Release Date: October 30, 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 consolidated total income of INR1,798 crores for the first half of FY 2025, marking a growth of over 25% compared to the same period last year.
- The company has a strong order book of approximately INR15,200 crores, providing significant visibility for future execution.
- Welspun Enterprises Ltd (BOM:532553) has diversified its order book to include projects in water, tunneling, and rehabilitation sectors, reducing reliance on road projects.
- The company is debt-free on a stand-alone basis with a strong net worth of INR2,533 crores and cash reserves of INR863 crores.
- Welspun Michigan Engineers Limited, a subsidiary, has been recognized for its innovative approaches in urban water solutions and has a healthy order book of INR1,572 crores.
Negative Points
- Consolidated profit after tax for the quarter decreased by 11% year over year, primarily due to a post-tax reduction from discontinued operations.
- The September quarter is seasonally weak, impacting margins due to lower turnover and fixed expenses.
- There is a delay in the awarding of certain road projects due to the election model code of conduct, affecting the order book.
- The company's tunneling segment reported a decrease in EBIT despite revenue growth, attributed to conservative revenue recognition practices.
- Welspun Enterprises Ltd (BOM:532553) faces challenges in maintaining margins due to the asset-light model, which relies heavily on subcontracting.
Q & A Highlights
Q: Can you provide details on the new water tunneling project from Dharavi to Ghatkopar and when revenue booking will start?
A: The project involves constructing an 8.45 km tunnel at a depth of 152 meters. Revenue booking is expected to start in FY25 after obtaining necessary clearances, as it is part of a CRZ Zone. - Saurin Patel, Managing Director, Welspun Michigan Engineers Pvt. Ltd.
Q: What is the CapEx guidance for this year and next, and how much has been done in the first half of FY25?
A: Welspun Enterprises is an asset-light company with no major CapEx planned, except for INR100 crore for the new project through Welspun Michigan. CapEx for the first half is not significant. - Saurin Patel, Managing Director, Welspun Michigan Engineers Pvt. Ltd.
Q: What is the potential market size for the tunneling business across India?
A: The tunneling business has mapped projects worth about INR3 lakh crores over the next five to seven years. We aim for a single-digit percentage market share. - Sandeep Garg, Managing Director & Executive Director
Q: Why has the valuation of the Michigan acquisition increased significantly over the past year?
A: The initial transaction was at 4x EBITDA, while the industry operates at about 9x. The strategic decision to acquire at INR1,000 crores is still considered undervalued, given the growth potential. - Sandeep Garg, Managing Director & Executive Director
Q: What is the status of the MSRDC project where Welspun was L1, and is there any risk of not being awarded the project?
A: The project is expected to be awarded post-election. There is no anticipated risk of not being awarded, as the project is necessary for connectivity. - Sandeep Garg, Managing Director & Executive Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
