Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Welspun Enterprises Ltd (BOM:532553, Financial) reported a 28% year-on-year growth in consolidated income, reaching INR960 crores in Q1 FY25.
- The company has a strong order book of INR13,000 crores, providing clear revenue visibility over the medium term.
- Welspun Michigan Enterprise Limited, a subsidiary, achieved a 64% year-on-year revenue growth, reaching INR144 crores in Q1 FY25.
- The company has been recognized as a Great Place to Work and ranked among India's Top 100 Great Mid-size Workplaces.
- Welspun Enterprises Ltd (BOM:532553) has a strong balance sheet with a net worth of INR2,600 crores and cash reserves of INR763 crores.
Negative Points
- The company is awaiting regulatory approval for its field development plan in the oil and gas segment, delaying potential revenue from this sector until FY26-27.
- There was a 48% spike in working capital days in FY24, raising concerns about future working capital requirements.
- The company had to renegotiate and reduce the bid price for the MSRDC order from INR1,864 crores to INR1,850 crores.
- The potential impact of upcoming BMC elections on key projects like Bhandup and Dharavi remains uncertain.
- The company’s guidance for EBITDA includes a significant portion of other income, which may not be sustainable in the long term.
Q & A Highlights
Q: My first question is regarding the CapEx investment in the oil and gas segment. When can we start to see the revenue coming from it?
A: Currently, the field development plan is under consideration at the regulator's end. The CapEx involved will be decided post-approval. We expect gas production to start in FY26-27, depending on when the field development plan is approved. - Sandeep Garg, Managing Director
Q: Can you guide us on the working capital number of days? Is it going to be the same range or fluctuate?
A: Our working capital requirements would not change and will remain in the same ranges. - Sandeep Garg, Managing Director
Q: What is the status of the Bhandup and Dharavi projects with the upcoming BMC elections?
A: These projects are critical for Mumbai and are well underway. The sewage treatment plant is monitored at the Supreme Court level, and the Bhandup plant is essential for freshwater supply reliability. We do not expect any election-related impacts. - Sandeep Garg, Managing Director
Q: Can you provide an update on the settlement claim with IOC?
A: The settlement has been accounted for, and the revenue has been received. INR15.95 crores is in the operating revenue, and INR7.72 crores is in other income, totaling INR23.7 crores. - Sandeep Garg, Managing Director and Lalit Jain, CFO
Q: What is the expected order inflow for FY25?
A: We expect to convert INR2,000 crores of L1 orders within this quarter and book additional orders between INR4,000 crores to INR5,000 crores across all verticals. - Sandeep Garg, Managing Director
Q: What are the sustainable margins and top-line expectations for Welspun Michigan?
A: We expect a 30% top-line growth, ending between INR550 crores and INR650 crores, with EBITDA margins between 21% and 23%. - Saurin Patel, Managing Director, Welspun Michigan Engineers Limited
Q: What is the project size of the Bhandup project?
A: The design and build cost is approximately INR2,250 crores, with an additional INR1,800 crores for O&M, totaling around INR4,200 crores. - Sandeep Garg, Managing Director
Q: Are there any plans for a buyback given the recent tax changes?
A: Currently, we have no plans for a buyback. We have good uses for our capital and aim to grow the business. We have already returned significant value to shareholders through buybacks and dividends in the past. - Sandeep Garg, Managing Director
Q: What is the status of the MSRDC order where you are L1?
A: We expect to convert this L1 status to an order within this quarter. The original bid was INR1,864 crores, which has been negotiated down to INR1,850 crores without impacting margins. - Sandeep Garg, Managing Director
Q: Are we prepared to take on more debt to grow significantly, especially in the water segment?
A: We are open to opportunities but will maintain a healthy balance sheet. We will grow sustainably and ensure our balance sheet remains strong. We are not averse to debt but will manage it prudently. - Sandeep Garg, Managing Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
