Ashoka Buildcon Concall Q3FY17 Concall Summary

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Ashoka Buildcon Q3FY17 Financials

Company will disclose consolidated numbers from next quarter

 

Effect of Demonetization

  • Toll collection was suspended across national highways for 23 days from 8th Nov to 2nd Dec 2016. NHAI has proposed to pay 922 Cr to private highway operators for loss of toll revenue but proposal needs cabinet committee nod.
  • No clarity on mode of compensation ie. One-time payment or extension of toll period to compensate the developers
  • Toll collections only slightly impacted in December. Mostly back to normal
  • Company installed POS machines at all toll plazas and electric collections have been to the tune of 15-20%
  • Company share Rs 40 CR out of Rs 922 to be paid out by NHAI
    • Rs 10 Cr for Jaora-Nayagaon in form of extension, so net claim Rs 30 Cr
    • Additional claim of Rs 30 Cr for interest. No clarity on interest payment by NHAI
  • All projects for which NHAI is expected to compensate are under ACL
  • Compensation from NHAI expected by Mar 2017

Awarding of Contacts by NHAI

  • NHAI facing challenges on land acquisitions. This is due to difference in compensation under old and new period. People who already got lower compensation under old period are demanding to be paid the difference to bring them at par with current levels
  • MoRTH targets 25000 kms of projects to be awarded of which 15000 km will be under NHAI
  • Guidance by NHAI is 5000 to 5200 km, slightly more than last year

Order Book Position

  • Company won Rs. 2800 Crores of Orders, the highest ever in any year
  •  Total order backlog Rs 6200 Cr, highest ever
  • Won EPC, T&D orders in Bihar for rural electrification amounting to Rs 950 Cr
Ashoka Buildcon Order Book
Ashoka Buildcon Order Backlog

Debt Position

  • Consolidated debt Rs 3880 Cr, of which project debt is Rs 3736 Cr
  • Standalone debt is Rs 144 Cr of which equipment loans amount to Rs 54 Cr and working capital loans amount to Rs 90 Cr
  • Bihar typically has good payment mechanism in advance as well as part payment and so working capital requirement will not go up too much. Will be in range of 150-200 Cr.
  • Debt refinancing
    • Mostly done in Q2. Next refinancing due in Q1 FY18 in the month of Apr-May
    • Plan to target two projects for refinancing
    • MCLR benefit of atleast 60 bps also expected in month of April and May
  • Debt tied up for Kharar-Ludhiana project at slightly lower than 9.5%
  • Most of project debt of 3700 Cr is linked ot MCLR except for one or two projects. They are in the process of getting shifted to MCLR soon.

EPC business Revenue break-up for Q3

  •  Revenue for Roads at Rs 395 Cr, for Power at Rs 80 Cr and for RMC business at Rs 30 Cr

Update on Projects Under Execution

  • All projects going on smoothly except Islampur Bypass of Rs 276 r. Difficult to predict when it will star. Company intends to take final call on this one after another two months
  • A bigger EPC order including Eastern Periphery and JNPT have picked up well
  • BOT projects
    • Will be completing Chennai ORR and Modhul Nipani before Mar 2017 end ie Q4
    • Bagewadi and Hungund annuity projects progressing well
  • Hybrid Annuity Projects
    • Project in Punjab is set to achieve financial closure by end of February 2017 and mobilization on this project has already started
  • Jharkhand Projects
    • Total three projects.Work already started on two projects
    • Only one EPC project in Chas, NH-32 is yet to start. The project requires some land acquisition and forest clearances. Likely to start in next 2 months
  • Lucknow-Ballia Expressway
    • It is a state funded project
    • Bids opened. Company is L1. Difference between L1 and L2 is around 2-3%
    • Total project size Rs 1800 Cr. Company bid in 50:50 JV. Company share Rs. 900 Cr
    • Project is a pure EPC contract and so contains early completion bonuses
    • Project is at advanced stage of land acquisitions. Farmers getting more than expect compensation
    • Most of land acquisitions for the stretch where company is L1 has been done. Good source of quarries also nearby
    • Threat due to elections in UP: Change in govt rarely affects fate of projects
    • Normal average margins expected from this project
  • Two annuity projects in Karnataka will see better pace from next quarter. Only Rs 40 Cr of movement last year
  • First annuity from Chennai project to come in by Q1 or Q2 FY 18
  • Kharar-Ludhiana Project
    • Mobilisation already started Appointed date expected by Mar end
    • Revenue booked but threshold not achieved so margins have not been booked
    • Expected margins when work will start wil be 12.5-13%
  • Indore-Edalabad project that was expected to be completed by Jan ’17 is delayed by one month
  • Nagar-Aurangabad project is delayed and will get completed by Aug 2017
  • Foot over bridge portfolio
    • All projects except one have stopped
    • Wainganga Katni will continue till 2019
  • Gas Project
    • Company had bid for gas distribution network project on BOT basis
    • Work expected to start from Q1 FY18. No investments have been till date except some small mobilization
  • New projects : Dhule-Maharashtra, Bagewadi-Saundatti and Hugund-Talikot all are under ABL
  • HAM project     
    • 80% land already acquired
    • Company is in process of submitting to NHAI and expects financial closure and appointed date declared in due course of time
    • Rate of interest for this project is sub 9.5
  • Sambalpur project- loss pending tilld ate for the last two and half years is around 120 Cr

Bidding Strategy

  • Opportunistic strategy, with bids being submitted across all segments
  • No geographical focus. Equal focus on EPC and HAM projects
  • Most projects in Maharashtra sub Rs 500 Cr. Company likes to bid for projects > Rs 1000 Cr, particularly hybrid annuity and pure EPC projects
  • Company not qualified for coastal projects on an individual basis. So, participation in those projects will be low
  • Will bid in Feb and Mar 2017. Will target around 2000 CR of projects, 1000 CR each in EPC and HAM. Small orders could be there under T&D

Traffic Growth in Toll Business

  • Overall flat growth
  • Belgaum and Dhankuni projects show a growth 4-5%. Overall basis traffic growth slightly negative or flat due to demonetization
  • Before demonestisation traffic numbers
  • Traffic expected to be flattish in January 2017 also
  • Traffic for Dhankuni project expected to be 75-77 lakh next year

Reason for Sharp Reduction in Depreciation

  • Rs 4.5 Cr due to Nagar-Aurangabad project that was amortized completely upto Q2. NO depreciation in Q2 but toll collection left out for another 6 months
  • Change in life of asset effective Apr 1 2016
  • Written down value also impacted depreciation

80-IA Benefits

  • All EPC contracts already started are eligible for 80-IA benefit
  • BOT projects also eligible
  • Only applicable to third party projects from NHAI

Tax on Direct EPC contracts form Government third party

  • Mix of MAT or 0%
  • 20% on profitability on non-80-IA projects and 0% on 80-IA projects. Overall practically it is 0.
  • 30% of Roads EPC at 0% rest at normal rate.
  • 20% blended rate like to continue for at least 4.5 years more

Revenue and Margin Guidance

  • Target of at least 20-25% growth. Better growth likely
  • EBITDA MArgins expected to be higher than 11.5% whihc is in the current quarter as couple of better margin projects like Kharar-Ludhiana project ar eet to be recognized 

SBI-Macquarie Exit Update

  • Exit planned over next one year
  • Company is looking for replacement of investor. Next options would be either IPO o InVIT
  • Lot of interest for portfolio of projects either as minority or majority shareholder
  • Expected valuation substantially higher than 12% IRR
  • Punjab project has been bid under ACL so it will be a part of the deal

ACL

  • Till date approximately Rs 1050 Cr equity is infused
  • Sambhalpur project presently being funded from cash available at ACL level. 120 CR of loss pending till date is included in the equity infusion amount

Cash Position

  • On cash balance, debt of 143 Cr and networth of 1880 Cr
  • Pending requirement for BOT projects
    • Kharar-Ludhiana 150 Cr
    • Badami and Karnataka BOT projects around 50 Cr
  • Company waiting for good opportunity to monetize real estate

Clarification on Sale of Goods

  • 45% increase from 22 to 32 Cr from Q2 to Q3 FY17
  • Increase is due to sale of ready mix concrete

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