Vascon Engineers LtdQ1 FY24Realty

Vascon Engineers Ltd

Q1 FY24 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

Yes

Order

Yes

Capex

Yes

3 of 5 growth signals are positive.

Revenue guidance

Category 3

→EPC division revenue expected to grow from Rs 700 Crores in FY24 to Rs 1,000 Crores in FY25.
→Real estate segment expected to contribute significantly in FY25 with multiple project launches in Mumbai, Pune, and Coimbatore.
→Total order backlog to reduce from Rs 3,500 Crores to Rs 2,500 Crores by March 2025, with a target order booking of Rs 1,500 Crores by April 2025 to restart growth.
→Company targets Rs 1,000 Crores EPC execution with potential to scale further beyond with additional CAPEX.
→Real estate launches planned: five new launches expected in FY25, with a focus on residential projects.
→EBIT and EBITDA margins expected to improve due to higher real estate contributions and scale in EPC.
→Growth driven by strong order book, improving project execution, and market opportunities post-elections.

Category 3

→FY25 expected to be a big year for growth in both EPC and real estate segments.
→EPC revenue targeted to increase from Rs 700 Crores (FY24) to Rs 1,000 Crores (FY25).
→Real estate division expected to contribute significantly to top line and profitability in FY25, pulling up EBITDA and PBT margins.
→EBITDA margins anticipated to improve by 1 to 2 basis points in EPC due to scale and better margins.
→The company aims to grow its order backlog from Rs 3,500 Crores to Rs 4,000 Crores by April 2025.
→Profitability expected to improve with better margins and increased order execution.
→Promoter maintains confidence in projecting better numbers over the next four quarters.
→Overall margin improvements and project completions will lead to enhanced earnings and EPS.

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Yes

→Vascon Engineers is planning a Qualified Institutional Placement (QIP) to raise capital in the next few months, primarily to fund new real estate project launches such as the Bombay project at Santa Cruz.
→Project launches will require capital, and while QIP is a key plan, temporary borrowings or private equity are alternatives if QIP faces delays.
→The company has adequate bank guarantee limits enhanced recently to support higher order intake without immediate need for new large debt.
→CAPEX for next fiscal year is estimated around Rs 20 Crores (8-10% of additional Rs 250 Crores growth target in EPC division).
→No specific mention of new large debt issuance, but financial management remains cautious with focus on sustainable growth.
→Company has improved credit rating (CRISIL BBB+, A2), aiding favorable interest rates but does not anticipate major interest rate reductions soon.

Yes

→Current order backlog is approximately Rs 3,500 Crores, expected to reduce to Rs 2,500 Crores after executing about Rs 1,000 Crores during the year.
→Out of the Rs 3,500 Crores backlog, Rs 2,838 Crores are external EPC orders and Rs 527 Crores are internal.
→Around 80% of orders are government projects, ensuring steady execution and cash flow.
→The Company aims to start FY 2025 with an order backlog of Rs 4,000 Crores, requiring new order booking of about Rs 1,500 Crores.
→Bank guarantee limits have increased to support this growth, with enhancements both within and outside the banking consortium.
→Order book margin expected to remain sustainable at around 12%, with most escalations contractually covered.
→Largest ever EPC order intake this year was Rs 1,800 Crores, including significant projects from government and private clients.

Yes

→No CAPEX needed in the current financial year (FY24) as per Somnath Biswas.
→For additional growth beyond Rs 1,000 Crores in EPC next year (FY25), about 8-10% CAPEX is required, estimated at Rs 20 Crores.
→To scale up asset base and internal bandwidth from current 3.7 million sq ft at 90% capacity to 8 million sq ft, additional CAPEX and fixed assets infusion will be necessary.
→Real estate projects launching will require capital; QIP (Qualified Institutional Placement) is planned in the next few months to support this.
→Temporary borrowing or private equity funding options are in place to avoid project launch delays if QIP is delayed.
→No significant CAPEX required for FY24 but planned strategic investments are aligned with EPC growth and real estate project launches.

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