Dhruv consultancy (DCSL): a feasibility study - a path of stones or a smooth highway?

About the company: Dhruv Consultancy Services Limited (DCSL), incorporated in 2003 is a leading infrastructure consultancy firm specializing in highways and bridges. It offers design engineering, project supervision, maintenance, and advisory.

The company has 15% market share in the Indian Infrastructure Consultancy segment. The Company’s clients primarily comprise of government agencies like MoRTH, NHAI, UPEIDA, PMGSY among others. DCSL was present only in two/three states 3/4 years back (predominantly Maharashtra), now company has expanded its presence in over 25 states.

Products and segments:

  1. It provides Authority’s Engineer, Independent Engineer and Supervision consultants (this was ~70% of revenues in FY23, EBITDA margins are in 10-15% range). As projects are tendered by government or government agencies, it is difficult to have governments own personnel in all projects. Hence, government agencies outsource this to agencies like DCSL. It has completed 1400km of Construction Supervision and is currently working on 2000 kms of highways all over the country. Revenues is billed on quarterly basis however there is lag of 45-60 days as invoice is raised post expense incurrence. Company has to incur expenses on resource mobilization few days/weeks before even the project kicks off. Resources/spending involved is rental paid on stay and commute of of personnel and other equipment’s used. However good things is that almost all of the onsite staff is on contract basis. So as soon as contract ends there is sharp fall (~80%) in numbers of staff, rent and/or salary paid. ~70-80% of contracted revenue is earned in 2.5 to 3 years, while rest is earned during defect liability period (also called as maintenance period) which is about 60 months. During maintenance period staff deployed will be only 20% of what was deployed during construction.

  2. Detailed Project Report (DPR) also called as design engineering: It is a feasibility study covering: economic analysis, design of highway and structures, preparation of tender documents, land acquisition, forest clearances and utility shifting, environmental and social impact assessment. It has completed detailed project reports of 2000 kms. Revenue is recognized based on milestone basis. 15% of revenues and margins in 20-25% range.

  3. Advisory business such as traffic survey – DCSL has robust expertise in carrying out technical audits using high-tech machineries namely Network Survey Vehicle (NSV), Falling-weight deflectometer (FWD), Horizontal and Vertical Retro reflectometer, Mobile bridge inspection unit (MBIU) and Automatic traffic counter-cum-classifier (ATCC). 5% of revenues and margins ~30%.

  4. Others: design services, design of highway, design of structures that mainly provided for private contractors (margins ~40%).

Industry landscape: 20-25 consultants, top/tier-1s are Intercontinental Consultants and Technocrats Private Limited , RV Infrasolutions, Sa Infra, LN Malviya infra, and Dhruv Consultancy. Many of the smaller consultants have fallen off from bidding process as government tightened the requirements in the past few years. So main contenders are limited to less than ten owing to size and other requirements.

I want to highlight various red flags and risks. Please note that I have reached out to company for some of the questions and I am awaiting the response:

Red flags:

  1. Unbilled revenue (43 crores as of FY23) and receivables (18 crores) was ~75% of revenues (81 crores in FY23). I don’t understand why do we have such high numbers in unbilled revenues as they mention billing cycle is about 90-120 days. This also does not tie-up with their statement that unbilled revenues are mainly from IHMCL (~5% of revenues) and DPR (~15% of revenues). Hence, both segment account for 20% of revenues but unbilled revenue is over 50% of revenues.
  2. One of the promoter Prutha Pandurang Dandwate is continuously selling shares.
  3. Related parties are in adjacent or similar areas of business. In fact, in one of the interview company’s management talked about acting as financing support to related or relative’s companies who shall execute projects on their behalf (sub-contracting?)
  4. Couple of independent directors resigned two months back: https://archives.nseindia.com/corporate/DHRUV_05072023125805_OutcomeREG30DCSL.pdf
  5. Many relatives in board/senior management


  1. Cash flows are highly concentrated and exposed to government agencies
  2. Political regime change in upcoming elections may result in change in transparency (in bids/tenders and payments) and pace of order flows
  3. Low liquidity in the stock

Order book: Order book is ~270 crores to be executed over next 3-years. Company expects 150-200 crores of order inflow during current financial year driven by pre-election increased activity. Company has already received 50 crores plus orders in the last two months. I have summarized below some of the recent orders below:

Date of filing Type Order size (crore) Contract period (month)
30 August 2023 Authority Engineer 7.0 78
25 August 2023 Independent Engineering Services 6.0 48
23 August 2023 DPR 3.8 12
16 August 2023 Independent Engineering Services 9.4 48
31 July 2023 Independent Engineering Services 7.4 48
21 July 2023 Project Supervision Services Agency 1.2 12
15 July 2023 Independent Engineering Services 5.6 60
14 July 2023 Independent Consultancy Services 1.4 36
11 July 2023 Authority Engineer 9.7 84

Source: company exchange filings available on NSE

Talent mix: 300 engineers out of 400 total staff. CV of personnel needs to be on Infracon website (a government portal). Person cannot move anywhere before the completion of the project. 25% senior and 75% junior staff. 70% of staff is onsite and on contract basis.

Entry barriers – moderate levels

  1. Minimum Technical requirements for tender participation: an extract from tender terms below:

“The two parts of the proposal are Part1: Technical Proposal and Part2: Financial Proposal. For a given EPC Project, Stage -1 of the Evaluation shall consider the evaluation of the Technical Proposal (i.e. Part 1). The firms scoring the qualifying marks (minimum 75%) as mentioned in RFP shall only be considered for further evaluation. Under stage 2, the financial proposal of such firms as selected above shall be opened and evaluated. Proposals will finally be ranked according to their combined technical and financial scores as specified in clause 5 of section 2. The weightage of Technical and Financial score shall be 80% & 20% respectively. The final selection of the firm shall be based on the highest combined score of Technical and Financial Proposal”

Source: https://infracon.nic.in/WriteReadData/consultantprojectsAETWO/605_File3378349816.pdf

DCSL’s technical score has improved from 88 points 3-4 years back to 95 recently. I believe strong peers are close to ~97. DCSL expects to close the gap with its strong peers soon.

  1. Financial strength and size requirements: Tenders contain minimum size and experience requirements for participation:


Source: https://infracon.nic.in/WriteReadData/consultantprojectsAETWO/605_File3378349816.pdf

DCSL mentions that now their size is allowing them to have no cap on maximum orders they can get.

Requirement of bank guarantees another constraint for smaller players. Extract again below from tender:

“Bank Guarantees: PERFORMANCE SECURITY 7.1 The successful consulting firm shall have to submit a Bank Guarantee (BG) for an amount of 3% of the Contract Value within 15 days of issue of LOA. The BG shall be valid for a period of 92 months i.e. upto 2 months beyond the expiry of the Contract period of [90 months].”

Source: https://infracon.nic.in/WriteReadData/consultantprojectsAETWO/605_File3378349816.pdf

Financial snapshots from screener.in:

Short-term (1 to 3 years) growth trigger: Increased order flow is likely this year as India goes into election year.

Medium term (3 to 5 years) growth trigger: Company has started bidding for international projects which are of larger ticker size (20-25 crores vs. 7-10 crores in India). Margins of international contracts is higher than domestic contracts. Counterparties on international contracts are multilateral institutions like world bank, ADB etc. However, this shall start fructifying only from 12-18 months down the line.

Recent key development: Company has issued preferential allotement of shares to some non-promoters at 63 rs.

Sources: Company filings such as annual reports, conference call scripts and other announcements by the company on exchanges (mainly NSE).

Disclosure: I have initiated position in the stock just last week (between 28th August to 4th September). It accounts for less ~1% of my portfolio.

Disclaimer: I am not a financial advisor and nor a SEBI registered Analyst. The content shared here is only for learning purpose. All the names mentioned here are for example and learning purpose. I may buy more, exit or partly sell the stock/bonds without any prior intimation.


Is this the reason for promoter holding going down as I see " Promoter holding has decreased over last quarter: -1.45%" from 64.07 to 62.62?
@Nitya_Shah @joinjp2003 ?


Reduction in promoter holding is both due to preferential allotment and one of the promoter “Prutha Pandurang” selling shares.

As I am writing just want to update here that company has seems to receive 80 crores orders in current Q1 24 quarter.

Date of filing Type Order size (crore) Contract period (month)
08 September 2023 Authority’s Engineer 10.62 138
07 September 2023 Independent Engineer Services 9.9 60
07 September 2023 Independent Engineer Services 9 60
30 August 2023 Authority’s Engineer 7 78
25 August 2023 Independent Engineer Services 6 48
23 August 2023 DPR 3.8 12
16 August 2023 Independent Engineer Services 9.36 48
31 July 2023 Independent Engineer Services 7.38 48
21 July 2023 Project Supervision Services Agency 1.2 12
15 July 2023 Independent Engineer Services 5.58 60
14 July 2023 Independent Consultancy Services 1.4 36
11 July 2023 Authority’s Engineer 9.7 84
Total 80.94

I am still awaiting response from company on questions I raised.


Yes. Would also be interesting to see foreign orders coming in at higher margins. Want to know why Prutha Dandawate consistently sells shares. Will ask next time on concall. Orderbook execution will be key to track.

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I also remember company wanting to raise more funds from a USA based investor for an acquisition a while back. It will be important to track developments in this regard.

@joinjp2003 Nice write up!! I started reading about the company from 2-3 days and you summed up nicely. I also have some observations which needed clarity.

Yeah, this is very high and we need to keep monitoring this. In Annual report, it is mentioned that, there is a difference of INR 8.8 cr in Net current assets between stock statement and audited value. Company explained that the difference is due to not reporting assets (trade receivables and unbilled services) more than 90 days in stock statement. Trade receivables more than 90 days (actually this is more than 3 years) is ~ 3 cr. It means that unbilled revenue more than 90 days is ~ 5.8 cr, which is troubling me. Also, there is one line item "Excess billing to customer which is amounting to ~ 5.6 cr. Does this mean are there any disputes regarding the invoiced amount ?

Also, it is mentioned that trade receivables pertaining to contract balances is 8.8 cr. Then what are the remaining 9 cr pertaining to ?

Company in current year has approved the following with respect to related parties, which appears material considering the transaction size.

Company Related party nature of contract Duration Value in cr
Samrth softtech Director brother consultancy services for traffic survey 12 10
Infovibe ventures Director husband Design consultancy 12 5
Innovision studios Director Husband Design consultancy 12 10

Also, professional and consultancy charges is ~50% of topline in FY2023 and FY2022. Is it common in these types of companies?

Another thing, company has business loan from NBFC of 0.68 cr @interest rate of 14-19%. Why company is taking loans from NBFCs at such high interest rates? Does this mean company not getting loans from commercial banks? If this is the case, then getting BG from Banks for long tenure would be really difficult. Need to understand how much limits company currently has and does it meets the requirements? Already BG outstanding of ~18 cr is there.

I think this is 6.3cr.

Disc: Not invested.

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Thanks @anjanikari for your comments. I am still awaiting response from management on my earlier query.

On preference shares, I meant 65 rs per share not the whole amount.

You did a great in-depth job. thanks.

Up to 3133800 equity shares of face value of Rs. 10/- each at an issue price of Rs. 108 per equity share (including a premium of Rs._ 98 per equity share) for an aggregate consideration of up to Rs. 33,84,50,400/.
preferential issue