Q1 Review: RITES Profit After Tax Falls 17.4% To Rs 120 Crore Year-On-Year
#Q1WithBQ | #RITES’ June quarter net profit falls 17.4% to Rs 120 crore.
CMD Rahul Mithal joins in to talk about the Q1 performance. #BQLive
CMD Rahul Mithal joins in to talk about the Q1 performance. #BQLive
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NewsTranscript
00:00 Hello and welcome to BQ Prime. A very good afternoon to all the viewers. I am Heera Lathadia.
00:05 One stock that is in focus is rights on the back of the first quarter earnings that have
00:10 been reported. Joining us on the show is Mr. Rahul Mittal, CMT, who tries to discuss more
00:16 in terms of how has the quarter been and what's in store going ahead. Rahul, good afternoon
00:21 and welcome to the show.
00:22 Good afternoon.
00:23 Rahul, my first question coming to you is, overall, has the quarter actually met your
00:29 internal expectations?
00:30 So, let's break down the quarter one performance. You see, when this financial year started,
00:38 our strategy was to minimize the impact of two major challenges. And one was the export
00:45 stream revenue. And the second was the change dynamics of the QA inspection stream of it.
00:52 So in the export stream of revenue, we started the FY with an order book of only 100 crores.
00:58 And this has impacted my profits in this quarter by about 16 crores. In the QA inspection stream
01:05 of business, the new order of railway started cutting in this quarter. And the rates have
01:11 gone down by one fifth from the previous rates, impacting more than 60% of my QA stream of
01:18 revenue. So we tried to build up on our other client base, as also rationalize our cost.
01:26 And this impacted my revenue, my profit by about 10 crores. So what we aggressively did
01:32 in this quarter was maximize the effective implementation of our high margin project
01:40 consultancy orders. So there, if you see, there's an year on year growth of 10%. And
01:48 in fact, maintaining a consultancy overall consultancy margin of 44%. That, along with
01:55 the growth of about 10 crores profit in my subsidiary RMCL, could minimize the overall
02:01 impact in this quarter is in line with our strategy to minimize and blunt the impact
02:06 of these two challenges. And we could limit the impact to about 19 crores in the EBITDA,
02:12 while still being able to maintain a core EBITDA margin of about 29.6%, and a packed
02:19 margin of about 21%.
02:20 Right. Point well taken, Rahul. So overall, if you have to look at FY24 as a whole, you
02:28 know, what's the kind of decline are you expecting in terms of the exports as well as the quality
02:33 assurance revenue? And how much of it can be mitigated with other businesses?
02:38 You see, in the export stream of revenue, the kind of movement that we have seen based
02:44 on our efforts across continents in the last few months, we are hopeful that we should
02:50 be able to get a finite order as in the coming months. And the aim is to be able that this
02:56 that these orders generate some revenue by the end of the FY. In the QA stream of business,
03:03 we are trying to aggressively tap on other client base, so that as I said, we restore
03:10 and you know, make up for the lost ground at the earliest possible. With that, the aim
03:16 is to cover all this by my high margin project consultancy stream of revenue, and recover
03:24 as much of lost ground in the entire FY. So if you look at the entire FY, the aim would
03:30 be to at least come back to the levels on overall last year and secure my margins to
03:37 the extent possible, which we have been able to do in Q1.
03:40 Right. And Rahul, overall, turnkey is another segment, which is the largest contributor
03:45 post consultancy there as well, we've seen the degrowth of around 8 to 9% on the top
03:50 line front, right. And as I was reading, it's many bad weather in certain regions that has
03:57 impacted the business. When do you expect a turnaround on that front?
04:01 You see turnkey, sometimes, yes, some of the projects got slightly impacted. But we have
04:09 an healthy order book of about 2700 crores. And I'm sure in the coming quarters, you will
04:14 see a growth in the turnkey revenue. But having said that, if you see the quarter one, the
04:21 bulk of the contribution, in fact, is in line with our strategy of having consultancy contributing
04:27 to more than 50%. The consultancy stream contributed to 53% of my revenue, which is our core strength
04:35 and which is our strategy and vision and direction moving forward. So even in the coming quarters,
04:41 we will continue to focus on growth on the consultancy revenue, while obviously trying
04:46 to execute the setback of some of the projects which got impacted in Q1 in the turnkey.
04:53 Right. So from here on, you know, which segments do you think will be growth drivers for the
04:58 company number one? And where do you see the margins and the growth stabilizing?
05:06 You see, in order of priority, the project consultancy wing, both domestic and international
05:13 will be our main priority. This quarter itself, as I said, consultancy gave us 53% of our
05:21 revenue. And in that, international revenue consultancy was also about a 12% contributor,
05:26 which is again, within our rights with this initiative, moving forward will contribute
05:33 more in the coming quarters. Within project consultancy, the kind of orders which we have
05:40 got, we've got about 60 plus orders already in quarter one, across sectors, you've got
05:45 the Hyderabad Metro consultancy order, we've got the Gurgaon Metro expansion, DPR, the
05:52 Chandigarh Metro DPR, we've got sustainability orders under Swachh Bharat Mission, we've
05:57 got the comprehensive mobility plan for Kolkata city, we've got orders for ropeways for more
06:03 than 10-12 ropeways feasibility. And we've got orders for surveys for four different
06:09 semi high speed sections of Indian Railways. So if you see spread across infrastructure
06:14 orders, we are getting these orders and we will continue to push them into revenue realization
06:22 in the coming quarters.
06:23 Okay. So with all of these new orders, where does the overall order book stand as on date?
06:30 The overall order book as on 30th June is 5700 crores, consultancy is 2700 crores, turnkey
06:38 is another 2700 crores, export is now down to only about 50 crores, and leasing is 150
06:44 crores and my subsidiary RMCL is another 100 crores.
06:49 Right. And what's the plan with REMC from here on because though it's a small base,
06:55 but it's good numbers that it has started to clock in and the kind of growth that you've
06:59 been witnessing as well. What's the contribution are you expecting over time from REMC?
07:05 In fact, as you correctly said, RMCL has been constantly performing very well quarter on
07:11 quarter. It's been constantly growing this year, this quarter itself, it saw growth from
07:18 28 to 43 crores in revenue, and a growth impact from 14 to 24 crores year on year. It's become
07:25 a debt free company last year, it's giving dividend, it's given 90% of its profit as
07:32 dividend. So moving forward, RMCL is showing a healthy pattern of growth. It has also finalized
07:41 the first 900 megawatt renewable tender, the RTC tender, and I'm sure moving forward, RMCL
07:49 is going to grow.
07:50 Right. And in terms of the first quarter of FY24, we've secured the company secured orders
07:55 for little over 300 odd crores. Is the company expecting to maintain the same run rate? Or
08:01 do you think it'll be way higher?
08:04 You see, we got about 70 odd orders totaling to about 300 crores in quarter one. While
08:11 the numbers of orders are high, but consultancy per se, the values of orders are normally
08:16 small normally, unless you get some very big project management consultancy orders, like
08:22 for example, Hyderabad Metro was a good order of 29 crores, our share of the order. So moving
08:28 forward, the numbers are definitely this, we are going to maintain the strength, but
08:33 our aim will be to even get some higher value orders, including some international consultancy
08:38 orders. So even the value, the total value of the consultancy order grows, besides obviously,
08:44 targeting some fresh orders in export.
08:47 Right. And if you see in terms of the order book split as well, do you expect that to
08:54 change or will it remain the same as what we are seeing in the first quarter?
09:00 You see, the overall strategy for taking orders is based on our overall vision that consultancy
09:09 must contribute more than 50% of my revenue, and turnkey should be limited to not more
09:15 than 25%. Because turnkey is a very low margin business, and we are primarily a consultancy
09:21 company. So in the interim phase till we get export orders, and as we get export revenue,
09:28 the turnkey segment will further go down to come up to 25%. So keeping in view this overall
09:35 mix of the revenue, the orders will be taken. Yes, turnkey orders are higher in value, but
09:43 consultancy, we would aim in getting more orders, and some high value orders, so that
09:48 we are able to maintain the contribution of consultancy revenue above 50%.
09:54 Right. And Rahul, my last question coming to you is what's the next milestone that the
09:58 company will be looking to cross or achieve, if I would say?
10:04 So you see, we are, I think our niche and our core strength is that whether it is in
10:12 the PSU domain or the private sector domain, we are the only company which, except maybe
10:19 oil and natural gas, we do consultancy across sectors, across infrastructures. So our vision
10:27 is to build up on this and call the go-to consultancy company across client base in
10:36 the domestic sector, as well as the international sector.
10:39 Right. So that's with regards to the overall outlook. Thank you, Rahul, so much for joining
10:43 us on the show and giving us those views. So that's the management of rights, clearly
10:49 speaking to us in terms of how the quarter has been, what are the pain points, what could
10:54 be the green shoots that you should be watching out for. That's all that we have on this session.
10:59 Thanks for watching. And lots more lined up on the other side. Please stay tuned to BQ
11:03 Prime.
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