Key takeaways of the call

Order backlog as end of June 30, 2019 was Rs 33495 crore. Order inflow (including increase in scope of existing orders) in Q1FY20 was Rs 636 crore. The company that started Q1FY20 with an order book of Rs 35121 crore has executed orders worth Rs 2262 crore during the quarter.

The company at the start of April 1, 2019 had an AP order book of Rs 18600 crore and of which the orders where work not commenced and likely to be impacted by the notification of new AP government estimated to be about Rs 6100 crore was removed leaving an residual AP order book of Rs 12500 crore. The order book of Rs 6100 crore includes orders for which cancellation letter received and also orders that are likely to be impacted. The company has got cancellation for few orders out of these Rs 6100 order book. Of the residual order book the order relating to Amarvathi Capital City was Rs 6500 crore, Affordable Housing (PMAY) projects was Rs 4975 crore and others in water etc are Rs 1025 crore.

The opening order book of the company at the start of April 1, 2019 amounting Rs 35121 crore was after adjusting for orders worth Rs 6100 crore which got impacted/cancelled subsequent to new government come in at AP state.

Order inflow in Q1FY20 comprises two orders aggregating to Rs 358 crore and the balance being due to scope variations. The two fresh orders one order from Maharashtra Metro Rail Corporation worth Rs 163.8 crore and Bangalore Electric Supply worth Rs 195 crore.

Standalone revenue including other income was down by 7% to Rs 2212.7 crore with EBITDA margin stand at 12% (up from 11.2%) the EBITDA was flat (up 0%) at Rs 266.59 crore. The net profit was down by 22% to Rs 81.32 crore. Consolidated revenue was down by 6% to Rs 2371.51 crore with EBITDA margin stand at 11.8% (down from 12.2%) the EBITDA was down by 9% to Rs 279.36 crore. The net profit was down by 29% to Rs 72.27 crore.

The company has not gone for aggressive execution of AP project this impacted the top line in Q1FY20. Due to elections there was delay in clearance as well as funds in case of some electrical projects and that slowed down their execution thereby hurting the top line in Q1FY20. In Q1FY20 the company was clearly watching the project executions on the basis of payments, waited upto elections and new government policy and fund allocation.

Aggregate loss at subsidiaries was Rs 9 crore in Q1FY20 largely driven by loss of Rs 3 crore, 3.56 crore and 1.3 crore at Dubai, OB Infra and NCC Infra respectively. Sales of Dubai and OB Infra in Q1FY20 stood at Rs 84 crore and Rs 26 crore respectively. NCC urban registered a revenue of Rs 70 crore and a PAT of Rs 1 crore in Q1FY20.

The company in the FY19 annual conference call guided a flat revenue growth for FY20. But that was given before regime/government change in AP and with changed circumstances, the company is confident of delivering a top line of Rs 10000 crore for FY20 without taking any turnover/contribution from residual AP orders (other than that of Rs 6100 crore orders removed from order book). The residual AP orders part of order book is Rs 12000 crore. Once the review of awarding is over in next 2-3 months there will be progress in residual AP orders and if they contribute Rs 1000-1500 crore to STO of FY20 the company is likely to end up with a revenue of Rs 12000-12500 crore, which will be a flat growth compared to FY19. Confident of maintaining EBITDA margin of 11.75-12% for FY20.

The company targets an order intake of Rs 14500 crore for FY20 despite weak order inflow due to elections. Starting Sep 2019 the company expects traction in awarding of orders.

AP government is asking for extension of BG given earlier and this show there is a silver lining and the government will not scrap all the projects especially that are related to core AP capital projects.

Standalone debt as end of Jun 30, 2019 was Rs 2399.8 crore of which CC & WCD was Rs 1847.5 crore, Machinery loans was Rs 462.4 crore and Long term loans Rs 89.7 crore. Standalone debt has increased by about Rs 400 crore.

Consolidated debt increased by about Rs 253 crore to Rs 2725 crore as end of Jun 30, 2019 up from Rs 2472 crore as end of March 31, 2019.

The debt at subsidiary level has come down. While the debt of NCC urban was down by 106 crore that of OB infra was down by Rs 23 crore. Similarly the debt of international subsidiaries has also come down in Q1FY20.

Standalone debt to come down to Rs 1800 crore by FY20 end. Interest cost to remain same level or little bit low for FY20.

Contribution of AP project to Q1FY20 STO was Rs 440 crore compared to Rs 450-500 crore in Q1FY19.

Loans to Group Companies and Subsidiaries as end of June 2019 were Rs 559 crore. Investment in associates & subsidiaries is Rs 919 crore. Total Exposure to Group companies as end of Jun 2019 was Rs 1478 crore compared to Rs 1387 crore as end of March 2019. Mobilization advance was Rs 1487 crore. Cash and bank balance was Rs 196 crore. Retention money outstanding at end of Q1FY20 was Rs 2249 crore. Trade receivables were Rs 3202 crore of which more than 6 months are Rs 697.9 crore.

Q1FY20 gross margin was improved by 2-3% on account of dispute claim settlement in favour of the company in Electrical and Building division. The company got claims of Rs 25 crore in Electrical business and Rs 15 crore in Buildings and this is part of the operations and can't say one off. Semcorp arbitration award is expected by March 2020.

Everything has come to a standstill in AP for all the contractors. The review is happening and once that review is completed in next 2-3 months the company will be in better position to tell what will be the status of these cancelled order book.

Capex planned for FY20 was Rs 250 crore.

The company extended RS 100 crore loan to NCC Urban to make urgent external payment in Q1FY20. NCC Urban have already repaid Rs 30 crore to NCC. The company from NCC Urban expects an inflow of Rs 170 crore in FY20. The company looking to sell mature land parcels and completed residential flats inventory they have in places such as Hyderabad.