ENGINERSIN — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Prepared remarks

ENGINEERS INDIA LIMITED · MR. SUVENDU PADHI – COMPANY SECRETARY &

MR. SUVENDU PADHI – COMPANY SECRETARY & INVESTOR RELATIONS – ENGINEERS INDIA LIMITED MR. R.P BATRA –EXECUTIVE DIRECTOR, FINANCE & ACCOUNTS & INVESTOR RELATIONS – ENGINEERS

INDIA LIMITED · MR. AMANPREET SINGH CHOPRA – GENERAL

MR. SUNIL SAXENA – EXECUTIVE DIRECTOR, TECHNICAL AND INVESTOR RELATIONS – ENGINEERS

MR. AMANPREET SINGH CHOPRA – GENERAL MANAGER, CMD OFFICE & INVESTOR RELATIONS –

ENGINEERS INDIA LIMITED · MR. SUVENDU PADHI – COMPANY SECRETARY &

MR. VIVEK MIDHA – GENERAL MANAGER, MARKETING BUSINESS DEVELOPMENT AND INVESTOR RELATIONS – ENGINEERS INDIA LIMITED MS. NEHA NARULA – SENIOR MANAGER, COMPANY SECRETARY & INVESTOR RELATIONS – ENGINEERS

Moderator · Conference Operator

MS. BHOOMIKA NAIR – DAM CAPITAL

ENGINEERS INDIA LIMITED · MR. SUVENDU PADHI – COMPANY SECRETARY &

May 29, 2023

Moderator · Conference Operator

Ladies and gentlemen, good day, and welcome to the Engineers India Limited Q4 FY '23

ENGINEERS INDIA LIMITED · MR. SUVENDU PADHI – COMPANY SECRETARY &

May 29, 2023 147% in the consolidated profit on year-on-year basis.

Overall, in the RFCL project, this unit is operating at the full capacity and excellent energy numbers, and we are expecting more and more profit in the coming time. and some of the other highlights are as follows.

Our cash flows are very positive and leanness is visible on trade receivables.

ER trade receivables reduced considerably during the year '22-'23.

Our debtor stood at INR353 crores during the year as compared to INR371 crores.

The number of days of turnover has declined to 39 days during the financial year '22-'23 from 47 days during the financial year '21- '22, which is the lowest in the last 10 years.

During the year, the company earned a total dividend of INR62.39 crores as against INR41.78 crores during the financial '21-'22.

And in the current financial year, we have earned a dividend of INR55 crores from the NRL investment.

And in the -- as on date, we have the order book status.

In the current year, order inflow in increased significantly to INR4,708 crores in the financial year '22-'23 as compared to order inflow of INR1,687 crores in the last financial year.

Recently, the company has received the following major foreign jobs order: USD 22.14 million for supervision of Guyana integrated NGL plant in the Guyana, South Africa -- South America.

EPCM job of USD 39.04 million for the greenfield 400 TPD urea and 2300 TPD ammonia complex in Nigeria.

Above order inflows, increases the international footprint as part of vision of the company for the geographical diversification.

And this is the highlight of the annual financial period.

Bhoomika, now I hand over to you.

Moderator · Conference Operator

We take our first question from the line of Venkatesh Subramanian from LogicTree Investment Advisers.

Venkatesh Subramanian

Congratulations on a good performance.

And I've been recently reading up quite a bit of media releases and is on part to further growth in the next few years.

So 2 questions, sir.

One is, I understand oil and gas continues to be a primary source of revenue for the company and you're also planning to increase your order book in the Middle East for that, but I'm more interested, while that goes on at a particular growth rate, if you can indicate some sort of a growth in top line over the next 5 years from the oil and gas segment?

And number two, from the new areas that you've been pointing out, which is in terms of renewables or nuclear power or anything else where Engineers India is now foraying into, what is the kind of vision that you have over a 5-year period that we can look forward to for the company?

Vivek Midha

Good morning -- good afternoon.

This is Vivek from EIL.

Regarding this growth, you are correct that our core area and core focus would be oil and gas because they are the business lies right now, and it's going to be there.

Specifically, we see there's a lot of growth in the petrochemical sector.

So all the refineries are going towards the petrochemicals.

ENGINEERS INDIA LIMITED · MR. SUVENDU PADHI – COMPANY SECRETARY &

May 29, 2023 Many crude chemical complexes are being planned, and we are involved in various studies.

So we see a lot of perspectives out there.

And definitely, these projects are going to be there in the next 4 to 5 years because they are right now in the book, like in the conceptual stage.

So when these gets realized, it will be actually next 2 to 3 years, 4 years because you must have seen that we have a few opportunities that have been published in the information that's been given in the media also with regard to the refinery compared to chemical It's petrochemical complex, which is INR61,000 crores as well as the is also going for the refinery expansion and petrochemical complex.

So in similar ways, all the companies are moving towards it.

So that's actually a very lucrative sector for all of us and it's a core for us.

So we'll be targeting that.

With regard to the other sectors, we have already moved into the other sectors like green hydrogen, bioethanol, biofuels, coal gasification, and then fertilizer is also growing.

We are going into that.

And then also growing.

We are also entering into defense nowadays.

So these are the sectors we have targeted now and we are working towards it.

Like -- sectors like green hydrogen or green ammonia or the green areas, these are the new sector -- coal gasification are the new areas.

So most of the activity is happening right now is in the conceptual stage, means like studies are being conducted.

And we see that it is going to increase -- it is when the project viability is established, the project will be established.

So we see that opportunity out there.

So this is the perspective we are looking at it.

And like going with the international.

International is the another area now we are going to focus.

You must have seen that this year, international has given a very good contribution in our business.

So we have also changed our strategy, and we have started focusing on the international market.

So we are strengthening our Middle East office, which is located in Abu Dhabi.

So that is going to take care of the Middle East market business as well as we said more manpower, more projects have been targeted.

We have also gone into -- you must have seen that this time, we have gone into the South America and we secured one of the assignments.

So we are also targeting nearby countries wherein we can have more business opportunities of similar types.

Then another area which is coming up very -- which is very productive for all of us and it's a new area is the Africa.

Africa, we are already there, and we have the substantial experience of working in Nigeria, wherein we are -- that we are constructing a refinery.

So using that experience, we have been able to secure projects for the fertilizer and now you'll be -- we are very pleased to tell you that we have received another order from the same client for the in this year, which will be reflected in this year's business.

We have already signed this order recently in last week.

So we are also thinking about having some petrochemical complex.

We are talking to some clients with respect to the petrochemical complex in Nigeria as well as we are focusing towards the other African countries, wherein there are prospects of like LNG are there or fertilizer is there on oil and gas is there.

So we are targeting those countries also.

May 29, 2023 So that's how we are focusing -- shifting our focus from purely being the domestic company to overseas companies.

So that's one of the areas.

And another focus has been given from the core sectors to infrastructure.

You must see that at the recent results also.

Our core infrastructure contribution in our business is increasing nowadays.

We have been doing various projects.

Earlier, we have been -- we have done various institutional building works, our data centre projects.

Now recently, we have got one -- this year, we have secured one assignment in EPC -- on EPC basis from -- in the infrastructure segment also.

So we are also focusing on the infrastructure part of it.

Venkatesh Subramanian

Perfect.

Okay.

Great, sir.

I think it's probably too early to talk about numbers, but is it fair to assume that we have enough opportunities to probably grow at 15%, 20% top line over the next 3 to 5 years?

Vivek Midha

Exactly.

So now talking about the numbers is difficult because we have to target a lot of projects.

Many of the projects are in the anvil, but saying that this number would be there, we cannot say that with surety.

But definitely, we have a target in mind we'll be securing that much business at least in this financial year.

So to maintain our business what we have secured this year.

So we'll be at least trying to reach to that level and try to improve over the results and all the efforts are being on.

So you must have seen in the progress in the business and the like visibility of you must have seen that, so that focus will continue to happen.

Moderator · Conference Operator

We take our next question from the line of Ashwani Sharma from ICICI Securities.

Ashwani Sharma

Yes.

Sir, my first question is on the clarification.

The change order that you had received during March from HRRL, is it totally implemented or still it has got something included in the backlog, current backlog?

Sanjay Jindal

It is yet to be implemented.

It is undergoing.

Ashwani Sharma

Yet to be implemented.

Okay.

Sanjay Jindal

This work we're doing already, and this is change order by way of increase in scope of work and that is to be executed in the coming time.

Ashwani Sharma

All right.

Sir, my second question is on the that we have received worth INR1,600 crores, what is the breakup of that in terms of consultancy and the turnkey projects?

Sanjay Jindal

Sorry, I could not get you.

Your voice is not clear.

Ashwani Sharma

I'm sorry, sir.

I'm saying that the INR1,600 crores of orders that we have received, which you have mentioned in the press release...

Sanjay Jindal

You are talking about the orders?

Ashwani Sharma

I'll just come back.

I'll come back in the queue.

ENGINEERS INDIA LIMITED · MR. SUVENDU PADHI – COMPANY SECRETARY &

May 29, 2023

Sanjay Jindal

Okay.

Moderator · Conference Operator

We'll take our next question from the line of Dikshit Doshi from Whitestone Financial Advisors.

Dikshit Doshi

First question is a clarification.

So if I see the Q3 end, our order book was around INR7,865 crores.

This quarter, we received in new fresh orders of INR3,900 crores.

And if I remove the execution of INR865 crores, the order book should have been INR10,900 crores, but it is reported around INR7,695 crores.

So there is a difference of INR3,200 crores.

So is it related to this change order?

ENGINEERS INDIA LIMITED · MR. SUVENDU PADHI – COMPANY SECRETARY &

May 29, 2023

Dikshit Doshi

Consultancy segment profit.

Okay.

So assuming that every year, we have some change order, the annualized basis, we can expect consultancy to post 27% to 30% range of margin and EPC at around 4%?

Moderator · Conference Operator

We take our next question from the line of Charanjit Singh from DSP Mutual Fund.

ENGINEERS INDIA LIMITED · MR. SUVENDU PADHI – COMPANY SECRETARY &

May 29, 2023

Charanjit Singh

Congratulations on good set of numbers.

Sir, my first question is in terms of the order inflow outlook, if you can give a guidance in terms of what is our expectation for this financial year.

And which would be the large projects in the petrochemical side or the refinery side, which would be targeting?

That's my first question, sir.

Vivek Midha

First is that we will try to match what we have secured this year.

We will try to improve upon that.

We won't be right to give the figure right now, but this is just a start up, right?

And at least we are going to meet that, and we are going to improve on that.

And with respect to the pet chem and other projects, you must be aware that we have talked about the BORL way which is going for the refinery expansion as well as the petchem.

So that's definitely on the card.

Then we have a expansion project, which is going to come in future.

Then many of the other refineries like in also, we are thinking of chemicals.

We are working with them.

We are preparing a feasibility report for them.

Then another private sector like we are already involved in the project, they are also thinking of specialty chemicals.

So we are also working for them.

IOCL is also thinking of a few petrochemical facilities in Gujarat.

In times to come, they'll be floating a tender, so we'll be also participating there.

This would come in this financial year, largely in this financial year.

So these prospects are definitely there.

Charanjit Singh

And sir, from a mix perspective, between Turnkey and Consultancy, what would the mix we can expect in the order inflow?

Vivek Midha

It would be primarily the purses.

You know that traditionally, we will be going for the only on the mode, wherein we are more secure.

So consultancy, and EPCM would be leading.

This year, LSTK has show -- it's already 57%.

Naturally, we'll try to maintain the same ratio next year also because we are also focusing on the OB kind of projects from right now from the oil and gas sector as well as in the other different sectors also, we are trying to get into that kind of mode.

So let's hope for the best.

If we keep our fingers crossed, we should be able to get more into OB.

And selecting definitely, we will be targeting them.

And we see that it could be approximately 50-50 in times to come.

So 50% Consultancy and 50% Turnkey that is what we are expecting.

ENGINEERS INDIA LIMITED · MR. SUVENDU PADHI – COMPANY SECRETARY &

May 29, 2023

Sanjay Jindal

Basically, our consultancy business depends on the mega project in India because all the oil and gas -- all the projects in oil and gas sector are driven by the government schemes and government approvals.

So there are so many factors for the consultancy job.

Charanjit Singh

Got it, sir.

Sir, if I may, just add another 1 question.

So in terms of the defense and some of the new segments while you have touched upon, but if you can just also give some more colour in terms of what is the area which we are targeting in the defense?

And you also touched on coal gasification where we have already seen a coal gasification policy and Coal India looking to get into that opportunity.

So that's a totally new area.

So these 2 segments, if you can highlight more, sir?

Moderator · Conference Operator

We'll take our next question from the line of Jonas Bhutta from Birla Mutual Fund.

Jonas Bhutta

Just a question on the oil and gas sector.

We were also targeting jobs in upstream.

Any updates there, what seems to be happening there?

There was a few jobs that we were expecting -- projects, sorry, we were expecting from the upstream sector?

Second one was a couple of years ago and for quite some time now, we've stopped discussing the mega refinery now off-rated the team in the news, but any update there in terms of the possibility that this project goes through?

ENGINEERS INDIA LIMITED · MR. SUVENDU PADHI – COMPANY SECRETARY &

May 29, 2023 Apart from that, in Consultancy also, we are getting a lot of assignments under same segment - - from the same segment and same kind of modernization of the facilities and all, so we are targeting those projects.

Apart from that, we are also there in the international and international marketing, we are working with that now.

We are carrying out a lot of feed and an engineering assignments with them in the Upstream segment.

Jonas Bhutta

Got it.

And any update on the mega refinery?

ENGINEERS INDIA LIMITED · MR. SUVENDU PADHI – COMPANY SECRETARY &

May 29, 2023

Moderator · Conference Operator

We take our next question from the line of Himanshu Upadhyay from O3 PMS.

Himanshu Upadhyay

I had a question on, we said about for growth, we want to diversify into various segments, okay?

And some of them are urban infrastructure, ports and harbours and defense and biofuels and -- see, what are the areas where we don't want to focus on?

Means, because we are seeing infrastructure growth happening across the board.

What would be the metrics which you will be using to select which businesses you think can be really sizable, sustainable business and profitable business over a longer period of time?

And hence, those would be the areas where primarily you will be focusing on?

Vivek Midha

Let's talk about the infrastructure part.

Infrastructure part if you see that we are primarily focused on the institutional buildings.

We're not into general construction project.

We work as a project management consultant.

We go into the institutional buildings, we go for the data centres or kind of airports, we work for.

Then other -- we have also been involved in the -- this bullet train project.

In some of the case, we have been -- we were working as a construction supervision consultant for one of that.

So these kind of projects, niche products are targeted.

We don't compete with the consultants wherein -- in those segments where -- which are low value segments and where the competition is very high and we are not likely to get the business.

Similarly, in the other segments like the biofuel, biofuels is going to be a new area.

We are already executing one of the first refinery in India, which is the bamboo-based refinery.

So this is a highly technology sensitive -- technology intensive.

We have entered into an agreement with 1 of the licenses to get the technology and we are implementing.

So this is adding niche to us.

Similarly, in the hydrogen.

Hydrogen is going to be a new area.

So hydrogen we are getting into electrolyzers, we are setting up hydrogen plants in the refineries from the brown hydrogen to green hydrogen, we are converting.

We are working into the green ammonia segment wherein the green hydrogen is also going to work and this -- so now if you see that renewable, we are not going into renewable because renewable in the basically solar in all these segments, there are a lot of players that are already available who are very low-cost players.

So we do not find any value for us to be in that segment and we cannot compete with those people.

So that is the kind of area we pick up, wherein some technology intensity is there and we are capable of this.

We can get certain assignments on a negotiation basis.

Like in infrastructure, we mostly get the projects on a negotiation basis from various clients.

So this way we segregate the and where their substantial engineering work is involved and we get the value and good -- I can book more engineering manhours, that will be our focus for selecting any of the area.

Himanshu Upadhyay

Okay.

And in terms of profitability, any views you want to have that below this type of margins is not conducive for us because even in some of these fields, -- we see some of the global players having very low margins, okay?

So what will be the threshold...

ENGINEERS INDIA LIMITED · MR. SUVENDU PADHI – COMPANY SECRETARY &

May 29, 2023

Vivek Midha

[inaudible 0:34:31] wherein we want to enter.

If it's a niche area.

It's a very specific area, which is going to add value to us then one can think about it.

Otherwise, we will be very cautious by taking decisions.

So every due diligence is done before bidding for any kind of project to -- we take a call on what basis we have to choose.

So there's no generic written policy that what should we do and what should not do.

It depends on the case to get business.

Moderator · Conference Operator

We take our next question from the line of Mohit Kumar from ICICI Securities.

Mohit Kumar

Sir, my question is what is the order left from the PCM service for Kaveri basin at Panipat?

And what kind of revenues have put in these projects in last fiscal?

And you think the ordering for Kaveri basin and Panipat -- so expect it to pick up in FY '24?

ENGINEERS INDIA LIMITED · MR. SUVENDU PADHI – COMPANY SECRETARY &

May 29, 2023

Moderator · Conference Operator

We take the next question from the line of Saket Kapoor from Kapoor & Company.

Saket Kapoor

Sir, firstly, just correct me here, it is the INR70 crores -- hello?

Sir, I'm audible, sir?

ENGINEERS INDIA LIMITED · MR. SUVENDU PADHI – COMPANY SECRETARY &

May 29, 2023

Sanjay Jindal

First of all, we have investment in Limited.

And we have investment of around INR700 crores in the refinery.

And as on date, we have fair value of INR766 crores itself.

And in the current year, we have received a dividend of INR55 crores on the investment of INR700 crores in the refinery.

Then we have subsidiary -- 100% subsidiary certification in India Limited.

And we have received dividend of INR7.7 crores from the EIL.

And in addition to that, we have investment in Ramagundam Fertilizer and Chemicals.

We have 26% stake.

And as I have already told this, in this year, at this moment, RSL is operating at 100% capacity.

And even sometimes it is running even more than 100% capacity.

And this is the first year where RSL has made a profit of INR8 crores on the annual basis since it was having losses in the -- up to third quarter.

And in the fourth quarter, plant was stabilized and it was running at 100%.

So it could make profit on an overall basis.

And we -- in the coming year, we are expecting good profit from the RL investment also.

Saket Kapoor

Sir, in the Ramagundam Fertilizer, what is our investment for 26% stake?

ENGINEERS INDIA LIMITED · MR. SUVENDU PADHI – COMPANY SECRETARY &

May 29, 2023

Saket Kapoor

So if you could segregate that amount, sir, what is our own fund and cash fund here and the advances?

R.P. Batra

Yes.

Its advances around INR100 crores, So it's around INR950 crores, INR1,000 crores of cash.

Saket Kapoor

We hope that this year should be better in terms of top line and also the contribution from the subsidies would be positive.

So that should be the substance going ahead.

Moderator · Conference Operator

We take the next question from the line of Ashwani Sharma from ICICI Securities.

Ashwani Sharma

Pardon me if it is -- if I'm repeating the question.

So the first question is, is that go ahead letter orders at INR1,600, I just wondered the breakup of that number in terms of consultancy in the Turnkey?

R.P. Batra

That all belong to the Turney segment.

ENGINEERS INDIA LIMITED · MR. SUVENDU PADHI – COMPANY SECRETARY &

May 29, 2023

R.P. Batra

It will be around INR4,500 crores.

Moderator · Conference Operator

We take the next question from the line of Viraj Mithani from Jupiter Financial.

Viraj Mithani

I have 2 questions.

One, the new areas which we are talking of going into, would it be on the [inaudible 0:048:04] or the consultancy side more?

Like what would be the mix in those area days to come?

Vivek Midha

Can you repeat the question, please?

Just again.

Moderator · Conference Operator

We take the next question from the line of Dikshit Doshi from Whitestone Financial Advisors.

Dikshit Doshi

Sir, my question was regarding the growth.

As you rightly mentioned that we will be targeting a double-digit growth -- but contacting the order book of INR7,600 crores with 3-year execution

ENGINEERS INDIA LIMITED · MR. SUVENDU PADHI – COMPANY SECRETARY &

May 29, 2023 and we are also targeting INR4,000 crores, INR5,000 crores order win.

So I mean even if we'll achieve double digit, it will be low double digit.

Is it fair to assume?

Moderator · Conference Operator

We take our next question from the line of Saket Kapoor from Kapoor & Company.

Saket Kapoor

Yes, sir.

Just a continuation to the question, sir.

So for this year, we are looking at a revenue growth of 20% of what we closed for FY '23.

And if we look at the bifurcation between Consultancy and Turnkey, how the growth would be distributed among the 2 verticals, sir?

R.P. Batra

We are not giving any number, but definitely, we will try to improve whatever we have achieved during the current financial year.

And definitely, there will be -- we are basically anticipating growth in both the segments.

But exact figure, right now, we cannot...

Saket Kapoor

Only the part number, the business plan must are done.

Now we have the execution.

So we know what the visibility is.

So any ballpark number would help us understand because we were flat year-on-year last year.

So taking into account -- yes, sir.

ENGINEERS INDIA LIMITED · MR. SUVENDU PADHI – COMPANY SECRETARY &

May 29, 2023

Moderator · Conference Operator

We take the next question from the line of Raj Rishi, an investor.

Raj Rishi

How do you place yourself with respect to competition, both domestic and international?

What's the edge, which EIL has?

ENGINEERS INDIA LIMITED · MR. SUVENDU PADHI – COMPANY SECRETARY &

May 29, 2023 area and more strengthening of the people in that office.

Similarly, we are focusing on the South America.

We have started focusing on Africa market, apart from Nigeria, which we were working earlier.

So those activities have started, and we are doing it.

And the results have -- we have got the results of that in this year.

So we hope that more of this sort business can be secured from there.

Raj Rishi

And do you think majorly it will be consultancy only, not the...

ENGINEERS INDIA LIMITED · MR. SUVENDU PADHI – COMPANY SECRETARY &

May 29, 2023

Moderator · Conference Operator

We'll take your next question from the line of Milind Karmarkar from Dalal & Broacha.

Milind Karmarkar

Just wanted to sort of reaffirm that Turkey and Consistency, roughly you have 50%, 50%, right?

Am I right on that, in terms of the projects in hand or the order book?

ENGINEERS INDIA LIMITED · MR. SUVENDU PADHI – COMPANY SECRETARY &

May 29, 2023 margin can be negative also.

In this case, we are getting the positive contribution always because our risk is basically limited.

So that's why we are doing these type of jobs.

Milind Karmarkar

Okay.

Got it.

And my last question was on -- besides the cash and bank balance, are there any investments which are not investments for business, which we have like investments in mutual funds or -- these type of investments do we have in addition to cash...

R.P. Batra

Yes, yes.

We are having a temporary investment for 15 days or 1 month basically to meet our immediate working capital requirement.

They have to vary between INR50 crores to INR100 crores.

Moderator · Conference Operator

Ladies and gentlemen, we have reached the end of the question-and-answer session.

I'd now like to hand the conference back over to Ms. Bhoomika Nair from DAM Capital for closing comments.

Over to you, ma'am.

Bhoomika Nair

Yes.

Thank you, everyone, for being on the call, and thanks to the management for giving us an opportunity to host the call, sir, and answering all the queries quite well.

Really appreciate it.

And wishing you all the very best, sir.

Sanjay Jindal

Thank you, Bhoomika.

Thank you very much.

Moderator · Conference Operator

Members of the management, thank you.

Ladies and gentlemen, on behalf of DAM Capital Advisors Limited, that concludes this conference call.

Thank you for joining with us.

You may now disconnect your lines.