Why Dilip Buildcon Has Beaten Peers To Surpass Analyst Forecasts

Another revenue stream for Dilip Buildcon is coal. The company became a mine developer and operator in 2016. This involves land acquisition, resettlement and rehabilitation, mine development and planning, and coal extraction and transportation. The company won contracts for Pachwara and Siarmal and estimates that it will add Rs 2,000 crore annual revenue in the next 22-55 years.

Suryavanshi expects 15-20% annual growth in revenue since FY22.

For the ongoing fiscal, however, revenue growth would have been 15-16% had the company not sought moratorium over debt, said Suryavanshi. The company sought a moratorium for its debt during Covid which led to lower sales as working capital was impacted to an extent due to this.

But the company also benefited from easier payment and bank guarantee requirements as part of the government’s attempt to provide liquidity to the road sector during the pandemic. The government provided an extension of three to six months in all projects, relaxing the payment terms, improving cash flows.

Improving Working Capital

Increased infrastructure activity has decreased working capital days—or time taken to convert working capital to revenue—from the peak of 127 in 2016-17. The metric, however, worsened ahead of and during the pandemic.

The endeavor would be to bring down working capital days to less than 70 over the next three years or so, said Suryavanshi.

One key factor that may impact Dilip Buildcon is its debt. The company is looking to pare debt by monetising at least a dozen road projects it won under the hybrid annuity model—where the government and private contract share the cost of the project.

The talks for at least 12 HAM assets are at an advanced stage, according to company’s presentation. It expects Rs 900 crore in the ongoing financial year and around Rs 11,00 crore in 2022-23 from sales.

According to Suryavanshi, the sale of assets will bring down net debt to equity to less than 0.5 times by financial year 2024 from 0.9 times at the end of December. Besides, he said, it will provide capital support for growth, and increase return on equity.

According to a report by IIFL Securities, leverage should sharply improve from 0.8x in FY21 to 0.2x in FY23 as capex is contained and proceeds from asset monetisation continue to flow in. 12 HAM projects are more than 50% complete and can be transferred within six months of commercial operations data, the report said, adding that the company has sold five assets to Cube Highways and Transport Assets Advisers Pct. and is in advanced talks to sell the remaining HAM projects.

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