Very good evening, everyone. We welcome you all in this analyst presentation of Q2 FY 2025. From company side, we are joined by our senior management, Arjun Dhawan, our Vice Chairman. Jaspreet Bhullar, our MD and CEO. Girish Gangal, our CFO. Santosh Rai, who is our Chief Business Officer, and Nitesh Jha, Company Secretary, have joined this call. I am Rahul Shukla, Vice President Finance. We will take you through this presentation. Before that, a quick refresher. As you know that HCC, with almost 100-year-old legacy, has completed various complex projects in the country and outside. As of now, we have completed more than 4,000 lane kilometer of highways, 400 km of tunneling, contributed to almost 60% of India's nuclear power capacity, and 26% of India's hydro power capacity has been done by us.
We are well-diversified with having executed projects all across India in various states. Currently, our 30 projects are also spread well across various states, so geographical diversification is quite well evident. Our order book as of now is almost INR 9,800 crore. Again, diversified across various sector, with as usual transport leading the pie with almost 47%, followed by hydro 26%, water 22%. Uttarakhand being a center of hydro projects, leads the pie in terms of geographical diversification, contributing to 31% of our current order book, followed by Maharashtra 18%, Gujarat 15% and so on. This order book of INR 9,800 crore is exclusive of INR 1,032 crore of recent LOA that we have received in the month of October for Agardanda Creek Bridge project. Key performance highlights for the quarter.
Our standalone E&C turnover is INR 1,203 crore, versus Q2 FY 2024 of INR 1,138 crore. So there is almost 6% jump. Net profit stood at INR 50 crore against INR 52 crore during same quarter last financial year. EBITDA margin is almost 18%, vis-à-vis last year's 14%. Consolidated revenue is INR 1,400 crore against INR 1,800 crore during last year, which essentially is because of lower contribution from Steiner due to sale of construction business. At consolidated level, our profit stood at INR 64 crore against INR 6.4 crore during last year. A significant jump can be seen here. Operation side also, we have received a project taking over certificate for Delhi Metro Rail Corporation, DC-06 project in Delhi. We have completed southbound arm of Mumbai Coastal Road project, which got inaugurated on 12th of September.
As I mentioned, we have received LOA for Agardanda Creek project of almost INR 1,000 crore. In addition to that, we are L1 in projects worth INR 3,860 crore. Serious work is underway in INR 46,000 crore worth of pipeline, for which bids will be submitted subsequently. In order to achieve our targeted order book for the year and ensuring growth that we are targeting, we have started our process of QIP also, as we had mentioned in the last quarter as well. There has been some significant development. We have done our road shows in India and abroad, and the investors are quite warmed up. In fact, our lenders have also put their best foot forward, and they have supported us by giving in-principle approval to reduce HCC corporate guarantee to Prolific Resolution Private Limited debt from 100%- 20%.
The debt of Prolific, which stands at around INR 3,700 crores today, for that debt, the corporate guarantee will reduce to 20%. You also know that HCC owns 49% of Prolific, which holds almost INR 6,000 crores worth of claims and awards. These are interest-bearing claims and awards. In addition to this, we have also received sanction letters for reduction of INR 307 crores of OCD, which will be a prepayment, and this will be settled at a payment of INR 234 crores. This will lead into annual reduction of interest by INR 35 crores. This is another step towards accelerated debt reduction that we are working on. You can see consistent performance quarter on quarter in terms of revenue, EBITDA, PAT. At the console level also, performance is consistent, except for reduction in revenue, which I described just now. Operational update.
In coastal road, as I mentioned, that inauguration of southbound traffic has happened, and this picture represents this segment launching work that is going on. In Delhi Metro, we have received project taking over certificate. Some pictures of that Mumbai Metro station completion work is going on and work is nearing completion. In the next few months, it will be completed. Tehri Pumped Storage Plant, this is India's first variable speed pump storage scheme, and unit five machine spinning was done on 4th of August. Vishnugad Pipalkoti, this project has also achieved a landmark of highest TBM mining of 509 m in the month of September. Our financials, you can take a look. Broad numbers I have already mentioned. Consolidated financials. Steiner, in this quarter, the company has received orders worth around INR 128 crore equivalent. Turnover was almost INR 200 crore equivalent, and PBT was INR 14.5 crore equivalent.
That's it on the presentation part. Now we open the forum for question and answer.
You may please raise your hands so that I can allow you to talk. We are starting with Sanjeev Damani. You can unmute. Yeah. Sanjeev.
Good evening, sir, and congratulations for a lot of good development. I am very happy to note that you are also planning and very close to getting newer funds. My first question is regarding how much work is on hand, which we can straightaway execute in the second half. Can I know the quantum of the total work, and we are likely to complete? I want two amounts from you. Pending work, which is executable in the second half, and how much we target to complete out of that.
Sanjeev, I have displayed the order book position, which is almost INR 9,800 crore, which everywhere the work is going on. However, we cannot mention the number which is executable in the next second half, because that will be a forward-looking statement, and we abstain from making that kind of statements.
Okay. I said now, where we are L1 in one of the projects, do you foresee that to start in this second half, or it may be in the next year only?
Execution start you are talking about?
Yes. The one where we are L1 so far.
I will request Mr. Santosh Rai to take up these questions.
Yeah. Sanjeev, we are expecting these awards to convert in Q3. The work will start, you can say meaningful work will start only four or five months down the line after the award, because these are all design and build jobs. We have to do a lot of preliminary works before actual execution can start on the site.
Okay. So when we talk of INR 9,000 crore worth of order, it is including all our subsidiaries that we are talking about, or the figure of subsidiaries and our partners abroad is to be added into this pending order?
No, this is standalone for HCC.
Okay.
This INR 9,800 crore is a standalone order backlog position of the company.
Okay
As of this quarter ending. Right?
Right.
This is the job what we do.
Okay. Standalone for HCC. We have lot of subsidiaries also, and then we have a foreign partner as well. There also some pending orders are there which will be executed, to be executed and readily available to be executed.
No, that's not a part of this.
Okay. But do we have a figure to disclose?
No, there is nothing like that, because these are the works where we are directly involved, and that's what we would like to look at.
Okay. Thank you very much, and all the best, sir.
Thank you.
Thank you, Sanjeev.
Hi, this is Viraj here. Congratulations on the continued progress. Quick question regarding, you mentioned regarding the Prolific corporate guarantee reducing from, I think INR 3,500 odd crores to 20% from 100%. What would the implications of that be on HCC and the working capital limits available to take on new projects?
Viraj, as you understand, this corporate guarantee is a kind of contingent exposure, right?
Right.
When the contingent exposure reduces, it's a kind of de-risking, which helps in raising capital and funding our growth. Now that company has started its journey towards accelerated order acquisition and growth, we never wanted this kind of niggling things to be there.
Right.
That's how this development has started unfolding, and which will certainly help us in future growth.
Understood. Is this contingent on your QIP fundraise going through or is it already in place?
It is linked with QIP fundraise.
Right.
For that, approval is already in place.
Once this process is completed, CG reduction proposal, we will complete our QIP process also.
Right. You mentioned regarding a 35 crore INR interest reduction, what is that on account of? Is it linked to this Prolific CG or is that something else?
That is separate from this.
I think in previous calls also somewhere we had mentioned that utilizing money deposited in court against our arbitration-
Right.
Is one of the ways through which we can-
Yes, I do recollect. Yeah.
Do accelerated debt reduction.
Right.
This is one step in that direction, wherein a few lenders are agreeing to give us bank guarantee, to withdraw that for their own repayment purposes.
Right.
Naturally, since they are getting prepaid, we are expecting some kind of yield waiver or some kind of waiver from them. In that process, some success we have seen, which we have disclosed here.
They are giving you credit against arbitration awards that are outstanding but not yet won. Is that my understanding?
There are arbitration awards against which money is already deposited in court.
Okay.
Now, bank will give us bank guarantee
Which will be put in court as a security, and court will allow us to withdraw that deposited money.
And then you repay the bank.
Which we will give to lender. Absolutely.
Understood. That will reduce your quarterly interest cost by INR 35 crore?
Annual.
Annual.
Right now, the amount that I mentioned, around INR 307 crore of sanction letters are there.
When we repay this INR 307 crore,
At the rate of 11.5%, this will be annual interest reduction by INR 35 crores.
And currently, your annual interest cost is about INR 600 odd crores, I think.
So in terms of interest cost, if you say, it will be around INR 370.
Okay. You just said INR 35 crores, now you're saying three. Okay, I didn't understand that last point.
No, you asked about current annual interest in HCC Bank.
Okay. So about INR 370.
Correct.
Okay. So about a little over 10% reduction in annual interest cost.
Yeah. Right.
Okay. All the best. Thank you.
Thank you.
I just want to add one quick point. There are two forms of capital, obviously capital that comes in the form of equity, which we will now basically be judiciously using for our growth and substantial. That is given the substantial visibility we have on our future and very near-term order growth. The other is, as you referred to, Viraj, there is clearly, when there is an evaluation, obviously with regard to working capital limits, while HCC's banks are fully supportive of whatever requirements that HCC will have in the future. Certainly, when evaluations do take place from a credit perspective, from an investment rating perspective, all of these criteria actually just boost substantially HCC's ability to have the required working capital support also as well.
Absolutely. I am assuming you would go, Arjun, for the credit rating review once all this is in place.
Absolutely. With these events, hopefully if we are able to execute them in the short term, that is our expectation. You will hopefully see as a result of that, a substantial basically increase in our credit rating as well.
Okay. All the best.
That itself will basically obviously look to lower the cost of interest, our plan.
Yeah
Really besides the growth, is to deleverage the company as early as possible.
Yeah. All the best.
Thank you.
Deepak Poddar, you may please start.
Yeah. Am I audible?
Yes, yes. Go ahead.
This first topic you see in terms of our revenue, we have seen a deep growth, right? Both in first quarter and second quarter. So for this entire year, any sort of range we are looking at in terms of execution, that would be very helpful. What sort of margins we are looking? Yeah.
Deepak.
Sorry, Rahul, before you go.
Yeah.
I think that one of the things that we've answered when we've been on the road talking to investors. We'd like you to sort of really look beyond fiscal 2025. Mathematically, you have a sense of what our current order book is. You know very clearly that any new orders we have in will actually take at least six months to actually start flowing very positively into our P&L and our cash flow. To some extent, while you might see some of that basically impacting the next couple of quarters, our point to you is to look beyond that to kind of the order book that we will build and the earnings that will actually come that will follow that. I'll let Rahul address the question regarding earnings margins.
That generally, historically on the EBITDA side, has been in the low to mid-teens, and that's what we look to kind of expect to do in the near future, given the lack of competitive intensity in the areas that we have an edge in, and that we will continue to basically execute on.
Deepak , I hope that addresses your question also. We essentially are not really looking at very much of a growth in this particular financial year because of limited number of projects and order that we have. But certainly, our expectation and our target lies on our growth, for which we have mentioned about the project, this order bid pipeline and all those things. Our order booking in this financial year will be something that will set the numbers for the coming financial years.
Correct. The current order book of INR 10,000 odd crores that we have, what is the execution timeline of that, if you have mentioned it, Rahul?
Two, 2.5 years is something that we will be completing it.
Two, 2.5 years. A lot of that project will start, basically, that you mentioned in four to five months. Meaningful work will start, basically.
No, this order book that you are seeing is already under execution.
Already under execution?
Already under execution, yes. One new project that we have mentioned, INR 1,000 crore, is not included in this INR 9,800 crore. As Santosh just mentioned, execution will start subsequently.
That is the creek bridge, right?
Correct.
Okay, fair enough. That is very helpful, sir. I think that is it from my side. All the very best. Thank you.
Thank you, Deepak.
Bharat Mani, you may please start.
Hi. My first question would be on the Steiner AG real estate development part. I guess you had appointed some investment banker to do some strategic initiatives. Is there any update on that?
Investment banker is there. They are looking for options to divest. Naturally, we want to divest, and we will update whenever there is an opportunity, some development will be there.
Okay. My second question would be on the PSP projects. I recently read an article where two PSP projects DPR were awarded in record time. What are we doing to capitalize on this opportunity of the government in this PSP sector? Could you just elaborate a little?
Santosh, would you like to take it?
No.
Santosh, are you there?
Sorry. Can you repeat the question, Bharat Mani, which you?
The question is on PSP. Deepak mentioned that there are two DPRs which are there on the market. We are going to take them.
Look, I think PSP as a sector, we are looking at them and we are engaged with various forms of clients. They are themselves private power producers and also government itself is coming up with some schemes. Just as a matter of information, we are constructing 1,000 MW Tehri PSP, which is also into the final stage of completion now, which gives us an edge. We are in discussions with some very well renowned, I can say, private power sector players. We have also formed some strategic joint ventures, which you will come to know very soon. We are looking at this sector because it is offering a huge potential. We are clearly seeing that there is an engagement to bid for nearly INR 12,000 crores-INR 15,000 crores in this sector in coming 6-8 months.
Okay. Just one question on this. What is the project cost per megawatt in the PSP?
Look, I think this is very specific. This will all depend upon how the original project is, what kind of strata we are dealing with. I won't say a fixed number to it.
Can you just give me a range?
Maybe we can take a range like 5-7 months.
Okay.
Yeah, because it actually depends, because let's say we are having soil versus we have a lot of rock.
Yeah.
How much is the distance where the pumping is to be done? That's important. What is the size of reservoir we are creating on the top side?
It's all a function of that.
Okay.
And also how much capacity are we really adding, because sometimes by doing all this still, if you are not adding a good capacity, your per megawatt cost vary a lot.
Okay. So the turnaround time of PSP is lesser than hydropower projects, right?
Yes.
The government is pushing for this more.
Yes.
Okay. The other question was regarding the subcontracting cost. In quarter two, it was around 54% of the revenue, and last quarter it was around 65%. So what is the reason for this much of a decrease? Is it because of lesser project execution, or what was the reason?
Girish, you may like to answer.
Yeah.
Please.
Good evening. Subcontract cost is a function of which type of project and which type of strategy we adopted for a particular project. If at all a particular project is a subcontract, it involves a lot of subcontracting, and if that gets executed, naturally my subcontract cost will go up. I'm giving only an example of one project. But if you collect all projects put together, the subcontracting cost will move accordingly. You can't apply a percentage there. It depends on my execution pattern also. A particular project may be where there may be no subcontract at all. I'll be executing myself. In some cases, I may have maybe 60%, 70% also subcontract. I'm just giving just a number. You can't judge unless you pick up overall picture.
Okay. One last question from my side. What will be the year-end total debt that you see? It is currently at INR 2,100 crores. How much do you expect by year end? Total debt.
We consider debt including accrued interest.
Okay.
That is roughly INR 3,600 crores today.
Okay.
Okay. We can expect at least, maybe just expectation, without considering any further repayments, what we are planning on a regular basis, it should be around INR 3,000 crores.
Okay.
However, we are trying to prepay also, as Rahul has mentioned earlier, with various other options. In that case, this debt can go substantially down.
Okay. That's it from my side.
Thank you.
Jignesh Kothari. Jignesh Kothari, please. Hello. Jignesh, you are not clearly audible.
Yes. Am I audible now?
No, there is a disturbance. Jignesh, we can't hear you at all. Means we can't comprehend what is Jignesh, I suggest you can directly talk to Rahul. Bharat, do you have any additional question? Bharat Mani?
No, I don't have.
Okay. I suggest Bharat can talk to Rahul separately. Rahul, we don't have any more questions, please.
Okay. We will close this session now.
No, just a moment. One Ashish Shah had just raised hand. One last question. Ashish?
Yes. Hi. Am I audible?
Yes, yes. Go ahead.
Yeah. Hi, Rahul, and hi, team. I just want to. Maybe, I am not sure, I may have missed that part, I got disconnected, but can you explain a little bit on this reduction in the corporate guarantee for the hived-off debt that we have mentioned in the PPT? Can you elaborate a little? Can you explain a little on that, please? That is the only question I have. Thank you.
When this resolution plan was implemented, Ashish, a portion of our debt got transferred to Prolific Resolution Private Limited, which today suits almost INR 3,700 crore. HCC has given corporate guarantee to that debt also. While it does not affect us directly, there is enough claims and awards which is there, which is also carrying interest. So there is sufficient amount of receivable that is there in that SPV to take care of that liability. But still, 100% corporate guarantee to that debt is a kind of contingent exposure that is there. However, now lenders have in principally agreed that they will go to their board and try to get it reduced, and that is the process which is going on and which we are optimistically looking at.
And once that corporate guarantee is reduced from 100% to 20%, naturally, the contingent exposure of HCC goes down significantly from INR 3,700 to almost INR 600 crores. And that really helps when investors look at HCC, investors like you or anybody else looks at HCC. It becomes a clean slate kind of company for any future contingent risk. So this de-risking is essentially being done from the point of view of essentially making HCC investment friendly, more lucrative for investors. As we are in the path of growth, wherein we might have to raise capital in future as well, apart from the current QIP that we are working on. So this all has been put together, and now we are here that the process has started.
Sure. I understand these things can be quite difficult to predict. But what's your sense of the timeline, if any, for this to happen? I mean, what's your best sort of an understanding at this point of time?
So best understanding will be end of November, is something that is our internal target. But obviously, as you know, lender approval sometimes take more time. But our target is end of November that we are working on.
But you've already had some initial round of discussions with most of the lenders.
Yes. Many discussions have happened.
Okay.
That's how the consortium of lenders have in principally accepted, and they are taking it up internally in their committees.
Got it, Rahul. Thank you. Thank you for this.
Thank you.
And all the best. Thank you.
Kunal Tokus.
Hi. Am I audible now?
Yes.
This is Jignesh Kothari.
Jignesh. Is it Jignesh? Okay, go ahead.
I had a couple of questions. This quarter, I see your margins moving substantially higher, standalone margins. Is there any one-time income that we have booked in our revenues or something, one time income, so that is increasing our margins? Or is it purely on the operational purpose?
There are a couple of awards that we have received. While our operation margins remain intact where they are, a slight bump is there because of couple of awards.
Sir, if it is possible to quantify those amount of awards that we booked.
Awards are contributing almost INR 300 crore of this turnover. And margin-wise, proportionate percentage, maybe INR 40 crore-INR 50 crore could be there.
Great, sir. And sir, on the second part, you mentioned this about the 20% reduction in the contingent exposure that we have. So from 100%- 20%. So I believe a lot of our non-fund-based facilities will get free up. Would there be any additional finance cost saved on this? And if you can quantify that too.
Sorry, I could not get your question. Can you please repeat?
Rahul, I'll answer that question. Jignesh, the c orporate guarantee reduction. The corporate guarantee does not attract any. It's not issued by the bank.
Right.
So there's no commission or bank guarantee commission payable on that, so it will not impact the financial cost.
Okay.
Yeah.
Okay. Thank you. That's all.
Viraj Mahadevi.
Sorry, if I may. Regarding Steiner, I think this question was already asked. Is it possible to disclose where you are in terms of that strategic evaluation with the investment banker? At what stage of the sale or the monetization process?
I think I will take that question. Let us cross the bridge when it comes. It will be too early to comment either way, okay? Let surprises be surprises, isn't it?
Have first-round bids already come in? Has diligence started? I mean, just broad.
Yeah. Everything is going on.
Okay.
As expected.
Okay.
Okay. We will see. As soon as we have better idea which we can share with you, we will definitely share at the earliest.
Thank you. All the best.
Thank you, Viraj.
Bye.
Kunal Tokas.
Am I audible?
Yes. Go ahead.
Just a question on your subsidiary, HCC Infrastructure. As I recall from the annual report, HCC Infrastructure was looking for more toll road assets to bid for. Any news about that or what the future of that subsidiary will look like?
Kunal, we are going to be very selective as far as these BOT projects are concerned. Not really keen on those things. Our current focus is completely on E&C business. However, depending on if there is some very good opportunity which really feeds into our E&C order backlog in a big way, plus there is support from equity investors, the capability lies and we are certainly in a position to take a BOT assignment without putting any cashflow burden on HCC. That selective evaluation is going on, and we will look for very selective opportunities.
Let me just add another quick perspective with regard to PPP. I think that the PPP program in India is an essential part of the infrastructure development of the country. It will only continue to increase and scale up. As far as HCC is concerned, our focus is, at least in the short run, over the next 2 to 3 years until we completely de-leverage the company, we would be a little reluctant to actually have a large amount of capital locked up in arguably a higher-yielding BOT investment. That said, I think that we are very clear that our focus on supporting BOT and PPP is clearly there. We understand how to price risk. We understand exactly the entire development cycle.
We've had a fantastic track record in developing BOT projects, and that's precisely why we have a number of partners that are interested, whether they happen to be private equity or they happen to be strategic, in wanting to actually partner with us, not only from a point of view of providing their support from an EPC partner perspective. And in some cases, by the way, when we actually look at our working capital lockup, we think about potentially partnering in some small way in a BOT project where we potentially are not just an EPC partner, but we might actually take a smaller interest that has to kind of be aligned with our working capital and our return on capital criteria, the same way we would look at an EPC project.
In many cases where we are actually seeing our larger development partners, whether they be strategic or financial, start to take some more sort of construction risk. We have handshakes and already with a number of partners where you will see us participate in BOT projects. But when you do see that, you need to rest assured, as Rahul said, that we're not going to have large amounts of capital locked up until such a time that we're substantially cash surplus and quite debt-free.
Avinash Nahata, you may please start.
Am I audible, gentlemen?
Yes.
Can we have one more question?
Okay. Wait. Let Kunal finish.
Yes. Sorry. Just to confirm, you said that this year, FY 2025, will be muted in terms of getting more orders, and major jump could be seen from next year onwards or even later. More so stacks, right?
No, I think you have misunderstood the answer. What Rahul has said was about the revenue for the year, not the order intake. Order intake will continue to.
The revenue booking will be muted.
Yeah. That's what he is saying.
Okay.
Yeah.
Got you.
Yeah.
Thank you.
Okay. Avinash Nahata, you may please start.
Yeah. There's a follow-up on this 20% corporate guarantee thing. So, the payoff from the standalone balance sheet of Hindustan Construction or the, it's not a payoff, it's the deliverables from Hindustan Construction's balance sheet is predicated on the raising of QIP. That's the only deliverable for that corporate guarantee to come from 100% - 20%?
Yes.
No. Sorry. So basically, reduction in corporate guarantee will happen even before raising that capital.
It's just that we are waiting for some of the lender approvals. After that will happen first.
No, sir, I understood that. My question is, why are lenders coming from 100%- 20%? Strengthening of balance sheet is what I can understand. If you can put more color to this.
Let me give you another perspective. One of the commercial aspects is obviously HCC's strength and success will only then basically end up generating a high investment grade rating for HCC and a greater growth and ability to actually then have Prolific as a 49% subsidiary further support it. I think both companies have a somewhat symbiotic relationship, because all the claims and awards that we are actually fighting to actually receive and accelerate are via HCC's efforts. That's number one. But at the same time, what we have actually done to keep incentives aligned is some portion of the equity proceeds that we will raise, a very small portion, is what we will actually use to provide as a loan to Prolific to end up prepaying some of the installments that we have for the debt, basically in FY 2026 and FY 2027. So a limited amount.
It's basically less than approximately 25% of the equity that we raise to a certain amount will actually be provided as support for Prolific. What we actually do is achieve a result both for lenders, basically in Prolific, but also for HCC. Then we have a combined success for both companies.
Yeah. That's well understood. If the team can again make us understand, I have slightly not got the thing, that INR 35 crores of interest saving. If you can just explain in half a minute the modus operandi, it would be great.
It's a pro forma annualized figure. Just to give you a sense as to what. We have our regular debt repayments that happen at the end of the fiscal year. During the fiscal year and over the next couple of years, we will make a concerted effort to now start prepaying debt. That prepayment of debt could come in various forms. Obviously, equity capital is expensive. We preserve all of that for growth. If there is, for example, the ability for us to procure through arbitration awards or through settlements, monies from court, that would then come to prepaid debt. That would immediately basically then have a deleveraging effect.
What we're doing for you is we're going one step ahead to actually point out that not only will debt come down by INR 300 crores, which is nearly about 10% of our total debt by just this one transaction, but the annualized interest pro forma on an annualized basis will come down by that amount as well.
No, sir, I got the thing. Rahul explained the modus operandi as to these awards. How do we get this?
We have talked about this a number of times before. When you receive an arbitration award in your favor, it generally takes about three to four years to actually make its way, conservatively speaking, through the court system, until which time when it gets upheld, then you get your monies released. There is an accelerated way that you can actually take those monies out, and that is basically through an execution petition, where the counterparty, the client, has to deposit the monies in court, and we can, on the submission of a bank guarantee, take that money out and use it for the company.
Now, as part of our understanding with our creditors, because we had that liability and asset mismatch with regard to awards and claims in our debt, our banks have issued us special guarantees, which we will then use when we actually have awards, so that we can procure the monies from court, and then we can use those monies to actually prepay our debt. This, for example, this particular sanction that we have received is just one of many sanctions we expect to receive when we actually have excess money sitting in court to use that to prepay our debt. Does that make sense?
Yeah. This will just involve a fee in terms of a bank guarantee.
Correct.
To accelerate the entire process.
That is a very nominal fee for us, a bank guarantee. But what you will see is a substantial deleveraging and a boosting in earnings and a boosting in liquidity.
Okay. Thanks. Appreciate that. Thanks.
Of course. Anytime. Just want to take the opportunity before our corporate communications abruptly ends the call. Just want to wish you and all your families a very, very happy Diwali and all the very, very best, basically, in the coming new year.
There are three more hands up. So I will just request Sarass, you can start. Sarass, are you there? Tanishq, are you there?
Wanted to confirm, like reduce to 25% of the QIP money raised will go towards the subsidiary repayment?
That is correct, Tanishq.
[inaudible]
25%.
Yeah.
Also, could you give us more outlook on your tax rate? I have seen it is high in the past four quarters, so that would be helpful. How should we look at it going ahead?
Gangal sir, would you like to take it?
Yeah.
Yeah.
See, till last year, are you comparing with the same quarter last year, or you are comparing with last quarter of this year only? So that I can answer very specific.
I think both. Last four quarters, it seems high, and then it was very low, and then it got high in the fourth stage. The two.
Yeah. See, it is like this, that we have substantial brought forward losses available for the company, okay, which we can set off against the income, what we earn during the year. So that is why there are no provisions which are there in the past as far as that account is concerned. But since we are following a regime, which is either you have to pay tax on the regular income or you have to pay on a MAT or book profit tax, whichever is higher. So though my regular income set off happens through my brought forward losses, if I have a book profit, I have to pay tax on that amount. Okay? So because of this book profit coming in last year as well as this year, if you see March 31 also had a book profit, and this year also have a book profit till September.
That is why the provisions are high. It is coupled with few changes in the tax laws also. One of the law is, if you know this capital gains tax has been changed, effect from July 2024, wherein instead of indexation benefit, you are only supposed to pay tax at a flat rate on long-term capital gains. So that also affects the notional computation of deferred tax liability. So these are the various reasons for which there is a tax increase, perceived tax increase rate as far as compared to the earlier year. Is it a sufficient explanation or you would like to know something more?
No, thank you. I think it was comprehensive.
Thank you.
Thank you so much.
Thank you.
Thank you.
Thank you.
There is one person registered as iPhone 183.
Hello.
Yeah.
Hi, this is Pratik Kothari. Thanks for taking my question. Just wanted to understand, for the coming years, if you can give some color on which segment will be a growth driver for us. Lastly, a little bit on the nuclear power EPC mandate that we have in our order book. How do you see that growing in the coming years?
Santosh, request you to take this question, please. Santosh?
Rahul, sorry, there is some issue with my laptop. Can you please repeat the question again? Sorry.
Yeah, the question is that for the coming years, which is FY 2026, FY 2027, in the EPC segment, where do you see our majority growth coming from in the order book/revenue recognition happening? That was my first question. The second was, we have shown around 5% of the order book to be in the nuclear power sector. So how do you see that progressing ahead in the next couple of years? If you can just give some color on that and kind of margins we are looking in that segment.
First question, how do we see our position and everything in FY 2026, FY 2027? I continue to foresee that transport segment and hydropower, these two segments. Hydropower would be a mix of hydropower projects as well as PSPs. Transport would be largely ruled by railways. Railways will bring out lot of surface as well as underground transportation network. Roads will continue to do whatever is happening, and I think that program will further get strengthened with more TTPs and other, I mean, HAM projects coming in. EPC anyway is on a downward trend. But road is a sector that you will see some growth. Somehow for us, the majority of the volume would be coming from railway projects, which would be a mix of tunnels and bridges. There will be a lot of focus on metros, and which we will continue to participate into.
That will be underground metros largely, plus overground. And of course, urban infrastructure, transportation projects, which are like elevated corridors within cities and everything. This will, in my view, approximately will continue to be 40%-50% of our business going forward. And that is evident even in the order mix today also.
Right.
Right. Nuclear, to the second question what you asked. Nuclear, look, it's a very specific kind of business, and though the government is planning to do a lot of thing in that, the nature of the business is such that you get one or two projects announced every year.
Okay.
Right now, it's a heavily controlled segment. Department of Atomic Energy is owning all the design drawing, and Nuclear Power Corporation of India Limited is implementing body through which all the projects come. So I see that this segment will continue to be like this. Maybe the sizes of the projects will keep changing, and our government will experiment with different types of modes, what they can use for procurement. Maybe what I mean to say, some large projects, some standalone projects, that's how they will keep bringing. So right now, there were few jobs which were very large size. At the same time, now they are coming up with small jobs, which are like INR 2,000 crore, INR 3,000 crore, and let's say NDCT, other things will keep coming.
So on an annual basis, if you ask me, nuclear sector could be like, only civil I'm saying, because nuclear sector is very big.
Right.
But civil-wise, it would be like INR 15,000 crore, INR 20,000 crore of opportunities coming every year. Within that, we shall be in a position to secure INR 2,000 crore, INR 3,000 crore, is what I clearly see.
Understood. Thank you so much and all the best.
Thank you.
If there is no one, Sandeep, can we close the call, or is there anyone who is willing to ask the question?
Yeah, just a small question. The trade receivables seems to have gone up substantially YoY basis. If I am not wrong. I could just check the because there is a very short time. So INR 1,000 odd crores in consolidated cash flow statement, the trade receivables. Any reasons for it?
I'll take this question. You need to see, this Ind AS accounting requires you to project this account receivable at two stages, one is current and one is non-current. What do we mean by current trade receivables? Which are due or receivable within one year, and which is non-current, which is receivable beyond one year. This composition keeps on changing depending upon the situation. Just to give an example, during this quarter, we have received certain awards. Now they will stand in my current receivables because as on date, there is no appeal or there is no objection filed by the clients against the same. In case the client files the objection within the statutory period of four months, then it is going to take a longer period to realize. So that will shift from current to non-current.
So if at all you are to see the overall scheme of things, the account receivable, you should see totally both current and non-current for both the periods. You'll find not much difference. What you're talking about, INR 1,000 crore, it'll be only restricted to the accrued interest as well as some portion what you received during the quarter.
Thank you.
Yeah.
Just to continue that nuclear thing which my predecessors were asking, we are personally asking. In this budget also, they had announced for a small nuclear thing. So is it at ground level, something is happening or nothing of that sort is there?
For nuclear sector?
Yeah.
Look, we are already seeing, for example, the already existing plants which are there, like Gorakhpur is under construction. They have come out with the next stage bids for that. There are a couple of more bids which are in pipeline, but they are all around the Indian program which is there. We are not seeing any movement on any foreign program, which was with the Americans or with the French.
Yeah. I was actually, sorry to interrupt. I am referring to that budget speech, which they mentioned that a small nuclear thing will be.
The modular ones.
Yeah.
You are talking about the modular ones.
Yes.
I think this is a good thought, and this is still under our discussion stage, that how this can be implemented because when we are involving a private party into that, they want the technology to be still controlled by them. What the idea is to have a private player who can fund some other parts of it and run the show, but then how does the liability get transferred and everything. These are all still under discussion. There has been some movements, but they are all at discussion stage.
Nothing concrete on that.
No. I think we did have some meetings with our clients, but we did not sense much of, you can say, concrete coming out of that.
Thank you.
Thank you.
Balli you may please start.
Hi. Am I audible?
Yes.
Yeah. Congratulations on the good set of numbers and the continuous improvement in the company. I think in the mid of September, we had got an approval to raise QIP. I just wanted to know the timelines for the finalization of the QIP raising basically.
Balli, tentatively, we are looking at end of this Q3. By December, we should be able to complete QIP.
Okay. Thank you.
Kapil Aggarwal.
Good evening. This is regarding that we are having unbilled revenue of approximately INR 3,000 crore. That is approximately half of the annual turnover at present on a standalone basis. Is it normal or in future also it will be like that only?
Are you referring to the consolidated results or you're referring to-
No, standalone basis.
Standalone will be INR 2,000 crore roughly, if I'm not wrong.
No, it's 3,000 something. INR 3,121 crore.
Okay. See, the accounting, what is required to be done as far as WIP or the work in progress is concerned, is based on the accounting standard Ind AS, okay, recognition of revenue 115.
So wherever we have to follow a particular method, call it input method or output method, okay?
So it requires that wherever I have incurred an expenditure under a contract,
Okay?
However, I have not billed to the client because I have not completed a particular milestone. Suppose I have to bill only once I complete 5 kilometers of road.
Okay. But I have done a work for complete 2 km.
The work has been already done, whereas I will not be able to bill the client. Correct?
Yeah, I got it. I got it.
Yeah.
Let's leave it. Yes.
So at that point of time, estimating the profitability of that project, you have to build in a WIP.
For a fair accounting that you will eventually get this much of billing. That is one part. The other part is a regular WIP, what you have completed, for which you are yet to bill to the client. That is generally one or two months billing cycle for which you will have a WIP, which is around INR 1,000- INR 1,500 roughly. I'm not getting into the individual breakup. But one is account of that for actual work what you have completed, yet to be billed. Second thing is the actual expenditure you have incurred, but you are not in a position to bill because of the contractual condition or the milestone, and you're required to account WIP based on the Ind AS accounting. These are the two.
I just want to have an idea that our standalone basis, our quarterly turnover is INR 1,400 odd crore, and that unbilled revenue is INR 3,100 odd crore. It's more than double of the quarter turnover. So it's normal for us?
I am not yet confirming the numbers. I do not have the numbers in front of me, but generally it should be 2,000, 2,500, not more than that.
Okay.
Yeah.
Okay, thank you.
Tanishq, you have any additional question? Kunal.
Mr.
Do you have any addition? Yeah.
I do. So it was told that the L1 project should get converted into orders in Q3. So, those will be new orders. Apart from that, what is the sort of quantum of new orders that we expect in the remaining two quarters of this financial year?
So Kunal, the L1 position is where we are is approximately INR 3,700 crore right now. One of them is a hydropower project, another one is a transport project. In addition to that, we have submitted bids in metro segment. Then we've also submitted bid for a port project, for a PSP project. So our estimates are that, in addition to this current LOA, which we have received for INR 1,030 crore plus this L1 position, we should be looking at a number which is around and of course, this is like an estimate, around INR 10,000 crore is the kind of number we are looking at for the whole year.
In addition to the.
No. For the whole year.
For the whole year. I have got it. Thank you.
Yeah.
Just a clarification where I asked a question on WIP. I asked the first question whether we are talking about consolidated or a standalone. So the standalone WIP is INR 2,148 crores, to be precise, not INR 3,000. INR 3,000 is a WIP for the consolidated number.
Yes. I see.
Just a clarification.
Yeah, I see.
Okay. Thank you.
Okay. Tanishq, do you have any additional question?
Thank you. Thank you, I am done.
Okay. I Phone 183.
Sir, hi. Pratik again. Thank you.
Yes, Pratik.
Sir, I have one more question. This was regards to the total outstanding that we are showing to micro-enterprises, which has gone up by almost about 29% from INR 2,400 crores to almost INR 3,100 crores, INR 3,097 crores as I see. Is there any plan to sort of bring that down, or are we waiting for the QIP arrangement and the funds to come in? Because apart from prepayment of debt, I think, faster execution, if you can throw some light, if you were to Is there a plan how to reduce this also? Because this looks to be a very substantial chunk higher than the borrowings also for us at this point in time.
See, as far as MSME is concerned, that is a regular activity what we will try to settle within the designated time. Depending upon the execution of a particular project where there could be more MSMEs, our liability can increase in particular quarter and it can go down in a quarter. There is always a focus to settle MSME as early as possible. It will have no direct impact on the revenue growth or whatever it is. It is independent because this is more of a liability, what you need to clear. I frankly did not get the correlation what you are trying to do with that.
Basically trying to judge it as a percentage of sales or as a percentage of order book, what can be expected to be maintained, that is there a level that you guys look to maintain it at?
No, that is what I am repeating once again. See, as far as you do not select a MSME depending upon the order of a particular project. MSME is a vendor, which whenever you select a vendor, and in a particular project, if at all you have 10 vendors, you do not select a vendor, whether it is a MSME or a large vendor. What is required for the project, we select accordingly. There is no specific, what you can say, theory to select or not select MSME. It depends on the actual work to be executed by that particular person and the capabilities of that person. There is no focus as such that, when you execute a project, you select MSME or non-MSME. It happens, but naturally. Depending upon the, as I earlier explained, depending upon how many people you would have employed in that particular project.
My question was from the fact that, whilst our outstanding has gone up by almost INR 700 crore, and if I was to look at the first 6 months' sales, INR 3,200 odd, and the profit in correlation to that. Would that be a right way to look at it? Because?
No, there is no correlation. There is no point in correlating that way because.
Okay.
It is on the class of vendor vis-a-vis. I mean, profit doesn't have any role to play with the class of vendor.
Right. Yeah. Understood. Okay. Thank you so much.
Thank you, Rahul. No more questions are there.
Thank you so much. Thanks everyone for joining this call, and wish you all a very happy Diwali. Have a good time, and look forward to see you again in next quarter. Thank you all, good night.