Man Infra — Q3 FY24 earnings call

Call held 5 Feb 2024

Management summary

Man Infraconstruction reported a mixed Q3 FY24 with a decline in revenue but a significant expansion in EBITDA margin, driven by the DM model in real estate. The company successfully completed a substantial fundraising round and launched two major luxury real estate projects in Mumbai, with strong initial sales. Management expressed high confidence in future growth, backed by a robust project pipeline and a debt-free balance sheet, despite some year-on-year fluctuations in quarterly financials due to project completion cycles and accounting norms.

Highlights

  • Q3 FY24 Revenue from operations stood at INR 242 crores, compared to INR 457 crores in the previous year.

  • Q3 FY24 EBITDA was INR 103 crores, with a margin of 42.5%, significantly up from 28.2% in the previous year.

  • Net Profit for Q3 FY24 was INR 83 crores, slightly down from INR 85 crores in the previous year.

  • 9M FY24 Net Profit recorded a jump of 33% year-on-year to INR 235 crores, from INR 177 crores.

  • The company successfully raised INR 543 crores through a preferential route, with INR 136 crores already received.

  • Two ultra-luxurious projects, Aaradhya One Park (4.1 lakh sq ft) and Aaradhya Avaan (6.5 lakh sq ft), were successfully launched.

  • Aaradhya One Park achieved INR 333 crores in sales, representing approximately 25% of total estimated sales potential, within days of launch.

  • The EPC order book stands at INR 1,047 crores as of December 2023, including a PMC contract for Aaradhya Avaan (18 lakh sq ft construction area).

Key financials

2 periods

Headline

  • Revenue from Operations
    ₹242 Cr
    YoY -47%
  • Total Income
    ₹261 Cr
    YoY -44.7%
  • EBITDA
    ₹103 Cr
    YoY -20.1%
  • EBITDA Margin
    42.5%
  • Net Profit
    ₹83 Cr
    YoY -2.3%

9M

  • FY24 Net Profit
    ₹235 Cr
    YoY +33%

What they filed

Q1 FY27: revenue up 4.0%, net profit down 1.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue71 86 131 99 58 −18%64 −26%65 −50%103 +4%
EBITDA14 20 21 27 11 −21%11 −45%13 −38%71 +163%
Net profit30 43 39 61 30 +0%30 −30%33 −15%60 −2%
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

Share of Revenue (Q3 FY24)
₹242 Cr Total
  • Real Estate ₹124 Cr 51.2%
  • EPC ₹118 Cr 48.8%

Guidance & targets

Fundraising

  • Remaining preferential issue funds Fundraising · within 18 months · High confidence INR 407 crores
    The remaining INR407 crores is anticipated within the next 18 months, solidifying our financial position for future growth.

    — Manan Shah, Managing Director

Real Estate Sales

  • Aaradhya One Park sales completion Real Estate Sales · next 2 years · Medium confidence 2 years
    So, Ghatkopar project is totally a three and half years project, but because the momentum is strong, we are seeing the anticipation of sales completing in probably two years.

    — Manan Shah, Managing Director

Project Launch

  • Aaradhya Avaan sales reflection Project Launch · by mid-April 2024 · High confidence mid of April
    We shall be closing our EOI route by the end of March 2024 and then the sales shall be reflected accordingly. But we have received phenomenal response from the buyers and the customers, which is showing a good progress and growth for that particular project as well.

    — Manan Shah, Managing Director

  • Pali Hill project launch Project Launch · by December 2024 · Medium confidence by end of next year
    And talking about the Pali Hill project, again, the paperwork and permission seeking is going on, where it would be launched before the end of next year as well. So, we are hoping it may be by around December time is what the anticipated timeline is.

    — Manan Shah, Managing Director

  • Goregaon West (Royal Netra) project launch Project Launch · Q4 FY25 · Medium confidence last quarter of next year
    Probably in the last quarter of the next year, because we are just securing the permissions and the groundwork is going on.

    — Manan Shah, Managing Director

  • Vileparle project launch Project Launch · Q1 FY25 · Medium confidence next year, first quarter
    most probably the next year, first quarter, we would be launching our Vileparle project also.

    — Manan Shah, Managing Director

Investment

  • Investment capacity without debt Investment · next three years · High confidence more than INR 1,000 crores
    cash flow will come, we believe that in next three years time, we will be able to invest more than INR1,000 crores without taking the debt or without considering any partners.

    — Parag Shah, Chairman Emeritus

US Project

  • US project profit recognition US Project · 2026 onwards · High confidence 2026 onwards
    The balance as per the US standard, we won't be able to recognize for next financial year also. It may start recognizing in 2026 onwards.

    — Parag Shah, Chairman Emeritus

Market context

  • Overall business performance Business Outlook · next 8 to 10 quarters · High confidence good
    And not only next quarter, we believe that next 8 to 10 quarters are good.

    — Parag Shah, Chairman Emeritus

Risks & concerns

  • Seasonality and monsoon impact on EPC execution

    medium

    EPC work, especially in the port sector, is significantly impacted by the monsoon season, leading to reduced activity for about 3 months each year.

    Management acknowledged

  • Delays in land acquisition and regulatory approvals for new projects

    medium

    Acquiring land and obtaining necessary approvals (IOD, CC, environment clearance, high-rise committee approval) for new real estate projects typically takes 1.5 to 2 years.

    Management acknowledged

  • Real estate revenue recognition delays

    low

    Revenue from real estate projects can only be booked once 25% of sales and 25% of construction are complete, leading to lags between sales and financial reporting.

    Management acknowledged

Areas of evasion (1)

  • One analyst question on operational cash flow from residential segment in FY24 was asked to be taken offline by Yashesh Parekh.

Q&A highlights

3 direct
Pre-sales performance and future outlook for new projects Direct
So, this year we have got multiple projects which are in pipeline, like Ghatkopar project we have already launched. We have seen good momentum. This year, last quarter, we are hoping to, but most probably the next year, first quarter, we would be launching our Vileparle project also.

Analyst sought clarity on the company's pre-sales trajectory given current numbers and the contribution from newly launched projects, which is crucial for future revenue visibility.

Asked by Dhananjay Mishra, Sunidhi Securities

EPC revenue growth and utilization of raised capital Direct
So, regarding the fundraising, which we've done, there are three aspects to it. One is we've raised the fund for future expansion and the newer projects that which we are targeting. Second is the existing projects. So, we have got a safe liquidity fund also, which is required at the time.

This question addressed the strategic allocation of the recently raised capital and the company's approach to balancing EPC and real estate growth, providing insight into future investment priorities.

Asked by Manish, Nirmal Bang Securities Private Limited

Quarterly financial fluctuations and comparison with previous year Direct
Again, I am repeating, it all depends on the sale. It all depends on when you have been able to book number one. Number two, always in a real estate sector or especially in an EPC business where we are doing the port sector work, the second quarter is a monsoon quarter. In the monsoon quarter, the work does not happen in a port. In a port when we work, practically we work maximum for 9 months and not 12 months. The 3 months we have not been able to work. So, that you cannot compare quarter on quarter.

The analyst questioned the year-on-year decline in Q2 and Q3 results, prompting management to explain the cyclical nature of the construction business, real estate accounting, and monsoon impact on EPC, which is vital for understanding financial reporting.

Asked by Vyomesh, individual investor

3 min read 7 chapters

Detailed narrative

Robust Fundraising and Strategic Capital Deployment

Man Infraconstruction successfully raised INR 543 crores through a preferential issue, with INR 136 crores already received from the allotment of INR 3.5 crores convertible warrants. The remaining INR 407 crores is anticipated within the next 18 months. This capital infusion is earmarked for future expansion, existing projects, and maintaining liquidity, with management stating they can invest over INR 1,000 crores in new projects over the next three years without debt.

Successful Luxury Project Launches and Strong Sales Momentum

The company launched two ultra-luxurious projects in Mumbai: Aaradhya One Park (4.1 lakh sq ft) in Ghatkopar East and Aaradhya Avaan (6.5 lakh sq ft) in Tardeo. Aaradhya One Park achieved INR 333 crores in sales, representing 25% of its estimated sales potential, within days of launch. Aaradhya Avaan, poised to be one of India's tallest residential towers, is closing its EOI route by March 2024, with sales to be reflected by mid-April.

Diversified Project Pipeline and Business Development

Man Infra has acquired three new projects in FY24, adding 22 lakh sq ft of carpet area, bringing its total real estate portfolio to 5.7 million sq ft. Key upcoming projects include Pali Hill (expected INR 500 crores sales, launch by Dec 2024), Goregaon West (Royal Netra, launch Q4 FY25), and a Vileparle project (launch Q1 FY25). The company is also bidding for another project in Ghatkopar and exploring opportunities in Marine Lines and Western Suburbs.

EPC Business Performance and Order Book

The EPC business contributed INR 118 crores to Q3 FY24 revenue. The order book stands at INR 1,047 crores as of December 2023, up from INR 980 crores in March 2023. This includes a PMC contract for the Aaradhya Avaan project (18 lakh sq ft construction area). For the BMCT port project, INR 1,060 crores of work has been executed out of a total INR 1,830 crores order, with INR 1,200 crores collected.

Financial Performance and Margin Expansion

Q3 FY24 revenue from operations was INR 242 crores, a decline from INR 457 crores YoY, primarily due to the DM model where revenue isn't booked but profitability is. Despite this, EBITDA margin significantly expanded to 42.5% in Q3 FY24 from 28.2% in the previous year, reflecting the higher profitability of DM model projects. 9M FY24 Net Profit jumped 33% YoY to INR 235 crores, demonstrating strong bottom-line growth.

US Real Estate Ventures Progress

The company has invested approximately INR 190 crores in US real estate projects and maintains INR 110 crores in cash liquidity there. One of two bungalows in the first project has been sold, with the second expected to close by month-end. In Miami's Coral Gables, RCC work for a high-end bungalow is nearing completion by March/April. Profits from US projects are anticipated to be recognized from 2026 onwards.

Dividend Declaration and Liquidity Position

Man Infra declared a fourth interim dividend of INR 0.54 per equity share (27%) for FY24, bringing the total dividend for FY24 to INR 1.62 per equity share (81%), amounting to INR 60.15 crores. The company maintains a net cash positive position with INR 545 crores in consolidated reserves as of December 2023, underscoring its prudent financial management and strong liquidity.

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