Categories Earnings Call Transcripts, Industrials

Sanghvi Movers Limited (SANGHVIMOV) Q4 2023 Earnings Call Transcript

SANGHVIMOV Earnings Call - Final Transcript

Sanghvi Movers Limited ( ?????? : SANGHVIMOV) Q4 2023 Earnings Call dated May. 25, 2023

Corporate Participants:

Sham D KajaleJoint Managing Director and Chief Financial Officer

Rishi C SanghviManaging Director

Analysts:

Deepan SankaranarayananTrustline PMS — Analyst

Riken GopaniCapri Global Capital Limited — Analyst

MelisaSanghvi Movers Limited — Analyst

Rishabhg ShahK R Choksey Shares and Securities — Analyst

Manish BhatiaSanghvi Movers Limited — Analyst

RohitMarshmello — Analyst

Manan PatelAiravat Capital — Analyst

Arpit RankaCoal Investments — Analyst

Hrishikesh BhagatKotak Mutual Fund — Analyst

Manan ShahMoneybee Advisor — Analyst

Unidentified Speaker

Sunil JainNirmal Bang Securities — Analyst

Presentation:

MelisaSanghvi Movers Limited — Analyst

Ladies and gentlemen, good day and welcome to the Sanghvi Movers Limited Q4 FY 2023 post Earnings Conference Call. Joining us on this call today Mr. Rishi C Sanghvi, Managing Director and Mr. Sham D Kajale, Joint Managing Director and CFO. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [ Operator Instructions ] Please note that this call is being recorded.

I now hand the conference over to Mr. Rishi Sanghvi Managing Director Sanghvi Movers Limited. Thank you and over to you sir.

Rishi C SanghviManaging Director

Thank you Melisa [Phonetics] for the introduction. Good afternoon. Ladies and gentlemen, and thank you very much for attending our Q4 and FY ’23 Analyst and Investor Call. This is Rishi, Managing Director of the Company, and Mr. Sham D Kajale, all with us who is the Joint Managing Director and Chief Financial Officer. So I will quickly take you through some highlights across the board and then open up for Q&A. In terms of our financial performance, our top line for FY’23 has grown to INR486 crores, which is a 30% growth year-on-year on FY’22. The net profit after tax was INR112 crores, which is a 381% growth over FY’22. I mean, the historical high for our company. During the quarter and throughout the year we have showcased robust operating performance. Our consistent focus on debt reduction over the past three years has further strengthened the company’s balance sheet. It has enabled us to generate surplus cash for future capital expenditures and investment opportunities and allied businesses. Our optimized cost structure has further strengthened EBITA despite escalating operating expenses. Our EBITDA in FY ’23 has grown 69%, which is an improvement of 12% over FY’22 whether EBITDA was 47%. This has resulted in an improvement in average blended yield to1.9% has touched 2.06% in the last quarter. Risk capacity utilization has increased to 83% for FY ’23, which was 76% in FY’ 22. We are also strengthening our position. We have also strengthened our position by adding 12 new cranes and 68 ancillary equipment in our portfolio by incurring a capex of INR163 crores for FY’23. Our order book stands at INR299 crores as of May 4, 2023, which will be executed during this financial year.

I would like to open up the the floor for Q&A, I’ll hand it back to the moderator Melisa. Thank you, everyone.

Questions and Answers:

MelisaSanghvi Movers Limited — Analyst

Thank you. Ladies and gentlemen we will now begin the question-and-answer session. [ Operator Instructions]. We have the first question from the line of Deepan Sankar Narayanan from Trustline PMS. Please go ahead.

Deepan SankaranarayananTrustline PMS — Analyst

Thanks a lot for the opportunity and good evening everyone. First of all I would like to congratulate management for conducting the call after long-time. So this would be very helpful and please continue this for a long-time. So first question from my side. So when do we expect India’s the Annual Wind Capacity implementation moving to 6 to 8 gigawatts per annum from the levels of 1.6 gigawatt for the past five years, it has been struck over that range.

Rishi C SanghviManaging Director

So in FY’23, the industry had added about 2.3 gigawatts of capacity addition. We believe that the last financial year over [Technical Issues].

MelisaSanghvi Movers Limited — Analyst

This is the operator, Sanghvi sorry to interrupt, but your audio is breaking. Let me just disconnect and call you back with you, sir. Thank you.

Riken GopaniCapri Global Capital Limited — Analyst

Thanks a lot.

MelisaSanghvi Movers Limited — Analyst

Ladies and gentlemen, this is the Chorus Call operator. We have the line for the management reconnected. Sir, please go ahead.

Rishi C SanghviManaging Director

Thank you, Melissa. I hope I’m audible now.

Operator

Yes, Sir it is much better. Thank you.

Rishi C SanghviManaging Director

Sorry for the technical difficulties. So just to answer the question in FY ’23, the wind industry added about 2.3 gigawatts of capacity addition. In the last financial year, it was a transition year as the industry has been laying the groundwork to achieve India’s ambitious target of 140 gigawatts of renewable wind energy. So this primarily involves building associated infrastructure and capabilities around mid [indecipherable] grid infrastructure substations, acquiring and developing sites. We’re looking-forward, we have order visibility and market full for FY ’24, but the country may add 5 gigawatts of capacity addition in wind.

Deepan SankaranarayananTrustline PMS — Analyst

Okay. Sir. Even though the auction and bidding has happened over the past few years at a very high level, but the installation has been at a very lower level, they had lot of concern, so add to government address all those concern for this level of jump out of this 6 to 8 gigawatt per year kind of installation happening at India. So is it possible still.

Rishi C SanghviManaging Director

So, I’ve already answered your question because I have told you that the industry is building infrastructure around substations. Grid infra acquiring land developing sites. It is both a private and public issue and I believe that the step of removing the reverse auctions, mechanism and assuring about 8 gigawatts of annual bidding will be a great boost to not only the wind industry, but also India’s renewable target for 140 gigawatts of wind energy.

Deepan SankaranarayananTrustline PMS — Analyst

Okay. Okay. That’s great to know Sir. And next from my side even this repowering potential of 25 gigawatt is announced by this National Grid of wind energy. So that also add a lot of potential to this.

Rishi C SanghviManaging Director

Yes, so it’s exciting opportunity, but till now it needs to play out and there is no traction at the ground level.

Deepan SankaranarayananTrustline PMS — Analyst

Okay. And also, are we planning to cater to this offshore wind power installation market as well in future that segment also of not of potential they talking about 30 gigawatts by 2030.

Rishi C SanghviManaging Director

I’m a believer that until the onshore capacity potential of the country is not exploited. Offshore power is too expensive. There is still about 25 to 40 gigawatts of additional potential, which is totally untapped in the country at 140 meters at 160 meters it is more than 100 gigawatts. So until we exploit this onshore opportunity, it doesn’t makes financial and viability to move to offshoring.

Deepan SankaranarayananTrustline PMS — Analyst

Okay, okay. And so, what kind of yields can we achieve over next two, three years. In the previous cycle we remember we have crossed some 2.6% to 2.7% kind of yield. So is it possible to reach that kind of yields over next two, three years when even the capacity growth of under utilization inching up and there is very high demand for the product.

Rishi C SanghviManaging Director

So we believe that anything about 2% as possible at least for the next financial year that is what the management of the company expects.

Deepan SankaranarayananTrustline PMS — Analyst

Okay. Thanks a lot and all the best sir, I’ll come back in queue.

Sham D KajaleJoint Managing Director and Chief Financial Officer

Rishi will answer [indecipherable] 2.7%, up 2.8%, those years where we used to get a good amount of overtime time now because of good logic exhibition from the client side, we are losing [indecipherable] substantially reduced. So getting those kind of [indecipherable]. So we believe that we will achieve in excess of 2000 wind power.

Rishi C SanghviManaging Director

Also in the past, we had a healthy mix of used and new equipment, but nowadays, we are purchasing mostly brand new equipment and therefore, sometimes a user maybe at 2%, it’s where we expect the yield to lined up.

Deepan SankaranarayananTrustline PMS — Analyst

Okay. Thanks a lot and all the best Sir. I’ll join back in the queue.

Rishi C SanghviManaging Director

Melisa.

MelisaSanghvi Movers Limited — Analyst

Thank you. We have the next question from line of Rishabh Shah Sam Shah from KR Choksey Shares and Securities. Please go ahead.

Rishabhg ShahK R Choksey Shares and Securities — Analyst

Am I audible. Couple of questions, the company has proposed to increase the share capital from INR10 crores to INR25 crores. Can you explain the reason behind this.

Rishi C SanghviManaging Director

I’ll answer this question. This needs are enabling resolution that we intend to take the shareholders’ approval. So we have authorized capital of INR10 crores out of which INR86,500,000 is already being consumed issued and predecessor capital. So in near future if we need to increase our share capital base, we start to better to take the approval well in advance, so that there should not be any holding. Well those are enabling resolution that we intend to pass right now. We don’t have land in near future at least next one year to go for any additional [indecipherable] equity or right to share something on that. If we do, we will get back to you.

MelisaSanghvi Movers Limited — Analyst

Thank you. We have the next question from the line of Riken Gopani from Capri Global Capital Limited. Please go ahead.

Riken GopaniCapri Global Capital Limited — Analyst

Hi sir, thank you so much for the opportunity and congratulations for a great year in terms of numbers. Sir, I wanted to firstly understand in the presentation you have outlined your guidance adding about INR264 crores worth of capital expenditure in FY ’24, if you could throw some more color on that in terms of –in comparison to the last four, five years of about INR150 crores less than that of capex, what is driving our view to accelerate that capex and how do you see this and in an ongoing basis over the next three, four years.

Rishi C SanghviManaging Director

I can answer that question. You see the country is in capex up screen and focus on infrastructure in the last 10 years it has been very minimal. Now looking-forward in the refinery and petrochemical space nearly 80 million tonnes per annum of capacity is being added either enhancement brownfield or greenfield project. In thermal power sector, almost 25 gigawatts of capacity are at various stages of construction. In steel sector 13 million tonnes per annum of capacity addition is expected in this financial year. The cement industry plans to add about 80 million tonnes per annum by FY’24, nearly every Tier-1, Tier-2 metro city has elevated or underground metro under construction. There are more than 20 airports that are being constructed across the country, including but not limited to Noida, Guwahati and multiple such locations when do you expected to add about 5 gigawatts of capacity addition in FY’ 24, so all round all co-sectors of firing on all cylinders. And there is sufficient demand or increased demand for [indecipherable]. Therefore, management of the company has started prudent to invest about INR263 crores, which has been approved by the Board of Directors. And we will be investing in capacity addition to cater to this demand.

Riken GopaniCapri Global Capital Limited — Analyst

Understood. Maybe I will just add a few, again this is the thought process, see not only being capex is happening across all sectors. You must be aware that Government of India has allocated INR10, 00,000 crore for infrastructure projects. Private capex are also happening on the sales side, we have a robust order book and good pipeline. And our balance sheet you mush have seen to reduce our debt substantially. And because of that, the Board has approved the capex plan of INR363 crore it is the pipeline is also healthy pipeline we have to cater to the needs of the customers.

Rishabhg ShahK R Choksey Shares and Securities — Analyst

Understood. That is very helpful. Thank you for the detailed outlook. Sir, do you see that this capex would be mostly tied with whatever orders you have in place and therefore utilization of the new capacity would be very strong once you add that capacity again.

Rishi C SanghviManaging Director

So all capex that has been committed has already been backed by order.

Sham D KajaleJoint Managing Director and Chief Financial Officer

Okay, so you’ll see a good utilization at the starting point of [indecipherable] debenture.

Rishabhg ShahK R Choksey Shares and Securities — Analyst

And therefore, the related question being in terms of utilization. We’ve moved quite strongly from 70%s to now about 83% utilization. Where do you see that utilization in view of the strong demand. And I’m assuming, therefore, longer-term engagements with your clients as well. Therefore, is there scope for utilization to further improve from wherever you are today.

Rishi C SanghviManaging Director

So we expect utilization for FY ’24 to be above 80% in terms of order book visibility the most of the projects that we are associated with our multi year projects. So some of our order book is we have visibility going into the next financial year as well, but we see good order visibility till the end of FY’24 a very healthy inquiry pipeline and almost INR300 crores add of order book, which needs to be executed in this financial year, FY ’23,’ 24. So if you can relate that order book to last year’s numbers you can extrapolate where we would and you are at.

Rishabhg ShahK R Choksey Shares and Securities — Analyst

Understood Sir. That is very helpful, sir. And just one last question which is on the gross net number, so do you indicated in your presentations the gross profits, so if you could outline the number at the end of FY ’23.

Rishi C SanghviManaging Director

We want to understand the gross profits as on March 31, 2023 right that number.

Rishabhg ShahK R Choksey Shares and Securities — Analyst

Yes Sir.

Rishi C SanghviManaging Director

INR2,300 crores.

Rishabhg ShahK R Choksey Shares and Securities — Analyst

INR2,300 crores. Got it, got it. I have some more questions, but I’ll come back in the queue Thank you.

Rishi C SanghviManaging Director

Thank you.

MelisaSanghvi Movers Limited — Analyst

Thank you. We have the next question from the line of Manish Bhatia, an Individual Investor. Please go ahead.

Manish BhatiaSanghvi Movers Limited — Analyst

Good afternoon. Am I audible.

MelisaSanghvi Movers Limited — Analyst

Sir, you need to be a little louder sir.

Manish BhatiaSanghvi Movers Limited — Analyst

Good afternoon. Am I audible.

MelisaSanghvi Movers Limited — Analyst

Yes, please go ahead.

Manish BhatiaSanghvi Movers Limited — Analyst

Yss. First of all congratulations for the great results. However, when I review the financial statements I could see that there has been a significant jump in the operating and other expenses line item. So is this a trend that is going to continue going forward or are there any one-offs incorporated into this particular line-item.

Rishi C SanghviManaging Director

You are talking about the Q4 operating expenses.

Manish BhatiaSanghvi Movers Limited — Analyst

Yes, yes, yes.

Rishi C SanghviManaging Director

See, there has been a increase in the freight cost and the manpower cost in the Q4 regarding the third quarter number. Will this primarily be freight cost is primarily on account of the weight of certain, because certain cranes got — we had got deployed within other cranes. So there is a movement of cranes and the freight cost has gone up, and the manpower cost has been increase in the manpower because of the deployment of the additional cranes plus the operating expenses relating to the EPC business that we are carrying out so there is a quantum jump in the labor charges that’s why we operating expenses has been slightly increase in the Q4 vis-a-vis Q3 number.

Sham D KajaleJoint Managing Director and Chief Financial Officer

I would like to add to this, if you look at our operating revenue on an annualized basis we have hit INR286 crores by FY’23. Now that is a 30% growth year-on-year for FY’ 22. Expenses for those two years are similar and this is reflected in our EBITDA, EBITDA was 47% for FY’ 22, maintaining a similar level of expense. We have been able to improve the EBITA for FY ’23, all the way up to 59%, which is a 12% jump.

Manish BhatiaSanghvi Movers Limited — Analyst

Okay. Thanks sir, very clear. And the next question is terms of the segment revenues. What are you observe is that today although we are planning to actually become a full turnkey solutions provider. As far as when the EPC and the project EPC revenues are concerned, it comprises almost just 2.5% of the total revenues of the company. In the coming the future, do we expect this share to go up in the overall the revenues.

Rishi C SanghviManaging Director

Yes, so strategically the company is looking at allied businesses and we are focused on driving those two revenue segments for both project and EPC. Last year was the first year where we had started. But going-forward, we expect to add more revenue coming from those two verticals.

Manish BhatiaSanghvi Movers Limited — Analyst

So in terms of the overall gross margins will there be any dilution in the overall gross margin this term.

Rishi C SanghviManaging Director

See, currently the EBITDA margin for both this business put together is roughly around 35% to 40%, because in most of the cases we’re outsourcing the some of the jobs, because we don’t have expertise, once we develop the expertise we may get some kind of lee way to increase our means of cost optimization. So currently, the EBIT margin from this segment is on an average 35% to 40%.

Manish BhatiaSanghvi Movers Limited — Analyst

Thank you very much. Yes, that answers my queries.

MelisaSanghvi Movers Limited — Analyst

Thank you. We have the next question from the line of Rishabh Shah from KR Choksey Shares and Securities. Please go ahead.

Rishabhg ShahK R Choksey Shares and Securities — Analyst

Hello.

MelisaSanghvi Movers Limited — Analyst

Yes, please go ahead.

Rishabhg ShahK R Choksey Shares and Securities — Analyst

Yes, my question is last time we did huge capex and then market fell off the cliff due to huge increased burden. It’s fall in revenues. How do you manage such high risk and how we better than place than the previous cycles.

Rishi C SanghviManaging Director

Sham would you like to take this question or I should answer.

Sham D KajaleJoint Managing Director and Chief Financial Officer

No, please go ahead. I’ll take towards the end. Go ahead Sanghvi.

Rishi C SanghviManaging Director

When we did a huge capex in the financial year ’15 and ’16 and ’16 and’ 17 we did a huge capex of almost INR800 crores in those two years after that, there was a downturn in the economy more particularly with respect to the wind sector, where as the government has changed the method bidding for the wind sector from [indecipherable] tariff to reverse auction and that’s how you must have seen the wind installation in India has come down from 5.3 gigawatt to 1.7 to 1.5 gigawatt on an average in last three to four years. Now, government first of all had scrapped the method of bidding. So they have scrapped that policy, now you can bid in field and develop. So there is a first thing which is happened and that’s why the wind installation has –is going to increase going forward. In FY’23 India has already completed 2.3 gigawatt of wind installations. The government has crated an [indecipherable] 8 gigawatt wind installations going forward. So there is a good amount of business we see from the wind sector. And if you see overall exposure, when it will every year financial year ’16, ’17 with one more than 70%, 75% we have reduced exposure to the wind industry. Okay, that is the first thing. Secondly, we have taken a huge amount of debt in financial year ’15 -’16 ’16-’17. We have a debt in excess of INR550 crores. You must have noticed that we have substantially reduced the debt number, debt level as on today is INR160 crores. You must have noticed in the financial year, we do the capex of INR111 crores, last year we did a capex of INR161 crores. In spite of that, our debt is come to INR160 crores in this. So now we have strengthened our balance sheet. You must have seen company have earned a cash accrual in excess of INR233 crores. So we are better-off as compared to the previous cycle that is the first thing. Secondly, not only from the wind sector the capex is happening across all the sectors where the cranes are deployed and that has been reflected in the yield as well as the utilization and obviously in the turner over of the company, so just to give some of answer I think we are better placed as compared to what we their in financial year ’15, ’16 and ’16, ’17.

Rishabhg ShahK R Choksey Shares and Securities — Analyst

Okay sir. Thank you so much.

MelisaSanghvi Movers Limited — Analyst

Thank you. We have the next question from the line of Rohit from Marshmello. Please go ahead.

RohitMarshmello — Analyst

Thank you for the opportunity and thanks for getting to the conference call highly appreciated. Great set of numbers as well. I was curious to follow-up on the authorized share capital. So as Mr. Kajale mentioned, we have more than INR200 crore, INR230 crore of cash flow that we generated, and with the next year looking strong and getting the cash flow could go up even more. So in that context, the authorized capital increase and we — I had a [indecipherable] that it could be because of, it could be for some type of bonus issue or later something if, is that in cards or is that too much guess work right now.

Rishi C SanghviManaging Director

It certainly is too much guess work we have already clarified enabling resolution. If there are any updates, we– the management after the Board approval we’ll update all stake holders.

RohitMarshmello — Analyst

Perfect. Thank you for that. And then the second question is. Mr. Sanghvi mentioned that a lot of the order book you have long-term contracts beyond FY’24 itself. And so you have two interesting scenario two interesting things happening together together where you have customers asking for long-term order book and you have very high utilization coming in. So what do– how do we think of yields in that context because would it be better to have short-term contract, and then reprice and higher going forward. How do you think about it.

Rishi C SanghviManaging Director

So in first strategy call that the sales team along with the management take. There are certain customers who we know are going to be repetitive customers who have long-term plans. For example in the wind industry, their annual gigawatt capacity addition and their annual wind energy capacity addition has more than a gigawatt. So for them, what we will get into is 12 month contracts where there is clause in the contract enabling us to renegotiate commercial terms for any further extension. It is a mixed bag where certain portion of the fleet is kept for long-term contracts or committed to customers for long-term contracts and certain portion of the fleet we play in a short-term market where we are able to take advantage of the dynamic pricing based on the situation. And this is how sometimes we may able to push the yield beyond 2% for the quarter. So that was very helpful.

RohitMarshmello — Analyst

On the order book that you’ve given INR233 crore last year and INR299 crores this year, we can accrual almost. Would it be possible to share with us what was the yield that with the order book was in beginning of FY’ 23 and the order book today. Is it possible to say that.

Rishi C SanghviManaging Director

No, because on the order book is expected Sham.

Sham D KajaleJoint Managing Director and Chief Financial Officer

We need not disclose this number.

RohitMarshmello — Analyst

Okay. Perfect. So that’s all that is my question.

Rishi C SanghviManaging Director

Two questions, if I missed, it’s too price sensitive and we don’t have to disclose this number for business reason, okay.

Sham D KajaleJoint Managing Director and Chief Financial Officer

At the end of the day we have to live with our customers.

RohitMarshmello — Analyst

Yes. Sure. Yes, I understand. Thank you. Thank you for that, sir, and. Just wanted to talk about the [indecipherable] a little bit more. So it’s great to see the positivity that we have across the sectors, which Mr. Kajale explained was not there the last time around. I wanted to get a sense or get your views on where do you think we are in terms of the cycle this time around. I mean, are we midcycle as in the beginning of a cycle or into an up cycle how do you think about that as Board level.

Rishi C SanghviManaging Director

So, we don’t believe that the current sentiment, a short-term sentiment at least I don’t believe it. I cannot speak for my Board or the entire organization. And there is sufficient traction of project planning from multiple private players that have long-term plans after2030.

RohitMarshmello — Analyst

Okay, okay, perfect. And last question sir, in the opening comments, Mr. Sanghvi is ended very healthy cash which allows for expenditure into the cranes and allied activities and we intend to strengthen allied activities as is. So is an increase in project space and how do you look at the capex outside of crane for the next two,three years.

Rishi C SanghviManaging Director

So as of right now the INR263 crores of committed capex, which has already been approved by the Board and there are orders to pack this capex, it’s all in our crore business, any further capex that would be done if any or for allied businesses will be subject to the approval of the Board.

RohitMarshmello — Analyst

Understood. So I mean let’s say, five years out, not more than that, but three to five years out. I mean given our position in the country already with the top green player and we are the fifth largest in the world. I’m just curious to know, sir, how do you see Sanghvi, we’re not asking for numbers at all. And asking about the segments that we operate in the infrastructure space in the country or others places if you think that makes sense. So just wanted to get your sense there.

Rishi C SanghviManaging Director

So crane has already central aspect of any infrastructure projects. And we have the benefit of working across several sectors, we are not limited to any one sector. Moreover, we have a brand name and a brand recognition along with 33 year track record, which will a lot of corporate houses and government agencies appreciate. So looking-forward, we will be going to the customers to understand what are the pain points and what are the solutions that we can provide them that are within our scope of business or our mission and vision. So around allied business is what we will be looking at exploring going-forward. Leveraging all the levers that are already operating in our favor.

RohitMarshmello — Analyst

Thank you so much Sir. The answered all my questions and I’ll get back in queue. Thank you so much.

Rishi C SanghviManaging Director

Thank you.

MelisaSanghvi Movers Limited — Analyst

Thank you. We have the next question from the line of Manan Patel from Airavat Capital, please go ahead.

Manan PatelAiravat Capital — Analyst

Thank you for the opportunity sir, and congratulations for good numbers and declaring a good dividend. Sir, my first question is related to the capex and capex of the competitors as well. So while we are committing a big capex, do you see the competition also having the balance sheet and ability given the demand in the country. They’re also doing similar amount of capex and the competitive scenario despite.

Rishi C SanghviManaging Director

So I don’t comment of competitions capex. But to put things in context we’re the only organized and listed player in this space. So you may draw conclude draw your influence from that.

Manan PatelAiravat Capital — Analyst

Sir, I understand we have a very high market share as well. So the idea is to understand how is the industry behaving and their ability, but you don’t comment. Sir move to the next question. Sir, so we have–you have a good order book visibility and the amount of installation almost when do you expect to double this year. So in that context don’t you think the yield projections that we are giving around 2% which we have already hit in the Q4. Is too conservative or how do you think about that.

Rishi C SanghviManaging Director

We believe that 2% is a fair number, if we communicate our yield at a higher level and underperformed, then our shareholders get upset if we give a lower yield, and over perform, then also they get upset. So either way is 2% is the number we are talking about.

Manan PatelAiravat Capital — Analyst

Okay, okay, that makes sense. And sir, you mentioned about the new cranes and old cranes mix. So in the current gross flow of around INR2,300 crores. So new cranes I would assume would be around INR300 crores to INR400 crores is it possible to give a breakup for fraud guideline on what would be the difference between yields of old cranes and new cranes.

Rishi C SanghviManaging Director

It’s a price sensitive information, the other vendor started giving the price for average vendor deal for our stakeholders.

Manan PatelAiravat Capital — Analyst

And clarifying questions statement is that, it’s not new and old, but it is first time purchase versus pre-owned cranes or used cranes. Okay, okay, got it. And sir, last question was related to the increase. We have entered into [indecipherable] understand our scope of activity in the EPC business because it’s new for us and it might be outsourcing some part. So could you help us understand in a project what all activities, you would be undertaking in the equity.

Rishi C SanghviManaging Director

So it’s a good question and I would like to share the following information with everyone present. So, there has been a condition in the wind industry in he last two years, where the OEM has now been focused on delivering the products to their customer and not undertaking the execution of the project. On the other hand, the customer of the OEM is ITP, who doesn’t have the project experience to do a complete project execution in the wind industry. So we see that there is a scope for a player such as ourselves where we can get involved in the providing turnkey EPC services for the wind industry. Cranes is majority of the portion of the construction of a wind farm. We have started developing in house expertise to provide services other than cranes around various activities involved with the construction of our wind farm. Surface logistics [indecipherable] foundations. So there are three categories of mechanical, electrical and civil, BOP which is balance of plant, which other services around which we are offering to our customer. In project EPC, we typically for the bigger projects such as fertilizer plants refineries and petrochemical, etc. There is a need to not only provide a crane on a rental basis to, but also undertake light activities such an equipment erection alignment, engineering solutions, fabrication, structural work, erection and so on and so forth. So there again our interest is to win composite work or composite orders, whereby we using our strength in crane. We are able to leverage our knowhow with the customer with our operational capabilities and our in house talent engineering skill sets to provide composite solution to the principal contract or plant owner. So that is the vision around which currently, we are focused on again both wind and project EPC contributed about INR10 crores to the top-line last year and we are focused on growing this in the coming financial year.

Manan PatelAiravat Capital — Analyst

Thank you sir. That’s very helpful and just one add on to this. So, are we open to any inorganic opportunities especially in the EPC part of the business.

Rishi C SanghviManaging Director

Is there any opportunity presents itself, the management will evaluated and seek the Boards recommendation on the same.

Manan PatelAiravat Capital — Analyst

Thanks a lot sir, wish you all the best for coming quarter. Thank you sir.

Operator

Thank you. We have the next question from the line of Arpit Ranka from coal investments. Please go ahead.

Arpit RankaCoal Investments — Analyst

Yes, hi, thanks for the opportunity. Most of our questions have been asked already. Just a quick follow-up on what was communicated earlier in the call. So from a strategy perspective, what’s driving our decision to buy or prefer newer games over the used crane despite the lower use, if you could help us understand.

Rishi C SanghviManaging Director

So typically have highest in the country have gone up from 90 meters to 140 meters. And world over there are very few cranes that can go up to 140 meter hub height. This is trend in the industry, including the European market where the hub highlights have been going up exponentially over the last few years. So, availability of use cranes is a challenge, that is the first part. The second part is that the newer crane has newer safety features, newer technology, they have more flexibility in terms of the components that can be used for different industries. So there is a lot of benefits and going for new cranes.

Arpit RankaCoal Investments — Analyst

Okay Sir. Is it fair to assume that what you’ve given is gross capex for the next year at INR260 odd crores, but the cranes, which are not or maybe these newer cranes will replace some of the older which less relevant. So would there be a plan to like sell them off also or how is the management thinking about.

Rishi C SanghviManaging Director

So older cranes don’t become a relevant after fungible across the sectors. Such as cement, steel, common power, refineries and petrochemicals, metros, railways, bridges, airports, etc. So we with 80% plus capacity utilization not many cranes are idle as of now.

Arpit RankaCoal Investments — Analyst

Okay. Perfect.

Rishi C SanghviManaging Director

Let me add, let me add to Rishi’s, we are contemplating selling gold crane. For example, we sold 11 cranes in FY2012 in FY ’21, in FY’22 we sold 6 cranes and_ last year we already sold 7 cranes. This year, this year we have some plan to sell old cranes. So the management prefers to revamp the crane space and that we need going forward also.

Arpit RankaCoal Investments — Analyst

That’s very good.

Sham D KajaleJoint Managing Director and Chief Financial Officer

Bringing down the average age of the fleet.

Arpit RankaCoal Investments — Analyst

And what’s the average age of the fleet. He speaks 12 years. I remember what that right now.

Rishi C SanghviManaging Director

More than 20, 22 years because we have lot of old cranes.

Arpit RankaCoal Investments — Analyst

Okay sir, as of now it is about 20 years, 20, 22 years.

Rishi C SanghviManaging Director

Yes.

Arpit RankaCoal Investments — Analyst

Okay. And in the past, this last question. So in the past you’ve spoken about that whenever feasible, we will consider a buyback at the current valuation using the Board will still kind of you’re open to that, are you saying that just like to understand your thought on.

Rishi C SanghviManaging Director

We have taken it as an advertisement, we have already declared a dividend of INR4, if our buyback is to be considered the Board will take a final decision.

Arpit RankaCoal Investments — Analyst

Thanks a lot. Thank you. That’s from me.

MelisaSanghvi Movers Limited — Analyst

Thank you. We have the next question from the line of Hrishikesh Bhagat from Kotak Mutual Fund. Please go ahead.

Hrishikesh BhagatKotak Mutual Fund — Analyst

Hi. Good evening. Thank you for coming. First of all, congrats on the work done on the balance sheet over the last few years. So my point is largely related to EPC business. Now, just want your thought, you did explain our fair bit of cover my answer, but just from the risk management perspective, how much capital will go over the next two, three years in this business. And secondly, what is risk management we’re taking considering historically we have seen this business does have challenges of working capital, or capital getting stuck, so from that perspective what are the measures we are taking. That’s my first question.

Rishi C SanghviManaging Director

Sham.

Sham D KajaleJoint Managing Director and Chief Financial Officer

Okay. So first of all. We are not doing the entire EPC as per this because EPC is the entire equipment procurement and the construction. Currently we are doing relatively small portion of that C part, okay. I know it’s labor intensive as well as the working capital intensive business. Currently, we have not allocated the easy funds or we haven’t done any capital allocation for this business. Okay, now we are going very cautiously in this business and in bringing [indecipherable] we are doing the business with the IT team most of the cases where we have a strong balance sheet and strong financials. So we are going very cautiously in terms of credit period payment terms to avoid any risk if at all arises in this kind of business. So that has already been taken care off in terms of risk management perspective.

Hrishikesh BhagatKotak Mutual Fund — Analyst

Okay. Thanks a lot. The second question is on the capex guidance. Now, how much will be funded through debt and how much probably through other internal accruals. And secondly, just related to that, do we have any other non-crore assets like land or anything that we can sell for to fund this capex.

Rishi C SanghviManaging Director

The capex is to be funded partly through internal accrual that is to the tune of 30% and the balance 70% will be availed by the long term loan from the bank.

Hrishikesh BhagatKotak Mutual Fund — Analyst

Okay. Thank you.

Rishi C SanghviManaging Director

Just clarify with our existing internal accruals. We don’t need to liquidate any non-crore assets to fund capex. There is sufficient cash flow generated through the business to fund our capex.

Hrishikesh BhagatKotak Mutual Fund — Analyst

Sure. Sure. Thanks. Thanks all the best.

MelisaSanghvi Movers Limited — Analyst

Thank you. We have the next question from the line of Manan Shah from Moneybee advisors. Please go ahead.

Manan ShahMoneybee Advisor — Analyst

Yes. Hi. Thanks for the opportunity. I hope this engagement with the investor community goes on going forward. My first question was on the order book now if we look at our order book on a sequential basis what we had declared during the previous quarter it was around INR449 crore versus this quarter, we had what we have is around INR300 crores. So sequentially we see a decline in this order book even though on a Y-on-Y basis, there is a significant jump. So if you can just highlight if this is a trend that we can see that majority of the orders are booked during Jan, Feb period or if you can just highlight a bit on that side.

Rishi C SanghviManaging Director

Basically, you have to see how much order book of the much order company has secured in the beginning of the year, because once you secure the order. We need to execute those orders. So obviously the cranes are booked for the next 6 to8 month period and that’s how we slowly and gradually build-up the revenue over a period of time, because the order book is given for a particular period. For example, on April 1, 2023 to March 31, 2024 one has to see from the other angle that how much the revenue almost of the order company has already secured. See if you see the order book for last financial year on the same day, it was INR236 crores and we already achieved a turnover INR455 crores, so almost 50% of order book company has secured in the first month itself and you have to see from that angle.

Manan ShahMoneybee Advisor — Analyst

Understood, understood. Thank you for that clarification. Secondly, my question was is there any differential in the yields for same crane whether it is first hand or second hand.

Rishi C SanghviManaging Director

Generally the yield for the brand new cranes are on the lower side and the new cranes that we have in the cost of acquisition relative less is on the higher side. That’s how we started giving the average lending rate.

Manan ShahMoneybee Advisor — Analyst

Understood. So basically, there is no difference in the rental absolute renters that we make whether it’s particular crane as a used cranes or on new crane.

Sham D KajaleJoint Managing Director and Chief Financial Officer

Yes, there is no different.

Rishi C SanghviManaging Director

Yes.

Manan ShahMoneybee Advisor — Analyst

Okay,

Sham D KajaleJoint Managing Director and Chief Financial Officer

You might get a slight premium from certain customers, but that’s about it.

Manan ShahMoneybee Advisor — Analyst

Understood. The various sectors that we cater to. Can you rank them on the basis of deals that we make, for example..

Sham D KajaleJoint Managing Director and Chief Financial Officer

We’ll use flat across all sectors.

Manan ShahMoneybee Advisor — Analyst

Okay, understood. And earlier you have guided that we plan to limit the wind sector exposure to around 40%, so that should continue going forward as well, right, or do we see any change in the mix.

Rishi C SanghviManaging Director

So as I have already described to everyone. All sectors of the economy are firing on all cylinders. I have mentioned, almost 80 million tonnes per– there’s almost 200 million tonnes per annum of capacity addition across all sectors and about 30 gigawatts of power both thermal and wind to be added. Now it is at management’s discretion or where we take the orders from because we have a very healthy order pipeline and the yield is flat across all sectors. So what we do is we focus on utilization on a FIFO basis, who comes first, we cater to, so that we can secure the order book and drive up the utilization.

Manan ShahMoneybee Advisor — Analyst

Understood. And lastly on be capex that we’re doing. So when do we expect this capacity to be available. I mean.

Rishi C SanghviManaging Director

The first, two quarters of this year.

Manan ShahMoneybee Advisor — Analyst

First two quarters this capacity should be available.

Rishi C SanghviManaging Director

Yes, sham how much of the capex we have already executed.

Sham D KajaleJoint Managing Director and Chief Financial Officer

Almost INR200 crores.

Manan ShahMoneybee Advisor — Analyst

Oh INR200 crores of this capex is already been executed. So this capacity is already available.

Sham D KajaleJoint Managing Director and Chief Financial Officer

Yes, in the first quarter itself. Most of the cranes have come in the fag end of the — some cranes have come in the month of May also.

Rishi C SanghviManaging Director

So, let’s take about a month to start generating revenue from docs to site.

Manan ShahMoneybee Advisor — Analyst

Understood. And you’ve been saying that we have already secured by orders.

Rishi C SanghviManaging Director

Most probably the majority portion of the capex has been set back by orders, if.

Manan ShahMoneybee Advisor — Analyst

Okay, understood. Sir I’ll get back-in the queue. Thank you so much.

MelisaSanghvi Movers Limited — Analyst

Thank you. We have the next question is from the line of Aditya Nahar [indecipherable] Please go ahead, sir.

Unidentified Speaker

Yes. Hi Rishi and Sham sir congratulations on fantastic last three to five years. Wish you all the very best and I hope you continue doing the con-calls in the future. Thank you.

Rishi C SanghviManaging Director

Thanks Aditya.

Unidentified Speaker

Thanks Sir.

MelisaSanghvi Movers Limited — Analyst

Thank you. We have the next question from the line of Sunil Jain from Nirmal Bang Securities. Please go ahead.

Sunil JainNirmal Bang Securities — Analyst

Yes. Thanks for taking my question. Sir, my question relates to Q4 financials. If we see, no doubt, year-on-year there is a very good growth, but in Q4 the growth was comparatively less at 16% and the utilization elsewhere 84% versus last year 88%. Was there any deferment or anything, which has happened, which has kept this revenue lower.

Rishi C SanghviManaging Director

There is no deferment as such. We are a listed company and we are big four, one of the big four, one of the big six, so there is no deferment of revenue. Your question is absolutely right in FY’ 21, Q3 versus Q4 our revenue has increased by almost 48% in the next financial year. It has increased almost 38% and in the current financial year that is in the last financial year that increased only by 4%. Now what has happened, most of the order that we secured in the beginning of the year, they have a long term order basically, so revenue on system almost flat during the year. So there is no postponement of deferment of revenue and more or less this is primarily on account of securing order on a long-term basis, but further revenue is more or less flat. But this is not the case in the earlier arrangement.

Sunil JainNirmal Bang Securities — Analyst

So what I got that your execution was there any lag or no, means execution wise like the utilization generally in the fourth quarter are very high.

Rishi C SanghviManaging Director

Correct. Absolutely right.

Sunil JainNirmal Bang Securities — Analyst

This time it has remain lower.

Rishi C SanghviManaging Director

Yes, there has been some movement of crane happened in the fourth quarter of the last financial year. We almost moved some 23 cranes packages in the fourth quarter. That’s mainly because of the transit this time there has been some dip in the revenue because the most of the cranes where in transit. We were having the order, but the order got executed in the third quarter of the last financial year and of course on the expiry of the order with the customer the crane has moved int the fourth quarters. So because of the transit time there has been some dip in the revenue.Although we got some mobilization revenue, but this is not that healthy to that the previous year top line growth Q3 versus Q4.

Sunil JainNirmal Bang Securities — Analyst

Sir, second question relate to ROE, we are doing very well on profitability and cash generation. But still the ROEs is sub 15%. Mainly because you deploy a lot of capital and the debt is quite low, it asset business and second thing yield either yield has to go up or you might have to leverage that only this ROE can go up.

Rishi C SanghviManaging Director

The capital investment that if you’re talking about the annualized ROE, it’s still [indecipherable] I would say considering the nature of Industry, that we have, we have reduced the rate also because interest has significantly come down as compared to what it was in the four year back or five year back it has come down from INR64 crores to INR16 crores. One has to see the particular nature of our industry. So ROE for our company like 15% I think the current [indecipherable] very good. If you see our net profit margin almost 25% cash profit margin of 46%, which itself is a very good number of healthy number I would say.

Sunil JainNirmal Bang Securities — Analyst

So you want to say this ROE will remain around this level or is there any scope for expansion in this.

Rishi C SanghviManaging Director

They will go what I mean to say it may not be the right metric to measure our Company. Right Sham.

Sham D KajaleJoint Managing Director and Chief Financial Officer

Yes.

Rishi C SanghviManaging Director

The depreciation charge will still be very high INR121 crores is my depreciation charge.

Sunil JainNirmal Bang Securities — Analyst

So that is the case with all the asset heavy companies. So whatever we take.

Rishi C SanghviManaging Director

Correct.

Sunil JainNirmal Bang Securities — Analyst

Okay. Yes. Fine. Thank you.

Rishi C SanghviManaging Director

Melisa.

MelisaSanghvi Movers Limited — Analyst

This is the operator should we move to the next question, sir.

Rishi C SanghviManaging Director

I think we can move to closing remarks, please.

MelisaSanghvi Movers Limited — Analyst

Sure, sir. Sir, would you like to give any closing remarks.

Unidentified Speaker

Yes. Once again I would like to thank all the ladies and gentlemen for joining this call and sparing your valuable time to your updates for the Q4 and FY’ 23 analysts and investor call forward to continuing what we have been doing and our outlook for the business is positive and for the economy and industry. Rishi Sanghvi and along with me was Mr. Shyam who is the joint Managing Director and CFO of the Company. Thank you, everyone, and thank you, Melissa. Have a good day.

MelisaSanghvi Movers Limited — Analyst

Thank you ma’am.

Rishi C SanghviManaging Director

Thank you, everyone.

Operator

[ Operator Closing Remarks].

Disclaimer

This transcript is produced by AlphaStreet, Inc. While we strive to produce the best transcripts, it may contain misspellings and other inaccuracies. This transcript is provided as is without express or implied warranties of any kind. As with all our articles, AlphaStreet, Inc. does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company’s SEC filings. Neither the information nor any opinion expressed in this transcript constitutes a solicitation of the purchase or sale of securities or commodities. Any opinion expressed in the transcript does not necessarily reflect the views of AlphaStreet, Inc.

© COPYRIGHT 2021, AlphaStreet, Inc. All rights reserved. Any reproduction, redistribution or retransmission is expressly prohibited.

Most Popular

ADBE Earnings: Adobe reports higher Q2 earnings; results beat estimates

Design software maker Adobe Inc. (NASDAQ: ADBE) on Thursday reported an increase in second-quarter 2024 revenue and earnings. The results also topped expectations. Second-quarter revenues came in at $5.31 billion,

Dollar Tree (DLTR): A look at the discount retailer’s growth initiatives at its namesake banner

Shares of Dollar Tree, Inc. (NASDAQ: DLTR) were down over 1% on Thursday. The stock has dropped 24% year-to-date. The company delivered sales and GAAP earnings growth for the first

Key highlights from Signet Jewelers’ (SIG) Q1 2025 earnings results

Signet Jewelers Limited (NYSE: SIG) reported first quarter 2025 earnings results today. Sales decreased 9.4% year-over-year to $1.5 billion. Sales were down 9.6% on a constant currency basis. Same-store sales

Add Comment
Loading...
Cancel
Viewing Highlight
Loading...
Highlight
Close
Top