Ircon International LtdQ2 FY22Construction

Ircon International Ltd

Q2 FY22 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 4

Fundraise

Yes

Order

Yes

Capex

Yes

3 of 5 growth signals are positive.

Revenue guidance

Category 3

→IRCON expects significant revenue growth in FY23, targeting a turnover between ₹8,000 to ₹10,000 crore, up from ₹6,900 crore in FY22.
→The company aims to focus more on execution in the current year, leveraging a strong order book of around ₹42,000 crore.
→By the end of FY23, revenues could potentially reach ₹9,000 to ₹10,000 crore if execution proceeds well.
→Order inflows for new projects are currently low, with project proposals worth ₹500–700 crore in the pipeline, mainly expected to materialize in the third quarter or later.
→Execution cycles for projects typically span 4–5 years, with concentrated turnover in the middle years.
→International business is a focus area for new orders, alongside domestic projects.
→EBITDA margins are projected at around 8.5% to 9%, with PAT around 7% to 7.5%, albeit with some expected margin pressure due to increased competition.

Category 4

→FY23 revenue guidance is strong with expected execution turnover between Rs. 8,000 to Rs. 10,000 crores, up from Rs. 6,900 crores in FY22.
→Margin pressure expected due to increased competitive bidding; EBITDA margins anticipated at 8.5% to 9% currently, with a potential decline by around 1% over next 2-3 years.
→PAT margins projected at 7% to 7.5% for near term, possibly declining slightly due to margin squeeze trends.
→Growth driven primarily by execution of a robust order book of Rs. 42,066 crores, with a typical project execution cycle of 4 to 5 years.
→Equity investments in roads, coal, and renewable sectors support long-term profitability through SPVs and JVs.
→Dividend payouts to continue as per DIPAM/DPE guidelines, balancing reinvestment in projects and shareholder returns.

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Yes

→IRCON itself is not currently borrowing; the debt is raised by SPVs on a project financing basis with rates typically between 7.75% to 8.25%.
→Equity investments have been made into road projects (~1,100 crores), coal JVs (~550 crores), renewable projects (~5 crores), and PMC work company (~65 crores).
→Future equity commitments include around 800 crores for road projects and about 100 crores for coal projects, to be paid over the next two years.
→The company is plowing back profits into these projects and aims to complete them quickly to start generating returns.
→No specific mention of upcoming new fundraising through debt or equity beyond these existing obligations and commitments.
→Dividend payout will follow DIPAM and DPE guidelines, with priority given to reinvestment in projects.

Yes

→As of June 30, 2022, IRCON's order book stood at Rs. 42,066 crore.
→The order book comprises a mix of nomination-based (53%) and competition-based (47%) projects.
→The typical execution cycle is about 4 to 5 years.
→For FY23, execution is the primary focus rather than new order inflows.
→Order inflow in Q1 FY23 was marginal due to focus on execution.
→The company expects order inflows to increase from the third quarter onwards.
→Current pipeline for bidding (domestic and international combined) is around Rs. 500 to 700 crore.
→Future commitments include approximately Rs. 800 crore to be paid in road projects over the next two years.
→Total equity investments in JVs/SPVs approximate Rs. 1,200 crore with a combined loan/quasi-equity of Rs. 1,800 crore.
→Targeted order intake for FY23 is between Rs. 8,000 to 10,000 crore.

Yes

→IRCON has invested in several sectors via SPVs/JVs including roads (approx. ₹1,100 crores), coal (approx. ₹550 crores), renewable energy (marginal ₹5 crores), and PMC work (₹65 crores).
→Future equity investment commitments include around ₹800 crores in road projects and about ₹100 crores in coal projects, expected to be paid over the next two years.
→The company is deploying funds for ongoing projects including highway SPVs, coal projects, and renewable energy projects.
→Current CAPEX for the core company is approximately ₹300 crores.
→IRCON is focusing on funding projects through project financing and equity, adhering to DIPAM and DPE guidelines for dividend and capital management.
→No immediate plans mentioned for buyback; the priority is to complete ongoing projects efficiently to start generating profits.
→New orders and investments will be carefully evaluated with a focus on execution rather than aggressive new order inflows in the short term.

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