W S Industries (India) LtdQ1 FY23Construction

W S Industries (India) Ltd

Q1 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 2

Margin

Category 3

Fundraise

Order

Yes

Capex

Yes

2 of 5 growth signals are positive.

Revenue guidance

Category 2

→FY24 revenue from infra and construction segment expected around Rs. 200 to Rs. 300 crores.
→FY25 revenue visibility expected to be slightly higher, projecting approximately Rs. 300 crores per year based on current Rs. 600 crore order book.
→Next quarter exploring possibility of additional Rs. 400 crore new orders in infra segment.
→Order book positioned for steady execution: Rs. 280 crore current order book with expected timelines for delivery.
→Logistics income expected to start in 2 years, creating steady annuity revenue.
→Rental income expected as stable monthly cash flow once logistics and IT parks become operational.
→Company aims to sign 3-4 MNC clients for lease rentals, focusing on asset-light annuity business.
→Future growth includes combining rental and EPC business revenues, with revenue mix evolving dynamically.

Category 3

→Revenue doubled in the recent quarter (Rs. 25 crore to Rs. 50 crore), although initial infrastructure support costs caused a minor negative EBITDA expected to normalize in coming quarters.
→The company aims for Rs. 1000-1200 crore turnover in EPC over the next 3 years with profits of Rs. 50-60 crore from EPC, supplemented by annuity income.
→PAT margins of 7-8% are seen as a bare minimum sustainable target; 8-10% is possible but 10% is considered high.
→Logistics income expected to start in 2 years, adding steady annuity income from rental yields with high occupancy from MNC partnerships.
→Dividend payout expected to commence from 2025, targeting 30-40% of profits as dividend once annuity streams stabilize.
→No immediate plans for inorganic growth; focus remains on executing logistics park, IT park, and infrastructure projects to drive earnings growth.
→Company currently well-capitalized with no debt, enabling smooth working capital management and project execution.

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→Currently, there is no immediate plan for raising funds through equity or debt.
→The company is well-capitalized with no existing debt and sufficient capital reserves.
→Promoters are infusing warrant money as and when working capital requirements arise, reducing the need for borrowing.
→The company aims to maintain a low debt-to-equity ratio (~0.25 to 0.5) to manage future funding needs.
→For developing new lands or projects, they may consider partnering with MNC clients who bring their own capital.
→There is a possibility of future equity partnering when leasing to foreign funds or large clients, where land may become equity.
→The company is also exploring an asset-light model, involving partnerships like Canadian Pension Fund or REITs for funding construction through revenue-sharing arrangements.
→Potential future REIT structuring is being considered but is at an early stage.

Yes

→Current order book is approximately Rs. 280-284 crores.
→Major ongoing orders include:
→ - Trichy bus stand project (Rs. 200 crore), expected completion by September 2024.
→ - Stormwater drain construction order, expected closure by May 2024.
→ - Macro drain project in Pallavaram and Thoraipakkam radial roadside, expected closure by March 2024.
→The company is exploring and in advanced stages of signing Rs. 400-500 crore new infrastructure orders expected to be announced in the next quarter.
→The Rs. 400 crore order being explored is purely infrastructure-related.
→Maximum single order received till date is Rs. 200 crores.
→Orders primarily include civil construction, roads, pipelines, stormwater drain, and public buildings.
→The company is focusing on executing these orders optimally over the next 12-18 months.

Yes

→Initial infrastructure setup for projects (e.g., Trichy project) involves upfront costs, written off within first two quarters; no further infrastructure spend once project is fully ongoing.
→The company recently acquired 254 acres in Kancheepuram (Rs. 107 crore), with 150 acres pre-approved for light engineering and warehousing; plans include logistics park and light engineering facilities.
→Capital investment for development of Kancheepuram land is flexible—can be asset-light via partnerships with international investors who fund construction in exchange for revenue share or asset-heavy if long-term tenants like Samsung sign up.
→No immediate fund raising planned; working capital is currently managed through promoter infusion via warrants.
→Future capex depends on signing up multinational clients for rental projects; potential increase in equity might happen if foreign partners join.
→Expected completion timelines for some projects (e.g., Porur property JV) are 36 to 48 months, with strategic partners doing the construction.

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