Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Patel Engineering Ltd (BOM:531120, Financial) reported a net profit increase of 25.81% to INR48.17 crore for Q1 FY25 compared to INR38.29 crore in the corresponding period last year.
- The company has a robust order book of INR17,900 crores, with significant contributions from hydro (61%), irrigation (21%), and tunneling (11%).
- The company's debt-to-equity ratio improved from 0.67 to 0.42 over the last year, indicating better financial health.
- Patel Engineering Ltd (BOM:531120) successfully completed major milestones, including the T15 and Part T-14 tunnel projects in Jammu & Kashmir and the Arun III Hydropower Project in Nepal.
- The company raised equity of INR400 crores through QIB and realized INR238 crores from arbitration awards, aiding in debt reduction and working capital augmentation.
Negative Points
- Revenue from operations for Q1 FY25 was INR1,101 crores, slightly down from INR1,118 crores in Q1 FY24, indicating stagnant growth.
- The net profit on a stand-alone basis decreased to INR68 crores in Q1 FY25 from INR130 crores in Q1 FY24 due to an exceptional income of INR91 crores in the previous period.
- The company's gross debt remains high at INR1,500 crores, although it has reduced from INR1,955 crores a year ago.
- The order inflow was subdued last year due to elections, impacting the revenue growth for Q1 FY25.
- The company faces challenges in maintaining its EBITDA margin, which was 15.3% for Q1 FY25, only slightly up from 15.2% in the corresponding period last year.
Q & A Highlights
Q: Can you elaborate on the impact of Mr. Patel's demise on the company's operations and any changes in the fee structure?
A: Kavita Shirvaikar, Managing Director: Mr. Patel was the driving force of the organization. His vision was to develop a professional team capable of running the company in all eventualities. The core team of professionals has been groomed over the last decade, and I have been actively involved in strategic decisions and project execution. The professional team is capable of taking forward his vision and working together to come out stronger.
Q: What is the current status of the order book and the bidding pipeline?
A: Rahul Agarwal, Acting CFO: The current order book stands at around INR17,900 crores, including an L1 of INR100 crores. The pending pipeline status is around INR50,000 crores.
Q: When can we expect the momentum in order book flow to pick up?
A: Rahul Agarwal, Acting CFO: The order building has started post-elections, and we expect order inflows to start looking up in about three months, around Q3 or Q4.
Q: What is the expected margin outlook for the upcoming quarters?
A: Rahul Agarwal, Acting CFO: We expect margins to remain in the historical range. The EBITDA margin for Q1 FY25 was around 15.3%, and we expect to maintain similar margins going forward.
Q: What are the plans for long-term debt reduction and interest cost savings?
A: Rahul Agarwal, Acting CFO: Interest cost savings are already evident this year due to debt reduction. The long-term plan is to reduce term debt over the next two to three years. While additional working capital debt may be taken for new projects, the overall serviceable debt is not expected to increase.
Q: What is the company's strategy for bidding in the road sector?
A: Rahul Agarwal, Acting CFO: The road sector is not a core focus, but we will selectively bid for projects that offer good prospects.
Q: How does the company ensure technology upgrades in the hydro segment?
A: Kavita Shirvaikar, Managing Director: We have a dedicated team for mechanical, procurement, and technology evaluation. We implement the latest technologies available in the market and have a special team for research and development. For example, we recently developed and assembled an over-well system for concreting, which was a first in India.
Q: What is the company's outlook for the hydro sector and the expected bidding in this area?
A: Rahul Agarwal, Acting CFO: The hydro sector is a major focus, with 60 gigawatts of projects expected to come up in the next few years. We have identified INR50,000 crores worth of projects for immediate bidding and expect more projects to come up in the next six months.
Q: What is the company's plan for monetizing non-core assets?
A: Rahul Agarwal, Acting CFO: We are in discussions for various land parcels and expect to realize between INR200 crores to INR300 crores over the next one to two years. Additionally, money from arbitration awards will be used to reduce debt.
Q: How has the company managed the transition in leadership following Mr. Patel's demise?
A: Kavita Shirvaikar, Managing Director: Ms. Janky Patel has taken over as Chairperson, and I have assumed the role of Managing Director. The senior staff and core team remain the same, ensuring continuity in operations and project execution.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
