RBM Infra - a less discussed SME

[Punit_T]

My experience of investing with RBM Infra:

Being from instrumentation background, I had some seniors who used to work here a decade back so was pretty much surprised to see its IPO coming. The impression among engineers of Saurashtra region was that this co. basically does the shutdown / overhauling of Essar and Reliance. These two companies are too big to do these kind of yearly shutdowns on their own and hence use companies like RBM to perform shutdown. But lately RBM has grown its business line and has become a small EPC player

Asked those seniors of the feedback and it was pretty much positive.

There was no buzz of this company when it got listed. After sometime it became 2x and still I didnot sell since I thought that there is a lot of steam in it.

The real test started when it became it came down to almost its IPO price and some investors started departing their ways from it. However those who knew of this company’s potential would definitely not have sold it during that downturn.

I started calling the CS in Dec 2023. She didnot pick and after a week I sold my entire holdings.

I got in touch with Mr. Deepak (one of their directors) via linkedin after sometime and called him up. He told me to mail the MD , Mr. Mani

I sent a mail to the Mr. Mani and was surprised that called me directly on my phone and answered all the queries. He seems to be quite humble and a god fearing person. He listened to me patiently and then answered on most of the queries.

Even last week I had a word with Mr. Mani.He is still quite confident in saying that all the plans of the company are as per the original plans and there wont be any problem in the execution. Though he denied to reveal much ( and I was happy for that) he told me to remain updated in screener

He seems to have set set ambitious plans for the company and is quite confident on moving to the main board.

What remains to be seen is how fast they can execute their current order book.

[rohit9771]

Sir, I wanted to share some feedback with you regarding the responses I’ve observed on several threads. I’ve noticed that sometimes the context of conversations with management isn’t fully provided. It would be immensely helpful if you could include more details about the questions asked and the responses received. This way, readers can better understand the situation. Your efforts to ensure clarity and transparency are appreciated.

Thank you

[Aditya_Mittal]

Hi @Punit_T, the management has guided for 189 cr of revenues in Q4 FY-24 as per the investor ppt but it is only 57 cr. There is no communication regarding the reasons for the same. Do you have any idea, what is the reason behind the same ?

[charan_datt]

The 4th Quarter projected report is calculated based on the Average Pending amount per month which is calculated in the next slide of the presentation (attached below).

Even though it is beneficial to share the order completion status and remaining order amount, I don’t think using the average pending amount to project the next 3 months is a good measure. This is because most of the amount will be settled at the end of the project, and there are various reasons for postponing project completion.

Example: Nayara Energy contract’s start date of 24.08.2021 was projected for 35 months and only has 7 pending months.

Scenario 1 - If you consider that the contract is going to end as mentioned in the end date. 23.99 crore revenue was booked for 28 months, which is 0.85 crore per month. So in the remaining 7 months, 16.57 crore revenue is going to be generated, which is 2.36 crore per month.

Scenario 2 - If you consider there will be a delay in the completion of the project. For this scenario, and to calculate the revenue, we can only depend on the management’s comments on the particular project.

So for Q4, as Epitome Industries’ order is the highest, we can clearly see that the projected revenue was very low compared to the projection calculated using the average pending amount.

Please correct me if I am wrong as I am new to investing in this sector.

[Sharvan]

While I was go through the balance sheet I see there is a significant jump in the short term loan items from 0Cr to 148Crs, Any idea behind this jump?

[vikas_sinha]

Interestingly, statutory auditors have resigned in Jun-24 within 1.5 years of appointment citing ‘‘lack of cooperation & coordination during audit process’’.

https://x.com/mukesh634/status/1818696994640011354?t=a6xmjFHUpkMEra70GUTR4w

Disc : invested

[vikas_sinha]

RIL to lead lift in capex spend to $45-50 billion over 1-2 years: Moody’s

The oil and gas sector and Reliance Industries will collectively account for over 60% of the rated Indian portfolio’s spending over the next couple of years.

Moody’s said the seven rated oil and gas companies in India will also account for around 30% of rated Indian companies’ capex.

https://nsearchives.nseindia.com/corporate/RBMINFRA_20082024144132_s_pr_rbm.pdf

Disc : invested

[vikas_sinha]

https://nsearchives.nseindia.com/corporate/RBMINFRA_26082024172744_Callinvite_signed.pdf

[kdjolly]

Compiled some notes, few days ago, Enjoy:

18.08,2024
Listed on NSE Emerge, Lot Size 200

Establishment in 1993, RBM Infracon Limited is a distinguished engineering and infrastructure company. Over the years, it has evolved into a Specialist highly professional, reliable, and safe service provider in the infrastructure service arena, aiming to provide innovative, integrated, and customized solutions tailored to client-specific needs.
Specializes in comprehensive services in engineering, execution, testing, commissioning, operation, and maintenance, primarily in the mechanical and rotary equipment sector.

This co. basically used to do the shutdown/overhauling of Nayara(Essar) and Reliance. These two companies are too big to do these kind of yearly shutdowns on their own and hence use companies like RBM to perform shutdown. But lately RBM has grown its business line and has become an EPC player.
Its expertise spans various industries, including Oil & Gas Refineries, Gas Cracker Plants, Coal/Gas/WHR based Power Plants, Petrochemical, Chemicals, Cement & Fertilizers.

Major Clients:

Main Lines of Work:

Piping Services
Plate Work Fabrication and Erection
Structural Steel Work
Civil Construction
Coke Plant Maintenance
Tanks, Silos, and More on EPC Basis:
Erection of Plants and Equipment:
Blasting Cleaning and Painting:
Insulation and Refractory Work
Work shop Specialists
Rail wagon loading
Operation and Maintenance services
Turnaround services
Operation & Maintenance of Heater & boiler
Operation and maintenance of Fertilizers and cement plant

In today’s interview with Tiger Assets, the management spilled some beans . It was an online event and I attended it.
Highlights:
Mr Jaybajrang Mani, Chairman & MD, told that they have clinched a Rs 2000cr, 15yrs deal with ONGC for Oil exploration. The LoI is expected by 30th August. The contract will state that ONGC will allot RBM with 132 wells for digging crude oil and natural gas and they would share it a ratio of 65:35.
65% of the output would go to RBM and the rest 35% would go to ONGC. This means that for 15 long years, RBM can keep on digging crude oil and natural gas from those wells and the chairman has also assured that the revenue potential from this contract can very well go beyond 2000cr. In his own words:
“Yeh Project Toh Samander Kee Tarah Hai, Jitna Chaho Paani Nikaal Lo”

Also he told that they have almost clinched a deal of Rs 500cr, for a Solar project with Reliance. Company has worked on Solar for the past 1 year with Kalpataru and other companies.

He said that PAT can grow upto 10% from next year onwards as ONGC project is higher margin (20-25%) although Reliance can be only 6-8%.

Also explained the reason for realisation of lower revenue this Q, the left over revenue will be added in coming Qs. Epitome order is done around 200cr but invoice is not generated and from next month the work will start.

The revenue guidance is Rs 400cr for the current financial year and Rs 1000cr for the next. Targeting 5000cr revenue in next 5 yrs.

The company is in negotiations with Greenzo Energy, a Gurgaon based company for Green Hydrogen project. The good news may come in few weeks. He sounded confident.
Greenzo has Govt. approvals for Green Hydrogen & Ammonia Projects.

https://www.greenzoenergy.com/

Challenges & Working Capital:

• Delays in material delivery
• High working capital needs
• Debt funding options: Rs.250 Cr preferential issue planned along with funding from bank.

Management & Operations:

• 1,700 employees (500 contract-based)
• Ex ONGC executives hired for project execution

Auditor changed due to excessive delays at the auditors end. They were not able to comply with compliances on time.

Sector Expansion Plans:

• Exploring coal mining and gas sector opportunities

Capex Strategy:

• Future plans to reduce Capex by engaging more subcontractors for larger projects

The Promoter holding is shown wrongly here, its 60.53%, reduced from 72.4% as 1662000 shares have been allotted at a premium of Rs.376 per share on Preferential basis to non-promoters in February 2024. There is no insider selling.

Compiled Notes from here & there, no position as of now. Do your own diligence.

[kdjolly]

The Order has come, Bigger than expected.

[Mohit_baid]

Q1 FY25 earnings conference call held on August 30, 2024.

1. Q1 FY25 Financial Performance:

   • The company achieved total revenue of INR 38.86 crore, reflecting a 98.17% year-over-year (YoY) growth.
   • EBITDA was INR 4.79 crore, representing a massive 237.05% YoY increase, with the EBITDA margin improving to 12.31%.
   • Profit After Tax (PAT) grew by 248.86%, reaching INR 3.29 crore, with PAT margins expanding to 8.46%.

2. Future Growth Projections:

   • The management expects CAGR in revenue of 57-65% from FY24 to FY26. The EBITDA margin is expected to be in the range of 13-15%.
   • The company’s top-line guidance for FY25 is around INR 400 crore, with a PAT of INR 40 crore.
   • They have already clocked over 85 crores topline in Q2FY24 as on date of this Con-call and expect to cross 100 by the end of the quarter.
   • Key drivers of growth include strategic expansions into sectors like oil and gas exploration, solar energy, and green hydrogen production.

3. New Projects and Expansion:

   • RBM Infracon currently has 16 ongoing projects with a work order value of INR 1,384 crore.
   • They are working with major clients such as Reliance, Adani, Nayara Energy, ReNew Energy, and L&T.
   • They have significant plans to expand into solar and green hydrogen production by the end of 2025, aligning with India’s energy transition goals.
   • The Epitome project, valued at INR 957 crore, is progressing with expected invoicing of INR 60 crore in Q2 FY25.

4. Challenges:

   • Delays in some projects due to heavy rainfall in Gujarat have caused slight extensions in project timelines.
   • However, the management is confident in meeting targets, with no significant penalties or setbacks anticipated.

[rajpanda]

1. Hope mgmt. will explain the dynamics of the ONGC order in more detail in the next call. it doesn’t seem like a normal EPC order compared to what they have been doing so far.
2. The big order from Reliance, which they guided to reveal in next few days after the call, hasn’t been received and need to be monitored.

Market may want to see if they getting to the next league of ~100 cr/qtr kind of topline company… If that certainty comes, this may rerate ?

[Mohit_baid]

They did provide more details on the ONGC order -

https://nsearchives.nseindia.com/corporate/RBMINFRA_09092024183752_pressrelease_signed.pdf

[Sharvan]

The order is for 15 years but the spread is not mentioned anywhere like how much per year, does it includes O&M

[rajpanda]

@rajpanda

explain the dynamics of the ONGC order in more detail in the next call. it doesn’t seem like a normal EPC order compared to what they have been doing so far.

this surely is not a EPC kind of order. Seems like they will maintain oil wells and get revenue based on output. The dynamics, margins profile, capital investment, relation with crude price etc etc… will come into picture. Mgmt can help to clarify. They mostly avoided these Qs in last call as they order was not in hand.

[Mohit_baid]

Just in -
https://nsearchives.nseindia.com/corporate/RBMINFRA_18092024131504_KALPATARU.pdf
https://nsearchives.nseindia.com/corporate/RBMINFRA_18092024132025_RELIANCE.pdf
https://nsearchives.nseindia.com/corporate/RBMINFRA_18092024184005_nayra.pdf
https://nsearchives.nseindia.com/corporate/RBMINFRA_24092024194545_NSE_LETTER_Nayra_signed.pdf

[vnktshb]

With Rs400crs revenues and Rs40crs PAT in FY25 it looks like stock trades at Rs882/40 = 22.0x FY25E P/E and Rs1000crs and Rs100crs PAT in FY26 (extrapolating same PAT margins as FY25) stock trades at 8.8x FY26E P/E.

With a backlog of > Rs4000crs stock looks like a doubler or tripler to me at the minimum

Disclosure: Invested.

[kdjolly]

The risk with Infrastructure Companies is very clearly explained by Sandeep Singh:

100% of infrastructure NPAs (including many large companies which went belly up) in 2013-2018 era were

Not because they didn’t have enough orders / business

But solely because they had too many orders and any execution slippage or delays …their balance sheet couldn’t handle

[vnktshb]

@kdjolly firstly, I dont know who Sandeep Singh is.

Secondly, what you have stated is a motherhood statement without understanding the nuances of infrastructure and construction contracting.

An infra company is one who owns the asset forever or owns it for a limited period time in a BOT (built own operate) project. They need to finance the project. Let us say the cost of the project is 100 (90 of hard costs and 10 of interest capitalized during construction). The infra company arranges 100 to finance (maybe 70 of debt from banks and 30 of own equity). If the economics of the project dont make sense the infra company defaults on the 70 of debt which is the NPA you are talking about.

RBM Infracon is a not an Infra company. It is an infrastructure construction company. The infra asset owner contracts out construction of the assets to people like RBM. So the loans are not on RBM’s books.

For example in the 2013-2018 period infra companies like Jaiprakash Associates, Lanco Infratech etc went belly up. The constructors like L&T etc are still around.

If you are trying to suggest ONGC, Adani, Nayara Energy and RIL who own the asset are going to go belly up and that will lead to orders given to RBM Infra getting cancelled then its different.

There are execution risks which i understand. Can such a small SME company execute such a large order backlog? Can they generate cash flow from operations? These are some of the valid concerns. Your concerns seem too random to me.

[Mohit_baid]

Promoter Interview RBM Infracon Limited

Edit (04/10/24) Just an MOU but early signs of where the company is headed to.