Ashoka Buildcon Limited (ASHOKA) Earnings Call Transcript

Good day, ladies and gentlemen, and a very warm welcome to the Ashoka Buildcon discussion on Q1 FY '22 results and future outlook call, hosted by Centrum Broking Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ashish Shah from Centrum Broking. Thank you, and over to you, Ashish.

Yes. Thank you, Ali. A very good afternoon to everyone. On behalf of Centrum Broking, I welcome you all to the Ashoka Buildcon's Q1 FY '22 Results and Earnings Call. We have from the management, Mr. Satish Parakh, Managing Director; we have Mr. Paresh Mehta, the Chief Financial Officer of the company; and we also have representatives from the Stellar Investor Relations. Over to you, sir, for your opening remarks.

Thank you, Ashish. Good afternoon, everyone. We would like to extend a warm welcome to everyone on our earnings call for the quarter ended June 30, 2021. I hope you all and your dear ones are safe and healthy. Along with me, I have Mr. Paresh Mehta, our Chief Financial Officer, on the call. Before I take you through the operational performance highlights, I would like to brief you on the key industry updates. Last fiscal year, the road infrastructure industry defied COVID-19 by delivering a stellar performance on the back of robust project awarding and record construction with a relaxation in lockdown in the second half. The second wave of COVID-19 was marginally slowed the growth momentum during the quarter. Awarding activity remained muted in Q1 FY '22, particularly from April to May, primarily due to the increase of COVID-19 cases. However, with NHAI's robust order pipeline and a steady stream of funds from budgetary outlays, borrowings and TOT route, the ordering activity to remain buoyant for FY '22. In terms of construction, the pace of highway construction has slowed amid rising COVID-19 cases. In April to June, highway construction totaled 2,824 kilometers, up 25% from corresponding last year. Despite the constraint posed by COVID-19, the pace of construction in the quarter was faster than Q1 FY '20. During April, June '21, '22, the highway construction rate was 25.37 kilometers per day compared to 23.29 kilometers per day in April June '19, '20. A number of industry-friendly measures, including better cash flow to the contractors gave the execution momentum going during the quarter. We believe with an improved COVID-19 situation, an accelerated vaccination drive, enhanced ordering activity FY '22 execution target of 40 kilometers per day set by the government can be achieved. On the toll collection front, toll collection began to improve in second half of FY '21 as economic activity began to recover. The second wave of COVID-19-led restrictions affected the toll collection in month of April and May. As the number of COVID instances decreases and lockdown is relaxed, we are seeing a modest improvement in the toll collection from the second week of June. The traffic is expected to improve further going forward due to declining COVID-19 instances, optimistic GDP growth, record high FDI and positive growth in core sector indicators. In 2022, we anticipate modest double-digit growth in toll collection related to the lower base of FY '21. Now coming to the company's performance. The second wave of COVID-19 had a less severe impact on business operations than the first wave. April and May saw a modest slowdown in execution momentum. But as the overall general situation improved, the execution began to pick up. At present, we are operating at 100% efficiency level. The execution of all 8 HAM projects is processing well. In terms of equity investment, the total equity requirement of all 10 HAM projects, including PIM, is INR 1,317 crores, of which we have already invested INR 814 crores as of June 2021. Our incremental equity requirements of FY '22 and FY '23 are INR 184 crores and INR 141 crores, respectively. Now coming to the order book. In the month of July, we won projects worth INR 1,031 crores, which includes an order of IRCON International Limited of INR 431 crores for supply, erection, testing and commissioning of electromechanical system. And also an order worth INR 600 crores from Zodaic Helotronics Private Limited for construction of 600-bed super speciality hospital, medical college and residential quarters. With this, the total inflow of fiscal 2022 stands at INR 2,980 crores. The company's total order book as on June 30, 2021 stands at INR 9,472 crores. The order book excludes Zodaic Helotronics and IRCON International worth INR 1,031 crores. Including this order book stands at INR 10,503 crores. The breakup of this order book is as of June 30, 2021. Road projects comprise around INR 6,133 crores, which is 65% of our total order book. Among the road projects, HAM projects are about INR 3,135 crores, and EPC are INR 2,998 crores. Power T&D and others comprise of INR 1,317 crores, which is 14% of total order book. EPC building segment comprises of INR 1,235 crores, which is 13% of total order book. And railway stands at INR 722 crores, which is 8% of order book. And EPC work from CGD business comprises of INR 65 crores. With this, I hand over the call to Paresh Mehta for financial results, Q4 FY '21.

Thank you, sir. Good afternoon, everyone. The results presentation and the press release for the quarter have been uploaded on the stock exchanges and on the company's website. I believe you all may have gone through the same. Now I would disclose the financial results for the quarter ended June 30, 2021, starting with the consolidated results. The total income for Q1 FY '22 grew by 65% year-on-year to INR 1,310 crores as compared to INR 792 crores in the Q1 FY '21. EBITDA stood at INR 424 crores in Q1 FY '22 with a margin of 32.3%. PAT is at INR 80 crores in Q1 FY '22, PAT margin is 6.1%. Coming to the standalone numbers. The total number of Q1 -- total income for Q1 FY '22 stands at INR 1,059 crores as compared to INR 621 crores in corresponding quarter last fiscal, registering a growth of 71%. EBITDA for the quarter was at INR 167 crores with an EBITDA margin of 15.8%. The company reported profit after tax of INR 101 crores in Q1 FY '22 with a margin of 9.6%. During Q1 FY '22, BOT division recorded a toll collection of INR 208 crores as against INR 133 crores in FY 1 -- Q1 FY '21 and INR 262 crores in Q4 FY '21. Total consolidated debt as on June 30, 2021 stood at INR 6,241 crores, of which project debt is INR 5,715 crores. The standalone debt is at INR 526 crores, which comprises of INR 138 crores of equipment loans and INR 388 crores of working capital loans. During quarter, we have made the payment towards redemption of INR 150 crores of NCD with interest payment of INR 18.2 crores. Further to this, we still have issued new NCDs amounting to INR 250 crores post June 30, 2021. With this, we now open the floor for question and answers.

[Operator Instructions] The first question is from the line of Vibhor Singhal from PhillipCapital.

Yes. Congrats on a great performance yet again. Sir, given that we have clocked a very strong performance in this quarter, would you like to give some guidance for this year as to what is the kind of top line that we are looking in this year and with what margin?

We expect to close the year by at least 25% above last year's turnover with a general EBITDA margins to tune of 12.5% to 13% without other income and to the tune of approximately 15%, 15.5%, with including other incomes. So that's the target, which we keep ourselves for.

Okay. So sir, 25% kind of growth, so we are looking to cross, let's say, INR 4,700 crores of top line for the year?

Exactly.

Sure, sir. Sir, my second question is on the debt front. So the stand-alone debt has risen in this quarter. If I understand it correctly, is it because we have borrowed to repay the NCD in this quarter and which -- that would probably be replenished in Q2, as you said, that we have replaced with another NCD?

That's the reasonable question, because on the year-end, we have used our cash credit to pay off the NCD and immediately after the first week of July, the NCD, which ACL raise of INR 250 crores was returned back to Ashoka Buildcon. So your assumption is right that NCD -- the stand-alone debt as on year-end -- as on quarter end is optically higher only for that bit.

Okay. So at the end of Q2, we can expect it to again fall by say around INR 150 crores to INR 200 crores?

It should fall back and [Technical Difficulty] of course, to the execution level also is there. If the execution is better, or if -- it will accordingly change marginally.

Sure, sir, definitely. And sir, how is the payment cycle looking at in terms of payment from various government bodies, NHAI or the other state government projects, specifically our power distribution projects that we have in the state of Jharkhand and basically Gujarat of course also? So what is the payment status from these projects? Are they delayed, on time? If you could give some color.

As far as power projects are concerned, we have definitely improved our collections during this quarter. And -- but Bihar, we have received our certain old dues, which are there on SD account. We see future in Jharkhand for the payments. We expect that they should be coming in by this quarter end, by September end, substantial payment should come on that account also. There is some allocation of funds for these states to be happening. Jharkhand is definitely running through a tight phase but I think so within a quarter time, they should also be able to pay us.

Okay. And sir, the other payments cycle from NHAI and other state governments...

That is quite smooth. NHAI is really prompt and active payment. They have began [Technical Difficulty].

Sorry, sir, your voice is...

Yes. Can you hear me now?

Yes, sir. Actually your voice was breaking. I'm sorry to say that.

Okay. Okay. Okay. Yes. So with the extension of the [ multi-payable ] scheme by NHAI, definitely, NHAI is keeping the pace of execution with their payment schedule in time. So there is no worries on NHAI account.

Sure, sir. Sir, lastly, if you could just quantify what is the receivable from Bihar and Jharkhand state governments for the par credits as of now?

See, approximately, Bihar would be to the tune of around INR 98 crores and Uttar Pradesh would be around INR 93 crores and Jharkhand around INR 36 crores.

So Jharkhand is running how much?

INR 36 crores.

INR 36 crores, sorry.

Sorry, sorry, sorry INR 136 crores. All put together [indiscernible] is INR 30 crores. That's what I was trying to say. Again, in prospective from Bihar around INR 198 crores; from Jharkhand, INR 136 crores; and from Uttar Pradesh, INR 250 crores. The first number, which I said were noncurrent, that is more than 6 months old, which other payments of -- in routine are coming in time. Current liabilities, our debtors are intact, not a problem.

[Operator Instructions] The next question is from the line of Seetharaman from Spark Capital.

Sir, can you give us an idea about the order inflow for the rest of the year that you foresee, for the overall FY '22 and FY '23, you foresee across the sectors?

See, as of now, we have bagged around INR 3,000 crores and another INR 4,000 crores is our target for this year, which includes highways and railways and building vertical, which we have now started.

Okay. So INR 4,000 crores for the rest of the year?

Yes.

Okay. And on the margin side, do you expect the margin to dip considering that the -- since you're going to take the building contracts, generally, the EBITDA margin in those contracts lower compared to the road contract? So overall, do you expect the margins to dip?

Overall margins will remain same, whether it is building, roads, railways or -- margins almost will remain same. EBITDA may change, but net margins are going to be same because there's no CapEx or any less CapEx for new buildings.

Okay. And what is the CapEx that you expect for FY '22 and '23?

For CapEx -- yes, you can speak.

Yes. So actually, this year, we are not expecting a CapEx of more than INR 25 crores, INR 30-odd crores which is planned. So based on new projects, which will be coming in, we may decide to do CapEx, but then that will overflow into the '23 -- '22, '23 year requirement.

Okay. Okay. And what did you mention the FY '22 and '23 equity, please, the equity investment? I just missed that.

That was INR 184 crores for '22.

It's not clear, actually. It just got cut.

INR 184 crores. 1-8-4.

INR 184 crores, okay, for FY '22? Okay.

And '22, '23, INR 141 crores.

Again it's INR 184 crores and?

INR 141 crores.

INR 184 crores and INR 141 crores.

This is the total requirement for the current project set of projects.

Okay.

Yes.

[Operator Instructions] The next question is from the line of Ankita Shah from Elara Capital.

Sir, I wanted to understand your strategy on diversification. What is the ideal mix of business segments that you are looking at? And what would be the key focus area going forward?

Yes. The key focus will always remain highways and railways. So 70% of our order book, 70%, 75% will be highways and railways. And we are becoming a full range EPC player in buildings, power and other segments. So that would comprise around 30%.

Okay. And within buildings, what kind of building projects are...

These are basically EPC contracts. So it could be residential, it could be warehousing, it could be hospitals. So this all basically we had been doing 2 decades back, which we have restarted now. So there is a huge opportunity in this segment also.

Okay. So in the balance, INR 4,000 crores of inflow target that you're looking at, you're expecting -- what is the kind of pipeline do you expect?

Around INR 3,000 crores, we expect from railways and highways, and around INR 1,000 crores to INR 1,500 crores in the building books.

Okay. Got it. And sir, on margins for the quarter, I mean would you like to highlight on what were the key issues that led to a drop in margins in this quarter? Was it because of the increase in raw material prices? Or is there something else also that has impacted?

No. If you see the past few quarters where the margins have looked robust, these were mainly on account of projects coming to an end and certain contingencies getting released from the budget and contributing to the higher margins. The margins today, which we have and which we expect for the coming quarters, would be in the range of 12%, 12.5%, which we believe is the standard margin guidance, which we have been always giving. Unless there is an event like a project closure and contingencies or a bonus being accounted for, at least the margin continue to remain at 12%, 12.5%.

The next question is from the line of Jiten Rushi from Axis Capital.

Congratulations on good set of numbers. Sir, my question is on revenue breakup. Can you give us a revenue room between floors, HAM EPC, railways, power CGD for the quarter and comparable Y-o-Y?

So the road execution was INR 816 crores against INR 475 crores last year. The power [ condition ] was INR 38 crores against INR 34 crores last year. The railway was INR 98 crores against INR 36 crores last year. And then [ miscellaneous ] works are there approximately of INR 20 crores. These are the major breakup of...

So CGD is included in this INR 20 crores basically?

Yes. CGD is a small number, approximately INR 6 crores in this quarter compared to INR 2 crores in last year.

Okay. And sir, on the balance sheet numbers, if you can help me with debtors, creditors, retention, unbilled and mobilizing advances?

So as I said, total debtors for certain states, which we had explained. But coming to the total debtor position, would be at INR 1,312 crores, against which there is an advance of INR 381 crores. And accordingly, the total payment position of debtors, INR 1,312 crores and INR 381 crores.

INR 381 crores is what? Mobilization...

Advances.

Okay. And sir, what would be the creditors unbilled revenue retention and mob advances?

Unbilled would be around to INR 650 crores. And retention, which is part of the total debtors, is around INR 307 crores.

Okay. So in INR 1,312 crores, INR 307 crores is included, right, sir?

Right, right. Creditors can help you later on.

And mobilization advances outstanding?

As I said, that is approximately INR 381 crores, total advance is including all.

INR 381 crores. Okay, got it, sorry. Got it. My bad. Sorry. Okay. And sir, on the project front. So what about the land status at the Tumkur project III and IV? And as last time, we were seeing that there were some advanced stages of land acquisition. So what is the status now? And when can we expect the appointed date for these projects?

Yes. So Tumkur III is around 94% available. We have also done financial closure for Tumkur III. So these works have already started. [indiscernible] around 65%, and we expect another 2 months, it should cross 80%.

So basically, sir, what was the rate of interest for financial closure in III? And which bank and when do we expect the appointed date, sir?

So Punjab National Bank is the financier for both these projects. I mean, in the sense, the [ SC ] for PS3 [indiscernible] PS4 is in process, unless land is available, bankers will not issue this that it is done until it will be done. And secondly, approximately in the range of 9% is the rate of interest at which we have closed the -- yes, we are closing the...

Okay. And sir, so basically, appointed, we'll receive this week only this for the Tumkur-Shivamogga Package III. And sir, on the other projects like NTPC, solar project. So what is the status, whether the work has started and the recently, 1 project in Maldives, when do we expect the work to start? And so like obviously, the quarter has been good in terms of awarding activity inflows. So when can we expect these projects to contribute to the revenue and the NTPC solar projects?

Yes. So NTPC solar project has started now. Land has been acquired and part of it has been handed over. Balance part would be handed over and then the project will begin. So this actually include purchasing land and handing over to NTPC. So that part is getting done, and it will get started in end of Q2 or start of Q3. Actual physical activities will start on the ground. As far as Maldives is concerned, Q3 is what we expect to start because it has to be -- the process has to be cleared by Exim Bank. And then once that is done, then the project starts.

Okay. So sir, in Maldives, we'll get any mobilization advance also?

Yes, we have mobilization advances clauses in Maldives project. We have 20% advances.

Yes. Okay. 20%. But these are interest-bearing, sir?

These are not interest bearing.

[Operator Instructions] The next question is from the line of Parikshit Kandpal from HDFC Securities.

I joined the call a little late. I just wanted to know about monetization update for the portfolio [indiscernible]?

So just to give a clarification. I mean as far as the monetization process is concerned, it is quite seriously be pursued. On all the assets under the ACL portfolio, that is the 10 HAM assets, 5 BOT assets and 1 annuity asset, investors are doing the diligence and they are almost on the verge of completing the diligence process. And we are -- we would immediately go into the share purchase agreement process. So this all process is going on with an intention to give exit to SBI Macquarie it will be in this financial year.

You're looking much more like one-off because of COVID it hasn't got delayed like towards the end of the financial year?

So definitely, there is impact of COVID because sharing of information and data collection become slightly difficult when the second wave also came in this April, May. But both the investor and investee both are seriously working on getting the process over.

And just on the GST part on the HAM side, so now that is again about contention [indiscernible] so how are you still assuming that when they're evaluating the valuation of the HAM projects?

You're very right. And these are some of the reasons which kind of delay the process of evaluation and SPA drafting. We are trying to sort that out in such a way that the investor is -- because he's giving a value today. So he's made a little on that account. So -- and we're also pursuing this with NHAI on how they're going to actually take steps to ensure that the GST collection is fair for all the projects which have been bid in the past.

So when is the notification expected sir from NHAI on [indiscernible] notification?

It's soon enough because they had promised a couple of weeks back that they should be coming out soon enough. So I think so within a week's time or 10 days' time, I think they should come out with the clarity how they are going to treat -- the treatment application of GST on HAM or either annuity projects.

Just on -- so just to refresh memory from last time, I mean we have been in -- we will also be looking at exiting the -- whenever this monetization happens, we will also monetize in our state. That process is continuing, right?

Yes. So it will definitely depend on how the investor is looking at. As we had already communicated in the past, investors are typically looking out for 100% acquisition of SPVs. So end of the day, probably we will also get into the same process of monetizing.

Including BOT and HAM both?

Yes, the whole portfolio. As I said, I mean the investors are looking at the whole portfolio, BOT and HAM and annuity.

So this could be with multiple platforms or multiple investors like some people may pick and choose.

It could be. Yes. Yes. Yes, it could be.

Just on the guidance part, sir, how much of the EPC revenue you're looking to book in FY '22 now?

I could not follow you the question, sir.

For FY '20, what kind of growth we are looking on the EPC [indiscernible]?

On the EPC business, we are targeting a growth of at least 25% this year because you see that pandemic typically has a lesser impact this -- the second wave was not so much of an impact. I believe -- and we believe that the third wave also will not be having so much impact. So I think we'll achieve this kind of a target based on the order book also available with us now.

Just last thing, sir, what is the acceptances sitting on the book now?

Sorry?

So I was just wanting to know how much the total interest bearing debt? So the debt somewhere you have given in the presentation, so you spoke about the mobilization advance I'm saying that how much is the expenses which are sitting on our book?

You want to rate? Because interest debited in the -- for the stand-alone debt is around INR 16-odd crores. So you're looking at...

I want the total interest-bearing liabilities on the books. So including mobilization advance and debt and acceptances.

Approximately INR 6,500 crores. So this is INR 6,240 crores, which is the debt on the books and mobilization advance of approximately INR 200-odd crores on projects like Bundelkhand and NTPC.

Creditor support and also that including that, I was asking more on the stand-alone side. So how much is acceptances mobilization advance and the working capital?

So exactly. It's around INR 225 crores on mobilization advance and stand-alone debt of around INR 500 crores.

Okay. No acceptances are there on the books?

No other debt. So another debt, which at ACL, which we have recently taken after 1st July is INR 250 crores of NCD, which will also carry fast.

[Operator Instructions] The next question is from the line of Seetharaman from Spark Capital.

Sir, can you give us the O&M expenses for the HAM projects on a yearly basis?

Probably, you can take a separate because each project will have a different kind of a structure because some are [indiscernible] payments, some are asphalt payment. So probably you can take it off-line. We can give a data of on each project, what is the whole expense.

Okay. Okay. And what is the reason for refocusing on building contracts?

Hello? Yes, there's a huge opportunity in this segment, and we understand EPC. We basically are EPC player. So wherever EPC opportunity is there, definitely we're going to buy.

The next question is from the line of Parvez Qazi from Edelweiss Securities.

Congratulations on a great set of numbers. Sir 2 questions from my side. One, what would the stand-alone level cash? And what was the equity that we infused in this quarter? And second, what is the kind of competitive intensity that we are seeing across segments like roads, [ park ], building, railways, et cetera?

So the stand-alone cash is approximately is small about INR 8 crores only. This is one. Second question, could you repeat?