HCC – Infra giant with massive turnaround story!

I have invested in HCC. My noting on company is here under.

HCC – https://www.hccindia.com/

Founded by industrialist Seth Walchand Hirachand in 1926.

Q1/24 earning call recording

Q4/24 earning call recording

• Order book 10475 Cr at the end of current quarter. Last year no order receipt.
• Right issue completed, 350 Cr raised.
• Debt reduced by money recd with client settlement, right issue and earning.
• Tehri – PSP for 2X250 MW completed, 2 remains. This year completion.
• Steiner AG – Switzerland – construction business sold to French company. Real estate remains with Steiner. Plan to make separate company and sell it.
• L1 – 4625 Cr, mainly from transport and hydro.
• Many arbitrages underway, some awards recd, few will be recd.
• Debt – FY 25 will by paying 425 Cr. Principle 200-220 Cr.
• Bidding can be done as net worth last year 600 Cr, current year 800 Cr.
• L1 to LOA @ 2 Months / 15-20% conversion. Normally L1 getting converted to LOA.
• Current year higher tax provision due to higher profit, brought forward losses will compensate.
• Next year FY 25 interest cost will be same that of FY 24.
• 3-4 years for order completion.
• Presently transport is higher contributor, future hydro and nuclear can be higher. Future order book will be much higher.
• 40K tenders open, @ 10K order can be expected in current year.

Q1/25 EARNING CALL AUDIO RECORDING

• Current order backlog is 9,534 crores – Q1/25
• L1 in 4,600 crores worth of orders.
• Tenders for 40,000 crores worth of strong project pipeline, conversion ration 15-20%. Almost 6-7K worth of projects being quoted on monthly basis.
• One of subsidiaries, Steiner AG – Switzerland being sold off, finding buyers. (loss contribution – 17 Cr). HCC may continue to be associated if new buyer wishes so.
• No guidance on revenue and margin in generally but will improve upon Quartey. FY revenue expected to be subdued, FY 26 revenue will be much more.
• Reduced interest cost due to debt repayment done in last two years. Debt: HCC has made significant strides in debt reduction, with consolidated debt, including accrued interest, declining sharply from ₹12,200 crore in FY15 to ₹3,500 crore by FY24 — a reduction of 71 percent. Standalone debt also decreased by 45 percent, from ₹6,200 crore in FY22 to ₹3,400 crore in FY24
• Normally Q2 revenue will remains subdued in relation to other Q due to monsoon.
• 65% order executed till date are from nuclear power plant.
• Green field hydro power takes 6-10 years, PSP 4 Years. Thus, existing dam with hydro plant will see more action.
• QIP planned for MF and large fund houses.

Earlier actions

• Right issues, 15/3/24 at Rs 20 premium in the ratio of 13 share for 118 holding.
• Right issues on 20/11/18 at Rs 9 premium in the ratio of 49 share for 100 holding.

05/09/24
Care rating upgrade from BB to BB+

04/10/24
Local swiss court extended Steiner AG’s provisional debt moratorium, by four months until February 07, 2025. The Court has authorized Steiner AG to conclude the asset transfer agreement for all real estate development projects including the transfer of assets from Steiner AG to Steiner Development AG, a wholly owned subsidiary of Steiner AG.
Price continue to be under pressure as compared to market, down to 40.33.

14/10/24
Price up by @10% to 44 in last two days.
HCC receives fresh order for construction of Cable Stayed Bridge across Agardanda Creek for Rs. 1031.6 Crore (excluding provisional sum & applicable GST) (HC original bid – 1187.76 Cr, Afcons Quote – 1249.42 Cr, MSRDC estimate – 809.89 Cr, Just east of Adani Ports & SEZ’s Dighi Port project)

Q2/25 Result – Earning call points – https://hccindia.com/uploads/reports/Analyst_meet_recording_Q2_FY25.mp3

• Operating Profit Margin %
  Sep ’24 Jun ’24 Mar ’24 Dec ’23
  17.78% 12.59% 15.02% 12.35%
• 30 Projects spread well across India
• Order book @ 9800 Cr excluding 1032 Cr order received in October (standalone excluding subsidiaries)
• Consolidated revenue is Rs. 1,400 crores against Rs. 1,800 crores, low mainly due to sell of Steiner construction business.
• EBITA 18% v/s 14% (YoY)
• L1 in 3860 Cr, bids submitted 46000 Cr.
• QIP procedure started, will likely to be closed by December.
• HCC corporate debt guarantee to Prolific Resolution debt (3700 Cr) from Rs. 100% to 20%. Thus HCC’s corporate guarantee will be reduced to 740 Cr only now. This helps in fund raising efforts for new projects (QIP). Helps in accelerated order acquisition and future growth.
• HCC owns 49% of Prolific which holds Rs. 6,000 crore worth of claims and awards. These are interest bearing claims and awards.
• 307 Cr OCD settled at 234 Cr, will help in interest payment by 35 Cr annually. One of the means for accelerated debt reduction by utilizing money deposited in court against our arbitration. Current interest out go 350-370 Cr. Annually. 35 Cr reduction means @ 10% less interest payment.
• Steiner received orders Rs. 128 crore equivalent. Turnover Rs. 200 crore, PBT was Rs. 14.5 crore.
• Financial restructuring underway by various means, equity fund will support new order win and working capital will be by bank by better credit rating. After present QIP plan, if more order win come, further equity fund can be raised.
• Q3/Q4 revenue will be almost flat as order presently can generate Q1/Q2 revenue. Rising order win is target, order win transform in to revenue and P&L after @ 6 months time.
• Steiner AG Real Estate business divestment underway, will share as and when it conclude.
• PSP: Discussions with private power sector players. Formed with others strategic joint ventures. Looking at the sector engagement to bid @ Rs.12,000 -15,000 crores, coming 6 to 8 months.
• Year end debt 3600 Cr to 3000Cr.
• Subsidiary HCC Infrastructure – not interested in BOT, E&C is priority. Finance is critical while deciding road projects.

Changes in share holding pattern in last 4Q
Summary Jun 2024 Apr 13, 2024 Mar 2024 Dec 2023
Promoter 18.6% 18.6% 18.6% 18.6%
Pledged 76.85% 76.85% 85.32% 85.32%
Locked 0.0% 0.0% 0.0% 0.0%
FII 9.6% 9.3% 9.2% 7.8%
DII 6.6% 7.8% 8.2% 9.4%
Public 65.2% 64.4% 64.0% 64.1%
Chetan Jayantilal Shah – 1.28%

Important event specific to HCC to be tracked

• Steiner AG asset sell / transfer
• QIP
• L1 conversion to order.
• Tracking by any fund house – Ellara securities started tracking.
• Business concentration / political tilt: Maharashtra