Release Date: August 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Turnover increased by 20.39% during Q1 FY25 compared to Q1 FY24.
- Net order book as of June 30, 2024, stands at INR13,143.72 crores, to be executed in the next 2.5 to 3 years.
- Total order inflow during FY25 till date is INR4,945.54 crores.
- Company expects to cross double-digit margins in the full financial year.
- Focus on private sector projects, which offer better rates and less competition compared to government projects.
Negative Points
- PAT decreased from INR49.73 crores in Q1 FY24 to INR30.60 crores in Q1 FY25.
- EPS dropped from INR7.42 in Q1 FY24 to INR4.57 in Q1 FY25.
- EBITDA margin decreased to 6.58% in Q1 FY25 from 10.83% in Q1 FY24.
- Labor shortages and increased staff costs have impacted margins.
- Monsoons and elections have significantly affected productivity and turnover.
Q & A Highlights
Q: My question was on this margin in the quarter was 6.5% if I am not wrong, can you just tell us why there was such a low margin this particular quarter and how do you think the balance here to pan out, if I remember correctly, I think we had guided for 11% margin for FY25?
A: So, Mohit, there are a couple of reasons, three, four reasons for reduced margins. One primarily is reduced turnover in this quarter. We have been impacted first by the elections. Then pretty much May and June have been heavily impacted, reduced manpower on account of election. Then the CSTM project that for a variety of reasons, the turnover that we had anticipated or planned for has not happened. We have done a turnover of about INR30 crores from CSTM in this quarter. That is on account of design finalization from the client or a lot of changes because the design which was given or the concept which was given was not as per the bylaws that had to be totally revamped. And then there were tree cutting issues in the buildings which were Greenfield buildings there. Then June has been a write-off, especially in Mumbai on account of rain, July also now, even in the rest of the country. So these are a few reasons and then our increased staff cost which is due to the fact that to execute the projects that we have in hand, we have obviously incorporated or taken in more staff. So that has led to an increased staff cost. So these are the reasons. And then there is one -- there are a couple of write-offs totaling INR6.20 crores where couple of our clients have been taken to NCLT. So we have had to put in those write-offs. So the sum total or aggregate of all these reasons has led to reduced margin. Did I answer your question?
Q: My second question is on the labor issue, are you facing labor issues because we have heard from various developers that they have labor issue due to elections, the labor issues has got over or you didn't face any challenges as far as the labor availability is concerned?
A: No. Two parts, I will answer this question. Yes, elections impacted labor in a big way. As I said May and June, we were virtually working at about 40% labor across pan India bases. This obviously now has improved the situation. But we expect that labor is going to be or labor shortage or skill shortage is going to be a perennial problem with so many projects having been launched and continuously developers are launching new projects. Infrastructure pace picking up once the new government is formed. Labor shortage is here to stay. So we will have to find out ways and means to combat this collectively. All the constituents of the ecosystems will have to come together to see how we can mitigate this problem.
Q: I just wanted to know the reason for the high subcontract work charges, it is about 40% year-on-year increase against a 20% increase in revenue, so what led to that high subcontracting work charges?
A: Just a second. So this is again primarily, part of the subcontracting work, this has two parts. One is subcontract with material and the other is subcontract which we give on labor rate, pay for it to shuttering contracts or bar mining contractors or stone contractors which is labor. So part of this includes the labor also, and due to the reduced turnover, that is why this cost is higher.
Q: And given the labor shortages and labor issues, do you think when the way we are bidding aggressively for the projects and all we should get to the double EBITDA margin going forward for the future?
A: We think we do. Based on the order book in hand as also the rates that we have managed to get, we factored in the increased parts cost and these new projects that we won, say about INR4,500 crores to INR5,000 crores in this financial year, I think in Q3 and Q4, these projects will take off and will contribute to an increased margin.
Q: Sir, just to confirm, when we say that Q2 will also be muted due to monsoon, so can we see similar kind of a margin or it would be close to 8%, 9% kind of a number?
A: We anticipate the margin will go up because as I said May and June were almost total write-offs on account of election and rain. So, elections are behind us now. Labor position has started going up. So, we anticipate our turnover to go lightly. And in this quarter, July has been a write-off, but I think September CSTM also the progress should pick up substantially. So, there will be an increase, but not a substantial increase in the margin, but H2, I think we will see a substantial increase.
Q: So in H2 then we should have a 10.5% to 11% kind of a margin, so will that run rate?
A: 11% in H2.
Q: So then that run rate will continue for FY26, so for FY26, so how one can look at?
A: It should, because in an answer to the earlier question, we are not bidding aggressively. Our focus, which I mentioned last time, has shifted more to the private sector. There is greater demand for timely delivery, quality delivery. There are only a handful of contractors in the private sector side. The competition is less. The rates that we are able to get are far better than the government projects, so I am quite hopeful that this run rate which we are expecting in H2 will continue to FY26 also.
Q: And in terms of the revenue guidance, we maintain the same 20% kind of number for FY25?
A: 15% to 20%.
Q: And for FY26 also, similar run rate can be maintained?
A: Yes.
Q: And then inflow, how much more now we are looking at so for? What is the bid pipeline and so INR4,950 crores-odd we have received, so how much more now we can look at?
A: I think we can look at about INR2,500 crores to INR,500 crores.
Q: Okay. And the pipeline remains the same for INR5,000 crores, INR6,000 crores kind of a pipeline?
A: Yes.
Q: Sir, some balancing number, I needed, inventory, debtors, creditors, mobilization advance
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
