Release Date: August 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ashoka Buildcon Ltd (BOM:533271, Financial) reported a 22% year-on-year growth in total income for Q1 FY25, reaching INR1,901 crores.
- EBITDA for the quarter grew by 52% year-on-year to INR145 crores, with EBITDA margins of 7.6%.
- PAT increased by 148% year-on-year to INR41 crores.
- The company has a robust order book of INR10,356 crores as of June 30, 2024, excluding projects where they are L1, which would increase the total to INR13,800 crores.
- Ashoka Buildcon Ltd (BOM:533271) has emerged as the lowest bidder for multiple EPC projects in Maharashtra and MMRDA, indicating strong future project inflows.
Negative Points
- Margins have declined from 12% to 7% over the past few years, with current margins at 7.6% excluding other income.
- The company faces delays in land acquisition approvals and elections, impacting the construction phase.
- Standalone debt has increased to INR1,410 crores, primarily due to working capital requirements.
- The monetization of BOT and HAM assets has been delayed, with some projects still requiring NOC and other approvals.
- Working capital requirements have increased, partly due to the mix of projects and the need for materials for longer project durations.
Q & A Highlights
Q: Margins in this first quarter were 7.6%, excluding other income. Do you think margins will improve in the remaining quarters? What is the target EBITDA margin for FY25 and FY26?
A: We are currently in the range of 7% to 8%. For the next two quarters, we expect to maintain this range. With new orders in the pipeline, we anticipate margins to improve to around 9% to 10% in the third and fourth quarters. Our long-term target is to return to 10% to 12% margins.
Q: What are your expectations for order inflows for the fiscal year, especially considering the recent elections?
A: The total bid pipeline, including NHAI and other MOD projects, is around 3,700 kilometers, worth approximately INR93,000 crores. We expect Ashoka Buildcon's pipeline to be around INR78,000 crores, covering 2,400 kilometers. We see a positive momentum in tendering activities post-elections.
Q: Can you update us on the status of monetizing HAM and BOT assets?
A: Both processes are at an advanced stage. We expect to enter into Shareholder Agreements (SHA) within a month, followed by the NOC process. Monetization of Jaora-Nayagaon and Chennai-ORR assets is still under discussion and may take longer.
Q: What is the current standalone debt, and why has working capital been consistently increasing?
A: As of June 30, standalone debt is INR1,410 crores, primarily due to working capital loans. The increase is attributed to higher turnover and the repayment of NCDs at the ACL level. We expect working capital requirements to stabilize as projects progress.
Q: What are the plans for the newly established water vertical, and what is its margin profile?
A: We are executing water projects in India and Ivory Coast and are participating in other projects. This vertical is expected to contribute 15% to 20% of our business in the next two years. The margin profile is similar to other EPC businesses, around 10%.
Q: What is the guidance for revenue and order inflow for FY25 and FY26?
A: We expect revenue growth of around 20% for both FY25 and FY26. Order inflows for FY25 are projected to be between INR10,000 crores to INR12,000 crores.
Q: What is the equity requirement for HAM projects, and how much has been infused to date?
A: The total equity requirement for HAM projects is INR1,170 crores, out of which INR919 crores has been infused. The remaining INR120 crores will mostly be infused in FY25.
Q: Are there any one-offs in the BOT Annuity projects' margins for this quarter?
A: No, the improvement in margins is mainly due to a reduction in interest expenses and better IRR from future collections, driven by increased interest rates.
Q: How do you see the NHAI project pipeline post-elections?
A: We expect the order book pipeline for the current year to be around 3,700 kilometers, worth INR93,000 crores. Major inflows are anticipated in Q3 and Q4.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
