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00:00Let's welcome in Mr. P.S. Patel who is the chairman and MD of PSP Projects who joins us now.
00:06Welcome to the show Mr. Patel. Back to back order wins for you.
00:11You know this total order wins so far you know sum up to roughly 1400 odd crores.
00:18So my first question to you is that considering all of these order wins,
00:22what are the kind of execution timelines that you are eyeing for these projects?
00:26Basically these two orders, one is 389 and the second is 165 crores.
00:31Both the orders extends up to 24 months, 18 to 24 months.
00:35One is in Ahmedabad and one is in Bangalore.
00:38Mr. Patel, I want to get a sense of what are the kind of order inflows
00:43that we should be looking out for this financial year 2025.
00:46Apart from these two orders that are already in place, what is the order inflow guidance
00:50and also what is the kind of order book that you are projecting?
00:53How is the order book projected to grow in the next 2 to 3 years as we speak?
00:57Right from the first day of the quarter year started we have envisaged
01:01and given a guideline of going up to 3500 crore order inflow this year.
01:07Out of which we have already reached to 1500 and still we have a 6000 crore bid pipeline.
01:12So mostly we will be in better position to reach to 3500 crore easily.
01:18Mr. Patel, your Q1 order book stood at roughly 5900 crores
01:24and plus these 1400 crores are also added to that order book.
01:27So total order book is more than 7000 crores now.
01:30So I want to understand what are the execution timelines looking like for the entire order book?
01:36The total order book which today outstanding is near to 7000 crore
01:42which I have already said that it will be completed in 24 months.
01:47One year is the projected time that we are looking to execute this order book.
01:50But you have also mentioned about the bidding pipeline which stands at about 6000 crore.
01:54Want to understand what usually for a company like PSP project is the conversion ratio
01:59or rather the success ratio that we should be looking for
02:02and what are the type of projects that we are eyeing on to grow forward as we go?
02:07See usually our bid winning ratio is within the range of 15 to 20%
02:12but it depends on the size of the project which we are bidding.
02:15If we are bidding for a large size project that ratio sometimes comes down
02:18but last year our bidding ratio was 8 to 10%
02:22because when you are bidding for a large size project
02:24and if you do not win large two project then the percentage goes down.
02:29Mr. Patel, your EBITDA margins are lower as compared to your historical EBITDA margins
02:34and you have given a guidance of margins remaining within the range of roughly 10 to 11%.
02:39But when do you expect that margins will come back to the original levels as they were?
02:46See actually this year the guideline which we have given is 10 to 11%
02:51depending on the experience which we had last year because of some shortfall at Uttar Pradesh
02:58and still we are confident that we will be in position to deliver 10 to 11%.
03:03Going beyond 11 to 12% depends on the size of the project and the type of the project.
03:08So presently our guideline still remains within the range of 10 and 11%.
03:13And what is the timeline for this 10 to 11% that we are looking forward for the next 2 to 3 years?
03:18When can we expect you to scale back to the 15 to 16% of margins that you had earlier?
03:23You mentioned about the size of the projects as you speak.
03:26So what are the type of projects that you need to target towards to get those margins back in track?
03:31See now getting to 10, 15 to 16% again is a little bit miracle
03:38because last when we reached to 15 to 16% was the time when the GST was not there.
03:44If you see our last 3 years it is ranging between 11 to 12 or 11 to 13.
03:48And to our experience now looking to the competition which we have
03:52and the size of the company is growing little bit high.
03:54So the overheads are going little bit high.
03:56Last year our interest cost was little bit high.
03:59So putting all these together, reaching to 15 to 16% is now not possible for an APC contractor.
04:05So still I would say that the bids which we bid and we will try to maintain 10 and 11.
04:13Mr. Patel, from what I understand is that cost escalation is one of the major reasons why margins are under pressure.
04:19And I believe that this cost escalation you have already considered in the guidance then?
04:24Yeah, as far as these government projects are concerned,
04:27very few government projects which do not consider price escalation.
04:31The story was for UP project.
04:33In general, most of the government project carries in price escalation which is through RBI index.
04:38And we always in the bid of our projects are of 50% of corporate and 50% of government.
04:49And in corporate it is always a pass through.
04:52So there we don't have to think about too much on the cost of major materials rate going high.
04:58Only we have to consider the escalation part for the labour for two years or two and a half years for the execution time for that project.
05:06Well, Mr. Patel, that was a fair understanding on the cost structure of the business.
05:11But now I want to come back to revenue growth.
05:14Revenue growth for this year is projected about 13.7%.
05:18Now earlier guidance was about 15%.
05:21So despite the strong start to Q1 wherein you've reported about a 20% growth,
05:25why have we lowered our revenue guidance for the year?
05:28And what's the outlook for FY26 also as we move forward?
05:33We have not reduced to 13%.
05:35It is generally...
05:37See, there are two things to understand.
05:39First and the second quarter is the major quarter which impacts the total revenue.
05:43So in first quarter it is usually the timeline when there are festive season
05:47and in the various season the labour availability is little bit less.
05:52And this year because of election,
05:54first April and May was majorly hit because of the election.
05:59So availability of labour was little less.
06:01So probably we'll be in position to gear up to 15% to 20% in near future.
06:06But at least for this year we keep it at 13% to 15%.
06:10Mr. Patel, your total debt as of FY24 was roughly 450 crores and net debt was roughly 190 crores.
06:17I want to understand what is the net debt position right now?
06:22After doing this GIP in April, we have raised about 240 crores
06:27and we have also received money from Surat Diamond Booth.
06:30So putting all these together we have reduced our debt to more than 250 crores.
06:36Then what is the plan going forward with respect to debt reduction?
06:40If you've come down to 250 crores,
06:42going forward will there be more debt reduction?
06:45Is that on cards?
06:46And if yes, by when do you expect to become net debt free?
06:51Today becoming net debt free, this year it is little bit difficult.
06:55But of course we've been positioned to reduce further 50 crores of debt from here
06:59because there are few creditors payment yet to come.
07:04At least 60 to 70 crores from UP and 100 more crores to come from Surat Diamond Booth.
07:09This will help us to put our debt to little bit down level.
07:13Okay, so 50 crores of reduction that we should be looking out forward for the company in terms of debt reduction.
07:19Now coming to the other piece is the CAPEX.
07:21I want to understand what are your CAPEX plans for the next three years.
07:24Also on to this you are expecting a ramp up in your precast business.
07:28Can you expand more on exactly what this is?
07:31And how do you expect to expand your CAPEX as you move forward?
07:38Specifically there is no such plan of making a special case in case of CAPEX
07:43because it will be project specific as and when required for the project.
07:47In general what we have always been in the ratio of 3% to 4% of the revenue.
07:52I think the guideline will still remain within that range.
07:55And as far as precast is concerned, yes precast business we started off in 2021 onwards.
08:01And these last two years or the breathing period wherein now people have understood this technology.
08:06And in Nestle project we did the project little bit faster to six months ahead of the scheduled timeline
08:13just because of precast.
08:15The new order which we have got from Coca-Cola also where we have to do a precast building of 50 crore.
08:20And furthermore orders are coming from industrial side and this warehousing facility.
08:26Last year we were able to make about 12 lakh square feet of warehousing in precast only.
08:32So probably precast revenue will go up and up every year.
08:36Now the technology is being accepted universally.
08:39And we hope for the best in next few years to come.
08:44So Mr. Patel then I want to understand that in terms of revenue breakup,
08:48how much of a revenue are you expecting from precast from a long-term perspective?
08:52And then will that improve margins? Are margins better in the precast business?
08:56Yeah, it can be better in future because these two years were in a period wherein
09:01we were making the position to make people learn about the technology.
09:05And we were not trying to make out more data at that level.
09:08We were keeping at the same guideline of what the general business of the company is doing.
09:13But as and when you are able to save timelines on the project period,
09:17people are going to pay you more.
09:19So probably we are in position to earn more in terms of precast in future.
09:23And yes, this year we learned about 180 crore and next year we will expect
09:28150 or so crore to come from precast.
09:31Precast is going to help the company in terms of labor efficiency,
09:38which is being faced by most of the construction companies as of now.
09:42So for us, this will be a win-win situation wherein we will be able to get projects
09:46which are being more affected on availability of labor or remote locations
09:51where the availability of small contractors are not there
09:55or projects which requires a very stringent timeline.
09:59Such types of projects are always now going to get converted to precast.
10:03And day by day, precast plants are also being installed more and more
10:08throughout the country.
10:09The company from where we bought this precast plant, Elematic,
10:12they have already told me that they are having a huge inquiry in terms of precast
10:17because since last two years we have faced a big problem in terms of consistency
10:23of labor availability throughout the year.
10:31Okay. Mr. Patel, just one last question before I let you go.
10:36What are the kind of expansion plans in terms of geography?
10:40Are you planning to do more geographical expansion other than Gujarat projects?
10:47It's not about going more or less. It is more about the opportunity as in when we get.
10:52So lastly, when we get an opportunity to work in UP, we have worked for 8 to 9 projects in UP.
10:57We have also worked for a few projects in Bangalore.
10:59We have worked for a few projects in Rajasthan.
11:02Presently also the last order which we have got is in Bangalore.
11:05And one more large bid we have already bid for a commercial project in Delhi.
11:09So it is more about the opportunity rather than thinking that how much we should expand out of Gujarat.
11:18Alright. Mr. Patel, thank you so much for giving us those insights on PSP project.
11:23A very interesting company to watch out for definitely.
11:25And thank you so much for taking our time and speaking with us at NDTV Profit.