In an interaction with Manan P. Shah, Managing Director, MICL Group

We aim to increase our market share in newer and high-potential markets such as South Mumbai, the western suburbs, and Bandra and Vile Parle, states Manan P. Shah, Managing Director, MICL Group.

In Q2FY24, Man Infraconstruction Limited (MICL) achieved a remarkable 31 per cent YoY increase in net profit, reaching Rs 70 crore. What were the contributing factors to this performance?

Firstly, the EPC division of MICL played a pivotal role by contributing a substantial portion to our topline. Notably, the port order received from BMCT, a subsidiary of the PSA group, in April 2022 and again in June 2023 has proven to be a substantial contributor. The cumulative worth of these orders is Rs. 1,827 crore, and MICL has successfully executed over Rs. 1,000 crore of work. This ongoing project has consistently boosted the company's profitability in the current quarter (Q2FY24) and preceding quarters since the order was secured.

Secondly, the company experienced a noteworthy reduction in finance (interest) costs, which plummeted by 56 per cent YoY to Rs. 6.5 crore in Q2FY24 compared to Rs. 14.8 crore in the previous year. This drastic decrease can be attributed to a strategic reduction in secured debt in MICL's real estate projects, amounting to Rs. 181 crore compared to the previous year. The prudent management of financial resources and the optimisation of debt have positively impacted the company's bottom line.

Thirdly, there was a substantial surge in other income, witnessing a remarkable 118% increase to Rs. 27.6 crore compared to Rs. 12.7 crore in the corresponding period. This surge in other income reflects diverse revenue streams and effective financial management strategies implemented by the company. These factors collectively underscore the company's resilience and strategic prowess in navigating the business landscape, contributing to its robust financial performance.

Can you tell us about the order book and the execution plans?

As of the current reporting period, our company boasts a robust order book at Rs. 1,156 crore, reflecting our commitment to sustained growth and excellence in project execution. This encompasses a vast construction area, over 110 hectares dedicated to port work and an additional 4.8 million square feet allocated to other infrastructure and residential projects.

In Q2FY24, we secured a Project Management Consultancy (PMC) contract for the Aaradhya Avaan project in South Mumbai, expanding our portfolio by 1.8 million square feet of construction area. Diversifying our endeavours, the order book mix illustrates a strategic balance, with 86% attributed to infrastructure projects, including substantial contributions from port developments, and the remaining 14% allocated to residential projects, including our proprietary developments.

Our execution plans are meticulous, with a projected 2 to 2.5 year timeframe for infrastructure projects. Simultaneously, our real estate projects are progressing at various stages of completion, reflecting our commitment to delivering high-quality outcomes. Our order flow pipeline indicates significant visibility, with over 10 million square feet of construction work in the queue for our real estate projects. This underscores our proactive approach to securing upcoming projects in the near future, further solidifying our position as a dynamic and forward-thinking player in the construction and infrastructure industry.

The company possesses a substantial cash surplus exceeding Rs 600 crore. Can you provide insights into its future utilisation?

The company's current cash surplus, exceeding Rs 600 crore, represents a significant increase from historical liquidity levels that typically ranged between Rs. 300-400 crore. This surplus, positions the company strategically for future growth and development. A substantial portion of this surplus is earmarked for upcoming real estate projects, constituting approximately 3.7 million square feet out of the total 5.9 million square feet in the company's portfolio. This underscores a robust pipeline of real estate ventures in the coming quarters, with a particular focus on acquiring new projects within Mumbai.

The company adheres to a prudent business philosophy, infusing its capital at the initial stages of project acquisition and resorting to construction finance only, if necessary, once the project is launched. This approach ensures efficient financial management and allows the company to deploy its surplus cash in a strategic and calculated manner to fuel both ongoing and prospective ventures, thereby maximising returns and sustaining long-term growth. We also maintain higher liquidity as a protective measure. This ensures that, in the face of an economic downturn or prevailing uncertainties, MICL remains capable of completing projects using internal funds. This approach allows us to deliver projects successfully and uphold our established track record.

Could you give us an outlook on the company’s EPC and Real Estate segments?

The company's outlook for the EPC and Real Estate segments is dynamic and forward-looking. In the Real Estate segment, the company is actively establishing its presence in strategic locations, including the western suburbs of Mumbai, the Mumbai Metropolitan Region (MMR), and South Mumbai. Embracing an asset-light model, the company is pursuing growth through Joint Ventures (JVs), Joint Development Agreements (JDAs), and Development Manager (DM) arrangements.

A key focus in the Real Estate segment involves expanding the portfolio, particularly enhancing the premium to ultra-luxury offerings. This strategic approach diversifies the company's real estate portfolio and positions it favourably in high-demand markets. The company remains committed to growth in the EPC segment by continuously bidding for new projects in the infrastructure and government sectors. The company's outlook reflects a balance between strategic expansion, prudent financial models, and a commitment to timely project execution in both EPC and Real Estate segments.

Currently, what are your top 3 strategic priorities?

We have identified three key strategic priorities that shape our focus and drive our actions. Firstly, a paramount goal is to strengthen our real estate business. This involves a concerted effort to enhance our presence, particularly in Mumbai's dynamic real estate market. Secondly, we have a solid and specific focus on growth within Mumbai. We aim to increase our market share in newer and high-potential markets such as South Mumbai, the western suburbs, and Bandra and Vile Parle. This strategic expansion aligns with our broader goal of consolidating and fortifying our position in strategically important regions.

Thirdly, a fundamental aspect of our strategy is maintaining an Asset Light model with a sharp emphasis on optimising our bottom line and ensuring robust cash flow. This approach provides financial prudence and flexibility, allowing us to navigate market dynamics effectively while maximising investment returns. Collectively, these strategic priorities underscore our commitment to sustainable growth, market leadership, and financial resilience.