Dhruv Consultancy Services Ltd (DHRUV) Q4 FY23 Earnings Concall Transcript

Dhruv Consultancy Services Ltd (NSE:DHRUV) Q4 FY23 Earnings Concall dated May. 16, 2023.

Corporate Participants:

Gopal Chandak — Investor Relations

Tanvi Auti — Managing Director

Rajesh Sindhav — General Manager Finance and Accounts

Pandurang Dandawate — Non Executive Director and Promoter

Analysts:

Tushar Raghatate — KamayaKya Wealth Management Private Limited — Analyst

Mukesh Panjwani — Value Securities — Analyst

Yashwanti Kelkar — Kojin Finvest — Analyst

Unidentified Participant — — Analyst

Sanjeev Kumar Damani — SKD Consulting — Analyst

Himani Oban — Suraj Enterprises — Analyst

Tushar Raghatate — KamayaKya Wealth Management — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Dhruv Consultancy Services Limited Q4 FY ’23 Results Conference Call hosted by Kirin Advisors. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Gopal Chandak from Kirin Advisors. Thank you, and over to you sir.

Gopal Chandak — Investor Relations

Thank you. Good afternoon everyone. Thanks for joining the conference call of Dhruv Consultancy Services Limited. I would like to welcome Mr. Pandurang Dandawate, Director; Ms. Tanvi Auti, Managing Director; Mr. Rajesh Sindhav; General Manager Finance & Accounts of Dhruv Consultancy Services Limited. Tanvi ma’am, over to you.

Tanvi Auti — Managing Director

Thank you, Gopal. Good evening, everyone. I welcome you all to the Q4 FY ’23 conference call of Dhruv Consultancy Services Limited. We are an infrastructure consultancy firm and our growth is directly linked with the infrastructure, mainly the Highway segment. We are working in six sectors at present Highways, Bridges, Tunnels, Architecture, Metros and Ports.

So the focus of the government is on infrastructure and therefore in the budget it has — there has been a heavy allocation of capex. The government has announced a capex spend of INR10 lakh crore that is 33% year-on year increase in FY ’24 budget estimates. This is allocated to sectors like railways, roads, defense, housing water and metro projects. The capex to GDP is pegged at an all-time high of 3.3%. And the two sectors that stand-out in terms of allocation are the railways, which is up by 51%, and road which is up by 25%.

So given the 50% of the total allocated capexes earmarked for roads and railways, it is a clear indication on structurally bringing down overall logistics costs in the economy, which are currently at 14% of the GDP. The government allocated around INR2.7 lakh crore to the Ministry of Road Transport and Highways, this means there is a huge scope of consultancy services. As consultancy — as infrastructure consultants, we provide so kind of services that is Feasibility Study and Preparation of DPR. Second is construction supervision for supervision and maintenance work. Third is advisory services, capex survey inspection work, and road safety project. And fourth is the design services, design of — highway design of structure that we mainly provide for private contractors.

So consultancy services accounts for about 5% to 6% of the total project cost, that you can estimate the huge potential growth for our business in terms of the budget allocation. We are only the qualified and an established player has an opportunity to bid for new project. So a new — there is a difficulty for new entrants. Now let me explain you how consultancy bids are evaluated. In the consultancy business, it is not the lowest bidder who is awarded the work, but it is based on two factors, first is the technical score, which is 80% — which has 80% weightage, and second is financial score, which has 20% weightage.

Also the technical scores comprises of the company credentials, the equipment that we are using. The CVs of the professional that we are proposing on site. And 20% is weighted for the lowest bidder. So proportionately, how lower or higher is their bid, the marks are considered. So 80% plus 20%, whoever is the highest is awarded the work.

So based on our past experience, we have grown from a score of 88 to 95-plus today, we have reached 96, 97 also. But we are very optimistic in getting good orders from the estimated order outflow for the next two, three years. We have not just restricted ourselves to the domestic market, we have also started taking up works in the international market and we are expecting to win one or two projects with high-profit margins very soon. As far as international projects are concerned, we have submitted bid in African countries, Southeast Asian countries, Bangladesh, Nepal, Cambodia, Vietnam, then in African countries, Zambia, Tanzania, Nigeria, and we have been shortlisted in about seven projects were result is awaited, and submitted more than 65 expression of interest in these countries.

The order inflow in the past for FY ’22, ’23, especially has been the best in the — this year company completes 20 years of its existence. And FY ’22, ’23 has been the best till date. And the company has received orders of INR150 crore-plus in one single year, which is the highest achievement ever. Our executed order book stands at INR250 crores, as against the total order book of INR500 crores-plus.

Few projects that I would like to mention here is that, the company is working — in majority of expressways, we have recently completed the Delhi Vadodara expressway section, where COD has been issued. We are working in Jaipur, Visakhapatnam, Delhi Dehradun expressway, Amritsar, Bathinda. So such received this projects are under the belt of Dhruv Consultancy and the major is the Ganga expressway project, this has been done by UPEIDA, the UP Expressway Industrial Development Authority.

The Ganga expressway itself is up 594 kilometer long project, and it is an important part of the government, it is an important project for the Uttar Pradesh State government, it is from Varanasi to Meerut. We are marching with high flow of orders and FY ’24 looks to be full of opportunities, as this is going to be the year before the central government election, so we are expecting huge number of order inflow year.

Now I request Mr. Rajesh Sindhav to take you through the financial performance of the company for the reported quarter and FY ’23.

Operator

Rajesh sir, over to you. I think you are on mute.

Rajesh Sindhav — General Manager Finance and Accounts

Hello.

Operator

Yes.

Rajesh Sindhav — General Manager Finance and Accounts

Hello.

Gopal Chandak — Investor Relations

Yes, we can hear you, sir.

Rajesh Sindhav — General Manager Finance and Accounts

So I — good afternoon Tanvi and Pandurang sir, and other shareholders. And — financial highlight for the FY ’23, FY ’22. The total revenue of the company has gone [Technical Issues]

Operator

Sorry to interrupt you, Rajesh sir, your voice is breaking. May I request you to take the mic little further to you and come in network area please?

Rajesh Sindhav — General Manager Finance and Accounts

Yes. Now it is audible?

Operator

Yes, this is audible now. Thank you.

Rajesh Sindhav — General Manager Finance and Accounts

Yes, so total revenue of the company has gone up by 8% from INR75 crore to INR81 crore, the net up by INR6 crore. The total expenditure has gone up by 13% from INR67.66 crore to INR76.63 crores, so net up by INR8.97 crore. The major contribution for increasing the expenditure side on account of the employee cost has been gone up by 10% from INR17 crores to INR19 crore. So the net increased by INR1.74 crores.

The finance cost has gone up by INR69 lakh, due to the BG charges and interest on the various loan and processing charges. The depreciation has gone up by INR2 crore due to increase in the fixed asset on account of plant and machinery motor car, and we have gone under IHMCL traffic survey assets. And the administration expenses has gone up by INR4.52 crores due to the increase in the professional fee by INR5 crore and the provision of ECL provision by INR21 lakh, however, the other expenditure in the course of the traveling expenditure, side expenditure and the conveyance and [Indecipherable] has been reduced by INR74 lakh.

The EBITDA margin has been gone up by INR48 lakh from the INR9.81 crore to INR10.29 crore. The paid margin has gone down by INR93 lakh from INR5.76 crores to INR4.32 crore, and that account of increasing the depreciation, professional fees and employee costs. These are the financial highlights for FY ’22 [Phonetic] versus FY ’22. Hello?

Operator

Yes sir, should we open the lines for Q&A.

Rajesh Sindhav — General Manager Finance and Accounts

Yes.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Tushar Raghatate from KamayaKya Wealth Management Private Limited. Please go ahead.

Tushar Raghatate — KamayaKya Wealth Management Private Limited — Analyst

Good afternoon, sir, and thank you for the opportunity. Sir, just wanted to ask a question on the order book. You mentioned in the con-call — last con-call that has a great [Indecipherable] And we are optimistic about 30% on that. So I just want to understand where has gone as of now and what sort of expectation — what are the expectation for FY ’24 in FY ’25 in terms of order book, in percentage term growth. I want to understand that.

And secondly would be the — in the recent quarter, the margins were kind of — was less. So what was the exact reason for the same? Yes, sir.

Pandurang Dandawate — Non Executive Director and Promoter

Tanvi?

Tanvi Auti — Managing Director

Pandurang, sir, you are answering?

Pandurang Dandawate — Non Executive Director and Promoter

Tanvi?

Tanvi Auti — Managing Director

Yes. Hello, Tushar. So to give an answer to your question of the first part. So we are — as on date, if I review the orders we did are close to INR799 crores and our estimation for the past year has been like, we are achieving a success rate of 22% to 25%, so this results are awaited. So accordingly you can see the flow of orders that we would be receiving. In addition to that, continuous bidding is going on every month. And as I mentioned in my opening remarks also that we would be bidding a lot this year, has lot many projects — this would be the peak year for infrastructure projects as more number of projects are to be awarded. Last year, we did around INR150 crore projects, this year we are expecting INR200 crore plus orders we would be — we would definitely be able to bag.

Coming to the second answer. So as Rajesh had also mentioned that the main reason why our margins are slightly low this time is because of the inflow of orders that we have received and the initial mobilization expenditures are very high, as these are all expressway projects like the Ganga expressway, as I told you. And the realization of margins takes a certain time. In addition to this, the — as mentioned in the last con-call also that we had been awarded the traffic survey project in two zones, in one Maharashtra and Punjab, Haryana, Rajasthan. So for these, the revenues are yet to be realized, whereas the expenditures are on a very higher side. For this, we had to purchase a lot of assets as well wherein that does have an impact on our depreciation, otherwise, if you see the operating margins, they are definitely doing good.

Rajesh Sindhav — General Manager Finance and Accounts

So we have to say that, that were front-loaded the cost, and the margins were a little bit going forward.

Tanvi Auti — Managing Director

Yes. As and when — see margins realization happens when the construction period is slightly coming to an end. Initially the expenditures in any infrastructure project is very high and the flow of orders that we have been having in FY ’22, ’23 and even this has been tremendous and has been the highest in the company’s history. So there’ll be a slight effect on the margins because of this, but eventually in the long run, the pictures will be very good.

Tushar Raghatate — KamayaKya Wealth Management Private Limited — Analyst

So ma’am what kind of margins we can expect for FY ’24, ’25?

Tanvi Auti — Managing Director

See, for FY — for the next one or two years this construction is going to go on. So it might have a similar trend because if we — like I said INR150 crore order in last year, this year, if we say that even INR200 crore order we receive, we’re keeping the same trend INR150 crore. So again, the mobilization expenses will be higher, but project — the IHMCL traffic survey, there the profit margins are higher, so it compensates. Along with that, if an international project is awarded, that will also compensate. So at an average, we are expecting similar margins for the next year as well. And after two or three years, these margins will go on improving.

Tushar Raghatate — KamayaKya Wealth Management Private Limited — Analyst

Fair enough, ma’am. Thank you.

Tanvi Auti — Managing Director

Yes.

Operator

Thank you. The next question is from the line of Mukesh Panjwani from Value Securities. Please go ahead.

Mukesh Panjwani — Value Securities — Analyst

Yes, hi. Am I audible?

Operator

Yes, please go ahead.

Mukesh Panjwani — Value Securities — Analyst

The first thing I would like to understand is that, if we see the property, plant and equipment in our balance sheet, previous year growth INR6.7 crores, this year it is INR11.25 crores. And that’s one more right-of-use asset last year it was nil, and this year that is INR5.39 [Phonetic] crores. So can you throw some light on it like are we having previous level of property, plant and equipment, almost about 70%, 80%.

Tanvi Auti — Managing Director

Rajesh, sir, can you answer this?

Rajesh Sindhav — General Manager Finance and Accounts

Yes. So for the IHM’s project, we have rents of — there are combination of fleet as well as loan options. So there is a write-off mixed assets which we have entering into the OPCN, for the three years lease period for the finance leads. For these the write-off asset has been realized in the books of account. So it is around INR6 crore. Apart from that, we have taken some equipment and the software, which is required for the IHMCL project, which is — we taken through the loan from the HDFC Bank, which is around INR2.7 crore. Apart from that — yes, so these are the major equipment we have bought during this financial year.

Mukesh Panjwani — Value Securities — Analyst

Okay. So this is for that traffic project we have taken recently.

Rajesh Sindhav — General Manager Finance and Accounts

Yes. And pertaining to that the expenditure has been arising in the last quarter, respective income for the traffic survey we have to submit the report and get the validation from the authority. So the realization will be occurred in the next quarter.

Mukesh Panjwani — Value Securities — Analyst

Okay. And my next question is like, can you please tell me that what is the bagged order size for FY ’23?

Rajesh Sindhav — General Manager Finance and Accounts

Unexecuted order size, you want to know?

Mukesh Panjwani — Value Securities — Analyst

No, the orders we have bagged this year.

Rajesh Sindhav — General Manager Finance and Accounts

INR150 crore.

Mukesh Panjwani — Value Securities — Analyst

INR150 crore, okay. And what about the unexecuted order book?

Rajesh Sindhav — General Manager Finance and Accounts

We have INR250 crore of unexecuted order book right now.

Mukesh Panjwani — Value Securities — Analyst

Okay. And what about the international orders, have you got any recently?

Tanvi Auti — Managing Director

Yes. So we have been shortlisted in seven projects recently in the last two months. Wherein majority of the projects are in Tanzania and Nigeria, and usually the turnaround time — because these are ADB and World Bank funded projects. So that one turnaround time goes up to nine months — nine to 12 months. So for the award of business. So we are expecting any time that an orders will be awarded as accessory it has been good in terms of shortlisting.

Mukesh Panjwani — Value Securities — Analyst

Okay. So we can expect in this particular quarter?

Tanvi Auti — Managing Director

Yes. In this quarter or next quarter definitely.

Mukesh Panjwani — Value Securities — Analyst

Okay. And what is the total order book as of now and what would be the execution time for the same?

Tanvi Auti — Managing Director

Total unexecuted order book as Rajesh sir said that it is INR250 crore, and to be executed in a period of 2.5 to three years.

Mukesh Panjwani — Value Securities — Analyst

Okay. Can you — ma’am I want to know one more thing, like as we know that the market in which we are working is huge, and that very good growth potential. But why haven’t we been able to increase our revenues like Q-on-Q or Y-on-Y in that manner.

Tanvi Auti — Managing Director

So the revenue if you ask that I think they are increasing good because in the past, if you see the company performance, it has been — it is doing double-on-double every year, because till FY ’21, FY ’22, we have received orders of INR50 crores, INR60 crores [Phonetic], last year we received INR150 crore, this year we are expecting INR200 crores-plus orders, because as I mentioned in my opening remarks also that our technical core is increasing day-by day. Now earlier when we got listed, we were working on two lane projects, then we started working in four lane, six lane. Today we are working on eight lane expressway projects. So this eligibility has been built over the past few years, that can be seen in our revenue growth also.

Mukesh Panjwani — Value Securities — Analyst

But like last year our revenues were INR75 crore, this year it is INR61 crore [Phonetic]. So we can’t see — like in revenues we can’t see such growth. Maybe we are getting good number of orders and all, but it is not reflected in our revenue that is my point.

Tanvi Auti — Managing Director

I think revenues are also on a better side. But yes, as I told you that anything because this FY ’22, ’23 has been a year, wherein we have received INR150 crores, earlier were it was very less, so that initial four to five months the revenue realization takes certain time. Now these revenues are getting realized for the projects which were awarded in Q3 and Q4 of FY ’23. So the initial period where the expenditure is also high, that has been the trend over the past 20 years if you follow our balance sheet, and this year and maybe next year also if we bag more number of projects, again, that is going to be the scenario, because initial four to five months are needed for revenues to start getting realized in the books. And it is a long-term process and year-on year with so many orders coming up. It is very difficult, yes.

Mukesh Panjwani — Value Securities — Analyst

So in this year, we can hope like our revenues would shoot up…

Tanvi Auti — Managing Director

Yes, for the INR150 crore order book that we received in the FY ’23m those revenues will be realized yet in FY ’24 to a large extent. But for the projects, when which would be awarded in FY ’24, they again will take time to get realized. So it’s a continuous process, and when the ticket size has also started to increase, it has gone up from INR2 crore, INR3 crore, INR5 crore, INR7 crore, Ganga Expressway is INR21 crores. So the ticket size is also increasing year-on-year.

Mukesh Panjwani — Value Securities — Analyst

Okay. That’s all from me.

Tanvi Auti — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Yashwanti Kelkar from Kojin Finvest. [Phonetic] Please go ahead.

Yashwanti Kelkar — Kojin Finvest — Analyst

Yes. Thank you for the opportunity. Ma’am I just wonder, understand like [Indecipherable] budgetize an amount. So what is likely count that we can have it for FY ’24, for FY ’25?

Tanvi Auti — Managing Director

Can you repeat the last part of your question?

Yashwanti Kelkar — Kojin Finvest — Analyst

No, I’m saying [Indecipherable] segment has been [Indecipherable] how much we can see that growth in the — in our orders in FY ’24 and FY ’25?

Tanvi Auti — Managing Director

Yes. Like I mentioned in my last answer also that see INR2.7 crore has been allocated as budget for the Ministry of Road Transport and Highways, which includes the NHAI. So 5% to 6% is really the consultancy costs including the VPR separation and the supervision — construction supervision. So last year like considering our success rate of 22% to 25%, we are expecting INR200 crore-plus order for this FY ’23, ’24.

Yashwanti Kelkar — Kojin Finvest — Analyst

Okay. Current order — unexecuted order of around INR226 crore-plus [Indecipherable] would be the approximate size of the order book.

Tanvi Auti — Managing Director

Yes.

Yashwanti Kelkar — Kojin Finvest — Analyst

And can you [Indecipherable] high margin of others have been added?

Tanvi Auti — Managing Director

So high margin orders — yes, so there are like Rajesh sir also maintained that the IHMCL traffic survey project is a quite high-margin order, and though the initial expenditures we had to purchase a lot of FX, because this is 365 by 24/7 traffic survey has been carried out at different locations all over the country, and we have been awarded with two zones. So there is lot of machinery to be procured for these projects. So the initial setup cost is high, but these are high-return projects as well.

So we are targeting such projects, and the second is the Ganga Expressway also, like I said it’s a INR21 crore, INR22 crore order, single order. So that is also a high margin order which has just started. So as the order value is also high the initial expenditures are high.

Yashwanti Kelkar — Kojin Finvest — Analyst

Can explain that — that’s the way to compete the — in this current financial year or it will take FY ’25?

Tanvi Auti — Managing Director

It will take three years to complete.

Yashwanti Kelkar — Kojin Finvest — Analyst

Three years.

Tanvi Auti — Managing Director

[Indecipherable] FY ’23, but it is…Our project is for a long tenure, because then, after construction, there is DLP, what we call as the defect liability period. So our appointment is for a period of seven years. But — so the revenues will be distributed, but during the construction period 70% to 80% revenue is achieved.

Yashwanti Kelkar — Kojin Finvest — Analyst

As our media customers [Technical Issues] how is the payment realization happen, is it new or it takes the…

Tanvi Auti — Managing Director

No it is very good. In the past we have worked with central — sorry, state government, then as we went on building our eligibility in central government. So in central government, it’s an online system completely, the NHAI uses a data-like portal and MoRTH also uses a SAP portal, so in our office we can identify where our build is at — where our build is right now.

And accordingly, our — we have a strong team at every client’s office. And so — but at an average — it is 60 days to 90 days, depending on what state it is, if it’s a nearby State it usually comes in 45 days to 60 days, it goes up to an average of 90 days, but it comes in a timely manner, it is government money, so there have been no cases in the past where we have been to write-off such amount. So since we are — government and we also are binded by that contract. So our payments are always safe and secured, so we do receive it in a timely manner.

Yashwanti Kelkar — Kojin Finvest — Analyst

So in case what will be our working capital then, cycle?

Tanvi Auti — Managing Director

Working capital cycle, Rajesh sir, you can tell.

Rajesh Sindhav — General Manager Finance and Accounts

Working capital cycle is almost around 75 days to turnaround the things.

Yashwanti Kelkar — Kojin Finvest — Analyst

Okay. And [Indecipherable] receivable would be?

Rajesh Sindhav — General Manager Finance and Accounts

Yes, 70 days to 75 days.

Yashwanti Kelkar — Kojin Finvest — Analyst

70 to [Indecipherable]. And are you planning to have any capex for the current year, like last year you…

Rajesh Sindhav — General Manager Finance and Accounts

So major of the capex is already being done.

Pandurang Dandawate — Non Executive Director and Promoter

Hello. Just I will explain what CapEx has been done almost INR5 crore or INR6 crore, that capex till — for part one, that is IHMCL project which is awarded. Number two, we have the assignments — regular assignments of VPR and supervision work, wherein also we’ll need these assets of these equipments. Previously we were acquiring or hiring it from market. So there were two problems, one, cost was going high. Secondly, availability sometimes is under question, and third is accuracy of the results. So we took a major call this year considering the more profit and we hope purchased all these equipment, software. So that 100% now we are foolproof in Indian consultancy market as far as equipments are concerned. So it will add to our profit, it will add to our accuracy, it will add to our level of service, because of our instruments owned by the company.

Yashwanti Kelkar — Kojin Finvest — Analyst

Okay. Sir any of this process, you expect going-forward?

Pandurang Dandawate — Non Executive Director and Promoter

Hello.

Yashwanti Kelkar — Kojin Finvest — Analyst

Yes, any for the process you expect, even in the current year?

Pandurang Dandawate — Non Executive Director and Promoter

Current year low capex is expected.

Yashwanti Kelkar — Kojin Finvest — Analyst

Low capex. Sir, on an — I just wanted one location, the tariffs — working on any international order.

Pandurang Dandawate — Non Executive Director and Promoter

Not yet. We have shortlisted for seven projects, and we have submitted the bids, but the turnaround time is very slow, because the — because of the World Bank nature of the work, and we are expecting order at least one or two in current financial year.

Yashwanti Kelkar — Kojin Finvest — Analyst

Okay. And this quantum [Indecipherable] can you mention the quantum?

Pandurang Dandawate — Non Executive Director and Promoter

72 [Phonetic] EOI we have submitted, expression of interest. Out of which seven results are out and we are shortlisted in all seven. So definitely once the flow starts, we will be flooded with international orders also.

Yashwanti Kelkar — Kojin Finvest — Analyst

That is so great. I’ll come back in the queue again.

Pandurang Dandawate — Non Executive Director and Promoter

Yes. Okay.

Yashwanti Kelkar — Kojin Finvest — Analyst

Yes, thank you, sir.

Operator

Thank you. The next question is from the line of Sriram as an investor. Please go ahead.

Unidentified Participant — — Analyst

Yes. I have two questions. So can you explain what is big capacity class and why is it advantageous for you?

Pandurang Dandawate — Non Executive Director and Promoter

Big capacity clause is like this for the company having turnover between x and y, say between INR20 crore to INR30 crore, they have maximum 10 numbers, then INR30 crores to INR40 crores, they have 20 number. If turnover is between INR30 crore to INR40 crore, 30 and if stories — average annual turnover of last three years is more than INR40 crore — I think INR50 crores, then there is unlimited. So we just entered into an unlimited zone as far as bid capacity is concerned.

Yashwanti Kelkar — Kojin Finvest — Analyst

Okay. And what is the unbilled revenue for this year?

Pandurang Dandawate — Non Executive Director and Promoter

Rajesh?

Rajesh Sindhav — General Manager Finance and Accounts

INR38 crores.

Yashwanti Kelkar — Kojin Finvest — Analyst

INR38 crores. And why is it high? I mean, last year it was INR30 crores.

Rajesh Sindhav — General Manager Finance and Accounts

Yes. Because there are certain projects around 10 to 12 projects, which have been started at the — by the end of the quarter — as well as there are some project also is there, where the revenue is likely to be achieved on the milestone basis. So there is no revenue has been recognized — unbilled revenue has been recognized the billing will be done in the next quarter or maybe in the next two, three months.

Yashwanti Kelkar — Kojin Finvest — Analyst

Okay. Earlier in the call you mentioned four areas of consultancy. So, can you provide the revenue breakups for each of the segment. And along with that, what would be the approximate margins?

Tanvi Auti — Managing Director

So far this year our orders are presently 15% of that open revenue. Supervision is 70%, and 5% for the FY ’23 I’m talk about, and 5% would be for the other works, advisory and private works. So going forward I assume IHMCL revenue that is under advisory services that will increase for FY ’23, ’24 as the revenues are yet to be realized. Yes, so this is it. And you had another question.

Yashwanti Kelkar — Kojin Finvest — Analyst

Margins for the…

Tanvi Auti — Managing Director

Margins, yes. So far DPR, our EBITDA margins are 25% to 30%, for supervision they are between 10% to 15%, and for IHMCL, they are again 20% to 25% for traffic subdivisions.

Yashwanti Kelkar — Kojin Finvest — Analyst

That’s very good. Thank you.

Tanvi Auti — Managing Director

Yes.

Operator

Thank you. The next question is from Sanjeev Kumar Damani from SKD Consulting. Please go ahead.

Sanjeev Kumar Damani — SKD Consulting — Analyst

Tanvi ji, Pandurang ji and Rajesh ji, am I audible?

Rajesh Sindhav — General Manager Finance and Accounts

Yes.

Sanjeev Kumar Damani — SKD Consulting — Analyst

Thank you. Very happy and proud to see this kind of a company getting lifted. I came to know about this company very recently, and I have started tracking. So my first clarification I want is from the discussion only. Tanvi, we said that INR799 crores is our pending order and then we started talking through INR50 crore is our unmet executed order, so Tanvi, can you explain?

Pandurang Dandawate — Non Executive Director and Promoter

No, it is not like that, INR800 crore tenders or bids we have submitted and results are awaited.

Sanjeev Kumar Damani — SKD Consulting — Analyst

Okay. Got it. Then the second question is regarding one — Rajesh ji, he was replying to my fellow person, IHM service, is it a correct word I have heard IHM service a rebate that IHM services we are procured certain needs [Indecipherable] our equipments. Is it — I heard is IHM or something else Rajesh ji…

Rajesh Sindhav — General Manager Finance and Accounts

It is IHMCL, I will tell you, it is a Indian Highway Management Company Limited, it is a 100% subsidiary of NHAI. It is only formulated for IT improvisation in highway sector, if you have traveled abroad, you might have seen the difference on the highways, the signages, the connectivity, you can see the capturing the images, which is just started on Mumbai-Pune Expressway, you are getting penalized if you are overspeeding. So all these things is coming under IT, it also includes traffic surveys and collection of tools, tolls software, hardware, all that comes under the IHMCL.

Sanjeev Kumar Damani — SKD Consulting — Analyst

Okay. So sir, we are erecting this special meeting for NHAI?

Rajesh Sindhav — General Manager Finance and Accounts

No, we have been awarded only with the traffic service. So we are in the service sector.

Sanjeev Kumar Damani — SKD Consulting — Analyst

What we service, can I understand sir, can you kindly explain?

Rajesh Sindhav — General Manager Finance and Accounts

Traffic surveys are needed for two purposes, first is to estimate the toll revenue for next three, four, five years, they lead-based number. So based on our traffic surveys and our accurate results, they put the number in the bid, particularly POT contracts. And for expansion of highways like widening or strengthening or converting highways into Expressways, they need certain traffic data. So that data is — our data is a base for future of the India.

Sanjeev Kumar Damani — SKD Consulting — Analyst

Okay. Very nice sir. Thank you very much. I got the answer. Now, I’m coming to one final question, before that, I would like to say that sir, am I right when I presume that Newman Power or Newman resources our biggest for raw-material, then on — I presume this is it correct that raw materials for this company…

Rajesh Sindhav — General Manager Finance and Accounts

Correct, 100% correct.

Sanjeev Kumar Damani — SKD Consulting — Analyst

Because, I would understand that ERPs I’ve been leaving to brands to make a survey or good technology is there, but minimum supervision is always needed, they are setting out wireless surveys.

Rajesh Sindhav — General Manager Finance and Accounts

Yes. Just to add to it, not only human, it is human brain also, that is intelligence.

Sanjeev Kumar Damani — SKD Consulting — Analyst

Okay, intelligence also is required.

Rajesh Sindhav — General Manager Finance and Accounts

No, intelligence is more important, out of the 400 employees, 300 plus are engineers, they are experienced engineers.

Sanjeev Kumar Damani — SKD Consulting — Analyst

So sir, now my question is, that how do we ensure retaining them, because one thing I could understand that you have reached the highest bid level, where we can bid for all kind of projects. And my understanding is usually people who get trained at your place, they can start their small enterprises, their holding.

Rajesh Sindhav — General Manager Finance and Accounts

That is not possible here, because when we select the personal for particular project, the CV of that person has to be uploaded on the INFRACON website, which is the Government of India website and outside INFRACON no person is allowed. And once we bid for the project and the project is awarded, the person has to give consent before award of projects or at the time of bid. And once the consent is given and once the project is awarded, we cannot move anywhere till completion of the project.

Sanjeev Kumar Damani — SKD Consulting — Analyst

Okay, that’s very nice sir. I was only wondering that we have to manage people, so people can escape from responsibilities and all that. One more thing that I was reading that unbilled amount is INR38 crore, so this is — is there no way we can change this method, whereby till the bill is made, some amount of monies are received by us against the work. So unless…

Rajesh Sindhav — General Manager Finance and Accounts

No. I want to explain it, the unbilled revenue is mainly for IHMCL project, where the payment is on quarterly basis, but expenditure is on daily basis, because our teams are moving on the site, in volumes, along with the equipment and vehicle. So expenditures are largely on that part. Secondly, DPR, DPR project report, wherein, our services — our bills are based on the milestone basis. So typical of RFP, typical of agreement.

Sanjeev Kumar Damani — SKD Consulting — Analyst

Okay. So when we run the DPR service, we are an external agency, which is certify certain things, am I right?

Rajesh Sindhav — General Manager Finance and Accounts

Yes, correct.

Sanjeev Kumar Damani — SKD Consulting — Analyst

Right. Now one more that every day we have to incur expenses for these kind of surveys, right? So are they being put as inventory in our book, when we are closing it on either quarterly basis or annual basis?

Rajesh Sindhav — General Manager Finance and Accounts

Every quarterly basis we are doing that thing, because in our supervision service also, we are incurring the cost on the daily basis or you can say, monthly. We are incurring the cost on account of the rental service for the paying our staff, offices, then we have procured the car — rental car, then we have to make the payment to the salary. However, we are raising the bill at the end of the — everything, so it will take 45 days to raise the bill to the authority. So at the same time, the expenditure which is already — that is we are following the accounting standard, which is saying that the input cost method. So on the basis of input cost method, we recognize the unbilled revenue.

Sanjeev Kumar Damani — SKD Consulting — Analyst

Okay. So sir, in this the balance sheet of 31 March, I want to ask you, otherwise also about other current assets. So in your current assets, there is other, that is INR14 crore, so is it — what is the nature of this item INR14 crore is shown as other in the current debt in the balance sheet that you have published on BSE.

Rajesh Sindhav — General Manager Finance and Accounts

Just a minute. That current asset is INR14 crore know? So these are the — on account of the TDS amount which is lying with the authority TDS receivable. TDS on GST, TDS on income tax and certain amount of on account of retention money which is lying with the authorities.

Sanjeev Kumar Damani — SKD Consulting — Analyst

Okay, got it. So here it sound like this, and I think trade receivable is okay and cash balance and — okay, sir, now I’m coming to final question, where you are showing your expenses as capital, because if you have not raised the bill for the services for which we have incurred our expenses, so are you showing them as some inventory or asset somewhere in the balance sheet or it is fully diluted and this INR38 crore revenue when it comes will be entirely our profit?

Rajesh Sindhav — General Manager Finance and Accounts

No. So as of now, how it has been booked some INR38 crore in expenditure which has been incurred already, that means the inventory has been recognized in the form of on-bid.

Sanjeev Kumar Damani — SKD Consulting — Analyst

But in the balance sheet where this item is shown sir, can you…

Rajesh Sindhav — General Manager Finance and Accounts

Yes, I will show you, this item is being showing under the other current assets.

Sanjeev Kumar Damani — SKD Consulting — Analyst

Other current asset, yes, this entire INR49 crore, which is our total — this thing, okay, got it sir. Now sir, coming to the final, can you just explain me, Tanvi madam was explaining certain compensate of revenue, of various activity. So one activity, I could understand is defective services…

Rajesh Sindhav — General Manager Finance and Accounts

Defect liability period.

Sanjeev Kumar Damani — SKD Consulting — Analyst

DPR, they called it, right? And the second one, which she explained is that you do lot of search and research for them and do surveys, right sir? So that is the second way of getting revenue from these projects.

Tanvi Auti — Managing Director

So I’ll just detail out in a simple way, yes. So the first is DPR wherein we do the feasibility study. So we have to check whether that project is technically and economically feasible.

Sanjeev Kumar Damani — SKD Consulting — Analyst

So madam can you tell me the full form of DPR?

Rajesh Sindhav — General Manager Finance and Accounts

Detail project report.

Sanjeev Kumar Damani — SKD Consulting — Analyst

Detail project report, okay, thank you.

Tanvi Auti — Managing Director

Yes, so we carry out everything from the surveys to designs, land acquisition, forest clearances, preparation of contact documents, everything is done under DPR.

Sanjeev Kumar Damani — SKD Consulting — Analyst

Okay. Then…

Tanvi Auti — Managing Director

Second comes the supervision, so when now the DPR is prepared, contractor is appointed. So to supervise the contractor’s work, a consultant is needed on a day-to-day basis. So government does not have that many machinery and manpower to supervise these projects, hence, they appoint a consultant, and we the certification authority in that case.

Sanjeev Kumar Damani — SKD Consulting — Analyst

Okay. What other activities that we do sir?

Tanvi Auti — Managing Director

Yes. These are two. And third activity is the advisory services herein, basically we carry-out the surveys. So we have lot of equipment — imported equipments like the retro reflector meter, falling weight deflectometer, mobile bridge inspection units, automatic traffic counter come classifier. So these equipments are needed to scan a particular road to check its quality to carry-out surveys to check the reflection on size board, so these kind of services we also provide to the government, as well as in some cases for private contractor. And fourth is the design coverages, so we have an in-house highway and a structural design team, who carry-out the detailed designing of highways and structure coming on the road. This is mainly for private contractors.

Sanjeev Kumar Damani — SKD Consulting — Analyst

Right. So thank you very much, I have been given to understand. I come back in the queue if required.

Tanvi Auti — Managing Director

Sure, okay.

Operator

Thanks. The next question is from the line of Himani Oban from Suraj Enterprises. Please go ahead.

Himani Oban — Suraj Enterprises — Analyst

Hello. Am I audible?

Operator

Yes, please go ahead, you are audible, yes.

Himani Oban — Suraj Enterprises — Analyst

Sir, my question is margin increase drastically in Q4 FY ’23, but sir for the year, it has decreased, can you please explain, what’s the reason?

Tanvi Auti — Managing Director

So as I have explained that this is mainly due to the traffic survey projects that started in the quarter four. So the depreciation cost has gone on a higher side. Along with that, we have received INR150 crore plus order in the FY ’23, for which the initial mobilization expansion [Technical Issues] Yes, so the quarter four, overall, it has been good. Only thing is few sales are to be recognized in the coming quarter and expenditures are on a higher side.

Himani Oban — Suraj Enterprises — Analyst

Okay. And what guidance or EBITDA margin we would like to give for future?

Tanvi Auti — Managing Director

So for, it is different for different kinds of services, for DPR, it is 25% to 30%, then for CNC, it is 15%, that is a supervision work, 11% to 15%. For advisory surveys, it is 30%, and for design it is 40%.

Himani Oban — Suraj Enterprises — Analyst

And what is current unexecuted order book? And what is average period to complete it?

Tanvi Auti — Managing Director

Yes, INR230 crore is the unexecuted order book as on date, and the expected time completion is 2.5 to three years.

Himani Oban — Suraj Enterprises — Analyst

Okay. Any disclosures in-hand?

Tanvi Auti — Managing Director

Yes, Ganga Expressway project is the highest one first, that is INR22 crore. Second is the IHMCL, the traffic survey project projects in two zones, that is INR10 crores. And then there are other PMC projects in Andhra Pradesh, BPR projects, they are also to the tune of INR15 crores to INR18 crores.

Himani Oban — Suraj Enterprises — Analyst

Okay. Thank you so much.

Tanvi Auti — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Tushar Raghatate from KamayaKya Wealth Management. Please go ahead.

Tushar Raghatate — KamayaKya Wealth Management — Analyst

Yes, thank you for the opportunity ma’am. Ma’am what is the total order book, so what percentage comparison of DPR, PMC advisory services?

Rajesh Sindhav — General Manager Finance and Accounts

Hello?

Tushar Raghatate — KamayaKya Wealth Management — Analyst

Hello. I just want to understand the possible contribution of all the services…

Rajesh Sindhav — General Manager Finance and Accounts

So on a EBITDA order book, out of which, the DPR project was INR15 crore to INR20 crore in unexecuted. The traffic survey is around INR10 crore. The balance is on the PMC side.

Tushar Raghatate — KamayaKya Wealth Management — Analyst

Okay. Fair enough. So out of this big projects which you expect orders. So the orders are more declined towards bid services.

Rajesh Sindhav — General Manager Finance and Accounts

PMC.

Tushar Raghatate — KamayaKya Wealth Management — Analyst

PMC, okay. And sir, like [Indecipherable] quarterly related to INR20 crores. Can we expect in the next two to three years, the company can increase its quarterly related to INR30 crore to INR35 crores?

Pandurang Dandawate — Non Executive Director and Promoter

Just I would like to explain the future plans. Am I audible?

Operator

Yes, sir.

Pandurang Dandawate — Non Executive Director and Promoter

So. Recently one new corporation is formed in Maharashtra, its name is MSSIDC, Maharashtra State Infrastructure Development Corporation. This corporation is 100% government of Maharashtra owned company, they have been assigned task of working outside Maharashtra on intra projects either G2G or on — Ircon or Rail Vikas Nigam Limited, wherein we are likely to be nodal consultant for that corporation. That is a big business coming up. Secondly, another corporation is there again a 100% on the Government of Maharashtra company, its name is MahaPreit, it is a Mahatma Phule Renewable Energy Department. And they have assigned a green hydrogen supply for RCF, amounting to INR10,000 crores. And now they are in search of investors and developers supplying the green hydrogen or ammonia.

So Brookfield, which is a International Agency and in-principle they aggregated to enter into agreements with MahaPreit, — will act as a nodal efficacy and consultant also. So big assignments are expected in current year, other than this [Technical Issues]

Tushar Raghatate — KamayaKya Wealth Management — Analyst

Hello?

Tanvi Auti — Managing Director

Hello.

Operator

Tushar, we are unable to hear you.

Tushar Raghatate — KamayaKya Wealth Management — Analyst

Yes. Sir, I just want to understand like how [Indecipherable] so what would — sir, can you quantify the opportunity going forward what sort of opportunity you are seeing?

Operator

I’m sorry, we have lost line for Pandurang sir. We’re just reconnecting him.

Tanvi Auti — Managing Director

Okay. Yes.

Pandurang Dandawate — Non Executive Director and Promoter

Hello?

Operator

Yes, sir. You are reconnected.

Pandurang Dandawate — Non Executive Director and Promoter

Yes, I was disconnected. So these are the two big assignments I am expecting current year, and that will also — lower picture or it is diversification in part of diversification. And also, it will add to the revenue numbers and profit numbers.

Tushar Raghatate — KamayaKya Wealth Management — Analyst

Just one question sir, if you quantify the opportunity which you are posting, so what sort of numbers you would…

Pandurang Dandawate — Non Executive Director and Promoter

It is almost double than what we are getting now in a year, in terms of order book, in terms of profits.

Tushar Raghatate — KamayaKya Wealth Management — Analyst

Fair enough sir. Yes, thanks.

Operator

Thank you. The next question is from the line of Sriram R as an investor. Please go ahead.

Unidentified Participant — — Analyst

Yes. I have two questions. I mean in terms of scope of work, like, how is it different from, let’s say, rights or NAPCOs.

Rajesh Sindhav — General Manager Finance and Accounts

Hello, Tanvi.

Tanvi Auti — Managing Director

Hello. Yes, okay, I think got disconnected.

Rajesh Sindhav — General Manager Finance and Accounts

I will answer.

Tanvi Auti — Managing Director

Okay.

Rajesh Sindhav — General Manager Finance and Accounts

So basically [Indecipherable] is a government of own India consultancy forum, they’re working exclusively for Indian Railways, and also sometimes for Ircon, internationally and in nationally also. So they are Government of India back-in the consultancy firm, we cannot have any comparison with them, because we have to get the work on competitive basis, not on nomination basis. That is one. Secondly, they are only in the railways, and we are in many vertical.

Tushar Raghatate — KamayaKya Wealth Management — Analyst

And sir, do you compete with [Indecipherable] then?

Rajesh Sindhav — General Manager Finance and Accounts

It is also like rightly only, it cannot be compared, they are 100% owned Government of India company. And we are totally private company.

Tushar Raghatate — KamayaKya Wealth Management — Analyst

I understand that, but in terms of — so to the NHAI portion, I mean do they compete with you or…

Rajesh Sindhav — General Manager Finance and Accounts

They do compete with us, but they don’t get qualify either or they don’t get numbers what we are getting. Our core sector is highway, their core sector is totally different. So it is not comparable. It is not apple-to-apple comparison.

Tushar Raghatate — KamayaKya Wealth Management — Analyst

Okay. And sir, one more question sir. If I look at your past track record, you use to do 20%-plus margins, and now you know about 70% of the work you’re saying you’re getting 10% to 15%, but your margins are still on the lower side, like it’s on 10%, 11%. So like I just want to understand what is the margin trajectory for the next couple of years?

Rajesh Sindhav — General Manager Finance and Accounts

Tanvi?

Tanvi Auti — Managing Director

Yes. So the earlier margins that we make — margins are there, now competition has increased a lot in India. You can see the budget provision that is being done in the country and to the road sector, so yes, over the past few years the competition has increased, which has had an impact on the margins. So anticipating that, we are targeting new clients like we bag the Ganga Expressway project. It is not an NHAI or a MoRTH project. A different organization all together. In addition to that, like sir said about MahaPreit and MSIDC, so organizations, we are trying to — through these organizations we are trying to increase our client base, which will in turn have an effect on our margins. Addition to that, the ADB and World Bank funded projects that we are very positive about bagging, they are on super high margins.

So again we would be able to come on that track. For NHAI, MoRTH, the competition has increased, the costs have increased, as the number of projects have gone on a higher side. And therefore, this balance between the clients is required, and we are definitely taking positive efforts towards it.

Tushar Raghatate — KamayaKya Wealth Management — Analyst

Can you just comment on your margin trajectory? I mean, like, what can we expect in the next couple of years?

Tanvi Auti — Managing Director

Yes. So as I told that the type of services — that depends on the type of services that we are providing. So if it’s a DPR project we are bidding all of them. So for DPR the project, you can expect about 25% to 30% margins. Like we bag the IHMCL traffic survey project, similar projects are coming up and these traffic survey project itself are extendable year-on-year, so traffic survey requirement is going to be a requirement of the government every year. So these are almost 35%, 40% margin projects. PMC is 11% to 15% margins, and the design services are again 40% margin.

Tushar Raghatate — KamayaKya Wealth Management — Analyst

Okay, that’s helpful. Thank you.

Tanvi Auti — Managing Director

Yes.

Operator

Thank you. [Operator Instructions] We have a follow-up question from the line of Sanjeev Kumar Damani from SKD Consulting. Please go ahead.

Sanjeev Kumar Damani — SKD Consulting — Analyst

Actually I was wanting to know who are our nearest competitor, who are equally competitive — equally competing and complete details in our work.

Pandurang Dandawate — Non Executive Director and Promoter

There were 20, 25 companies, two years back or three years back. But this bid capacity clause and the stickiness of NHAI and MoRTH, in terms of services, many companies are debarred from bidding process, or the are lost a bid capacity, right. And now only five to seven companies remained in the market. Namely, it’s SA Infrastructure, RB, L. N. Malviya, Ourself and few more, two, three. There are six or seven companies remained in market.

Tushar Raghatate — KamayaKya Wealth Management — Analyst

Okay. So sir, actually I was presuming that many company might have vanished in the process, because it is to give good services, which is very important sir. So how we are being rated amongst the — our customer preferred? Because usually when money comes only bad besides we will get the contract, but when we are bidding in government, do we get any edge, except this bid one is there, but in the same bid section when four, five players are there. So are we being preferred or are we being light, or are we getting any bonuses for good work done?

Pandurang Dandawate — Non Executive Director and Promoter

No, it is based on the technical marks, which are getting the — we are getting the advantage. Technical marks are based on three parts, one part is, your experience, wherein in how these things count. Second is the CV of the personal put on the assignment. And third is your equipment and software Bank. So in all three fronts, we are top most in India, almost scoring now 95-plus marks out of 100. And others are not scoring more than 92 or 93.

Tushar Raghatate — KamayaKya Wealth Management — Analyst

So will it be that we’ll be virtually a monopoly in the days to come?

Pandurang Dandawate — Non Executive Director and Promoter

Not monopoly, because always six, seven players will be there. Those who are debarred again will come in picture. Those who have lost the bid capacity will again come for the competition, international players are coming up. So competition will always be there.

Tushar Raghatate — KamayaKya Wealth Management — Analyst

Okay. And madam was — Tanvi, ma’am was explaining to some other fellow person, that competition has gone up. So are we not able to raise the prices, because cost of outbreak…

Pandurang Dandawate — Non Executive Director and Promoter

We cannot raise prices to the much — for the reason that technical marks govern the assignment. So suppose I am scoring say 95, other fellow is scoring 94, I can bid INR25 lakh-plus, not more than that, if I bid for INR50 lakh-plus then I will loose the job.

Tushar Raghatate — KamayaKya Wealth Management — Analyst

Okay, got it, sir. So some reasonable level we can raise, but…

Pandurang Dandawate — Non Executive Director and Promoter

Yes. Reasonably we are raising, but again, you can say it’s a very volatile world.

Tushar Raghatate — KamayaKya Wealth Management — Analyst

Because the fellow person there — the person state that you were having 70% and these days the margins were almost getting finished, very in margins are there now basically. So sir, thank you very much and if possible, I’ll get in touch with your someday in the office. Thank you.

Pandurang Dandawate — Non Executive Director and Promoter

Sure.

Operator

Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference back to Mr. Gopal Chandak. Thank you and over to you.

Gopal Chandak — Investor Relations

Yes, thank you everyone for joining the conference call of Dhruv Consultancy Services Limited, if you have any queries, you can write us to at address kirinadvisors.com. And once more, thank you everyone for joining the conference.

Pandurang Dandawate — Non Executive Director and Promoter

Thank you very much.

Operator

Thank you very much.

Tanvi Auti — Managing Director

Operator, thank you.

Operator

[Operator Closing Remarks]