Release Date: January 29, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vascon Engineers Ltd (BOM:533156, Financial) reported a strong revenue growth of 48% year-on-year in Q3 FY25 and 37% in the nine-month period, driven by robust project execution in the EPC business.
- The EPC segment has a promising outlook with a robust order backlog of INR3,179 crores, nearly four times the FY 2024 EPC revenue.
- The company successfully completed the divestment of its subsidiary, GMP Technical Solutions, receiving net sales proceeds of INR110 crores, strengthening its financial position.
- Vascon Engineers Ltd (BOM:533156) achieved a net debt reduction from INR124 crores in June 2024 to INR104 crores in December 2024, reflecting a focus on prudent financial management.
- The company is optimistic about its real estate segment, with upcoming projects like Om Sainath in Mumbai and Powai residential and commercial projects expected to contribute significantly to future revenue.
Negative Points
- The real estate segment showed lower revenue recognition in Q3 and nine months of FY25, leading to a decline in profitability compared to the previous year.
- EBITDA margins declined due to lower contributions from the real estate business, with the overall margin standing at 8% for Q3 FY25.
- The company has not yet achieved its INR1,500 crores order booking guidance for FY25, with a shortfall of INR1,000 crores remaining.
- Real estate sales have been lower than expected for the nine months of FY25, raising concerns about the ability to sell new projects.
- The company has faced delays in project launches due to regulatory approvals, impacting the timeline for revenue generation from new projects.
Q & A Highlights
Q: Is the majority of the finance cost related to the EPC division?
A: No, not entirely. The EPC business has a dedicated CC limit with an average drawdown of INR60-70 crores at a 10% interest rate, resulting in about INR6-7 crores annually. Additional short-term borrowings and client advances may add up to INR10-12 crores annually. The rest of the finance costs pertain to the real estate business. - Santosh Sundararajan, Group CEO
Q: When can we expect the EBITDA margin to improve from 8% to 8.5%-9%?
A: The current 8% is a blended EBITDA, with no significant revenue from real estate yet. We expect some real estate revenue in Q4, which should help us reach the 8.5%-9% target by the end of the year. - Somnath Biswas, CFO
Q: What is the status of the INR1,000-1,500 crores order booking guidance?
A: We have already secured over INR500 crores and have several tenders in the pipeline. We are confident of achieving the INR1,000 crores target by April, with a stretch goal of INR1,500 crores shortly thereafter. - Santosh Sundararajan, Group CEO
Q: How will the Mumbai redevelopment and Powai projects be financed given the lapse of the QIP?
A: The proceeds from the GMP sale, amounting to INR110 crores, will primarily fund these projects. Any shortfall will be covered by short-term borrowings, with plans to raise equity when market conditions improve. - Somnath Biswas, CFO
Q: What is the expected completion timeline and revenue for the Sainath project?
A: The Sainath project, a real estate venture, is expected to be completed in two to three years. Vascon's share of the top line is projected at INR270 crores, based on current sale rates. - Santosh Sundararajan, Group CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
