RITES, the leading Transport Infrastructure Consultancy and Engineering firm, recently announced the financial results for the quarter ended on June 30. The Q1 results show movement in the right direction, operating revenue (consolidated) stands at ₹563 crore; PAT ₹120 crore. In an interview with Financial Express Online, Rahul Mithal, Chairman and Managing Director, RITES highlighted the segmental performance, orders, operating revenue, growth prospects and focus areas of the company.
Q 1. According to Rahul Mithal, the Chairman and MD of RITES, what are the growth prospects and focus areas for the company in the upcoming quarters?
The strategy at the beginning of this FY was to minimize the impact of two major challenges, the changed business dynamics on the inspection business (QA) front and the downtick of the export of rolling stock revenue. The new order for the Railways QA business impacts about 60% of the QA revenue with the rates being about 1/5th of the earlier rates. As this impact started cutting in from this quarter, the strategy was to have substantial growth in the orders for inspection from other clients as well as do a rationalization of the costs.
Further, there was a concerted effort to aggressively pursue effective execution of the high-margin project consultancy orders and this along with the incremental profit in our subsidiary REMC Ltd. has helped in blunting the impact of the two challenges.
Moving forward in the coming quarters, we will build up on this strategy so as to recover lost ground in these 2 streams of business at the earliest, while still trying to secure our EBITDA margins.
Q 2. What was the total order book value for RITES as of June 30th, 2023, and how many orders did the company secure during Q1FY24?
As of June 30th, 2023, our total order book value stands at ₹5702 crore which includes consultancy orders for about ₹2700 crore, turnkey business at about ₹2700 crore, ₹50 crore from exports, ₹150 crore from leasing, and ₹100 crore from REMC Ltd, our subsidiary.
During Q1FY24, we secured more than 70 orders worth more than ₹300 crore. Some of the recent examples are the Hyderabad airport metro line consultancy, Detailed project reports for the Chandigarh Metro and expansion of the Gurgaon Metro and the City Mobility Plan for Kolkata. We have also got ropeway orders for about Rs. 10 Cr. Additionally, we have got 4 semi-high speed survey orders from the Railways. On the sustainability front, we’ve got orders in the field of Swachh Bharat Mission 2.0, clean air pollution (NCAP) and solid waste management. These orders, as you see, underscore our strength of providing consultancy across all sectors of infrastructure.
Q 3. What were the operating revenue and PAT figures for RITES on a consolidated level during Q1FY24?
On a consolidated level, during Q1FY24, we recorded an operating revenue of ₹563 crore. The PAT stood at ₹120 crore with margins of 21.3%, which have remained range-bound. While the impact of the exports stream of revenue and the inspection business on margins in the coming quarters will be substantial as both are high-margin streams of revenue, the efforts on lines of Q1 will be to maximize the project consultancy revenue so as to secure the margins as close to these levels as possible.
Q 4. How much was RITES’ EBITDA on a consolidated level, and what were the corresponding margins in Q1FY24?
Our EBITDA stood at ₹161 crore with 29.6% margins which we have been able to sustain YoY despite fall in revenue from the quality assurance and exports business. Our endeavour will be to continue to secure these levels of margins moving forward with continued focus on high-margin project consultancy orders.
Q 5. Which division of RITES contributed the highest revenue during the mentioned quarter, and what was the margin for this segment?
The Consultancy stream of business contributed to more than 50% of the total revenue this quarter, underscoring our core strength of being a niche consultancy company. With a growth of 10% YoY in our domestic project consultancy revenue, we were able to secure the overall consultancy margins at 44.2%
Q 6. How much was the first interim dividend declared by RITES, and what is the record date for dividend payment?
The Board of Directors has declared an Interim Dividend of Rs. 3.75 per year which is a dividend payout ratio of about 93% (on quarter earnings). The record date for payment of dividend is August 7, 2023.
Q 7. What specific strategies or initiatives does RITES have in mind for this financial year in terms of growth in the Project Consultancy and Export business?
Going forward in the coming quarters, the aim will be to be able to get finite export orders at the earliest which has seen some positive headway, as also recover lost ground in the QA stream of revenue by enlarging our client base. Continued focus would remain on executing the high-margin consultancy orders as well as securing further consultancy orders across our different verticals covering various infrastructure sectors. Further, under the ‘RITES Videsh’ strategies initiative, an increased push is being given for obtaining more international consultancy orders which contribute in securing the margins.
The Q1 performance shows movement in the right direction, in line with our envisaged goal for the financial year and we will continue to build up on this, leveraging our strength as a ‘Go To’ Infrastructure Consultancy Company.