Dilip Buildcon Limited (DBL) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Dilip Buildcon Limited's Q1 FY 2027 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ashith Salian from Adfactors. Thank you, and over to you, sir.

Thank you. Good morning, everyone, and thank you for joining us today to discuss the audited financial performance for Q1 FY '27. From the management, we have Mr. Devendra Jain, MD and CEO; Mr. Rohan Suryavanshi, Head, Strategy and Planning; and Mr. Sanjay Bansal, the CFO. Before we proceed, I would like to bring to your attention that certain statements made during the discussion may constitute forward-looking statements. These statements are based on our current expectations, assumptions and beliefs regarding future developments and are inherently subject to various risks, uncertainties and factors beyond our control. Such forward-looking statements involve both known and unknown risks, and we advise you to interpret them with caution. I will now hand over the call to Mr. Rohan Suryavanshi for his opening remarks. Thank you, and over to you, sir.

Good morning, everyone. On behalf of the entire DBL family, I extend a warm welcome to all our investors and analysts to our quarter 1 FY '27 earnings conference call. The financial results and investor presentation for the quarter have already been uploaded on the stock exchanges, and I trust you've had the opportunity to go through them. Let me begin with providing the broader sector environment. The infrastructure sector continues to enjoy strong policy support with sustained government focus on roads, railways, water, transmission and renewables, all sectors in which we are currently and actively engaged in. The awarding cycle in the first quarter was on the softer side as is usually the case, and particularly in the national highways on account of the ongoing recalibration of the Bharatmala pipeline and the process-related delays. However, the medium-term signal from the government remains constructive. During the quarter, NHAI articulated its FY '27 project pipeline of 54 highways and expressway projects covering 2,442 kilometers, with a total capital cost of approximately INR 1.80 lakh crores spread across 13 states. Of these 26 projects are proposed under the EPC route, 21 under the HAM route and 7 under the BOT route. This gives the industry a clear line of sight on award activity for the balance part of the year. It's also heartening that aligned with our own strategy is the acceleration of the government's own monetization program. NHAI has finalized 17 highway stretches spanning approximately 1,693 kilometers for monetization in FY '27 through its TOT and InvIT routes and which is expected to generate proceeds in the range of INR 30,000 crores to INR 35,000 crores. This is part of the second national monetization pipeline under which the road sector alone is targeted to unlock INR 4.42 lakh crores between FY '26 and FY '30. This validates the InvIT-led capital recycling model we are building at DBL and reinforces the depth of the institutional market for the operating road assets we develop and transfer. Now global uncertainties around crude prices definitely continue to weigh on fuel, bitumen and related input costs. Working capital cycles across the industry remain elongated and administrative delays on project approvals and payments have persisted through the quarter. Now in our assessment, these are cyclical rather than structural. And the medium-term thesis for Indian infrastructure remains firmly intact. Our approach, therefore, continues to be one of selective tendering, execution discipline and preservation of balance sheet strength. Now coming to DBL's performance. Our order book stood at INR 27,691 crores as of 30th June 2026, with a well-diversified presence across 12 verticals. Key segments include mining, roads and highways, irrigation and renewable energy, which together form the core of our order book. This spread is deliberate outcome of the DBL 2.0 strategy and gives us strong revenue visibility without dependence on any single segment. Now out of this order book, in the MDO, the reported order book is about INR 5,224 crores, which represents only a 3-year rolling snapshot across the CRML, Pachwala and Putangi SPVs. Beyond this, the balance contract value of the mining sector stands at approximately INR 1.03 lakh crores at current pricing. These assets provide a substantial pool of long-term contracted revenues beyond the reported order book. In FY '27 quarter 1, order inflow stood at approximately INR 268 crores, as I mentioned, this is the first quarter and the ordering activity usually picks up at the end of the financial year, and we are very hopeful of maintaining our guidance of INR 10,000 crores, INR 12,000 crores of new orders in this financial year. Currently, our bid pipeline stands at approximately INR 1.5 lakh crores across sectors. We continue to maintain our selective bidding approach, prioritizing profitability, cash flow visibility and balanced risk reward over pure top line growth. Additionally, I'm pleased to share that DBL has been declared the L1 bidder for the construction of Sikasar to Kodar Reservoir Link Canal pipeline project in Chhattisgarh on a lump sum basis, which is valued at about INR 2,524 crores. This win further reinforces our positioning in the water and irrigation vertical, which remains a strategic focus area within our diversified order book. Now on the execution front, during the quarter, we have completed 3 HAM projects worth INR 1,700 crores, all forming part of the Bengaluru-Vijayawada Expressway in Andhra Pradesh. Each of these packages was completed ahead of the scheduled COD, consistent with our track record of nearly 90% early completion across our project portfolio. Our mining vertical, which is progressively becoming the most important driver of our long-term earnings visibility and predictable cash generation, the total coal production for quarter 1 FY '27 stood at 4.79 million tonnes. At the Pottangi Bauxite, production is yet to commence, and we will update the market as we approach the operational start-up. However, we remain firmly on course to reach our previously guided coal production of approximately 57 million tonnes by FY '29. At that scale, DBL will be one of the top 3 participants in India's energy security architecture and a significant contributor to the country's coal supply mix. On our multi-asset platform, Anantam Highways Trust continues to progress in line with the road map we had shared at the time of listing. As of 30th June 2026, DBL along with its associates and economic interest hold units of approximately INR 1,314 crores at face value in Anantam Highways Trust and approximately INR 207 crores face value of units in Shrem InvIT, taking the total value of units held by the group to approximately INR 1,521 crores. On the pipeline of asset transfers to the Anantam Highways InvIT, we remain on track to transfer the balance HAM assets in phases through March 2027. The next tranche of 11 assets that will be flipped is expected to require less than INR 81 crores of incremental equity investment while generating InvIT units valued at approximately INR 1,750-plus crores. Beyond the HAM portfolio, I'm very happy to report that our multi-asset platform is being built further through the 1,977 megawatt solar plant mandate that we have been awarded to us in FY '26 and the Mekhali Interstate Transmission project in Karnataka. As these assets are also commissioned, they will feed into the recurring distribution income over the medium term. Beyond these assets, we also have Water HAM and oil and gas portfolio, which we will also look to put into an InvIT structure so that it is held off DBL's balance sheet plus held in the most tax-efficient manner and providing long-term cash flow visibility to the group. Now coming to our debt position. Now this is a question that is usually asked, and I'll just take some time to explain where we are. On net debt on a stand-alone basis, as on 30th June 2026 stood at INR 2,106 crores compared with INR 1,880 crores as on 31st March 2026. Now this movement reflects a normal seasonal buildup in working capital that is typical in the first 2 quarters of the fiscal year and has been the same in the last few years, if you look at our past record. The normal working capital cycle has moved marginally from 131 to 133 days. However, we expect working capital to normalize in the second half of the year. The stand-alone net debt to equity stood at a comfortable 0.31x as of 30th June 2026. The consolidated net debt as on 30th June 2026 stood at INR 7,801 crores, and Mr. Bansal will provide additional color on this shortly. Now while these are the numbers, as I've said before also, our debt must be viewed in context of whatever has happened in the last couple of years and in the context of the asset base that sits on our balance sheet. Now when we first gave the vision of DBL 2.0, we expected our debt levels to reduce further -- significantly further than what we have been able to do. But part of the reason has been the last 2 years, 2.5 years has been years of low order book, which eventually led to lower revenue, which eventually led to lower profitability and lower capital generation. Because of which we were not able to do as much as we had intended. In the same time, we were also investing in our assets, where DBL in the last 2.5 years has invested INR 1,200 crores plus from its own or around so from its own books into these assets, which will convert into InvIT units going further. Now had we not made this call of holding this investment and doing this investment, we would have been able to reduce our debt significantly, but all these things led to it. Now today, we have hold InvIT units of INR 1,521 crores already on our books, and we're expecting INR 1,700 crores, INR 1,800 crores of InvIT units to come as the balance 11 assets are transferred to Shrem InvIT. Besides this, like I mentioned last time also, our gross block of about INR 3,600 crores, which roughly is about INR 800 crores of net block, which is also almost entirely debt-free is also on our books. So that's again very positive. Our goal to reach net debt positive on a stand-alone balance sheet by FY '28 remains firmly on track. Let me assure you guys. And it will be supported by the combined cash generation from the EPC, MDO and the rising InvIT distributions. I reiterate that our debt reduction guidance of INR 600 crores to INR 800 crores that we have mentioned at the start of the year is on track, and we will achieve that. At the same time, let me reiterate that our guidance on our revenue of 30%, 40% also remains on track. So none of our guidance that we had given in the last quarter has changed, and we are very positive on that. See the key thing that we need to understand that the revenue from our large projects, whether it's transmission, whether it's road project, whether it's solar, all those projects or water has not really meaningfully -- has not really started. But as this year progresses, we will see significant buildup in our revenue because of all these new projects which are there on our order book. Now, let me come to one of the most important and last agenda that I have to share with you. I'm very happy and glad to share that the Board has considered and approved a stake sale in our under construction power transmission and solar projects, which represent a combined project cost of approximately INR 8,400 crores to Alpha Alternatives. Now this deal is like the past deals that we've done with Alpha Alternatives, where the consideration under this transaction will be received in 2 parts, partly in cash and partly in units. And once the final terms are firmed up as the definitive agreements are signed, which should happen in the very near future, we will be able to disclose in detail of how that is structured. But what is most important that I can say that as part of this arrangement, Alpha will also co-invest alongside DBL throughout the construction phase to the extent of 49%, now which will meaningfully reduce our equity commitment into these projects. And this freed up equity commitment can be used for redeployment across our businesses and will also help us in reducing our debt. So more on this when we -- and we will hold a separate call once we announce this deal to explain it in detail. Like I said, as per regulation, I can only share this broad part right now that this is a transaction in line with our past transactions and which furthers both our debt reduction goals and also our second goal of building long-term cash flows for the company. So to summarize, quarter 1 FY '27 has been a quarter of steady execution against a sectoral backdrop that was on the softer side in terms of awarding activity, but constructive in terms of medium-term policy signals. Every one of our 3 engines, EPC, MDO and the multi-asset platform is progressing in line with the road map we shared with you last quarter and the strategic direction of the company remains unchanged. We are confident that the compounding effect of these 3 engines will translate into strong and sustainable value creation for all our stakeholders over the coming years. I can very confidently say that, our capital efficiency will be amongst the top guys in the sector. And the ROE and ROCE will be much better as not only our investment has reduced significantly, but also the return that we will accrue to DBL will be meaningful. Now with that, I'd like to hand over the call to our CFO, Mr. Sanjay Bansal, who will take you through the financial performance in greater detail. Thank you.

Thank you, Rohanji. Good morning to all. I will now briefly take you through the key financial highlights for the quarter ended 30th June 2026. On a stand-alone basis, the revenue from operations for quarter 1 FY '27 stood at INR 1,930 crores and EBITDA stood at INR 199 crores. The EBITDA margin was 10.32%, marginally expanded from 10.11% in quarter 1 FY '26, reflecting steady cost management even in a quarter of moderate execution. The profit before exceptional item and tax grew to INR 72 crores in quarter 1 FY '27 from INR 57 crores in quarter 1 FY '26, an increase of approximately 26% year-on-year. The profit after tax stood at INR 39 crores in quarter 1 FY '27 as against INR 123 crores in quarter 1 FY '26. The base quarter profit after tax included an exceptional gain of approximately INR 98 crores relating to divestment transaction. And once we adjust for this, the underlying profitability is a clean improvement during the last quarter. Now come to the consol performance. The consolidated revenue from operations for quarter 1 FY '27 stood at INR 2,378 crores against INR 2,620 crores against in quarter 1 FY '26. The EBITDA, excluding other income, was INR 429 crores with EBITDA margin of 18.05%. The profit before exceptional item and tax at the consol level was INR 127 crores during last quarter. The profit after tax on a consolidated basis was INR 128 crores in quarter 1 '27 against INR 271 crores in quarter 1 FY '26. With this, I would like to hand back the call to the operator for the questions-and-answer session. Thank you so much.

[Operator Instructions] First question is from the line of Shravan Shah from Dolat Capital.

A couple of questions. Rohan, sir has already mentioned in terms of the guidance, most of the parts. Just 2, 3 things on that front. On the EBITDA margin guidance for this year, 11%, 12%, that remains the same?

Yes, the guidance is as we had indicated earlier only, Shravanji, that 10% to 12% that guidance is still there.

Okay. Okay. And in terms of the execution when we are saying 30%, 40% growth, so primarily the fourth quarter, then we will be seeing a significant growth. That's the way one can look at?

Third quarter ramp up [Foreign Language] and this will continue to the first quarter till rainfalls come of next year -- next financial year.

Okay. Okay. And till now, how many value of projects that we have bidded and where bid is yet to be opened?

[Foreign Language]

Okay. Okay. And this working capital that we are seeing, obviously, in 1Q, 2Q, normal cyclical increase. So year-end, how one can look at -- will it be a kind of a 10, 15 days kind of a reduction versus the last year? How one can look at on the working capital days core?

120.

So yes, the working capital days will reduce to about 120, where we expect. And the overall debt also, like I mentioned, that will also reduce INR 600 crores to INR 800 crores that we had given the guidance for.

Yes, yes. Got it. Sir, now on the MDO part, so a couple of things I just wanted to understand. So this quarter, so first, last time we have talked about that in FY '27, '28 and '29, we were looking at INR 2,500 crores, INR 3,000 crores plus and INR 4,000 crores kind of revenue. And in terms of the coal production, you have mentioned that 57 million tonnes by FY '29. But looking at the first quarter number, it seems that to achieve FY '27, INR 2,500 crores, this quarter, we have done INR 362 crores. So we need a significant kind of 82%, 83% kind of a growth. And similarly, in terms of the coal production also, we need a decent growth. So just wanted to understand that we will be able to do that?

Shravanji, coal production [Foreign Language] in the Siarmal, we have planned around 27 million metric tonne of the coal production. First quarter [Foreign Language] in another second and third quarter equal [Foreign Language] we will close with the 27 million tonne in this year, 7 million tonne will be in Pachwala project. Hence, Pachwala project [Foreign Language]. And the same plan is there, 57 million tonne we will achieve in the FY '29 as per the contract plan. [Foreign Language]

Okay. Okay. [Foreign Language] whatever the numbers we have. [Foreign Language] I understand there is a over burden [Foreign Language] but still Q4 Fy '26 last year [Foreign Language]. Just wanted to understand, [Foreign Language]

[Foreign Language] The coal production will run without coal handling plant as per the contract. [Foreign Language] So accordingly, coal production ramp-up, this year 27 million next year 35 million [Foreign Language] coal handing plan with the 50 million. In case of the Pachwala, 7 million is the contracted capacity [Foreign Language] then our cola fee 78% will become the 100%. Then the major jump will come in the FY '29.

Okay. Okay. [Foreign Language] If I have to broadly break it [Foreign Language]?

[Foreign Language] 27 million in the Siarmal with the rate of around INR 600 per metric tonne, and 7 million in Pachwala with the rage of 1,200 metric tonne whole year.

[Foreign Language] And sir, just one thing to understand [Foreign Language]?

[Foreign Language] Once we cross the 6 months of -- after the first annuity [Foreign Language]

Okay. Okay. And sir, [Foreign Language] obviously we're doing a much better in terms of the margin at MDO level [Foreign Language] Can we divert or maybe can give a dividend to the stand-alone that will also help [Foreign Language]?

[Foreign Language] revenue participation will start from Q2 slowly and Q3, Q4 [Foreign Language] once the revenue will come [Foreign Language]. We buy the diesel in the INR 140 and bitumen prices is double, [Foreign Language] we will achieve the 30%-40% revenue guidance [Foreign Language] 100% achieve [Foreign Language] Q2, Q3 onward [Foreign Language]

[Operator Instructions] Next question is from the line of Deepak Purswani from Svan Investments.

Congratulations for the deal. Sir, just wanted to check it on this deal front. In the presentation, we have shown that the balance equity requirement for these 2 projects is going to be around INR 1,250 crores and INR 420 crores. So once this deal culminate incrementally, do we have to put the equity or this would come entirely from the Alpha, correct?

Thank you for your question. Yes, you are very right. In both of these projects put together, there is some INR 1,600-plus crores of equity needed. Now Alpha will be putting 49% during construction. So which means INR 800-odd-plus crores of equity, somewhere around in that range will come from Alpha, and only the remaining INR 800 crores will need to be put from DBL side.

Okay. Okay. And secondly, just wanted to check on some of the development which has recently happened, especially related to the Kerala project. I mean, how should we see that development from overall project execution point of view? And how much that order is there in the order book? And is there any implication for us going ahead?

[Foreign Language] They have given the report that was a natural calamity. [Foreign Language] that accident was due to purely natural calamity [Foreign Language].

Okay. Okay. And secondly, sir, I mean, 2 things. One, from the working capital point of view, [Foreign Language] overall, what is the kind of reduction [Foreign Language] especially in the case of inventory -- at this point of time relatively [Foreign Language]? And secondly, on the margin front, because of the commodity price hike, [Foreign Language] still we are facing some problem in terms of the commodity prices?

Commodity prices government ne [Foreign Language] in case of the fuel and bitumen, [Foreign Language] 60%-65% [Foreign Language] like cement, bitumen cement, steel, and everything transportation [Foreign Language]

Working capital, basically, like Rohan said, by this year-end, we may reach to 120 days. And next year, probably around 90 days of the total.

Okay. And sir, from the finance cost point of view, [Foreign Language] how should we see this finance cost?

So the finance cost for full year would be total INR 350 crores because we are basically expecting some lesser utilization of working capital during quarter 3 and quarter 4. So our targeted cost is around INR 350 crores.

[Operator Instructions] Next question is from the line of Vishal Periwal from PL Capital.

Sir, a few questions on that slide that we gave on equity investment trackers. So I think just a few clarifications. One is you mentioned like for transmission and solar, the total equity requirement is almost INR 1,600-odd crores and then half of it is coming from Alpha. But in that slide, that the sales number HNI, if you just do a clubbing of both, then the number is coming lower than INR 1600-odd crores. So how do you reconcile that thing?

So as Rohanji said, the total requirement in transmission and solar is INR 1,650 crores and around 49% will be infused by Alpha. But we have also arranged structured equity of about INR 900 crores. So if you refer the HNI line. So almost 85% equity will be sourced through investor and through structured equity.

Okay. Sir, when you say structured equity, it is not an internal accrual. It is coming from --

Yes. It is not from internal accrual. We have already raised INR 900 crores.

Okay. Okay. Okay. Got it.

And I'd like to add this very clearly, like you mentioned, in the last 2, 2.5 years also, DBL from its book has invested INR 1,200-plus crores of equity, which obviously had we not done, we could have reduced our debt by that same number. Now while our goals are twofold, we want to reduce debt on the stand-alone front, we also want to build a long-term cash flow business, which is via the InvIT units we want to hold assets. So for that -- so how do we achieve that goal is, a, we don't use a lot of capital from our own books to build these assets. What we will do is, a, partly we have -- so one part we solved by having a partner who's going to co-invest with us. The second part is structured equity where we get a structured equity play in place. Once these convert into a higher valuation at COD, we will let go of whatever was the structured equity we have raised and the interest there, we will sell that much of and use the remaining assets and keep the remaining assets on our books. So in a sense, DBL balance sheet has free cash to reduce debt. Plus, we have equity for our assets where we build those assets and we get the upside of the higher valuation once the COD happens.

Okay. So I think you're linking it with the debt also. So have we raised debt at a Holdco -- I mean, stand-alone and that the same we are putting in equity? And is that once like Alpha put in money, so we can reduce the debt? Is that what is the implication?

No, no, 2 separate parts. One is the equity that Alpha is putting in. That's not -- that they are putting as a partner into it. Besides the 50% -- 49% that Alpha is putting it, we have also made arrangement for structured equity to come in for our part of 51% for that part. Now that what we are putting in is the idea and the goal there is that we will keep -- we will use whatever we want to with the idea and goal that our stand-alone debt does not increase, and we use our stand-alone cash flows to reduce our debt. So my -- very simply, whatever cash flows I have today, whatever free cash the company generates, either it can reduce debt or it can put in equity, correct?

Yes.

So I am saving all the free cash that the company creates for reducing the debt. while -- and keeping a line open for structured equity where as soon as my project during construction, we build it and as -- and as soon as it gets -- my project gets completed and I get my units, I will flip the structured equity into those units, pay off whatever structured equity is left and keep the remaining units for DBL.

Okay. Okay. And then in the same slide, the serial number F and G. So is it fair to say the INR 20 crores and then INR 161 crores, so they will -- they will be coming in P&L as other income for us?

So this distribution from Alpha, so this INR 161 crores partly will be received at DBL level because the total INR 1,314 crores equity is held in 2 places, DBL and 1 subsidiary. So basically, this INR 161 crores will receive from the Alpha in DBL and partly in one of the subsidiaries.

Okay. Sir, the reason why I'm asking is because if you do a difference of our number, which were there in FY '26 PPT and this number, so ideally, the reduction which is happening is to the extent of like INR 60 crores, INR 65-odd crores. So just thought to check like is it everything coming in other income or probably something is some other subsidiary in a stand-alone business or some other -- the number is also going?

So the change in number is because the timing of transfer of the asset to InvIT and getting the units. So the transfer of units got delayed by 1 quarter because in June, we could not transfer. So now this transfer will happen in this quarter, and we will receive around INR 700-odd crores units against 4 asset transfer, what Rohanji said. So it is because of that. Otherwise, all this long-term amounts written from F to I will be received in cash.