Good evening, everyone. I would like to welcome you all for Q2 FY23 results conference call of Ahluwalia Contracts (India) Limited. We thank the management for giving us the opportunity to host the call. From the management, we have Mr. Shobhit Uppal, Deputy Managing Director, along with Mr. Vikas Ahluwalia, Executive Director, and Mr. Satbir Singh, CFO, with us. Without wasting much time, I will hand over the floor to Shobhit, sir, for opening remarks and post that they will be sharing their data regarding the order book and all the bookkeeping questions, and then we will have a Q&A session. Over to you, sir.
Thank you, Shravan. Good evening, everybody. Ahluwalia Contracts (India) Limited has announced its financial results for Q2 FY23. During Q2 FY23, the company has achieved a turnover of INR 622.84 crores and a PAT of INR 39.17 crores in comparison to a turnover of INR 698 crores and a PAT of INR 35.78 crores in the corresponding quarter of the last financial year. EPS of the company for Q2 FY23 is 5.85, as compared to 5.34 in Q2 of FY22. During Q2 FY23, the company's EBITDA margin is 10.99%, as compared to 10.04%, and PAT margin 6.29%, as compared to 5.13% in the corresponding period of the last quarter of the last financial year.
During the H1 FY23, the company has achieved a turnover of 1,232.09 crores and a PAT of 76.94 crores, in comparison to a turnover of 1,278.11 crores and a PAT of 70.60 crores in H1 of FY22. EPS of the company for H1 FY23 is ₹11.49, as compared to ₹10.54 in H1 FY22. During HY1 FY23, the company's EBITDA margin is 11.06%, as compared to 10.67%, and a PAT margin of 6.25%, as compared to 5.52% in the corresponding period. Net order book of the company is 7587.73 crores to be executed in the next 24 to 30 months. Total order inflow during the current financial year stands at 3182.77 crores. We are L1 in three projects, aggregating to 1098.35 crores. Thank you.
Shall we open the call for Q&A session, sir?
What I would suggest, Shravan, that all the bookkeeping questions and all details relating to geographical divide and other such questions, Satbir will make the announcements, and then I'll take questions after that.
Okay. Okay.
Over to Satbir.
This is, first of all, segment-wide order book.
Yes, it is.
Segment-wise order book, which is commercial, 8.35%. Hospital, 32.04%.
Sorry to interrupt you, sir. May I request you to come? I'm so sorry to interrupt the current speaker. I would request you to come a bit closer to the phone, please.
38.27%. Residential, 13.24%. And sector-wise, government, 81.51%. Private, 18.49%. And if you ask about region-wise, East, 37.60%. North, 33.97%. And South, 4.88%. West, 17.74%. And outside India, 5.82%. And if you ask about state-wise, this is Assam, 5.56%. Bihar, 28.31%. Delhi, 8.30%. Himachal, 11.26%. Haryana, 1.89%. Jammu, 8.55%. Karnataka, 4.88%. Maharashtra, 12.77%. And Odisha, 3.76%. UP, 2.91%. West Bengal, 5.52%. And Uttarakhand, 0.72%. The rest is outside India, Nepal, 5.82%. This is about order book. And besides that, there is a retention money. It's around ₹160 crores. Total data, including retention, this is coming out ₹691 crores. Mobilization advance is ₹190 crores. And out of this, interest bearing is 50%. And trade revenue is ₹605 crores. Inventory, ₹238 crores. Real estate inventory, ₹39.73 crores. Unbilled revenue, ₹316 crores. And net working capital days, this is coming out 71 days.
And besides that, there is, I think so, more of interest bearing 50%. And fixed-price contract is around 20%. Bid pipeline is INR 5,000 crores. I think most of the questions have been covered. And CapEx also. CapEx during the quarter, INR 21.65 crores. And last quarter, INR 12.204 crores. This is now aggregated to INR 33.85 crores.
Yeah.
We can take questions now.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use hands up while asking a question. Anyone who would like to ask a question, please press star and one at this time. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Mohit Kumar from DAM Capital. Please go ahead.
Yeah. Good evening, sir.
Good evening, Mohit. This is another good quarter, sir, as far as margins are concerned. So my first question on the execution run rate, we can expect, and of course, I think we've given a guidance of 15% growth, which means the second half, we should do INR 1,800 crores as top line. Are you maintaining the guidance, or do you think there is a downward risk?
We will strive to maintain that guidance.
So the margin side?
Because our order book is heavy, and traditionally, the last two quarters, the run rate is always higher. Yes, our turnover has been flat as far as this quarter is concerned. There are a number of reasons for that, but I think we are geared up to increase it substantially in the last two quarters or the next four and a half to five months which are left for this financial year.
Understood, sir. Secondly, on the order pipeline, how does this look like at this point of time? And given that we are already key, I think our guidance was INR 40-50 billion. I think we are already largely there. Can you just comment on the order pipeline opportunity for the Q3 and Q4?
Yeah. We've actually exceeded our target. We're being conservative in our bidding now. So we are already L1 in three projects, two out of which we are expecting to be awarded shortly within this month. So going forward, the pipeline is robust, but we are being conservative in how we are bidding.
But can expect some, sir, to surpass the order inflow guidance for the fiscal?
Maybe we'll surpass it by about. Our guidance was INR 3,000 crores, so we may surpass it by about INR 1,000 crores.
Understood, sir. Thank you for all the questions.
Thank you.
Thank you. Anyone who would like to ask a question, you may press star and one.
Sir, can you hear me?
I can, yes.
Yeah. Meanwhile, the question comes. So I just wanted to understand. So these three L1, if you can help me in terms of breakup and also when it's likely to be converted into order. So INR 3,183 crores we receive plus this INR 1,100 crores. So close to 4,300, 400 crores is there. So are we not now expecting any further order inflow apart from L1 in the second half?
No. Out of these three L1 projects, one project is the Tata Memorial Hospital, which we are still not very sure when the funding would be approved and when the LOI will be released to us. So as I said, INR 1,000 crores likely increase. The two other projects, the total aggregate of that is about INR 150 crores. So I'm saying that we will get another INR 500-600 crores at least, over and above the Tata Memorial or these three projects that we're talking about.
Okay. So currently, in terms of the overall bid pipeline, if you help us, where are we looking at? What's the total size? Any big ticket project? And what can stop us in terms of not taking the bigger projects now, so?
Look, just to give you an idea, pipeline is very robust as a matter of fact because there are a number of infrastructure projects like railway station development, airports, hospitals which are coming up. But as I said, we are being very conservative because the competitive intensity remains high. So there is a concerted push to try and push up our margins, right, which I had given the guidance during my last two phone calls that we'll get into double digits. We'll touch about 12%. So that is what we are pushing on. And another thing is that while the competitive intensity increases in the public sector, what we are seeing is that the private sector is reviving. Residential projects are not a focus for us, but we're seeing in the education side, in the institutional side, we're seeing hospitals. We're seeing a growth on the private sector side also.
This is what we are focusing on now. But the focus remains on the margins for the next two quarters.
Okay. Okay. Margit, you can take the question from the queue.
Thank you. Before we take the next question, we would like to remind our participants, you may press star followed by one to ask a question. The next question is from the line of Ashish from Centrum Broking. Please go ahead.
Yeah. Thank you for the opportunity.
Yeah. Hi, Ashish.
Hi. Hi, sir. Sir, my question is again on the margins which you were just talking about. So we were probably looking forward to some sort of improvement in the run rate in the second quarter, given that commodity had fallen. But still, we seem to be close to around 10% only. So.
No, 11%, Ashish. And sorry to preempt you, but I have a peer comparison in front of me. I think we've beaten the margins of some of my closest peers, smaller and bigger than us.
Right. No, that I appreciate. I know, I mean, there are quite a few who have not reached 10%. But more specifically to.
11%. You can't discount, and this is in spite of headwinds, primarily on account of excessive rainfall. Why our turnover is also a bit flat is because we've lost a lot of time due to excessive rainfall across the country.
Right.
So, in spite of that, our overhead has impacted. In spite of those impacts on the margins, we have ramped up or we've got good numbers.
Sure. So basically, we are saying we are on track to go to our 12% targeted range. Probably we'll exit the year at that level, around 12% or so.
That's what we'd like to strive for, and we're maintaining that.
Sure. No, that's helpful. So second is on the, I mean, we did say that, of course, NCR is now not that big a proportion of our book, around 8% you mentioned. But.
Yeah. But that's increased in the last in this financial year. We've won in the NCR. We've won a couple of large marquee projects. So yeah, it will contribute to the turnover in these two quarters now, going forward.
So my question was on the ground situation as far as currently is concerned because, again, there are the pollution-related issues there. So are we looking at another quarter where, at least in the NCR-related projects, you may have a significant headwind, or you think it won't affect execution much? It's been allowed in that sense.
Going forward, I don't think we've lost about three weeks, 15-20 days. But I think going forward, this is behind us.
Right. Right. That's all from me.
Thank you. Thank you, Ashish.
Thank you. Anyone who would like to ask a question, you may press star and one. The next question is from the line of Nikhil Abhyankar from DAM Capital. Please go ahead.
Thanks for the opportunity, sir. So when we are planning for the EBITDA margin, are we including other income or excluding it?
Yes. Yes. We are including it.
Sure. We are including it. So excluding other income, what can be our margin?
Yes. Because our other income is mainly improved, and everything's written back, and that's kind of related to business income, so that's why it has been included in the calculation of EBITDA.
Okay. So the second question is, currently, our order book is majorly focused on government contracts. So what will be our focus going forward? Will we be focused on government contracts, or will we try to ramp up our private order book?
No, we will. I've been saying that over the last two or three interactions that I've had with all of you, that we will ramp up our exposure to the private sector, though not the residential private sector. And we will increase the private sector share of our total portfolio. It stands at 20% now.
Okay. That's all from my side. Thank you.
Thank you.
Thank you.
Sir, just wanted to further understanding on a couple of the large projects in terms of the status. Where are we in terms of the execution front? What projects are likely to be completed in the next 6-12 months, so if you can help us, it would be great.
Okay. So our biggest project, Jammu, will be completed in the next 12 months. The other hospitals that we are doing, Hamirpur and Chamba, will also be completed in the next, say, nine to 10 months. We have just started the veterinary university and hospital project and NIT Patna. So that will go on for about two, two and a half years. The Adani Data Center project will be completed in the next 12 months. As far as other projects are concerned, the Bennett University, that will be completed in the next 12 months. The Muthoot Hospital that we are doing in Dwarka, which is now a Max hospital, Max is partnering that, has moved in as an operator. That will be completed in the next 12 months.
As far as the projects which will go on beyond that, Bharti, the commercial project that we're doing at AeroCity, that will continue beyond that. That's about 2.5 million sq ft of commercial space that we've just started. So that timeline is about 18 months. The Central University project, which we've just started designing, is going on. That will go on for about two years in Dharamshala. The Nepal project, the National Police Academy, that designing is happening. So that will go on for about two and a half years. We should be completing our scope of work at the Sant Nirankari Hospital in Burari, in Delhi, in the next 12 months. So does that answer your question?
Yeah. Yeah. That's helpful. And just in terms of then you mentioned that you will keep looking to increase the private exposure but not the residential. So not even in the south also, though we are hearing that the real estate is in the news and it is continuously seeing higher sales. So just trying to understand what's your view. Still, we are not comfortable.
Shravan, as you would know, we have now started or restarted in Bangalore. We have projects aggregating about INR 450 crores there. We have started our first project in Hyderabad. Yes, Ahluwalia is now forayed into South India. We already have inquiries on projects both from the private sector side, both for residential and commercial. But residential is something which we are very, very cautious on. Commercial, we're bidding. Residential, at the moment, down south, not very focused on that.
Okay. Margit, take a question from the queue.
Thank you. The next question is from the line of Vasudev from Nuvama. Please go ahead.
Yeah. Thank you for the opportunity, sir. So you said that we are L1 in three projects. One of them is Tata Memorial Hospital project. So where are the other two projects?
Sorry, please go ahead.
Even your voice was not very clear.
Sorry, sir. We'll check on that. Just give me a moment. And were you able to hear Shravan Shah clearly?
Yes. Shravan was clear, but your voice isn't.
Okay.
Sir, I can hear Margit's voice clearly and your voice clearly.
Yeah. Margit.
Maybe the gentleman can ask his question again.
Yeah. Is it better now?
It is. It is.
Okay. So you said we are L1 in three projects. One of them is the Tata Memorial Hospital. So which are the?
Sorry to interrupt. Actually, Vasudev, your line is breaking. Your audio is breaking.
Yeah. His voice is not clear at all.
I would request you, Vasudev, to please check your line and rejoin the queue. In the meanwhile, we'll move to the next question, which is from the line of Uttam Kumar Shrimal from Axis Securities. Please go ahead.
Yeah. Thanks for the opportunity, sir. Sir, what is our CapEx there for FY23 and FY24?
Can you say it again, please?
Sorry. I'm sorry to interrupt. Mr. Shrimal, please come on the handset mode. I think you're on speaker, so the audio.
No, no. I'm on handset mode. What is the CapEx guidance for FY?
You're clearer now. Please. Yes.
Yeah. Yeah.
Yes, sir. I just want to know what is your CapEx guidance for FY23 and FY24?
Yeah. For FY23, our guidance would be we've done about INR 33 crores, as Sandeep mentioned in his initial comment. It'll be another INR 20 crores for the next two quarters. And as far as FY24 is concerned, it would be in the range of about similar, INR 50-60 crores.
50-60. Okay, sir. And sir, in case of East projects, how the execution is going on since after change in government? Is payments and all that has become normal?
Which geographical thing are you talking about?
Bihar, sir.
So look, Bihar, JDU continues to head the government. The RJD is a part of this now. Previously, it was BJP. So it's not only this quarter, but we've been facing payment issues. Cash flows have been an issue with the Bihar projects, especially the Bihar medical projects, the hospitals that we are doing. So that continues to be an issue. But we feel that maybe in the last quarter, it'll improve because there seems to be an active push from the political leadership to complete the healthcare projects.
Okay. Okay. That's all from my side. Thank you, sir.
Thank you. The next question is from the line of Padma Devan, an individual investor. Please go ahead.
Hi. Good evening.
Hi.
Is it your voice audible?
Yes, it is.
Okay. I just have one question. This is based on your annual report. The annual report claims that there are legal claims worth roughly INR 900 crores filed by the company and about INR 1,800 crores filed against the company. It will be really helpful if you can provide some details about these claims in terms of nature of these claims, how old are they, have you provided anything against these claims? It will be very helpful.
So maybe we can get back to you. I can broadly give you the details. The major, as you know, you would understand this. I'm assuming that when we file a claim, the client, for obvious reasons, files a counterclaim, right? So the major one in this is the arbitration that is going on with Emaar MGF for the Commonwealth Games Village project that we had completed in 2010 before the Commonwealth Games. Now, our claim against them is to the tune of about INR 400 crore and about approximately INR 500 crore, and they have filed a counterclaim of about INR 1,100 crore. So this is otherwise, there are a slew of other clients, but those would be different.
Virtually about 60%.
Rest, all the other details, you can reach out to our IR department or our CFO. We will be more than happy. It's in the public domain. The details should be there in our annual report.
Okay. Just to clarify, these are all very old claims, at least 10-year-old claims?
Yes. The major one is not 10 years. The arbitration has been going on for the last 7 years. It is just that when it was reaching a culmination because of COVID, the arbitrator, the presiding arbitrator, was very old. He was 85 years old. He recused himself. He resigned, actually. So it is actually going to start again. We are in the process to approach the courts to get a presiding arbitrator appointed, a new one. But what I'm trying to lay stress on here is that the 1,800 figure of counterclaim, that's actually most of it is baseless because when we go and file claim, the builder or the client has to file a counterclaim.
Understood. If I understood your answer correctly, the top claim alone accounts for 60% of the entire claim. Am I right?
Yes.
Is there a need for providing for these claims? Is there a chance of this risk materializing in the future?
No. As per the new guidelines that have been given by the Government of India, we have to mention this because of transparency. But the risk of this materializing is highly, highly, highly unlikely.
Okay. Okay. Thank you very much. The reason for this question was that only FY21 and FY22, the annual reports talked about these claims, actually. I could not find anything in the prior annual reports. That's the reason why we wanted to clarify.
Our auditors insisted because they are now bound. Our CFO will tell you what the new guidelines are. They were bound to kind of state this. They insisted. Our auditors insisted. That's why we've done it.
Okay. This is very helpful.
Yeah.
Thank you. Thank you. Thank you very much. This is very helpful.
Thank you.
Thank you. The next question is from the line of Sandeep Sabharwal from sandeepsabharwal.com. Please go ahead.
Yeah. My question was for some more clarity on the margin front. You are at around 11% now. You have indicated a target of around 12%. So you think that you'll be able to get to the run rate of 12% by the end of this year and maintain it next year, or how are you looking at it?
Yes. To both questions. Yes.
Hello? That's it?
Yes. No. You want further clarification?
Yes.
I'm saying yes to both. So you have a further question? Kindly ask that.
Yeah. My question was that when you have guided for the margins, you are looking at a full year margin of 12%, or you're looking at an exit run rate of this year of 12% and maintaining it next year?
Yes. We are looking to maintain it next year. The logic is that a lot of our projects, we have a very healthy order book. And out of that order book, a lot of projects which I named in response to an earlier question from Shravan, they are just going to take off now. These are design-build EPC projects where actual construction will begin on the ground in the next, say, a month or so. And expenses towards site mobilization and all have been done.
All right. Okay. Thanks.
Thank you. Anyone who would like to ask a question, you may press star and one. The next question is from the line of Vasudev from Nuvama Wealth Management. Please go ahead.
Yeah. Am I audible now, sir?
Yes, you are.
Yeah. Sir, I was asking that we are L1 in three projects currently. One of them is the Tata Memorial Hospital project. So which are the other two projects?
There is a convention center in Guwahati for PWD there, which is about INR 260 crores. There is a Lachit Memorial coming up in Jorhat. Lachit was a renowned freedom fighter of Assam. That is about INR 175 crores. This is in Jorhat.
Okay. So this is approximately around INR 400-450 crores, and then we are targeting about INR 700 crores.
Okay.
So we are targeting another 1,000 crores of order inflows for the second half.
Yes.
Okay. Sure, sir. And in terms of the bid pipeline, you told that it's INR 5,000 crores, and we are looking at hospital.
We lost you again.
Mr. Vasudev, your line is breaking up again.
Hello?
Yes.
Yes.
Yes, please.
Yeah. So I was saying that our bid pipeline is 5,000 crores, and you said that hospitals is one segment that we are looking at. So which are the other segments that we are looking for?
Hospitals, institutional buildings, campuses, commercial projects.
Okay. Okay. Got that. And in terms of the competitive intensity, you said that it is still high. So what's your outlook for the next, say, six months to one year? Do you see competitive intensity coming down, or do you feel that it will still remain high?
It will remain high.
Okay. Yeah. And just one last thing, sir. What is the average cost of debt for us now?
The debt is hardly in terms of debt, it's hardly INR 22 lakhs during this half year. This is approximately.
Okay. Okay. Got it, sir. Yeah.
What Mr. Sandeep is saying, there is no debt, virtually zero debt.
Okay. Yeah. That's it from my side. Thank you, sir.
Yeah.
Thank you.
Yeah. Sir, just trying to get one aspect in terms of the working capital. So though it marginally increases in this H1, but we will not see any significant further increase, or will it come down to the March 22 level? So core cash conversion days, if I look at inventory, debtors, payables, currently is closer to 22 odd days versus March it was 15 odd days. So just wanted your view on that.
I think so, sir. This is inventory capital is coming down. If you compare with the last, this is 31st March 2022. And if you also ask about the last quarter, this is last quarter is 87 days. Now this is coming out 21 days. And before that, you asked about 31st March 2022. This is around 73 days. So I think that's fair with this 31st March 2022. That is normally coming down now.
We have some other figures. Maybe you're asking for some other metric. Shravan, can you repeat?
No, no. I'm just saying we will not see any increase in the working capital. It will remain, or we will see further marginal reduction in the working capital by the year end?
There will be no increase. There should be a reduction.
Okay. And just two things. One is the real estate inventory. So how much is that, and when can we see to getting liquidated and Kota bus terminal projects? So anything in terms of the monetization on that aspect?
This is Kota. This has been laid out approximately. This is ground for the second quarter, 82%. And we are basically filing for the third and fourth floor. And I expect that middle of next year, we are expecting that approximately entire area would be covered, 80% would be covered. And this is basically at present. We are trying to lay out the entire property. And this year, at present, if you ask about the quarter two, we are still cash deficit around INR 11 lakhs hardly. And if you ask about half year, this is INR 36 lakhs in surplus. This is cash surplus. Again, the net loss of this is INR 1,484 lakhs this quarter two and INR 3,015 lakhs for the half year. But we are expecting that by the end of the year, this will be accounting would be at par approximately.
Okay. Margit, take the question from you.
Thank you. The next question is from the line of VP Raj, Banyan Capital Advisors. Please go ahead.
Yes. Hi. Thanks for the opportunity. Just had a follow-up question on the competitive intensity. Has it gone up over the last six months? How would you describe it? And is there a segmentation, meaning if the contract value is higher than a certain threshold, then there is less competition? If you can just give a little more color on that?
Yeah. On the public sector contract, government contract, the competitive intensity has increased. On the private sector side, there seems to be a greater discipline, and the clients want to be there seems to be a conscious effort from the client side, at least large clients, to go with the proven contractors with proven track record. So what I'm trying to say is that the margins, we feel that the margins will start improving on the private sector side. And with RERA and other consolidation which has happened, we feel especially non-residential projects, they will be more attractive to us, of course, with more due diligence in place. As far as the public sector, this thing is concerned, for obvious reasons, you see more competitive intensity. On larger contracts, yes, the intensity is lesser. The number of bidders because of pre-qualifying conditions is lesser.
We see most of the contracts or a lot of contracts which are coming in the building segment are ranging in the range between INR 300 crores to INR 700 crores. In this range, the intensity is high.
I see. And beyond 700, you are saying it becomes less, right?
Yes. Yes.
I see. Okay. And that's very helpful. Thank you. And my second question is, you have been saying on this call, and I'm sorry, new to the company, that you are avoiding residential. So given that RERA has really taken out all the marginal builders, and most of them are getting corporatized, why are we staying away from residential?
So I'm not saying that we will never do residential. Even in the rest of this financial year, we will not do any private residential contracts. It's just that we've burned our fingers. And since you're new to the investors, earlier investors, and people who interacted with us in the past, no. Not only us, but all the large contracting companies have burned their fingers big time with private developers. So we want to tread very cautiously, more so when we're not very hungry. We've already met our inflow targets for the year. So that's why residential is not a priority for us as things stand. But going forward, we've always maintained that in the long term, we would like a 50/50 breakup between the public and the private sector. Once this discipline on the developer side increases, we would start looking at the residential side again.
Understood. Thank you so much. That's all.
Thank you. The next question is from the line of Uttam Kumar Shrimal from Axis Securities. Please go ahead.
Yeah. Thanks for the follow-up. Sir, if it's just a request, like other infra companies, can you also provide some kind of earnings presentation on quarterly basis? That will be very helpful for us.
Sorry. Can you repeat your question again, please?
Sir, I just want the company to provide earnings presentation on quarterly basis. That will be very helpful for people like us.
Earnings presentation on a quarterly basis. Sandeep is saying we will be uploading this shortly today only.
Okay, sir. But if we get just before the con call, then it will be really helpful to us. That's a request.
We'll do that. We'll keep that in mind, and from next time around, we'll publish it or upload it before the con call.
Yeah. Okay, sir. That's all from my side. Thank you.
Thank you.
Thank you. The next question is from the line of Dipika Bhandari from PhillipCapital. Please go ahead.
Good evening, sir. Most of my questions have been answered. I just missed the segmental breakup for hotels, infra, infrastructure, and institutions. Can you repeat?
Yeah. Sandeep will just give it. Yeah. Can you repeat your question, please?
Segmental breakup for hotels, infrastructure, and institutions?
Okay. This is institutional, 38.27%. And hospital, 32.04%.
Okay.
13.24%. Infrastructure, 7.20%. Commercial, 8.35%. And hotel, 0.90%.
Okay. Thank you, sir. That's it.
Thank you. As there are no further questions from the participants, I now hand the conference over to Mr. Shravan Shah for closing comments.
Thank you, everybody. I thank the management again for giving us the opportunity to host the call. So, sir, do you have any closing comments?
No. Thank you, Shravan. Thank you, everybody. So hope to be talking to you again post our next board meeting. Thank you so much. Have a good evening. Bye.
Bye. Thank you, sir.