PSP Projects Limited

About Company:-

Incorporated in August 2008, PSP Projects Limited is a construction

company offering a diversified range of construction and allied services
One-Stop-Shop solution providing planning and design to construction
and post-construction solutions
Proven track record in delivering on-time and quality projects across
diverse industry segments and projects
Leveraging technology and best industry practices
Focus on industrial, institutional and high profile government projects
Long-standing relationships with customers who have provided repeat
business
Promoter has over 22 years of experience in the industry

 Net Cash Company with Negative working capital cycle

COMPANY JOURNEY:-
Indian Construction Industry Overview:-

The nationwide lockdown restrictions imposed in late March 2020 have heavily weighed on the
construction industry, as activities came to a standstill during most of April and May 2020.The
Centre announced a slew of relief measures to support players, including relaxation on EMD (earnest
money deposit) and performance security, relaxation of bidding eligibility criterion and increased
frequency of payments for government tenders.

The construction sector is expected to be on a strong growth route in FY22 due to large pipeline of
projects across manufacturing, infrastructure and housing and various government measures aiding
growth. The new order inflows are expected to be strong driven by a huge pipeline of projects to be
awarded in the infrastructure sector through National Infrastructure Pipeline (NIP). A major part of
the NIP is towards transportation (roads, railway, etc.), energy/power and urban infrastructure.
Growth will also be driven by the newly-announced Affordable Rental Housing Complex (ARHC)
scheme and investments in the industrial segment due to Indian government’s push towards
‘Atmanirbhar Bharat’.

Government initiatives to drive the infrastructure, manufacturing and housing are expected to
propel the Indian construction market. The Gross Value Added (GVA at Current Prices) by the
construction sector in India is estimated to be about ₹ 12.8 lakh crore in 2020-21 as compared to ₹
13.7 lakh crore in 2019-20.

According to theMinistry of Statistics and Programme Implementation (MOSPI), the Indian

construction industry grew by 6.2% year-on-year (YoY) in Q3 FY21 ending December 2020- up from
Y-o-Y declines of 7.2% in Q2 FY21 and 49.5% in Q1 FY21. As per the Mordor Intelligence Report, the
Construction market is expected to register a CAGR of 7.4% over the forecast period, 2021-24.
However, the resurgence spread of COVID-19 in May 2021 could be dampener to the expected
recovery.

Source: Constructionweekonline

OPPORTUNITES AND THREATS:-

 Opportunities:

Industrial Corridor:

The government is developing various Industrial Corridor Projects as part of National Industrial Corridor
Programme which is aimed at development of greenfield industrial cities in India. The development of these
corridors is aimed to expand the industrial output, increasing employment opportunities, provide better
living and social facilities for the new and growing workforce. The government has provided approval for 11
corridors to support industrialization.

Policy Reforms

Government has taken various initiatives to drive growth for infrastructure and real estate sectors. The
production linked incentive scheme in 2020 to boost domestic manufacturing, allocation of sizable funding for
housing in Union Budget 2021-22, Pradhan Mantri Awas Yojana (PMAY) program for affordable housing to all
urban poor by 2022 through initiatives like financial support, and the extension of tax holiday up to March
2022 to increase the supply of affordable housing units are expected to benefit the construction sector.

Growth in real estate and infrastructure

The construction industry will grow due to growth in real estate and infrastructure. The urban infrastructure in
India is not properly developed to meet the demands of the existing and increasing urban population and
migration from rural to urban areas.

 Threats

Safety

Infrastructure safety is highly important in the construction industry. Ensuring all-round safety is an ongoing
challenge for companies.

Political and Economic Instability

The present economic situation may have an adverse impact on the construction industry. Political instability
and insecurity conditions may be a concern to any industry in India. Lack of political support on promoting new
policies may limit the growth of the sector.

Natural Calamity and Pandemic

Natural calamities including earthquake, floods and pandemic such as COVID-19 may affect the growth of the
construction sector
PRESTIGIOUS PROJECT COMPLETED IN 2021:-
Surat Diamond Bourse, Gujarat

Surat Diamond Bourse is the world’s largest office building on a single basement. The smart city is
also known as DREAM (Diamond Research and Mercantile) City. The project has 4,200 offices
ranging from 300 sq. ft. to 75,000 sq. ft.

Project scope

This Rs 1,775 Crore project is of a size is of 66 lakh sq. ft. with 9 towers of 75 meters length each of
Ground+15. These are connected with a spine tower of 400 meters long with curvature elevation
free stand walls. On completion, this will emerge as the world’s largest office complex with common
double basement of 10 lakh sq. ft. each. The project includes a lumpsum contract inclusive of civil
and common area interior, MEP and a façade. It will also have 6 nos. of 75-meter heighted free-
standing wall in curvature length of 60 meters.
COMPANY EXPANDING VERTICALS:- AUTOMATION:-
AS ON 30.6.21

Shri Kashi Vishwanath Dham,Varanasi:-

Project scope

The scope includes expansion and beautification of the ancient Kashi Vishwanath temple, spread across 11.6
acres or 30,000 sq. meters. It comprises redevelopment of the entire stretch from the temple to River Ganga.
It also involves building of upgraded amenities for the pilgrims including Yatri Suvidha Kendras, guesthouses,
museums and Mandir Chowk, among other structures. The project will also ease traffic and movement around
the Jyotirlinga temple and connect it with nearby ghats.
MANAGEMENT:-
FINANCIAL ANALYSIS:-
ALTMAN SCORE: 5.50

PITROSKI SCORE: 4

MCAP TO SALES: 1.21

PEG RATIO: 0.59 (cheap stock)

AVG ROCE OF 10 YEARS: 41%

STOCK PE: 16

INDUSTRY PE: 34
CONSOLIDATED PROFIT & LOSS

Mar- Mar- Mar- Mar- Mar- Mar-

TTM
Particulars 16 17 18 19 20 21

Sales 472 445 752 1,050 1,499 1,241 1,451

Expenses 438 378 646 901 1,308 1,106 1,278
Operating Profit 35 67 106 149 191 135 173
OPM % 7% 15% 14% 14% 13% 11% 12%
Other Income 10 13 18 22 24 17 15
Interest 3 8 9 10 15 15 15
Depreciation 7 8 11 24 27 26 25
Profit before tax 35 65 102 137 173 111 148
Tax % 37% 36% 36% 35% 26% 25%
Net Profit 23 42 66 89 128 82 110
EPS in Rs 71.34 14.41 18.2 24.84 35.69 22.65 30.52
Dividend Payout
% 21% 17% 27% 20% 14% 18%

CONSOLIDATED BALANCE SHEET:-

Mar- Mar- Mar- Mar- Mar- Mar-

Particulars 16 17 18 19 20 21

Share Capital 3 29 36 36 36 36
Reserves 61 76 265 333 418 500
Borrowings 47 75 30 31 80 84
Other Liabilities 142 148 268 335 429 372
Total Liabilities 253 328 600 735 963 991
Fixed Assets 54 52 78 103 108 116
CWIP 0 0 2 0 0 42
Investments 14 18 16 1 1 1
Other Assets 185 258 504 631 854 833
Total Assets 253 328 600 735 963 991

Management commentary highlights:-

CONCALL Q1FY22

 Labour availability at site was lower during Mar-May’21 due to the second wave of Covid-19 and
impacted project operations.
 The Surat Diamond project is likely to get completed in Q3FY22.
 Execution has started at five locations for the UP Medical Colleges project and will start contributing
to revenue from Q2FY22. Design approval for the remaining two locations is under process and would
be completed in Jul’21.
 In the EWS Housing project (Bhiwandi), client will submit its answer in the court after PSP had
moved to the court to claim bank guarantee and mobilisation advance.
 The company has outstanding receivables of INR281cr, unbilled revenue of INR77cr and retention
amount of INR99cr.
 PSP received mobilisation advance of INR100cr from the UP Medical Colleges project and a residential
project.
 Till 30th Jun’21, PSP spent INR85cr on the precast plant.
Key Clientele over the years
 Surat Diamond Bourse
 Reliance Industries
 Zydus Cadila
 Torrent Pharmaceuticals
 IIM Ahmedabad
 MRF
 Maruti Suzuki
 The Gujarat Cancer Society, Ahmedabad
 Dharmsinh Desai University
  Ahmedabad University
 Pandit Deendayal Petroleum University
 Brigade Group
 Manmul Bangalore
 Prestige Group
 Puniska Healthcare
 Pandharpur Municipal Corporation
 Bangalore Milk Union Ltd.
 CEPT University
 Farpoint Properties LLP
 SGH Realty
 Bsafal Group
 Dalal Street

AUDITOR CREDENTIAL:-

M/s. Kantilal Patel & Co.

M/s. Riddhi P. Sheth & Co
Auditors seems to be from local area which is not good for listed entity.
However, Remuneration to Auditor are only 20lacs which is very low compare to Profit.

Credit Rating:-

CARE Ratings Limited has reaffirmed its Credit rating of your company’s Long term/Short term bank

facilities as under:

Facilities Amount (₹ in Lakhs) Rating

Long-term Bank Facilities 4,500.00 CARE A+; Stable

[Single A Plus; Outlook: Stable]

Long-term/ Short-term Bank

Facilities 56,500.00 CARE A+; Stable / CARE A1+
[Single A Plus; Outlook: Stable, A One Plus]

Total Facilities 61,000.00

REMUNERATION:-

REMUNERATION is ok in terms of % of profit.

RELATED PARTY TRANSACTION:-

2021 2020

So Miss Pooja Patel & Mr Sagar Patel are sibling and both are children of Mr Patel. Increase in
remuneration from last year for both but at same time himself he along with other has taken a cut
which shows sign of good management.

SHAREHOLDING:-
However during last week Promotor has sold 4%-5% stake to Mutual Fund.

LOW FLOAT BEST EXAMPLE

DISPUTED DUES:-
The dues of income tax, duty of custom, duty of excise and goods and services tax which have not
been deposited as on March 31, 2021, on account of disputes are as follows:

Its a very small amount.

FUTURE OUTLOOK:-

The Indian infrastructure sector has a multiplier effect on several sectors. The country is expected to
become the world’s third-largest construction market by 2022. To strengthen the sector further, the
government has announced several initiatives which are likely to have a remarkable impact on
infrastructure. The government and private players are together giving a massive push to the
construction sector and giving it a definite edge. This new decade seems to be a promising one.

Pradhan Mantri Awas Yojana or Housing for All is a mission launched by the government with the
aim of boosting home ownership. It aims at providing affordable housing loans to the urban poor by
2022. In the Union Budget 2021-22, the finance minister proposed the extension of the eligibility for
affordable housing. The above interventions augur well for the construction industry. PSP Projects,
with its capabilities and strengths, is well-poised to benefit from these emerging opportunities.

Strong bid pipeline gives confidence of recovery in order inflows :-

Although the second wave of Covid-19 affected PSP’s order inflow in Q1FY22, the company still has
strong bid pipeline of INR3,000cr (projects such as Gujarat Housing Board – INR750cr, Adani Ports –
INR300-400cr, Medical College in Amethi – INR250cr and others), which can be converted into
orders of INR2,000cr. The company’s order book sits comfortably at INR3,850cr and gives revenue
visibility of more than 2.5 years. The Surat Diamond project is likely to get completed in Q3FY22.
Following this, PSP could apply for the Central Vista project’s pre-qualification process. Post
approval, PSP would have an opportunity to bid for INR12,000- 15,000cr in the Central Vista project.

Good resilience in revenue, margins intact despite challenging environment :-

With labour availability declining to ~50-60% due to the second wave and few slow moving projects
such as EWS Housing (Bhiwandi) and Affordable Housing (Pandharpur), revenue was expected to get
hit in Q1FY22. However, due to PSP’s good resilience and strong execution, the company’s revenue
surged 197% YoY. Work has started at five locations for the UP Medical Colleges project and we
expect PSP’s revenue to grow further from next quarter. EBITDA margin once again remained intact
at 12.4% sequentially negating the impact of high commodity prices. Management has reiterated its
commitment to achieve 25-30% revenue growth and 11-13% EBITDA margin in FY22.

CCC stretched, improvement due in next quarter

Due to the second wave, receivables in Q1FY22 increased by ~INR20cr sequentially to INR281cr. CCC
was also affected due to lower denominator and stood at 55 days in the quarter (v/s 15 days in
Q4FY21). However, management has indicated that revenue growth will come back on track and
collections will normalise by end-July. Considering this situation as a temporary phenomenon, we
expect CCC to improve in the next quarter.
PEER COMPARISION:-

Free
Int Earning Cash CF Opr
ROCE Prom. Debt / Cash CMP / 10Yrs EPS
Name CMP P/E Coverag s Flow 10Yrs R PEG
% Hold. % Eq Cycle Sales PE Ann Rs.
e Yield % 10Yrs R s.Cr.
SL NO s.Cr
1 Macrotech Devel. 1069.6 7.11 88.5 1.43 3.96 43.85 8.78 2.48
2 PNC Infratech 355.25 17.43 16.95 56.07 2.93 1.37 -35.71 1.48 9.79 -749.91 2539.11 13.3 19.39 0.87
3 KNR Construct. 287.95 17.12 22.15 53.25 4.78 0.39 1.37 2.54 7.41 -762.52 1652.92 12.91 14.49 0.58
4 NCC 81.9 16.04 11.61 19.69 1.99 0.4 -202.81 0.57 14.19 5040.11 6915.99 27.09 4.4 0.97
5 Mahindra Life. 280.35 -3.5 51.45 -7.48 0.15 123.85 14.4 -1.44 -161.79 -38.81 15.31 -4.66
6 PSP Projects 488.2 15.97 21.99 74.19 10.79 0.15 -92.09 1.21 10.18 67.05 333.44 18.21 22.44 0.59

TECHNICAL ANALYSIS:-

STOCK HAS GIVEN A SOLID BREAKOUT WITH NEVER SEEN VOLUMES BEFORE.

Expecting minimum 50% target.

Sources: Company Website, Screener & brokerage reports.

This is for educational purpose only. Not a SEBI registered advisor.