Engineers India Limited (ENGINERSIN) Earnings Call Transcript
May 30, 2024
Earnings Call Speaker Segments
Ladies and gentlemen, good day, and welcome to the Engineers India Limited Q4 FY '24 Earnings Conference Call, hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Bhoomika Nair from DAM Capital Advisors Limited. Thank you, and over to you, ma'am.
Yes. Good morning, everyone, and a warm welcome to the Q4 FY '24 and FY '24 earnings call of Engineers India Limited. We have the management today being represented by Mr. Sanjay Jindal, Director Finance; Mr. Suvendu Padhi, Company Secretary and Investor Relations; Mr. R.P. Batra, Executive Director, Finance and Accounts and Investor Relations; Mr. Sunil Saxena, Executive Director, Technical, and Investor Relations; Mr. Amanpreet Singh Chopra, Senior General Manager, CMD Officer and Investor Relations; Mr. Vivek Midha, General Manager Marketing, Business Development and Investor Relations; and Ms. Neha Narula, Senior Manager, Company Secretary and IR. I'll now hand over the floor to Mr. Jindal for his initial remarks, post which we'll open up the floor for Q&A. Thank you, and over to you, sir.
Thank you, Ms. Bhoomika. Good morning, everybody, and warm welcome. We have declared our annual results for the financial year '23-'24 on 28th May 2024. Our stand-alone information are as -- with respect to financial performance for the year ended 31st March 2024, on a stand-alone basis the company has registered a turnover of INR 3,232 crores in comparison to INR 3,284 crores in the last year ended 31st March 2023. The turnout from Consultancy and Engineering segment stood at INR 1,454 crores, and from the Turnkey segment was INR 1,778 crores. In the fourth quarter, the company achieved a turnover of INR 790 crores, with turnover from Consultancy and Engineering segment amounting to INR 388 crores, and INR 402 crores in the Turnkey segment. During the fourth quarter ended 31st March 2024, the company earned a profit after tax of INR 91 crores in comparison to INR 50 crores earned in the previous quarter ended 31st December '23. During the year ended 31st March '24, the company earned a profit after tax of INR 357 crores in comparison to similar profit of INR 342 crores in the last year. The company is having a healthy earning per share of INR 6.35 as comparison to last year of INR 6.09. Other income during the financial year '23-'24 increased to INR 225 crores as compared to INR 169 crores during the last financial year. On the consolidated front, the company earned a profit of INR 445 crores for the year ended 31st March 2024, in comparison to INR 346 crores earned during the last financial year '22-'23. Therefore, there is an increase of around 29% in the consolidated profit on a year-on-year basis. During the financial year '23-'24, the order inflow in the company amounted to INR 3,406 crores. The overall status of order book position as on 31st March '24 is INR 7,823 crores in comparison to INR 7,695 crores during the last year. Further, during the current financial year, up to 29th May '24, the order inflow is INR 1,230 crores. And after including the go-ahead from our client, the same works out to be INR 1,835 crores. Further, during the -- in the current financial year, EIL's trade receivable reduced considerably during the financial year 2024. The debtor stood at INR 314 crores during the financial year. And in the last year, this was INR 353 crores. The debtor as on number of days of turnover has declined to 35 days during the financial year '23-'24 from 39 days during the financial year '22-'23. Thank you, Bhoomika. Bhoomika, now it is up to you.
Yes, sir. Thank you very much. We will now begin with the question-and-answer session. [Operator Instructions] The first question is from the line of Noel Vaz from Union Asset Management.
Yes, sir. Just one question. So regarding the expansion, which is going on at the Numaligarh refinery, are we involved in that particular project in the expansion from 3 to 9? That is my only question.
No, this expansion has been done by some other consultant. We are not part of that expansion.
Part of the expansion project, there is the pipeline, that is being done by EIL. And there is another unit, which is not part of the expansion. There's a [ coker ] that is being done by us.
Sure, sure. And just one follow-up. We currently have a small minority stake. Is there any plan to monetize this as such? Or -- I mean, some clarity on that.
There's no plan for monetizing as of now because it's a long-term investment.
The next question is from the line of Amit Anwani from PL Capital.
Sir, first question, we did guide -- used to guide about INR 4,500 crores to INR 5,000 crores intake, and we saw roughly about INR 3,400 crores, and that too in Consultancy, I can see INR 500 crores coming from overseas market this year. So just wanted to understand, was there any major slippage in order? And also would like to understand what are the key orders in Consultancy side and Turnkey side, which we are now considering as a pipeline for FY '25? And if you could highlight the value also, yes.
This is Vivek from Marketing and Business Development. I would like to answer that question. Like, we were negotiating few of the contracts towards the closure of this financial year, but those could not be concluded at that point of time. And those exactly got concluded after the completion of the financial year. So that's how you have seen that kind of impact. For your information, as of now -- as of today, we have reached almost INR 1,800 crores worth of business, which includes the awarded work as well as certain go-aheads that have already been given to us. So those orders got realized late. Most of them got realized in April itself. So that is the impact that we could not reach the earlier promised figure of around INR 4,700 crores and [ INR 5,000 crores ], so similar kind of figure we have already reached in 1.5 months -- approximately 2 months, you can say. With respect to the future prospects, there are still major opportunities available. Two major petrochemical complexes are in the bidding process. We are in the process of bidding for that. They are in the open market, let's see. Those would be realized in a couple of months' time. Internationally also, we could partially close one of the pet-chem complex, and the balance part is still pending, and it could be closed in a couple of months. It's there. So there are a lot of prospects out there in the market itself for the refinery and petrochemical, a lot of projects are there on the anvil. So we see that we should be able to get good business out there. As far as this, at least the last time's figure we should be able to meet unless there is any exigency happens, but we are on the actually good track right now.
Right. So apart from this INR 1,800 crores, you said YTD we already did. So can we expect INR 3,000 crores, INR 4,000 cores more in the remaining 9 months?
Yes, yes. If this pace continues, we have opportunity for getting INR 3,000 crores to INR 4,000 crores.
And sir, how is the expectation on mix, Consultancy versus Turnkey?
It marginally remains the same. It's always 50%-50%. Sometimes, LSTK goes more. This time LSTK has gone more and consultancy got reduced like that. But it is going to be more or less in the same ratio, Consultancy and LSTK. LSTK is specifically OBE. It's more of a kind of Consultancy only. So we don't take the high-risk jobs. We take comfortable jobs. So we'll be targeting OBE projects only in the LSTK segment also. So ratio is going to be just similar as we were having earlier.
Right, sir. Second, on the revenue and margins, again, the top line also did not grow too much, though we were expecting some growth for the full year. And second -- so wanted to understand what is the guidance now for FY '25? And second, on margins now, the Turnkey margins appear to be on EBIT level of almost more than 4.85% for the past 2 quarters. So what are the expectations of margins now? And on the top line, was there any slippage, and what is the outlook for FY '25?
Basically, as you know, we are operating in the cyclic nature of industry. And our turnover basically depends upon the orders in our hands. Though we have a handsome order book of INR 7,800 crores, but in the last year, we were expecting some new orders and we were expecting some turnover from that new jobs also. But these new jobs were shifted either in the late month of March or it is coming in the first quarter of this year. So there is a 2% or 3% down in the turnover portion. But on the margin side, you may please see there is increase in the EPC business segment. Earlier, our margins were in the range of 3% to 4% -- 3%, now it is more than 5%. And in the Consultancy segment also, we are maintaining our margins.
Sure, sir. Lastly, on all the sunrise sectors, which were highlighted, and we saw past couple of days there was announcements on coal gasification fast-tracking, and there was announcement a few months back on bio-related sector, there could be policies coming in. I wanted to understand, are we expecting anything significant for EIL in FY '25, where it is green hydrogen pilots, which were already doing, compressed biogas, coal gasification. So just wanted to understand the opportunities here in 12, 24 months for us.
With respect to the Sunrise sectors, we have secured the business worth, I think in the range of 8% of the total order value has come from -- 8% to 9% has come from the green areas. So with respect to the coal gasification, we are in touch with -- we are already executing a few of the assignments in coal gasification. Some of the studies we are doing. And we are also in touch with a few more private investors, who are interested in developing coal gasification based upon plant. One is in the steel industry, which is a coal-gasification based project, and they are thinking of going for the DRI plants. So we are in touch with few of the private investors in this sector. But mostly, in coal gasification, it is coming from the private companies only. And also recently, Coal India and BHEL have also signed an agreement. They are also anticipating some major commercial projects. So we will be also pursuing that project too, and other projects of Coal India also, which would be signed after this, because they also have two more projects in the pipeline in future, wherein they would be investing and setting up those projects. So we'll be pursuing those public sector projects also.
So on compressed biogas, are we expecting orders this year?
Sorry?
On compressed biogas, CBG?
CBG, yes. On the CBG, actually, the plants, all the OMCs are in the process of preparing the DFRs. So when the DFRs will be submitting it the real investment that we are expecting during this year, so we are expecting a pie of the CBG plants as well, but once the OMCs will take investment decision, then it will go forward in execution stage.
The next question is from the line of Prathmesh Salunkhe from PL Capital.
I just had a simple question in our order intake. So in our presentation, we have said that one of the jobs awarded in Q3 was considered in Consultancy and now it is considered in Turnkey. Just wanted some more color on it. Which order was it exactly, and what was the value of it?
It was a Consultancy assignment. It was actually a depository which was received from the Intelligence Bureau. It was the construction of their office facilities. It was worth INR 350 crores. So initially, we were thinking of -- we had -- we were having a discussion with the client with respect to whose PAN and TAN needs to be used. Initially, they were not agreeing. Later on, they agreed on the philosophy and we could convert that into a depository mode. So that's how it was shifted from the Consultancy to further in the LSTK segment, because we could convert that job into depository mode.
The next question is from the line of Nidhi Shah from ICICI Securities.
So as you just mentioned about the projects that moved from Consultancy to Turnkey, is there any change in value given that the project has now become a Turnkey project?
Sorry to interrupt, ma'am. May I request you to use your handset, please?
Voice is not clear.
Hello. Am I audible now?
Yes, ma'am. Please go ahead. Thank you.
So the project that you mentioned just now that has moved, is there any change in value since the project has now gone in depository mode?
No, there's no change in value at the moment.
Okay. There's no change in value. A couple of other questions that I had was that this year's finance cost on the consolidated level is much higher than before and so is the other income. Could you just give me some color on that?
On the consolidated basis, definitely our profits have increased from INR 346 crores to INR 445 crores. This is mainly on account of our share in our RFCL project. In this year, EIL share was INR 85 crores in comparison to last year's figure of INR 2 crores only.
Okay. And what is the reason for the increase in interest cost?
Other income, madam, we have settled a change order with our client. And the major portion was -- some portion was in the fees portion and major portion was towards the interest on the long outstanding payment. So that's why there is increase in the interest payment. So we have got around INR 55 crores interest from our client in settlement of our change order.
All right. And lastly, could you give me some guidance for FY '25 in terms of revenues and margins?
Definitely, madam. As you know, we are in the cyclic nature of business. Though we are having a strong order book of INR 7,800 crores, and we have good order flow in the first quarter itself, and we are sure that there will be increase in the turnover as well as in the PAT, but right at this moment of time we cannot quantify. But definitely, this will be better than this year.
So revenue can we expect single digit or low double-digit growth? Is there some color that you could give possibly on that?
Because we are in the cyclic nature of business, it totally depends on the order inflow during the current year also. Therefore, it is difficult to quantify, but we assure you, our performance will continue to be better than last year.
All right. And my last question would be on JV profit. This year, JV profit has grown astronomically. What is the outlook on that for the upcoming years? And also if you could give me a breakup of the JV profit as to which JV is how much coming from?
Coming from our JV, Ramagundam Fertilizer Corporation Limited, we are expecting more than whatever we have achieved during the current financial year. We expect the similar, rather more than that particular profit in the coming year also.
Madam, in the coming year, we are expecting more than INR 100 crores from the RFCL project, because plant is running at around 85% capacity. And in the current year, it is expected that plant will run on 100% capacity, and it will generate more and more profit, and our share will be more than INR 100 crores in the coming year.
[Operator Instructions] The next question is from the line of Bhoomika Nair from DAM Capital Advisors.
Sir, just wanted to understand our -- you said about INR 1,800 crores of order intake. Is it possible to get a breakup between how much would have been Consultancy versus LSTK of this INR 1,800 crores?
Approximately INR 1,000 crores is coming from the LSTK and balance is coming from the Consultancy.
Sure. The other question was regarding international orders. We were expecting one from Nigeria, some more in MENA region, including Saudi and Abu Dhabi. So if you can just give some -- what is the status out there? When do we expect these orders to come through? And how large can possibly the size be of these three large orders?
With respect to the order in Nigeria, partially, we have closed the order. We have booked that order in this INR 1,800 crores. It's a smaller value right now to the tune of INR 70 crores to INR 75 crores, but the major value is about to come in a couple of months' time, because we are negotiating the contracts with them and that's a bigger contract. We'll be able to close it in a few months' time. Because client side is also taking some time and they want to do the initial phase 1 and then proceed with the next phase. So we'll be shortly closing the other part of the contract, which will be much larger than this. And with respect to the Saudi, right now we are in the initial stages of Saudi. We're setting up an office. So it is going to take some time from Saudi. However, we have done quite significantly in the Middle East market, specifically with respect to the Abu Dhabi in UAE. UAE, we have been doing a lot of Consultancy business. It has increased in a good way. If you see that out of the total business what you have seen overseas, 50% has been considered from that market, Middle East market, and 50% has come from the Nigeria market. So that kind of contribution is that Middle East region is doing, and we are expecting it to grow further.
Okay. So are we expecting any larger-sized orders from the international market from any of these?
We are expecting -- I've told you, we will be concluding a major contract in Nigeria.
No. I meant Middle East, sir.
And South and Middle East are also in the process. If they are successful, then we'll have good news probably.
Okay. And sir, there was also this IOCL Paradip order, which was to be, what do you say, the petchem order?
It's in the tendering process, ma'am, in the current market.
Okay. And any other IOCL petchem orders or refinery orders which are there in the pipeline, which may come up?
Majorly, the Paradip is there in the market. IOCL's only one major project is right now continuing.
Okay. And from the Bina refinery, sir, what is the status out there? I mean, when will that likely commence?
It's also in the market, ma'am. There are 4 packages which are in the bidding process. We hope to see results soon. In a month or so, you will get to know what will happen there.
Okay. Got it. So from that perspective, given that we win a couple of these orders, would it be fair to say that this year in Consultancy, we could probably see the order intake going towards INR 2,000 crores, INR 3,000 crores, kind of a number? Or do you think that will be a little difficult?
So it will remain -- if we see the total order value towards as of the earlier perspective, it was around INR 5,000 crores. And out of which 50% came from the Consultancy. So we at least can achieve that kind of order value from there. If we get more, it would be good for us. And we are trying towards it. More Consultancy would be always beneficial.
Right. And sir, when you're bidding for all these projects, whether it be IOCL, BPCL, or others in the domestic market, how is the competitive intensity? I mean, earlier we used to get a lot of orders on nomination basis, but now there's a lot of ordering and L1. So we've seen the Consultancy margins, which used to be around 26%, 27%, going down to 22%, 23%. Now how should we think about margins? Is this 1 year anomaly and you should see margins going back to the 25% range, or you think it will be closer to this 20%, 22%?
Ma'am, it depends on the project to project wherever it is happening. It depends on the geography. If it's outside India geography, the margins would be more, because less competition would be there. In India, there will be competition. Some would be negotiated. So it all varies. Today, also in the Consultancy, we are around 22%, 24%, in that range itself. So that's a good margin as far as the market is concerned, because market, actually, the times have changed. Competition has increased. Lot of companies are there. So we have to beat the competition and get the jobs. It's not the PSU market now. Even government doesn't support any PSU. They are asking us to fight the competition, so we have to fight the competition and we are winning the jobs. At least you can see the track record in the market.
But in spite of that, we are maintaining good margin, around 22%, 23%. And a figure of 25% is not far away, because this may fluctuate on a year-on-year basis. But we are very confident of 25%.
Understood. Okay. Sir, one last question. What was the dividend income booked from Numaligarh in this year? And anything from Ramagundam?
Around INR 30 crores. And RFCL Ramagundam have not paid dividends so far, and we are expecting a dividend in this year if possible.
The next question is from the line of Nishit Master from Axis Securities.
So my question was on two things. So one, you mentioned that obviously, Nigeria, major part of the order is still pending. There were two other nomination-based contracts, big contracts which we were expecting in India. If you could give us a status for that. And two, are we doing any projects for HPCL's Barmer refinery, or you expect orders coming for Barmer anytime soon this year? If you could give...
Barmer, we have two projects, one is as a PMC and one is as an OBE contractor. Those are almost on the verge of completion in times to come. The refinery is expected to be commissioned by the end of this year or early next year, just to be commissioned.
Okay. Any further orders which we can expect from Barmer on the downstream side, if there are more...
Let the refinery start and then every refinery would go in expansions in future and there would always be modifications. Those kind of assignments will keep on coming to us on a regular basis. It will not be large assignments, but if in future they try and think of expanding it, then naturally it would be a bigger assignment. But first let the refinery commission and then start operating. Then regular flow of income should be there from there.
Sure. Sir, and on the other two nomination-based contracts, which we were expecting...
There's a number of contracts we are discussing. Some of them on nominations, some of them are on a competitive basis. Let them realize, because in one of the projects we were earlier thinking of nomination, that they changed into -- went into competition. So nothing is certain. So in any case, those projects are there on the anvil and we are bidding and we'll get some results in a couple of months' time -- in a month or so, we'll get some good results.
Okay. Sir, and on the fertilizer side, are we seeing any traction?
Sorry, any?
From the fertilizer industry, are we seeing further traction on ordering?
Fertilizer, specifically, any smaller works we can expect. We are talking to few of the fertilizer companies like KRIBHCO, lFFCO and Ramagundam. All these companies are there. Wherever smaller works are there, we will be part of that. Consultancy orders will be there. There is no anticipation of any major fertilizer contract other than what is expected in the green segment from a private refinery -- private investor. So that we expect in the future.
[Operator Instructions] The next question is from the line of Mohit Kumar from ICICI Securities.
My question is, do you see any tender from Petronet LNG or GAIL in the fiscal year?
Yes, number of inquiries are there from Petronet LNG, yes.
Something big, I think they announced INR 20,000 crores worth of project last year. Are they looking for large Consulting packages in this fiscal?
No, they are still in the initial stages of the project. We are doing some pre-project activities for their projects. Let us see, when they take the investment decision and proceed with the tendering, they will let us know.
Any large deals from GAIL?
GAIL, yes, there are some of the projects there. They are also carrying out some feasibility studies for some pet-chem plant in Madhya Pradesh, and some of the assignments are there for PDH-PP. We are in process of that. We're engaged with them for their projects. And regularly we get engaged with them for various engineering assignments from the GAIL, because it's a day-to-day activity with them.
Understood. My second question is on the coal gasification. Of course, I think there are a few more projects which look like they will come up. Are you hopeful that this year you can see some consulting packages, again, from coal gasification, especially from CIL/BHEL JV?
We are right now in touch with few of the private investors who are eyeing for the government's viability gap funding and they're taking funding. We are supporting them in their feasibility studies. They get funding from the government, so definitely they are going to execute. So this kind of assignment is there. Already, we are executing one of the projects in coal gasification for Neyveli Lignite. Its phase 2 is yet to start. So that is also in the anvil. Apart from that, Coal India has also set up a JV for the upcoming commercial project. So they would be coming out with the tendering and those assignments. We will be also discussing with them for the prospects in that project. That's going to be a commercial plant.
Thank you. [Operator Instructions] The next question is from the line of Anuj Sharma from M3 Investment.
So my first question is on capital allocation. Historically if we see, our dividend payout used to be upwards of 65%, 70%, and gradually it has come down and this year it has been less than 40%. We have also seen that excess capital we have deployed in unrelated projects, so how is the management now thinking about capital allocation going forward. That's question number one.
Mr. Sharma, may I request you to self-mute your line once you're done. There's a lot of disturbance coming from the line.
Sure.
Can you just repeat the question please, because there was a lot of disturbance in there.
I'm sorry. I was asking about capital allocation. Historically, we have seen that our dividend payout used to be upwards of 65%, 70%. And gradually, over a period of time, it has come down. This year, it's less than 40%. We have seen that excess capital we have deployed in unrelated projects. So my question is, how does the management and Board think about capital allocation going forward?
In this year also, we have paid 60% dividend, INR 3 on the face value of INR 5, and we think that this is a good dividend comparing the industry. And be sure, EIL will always reward their shareholders by way of dividend.
No, I was asking more about the allocation policy. So we are looking at payout rather than the face value as usual.
Allocation policy is 5% of net worth or 30% of PAT, whichever is higher. So whatever we have paid, that is more than the policy.
My second question is on NRL, historically, what's been our share of [Technical Difficulty].
Sorry to interrupt, sir. Mr. Sharma your voice is breaking, sir. May I request you to use handset?
Yes, is this better?
Yes, sir. Slightly muffled, sir.
Yes, I'll try speaking a bit louder. So, sir, in terms of NRL, historically, what's been our share of NRL projects? And going forward, how much opportunity still remains in NRL and our wallet share expected in that?
Our share is 4.34%.
4.37% is our equity share and we are going to maintain that equity. And NREP expansion is going ahead. And after NREP expansion, some modification jobs would be there.
Okay. No, I was not talking about the equity share. I was trying to understand the share of the work which has been given by NRL to companies like...
NRL is getting business heads. Right now, the expansion project is being done by us, but few of the units like DCU and one process unit, SRU, is being done by us. And we are also trying for one of their upcoming polypropylene unit, where they have planned for PP unit. We'll be discussing and getting those units. Last year, we got one aqueous ammonia project from them. So the projects are also being discussed with them. It's not that they are giving it on nomination. We are bidding and getting those tenders against the competition.
[Operator Instructions] Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Ms. Bhoomika Nair from DAM Capital Advisors Limited for closing comments.
Yes. I would like to thank all the participants for being on the call and particularly the management for giving us an opportunity to host the call. Thank you very much, sir, and wishing you all the best. Any closing remarks from your side, sir?
No. Thank you, Bhoomika.
Thank you, Bhoomika.
Thank you, sir.
Thank you.
On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
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