Ircon International Limited — Q4 FY24 earnings call

Call held 22 May 2024

Management summary

IRCON delivered a record-breaking FY24, achieving its highest-ever turnover and profitability while securing prestigious Navratna status. While the full-year margins were bolstered by a one-off arbitration settlement related to a South Africa project, management remains confident in maintaining core PAT margins between 7% and 7.5%. However, the near-term outlook for FY25 is conservative, with revenue expected to remain flattish as the company navigates a temporary slowdown in project awards linked to the general elections.

Highlights

  • Reported highest-ever annual Revenue of ₹12,871 crores, up 19.7% YoY

  • Annual PAT reached a record ₹930 crores, representing 21.5% YoY growth

  • Order book stands at ₹27,208 crores as of March 31, 2024

  • Company upgraded to 'Navratna' status by DPE due to strong financial performance

  • Board recommended a final dividend of ₹1.30 per share, totaling ₹3.10 for FY24

  • EBITDA margin for FY24 stood at 11.73%, aided by one-off arbitration settlements

  • Bullet train project accounts for ~₹5,200 crores (19-20%) of the current order book

  • Management guides for a 'flattish' revenue growth in FY25 due to election-related bidding slowdown

Key financials

  1. Revenue ₹12,871 Cr +19.7%YoY
  2. PAT ₹930 Cr +21.5%YoY
  3. EBITDA Margin 11.7%
  4. Order Book ₹27,208 Cr
  5. EPS ₹9.88 +21.3%YoY
  6. Cash Balance ₹812.5 Cr

What they filed

Q1 FY27: revenue up 9.5%, net profit down 43.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue2,448 2,613 3,412 1,786 1,977 −19%2,119 −19%3,189 −7%1,956 +10%
EBITDA201 132 254 200 141 −30%158 +20%267 +5%192 −4%
Net profit206 86 212 164 137 −33%100 +16%191 −10%92 −44%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Domestic vs International
    91% Domestic Revenue Mix9% International Revenue Mix
  • Order Book Mix
    50% Competitive Bidding50% Nomination Basis

Guidance & targets

Revenue

  • Revenue Growth Revenue · FY25 · Medium confidence Flattish

    Previously 15-20% CAGR → Flattish

    So as of now, it is flattish growth for the next one year.

    — Ragini Advani, Director Finance

Margin

  • PAT Margin Margin · FY25 · High confidence 7% to 7.5%
    we should be able to maintain PAT margins in level of about 7 to 7 and a 1/2% going forward.

    — Ragini Advani, Director Finance

Other

  • Order Inflow Target Other · FY25 · Medium confidence ₹10,000 - ₹15,000 crores
    I'm saying as I mentioned in the range of 10 to 15,000 crores is what we will target getting this year.

    — Ragini Advani, Director Finance

  • Effective Tax Rate Other · FY25-FY26 · High confidence 25%
    going forward it will be around 25%.

    — Ragini Advani, Director Finance

Capex

  • Investment in SPVs/JVs Capex · next 2 years · High confidence ₹1,000 crores
    we have to do another 1000 crores in the next two years... outflow in this year's FY24-25 towards all these projects should be in the range of 500 crores.

    — Ragini Advani, Director Finance

Risks & concerns

  • Election-related slowdown

    medium

    Decisions on large domestic projects are delayed due to the general elections, impacting order inflow in Q1 FY25.

    Management acknowledged

  • Intense competition in small-ticket projects

    medium

    Small-time players are under-quoting in the ₹50-100 crore segment, making it difficult for IRCON to compete there.

    Management acknowledged

  • Loss-making JVs

    low

    The CERL coal connectivity project is expected to continue incurring losses (₹25-30cr range) for another 2 years until traffic picks up.

    Analyst acknowledged

Areas of evasion (1)

  • Specific names of large projects in the bidding pipeline were not disclosed due to sensitivity.

Q&A highlights

3 direct
One-off impact on Q4 margins Direct
In this quarter, we had a one-off income against an arbitration settlement... in regards of our South Africa project... Quantum was 97 crores. The impact in my P&L is about 66 crores.

Clarifies that the margin expansion in Q4 was not entirely organic and sets a normalized baseline for future quarters.

Asked by Shreyans Mehta

Downward revision of growth guidance Direct
On a year-on-year basis, it may not be every year a growth of about 10 to 20% we do see next year... we kind of see a flattish growth going forward for the next financial year.

Management tempered expectations for FY25, citing the impact of elections on project awards and the current order book execution cycle.

Asked by Tushar Rangate

Asset monetization progress Direct
We had hired a consultant... in principle decision to monetize the assets which are already operational. And road and highway sector has been taken... currently that approval we have sought from our parent ministry.

Confirms IRCON is actively moving toward an asset-light model by monetizing operational HAM/Road assets, which could unlock significant capital.

Asked by Shreyans Mehta

2 min read 5 chapters

Detailed narrative

Record-Breaking FY24 and Navratna Status

IRCON achieved its highest-ever financial performance in FY24, with total revenue reaching ₹12,871 crores, a 20% increase over the previous year. PAT grew by 21.5% to ₹930 crores, leading to an EPS of ₹9.88. This performance earned the company the prestigious 'Navratna' status from the Department of Public Enterprises, reflecting its operational efficiency and financial strength.

Order Book Dynamics and FY25 Outlook

The order book stands at ₹27,208 crores, with a healthy 50-50 mix between competitive bidding and nomination projects. However, management expects FY25 revenue to be 'flattish' as the first quarter saw a slowdown in project awards due to the general elections. The company is targeting new order inflows of ₹10,000 to ₹15,000 crores in FY25 to sustain future growth.

Margin Sustainability and One-off Impacts

While FY24 EBITDA margins were high at 11.73%, management clarified that Q4 was aided by a ₹97 crore arbitration settlement from a South Africa project (₹66 crore impact on P&L). Excluding such one-offs, IRCON aims to maintain a steady PAT margin of 7% to 7.5% and EBITDA margins in the 10% to 11% range going forward, despite intense market competition.

Strategic Focus on High-Speed Rail and Complexity

The Bullet Train project currently represents approximately 20% of the order book (₹5,200 crores). Management believes IRCON's experience in 'ballastless track' and complex tunneling (like the Sivok and USBRL projects) creates a niche where competition is limited to large players like L&T, shielding them from the aggressive under-quoting seen in smaller civil works.

Asset Monetization and Investment Strategy

IRCON is progressing with plans to monetize its operational road and highway assets. Board approval has been secured, and the proposal is currently with the Ministry of Railways before moving to DIPAM and Niti Aayog. Simultaneously, the company plans to invest ₹1,000-1,100 crores into its SPVs and JVs over the next two years, primarily in road and solar power projects.

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