Ahluwalia Contracts (India) Limited (532811) Earnings Call Transcript
August 12, 2021
Earnings Call Speaker Segments
Ladies and gentlemen, good day, and welcome to the Ahluwalia Contracts Q1 FY '22 Results Conference Call hosted by Ambit Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Varun Ginodia from Ambit Capital. Thank you, and over to you, sir.
Thank you. Thank you so much, Melissa, and good afternoon, everyone. And Ambit Capital welcome you all to Ahluwalia Contracts 1Q FY '22 Earnings Call. We are pleased to have from the management, Mr. Shobhit Uppal, Deputy Managing Director; Mr. Vikas Ahluwalia, Director; and Mr. Satbeer Singh, Chief Financial Officer. In terms of the format, Mr. Uppal will give brief remarks on 1Q results. And then we will open the floor to Q&A. Sir, over to you.
Thank you, Varun. Good afternoon, everybody. Ahluwalia Contracts India Limited announced the financial results of Q1 FY '22 on 10th of August. During Q1 FY '22, the company has received a turnover of INR 580.10 crores and a PAT of INR 34.79 crores in comparable to a turnover of INR 249.85 crores and a PAT of INR 7.48 crores in Q1 of FY '21. The company has registered a year-on-year growth of 132% in revenue and 365% in PAT. EPS of the company for Q1 FY '22 is INR 5.19 as compared to INR 1.12 in Q1 of FY '21. During Q1 FY '22, the company's EBITDA margin is 10.84% as compared to 7.42% and a PAT margin of 6% as compared to 2.99% in the corresponding period of the last financial year. Net order book of the company as on 30th June 2021, stood at INR 7,115.33 crores to be executed in the next 2 to 2.5 years. The company is L1 into tenders, having an aggregated value of INR 1,160 crores. Thank you. We are open for questions.
[Operator Instructions] We have the first question from the line of Seetharaman from Spark Capital.
Sir, my first question is, what is the bid pipeline that you see across for the rest of the year?
Mr. Seetharaman, I can barely hear you. I heard this question, but [Foreign Language] sound clarity [Foreign Language] our tenders that we have submitted are about INR 6,500 crores under commission.
Okay. Okay. And now you're able to hear me sir??
Yes, I can. I can. Your voice is a little muffled.
Okay. I'm talking on the speaker. I'm also off the speaker.
Okay. Go ahead.
No, no. I'm also off the speaker. So what is the guidance that you -- for FY '22 for the year -- for FY '22 that you see? And what is the CapEx that you are expecting to invest?
I think last time around, I've given a guidance of about INR 2,500 crores fresh orders in this financial year. You're talking about order inflow, right? Guidance for that.
Yes, the revenue guidance also.
I said about 15% to 20% growth.
Okay. Okay. Fine. Because right now, the COVID situation has also improved. So I was just asking from that front. And the EBITDA margin will be around 11% to 12%?
Yes.
Okay. Again what are the segments that you see like to the private sector and also how -- what is the confidence level in the market and can you give some idea on that?
Look, there seems to be -- in the private sector, there seems to be, in some geographies, there seems to be an uptick in the residential side of private sector works. But having said that, we continue to kind of derisk our work as far as private sector development is concerned, especially residential. It's not a focus area for us. On the public sector side, hospitals continue to be an area where the various governments are investing. Just yesterday, we submitted to the Delhi government, there were 3 large tenders, which we submitted, the aggregate value was close to about INR 2,000 crores approximately for these jobs.
Okay. Okay. And what -- can you give an idea about various -- the unbilled revenue, the receivables and all those things, can you give an idea of that, how it stands at the end of 1 -- June 21?
Satbeer will answer this question. Please go ahead.
This is unbilled revenue, is INR 359.40 crore.
Sir, 3?
INR 359 crores.
INR 359 crores, okay. And the receivables and the...
The receivables that is around INR 619 crores, including retention money of INR 198 crores. And mobilizations are INR 327 crores. PAT it was INR 588 crore.
Payables is INR 588 crores, okay. Okay. And is there any signs of weakness that you see in the -- with respect to the state government, with respect to handling having our products, is it coming up with new projects because they are...
Repeat the question please, not very clear.
No. Basically, among the state government, do you find any of the government stress because of the COVID impact they could have [indiscernible].
Bengal state.
Hello?
West Bengal.
Oh, West Bengal is the one which is stressed with respect. Okay. And with respect to other governments?
Look, the other states are also stressed, but relative, what I said is Bengal seems to be slightly lots of security since COVID.
[Operator Instructions] We have the next question from the line of [ Richard Kanwal ] from Axis Security. Sir, Mr. Kanwal, please use your handset. We cannot hear you clearly.
Yes. congratulations. So my first question is, was the quarter impacted in any way in terms of margins or costs related to COVID because we do see improvement in margins. So is it like an online margin now? Or there was some impact because of the COVID related costs?
It's a loaded question. But yes, there was an impact. I can't deny that. April and part of May, the second wave was there. So the impact obviously was there. But notwithstanding that, we have been able to achieve good results because on the ground, the projects didn't really stop. But yes, the impact was there.
Okay. Because the top line has also been quite good. I was expecting like -- better than expectation. So what could happen in the net in revenue because of COVID in this quarter. So ballpark, loss in the revenue you could not book because of COVID related issues.
It's very difficult to give you a figure. But I can say if COVID wouldn't have been there, we've been impacted by about 10%.
About INR 60 crores, INR 70 crores worth of revenue were impacted.
Yes. Okay.
Just on the ordering rate, Singh said, you already are in about INR 1,300 crores worth of project, 2 projects Fixed for INR 1,160 crores worth of the tender. And you are also bidding for more tenders. You are still guiding a conservative number of about INR 2,500 crores. And I assume that tender also is not figured out here. So if you take for that, so do you think that this number is quite conservative.
There's a reason for that. As the earlier question which was asked to me as to which states are impacted financially. So what we are seeing is that health care side, a lot of other projects made that impacted. The tendering is happening, but below 20%, 30%, 40% into the life cycle probably, we are seeing that they are getting -- they may have impacted because the government success. So we are very worried, right? That's why it's better to be conservative going forward.
Okay. Just lastly, all this cost overrun and escalations and issues regarding one-offs which will be coming quarter -- quarter-on-quarter. So has it -- is it all behind [indiscernible] no limit of surprises not now maybe in the next couple of quarters. Does it mean it's done and dusted, just to reiterate what you said last time on.
Yes. Yes.
We have the next question from the line of Nitin Arora from Axis Mutual Fund.
Sir, just a question on the order book. Can you throw some light specifically on orders of Jammu? Because in Q3, I think that order was closer to INR 1,250 crores. Q4, I think we didn't get the presentation, which obviously given by the company in terms of order breakup. So can you throw some light how Jammu has moved in the overall backlog? And also, if you can touch on the Bihar projects, I think that Bihar project also in Q3 was to the P&F what you have in the order book of 640. So can you touch on these 2 projects, how they are moving now of the overall backlog?
Jammu, the order value is INR 1,253 crores, the end. Obviously, last year, the calendar year last year, it was a nonstarter because of COVID. But now I did mention in my last con call, the project is now moving ahead and moving ahead fast. I think we are now logging a monthly billing there of close to INR 20 crores, which will ramp up considerably in this quarter and onwards. COVID third wave not happening. But yes, if it's fully mobilized then we will move straight ahead on Jammu. As it stands today, we have done a billing of close to about INR 150 crores there. And we hope to achieve a run rate there anywhere between INR 25 crores to INR 30 crores per month, the rest of this financial year. So that answers your query as far as Jammu is concern.
Yes, sir. And what about Bihar, sir? I think that was -- total Bihar was, I think, INR 630 crores, INR 640 crores. How that is moving?
Bihar is moving, but Bihar is not fully up to speed as yet. Reins are bounding that stake. That is impacting our project run rate, monthly run rate. And also -- Bihar also seems to be set for not as badly as Bengal, but yes, that's also stressed financially. But going forward, we foresee that the situation will improve there in the second half of this financial year.
Basically, I was asking -- wanted to know from you if these 2 bigger areas because Central Vista, you have done a lot of billing already. And if these 2 doesn't move that far. Do you see...
That is moving now. Jammu is moving, I told you.
Got it. So you don't see a risk to at least 15% growth this year in your revenue?
No.
Got it, sir. Got it.
COVID situation, if we continue to remain the way we are, the way they are, I don't see any threat.
Sir, generally, a question on the margin. I understand..
I suggest you to further take that point forward, even our projects -- hospital projects in Hamirpur and Chamba has started moving now full steam.
Okay. Great. Sir, generally, given our margins are closer to 10% plus in this quarter, given our 15% guidance, we'll be doing somewhat with similar revenues in the next 3 quarters plus and minus here and there.Margins will still guiding 11% to 11.5%, so which optically goes towards 11.5% consistent. You don't see that is a threat as well, given what you have done -- I mean, whatever the risk or the provisions you are creating in the first quarter, you don't see much of the provisions to happen.
Yes. Yes, I stand by my guidance. So what are you saying? Are you saying that my guidance is conservative? You see there is a threat to that?
No. I'm saying, sir, on a INR 580 crore top line, we are delivering 10.4%. And in our past on such top line, we have delivered more than 12%. So I would -- and I understand it is a COVID quarter, there would be some issuance and provision would be done. So I'm just trying to understand is the top line is largely remaining the same based on a 15% growth guidance. This margin ideally you think should improve towards 11% and 11.5% in the next 3 quarters. That's the way to look at it.
Yes. As I said, I'm qualifying that statement by saying -- by adding that COVID situation if it's everything keeps running the way it is right now, yes, I agree with you.
Sir, lastly, [indiscernible] on the big pipeline of INR 6,000 crore to INR 6,500 crores you have bidded. Can you throw some light, which are these segments, which are these orders, is something new also we are trying to bid that would be really helpful.
So as I said, 50% to 60% of this order pipeline is hospitals. Then some of this is about 20% is commercial and rest is institution.
[Operator Instructions] We have the next question from the line of Ashish Shah from Centrum Broking.
Sir, question is on the interest cost for the quarter. So we are seeing a quarter-on-quarter reduction in -- note of why it would have come off [indiscernible] according quarter.
As we had mentioned in our last call, the interest costs were -- so primarily there on account of mobilization advances. We have paid off a fortune. Satbeer, will give you the details.
Mobilization was INR 6.34 crores out of INR 11.4 crores. And also this is lease liability, that interparts that is accounted for 1 point [indiscernible].
His question is, is it come down? So that's come down because of recovery of the advance. We paid off. .
Okay. Because of the underwriting of the mobilization. Sure. Secondly, sir, do our numbers include any provisions for any of the past legacy issues? Or is this the normal level of expenditure.
It has normal provision has been made.
Sorry, sorry, I couldn't hear you.
That basically breakup is more than 1 year, more than 2 years, more than 3 years, according to that percentage wise provision has been made.
But there is nothing pertaining to...
There is not a strategic one.
Got it. Sir, lastly, what would be the cash balance as of June.
That's INR 219 crores.
We have the next question from the line of Vibhor Singhal from PhillipCapital.
And congrats on a very great set of numbers again.
Thank you.
So just basically, I wanted to get -- so one clarity, you mentioned that you have withhold INR 2,000 crores of projects in Delhi. These are all hospital projects, is it?
Yes, yes. So Delhi government is -- came out with 3 packages yesterday. We bid work yesterday. Interesting contract, we are -- these are spread over 7 locations. They want them to be built in an emergency for a potential third wave. So they want these hospitals to be completed in 6, 7 months.
Okay. And are these like some kind of makeshift hospital which are going to be dismantled later on? Or is it like permanent structure, which is going to stay and we can probably even convert it in [indiscernible] or something like that.
Yes. The second part of what you're saying seems to be right. There are steel structures. So they would be, I think, retained as some other -- they would be converted into something else. So let's see, it's not that there will be dismantled.
Right, right. Got it, sir. And sir, as you mentioned, I think the execution on the Jammu -- just wanted to basically get some status update on other projects like AIIMS Kalyani or Nagpur project and also the Alport Stadium and the 2 projects from Bombay.
Okay. So in Kalyani and Nagpur handing over stage, I mentioned last time that is September, October, we will be handing them over. So that's what's happening. In fact, half of the project, the academic part -- areas that we've already handed over, both locations. And the main hospital block, we will -- we've already handed over to -- for which, but complete, I think it will be completed by September end, with the jobs. As far as the auditorium is concerned, the project is moving. We are logging a billing of INR 8 crores INR 9 crore every month. But as I said, Bengal is cash trap. So -- but I think completion is around March. As far as Mumbai, Vikas do you want to take that question?
Mumbai is, they're starting off little slow. Initially because immediately, the lockdown came in and then the rains. Rains are not so kind to Maharashtra this time, especially Mumbai. But now for the last 2 months, now, they are on track. -- Sion is going to be a little slow project because it is to be done in part. We have to get first one building and then a couple of buildings are going to be demolished. Regarding the other one, which is there before, that is now on track. So we are back on whatever time we've lost, we are going to cover it up.
Great to hear that, sir. Also, sir, if I could just get -- I mean there is no debt on the balance sheet side at the end of the quarter as it was last quarter as well?
No debt. Yes, there is a small amount of debt, INR 22 crores.
INR 22 Crores. Sure, sir. Lastly, just one bookkeeping thing. If I could get the order book breakup in terms of the commercial and all those numbers deployed.
This is a, commercial 5%, hospital 53% and infrastructure 13%, institutional, 14% and residential of 15%. And also government, 81% [indiscernible] 19%.
And region wise sir, Northeastern...
Region wise east 33%, north 45%, and west is 21%.
North is 45%, right?
West 21%.
North is 45%, yes.
Yes, North is 45%.
Okay, sure. Great. Sir, just one last, if I could just squeeze in one more question, I know I have many -- just one more question if I could squeeze in. Sir, in terms of the order approval, I think for the last couple of years, we have been very, very strong. And as you have mentioned before that I think the government focus on health care is also on which over well for us within our expertise in this segment. Any plans of or are going into the affordable housing segment, which has also seen quite a big [indiscernible]? Or is that going to be a no, no for us?
No. Not in the short term.
We have the next question from the line of Charanjit Singh from DSP. Mr. Singh, I'm sorry to interrupt, please use your handset.
Okay. Hello, can you hear me, sir?
Yes, Charanjit. Yes.
So sir, congrats for a good set of numbers. First question is, you talked about there could be some stress in some of the state government finances. So in terms of the working capital front and how do you see things panning out? Could we see stress on the working of the side and how you are trying to manage that? That's my first question.
There is a bit of a stress, but we are managing it through internal accruals.
In terms of the number of days, you see how much it could in check and specifically, generally we had followed the policy that you tend to see the payments and then deliver on the work. So how does that pan out to the bigger more state government project which have the fixed time lines? And so on the overall number of working after this?
So Satbeer, do you want to answer that? Do you mind?
That's the -- that working capital has been -- they've increased to 107 days, it's being compared to the last quarter, that's 97 days. And that there is slightly improvement in better grade but definitely increase in the unbilled revenue. That's not increase because of the certification that is taking place in another 1 or 2 months. That's why there is and GST, GST unbilled revenue. Otherwise, that is as part of the revenue in earlier quarters. So that's why, but there is not a major increase in working capital days. It's still -- that gap has been filed by our -- out of our internal network and there is not any recurring increasing debt also.
So earlier also said, like Bengal, we see -- we stated. So we have 2 projects directly with the state government. We are monitoring the cash flow situation and executing work on the ground based on whatever the indication from state PWD are. But these projects, I am confident that we'll be able to finish with these projects before the end of this year, financial year, that is because these are very visible project enclosed to power executive.
Okay, sir. The other question is on the margin front. While I understand this is a COVID impacted year. We had been and doing certain provisioning in the past couple of quarters. So we have seen a peak margin of more than 13%. And if we have to just understand some of the -- maybe a 2-year trajectory perspective for Ahluwalia Contracts, how do you see this margin trending upwards or remaining at 11.5%, 12%. If you can just give some color on that based on the order backlog that you have.
Yes. I mention a time in about 2 years, 2 to 3 years' time, I expect us to be back at the [indiscernible] margins that we had received around 2010. As far as this year is concerned, I foresee headwinds continuing to be there. The impact of COVID continuing to be there and then cash flow issues. So that's why we have given a guideline of about 11% to 12% as far as the year is concern.
Okay, sir. And just a last question on my side is on the competition front. So we see a lot of road contractors talking about entering into the building space and expanding their own segment portfolio. So how do you see that in different government projects...
Yes, in the short term, again, I'm repeating myself. I said this last time around also the competitive intensity is increasing. That's why our order guideline is consummated for this year because we are -- we don't want to be too aggressive.
Okay, sir. And just on the hospital side, but still the competition tends to be lesser, is that right understanding?
No. It is increasing there also.
[Operator Instructions] We have the next question from the line of Vasudev from Edelweiss.
If you could help us with the CapEx that would get in Q1? And what is the amount that we plan to spend for the rest of the year?
Can you repeat?
Q1 CapEx.
CapEx is INR 7 crores.
INR 7 crores. And what do we plan for the remaining part of the year?
It will be more or less the same every quarter. So it will be around INR 30 crores for the financial total year.
Okay. Okay. And one last thing, if you can tell me the inventory balance that we have since 30 June?
This is INR 41 crores.
INR 41 crores. Okay. And our gross debt just to confirm is INR 22 crores, right?
Yes, yes.
[Operator Instructions] We have the next question from the line of Parth Navin Bhavsar from Dolat Capital Markets.
And congratulations for a really good set of numbers. So just wanted to know that the L1 that you said that you've been awarded L1 of around INR 1,160 crores. So if you could help me with the breakup like in terms of location and value, when do you expect to get the LOA.
One is in Kolkata, Rajarhat, this is INR 250 crores, is a government tender residential, for HIDCO that the award should be happening in the last week of this month. The other is for BCD, Bihar construction department, it's a large animal husbandry and veterinary university for INR 890 crores, that should also be awarded in this month.
[Operator Instructions] As we have no further questions, I would like to hand the floor to Mr. Varun Ginodia. Please go ahead.
Thank you. Thank you, Melissa. So thank you so much, sir, for answering all the questions patiently. And I'll hand over the call back to you for any closing comments.
Thank you, Varun. Thank you, everybody, who joined in, and we look forward to interacting with all of you again in a few months' time. Thank you so much. Bye.
Thank you, members of the management and Mr. Ginodia, ladies and gentlemen, thank you -- Ladies and gentlemen, on behalf of Ambit Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.
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