Dilip Buildcon Limited (DBL) Q3 FY23 Earnings Concall Transcript

Dilip Buildcon Limited (NSE:DBL) Q3 FY23 Earnings Concall dated Feb. 10, 2023.

Corporate Participants:

Devendra Jain — Executive Director and Chief Executive Officer

Rohan Suryavanshi — Head Of Strategy and Planning

Sanjay Kumar Bansal — Chief Financial Officer

Analysts:

Shravan Shah — Dolat Capital — Analyst

Mohit Kumar — DAM Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, you have connected to the Dilip Buildcon Limited Q3 FY23 Results Call, hosted by Axis Capital Limited. As a reminder, all participant lines will be in the listen-only mode. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Jiten Rushi from Axis Capital. Thank you. Over to you sir.

Operator

Thank you. Dawvin. Good evening, everyone. On behalf of Axis Capital, I would like to welcome you for Q3 FY23 Earnings Conference Call of Dilip Buildcon. From the management, we have with us today Mr. Devendra Jain, Executive Director and CEO; Mr. Rohan Suryavanshi, Head, Strategy and Planning; Mr. Sanjay Kumar Bansal, CFO. We also have with us Investor Relation team from [Indecipherable]. We thank the management for giving us this opportunity. We shall begin the opening remarks from the management followed by Q&A session.

I would like to hand over the call to the management for opening remarks. Thank you and over to you sir.

Devendra Jain — Executive Director and Chief Executive Officer

Thank you Jiten Ji. Good evening, ladies and gentlemen. A very warm welcome to all of you to the third quarter of FY23 earnings call of Dilip Buildcon Limited. It’s my great pleasure to be able to present to you guys. The earnings presentation was uploaded on the stock exchange. Hope you all had a chance to have a quick glance at the same. I’ll take you through the key highlights for the quarter for the next 15 minutes or so, post which we will take Q&A.

But before I begin our standard disclaimer. The presentation that we have uploaded on the stock exchange today including the interaction in this call contains or may contain certain forward-looking statements concerning our business, prospects and profitability, which are subject to several risks and uncertainties and actual results could differ from those in such forward-looking statements.

So. I having said that, let me begin. So first, let me talk about the Indian Economy and the broader outcome. So Indian economy’s pace of recovery has been better compared to the global peers despite headwinds such as high inflation, monetary policy tightening, rising interest-rate and the Russia-Ukraine war. We continue to remain the fastest-growing economy among large economies. Reserve Bank of India in its latest report has committed GDP growth to continue to remain about 6% for the Indian economy. So this is a very strong performance in our view, given everything that is happening globally.

However, rising inflation which is a global factors also led RBI to increase benchmark interest rate cumulatively by about 250 basis points in the fiscal year 2023. This obviously impacts the economy in general.

Moving on. The big event that has happened recently is the Union budget. In the recently-announced India budget, Indian government has announced the highest-ever capital outlet for infrastructure at INR10 lakh crore. This is about 3.3% of GDP and is an increase of 33% versus the previous allocation in FY22. This shows the commitment and continuous focus of the government on the infrastructure sector. Ministry of Road Transport and Highways has allocated about this INR2.70 lakh crore. While railways got the highest-ever outlay of INR2.70 lakh crores, defense and infrastructure got about INR1.6 lakh crore each. And rural Ministry got about 1.6 lakh for increased development — for increased infrastructure development while broader infrastructure got about INR23,000 crores or so.

So for railways, the budget allocation has increased about 72% from the previous year. While for roads, there was a jump of about 35%, pervious — versus last year. An increase in the capital expenditure on the infrastructure investment as announced by the Finance Minister in our budget speech will go a long way in creating more opportunities for the sector across roads, bridges, houses, buildings and other infrastructure contracts.

This in our view also paves the way for a very strong order pipeline and awarding activity for many quarters. With all time high tax collections, stable fiscal deficit, credit ratings, we believe that the government will find enough resources to invest into infrastructure. Revenue generating assets like FASTag collections have also been strengthening the hands of the government. FASTag collections has consistently improved from about INR7,500 crores in the first-quarter of FY22 to about INR11,300 crores in the fourth quarter of FY22. And in FY 23, we’ve seen that the quarterly FASTag collections have been more than INR12,000 crores every quarter in the first nine months of the fiscal year.

So improved toll collections, which are very critical for faster monetization of road assets by the Road Ministry and, you know, are great for the government to shore up their finances. This is also helping the companies who are looking to monetize on their existing toll assets. Besides this, on the input prices, good news is that inflation has slightly subsided while raw-material prices have continued to soften, but still we are yet to see the normalized price levels across raw-material prices. Aluminum prices now down 10% versus last year. Steel prices have remained stable in the third quarter versus second-quarter, but overall steel prices ar down 20%, 22% from April levels, but still up by 10% versus last year. Overall, cement prices have also been one of the highest in so many years. While most contractors have seen the positive impact of reduction in input cost in the second of FY23, we are all and will continue to wish for more reduction in input prices.

Rohan Suryavanshi — Head Of Strategy and Planning

On the project award momentum in the second — during the third quarter, project awarding by NHAI has picked-up speed as we saw more than 1,500 kilometers of work were awarded in the third quarter versus about 800 kilometers of work in the first two quarters of the financial year. This amounted to more than INR33,000 crores from the projects awarded in the first nine months of the fiscal year. However, there is a lot more that needs to be done because the government started about 6,500 kilometers of work and so which means roughly about 4,000 kilometers of work still need to be awarded. While there is a healthy pipeline of orders, which have been floated by the government, hopefully a lot of them will see materializing in this quarter.

On the other hand, Ministry of Road Transport and Highways has also constructed about 5774 kilometers of national highways up to December ’22-’23 as compared to 5835 kilometers constructed up to December ’21-’22. So construction there is while slightly lower than last year, but roughly about the same number. They awarded figure for MOT Is about 7,200 kilometers plus compared to about 6,100 kilometers during the same time in the previous year.

Now let me talk about the. Performance for the third quarter of FY23. Our order book has increased from INR26,539 cores — it has increased to INR26,539 crores from INR26,338 crores at the end of September quarter. We had received about INR6,817 crores of orders in first half of FY23. We are happy to say that in the third quarter, we have received Letter of Acceptance for more than INR7,500 crores of projects. And this bodes well for our execution going forward. We’re also happy to inform that we have been declared L1 bidder for Rewa Jal Nigam Project worth INR1,947 crores in quarter four. And we have received a Letter of Acceptance of Bangalore-Vijayawada project worth INR1,373 crores. This now takes us closer towards our full-year target of INR10,000 crores to INR12,000 crores of order inflow guidance that we’ve given in FY23.

We look-forward to our fourth quarter with very-high optimism and feel comfortable with our order inflow guidance. Our execution strength was also reflected in the Rewa City Project in Madhya Pradesh where we were awarded early completion bonus. So. all the detail are available in our presentation index. Happy for all of you guys to look at it.

Now let me pass on to our CFO, for comments on the financials.

Sanjay Kumar Bansal — Chief Financial Officer

Thank you. Rohan jii. Good evening, everyone. I welcome all our partners to the call of this quarter. Let me present the results for the quarter three of FY23.

Firstly, the revenue increased by 8% in quarter three FY23 and 12% in nine months FY23 Y-o-Y basis. This is mainly due to better execution of the projects. The EBITDA margin increased from 0.29% in Q3 FY22 to10.5% in Q3 FY23, EBITDA increased by 39% in nine months FY23 in absolute terms on Y-o-Y basis.

Finance cost decreased by 14% in Q3 FY23 and 18% in nine months FY23 on account of reduction in outstanding debentures, term-loan and additional working capital facilities. The company registered profit of INR795 million In Q3 FY23 visa a vis a loss of INR967 million in Q3 FY22. This 182% increase on Y-o-Y basis is on account of better EBITDA margins, lower finance cost and profit on account of divestment of four hand projects to Shrem InvIT.

On nine-month basis, DBL registered profit of INR1,635 million vis-a-vis loss of INR890 million in nine months FY22. This is on account of higher revenue, lower finance costs and profit on account of divestment to Cube and Shrem InvIT. Now let me take you through some important items of the balance sheet.

The inventories as on 31st December 2022 decreased by INR112 million vis-a-vis 30th September 2022 and INR753 million vis-a-vis 31st March 2022. Big debtors [Phonetic] as on 31st December increased by INR3,063 million vis-a-vis 30th September ’22 and same will be realized — the increased debtors will be realized in quarter four FY23.

There is increase of 10 days in working capital vis-a-vis September ’22. This is mainly due to increase in debtors base. However, it is at the same level of March ’22.

The net-debt to equity ratio marginally decreased on 31st December ’22 to 0.58 times from 0.63 times as on 31st March ’22. Here, I would like to highlight that the Company is continuously on track of reducing debt on quarter-on-quarter basis since last two years.

[Indecipherable] generated from operating activities stood at INR2,285 million during Q3 FY23 and INR4,743 million during nine months FY23. Thank you once again. Now we can open the floor for the question — Q&A. Thank you.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session.[Operator Instructions] The first question is from the line of Shravan Shah from Dolat Capital. Please go ahead.

Shravan Shah — Dolat Capital — Analyst

Hi sir, thanks for the opportunity. Sir, couple of things, first on the revenue front, so. In terms of the INR10,000 crore revenue that we were looking for the FY23, so just wanted to recheck can we — are we able to do that because we need close to INR2,700 crore revenue in quarter four. So just wanted to check on that first.

Rohan Suryavanshi — Head Of Strategy and Planning

So Shravan jii. As Guided in the past calls, we are very close to the guidance given. We are almost on the guidance given. So yes, you are right. We are around. INR10,000 crore revenue on full-year basis.

Shravan Shah — Dolat Capital — Analyst

Okay, second sir, on the EBITDA margin front. So there from the last quarter Q2, we had a 11.6% and now again it has came down to 10.5%. So for nine month, we are at 9.9%, We were looking at 12% to 13% for FY23. So. for that, we need a significant improvement in margin in Q4. So how much now are we looking at for the full-year margin and maybe you can help us with the fourth quarter how much we are looking at and at the same time, in terms of the FY24 because of the past old projects last time we said that most of the projects is 90%, 95% is completed. Then in this quarter on Q-o-Q basis, there is a decline despite there is an improvement in top line. So just wanted to understand on that front.

Rohan Suryavanshi — Head Of Strategy and Planning

So in terms of the EBITDA guidance, yes we are a bit below the guidance given, but on full-year basis, we will be close or around 11% on full-year basis.

In terms of the FY24. Guidance. On revenue side, we expect around 10% to 15% increase and EBITDA, we are basically targeting or will be around 12% EBITDA. So basically, this is our guidance as on today for FY24. So, Shravan Ji, are you on the call? Can you hear us?.

Shravan Shah — Dolat Capital — Analyst

Yeah, I can hear you.

Rohan Suryavanshi — Head Of Strategy and Planning

I think we have answered the guidance part.

Shravan Shah — Dolat Capital — Analyst

Yeah, I I just wanted to further understand is there any specific reason why now we are only looking at 12% for the next year as a whole also because now the old projects will not be the issue. And whatever the new projects should be — we should be able to get 13%, 14%. So just wanted more clarity why we are now only looking at 12%.

Rohan Suryavanshi — Head Of Strategy and Planning

So there are two-three things. First thing is that, as you know that now the bonus has got eliminated because now the timelines are so stringent that it is next to impossible to get the bonus. That is the first thing.

Second thing, if you will see there is fuel prices and material prices, which still not decrease at that level, which you are expecting. So right now for this, you keep the guidance of 12% and then we’ll come to the Q4, we will see that whether we can increase where we will be reaching.

Shravan Shah — Dolat Capital — Analyst

Okay, okay, got it. Third on the date front, it’s good that at least on Q-o-Q front, we have being able to INR136 crore reduction on the gross debt fund. But we were looking at close to INR400 crore to INR500 crore reduction in this second-half. So, we need at least the same kind of INR300 crore kind of a reduction from here on in the fourth quarter. So can we do that?

Rohan Suryavanshi — Head Of Strategy and Planning

So, Shravan Ji. Yes, you are correct, we have given in the guidance of the INR400 crore reduction. So we are close to that and we will be reducing around INR200 crore in the FY23 financial year. So around INR200 crores reduction will be there and we will be there and we will be with the INR2,400 crore net-debt as on FY23 end.

Shravan Shah — Dolat Capital — Analyst

Okay, sir INR200 crore from the March ’22, we will be reducing.

Rohan Suryavanshi — Head Of Strategy and Planning

INR200 crore from this level. So this level is INR2,600 crores from this level, we will reduce further INR200 crores. So cumulative, there will be a reduction of INR350 crore vis a vis March.

Shravan Shah — Dolat Capital — Analyst

Okay, okay, got it. Second thing, just wanted to understand our Surat Metro CS5 INR1,061 crore project we received, but it is not part of the order book. Is there any specific reason for that?

Sanjay Kumar Bansal — Chief Financial Officer

So, this been received in the JV — for JV, partner will be executing that project. That is why we have not included it in the order book and we don’t enter the Surat in our order book.

Rohan Suryavanshi — Head Of Strategy and Planning

[Technical Issues] Metro and Surat metro, which we have received individually, we will be executing them.

Shravan Shah — Dolat Capital — Analyst

Okay, got it, got it. And on the working capital front. though, definitely Q-o-Q, it has increased, but 89 days it is same as the March. So how much more reduction. But you mentioned that the details we have received in January. So 80 days we can look at by end of March.

Devendra Jain — Executive Director and Chief Executive Officer

Yes, yes, yes, surely.

Shravan Shah — Dolat Capital — Analyst

Okay good, lastly on the capex front, definitely it’s not significant for us, INR55 odd crores. So for full-year, how much — fourth quarter, how much more we are planning and for the next year, how much capex are we looking at?

Devendra Jain — Executive Director and Chief Executive Officer

For the Q4, we will be doing around the INR10 crore to INR15 crore capex, so it will additively around INR70 crore and for next year, it will be around INR50 crore capex. which will be there like kind of special equipment like for the metros and [Indecipherable] and replacement. INR50 crore for the next 12 months.

Shravan Shah — Dolat Capital — Analyst

Last on the bid pipeline front sir, how much more now are we looking at and in terms of because this is the one issue where all the players are facing, not able to get the orders particularly from the NHAI front. So just wanted to understand. The pipeline is there. But in terms of awarding, it is not happening. Also, how many bids or the value have we submitted or planning to submit? How much are we looking from the EPC or HAM or any other segments, it would be helpful.

Sanjay Kumar Bansal — Chief Financial Officer

Shravan total pipeline NHAI [Foreign Speech] and rest of the projects are from the EPC front. No doubt [Foreign Speech].

Shravan Shah — Dolat Capital — Analyst

Okay, so have we already submitted and awaiting the.

Sanjay Kumar Bansal — Chief Financial Officer

We have submitted 10, 5 bids and we are awaiting for the bid results.

Shravan Shah — Dolat Capital — Analyst

Okay, okay, thank you and all the best sir.

Operator

Thank you. The next question is from the line of Mohit Kumar from DAM Capital. Please go ahead.

Mohit Kumar — DAM Capital — Analyst

Good evening, sir and thanks for the opportunity. My first question is, what is the appetite for the orders given that we have very healthy order book, right. We are not really — my question is are we desperate for order because given that we have a very large order book and that gives us a healthy visibility for FY24, so are we — are you going all out or are you being conservative in bidding right now.

Rohan Suryavanshi — Head Of Strategy and Planning

Mohit, we are not desperate in our orders, because like I said in my opening remarks as well. We had a target INR10,000 crores to INR12,000 crores of order wins, new order wins in this year. And we are near that number. So there is already a significant sort of and the good part is, if you look at our presentation, our order book is very-very from diverse sectors. So there is waters as well, there is metro as well, there is road as well. All of them, there is — we have a very diverse order book and currently it’s about INR26,500 crore plus order book. So there is no desperation at any level. And there is a very strong and robust pipeline that is already the orders, which have already been floated by the NHAI and MOT besides the other divisions that we look at like, whether we look at water, metro, mining. All those have new orders coming in.

And to add to that, we have a lot of comfort from the fact that the government has reduced, I mean, increased the budgetary allocation to infrastructure by 33% to getting it to INR10 lakh crore. So, no as such fear from any side. We are very in a comfortable place.

Mohit Kumar — DAM Capital — Analyst

Secondly, sir, we have been executing a lot of irrigation and mining orders for the last few years. How has been your our experience margin on the non-road orders? And are there any fixed-price contracts in their basket?

Rohan Suryavanshi — Head Of Strategy and Planning

Sir, our experience has been largely decent amongst the other sectors, which is why we have kept on improving and increasing our exposure to those sectors, The thought process when DBL first started off on the diversification exercise in 2015 or so was that as you are growing, as a growing an ambitious company, there were two types of things that we were doing. One was the geographical diversification and the other was the sectorial diversification.

We wanted to reduce the risk of being concentrated in one sector or in one geography. So that’s why we did that. Today, we are in 20 states and we are working in some eight different sectors and getting very good revenue from all this. And roads, which we used to be our mainstay and almost 90% of our order book before then or 100% is now only 45% and an increase of order book. So we have and the way we went about diversification was where we tried to do sectors, which were either usually in close proximity to what we’re already doing and required similar kind of equipment.

So the experience has been largely good. There might be some hits and misses along the way as we go into a new sector, but largely we’ve been satisfied with what’s been happening and we are optimistic about the increasing opportunities that will continue to come in the coming years.

Mohit Kumar — DAM Capital — Analyst

Lastly, on the Siarmal open cast, I think there was the media news saying that there is some issue with getting the land. How is the situation right now. And when can we expect the revenue booking from this particular project?

Rohan Suryavanshi — Head Of Strategy and Planning

Which project are you talking about sir?

Mohit Kumar — DAM Capital — Analyst

Siarmal open. Yes, yes. Yeah,

Devendra Jain — Executive Director and Chief Executive Officer

No, sir, Siarmal, the land has been acquired by the government already and the appointed date has also already come on 2nd January. I do not know what media reports are but — thing you’re looking at. In the MDO process, in fact, I’m also very happy to say that usually typically MDO takes three, four years of preparation time before revenue comes. We will start delivering revenue in this — hopefully in this quarter. And then going-forward, we will have like a full blown sort of revenue and we will be adding a significant amount towards revenue year-on-year.

Mohit Kumar — DAM Capital — Analyst

How much you expect from mine sir in FY24 and FY25, if i get to that.

Devendra Jain — Executive Director and Chief Executive Officer

And, sir, largely. About 5 million metric ton is what we are targeting for those government contracts.

Mohit Kumar — DAM Capital — Analyst

Understood. Thank you sir. Thank you and best of luck sir. Thank you.

Devendra Jain — Executive Director and Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Shravan Shah from Dolat Capital. Please go ahead.

Shravan Shah — Dolat Capital — Analyst

Sir DBL Infra debt is the same. INR700 crore?

Rohan Suryavanshi — Head Of Strategy and Planning

Yes.

Shravan Shah — Dolat Capital — Analyst

Okay. And then we are not looking at right now in terms of INR200 crore, INR300 crores that option we have in terms of the increase.

Sanjay Kumar Bansal — Chief Financial Officer

Yeah, we have that option. Right now, we have no immediate plans to down it on anything but that option continues to be with us and we get it if we have any need at any point of time [Technical Issues] investments we need to increase, we always have that option. But, currently we have no such plans.

Shravan Shah — Dolat Capital — Analyst

Okay, okay and sir, in terms of now definitely Devendra sir has mentioned that bid pipeline is there and we are also looking at, but our internal expectation in terms of in next two months, how much more can we win in terms of further orders. So for the full-year, how much that number goes in terms of order inflow.

Rohan Suryavanshi — Head Of Strategy and Planning

In the next couple of months, we think about another four, five order come in. So, already, till now, we have already reached about INR10,000 crores of orders. So we will actually end up exceeding our guidance. So the target is about INR30,000 crores as on first of April. So hopefully, this will all dependent on how many orders the government opens up and all, but we are fairly confident that we are looking around that number.

Shravan Shah — Dolat Capital — Analyst

Okay and then in terms of the — across-the-board, in terms of the execution level and IIAC in terms of the couple of HAM projects, four or five where appointed date is slightly getting delayed further versus the last time what we were expecting. So anything in terms of the land or anything issue on that front, where we have not started and wherever we are doing the execution, anything you want to highlight, everything is going smooth. Any specific state or project where we are facing issue.

Devendra Jain — Executive Director and Chief Executive Officer

Shravan Ji, I always appreciate the amount of detail that you get into and it always keeps us on our toes. The thing is that. I don’t foresee — like the execution is going good now. Obviously last two years, COVID had really disrupted. We had exceptional rainfall as well that are happened in two years. So at least all of those disruptions have not happened as much. Execution is going good across. There is no big sort of disruption that I am foreseeing right now in terms of land acquisition. It is business as usual.

We are also quite — the fact that we have not been able to take you guys on site visits for the last two, three years because of COVID, but hopefully, in the near-future, we can continue that exercise once again and take you down to the site so that you can see the progress by own sort of eyes. But right now, this is all business as usual.

Shravan Shah — Dolat Capital — Analyst

Okay. Great to hear that. Thank you sir.

Operator

Thank you. [Operator Instructions] As there are no further questions. I would now like to hand the conference over to the management for closing comments. Over to you sir.

Rohan Suryavanshi — Head Of Strategy and Planning

Thank you all participants. We are looking-forward to more questions but I guess the presentation has a lot of detail. But in case any of you guys have more questions, please feel free-to reach out to our team head at DBL or our Investor Relations team from [Indecipherable] and we’d be more than happy to address any and all of your queries. And I wish all of you a good end to the financial year and I look-forward to speaking to you on our quarter-four call.

Operator

Thank you. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.