Key takeaways of the call

Lockdown impacted the operations significantly in Q1FY21 and thus the contract revenue was down by 44% to Rs 274. 2 crore. The O&M revenue in Q1FY21 was down by 15% to Rs 120.3 crore (or 44% of total). But the fall was steeper in case of Erection with its Q1FY21 revenue was down by 66%, that of civil was down by 45% to Rs 74 crore and electrical was down by 46% to Rs 20.1 crore.

Various projects except O&M railway, irrigation and Nigeria projects were impacted. Over all execution was just 34% compared to last year if we exclude the O&M, railway, irrigation and Nigeria projects.

As most of the projects are manpower oriented, restriction of moving men and material impacted the company. But slowly productivity is improving.

Executable order backlog (excluding projects cancelled/suspended/on hold) as end of Sep 15, 2020 was Rs 7136.9 crore (up from Rs 4574.8 crore as end of March 31, 2020) and of which about Rs 2550.5 crore is Erection, Rs 1136.4 crore from O&M; Rs 277.4 crore from Electrical works and Rs 3172.6 crore from Civil & other works.

Order inflow YTD FY21 (upto Sep 15, 2020) was Rs 2836.2 crore [of which 71% was Civil works and 20% for erections, 9% for O&M jobs] and this in higher compared to Rs 1952 crore worth of order bagged for entire FY20.In addition the company expects bagging of fresh orders worth Rs 1500 crore in next 6 months largely especially in O&M, mechanical and international.

Order book excluding O&M orders is executable over next two and half years.

Considering the current order backlog, the company can comfortably attain an execution run-rate of Rs 200-225 crore a month. The execution has picked up from Rs 90 crore a month to about Rs 140-150 crore a month currently and the company expect that to gradually improve to about Rs 220 crore.

The company made all efforts to minimize the cost across all sites. In case of bill to contractor, the company is not impacted by cost.The company had about 8700 people on its rolls.

During Q1FY21, in Erection the company has bagged new orders worth Rs 155 crore and RS 176 crore from BHEL and L&T Subsidiary for Yadadri and Bauxar power projects respectively. In non power segment the company has bagged orders worth Rs 556 crore in Q1FY21.

So far in YTD FY21, the Civil segment won orders such as (a) Rs 450 crore balance of plant work at 5x800 MW Yadadri TPP at Telangana (b) Rs 113 crore (for two package) RVNL Vijayawada project. As a new effort, the company has bagged two orders one in Karnataka (Hasan) and Mizoram in road sector aggregating Rs 1100 crore from a company with which the company has project execution arrangement.

Nearly 15 existing O&M contracts have been extended by customers for a period of 6 months to two year, which has further added to the order book.

In Electrical the company has not bagged any major orders, but the company has become L1 for a substation work worth Rs 85 crore.

Road project in consortium with SRC Infra: The Company will not invest any capital in road construction projects. It has sub-contracted the same and will make single digit margin.

The company is tracking projects worth Rs 20000 crore in various sectors. On Civil side, the company is also looking at additional orders from JSW which has revived its expansion plans. The company is currently doing jobs worth RS 325 crore and its expecting a job worth Rs 65 crore soon. The company expects additional jobs/opportunity worth RS 1000 crore from new blast furnace and auxiliary systems. As far as International business is concerned, the opportunities are coming down in Middle East due to oil sector weakness but the company is making effort to bag order from the ongoing projects worth around Rs 750 crore.

On O&M side projects in pipeline are Rs 100 crore Bara project (Tata Projects), Rs 30 crore from NTPC's Sholapur, Rs 150 crore from Vedanta. So overall in O&M and with new efforts that has taken seed, the company expects orders worth about RS 300 crore in next one month.

Immediate challenge is the execution, where manpower planning being tough as the company has no problem with equipment etc. Manpower availability has not impacted much in O&M but other verticals got impacted by manpower availability. By end of Q2FY21 (about Sep 18, 2020) the company reached a manpower availability of about 60% over pre covid levels. Once the manpower availability increase to about 80-90% the turnover will improve.

Of the new orders the company has to start work on Bauxar project (Rs 176 crore) in a month. Apart from this Yadadri Project, in which the company has jobs worth Rs 810 crore in civil, structural and mechanical it expects a run rate of about Rs 30-40 crore a month. The company has executed orders worth Rs 180 crore in RS 860 crore Bangladesh Project and this will come to full stream in terms of execution in current fiscal. Other order which are expected to contribute much are Nigerian (Dangote) order, Bhusaval (Rs 280 crore order), Telangana Irrigation order (Rs 350 crore 30% work completed) and Gudivada Machilipatnman Railway Line order (95% completed). Other major project that will get focus for execution are Rs 340 crore Barh order, JSW project at both Dolvi & Bellary worth RS 346 crore.

Expect upsurge in revenue from power sector projects especially from Bauxar, Yadadri, Bangladesh and Bhusaval subject to how fast the company augment manpower at this sites.

By current fiscal end the company expects the order book mix will be about 18-19% for O&M; 38-40% civil; 36-38% mechanical and balance electrical.

Manpower availability has to be ramped up to 15000 for existing jobs and by another 1000 numbers for new jobs.

The company is executing civil of Rs 90-100 crore now and that will go up to Rs 200 crore a month which will be higher than last year.

Loss on share in JV is largely due to Saudi project.

Some delays in collection during COVID period.

Manpower in O&M is about 3900 people.

Peak borrowing had gone up to Rs 590 crore and that has now come down to about Rs 540-550 crore. The net borrowing stood at 430 crore.

Receivables stood at Rs 450 crore as against Rs 542 crore as end of Q4FY20.

The company expects to receive Rs 140 crore of final bills significant part of it from AP.This payment was expected in last 4 months, the bills are now moved to treasury and thus the receipt of it is expected soon.

International order book was Rs 1300 crore largely in Bangladesh and Nigerian order. The Nigerian order is about USD 75 mln of which about 65% is already completed.