Creative Newtech expects Rs 150-200 crore BSNL Q4 revenue

Creative Newtech Limited expects Rs 150 crore to Rs 200 crore of BSNL revenue in Q4, its first booking from the project, and management expects Rs 500 crore to Rs 600 crore in the following financial year. Ketan Patel said billed value could yield net profit of about 6% to 7%.

When will Creative Newtech start booking BSNL project revenue?

Creative Newtech expects BSNL project revenue to begin in Q4, with management guiding for Rs 150 crore to Rs 200 crore of billing in that quarter. The company said it had not booked any revenue from the project at the time of the call because execution and BSNL quality-certification processes were still under way.

Ajit Thakur initially referred to an expectation of about Rs 100 crore to Rs 150 crore of booking in the current financial year. Ketan Patel subsequently clarified that the Q4 expectation was Rs 150 crore to Rs 200 crore, describing that quarter as the point when the billing cycle should begin after certification.

Management also said that “in the next two years” revenue could be close to Rs 600 crore to Rs 650 crore, alongside the more specific Rs 500 crore to Rs 600 crore forecast for the following financial year. Creative Newtech did not provide a quarter-by-quarter schedule after Q4, leaving later revenue timing dependent on execution progress and BSNL certification.

What is Creative Newtech's BSNL project execution plan?

Creative Newtech said the project has about Rs 1,700 crore of capital expenditure, or capex, to be executed over around three and a half years. Management described the wider opportunity as a Rs 3,000 crore project, with about Rs 1,200 crore of operating expenditure, or opex, for maintaining the installed network after capex work.

The capex work includes material procurement and deployment for geographic information system, or GIS, components and SNOC, which management identified as a data-centre element. Creative Newtech said it had mobilised teams and started placing orders for substantial materials, including requirements for GIS and SNOC.

The company said BSNL applies quality checks at procurement and execution stages. BSNL inspects vendor factory premises, checks the bill of materials and uses an independent engineer to review work, according to management. These inspection stages are the mechanism linking physical execution to the Rs 150 crore to Rs 200 crore Q4 billing expectation.

Creative Newtech said surveys and related preparations were in place, while BSNL operates a digital platform showing project progress, including the number of gram panchayats, or GPs, connected. Management did not disclose the number of connected GPs, the date of the first quality certification or the value of material orders placed.

How profitable could Creative Newtech's BSNL billing be?

Creative Newtech expects net profit of about 6% to 7% of the value billed under the BSNL project, according to Ketan Patel. This was management's project-specific expectation for billed value, rather than a forecast for Creative Newtech's consolidated net profit.

At the ends of the stated Q4 range, a 6% to 7% net-profit profile would equate to about Rs 9 crore to Rs 14 crore on Rs 150 crore to Rs 200 crore of billing. On management's Rs 500 crore to Rs 600 crore revenue range for the following financial year, the same calculation equates to about Rs 30 crore to Rs 42 crore; these are calculations from management's ranges, not company guidance for reported profit.

The BSNL indication differs from management's stated target for the brands business. Management said its brands business could generate profit after tax, or PAT, of about 10% to 11% by FY29, when it expects brand revenue of Rs 2,400 crore, compared with the 6% to 7% net-profit profile cited for BSNL billings.

Management attributed the prospective brands-business margin to scale, saying earnings before interest and tax, or EBIT, could reach 18% after brand revenue crosses Rs 500 crore to Rs 600 crore. That explanation concerned Honeywell, WOZOYO, CyberPowerPC and Infinova activity, whereas the BSNL margin comment concerned infrastructure execution and subsequent maintenance.

What could delay Creative Newtech's BSNL revenue recognition?

BSNL quality certification is the stated condition that could affect Creative Newtech's Q4 revenue recognition. Management said no BSNL revenue had been booked before the call, and that factory inspections, bill-of-material checks and independent-engineer review occur before billing can be recorded.

The company said the Rs 1,700 crore capex component is planned over roughly three and a half years, so execution timing will determine the pace of revenue beyond the first Rs 150 crore to Rs 200 crore Q4 booking. Management said the opex component continues for another seven years after capex execution, extending the work beyond the initial build phase.

Working-capital management is another execution matter Creative Newtech said it was monitoring. The company reported net working-capital days of 45 and said debtor days had fallen from 75 days to 65 days in the previous quarter, with a further reduction in the current quarter.

Management said vendor payable days were being extended while it worked to reduce debtor days, but it would assess the trend over the next couple of quarters. It linked that assessment to available opportunities, margin levels and customer-credit terms, without giving a specific working-capital target after the reported 45 days.

Why does the BSNL project matter to Creative Newtech's wider plans?

Creative Newtech said the BSNL project includes a data-centre component worth close to Rs 50 crore within capex, which management views as a prequalification, or PQ, credential for future government data-centre opportunities. Management said completing a government data centre of that size would demonstrate relevant experience in subsequent tenders.

The project also includes fibre, and management said Creative Newtech makes Honeywell fibre cables. Honeywell was not the authorised mapped manufacturer for this project, but management said that working with BSNL could help Creative Newtech seek Honeywell mapping in future opportunities; it did not say any mapping approval had been received.

Outside government work, management said Creative Newtech had tied up with Super Micro for gaming, artificial-intelligence servers, graphics-processing-unit servers and high-performance computing. It also referred to a large deal under discussion, but disclosed no value, counterparty or completion date, leaving Q4 BSNL billing as the identified near-term revenue milestone.

Conclusion

Creative Newtech has provided a defined initial revenue schedule for the BSNL project: no booking before the call, Rs 150 crore to Rs 200 crore expected in Q4, and Rs 500 crore to Rs 600 crore expected in the following financial year. Management's 6% to 7% net-profit expectation separates the project economics from its FY29 brands-business PAT target of 10% to 11%.

The next disclosed milestone is BSNL quality certification that would permit the planned Q4 billing after factory, material and independent-engineer checks. Management also plans to monitor working capital over the next couple of quarters, including whether debtor-day improvement from 75 days to 65 days is maintained as project execution and customer-credit terms develop.