Q1FY25 Concall Summary
Business Updates
- The reduction in revenue was due to lower yields and lower capacity utilization with yields falling to 2.04% per month and utilization falling from 84% to 77%
- The capacity shall further drop along with a fall in blended yield in Q2 as well
- Based on ongoing visibility there could be an additional capex of Rs 120-140 crores during the year
- The company has a fleet of 361 cranes on the books and there are around 40 cranes which are held as asset for sale
- The company has a cash corpus of Rs 175 crores which is kept aside for long term strategic plans and this money is parked in bank funds and mutual funds
- The company is the fourth largest crane rental company in the world and the largest in India/Asia region
- The company will spin off two business from its company viz the renewable EPC business and the logistics business and this will be done this year
- The value creation exercise is being done in consultation with Bain & Co.
Participants
Invest Analytics Advisory LLP
Trustline PMS
Nirmal Bang
Sapphire Capital
JM Financial
QnA
- The project execution is slow and ground approach is muted along with slowdown in capex activities which should put pressure in near term
- The new businesses in renewable EPC and logistics are volume-based business with low EBITDA margins. Going forward these should grow at more than 50% yoy the management has taken a call of carving out these activities from the parent company and they will be 100% owned subsidiaries
- These areas of business are currently cost centers for the company and the idea is to carve them out and run them as separate business with a new CEO who will run this business in a certain manner
- The erection that has taken place in Q1 has declined by 335 on a yoy basis in terms of wind turbine erections and this should go up post monsoon and thus H2 should see better numbers for crane rental business
- Earlier when the company started it used to purchase used cranes and slowly they started buying German cranes which are costlier and have lower yields because the purchase cost is higher and thus yields are lower compared to Chinese cranes which are cheaper
- The EPC business will require bank guarantees for which the company is tying up with banks and for debtors the threshold will be 30-45 days
- The orderbook of wind turbine generators have gone up but there have been delays in land availability and installations which has led to lower installations in Q1
- The management is looking at scaling up the crane rental business but will also look at quality of customer, financial closures and also whether the company is able to achieve a certain size and scale in the EPC business which should have sustainable EBITDA margins of 12-15%
- The higher rate of commission on profits in FY24 was for one year only and for the remaining part of the contract the MD will continue to get commission on profit at earlier rate of 1.5%
- The crane rental business in FY25 should remain more or less flat compared to a yearly basis because already 4-5 months have been lost to elections and heavy monsoons
- The renewable equipment space is extremely in demand and there is a lot of Chinese equipment entering the Indian market and competitive intensity is very high
