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Earnings Call Analysis
Summary
Q1-2024
Capacit'e Infraprojects Limited kicked off FY '24 with a slight downturn in financial performance. Revenue dropped to INR 430 crores from INR 477 crores in Q1 FY '23, while profit after tax (PAT) declined to INR 19 crores from INR 28 crores. Margins too reflected the contraction, with EBITDA margin at 17.4%, down from 21%, and PAT margin reduced to 4.4% from 5.2%. Nonetheless, the company asked stakeholders to focus on annual guidance over quarterly figures, providing a margin forecast of 17% to 18% for the fiscal year.
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Ladies and gentlemen, good day, and welcome to Capacit'e Infraprojects Limited Q1 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.Before we begin, a brief disclaimer. The presentation, which Capacit'e Infraprojects Limited has uploaded on the stock exchange and their website, including the discussions during this call contains or many contain certain forward-looking statements concerning Capacit'e Infraprojects Limited business prospects and profitability, which are subject to several risks and uncertainties, and the actual results could materially differ from those in such forward-looking statements.I now hand the conference over to Mr. Rohit Katyal, Executive Director. Thank you, and over to you, sir.
Good morning, everyone. On behalf of Capacit'e, I welcome everyone to the Q1 FY '24 earnings conference call of the company. Joining me on this call is Mr. Rajesh Das, CFO; Mr. Alok Mehrotra, President, Finance; Mr. Nishith Pujary, President, Accounts and Direct taxation, and our IR team. I hope everyone had an opportunity to look at the results. The presentation and press release have been uploaded on the stock exchanges and on our company's website.The revenue and the resultant profitability was slightly lower as the revenues were linked to cash flow receipts. Cash flow for the quarter 1 stood at INR 405 crores. However, the function of additional working capital, non-fund-based limits of INR 150 crores by SBI, and infusion of INR 96.3 crores of equity, the liquidity position has significantly improved and the same would get reflected in totality from H2 FY '24. The project ramp-up has gained momentum and will start reflecting strongly in the numbers during second half of the current financial year and onwards. The capital raised in Q2 FY '24 will be strategically utilized to fuel our future growth and fortify our operational capabilities, allowing us to deliver exceptional value to our clients and stakeholders.Other key updates. Projects awarded stood at INR 1,151 crores during Q1 FY '24, of which more than 60% was from existing clients. The company has raised INR 96.3 crores from esteemed investors. Recoveries of old stuck debtors is on track, and we believe we will be able to recover INR 35 crores in the current -- for H1 of the current financial year, thereby strengthening our balance sheet and cash flow position. We expect retention recoveries to the tune of INR 50 crores in H1 FY '24, which will have a positive impact on our working capital cycle. The order bid pipeline and inquiries remains strong from both private and public sector across segments. We are witnessing overall positive and healthy shift towards quality contracting companies in the building segment.Consolidated performance highlights for Q1 FY '24. Revenue from operations in Q1 FY '24 stood at INR 430 crores as compared to INR 477 crores in Q1 FY '23. EBIDTA for Q1 FY '24 stood at INR 76 crores as compared to INR 101 crores in Q1 FY '23. EBITDA margin for Q1 FY '24 stood at 17.4% as compared to 21% in Q1 FY '23. EBIT for Q1 FY '24 stood at INR 51 crores at 11.8% as compared to INR 58 crores in Q1 FY '23, which was 12.2%. PBT for Q1 FY '24 stood at INR 26 crores as compared to INR 38 crores in Q1 FY '23. PBT margin for Q1 FY '24 stood at 6% as compared to 8% in Q1 FY '23. PAT for Q1 FY '24 stood at INR 19 crores as compared to INR 28 crores in Q1 FY '23. PAT margin for Q1 FY '24 stood at 4.4% as compared to 5.2% in Q1 FY '23.We continue to be focused towards meaningful reduction in working capital cycle during the current financial year at 80 to 85 days in March '24 vis-a-vis 100 days in March '23.Order book on stand-alone basis stood at INR 10,245 crores as on March 31, 2023. Public sector accounts for 63% while private sector accounts for 37% of the total order book.The gross debt stood at INR 357 crores, with gross debt-to-equity at 0.33x. Net debt stood at INR 191 crores, with net debt-to-equity at 0.17x.Looking at the growth business opportunities. The Promoter & Promoter Group have offered a pledge of 25 lakh shares as collateral security for renewal of company's credit facilities from the banks. We believe that company's interest as paramount interest.Now, the floor is open for questions. Thank you.
[Operator Instructions] Our first question is from the line of Chirag Singhal from First Water Capital.
Sir, 2 main questions. First on the execution side. So I understand that we had liquidity issues, which appear to have withhold to some extent. So what is the sales guidance for this year? And how do you envision the growth rates for the next fiscal based on our assessment on the funding limit availability? That is first.And second is on the margins. So we thought that there was some dip in the margins, but I believe that some of it was because of the site establishment expense moving from depreciation to above EBITDA level. So for the full year, how are you seeing the operating EBITDA margin shaping out?
See, first of all, execution as I just mentioned for last year also and in the Q1 of the current fiscal also was linked specifically to inflow of funds from the client. Inflow for the first quarter was INR 405 crores. And therefore, without availability of any additional working capital limits, the company achieved a figure of INR 430 crores. We just mentioned that INR 150 crores of tie-up has happened on the non-fund-based class side, of which INR 50 crores of retention money is expected in H1 of the current fiscal, that means in Q2 of the current fiscal, which will improve the liquidity significantly.Second point is that, we have infused through preferential issue of INR 96.3 crores in the company, which takes care of the company to mismatch. Now, any further releases into the system, whether on account of advance, retention, release of old outstandings, which I just mentioned in brief, will add to the liquidity of the company. We see approximately INR 150 crores further getting added to the long-term working capital of the company's by the actions which the company has promptly initiated. And therefore, the guidance for the full year does not change. We have given a guidance of INR 2,000 crores, plus escalation on this INR 2,000 crores was [ regularly ] executed. So it's around INR 2,100 crores, and there is no reason that we need to change that because the growth from Q3 is given, and we do not see any hiccup, which will alter that growth. That's the first part of your question -- first question.Secondly, margins, we have been maintaining that quarter-on-quarter margin should not be viewed at. The company has been giving guidance for the whole year, and we have been achieving and maintaining that. And we see no reason why that will be any different in the current fiscal year. So kindly, we request once again that stakeholders, investors should look at the full year guidance rather than a quarter-on-quarter basis.I hope to have answered your question.
Yes. So if you can please reiterate the margin guidance, what should be the range that we should be looking at for the current fiscal?
So we have given a guidance of 17% to 18%. We have so far year-on-year achieved and improved on that. However, the guidance will remain the same. And hopefully, we can give you a positive surprise.
Our next question is from the line of Jiten Rushi from Axis Capital.
Sir, on the first question or the first question is, you said INR 150 crores of overall collections you are expecting this year. And of this INR 85 crores, which you have highlighted INR 35 crores through old [ debtors ], INR 50 crores through retention money in Q2. So this balance recovery in H2, what would be the breakup in terms of old collections and retention or it could be completely over collections?
So the retention stands at INR 170 crores. We have been able to maintain at that level because of additional guarantees. We believe that INR 50 crores of retention will be released in the first -- H1. That mass Q2 -- up to Q2 of the current financial year. And another INR 40 crores will be released in the H2 of the current financial year. All right? So taking the total retention release close to INR 100 crores. Number one.Number two, of the old outstanding, slow-moving debtors, the company, starting the quarter 4 of last fiscal, to date has recovered in excess of INR 30 crores. We believe that in the remaining period of the current financial year, another INR 50 crores to INR 60 crores will be realized. And that is why we -- why this entirely becomes INR 210 crores or thereabouts, a conservative figure of INR 150 crores has been given.
Got it, sir. That's good to hear. And sir, on the distribution part, can you throw some light on the CIDCO project and the MHADA project, what is the state of CIDCO? How much has been executed in Q1 and the target for this year and the next year run rate monthly or quarterly for CIDCO and both MHADA [ project ]?
Yes. So starting with MHADA project. We have -- we had earlier 8 buildings. Last time, we said that we were given a scope of additional 6 buildings. Work has started on all the 14 buildings now, and we expect the remaining 17 buildings or 16 buildings to be released in the current fiscal itself. So the revenue at the SPV level, while it is at about INR 30 crores to INR 35 crores per month at the moment in time. At the subcontractor level for Capacit'e, the revenue was INR 28 crores in Q1 of the current fiscal. We believe that there will be a momentum gain after the monsoons over there while we are casting the 3 flats per month on each building. However, the actual momentum will pick up in the quarter 3 of the current fiscal. And we do believe that we will be able to execute close to INR 40 crores, INR 45 crores per quarter from that project alone, as a stand-alone subcontractor, not at the SPV level. SPV level will be much higher. Okay?
Much higher, INR 40 crores, INR 45 crores in Q3, Q4 broadly.
Yes. So that would add about INR 90 crores, okay? And if you see last year, it was hardly any amount. Similarly, in CIDCO, we have built INR 104.74 crores in Q1 of the current fiscal. We believe that this figure will be slightly higher in the current quarter. But from quarter 3 onwards, we do believe that this figure will be INR 60 crores per month, [ or rather ] running rate will be INR 180 crores plus per quarter minimum.
You believe you should be doing almost INR 500 crores broadly this year from CIDCO or more than that easily?
Easily.
Our next question is from the line of [ Yash Dantewadia from Dante Equity Research ].
Am I audible?
Yes.
Yes. I just wanted to know if you have plans to dilute any more equity through QIB or any other route? And do you need more funds through this route?
So we have an enabling resolution for INR 200 crores of QIB. We are closely monitoring whatever will be in the interest of the company will be done. And as standing true to what we say, when we can offer a pledge of 25 lakh shares for renewal of the limits, then you can gauge the confidence which the promoters have on the company, number one, and the management is ready to what it takes to bring back the company to INR 600-plus crores of revenue per quarter. So I cannot give you any timeline. However, we have an enabling resolution valid for 1 year. And whatever is best in the interest of the company will be done.
Could you tell me the growth rate for FY '25 based on the visibility on the funding limits?
We have told you that the company should grow at least at 25% year-on-year on the expanded revenue base. So if you are doing INR 2,100 crores this year, you will grow at 25% minimum the next financial year.
And for this INR 2,100 crores revenue target or the guidance, whatever you want to call it, that you've given, how much more funding do we really need to execute this project at this stage? Or do we have enough funding to execute the INR 2,100 crores worth of projects?
We only need bank guarantee limits and for that, we have received a sanction of INR 150 crores already. And further sanctions of INR 300 crores are under process with various banks, namely PNB, SBI, UBI. So we believe that the company will be well equipped within the third quarter of the current financial year for achieving the revenue guidance for FY '25.
[Operator Instructions] Our next question is from the line of Deepak Poddar from Sapphire Capital.
First, just a clarification, I wanted to understand, when you said EBITDA margin outlook of 17%, 18%, does it include other income?
Yes, definitely.
So that is including other income, we are saying?
That our income is hardly any portion. It's not a material or substantial portion that it needs to be looked at. If you want to reduce that and have a view, hardly make any percentage difference.
Fair enough. Understood. And sir, just I wanted to understand, I mean, in the last con call, we did say that we got some non-fund-based limit of about INR 100 crores, right? So ideally, I always thought that our execution would not go down as compared to what we did in first quarter of FY '23, which was in the range of INR 477 crores to INR 480 crores, right? Because our -- I mean, non-fund-based limit has also increased. So I just wanted to -- can you throw some more light like why we saw, I mean, a downward division in our execution in this quarter when our fund-based limit has increased?
A very good observation, Deepak. The point is that, we had informed that on 4th of March 2023, we have received a sanction from SBI. You see the documentation, consortium, all these things take time. So primarily, the release has started happening on CIDCO limits in the first quarter of the current fiscal. And out of that, another INR 50 crores is being released in the current month and next month for release of the INR 50 crores retention. So, obviously, it could have reflected in the revenue growth of the Q1 numbers. What we have maintained in the last earnings conference call and again today, that the company has tied up. The concern was whether tie-up would happen or not. That concern has been addressed and with an additional infusion of INR 96.3 crores of equity, the company is well equipped to ensure that the current year's revenue guidance will be achieved.
Correct. Correct. But I think in your -- I mean, opening remarks, as well as in your press release, you -- I mean, the tone is more towards that the impact of this higher working capital would be seen more in the second half, right? So do you expect your second quarter execution also to be on the muted side?
See, I'll just tell you, we are -- we have lost 15 days in July due to monsoon, not we, everyone has lost in Mumbai, at least. All right? So I do not want to guess too much on the monsoon intensity in August. July has been fair so far, has been kind so far. Generally, you lose in a quarter 15, 17 days during the monsoon period because if the work is only being done below the ground level, then there is an issue. Above ground level, there is not an issue if normal monsoons are there. But heavy to very heavy monsoons have been witnessed during July. So therefore, there has been an impact. What we have mentioned in our opening remark is that, you will see a very, very strong growth starting from Q3 onwards, where we do believe that INR 600-plus crores is the given.I think if we are targeting figure sensibility, INR 430 crores, INR 420 crores or let's say, INR 850 crores in the first half year, we are definitely targeting more than INR 1,300 crores in the second half year, and that is why the revenue guidance. I'm being open because a company who stop a bank guarantee limits and now has started receiving them can only -- cannot just grow the next day of receiving the sanction. It takes a quarter to ensure that the revenue comes that is optimum and is visible in the quarter numbers.
Okay. Sir, the mix that you mentioned is first half maybe INR 800 crores to INR 850 crores of execution and the second half in -- maybe in the range of INR 1,300 crores to INR 1,350 crores kind of execution.
Absolutely.
[Operator Instructions] Our next question is from the line of Vasudev from Nuvama. Sir, Mr. Vasudev has dropped off. May I request you move to the next participant?
Yes, please.
Our next question is from the line of Shreyans Mehta from Equirus.
Sir, first, if you could help us with the amount for the unbilled?
The uncertified amount stands at INR 280.75 crores. For the entire contract asset bifurcation, please send us the e-mail ID, we will mail it to you.
Sure, sure. And sir, secondly, on our fund-based and non-fund-based limit, what is it currently? And how much have we utilized?
The current non-fund-based limits in the consortium, utilization is at about INR 451 crores. We have availability of INR 150 crores or thereabouts for utilization, balance, over and above what we have utilized. The LC utilization is at INR 130 crores, which reflects that the LC utilization over the last 2 years on an absolute basis in spite of increase in revenue has come down from INR 190 crores to INR 130 crores. And the fund-based limit sanctioned is at INR 165 crores, of this utilization at the current moment is close to INR 130 crores.
INR 140 crores?
It could be INR 2 crores here and there. Not on June 30, current position.
Got it. Got it. Got it. Sure. Sir, and secondly, in terms of inflows, are we still on track for that INR 2,200-odd crores number?
I just mentioned the quarter-wise revenue breakup, what the company is targeting. So for the full year, yes, INR 2,000-plus crores escalation, INR 2,100 crores to INR 2,150 crores. It depends on the escalation. You're talking about the order book or revenue?
Inflows?
Order inflow target has been given at INR 2,200 crores to maintain that 3.5 to 4x the order book of the subsequent guidance. And out of that, we have already booked close to INR 1,200 crores. So I don't see any challenge given the current strong bid pipeline, which is happening, we believe that we should be able to do this and much more, but the guidance will continue at INR 2,200 crores.
Sure. And sir, can you highlight where we have bidded for which segment or which projects have we bidded for and where bids are yet to open?
We are prequalified along with L&T and B. G. Shirke for MAHAPREIT data center of INR 800 crores. We are L1 for Vartak Nagar MHADA. There has been a government change in Maharashtra, and there is everything is going on. So we are awaiting the work order yet. Apart from that, we expect a repeat order from Raymond very shortly. So these 3 put together itself will ensure that we surpass the target over the current financial year. Apart from this, we qualified for our RLDA project, that is Rail Land Development projects. We qualified for airport projects. And practically, most of the housing projects, which -- for which the bids are being invited by the central and state government. Apart from this, we are bidding actively for hospital projects for both state and central. And we do believe that the projects of INR 600 crores or thereabout hospital or up to INR 800 crores the company stands qualified on a stand-alone basis.
[Operator Instructions] Our next question is from the line of Ankita Saxena from ET Now.
Yes, sir. I wanted to ask how are we looking at improving the credit rating from the agencies?
You will see that rating upgrade within this month.
Yes, ma'am, do you have any other questions?
No, only this question.
So I just answered that, you will see the rating upgrade happen within this month.
[Operator Instructions] Our next question is from the line of Balasubramanian from Arihant Capital.
Sir, my first question is regarding private and public projects. What would be the margin difference between both?
As explained during the previous con call, we are only focusing on EPC projects in the government sector where the margin profile is similar or slightly better than the private sector projects. In private sector, we are doing more of shell and core, like any other construction company. So, obviously, the EBITDA margins over there will depend on whether we are constructing, where means in private sector will depend on whether we are constructing super high-rise, high-rise or normal buildings. Generally, as a company philosophy, we only go for high rises and above. And therefore, the EBITDA margins range between 14% to 23% between high-rise and super high-rise. So therefore, you see an average EBITDA of 17% to 18%, which also is the guidance.
So what kind of asset turns are expected in this year FY '24?
Please, can you re-ask your question?
Asset turn.
Asset turn. So we believe that our net asset will be in the range of INR 430 crores to INR 440 crores. And therefore, we do believe that we have a very good opportunity to be close to 4.7 to 4.9 in the current financial year as asset turns.
[Operator Instructions] Our next question is from the line of Vasudev from Nuvama.
So I just wanted to know what is our CapEx plans for FY '24? And how are we looking at our debt levels by the end of the year?
So the CapEx plan continue to be pegged at INR 55 crores to INR 60 crores. There is an increase of about INR 20 crores in view of the new project, which we have received in quarter 1. That's number one. The total addition has -- in the first quarter has been INR 12.77 crore. So we do believe that from the earlier guidance of INR 40 crores, the overall CapEx would be at about INR 55 crores to INR 60 crores. That's number one.Number two, was your question on the debt level. So as I speak to you, the debt level in the current quarter has already fallen by about INR 18 crores. And we do believe that with the repayments of NCDs in the current financial year, where another 2 installments have to be going. The debt reduction will be close to another INR 40 crores, INR 45 crores. So putting together these 2, INR 20 crores, plus INR 60 crores. We should be close to about reduction of INR 80 crores on gross level. Further, the promoters unsecured loan also will get converted in -- warrants will get converted in the current financial year. And therefore, the promoters' debt appearing on the books will also get reduced converted into equity.
Okay. And sir, second question is that, we've seen our private sector share in order book is increasing. So do we have any comfortable share that we want to target or we are open to private and government both at any mix?
Balasubramanian ji, the point is that -- Vasudev ji, my point over here is that, its order book is dynamic. So we are comfortable with 35%, 40%, 45% of private sector as well. If the client quality is not being compromised, okay? We have seen tough 3 years because of certain clients who are [indiscernible] suddenly going bad. So we do not want to get into that. Exposure per client will be a criteria as risk mitigation, number one. Number two, government sector is no different, clients which they are having -- which have their own source of income or central and state budgetary, sanctioned budgetary support are the projects or the clients we will be looking at. So this 35%, 36%, 37% is a number just because we got a couple of projects in the first quarter from the private sector has increased from 33% to 37%. Maybe we receive another INR 1,000 crores from the government in the quarter 3, and the government share will go up. However, I do believe that we would like to have a robust mix of government and private sector and that ideally over the next 2 years should be visible at 70-30 or thereabouts.
Thank you. Ladies and gentlemen, that was the last question of our question-and-answer session. I would now like to hand the conference over to Mr. Rohit Katyal for closing comments.
I would like to thank once again all of you for joining us on this call today. We hope we have been able to answer your queries. Please feel free to reach out to our IR team for any clarifications or feedback. Thank you, and see you next quarter.
Thank you. On behalf of Capacit'e Infraprojects Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.