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    Hind.Construct.

    HCCGood
    Construction·8 Feb 2024
    Management Summary

    Hind.Construct. reported a strong Q3 FY24, marked by an 8.6% increase in consolidated revenue and a significant return to profitability with a consolidated PAT of ₹233 crores. The company maintained a healthy EBITDA margin of 12.4% and highlighted a robust order book of ₹11,000 crores, supported by a substantial bidding pipeline. Management expressed confidence in the infrastructure sector's growth and the company's strategic positioning for future order inflows and debt reduction.

    Highlights

    7
    • Consolidated revenue for Q3 FY24 was ₹1,474 crores, an 8.6% increase year-on-year from ₹1,357 crores in Q3 FY23.

    • Consolidated profit for the quarter stood at ₹233 crores, a significant turnaround from a loss of ₹283.7 crores in Q3 FY23.

    • Standalone E&C turnover grew by 7.7% to ₹1,245 crores in Q3 FY24, up from ₹1,155 crores in Q3 FY23.

    • Standalone profit surged to ₹68.5 crores in Q3 FY24, a 171.8% increase from ₹25.2 crores in Q3 FY23.

    • EBITDA margin was maintained at a healthy 12.4% for the quarter.

    • Order book at the end of Q3 FY24 was ₹11,000 crores, with 50% from the Transport sector.

    • The company has a strong bidding pipeline of over ₹46,000 crores for future projects, with bids worth ₹7,000 crores under evaluation and another ₹14,000 crores in process for submission.

    What Changed2

    vs Q2 FY25

    Guidance items14 → 9 (-5)Risks discussed3 → 4 (+1)

    Key financials

    Single quarter

    06 metrics
    1. 01Consolidated Revenue₹1,474 Cr+8.6%YoY
    2. 02Consolidated PAT₹233 Cr
    3. 03Standalone E&C Turnover₹1,245 Cr+7.7%YoY
    4. 04Standalone PAT₹68.5 Cr+1.7%YoY
    5. 05EBITDA Margin12.4%

    Guidance & targets

    9
    CategoryTargetPriority
    Profitability
    EBITDA Margin
    12-14%
    Medium
    Debt
    Interest Cost
    ₹400-450 crores
    Medium
    Debt
    Net Debt Reduction
    ₹100 crores
    Medium
    Debt
    Debt Status
    Debt Free
    Low
    Order Inflow
    Bidding Pipeline Timeframe
    3 to 12 months
    Medium
    Order Inflow
    New Order Capacity
    ₹15,000 crores
    Medium
    Project Strategy
    Average Project Size
    ₹1,000-1,500 crores
    Medium
    Project Strategy
    Larger Project Size
    ₹2,000-3,000 crores
    Medium
    Capital Raise
    Rights Issue Size
    up to ₹350 crores
    High

    Risks & concerns

    7
    RiskSeverity

    Competition in Commodity Projects

    Management notes 'fairly ruinous competition' in less complex, commodity-type projects, which HCC aims to avoid by focusing on its engineering edge.Management acknowledged

    medium

    Labor Availability and Wage Inflation

    The 'migrant labour population' is being squeezed, especially in urban areas with high cost of living, posing a challenge for continuous supply of skilled manpower.Management acknowledged

    medium

    Project Approval and Clearance Delays (Hydro)

    Permissions, clearances, and security clearances for hydro projects can be complicated and cause delays in bringing projects to market.Management acknowledged

    medium

    Arbitration Settlement Delays (Vivaad se Vishwas)

    The Vivaad se Vishwas scheme process is taking longer than expected due to reconciliation requirements and interest calculations, making some settlements less attractive.Management acknowledged

    medium

    Areas of Evasion(3)

    • Exact valuation of Steiner AG and its acquisition cost
    • Specific timeline and amount of capital return from Steiner AG to HCC
    • Valuation of company-owned land parcels

    Q&A highlights

    3

    “First of all, I will answer your question about the dip, there is no dip as such our margins are anything between 12-14 it depends on composition of the project, what we execute during particular quarter. So, one project may have an EBITDA margin which is giving me 15%, one may give 8% so it's a combination of those 30-40 projects what we will get into this EBITDA for a quarter.”

    Clarifies management's view on current margin performance and provides a realistic range for future expectations based on project mix.

    asked by CA Nihar Shah

    3 min read6 chapters

    Detailed Narrative

    01

    Q3 FY24 Financial Performance and Turnaround

    HCC reported a strong Q3 FY24, with consolidated revenue reaching ₹1,474 crores, an 8.6% increase from ₹1,357 crores in Q3 FY23. A significant turnaround was observed in profitability, with consolidated PAT at ₹233 crores compared to a loss of ₹283.7 crores in the prior year. Standalone E&C turnover also grew by 7.7% to ₹1,245 crores, and standalone profit surged by 171.8% to ₹68.5 crores. The company maintained a healthy EBITDA margin of 12.4% for the quarter, reflecting improved operational efficiency.

    02

    Order Book, Bidding Pipeline, and Sector Focus

    The order book stood at ₹11,000 crores at the end of Q3 FY24, with approximately 50% contributed by the Transport sector. HCC has a robust bidding pipeline of over ₹46,000 crores for future projects, with bids worth ₹7,000 crores currently under evaluation and another ₹14,000 crores in the process of submission for the coming quarter. Management highlighted strong opportunities in Hydro, Water, Nuclear, Railways, and Pumped Storage schemes, aligning with India's infrastructure push and net-zero targets.

    03

    Debt Management and Capital Structure

    HCC is actively managing its debt, with outstanding Optional Convertible Debentures (OCDs) around ₹2,000 crores. The company expects its interest cost to reduce significantly to ₹400-450 crores in the next financial year, down from an estimated ₹800 crores in FY24. An annual bullet payment of ₹340 crores is due by March 31st, with a projected net debt reduction of ₹100 crores for FY24. The board has approved a rights issue of up to ₹350 crores to support growth initiatives.

    04

    Steiner AG Update and Monetization Strategy

    Steiner AG, HCC's Swiss subsidiary, has divested its construction business to focus purely on real estate development. Its development pipeline is valued at 4.9 billion Swiss Francs, with an expected cumulative developer fee of 395 million Swiss Francs and a total sellable area of over 7.22 lakh square meters. Management indicated that part of the capital from Steiner will be used to strengthen its balance sheet and fund development projects, with some capital eventually returning to HCC, though specific timelines and amounts remain undisclosed.

    05

    Operational Progress on Key Projects

    Significant operational milestones were achieved across various projects. The Mumbai Coastal Road project saw the completion of all monopile foundation work, reducing the number of piles from 424 to 79. The first navigation span of the composite bridge was successfully launched on February 2, 2024. The Nikachhu Hydro project in Bhutan achieved wet commissioning of turbines and grid synchronization in December 2023. Other projects like Anji Khad, DMRC DC06, Mumbai Metro, T-49A, and Tehri Pumped Storage are also progressing well.

    06

    Industry Tailwinds and Growth Drivers

    The infrastructure sector is benefiting from substantial government attention and capex plans, including ₹11 lakh crores announced in the recent budget. Private capex is also reviving, with ₹7-8 lakh crores invested in the last financial year. Public-Private Partnerships (PPP) are gaining traction with over 50 BOT projects valued at more than ₹2 lakh crores. India's commitment to net-zero targets and generating over 500 GW of non-fossil fuel power by 2030 is driving sustained fund allocation in hydro and pumped storage sectors, which are core strengths for HCC.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.