work like an EPC company. Therefore,
we will do certain works in house. We will have material procurement,
design and many other works that we like to do ourselves and that is
the reason we have that kind of strength of manpower available with us.
Sujit Jain:
And do we also eventually intend to get into consulting business which
is more like a DPR viability etcetera which is mainly done by RITES?
Ragini Advani:
So, there are two things. One, we offer a concept to commissioning to
all our clients. Two, we have a subsidiary called IISL which does PMC
as well as some of the initial consultancy work, but typically where the
consultancy work is aloan standalone. Either we will have our IISL the
subsidiary to do to some extent.
But we may not like to do that directly in our company if it's pure
consultancy because then a consultant versus an EPC there could be
a conflict of interest going forward. So, that is where we tend to prefer
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Ircon International Limited February 9, 2024
going into EPC role because that's where our strength is, but if it is a
part of the overall opportunity then we are definitely also doing that.
Sujit Jain:
And just to understand more about the 11 subsidiaries that you spoke
about, are there any asset ownership businesses residing in those
subsidiaries and what is our position there in terms of capital allocation?
Will we undertake, will we not?
Ragini Advani:
Other than subsidiaries other than IISL which is a perfect management
consultancy company essentially rest all are asset owned companies
they all have assets, but these are long term PPP assets that you have.
Sujit Jain:
And in the field of railways or it is in the field of other infrastructure?
Ragini Advani:
So, our joint ventures are in railway connectivity projects. Our
subsidiaries are mainly into roads and highways. There is one which is
in renewable, and the rest are roads and highways.
Sujit Jain:
And in terms of more capital allocation to asset owned projects what is
our thought process?
Ragini Advani:
Yeah. So, we'll continue to do that as well and if you see that we started
with some 2 or 3 projects then moved on to 5, then we took another 5.
Currently we have something like total of about 9 road and highway
projects, another 4 to 5 coal connectivity projects and we continue to
doing that. As a part of our business, we will be doing both PPP as well
as EPC.
Sujit Jain:
And ma'am one last question so as I understand international is 9%,
10% not large. Right now the IMEC corridor is at a very conceptual
stage. So, the main growth driver would be railway CAPEX and you
have small portion in infrastructure. So, how do we view this company
in terms of on a medium term let's say 3 to 4 year horizon from today
from then, what kind of growth one can expect? Would this be a 13% to
15% kind of a growth company? Would it be lesser, how do we view
this?
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Ircon International Limited February 9, 2024
Ragini Advani:
Yeah. So, I think we've mentioned earlier also that in the next 4 to 5
years we see our doubling our turnover.
Sujit Jain:
And that is mainly riding on the CAPEX in budgeted CAPEX in the
railway sector?
Ragini Advani:
So, it would be a mix of railway roads and highways and some related
infrastructure activities that we may foray into, but yeah it would be
driven mainly by railways, roads and highways.
Sujit Jain:
Because when you say doubling in 4 years, it's 18% CAGR?
Ragini Advani:
Yeah.
Sujit Jain:
I'm sure you would have worked it backwards?
Ragini Advani:
So, 4 to 5 years if I may use that word.
Sujit Jain:
Yeah, 5 years then that would be about 14%, 15%?
Ragini Advani:
Yeah that is what we would like to target.
Sujit Jain:
And one last question is 45% nominated and remaining is a competitive
bidding if you can give us a flavor which contracts with some examples
where those are nominated contract and which contracts were
competitively bided just to understand that in terms of future pipeline
what would be coming directly to us on nomination basis and what
would be bided out?
Ragini Advani:
Going forward nothing will come to us on nomination that practice has
been stopped. So, whatever existing nomination business we have it
should get completed in the next 2 to 3 years one of them being let's
say, a Sivok project, USBRL we are in the process of completing, so it
should get completed in this year and similarly we will have some other
railway projects which were on nomination basis.
Usually we have one nomination project internationally. This is the
Myanmar project which has been given to us by MEA, but that is again
an exception which has come to us. But typically, the way ahead as a
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Ircon International Limited February 9, 2024
rule would be competitive basis. Any new orders would be on a
competitive basis.
Moderator:
Thank you. The next question is from the line of Rohit Natarajan from
Antique. Please go ahead.
Rohit Natarajan:
My first question is more to do with what Ircon is doing as compared to
competitors. For instance, I was on another call with RVNL they were
saying they are looking at orders. In fact, they have bid for a $10 billion
Trans-Kalahari in South Africa, $4 billion in Kyrgyzstan even a company
like RITES they are in discussion with a country like Chile to export
Vande Bharat whereas Ircon by design was supposed to be an
international railway execution agency as well. We have had a rich
history of doing projects in the past in international countries like Sri
Lanka.
We were talking about Malaysia, Singapore, one MDB that particular
high speed rail contract, somewhere this international picture is
nowhere to be seen in the discussion stage where exactly is that
disconnect?
Ragini Advani:
While I may not like to comment on what RVNL, RITES are doing, but
from Ircon perspective yes you are right. We were internationally very
strong till about couple of years back so much so that we had most of
our turnover coming from international projects and we continue to
enjoy that credibility or that respect that we have in those countries.
In the past jobs that we got internationally were of two types. One which
were mainly funded through some kind of government grants for MEA
funding. So, the projects which we negotiated on a one-to-one basis
and managed to get good returns there on. There have been changing
scenarios all over the world. It is not that your Ircon is not making efforts.
We are making efforts right now we are doing it in our neighboring
countries as well as in the Middle East.
But having said that the window which is right now currently drying up
is where Government of India or MEA used to fund projects. Though
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Ircon International Limited February 9, 2024
that kind of projects are not coming as of now. They may be coming in
future, and we are very much in touch with MEA. As far as one to one
projects are concerned typically most of these countries when they talk
of such large size projects are also looking for project financing.
It is not that they're sitting with this kind of finance, and they just want
you to come and execute. The project financing by itself is a difficult
task if Government of India is not a part of it and therefore when we are
looking at international projects we are essentially trying to look at the
projects where either they have already tied up.
The financing from somewhere and we are doing the EPC or where we
are confident we'll be able to manage some kind of a structuring in
which those kind of financing would be possible. Having said that yes
we still need to work a lot on our international business. Our business
development and marketing teams are looking into it so is our CMD, but
what is very important is to really understand that which are the projects
which are tangible, and which are actually on paper and which are the
projects where we are looking at some kind of an MoU and not knowing
when they're actually going to come ahead. So, I think I'll leave at that
point and I think it would be best if we speak with our results as and
when they happen.
Rohit Natarajan:
My second question is more to do with the domestic opportunities.
There was a time when all this network debottlenecking, electrification,
doubling, all those orders came to you nomination, but if you look at the
National Rail Plan as such the scope of conventional works is very
limited.
Going ahead, the CAPEX is largely confined to high-speed rail, rolling
stocks and dedicated freight corridor where technically speaking Ircon
hasn't proved its credential probably dedicated freight corridor could be
an exception?
Ragini Advani:
Both high speed and dedicated freight corridor, Ircon has the
advantage. It's the only CPSE which has that credential.
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Ircon International Limited February 9, 2024
Rohit Natarajan:
Yes, there is one particular tender that you may be doing in Gujarat part,
but when you look at the overall scheme of things, you will have to fight
with the remaining players as such private player. You will have to the
market share is dramatically reduced over there even within the overall
scope of things?
Ragini Advani:
So, okay yes, there are two things. As you rightly pointed out when we
talk about National Rail Plan or any of the railway CAPEX it is split
between what I may call as rolling stock and the areas which Ircon may
not be into and the areas where Ircon is into which would include
doubling, tripling, whatever of the lines having new lines, modernization
S&T works, electrical works and then having semi high-speed, high-
speed kind of networks as well as dedicated freight corridor.
So, on the latter part, I would say as of now whatever has been there
the budget is easily between 30% to 50% of the total. It's not a low
number. So, I mean it is not that the cost the rolling stock has come
these numbers are low. In fact, these are quite significant. As far as
competition is concerned yes there is a competition amongst serious
players, good players and that is what Government of India wants and
we are happy to participate in the competition and get the jobs.
The advantage with Ircon has been that one we have the credentials.
Two we do a lot of work in House and we have that kind of requisite
experience and the quality. So, per say the market share is depleting
as of now for Ircon in certain area, but that's a very temporary
phenomena because a lot of players are coming in small ticket size jobs
wherein some of them have been quoting numbers which are not even
covering the cost. If one was to look at those project estimates, but we
are fairly confident of our skills as well as the fact that we should be able
to get some of these complex and reasonably sized jobs.
Rohit Natarajan:
Then finally, when you come to the order inflow part, we last time we
said you have placed bids for 50,000 crore projects as such and you
were confident to win some 5,000-crore kind of number, but when you
look at the execution you require…
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Ircon International Limited February 9, 2024
Ragini Advani:
We have never said that we bid for 50,000 crore.
Rohit Natarajan:
My point here is the order inflow for this year this fiscal that is FY24.
How what is that realistic number one should be looking at and second
part of the question is are we really going into the road projects with
BOT toll model is that in our cards?
Ragini Advani:
So, there are two things again. One I did give a message in the last
concall as well as that we have been going low on our order secured or
input and that is something which has further come down from the
estimate that we thought in Q2.
Till date, I think we've had order size that we've secured in this year of
currently about in the range of 500 crores and since we're already sitting
in mid-February and some of the big ticket jobs which we were
anticipating should come this year are not likely to come because of
various reasons.
There could be political scenario, there could be delay in decision
making at some of these client ends. So, I don't see this number going
very high in this financial year, but some of our efforts of this year should
give us good results next year in terms of order, in terms of the BOT
projects.
See we will continue to focus on road and highway projects. We will
also be doing EPC as well as PPP projects. BOT specifically is
something that we will be examining on a case-to-case basis. We have
taken up 2 or 3 BOT projects in the past. So, based on how we see
them we may be looking at them whether on a standalone or on a JV
basis.
Moderator:
Thank you. The next question is from the line of CA Akash Dhanuka an
Individual Investor. Please go ahead.
Akash Dhanuka:
Ma’am, in the last conference call you had upgraded your guidance with
respect to the revenue part to 15% over the last year which means that
we'll have to achieve around 11,900 crores and that could mean that in
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Ircon International Limited February 9, 2024
Q4 you have to achieve over 3,300 crores. So, are we on track to
achieve that, will we achieve that number?
Ragini Advani:
Yes it could be a 200, 300 here or there, but we are there pretty much.
Akash Dhanuka:
So, I mean 11,600 will touch for sure?
Ragini Advani:
Yeah, 11,500 or is something that we should be touching, yeah.
Akash Dhanuka:
The other income part, ma'am, you also said that we'll be touching 550
crore and till now we have touched 388 crores which means in the Q4
we'll be needing 162 crores and in this quarter we had only 127. So, will
we achieve that 550-crore number?
Ragini Advani:
In the other income part what is happening is at a consolidated level as
we mentioned we started getting income from our interest element in
annuity of HAM projects which if you see is has been a significant
contributor in these 9 months also. So, if we are at about a 550 level,
yeah we should be in the level of about 800 in March. You're already in
the number of 388 so we should be in the range of 500.
Akash Dhanuka:
And now with respect to the guidance for FY25 ma'am, I mean, if we
are touching 11,500 crore this year if you can help us with the guidance
for the next year FY25?
Ragini Advani:
Sorry FY25?
Akash Dhanuka:
Yeah ma’am.
Ragini Advani:
So, next year I think we should be seen given the current order book
that I have, I would say we would be at similar levels. I will be revising
my judgment as and when I get more order in flows if any.
Akash Dhanuka: With respect to the EBITDA part ma'am just give me a patient hearing
on this ma'am, in public interest then there is a lot of confusion because
of that HAM annuity part and why I'm saying this is because a section
of media for the past few quarters is putting a figure of 7.4.
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Ircon International Limited February 9, 2024
Whereas we have in our presentation quoted 12.6 and that is because
of two different and which is because we are taking the media is
showing the revenue from EBITDA from operational part only whereas
we are taking into account the other income and also the profit from the
joint venture part.
But this creates an anomaly and at the end affects the share prices does
the investors interest. So, my request is if you can give the PAT
percentage instead of EBITDA percentage it brings the clarity ma'am. I
hope I have conveyed it correctly.
Ragini Advani:
I think we would be conveying PAT percentage as well. If we are not we
shall do that. So, we'll do PAT percentage as well.
Akash Dhanuka:
So, if you can help me with that ma'am for this year and the next year I
mean FY24?
Ragini Advani:
I have been as far as in my con-calls I've always been stating that the
PAT percentage will be in the range of 7 to 7.5.
Akash Dhanuka:
And for the next year ma’am it remains the same?
Ragini Advani:
PAT percentage I've been saying that we'll be maintaining at that level.
Moderator:
Thank you. The next question is from the line of Shreyans Mehta from
Equirus. Please go ahead.
Shreyans Mehta: Ma'am just wanted to understand since we have a lot of JV's into rail
connectivity and I believe we were probably expecting them to be up
and operational by 24 end or 25. So, is that on cards and how much of
that income will we see in the JV share of profit coming through?
Ragini Advani:
So, in the cold connectivity projects two of my JV part one, I mean if I
would call phasing of those projects are already commercial. So, in
Chhattisgarh I have phase 1 which is already operational and MCRL
though of course we have now mentioned that it may be taken over by
Railways. Again, the phase 1 was operational or I can say still
operational.
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Ircon International Limited February 9, 2024
Now in the Chhattisgarh project where the phase 1 is operational there
have been certain losses because the traffic has been little lesser than
the overall expenses. This has been the first quarter where we've had
some good marginal profit, but otherwise ever since operations there
were certain losses.
The rest of the projects which are right now under construction they
should be getting completed by some partly by the end of this year and
some by the end of next year. So, the actual benefit of coal connectivity
projects should come two years from now and it will take some time for
them to stabilize because once you have these coal connectivity
projects, the coal companies have to have that kind of the fact that some
of the traffic is already going by truck and they also need to have certain
accessories and certain yards and linings and all in place so there could
be some mismatches that's why I'm saying it should take 2 years for it
all to stabilize.
Shreyans Mehta: Ma'am in terms of your order inflows as you mentioned that probably
there were certain projects which we were targeting and are yet to be
ordered. So, in terms of the projects which have been awarded, so is it
fair to assume that it is primarily because of competition or something
else which we need to introspect into?
Ragini Advani:
So, couple of factors again the first thing is the big-ticket complex orders
that we were looking at some of them are delayed and that is where our
forte lies. Some of the projects where we bid again there were two
categories. One where we were quite close to being L1, but did not get
it. Some where you had something like 20 to 30 parties quoting and
again it's gone at a very indecently low price.
So, that is what I'm talking about the domestic segment per say and
internationally again certain projects that we are tying we're trying to get
that is something which we are trying to, I mean, it takes time because
as I told you this is not coming through an MEA or a government grant
too. So, it's taking us some time to get to moving even on the
international front. Certain projects which we updated the results are
still awaited. Now, given the kind of scenario right now in India in terms
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Ircon International Limited February 9, 2024
of political the elections coming up etcetera there could be further
delays in certain tenders of bids that we were targeting or certain results
which we were targeting that they will come in this year. So, it's a mix
of everything. It's not just competition, but it's a mix of everything.
Shreyans Mehta:
And ma'am in terms of clarification I mean when you mentioned that
probably we expect to grow at some 15%, 20% CAGR for next and we
need to double our revenues. So, if I just do a rough ballpark calculation
probably we need order inflows to the tune of say around 15,000,
20,000 odd crores on a yearly run rate basis. So, how confident are we
in achieving that?
Ragini Advani:
So, there's been a year when we moved from 26,000 crore to 41,000
crores in terms of order books. So, the confidence is there, but it is such
a dynamic market where we are working in and as I also mentioned
earlier that there are lot of these fly by the night players which are times
travelers or in fact some of the serious players.
So, given all these factors the confidence is there, the growth overall in
infrastructure segments shall be there both internationally as well as
domestic, but on the other hand, we want to be doing projects which
are serious projects and where ultimately we are making profit.
We don't want to increase our top line or the order book by knowing at
stage 0 itself that it will be into a loss. So, given all these factors as I
mentioned, that is what we target. There could be some ups and downs,
but overall from a 5 year scenario should be doable.
Shreyans Mehta:
And in terms of investments what have we done till date if you could
break up in road SPVs and the other segments and at the same time
our cash on the books, our own cash?
Ragini Advani:
Our own cash on the books is about 700 crores to 750 crores and in
terms of the amount that we have already put in JVs and subsidiaries is
about 2,300 crores. We have another 1,000 crores that we have to
invest and I think in this year we've done about 200 crores, 150 crores
to 200 crores.
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Shreyans Mehta:
So, this 2300 also include the road, right?
Ragini Advani:
Yeah, this is road and rail connectivity and renewable project that we
have.
Shreyans Mehta:
So, just to clarify 2300 odd cores is what we've invested, and 1000 odd
is what we need to do over next 2 to 3 years?
Ragini Advani:
Next 2 years in fact it is lesser than 2 years.
Shreyans Mehta:
And my last question from my side in terms of the solar Power project
which we are doing for the status of the health, the construction started
and when will it be operation?
Ragini Advani:
So, I will ask my CFO to address this question since he's directly looking
into this.
B. Mugunthan:
Currently we have acquired or done the lease dates for about 70% of
the total land requirement. We have already started constructing four
blocks and our other assets like pulling substation and transmission
lines are under construction.
We were targeting to partially commission the project by 31st of March,
but there are some impediments which are there which need to be
sorted before it and in any case we are planning to complete the project
by September, October of 24. So, that is the current status.
Shreyans Mehta:
But in terms of raw material is the entire thing procured or we are yet to
procure it?
B. Mugunthan:
So, we have placed the orders for all the transmission equipments,
transformers and all the modules also entire order is placed and we
have already received the modules for about 50 megawatts also at the
site and over the current month and the next month we do hope to install
partially some of these modules also and our target is to kind of partially
commission the project, but there are certain issues which are involving
other agencies of government of Karnataka. We are trying to get those
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permissions so that we can partially commission. So, that is the current
status.
Shreyans Mehta:
And just to follow up on the same so sir just trying to understand there's
no raw material risk because largely this projects generally fail because
of raw material then second these are back-to-back signed contracts as
in the PPA are backed by the state governments 100% procurement bill
will be there right?
B. Mugunthan:
So, raw material I assume that you are referring to modules.
Shreyans Mehta:
Right majorly modules.
B. Mugunthan:
So, we have already placed the orders and the supplies have already
started. So, we don't foresee any disruption on that account. As far as
the power evacuation and PPA we have already signed the PPA with
the Indian Railways. So, they will buy whatever power is being
generated, so that has already been tied.
Moderator:
Thank you. The next question is from the line of Abhishek Maheshwari
from SkyRidge Wealth Management. Please go ahead.
Abhishek Maheshwari:
My first question is regarding the budget that was announced to
2.55 lakh crore for this year. Can you give a dissection of this amount
how much of it is going to infrastructure work that we do and or bulk of
it is being used for conversion of old trains to Vande Bharat. So, how
much of it will be helpful for us the kind of work that we do?
Ragini Advani:
The budget split is still not known of 2.55 lakh crore, but mainly they
mentioned two things. One, of course for the Vande Bharat coaches
and the trains and the second thing they mentioned was more
connectivity projects to port and many other infrastructures. So, the
second part since it's been mentioned especially as a part of the budget.
I think it should have a significant share and that is where we are already
there. We are already doing some of the coal connectivity projects also.
So, once we also get to know we'll be looking at all those aspects.
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Abhishek Maheshwari:
Ma’am second question so whenever just for understanding
sales whenever a budget is announced do you have some clarity on
hand before the announcement that okay these projects are in pipeline,
these are going to happen in the coming year or is it completely
secretive process?
Ragini Advani:
We work like any other company does, so it is not that because we are
a government company, we get to know anything before or just
immediately after the budget. All of us will know it in due course as and
when Ministry of Railway works it out.
Abhishek Maheshwari:
OK, ma'am, lastly now you're working on one high speed rail
project for Ahmadabad, Mumbai. So, are there any more such projects
in discussion even in discussion or is it first you will finish this project
and then government will see if it is feasible to proceed with others?
Ragini Advani:
Parallelly the discussions have started on some more high-speed
projects. I think at a DPR stage two projects are already being
discussed. Overall, the government wants more of these projects, both
semi high speed as well as high speed and in semi high speed like we
have recently also done NCRTC electrification work. This is the Delhi
Meerut corridor.
So, I think a mix of semi high speed and high speed from a long term
perspective is what government could want our country to have. So, it
is here to stay and grow in a big way. The details will be known to us as
and when they are announced, but yeah it is a promising area going
forward.
Abhishek Maheshwari:
One last thing when if such projects are discussed generally, it's
the conversion of existing lines into high-speed lines or you have to
completely look for new line?
Ragini Advani:
No. This is a completely new project, and it is based on Japanese
technology.
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Abhishek Maheshwari:
No, I mean when you want to lay down the railway lines for such
high-speed rails, are the existing lines, old lines converted to new lines
or you have to look?
Ragini Advani:
That's what I'm saying. It's completely new. It's a Greenfield setup of
lines.
Abhishek Maheshwari:
So, land acquisition must be a big challenge here.
Ragini Advani:
So, that's where you have a company National High Speed Rail
Corporation Limited, which is doing these projects on a dedicated basis.
So, we are doing the part of the EPC work, but there is a company.
There is a set up within Government of India which does all this. It's
something similar to when you have metro setups.
Moderator:
Thank you. Next question is from the line of Vishal Periwal from IDBI
Capital. Please go ahead.
Vishal Periwal:
In awards, ma'am can you clarify like in railway sector is there any data
available that what was the total award for the sector as a whole in this
year last year, anything that you can provide color?
Ragini Advani:
I think you are talking about Ministry of Railways awarding?
Vishal Periwal:
Yes ma’am.
Ragini Advani:
No, I will not have that data with me because that data is I mean every
zonal railway will have their own set of data then there will be certain
centralized projects also different departments civil, mechanical,
electrical will have their own set off. At company level I may not have
that data.
Vishal Periwal:
But the CAPEX number which generally it's shared in the public and
everywhere. So, that is combined of all the zonal railways and
everything, right?
Ragini Advani:
Yes sir.
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Vishal Periwal:
And second you mentioned there were like 30 parties in one of the order
that we bided. So, can you give some color like where exactly this
competition is, is it in the station development side or a traditional
railway work of laying lines if you can just give some color?
Ragini Advani:
So, it's this particular one that you're talking about it is a railway project,
it's not in station development, I think. Let me just look into this one.
Can you move ahead till I get back to you because this is a very specific
question or we can take it off the conference call also because it’s
something I need to fetch out the data.
Vishal Periwal:
In terms of to get more orders for us. So, is there any sector that we are
building up a team for ourselves and then like we can get orders,
anything that you can provide a color?
Ragini Advani:
See as much as you all are anxious about it. As company management,
we would be even more anxious about it and would be making all efforts
towards the side because we understand that is something which is
important for us. So, while we are doing well on many of the stratas or
the pillars that company has, this is the area where we've fallen short in
this year and we need to gear up.
So, a lot of internal deliberations activities some deliberations on how
we are doing it and how should we be going ahead and what should be
the identified team all that is happening, but again that's something
which I mean I would rather have the results speak for it rather than get
into that deliberation.
As regards your previous question, this was the construction of road
bridge major and minor bridges, ROBs, RUBs etcetera in the state of
Maharashtra for Central Railways. So, those kinds of projects you are
getting bidders in the range of about 15 to about 28, 30 odd percent.
Vishal Periwal:
So, is it like the norms are being relaxed or any changes which have
happened?
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Ragini Advani:
As we mentioned these are typically projects which have been taken by
zonal railways. The project size is of a smaller scale and it's and it's also
has a lot of routine work for normal bridges, the normal ROBs etcetera.
So, the credentials and the EQC requirement are also not as stringent
as they should be and typically the size could be anywhere between
300 to about 600 crores, 700 crores. So, more people do get to
participating including some of the local parties.
Vishal Periwal:
And ma’am in terms of awards only I think I'm asking that repetitive kind
of question. So, can you give some color what could be the total bidded
project that we have right now, what it could be like maybe 6 months
before how it was, and any bid pipeline is it becoming more promising
to you or still it’s conclusive?
Ragini Advani:
What I can tell you is that as of now there are 5,000 crore worth of
projects for which we have bid, but the results are awaited and we are
bidding for another 3,000 crores and in the past, we've already bid for
about 15,000 to 18,000 crores in the cumulative 9-month period.
Vishal Periwal:
So, incrementally this 9-month period that awards in terms of actual
results are out incrementally what we have is 3,000 plus 5,000 that you
mentioned?
Ragini Advani:
So, 3,000 will be bidding and 15,000 the results are awaited.
Vishal Periwal:
And last thing from my side if it is covered pardon me. In terms of
revenue, we did mention like 11,500 crore that we are targeting for
FY24 is it?
Ragini Advani:
Yeah.
Vishal Periwal:
So, that is on a standalone EPC work typically that the number that is
being shared?
Ragini Advani:
No, we talk everything on a console basis.
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Vishal Periwal:
I mean fourth quarter number if we just imply then is it like you're seeing
things to be a little kind of subdued or because the implied number looks
to be little?
Ragini Advani:
So, what has happened is, I mean, the reason I'm giving this is again
because I'm fairly confident that this is something I'll do, but if there is
an upside I'll also be as happy as you are because they're sitting in mid
of Feb and I've had some of my projects which have been affected
geopolitically.
Like Myanmar project there have been some political disturbances,
insurgencies because of my work has temporarily been stopped almost
and similarly in Sivok we were all aware that there were certain issues
in the month of October, November after which lot of our resources were
pulled in and given to NHAI to get the roads etcetera back.
Our own work was told to be stopped because the national priority was
to get the road back in place and even those roads right now are
working on a very temporary basis only for the army, trucks, etcetera.
So, even our own stuff cannot go up and down from those roads. So,
these are things because we are working in some tougher terrains.
So, these projects especially Sivok is an important project for me in this
year for my revenue, so it did take a toll in my October to December
quarter, and I see that happening till March because we're already in
Feb and these activities are not picking up in this year.
Vishal Periwal:
But if I look at your quarter 3 numbers I think double-digit growth that
we have shown. So, maybe there are certain projects which are
compensating for that. So, can we expect the same continuing in
quarter 4 also?
Ragini Advani:
Yeah that is the reason I'm saying the overall number would be in the
range of about 11,500 plus, but yeah that is how it’s being doing and
hopefully it will continue, but we should be there.
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Moderator:
Thank you. The next question is from the line of Ayush Agarwal an
Individual Investor. Please go ahead.
Ayush Agarwal:
So, I was looking at the numbers reported this year this quarter and
when we look at the consolidated versus standalone for December
2023, I noticed that the standalone number for December 2023 has
dropped compared to December 2022, while the consolidated number
has increased. Can you share some more information on how that
changed?
Ragini Advani:
I just mentioned that on a standalone basis some of my projects were
had a drop like I just give an example of Sivok and Myanmar more
domestic as well as international. So, on standalone all those have
taken a toll on my results. If you were to see it vis-a-vis the previous
quarter, but on a consolidated basis I have two of my HAM projects
which are fully operational, and I've started getting annuity incomes
from them.
Also, there have been some dividend inflows because of my joint
ventures and subsidiaries. So, given all this consolidated I'm making it
up but on a standalone I've taken that it.
Ayush Agarwal:
And when we talk about these auctions that you are being outfit by other
players and you've mentioned a couple of times that these other players
are getting ridiculous numbers which don't even cover the cost of the
bid like project then can you give us some more information on why it
couldn't be a case of less operational efficiency on your part?
Ragini Advani:
Sorry.
Ayush Agarwal:
I'm saying that if other companies are outbidding you in an auction and
you're saying that the offers that we are making the numbers are very
bad like it's not possible to even cover the cost of the project then could
you give us a reason why or rather like some information on why this
could be down to a more efficient operations from your compensation?
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Ragini Advani:
No, all the serious players are the ones who have been in the industry
and who are of our kind of size and credibility they are also not getting
those jobs. I also mentioned that these are players who you would not
have heard of and are taking the bids.
Ayush Agarwal:
So, please correct me if I'm wrong on this, but I have read that many
times the government puts certain criteria on who can be qualified
bidders for these projects. So, on that basis I would assume that these
players whom no one has even heard of, wouldn't actually qualify for
the bid?
Ragini Advani:
Again, as I mentioned there are couple of reasons. So, in certain
projects where the project size is low or the EQC criteria such that some
of these are very relaxed criteria where you have such kind of players
who are coming and quoting ridiculously low and probably they would
not be the players you would have heard of earlier as your serious long-
time competitors.
So, that is one part which I mentioned, and I said that is where if there
are 15, 16 players we would not even be L1, L2, L3. So, there is that
class of orders which are happening right now in which we don't see
ourselves standing a chance because of the kind of players who are
coming, probably either they don't understand the business or they are
trying to enter into the market by quoting low so that's something which
I will not be able to comment upon, but long term serious players are
not the ones who are winning this bids.
But on the other hand there is a category of projects where the
competition is good. The EQC is well laid out where we may not have
won the jobs, but we may have been an L2 or L3. So, that’s another
class of history that we've had recently.
And third are certain projects where the tenders were expected to come
out those are fairly complex or large size projects, but either they have
not come out or if they came out then they have been rescheduled or
retendered and that is where we see ourselves picking up a recent good
file.
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So, it's all the three categories, but the category that you've been asking
the question on the fact is that yes see there are many players
especially local players and if the local zonal railways is taking it out you
will have some many many players in that city or in that zone to do civil
work.
And you may see them doing the civil construction work and similar
activities for railways as well when such tenders come out so they bid.
The idea is to see if they'll be able to perform at that price.
Ayush Agarwal:
So, when you when you say that because of these projects getting
delayed because of elections and environmental reasons and stuff, so
does that mean there will be a spurt in a particular year or does that
mean it will be a long-term increase year over year for these new
projects which were delayed?
Ragini Advani:
So, what I'm trying to say is that as of now going forward for the next
few months we expect there to be a lull and whatever projects we're
already looking at we should be looking them coming after few months
and then from there on onwards it should become a regular feature. So,
this should be a short to midterm issue right now.
Ayush Agarwal:
My last question is regarding your EPC and modernization projects like
the Japanese rail project that you're working on. I wanted to know as a
business how much R&D is a part of your business strategy or do you
generally rely on other parties to create technology and then you
implement it in your project?
Ragini Advani:
So, the high speed project has been taken by Government of India
based on JICA loan on Japanese technology only. So, there is no R&D
or technology improvement that India is doing from their side. It's a well-
established technology in Japan and which is being imported into India
and that is how the high speed is being set up. So, we are doing it on a
project, technology as well as guidance from Japanese company and
whosoever are associated in Japan for this project.
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Ayush Agarwal:
What I actually meant was how does this affect your technologies that
you can offer in your bids for other project even in the conventional?
Ragini Advani:
Technology in our kind of jobs it is owner driven. What we do is an EPC,
EPC may R&D and technology is not so significant part wherever it is
done it is taken with the help of this thing, but per se it is not a critical
factor for our kind of business.
Moderator:
Thank you. The next question is from the line of CA Akash Dhanuka an
Individual Investor. Please go ahead.
Akash Dhanuka: With respect to the PAT again ma'am we were. 8.12 in this current
quarter and 8 in the previous quarter. So, are we a little conservative on
guiding on 7.5?
Ragini Advani:
No, we are not. It really depends on the kind of where we are in the
project cycle because when I'm talking of a PAT number we have a 7.61
for the 9 months and we have 7.49 for the previous year 9 months and
we had for FY23, 7.12. So, I am talking the same range. I don't know
where you're putting 8.16. So, that’s on a quarter-to-quarter so quarter-
to-quarter really kind of project that we have, it could really vary.
Akash Dhanuka:
So, just correct me if I'm wrong on the conclusion part that we'll touch
11,500 crores on the operational revenue, 500 crores on the other
income part which brings us to 12,000 crores and on that we'll be
earning 7.5% which amounts to a PAT of 900 crores?
Ragini Advani:
7 to 7.5 and it could be the overall revenue could be in the range of
11,000 to 11,900.
Akash Dhanuka:
So, I mean as of now we have achieved a PAT of 682 crores. So, can
we assume another let's say about 275 crores?
Ragini Advani:
Mathematics I'm sure you can do please. I'm confirming again and
again the same.
Moderator:
Thank you. The next question is from the line of Niket Jadhav from
Purnartha Investment Advisors. Please go ahead.
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Niket Jadhav:
So, if I'm not wrong out of the 8 road projects that we have 2 are
completed. So, could you provide us the breakdown of how much
income goes from the HAM model to operating and how much goes to
other income?
Ragini Advani:
So, out of the 4 projects that are operational right now there are 2 are
HAM projects. So, out of the 2 HAM projects that I have my interest
income that I earned from them is roughly 130 odd crores, 140 crores.
Moderator:
Thank you. The next question is from the line of Rupali, an Individual
Investor. Please go ahead.
Rupali:
Can you please give us a flavor of contribution of roads, highways and
railway projects in your total order book for FY25?
Ragini Advani:
I think roads and highways are about 15% to 20% so about 6,000 crore
is highways out of 30,000 crores and about 2000 crores is others and
balance about 21,000 is rail.
Rupali:
One more thing does this order book includes the overseas project as
well?
Ragini Advani:
Yeah domestic as well as international.
Rupali:
International means which countries you are…
Ragini Advani:
So, we have Myanmar project. We are doing some works in Sri Lanka
and Nepal, Bangladesh though some of them are under I mean they're
at the fag-end of almost getting close and in Algeria.
Moderator:
Thank you. The next question is from the line of Shreyans Mehta from
Equirus. Please go ahead.
Shreyans Mehta: Ma'am my question pertains to our standalone core EBITDA margins
excluding other income. So, it seems to have being settling at say closer
to 6.5 odd percent since the last 3, 4 quarters. So, assuming you know
that we are expecting a 15% growth year over year, so can we expect
that margins have stabilized here and once we heal up then economies
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of scale can play out and this margins can actually go upwards of say
7.5?
Ragini Advani:
No, it's not about the economies of scale it is about the competition and
the fact that the jobs are going at very, very thin and competitive
margins. So, the very fact that we'll be able to protect them by itself and
also continue to get good size of order book is the balancing that we'll
be doing and we hope to continue doing that from a small-to-mid term
perspective. It is not expected to go up the margins it would be a few
percentage decline.
Shreyans Mehta:
So, at least, as a stabilized year I would say 6.5 the core EBITDA
margins or there is a scope of further going down?
Ragini Advani:
So, given our order book that we have right now and the margins therein
we hope to be there, but having said that now we have to start securing
more orders and the market is getting intense day-by-day. So, from a
next 1 to 2-year perspective it should be there, but going forward I mean
I'll only be able to tell as and when we pick up those orders.
Moderator:
Thank you. The next question is from the line of Niket Jadhav from
Purnartha Investment Advisors. Please go ahead.
Niket Jadhav:
So, I had a question about our profit from associates and joint ventures.
So, if we compare the 9 months of FY23 to the current 9 months of
FY24. There's a jump from 18 crores to about 60 crores. So, could you
tell me what is driving this increase in profit?
Ragini Advani:
So, there are two things. One as I told you that my two HAM projects
are now fully operational and therefore, they are giving me a significant
contribution to my PBT. Second in one of my coal projects CERL phase
1, I had losses till about last quarter and the losses were significant
while this quarter it has given me a profit. So, these are the two main
reasons for this increase.
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Moderator:
Thank you. Ladies and gentlemen, we have no further questions. I
would now like to hand the conference over to the management for their
closing comments. Over to you ma'am.
Ragini Advani:
Thank you so much for moderating the call, Mr. Dorwin. I would also
like to thank all our shareholders, business partners, analyst, investor
friends and the overall stakeholder community who have shown
continuous faith on us and supported us throughout the journey.
We assure you that we will continue to strive towards greater height and
are doing all our efforts as management to carry on with this growth
journey of ours. We would be happy to connect with you on one-to-one
basis for any other further queries that you would have and take it
forward. I conclude today's concall and thank you once again for your
participation. Thank you, everyone and good evening.
Moderator:
Thank you all for being a part of the conference call. If you need any
further
information
or
clarification,
please
at
sachin.garg@ircon.org. Thank you everyone for joining this call. You
may now disconnect your lines.
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