• Upside at top-line is largely due to strong revenue growth in exports as well as Turnkey Projects (TP). The segment revenue of Consultancy business was down by 10% to Rs 255.34 crore with consultancy domestic down by 3% to Rs 242.87 crore and consultancy abroad register a sharp fall of 63% to Rs 12.47 crore. The contribution of Consultancy business to total sales declined to 35% from 67% in corresponding previous period. However the export sales jumped to Rs 262.14 crore (or 36% of sales) compared to mere Rs 0.73 crore (or 0% of sales) in the corresponding previous period. Similarly, the turnkey project was up by 54% to Rs 178.52 crore (or 25% of sales down from 27% in Q2FY19). The domestic leasing was up by 24% to Rs 30.21 crore (or 4% of sales).
• EBIT was up by 21% to Rs 202.40 crore largely driven by export sales. Segment profit of consultancy was down by 26% to Rs 113.74 crore hit by lower revenue as well as sharp decline in segment margin to 44.5% from 54.1% in the corresponding previous period. The domestic consultancy EBIT was down by 14% to Rs 110.19 crore and consultancy abroad was down by 86% to Rs 3.55 crore. The segment profit of export jumped to Rs 68.32 crore (compared to a loss of Rs 2.68 crore in the corresponding previous period) facilitated by higher sales and positive segment margin. The segment profit of turnkey projects was up by 32% to Rs 7.57 crore gained largely by higher sales as its segment margin declined by 70 bps to 4.2%. Similarly hit by 410 bps crash in segment margin the segment profit of domestic lease was up by Rs 12.77 crore driven largely by higher sales.
• The OPM contracted by sharp 700 bps to 24.8% and that is largely due to change in revenue mix. With the contribution of higher margin consultancy business decline compared to corresponding previous period seems have dented the margin.
• The other income jumped up by 278% to Rs 147.50 crore largely as the company account receipt of an outstanding amount of RS 91 crore from a client against whom the company has initiated arbitration proceeding but concluded out of the court settlement and received payment.

Consolidated sale for the quarter was up by 68% to Rs 746.24 crore and with OPM contract by 700 bps to 26.3%, the operating profit was up by 32% to Rs 195.89 crore. Spurred by higher other income (jumped up by 307% to Rs 141.62 crore inflated by receipt of outstanding payment from a client against whom arbitration proceeding was initiated) the PBIDT was up by 84% to Rs 337.51 crore. After accounting for lower interest and higher depreciation, the PBT before share of profit from JV was up by 88% to Rs 324.58 crore. With share of profit from JV stand higher by 182% to Rs 1.38 crore, the PBT was up by 89% to Rs 325.96 crore. After accounting for taxation, which was up by 46% to Rs 89.26 crore in absolute terms but the tax rate was lower at 27.4% compared to 35.3% in corresponding previous period, the PAT more than doubled (up 112%) to RS 236.70 crore. The PPT was Rs 0.51 crore against nil in the corresponding previous period and thus the net profit was up by 112% to RS 237.21 crore.

Half yearly performance

Standalone revenue has gone up by 69% to Rs 1245.43 crore but the growth at operating profit was restricted at 45% to Rs 300.61 crore with OPM contract by 410 bps to 24.1% on account of change in revenue mix with the contribution of high margin consulting business stand lower in relation to corresponding previous period. The PBT was up by 60% to Rs 458.38 crore after accounting for higher other income, lower interest and higher deprecation in absolute terms. With taxation stand lower by 37% to Rs 133.93 crore but tax rate stand lower, the PAT was up by 72% to Rs 324.45 crore. Eventually the net profit (after PPT) was up by 72% to Rs 325.26 crore after accounting was PPT of Rs 0.81 crore compared to nil in the corresponding previous period.

Consolidated sales was up by 66% and the operating profit was up by 39% to Rs 330.26 crore with 500 bps contraction in OPM to 25.7%. Eventually the net profit was up by 67% to Rs 339.29 crore.

Order book

Gross order inflow in Q2FY20 was Rs 507 crore up from Rs 473 crore in Q1FY20. The order book as end of Sep 30, 2019 thus stood at Rs 5833 crore (Rs 6052 crore as end of Jun 30, 2019) and of which turnkey orders were Rs 2369 crore, consultancy was RS 2474 crore, exports Rs 860 crore and Leasing Rs 130 crore.

Other developments

The company signed an agreement on 30th August, 2019 with a foreign client for receipt of payment of USD 12,818,152.17 (approx. Rs 91 crore) on or before 15th September, 2019 towards outstanding payment due to RITES, for which arbitration proceedings were already initiated and RITES agreed to withdraw the arbitration proceedings on receipt of the total payment as above. The payment has been received on 10th September, 2019 and as agreed arbitration proceedings have been withdrawn. Accordingly in the current quarter, company has recognized Rs 91 crore (approx.) as other income out of which Rs 63 crore (approx.) towards recovery of principal amount for which provision was already made, Rs 26 crore (approx) towards interest on delayed payment and Rs 2 crore (approx.) towards exchange fluctuation.

The Company opted to exercise the option permitted under section 115BAA of the Income Tax Act, 1961 as promulgated by the GOI vide the Taxation Laws (Amendment) Ordinance, 2019 and has taken 25.168 % rate of Corporate Tax in its accounts. Accordingly, the company has recognized provision for income tax for the quarter/ period ended 30th September 2019. The Company has also re-measured its deferred tax assets/ liabilities on the basis of the above option and additional deferred tax expense due to such change in rate is also recognized for the quarter/period ended 30th September, 2019.

The company has issued bonus shares to the shareholders on Aug 14, 2019 as approved by the shareholders in Annual General Meeting held on 30th July 2019 in the ratio of 1:4 (one bonus share for every four shares). As a result the paid up share capital of holding company increased to Rs 250 crore comprising of 25 crore equity shares of Rs 10 each.

Management Comment

Commenting on the results, Rajeev Mehrotra, Chairman and Managing Director, said, "I am glad to share that RITES has reported its highest ever quarterly and half yearly performance driven by growth in exports, turnkey works and leasing, besides consultancy continue to be the key segment. Our focus on exports has been productive and we are seeing steady upward momentum from clients." Further commenting on performance, Mehrotra said "Through the first half of FY20, RITES has provided a good mix of growth & profitability. These results are an indicator that we are on track to achieve our performance guidance for FY20."