Rail Vikas Nigam Ltd Q3 FY23 Earnings Conference Call Insights

Key highlights from Rail Vikas Nigam Ltd (RVNL) Q3 FY23 Earnings Concall

Q&A Highlights:

• [00:09:21] Ash Shah of Elara Capital asked about the order book outstanding as of 3Q23. Rajesh Prasad Director replied that As of Mar. 31, 2023, the projected order book will be between INR55,000-60,000 crores. 20% of that will come through market bidding, while the rest will be through nomination based railway projects.

• [00:11:22] Ash Shah at Elara Capital queried about the order inflow for 9M FY23. Rajesh Prasad Director answered that the strike rate is around 24-25%. On the bids submitted, that started 15 months back, it’s about INR70,000 crores.

• [00:11:54] Ash Shah from Elara Capital also asked about the progress of the Kazakhstan project. Rajesh Prasad Director said that RVNL has identified 4 projects totaling 1,000 km in length and costing between $2-3 billion. RVNL has signed an MOU and formed a JV to execute the projects in the first phase.

• [00:14:14] Pranay Khandelwal from Alpha Invesco enquired about any update on the Maldives project. Rajesh Prasad Director answered that RVNL has been awarded a project from the Govt. of India worth over INR1,500 crores for the Maldives. It is a marine work project, and it is the first overseas project RVNL has executed. RVNL is looking forward to having more projects overseas in the future.

• [00:15:54] Sandeep Sutodiya with Shivam Dealmark asked if the company has any constraints in ramping up the order book since the ticket size of orders is very small. Rajesh Prasad Director said that in Q3, the topline of the company increased by 12.5% cumulatively and the PAT was up by 30.45%. The company entered the market with two packages from Indore Metro. There is a mix of small value and higher value tenders, such as the Chennai Metro package which costs around INR1,134 crores, while the Maldives project is estimated to cost around INR1,546-odd-crores.

• [00:18:39] Sandeep Sutodiya with Shivam Dealmark queried if the company’s margins are affected by higher technical projects, and if so, what are the expected changes. Rajesh Prasad Director clarified that RVNL has various projects assigned on a nomination basis and SPV projects that are almost at completion phase. The margins for these projects range from 5.6-5.8%. In the future, RVNL will focus more on increasing the margins by using value engineering for the projects.

• [00:27:23] Devang Shah from Asit C Mehta Investments asked that in light of the govt.’s budget allocations for infrastructure, what plans does the company have to capture and benefit from increased order inflow. Rajesh Prasad Director said that the Ministry of Railways and the Govt. of India have huge plans for creating infrastructure, with a capex of INR2.4 lakh crores in comparison to INR1.37 lakh crore of budget expense of FY ’22-’23. RVNL will be focusing on this sector, as well as the metro, road and high speed corridor sectors.

• [00:32:42] Devang Shah from Asit C Mehta Investments enquired about the decline in the share of profit from JV sequentially. Rajesh Prasad Director replied that the seasonal flow and traffic pattern of imported coal transportation changes depending on demand, supply, and government requirements. RVNL monitors these changes regularly, and have seen a sharp increase in this type of transportation from FY21-FY22 to FY22-FY23.

• [00:34:21] Devang Shah from Asit C Mehta Investments asked if for FY23-24, RVNL is going to maintain the same revenue guidance. Rajesh Prasad Director said that the MOU aims to reach a topline of INR20,000 crores. RVNL is focusing on the bottom-line and expect it to reach INR1,200-1,300 crores by ’23-’24, which is more important for investors.

• [00:37:41] Ash Shah from Elara Capital asked that 80% of the order book being nomination based, when will it be out of the books. Rajesh Prasad Director answered that a typical railway projects takes around 5 years to complete and commission. If the project started two years ago, it may take another 2 years. If it has started 3.5 years ago, it will take 1.5 years. So maybe in 3- 3.5 years, it should be completed.

• [00:44:13] Deep Mehta from Bank of India asked about the growth outlook for FY24. Rajesh Prasad Director replied that this year, FY23-24, Indian Railways will aim to achieve a topline of INR21,000 crores plus and a bottom-line of more than INR1,200 crores.

 

• [00:46:21] Devang Shah from Asit C Mehta Investments enquired if RVNL has a cost escalation clause in a tender since it’s participating in a tendering process. Rajesh Prasad Director said it depends upon the clients and provisions of each tender document, which varies from tender to tender. RVNL has a business development process to allocate risk based on the provisions of the tender, in order to mitigate risk. Depending on the provisions, some banks may get extra benefit, while others may not. However, RVNL said it is still able to allocate risk for each case.

• [00:48:14] Sandeep from Shivam Dealmark asked about the fund allocation expectation towards dividends from FY23 profits. Rajesh Prasad Director said the guidelines are available as per the Ministry of Finance directive and RVNL will abide by that. Last year it was 35%, and it’s not issued for this year.

• [00:49:12] Rajesh from Moneyore queried if the margins are more in the bidding order. Rajesh Prasad Director clarified that in longer term the margins will go up, but in the initial phase there could be a dip.

• [00:50:05] Rajesh from Moneyore asked about the PAT growth outlook of 20%, considering the stagnant topline growth. Rajesh Prasad Director said that since RVNL is in the market, it has the flexibility. RVNL is setting up a design and procurement cell to reduce costs and increase margins in the execution of projects. This is something major infrastructure companies do.