Rahul, you may please start the proceedings.
Good evening, everyone. I am Rahul Shukla, Assistant Vice President, Finance from HCC. I welcome you, all the investors and analysts for this presentation of Q3 FY 2024. Joining with me for this presentation from HCC side are senior management of HCC Finance Department and Corporate Communication, HCC Infrastructure. Moving forward with the presentation. Just a small refresher, o n its almost 100 years of legacy, HCC has constructed over 4,000 km of India's highways, almost 400 km of tunnels. 60% of India's installed nuclear power capacity has been contributed by HCC, and 26% of India's installed hydropower capacity has been contributed by HCC. These are our key pillars of execution. In terms of national footprint, as you can see, we are present all across India, and very strong geographical diversification of our projects helps us in mitigating risk as well.
As of end of Q3 FY 2024, our order books stood slightly above INR 11,000 crore. Almost 50% of that comes from transport sector, followed by hydro, water, and other projects. In terms of business outlook, you all must appreciate that infrastructure sector has been getting a lot of attention in terms of government attention span as well as CapEx plans. In the recent budget itself, we have seen that government has announced capital expenditure of almost INR 11 lakh crore. Even private CapEx has been reviving, which was subdued two, three years back. But in the last financial year, we have seen INR 7 lakh crore-INR 8 lakh crore of private CapEx going into this infrastructure sector, which is a very, very big positive sign. Public-private partnership is also picking up quite well. In last few years, there has not been much of the traction over here.
But recently, with modification of model concession agreement and government coming up with more than 50 BOT projects, valuing more than INR 2 lakh crore, is a good sign for this sector. Coming to other HCC specific sectors like hydropower, pumped storage scheme, and other sectors, there has been a sustained allocation of funds as well as capacity expansion plan because India ultimately has to meet its commitment of net zero targets, and also the commitment of generating over 500 GW of power through non-fossil fuel by 2030. This sector will keep on getting a lot of attention, which is good for HCC. Especially for hydro projects, you must be aware that in Arunachal project, there was a lot of stagnation in development of hydro projects.
Arunachal Pradesh government and central government have assigned almost 10 projects to various central PSUs, which will be a boost for development of hydro projects in that area. HCC being present in those areas historically, can be a big positive for us as far as execution is concerned. We know the geography, we know the risk and rewards over the area. Another sector, pumped storage scheme, is also a rising sector because in order to meet peak power demand, there has to be a development of this kind of projects. There is going to be strong pipeline of, say, 8 GW- 10 GW of pumped storage scheme coming for award in next few years. Another sector of keen interest is railways, because ultimately, it's the logistic which is going to drive the utilization of India's true potential of its geographies.
Under National Railway Plan, there is a clear visibility of capacity addition that by 2030, the railways have to have capacity to meet its 15, 20 years ahead of requirement, which is attracting a lot of investor interest. Also, the EPC model is being worked out for fast-track development of these projects, which will help boost India's infrastructure, as well as will give us much more visibility in terms of order books. Nuclear sector, which had been a slow-moving sector for last few years, is now picking up. There is administrative approval for 12 nuclear reactors from government, and this is the first time in the history that fleet model has been brought into this sector for fast-track development of nuclear power projects.
HCC, being a leader, in this sector is clearly expected to have competitive advantage because there is a low competition in this sector, and we have got very strong know-how by contributing to 65% of India's installed capacity. We are very positive as far as business outlook is concerned. Now we have to gear up ourselves to encash it. In terms of key performance highlight for the last quarter, as you can see, we have achieved a revenue of INR 1,474 crore, which is 8.6% higher than the revenue for Q3 FY 2023, which was INR 1,357 crore. Our consolidated profit for the quarter was INR 233 crore, against a loss of INR 283.7 crore last year.
Standalone ENC turnover is up by 7.7% and is at a level of INR 1,245 crore versus INR 1,155 crore last year. Our standalone profit is considerably up to 68.5%, is against a profit of INR 25.2 crore in the same Q3 of FY 2023. EBITDA margin is also maintained at a very healthy level of 12.4% in terms of industry, even though it was slightly higher in the Q3 of FY 2023, but this is okay. In terms of operations, we have achieved a provisional completion certificate for Sawalkot Tunnel project in J&K. Also a major milestone has been achieved in Nikachhu Hydro Project in Bhutan, wherein water in turbine has passed and grid synchronization of the power project has been achieved, which is considerable.
In terms of progress in our rights issue, we had filed our draft letter of offer to SEBI, and also BSE and NSE. We have received BSE and NSE approval, and SEBI approval is also expected shortly. We have also received upgrade in rating from ICRA to BB (Stable), and another rating agency, CARE, had upgraded us during last quarter. So both the agencies have now upgraded us to BB. In terms of business development, HCC has submitted its bid for almost INR 7,000 crore worth of projects, which are under evaluation. Another INR 14,000 crore worth of bids are in the process of being submitted in the coming quarter. We have got very strong pipeline of almost more than INR 46,000 crore project, which we will be bidding in the future.
This is a snapshot of our quarter-on-quarter performance for this financial year, just to demonstrate that the performance have been quite consistent in terms of revenue, EBITDA, PAT. This is what we have been striving for and we believe that we have reached to the level now. Here, we can see year-on-year performance. We can see consistency in revenues, EBITDA, and also the PAT which was negative in FY 2023 has come to a considerable positive level in FY 2023. Also in FY 2024, we have clear visibility of positive profits. On operations updates, this is an update on Mumbai Coastal Road Project, which is one of the largest project that we are executing as on date. In the first photograph, you can see that the monopile work is going on. All monopile foundation work has been completed.
With the help of this monopile technology, the number of piles, which were supposed to be 424, has now been reduced to only 79. This is the first large scale monopile implementation in India. This is one of the engineering feat that we have achieved in this project. Photograph number two, you can see the Worli interchange segment launching, which is in progress, this circular section that you see. This is progressing quite well. The bottom left photograph, you can see the navigation span of composite bridge that connects coastal road to the Bandra-Worli Sea Link is casted at Nhava Sheva Yard.
This is a photograph of the Nhava Sheva Yard, which is almost 9 acre facility that we have developed for casting these very long spans, because you must be aware last time we had updated that these are 120-meter spans that we have to do. This casting has to be done in a special casting yard, and then these segments are transported through sea, through barges to bridge location, and then they are installed. This is a photo of that. The first navigation span of composite bridge was successfully launched on 2nd February 2024. This is one of the major thing that we have achieved over here. With regard to other projects, Anji Khad project, here most of the civil work has been completed.
Now finishing work is going on, and we hope to finish that also very soon. In DMRC's DC-06 project also, metro tunnel and civil work all have been finished, and now architecture and finishing work are going on in the station. The project is progressing quite well. Mumbai Metro project, again, there are four stations. A couple of stations are at a very advanced stage. Other two project stations are also progressing well. T-49, entire tunnel is ready in all aspects, and finishing work like slope protection and all is going on. In a nutshell, all our major projects are on track. Tehri Pumped Storage scheme, this is a 1,000 MW pumped storage scheme that is being constructed in Uttarakhand. I just mentioned in the previous slide about the importance of PSP for peak power generation.
This is a very important project, and have been progressing quite well. Vishnugad Pipalkoti Hydro Project is also, o ur TBM is functioning quite well now. During January itself, we have been able to do 431 m of HRT tunneling. An important aspect to mention here is that it is a very large diameter TBM, 9.86 m diameter double shield TBM. It is one of the largest tunneling that is being done, and a progress of 431 m in a month is quite remarkable. Nikachhu Hydro Electric Project is in the final miles. Here, we have achieved a final milestone of wet commissioning of turbine in December 2023, and grid synchronization has also happened, as I already updated in the previous slide.
These are some of the numbers. Key numbers I had already explained, so I will not be going through each and every number. You can just go through them. They have also been updated, uploaded in the websites. Consolidated numbers.
Now a brief on Steiner AG. Some of you may not be aware, in case you have not been tracking for some time. Steiner AG is a fully owned subsidiary of HCC in Switzerland. This was founded in 1950, so completed more than 100 years of its establishment. It is one of the top contractor in Switzerland and constructed many marquee projects. Company was acquired by HCC in 2010, and it is headquartered in Zürich. There have been some development in this company. In 2021, company embarked on the reorganization, and in 2023, major milestone was achieved by selling its construction business. To give you a better light, Steiner comprises of real estate development as well as real estate construction business.
Since HCC is in the process of monetizing and getting capital back for its own business and growth, this business of development and construction was bifurcated in 2021. Now we have exited low margin, high risk construction business. Our pure focus over there is on development, which requires very niche skill set that Steiner has developed over the years. We have got very strong pipeline of development project, and we are very confident that this is going to be a real value generator in the future. To give you a sense of numbers, this is a spread of project that Steiner development business has got. Most of the focus is on west side of the Switzerland. We have got more than 65 active projects. When I say active projects, it means clear development activities are going on.
So there are various stages of development, starting from signing of MOU with landowners and then taking various clearances, approvals. Taking the project to the level where some construction activity can start. There is a fund who will come and invest. All those things need to be performed before the project can be taken to the construction. As on date, there is a pipeline value of CHF 4.9 billion , from which we can expect a cumulative developer fee to Steiner of around 395 million. The total saleable area through the current portfolio is over 7 lakh sq m, 7.22 lakh sq m, which is huge. Obviously, company will keep on striving for new project, expanding its portfolio and creating more value for shareholders. These are some of the select ongoing and completed project.
Just to give a sense that these are very marquee projects. Many of them are marquee projects which have been done by the company, and it continues to do so. Some of the financial highlights, for Q3 FY 2023, the order book of the company was INR 4,367 crore or CHF 448 million . For Q3, the turnover was INR 218 crore as against INR 800 crore in FY 2023. PAT was INR 56 crore, as against loss of INR 329 crore during last year. You can see lower number for the turnover, essentially because Steiner construction business is divested now, so its turnover is not being captured in these slides now. This is pure development business turnover that you are seeing here. With this, I am closing the presentation and we open the floor for question and answer. Thank you.
Hello.
Mr. (Nicar Shah), can you start, please?
Hello.
Yeah, we can hear you. Yes.
Yeah. My first question is on the EBITDA margin. We have seen a dip here. What are the EBITDA margin expectations for the year-end this year, and EBITDA margin expectations going into the next year?
Good evening. Girish Gangal. See, first of all, I'll answer your question about there is a dip. There is no dip as such. Our margins are anything between 12%- 14%. It depends on the composition of the project, what we execute during particular quarter. So one project might have an EBITDA margin what is giving me 15%, one may be giving 8%, so it's a combination of those 30, 40 projects what will get into this EBITDA for a quarter. First question. As far as future is concerned, the general statement we can make that we are, I mean, historically, have been making this kind of a margin, anything between 12% to 15%. So hopefully we should continue to do that. I can't make any future, forward-looking statement as such.
Okay, sir. What is the ballpark figure for revenue which we will achieve this year, like, by in Q4?
See, again, this is a matter of, any forward-looking statement, I am not supposed to make it because of the SEBI regulation. I can't make a statement that I'll make XYZ profit, I'll make this much of turnover, and so on and so forth. Unfortunately, I can't directly answer this question, but we'll have a reasonably good run rate. That's what I can say. Just as a matter of information, our last quarter, generally March quarter is always stronger than all the three quarters. Very strong compared to other three quarters, historically also.
Okay, sir. Okay.
Yeah.
Thank you, and all the best.
Thank you.
Avi Aggarwal, can you please start? Avi, you can unmute now and start.
No, sir. I have no questions. Thank you.
Yeah. Okay. Pushpendu Chand. Pushpendu. Okay. Yeah. Pushpendu, you can go ahead. He's not getting connected, so I will move to the next one. Viraj. Viraj.
Yeah. Hi.
Yeah.
Yeah. Hi. I had a question. Last year you had an interest cost of INR 1,000 crore for the financial year. Looks like this year you will finish at about INR 800 crore. What is likely to be your interest cost in the next financial year, given that you will use the proceeds from Steiner to repay debt?
Viraj, historically, yes, you are right, our interest cost has been around INR 1,000 crore. However, we have carved out a significant portion of our debt to a separate company, and now we can expect that going forward, our interest cost should be around in the range of INR 400 crore, INR 400 crore-INR 450 crore. That is not just by virtue, that is not just because we are planning to make any debt repayment from Steiner, but HCC debt itself has gone down. That is why interest costs are going down.
Right. Debt cost should halve in the next financial year again, approximately.
The same number. INR 400 crore-INR 450 crore is the number that I mentioned. We will be in that range.
Okay. What is your net debt now, as of current, after the Steiner realization?
As you can see from our books, our debt and all are basically now in the form of primarily OCDs. There is around INR 2,000 crore worth of OCD outstanding, and we will be repaying that along with accrued yield, as and when it is due for repayment.
When is this due for repayment?
This is an annual repayment that we have got. Every March, every 31st March, every year it becomes due. There is no repayment due anywhere in between, not even interest. It is kind of annual bullet payment that we have to make.
What will be this annual bullet payment on 31st March this year?
This year, it's around INR 340 crore, and we have made some part payment to the lenders already. Balance, we'll be making before or on March 31.
Right. This year you should go down by about INR 300 odd crore in debt?
Correct.
Okay. Thank you.
Mahesh, can you start, please?
Yeah. Hi. First of all, congratulations. At last, the numbers are showing the results of efforts that we have been at for years now in terms of changing the structure of our balance sheet as well as our P&L. My first question is regarding the money that has flown in Steiner AG. What is it that the management intends to do with it? Will it go to the parent, or there are some plans in Steiner AG itself? How will that work out?
Let me address that question.
Yeah.
Part of the capital will be used to strengthen Steiner AG's balance sheet and to capitalize, and to fully fund our various equity projects or development projects. Part will actually involve some return of capital to HCC. We don't get into that level of detail, but one thing that we are certainly focused on in the next few quarters is to see how Steiner AG can actually contribute to a return of capital to HCC as well.
That is not an immediate event, meaning we will
It's not. Well, if you are referring right now to the current sale of Steiner construction that's happened, like I said, there's been a partial contribution. What you can expect is that a more material contribution will happen when we actually do a larger capital raising, or a return of capital transaction, in the coming quarters. That certainly is planned. Ultimately, this is a question that we've been asked repeatedly in the past, and I think that now that we actually are in and look, I think the return of capital for us is, there's two aspects to it. One is that we realize the true value of Steiner AG, and be reflected in the quality of transaction we do. We are not going to just do that in a hurry.
Certainly, HCC doesn't require that capital for, let's say, yes, it's always nice to actually have capital return to HCC for debt prepayment. But at this point in time, HCC has more than enough sufficient means to address its various debt repayment obligations. The only question for us is what the use of capital is going to be, what the best use of capital is going to be for growth. So we see certainly some opportunities in Switzerland for the closure of our development platform. At the same time, we see tremendous opportunities for our growth of our construction business in India. So it's a combination of that.
So you will probably, in the subsequent quarters, I'm being a little vague because obviously I can't give you details at this point in time, but in subsequent quarters, we will certainly basically expect to see that return of capital that I guess all shareholders have been patiently waiting for.
Okay. Thanks a lot, Mr. Dhawan. Now, one blue sky question. If one looks at HCC's history, and you have mentioned it in the presentation also, when it comes to nuclear power, our credentials are impeccable. Hardly anyone can match them. Okay? Europe is a power-starved geography, meaning over the, what, I don't want to get into the geopolitics of it all, but clearly last two years, they have suffered in terms of energy availability. Do you see HCC at some point in time in next two, three years playing a nuclear, getting an EPC nuclear power kind of project in Europe, given the fact that the political resistance to nuclear has come down quite a bit in Europe right now?
The answer is no. We certainly are very proud of the fact that we have partners all over Asia and Europe that we evaluate opportunities with, but we see a lot more opportunity in India where our infrastructure is and where our edge is for execution, and where our scale efficiencies lie. So at least in the foreseeable future, the answer is no.
Thanks a lot. Thanks a lot. One last thing. We are going in for rights issue, and you just mentioned, we have been restructuring balance sheet for 18 months now, and we have done a great job of it. Clearly, we are in a much healthier financial position. So where would the rights issue capital flow into? Where will it be utilized?
Again, I have answered this question before. The entire purpose of raising any equity from shareholders is going to be focused on growth. We have timed this equity raise with the confidence of what we basically see as a material order booking in the months to come. As always, nice to actually have a little extra liquidity on our balance sheet. So we think this is the right time, and as far as the promoter group is concerned, it also I think from our standpoint, is a good time to show our own basically contribution in terms of the confidence of what we see going forward in the business as well.
Thanks a lot. Thank you very much, and all the best for future.
Sanjeev (Dhamanji), you may please start.
Sir, I am audible?
Yes.
Sir, firstly, I really congratulate the company. Financially, now that we are coming on track , a whole lot of effort has gone to conclude all messes of earlier years and problems of earlier years, and further making so much of good progress. I really feel like to salute our teams at HCC, and my best wishes for future as well. Now, sir, my question is, and I want to understand, that, sir, we are becoming better. But sir, in last call you had given a figure that executable order is almost INR 12,000 crore, and the output is only INR 318 crore, if I am not wrong in assessing this. Kindly tell me why we are not able to make some big progress every quarter, and this being a quarter in which I think rains, et cetera, may not have disturbed much at our sites. Kindly reply, sir.
Sanjeev, can you please repeat your question once again in short? I missed it.
Okay. No problem. Sir, my only question is, in last call I was given to understand that we have executable order of approximately INR 12,000 crore.
Yeah.
Which can be executed, which are running that way. So our outputs per quarters are not coming to that ratio. I just wanted to understand what is the problem there.
Okay. Sanjeev.
I will answer, Rahul, this question.
Okay.
Yeah. Sanjeev, the order book was INR 12,000 crore last quarter, which has come down to INR 11,000 and odd for this quarter. This turnover has to be executed over a period of two to three years. This has not to be executed in one year.
Okay.
The run rate what we have is around INR 1,000 crore, INR 1,200 crore per quarter.
Okay.
We are improving quarter by quarter. Rather, if you see for last eight quarters, rather last two years, March 2022 and March 2023, we have done the highest ever turnover in the company.
Okay.
INR 4,600 crore and then INR 5,200 crore.
Okay.
We are planning to even do better this year.
Right.
However, this entire order book will be cleared within a period of next two to three years, not in one year.
Okay.
That is why possibly you are getting that mismatch, what you are thinking.
Okay.
We are doing better rather every quarter.
I know, sir. We are performing much better, and we are really clearing the mess.
Correct.
Getting into a correct direction of growth in the days to come.
Yes.
My best wishes, sir. Thank you so much, sir. Thank you.
Saurabh, you may please start.
Can you hear me?
Yeah, we can hear you. Go ahead.
Okay, great. Mr. Arjun, like others, I would like to congratulate you and your team for good financial performance and the improvements that we are seeing. I have a couple of questions. The first one is, what was the cost of acquisition for Steiner AG versus the disinvestment that we have done?
I think what we can do is just get back to you precisely on the answer to that question. The acquisition that was done in 2010, if I recall, I do not have the number frankly off the top of my head, but we will come back to you on that. Just keep in mind that the amount that we have actually realized from the current sale is only for a small portion of the business.
Okay.
And in fact, the value of the business that remains is actually far more valuable. Then the one more thing I will say is that certainly when you compare the number that we will give you offline, I don't hesitate to basically say that the amount that we have divested, just a portion of the business today, is actually itself higher than, substantially higher than what we actually paid for the entire company in 2010. I think that I will stop there and actually let the team get back to you potentially offline unless they have the numbers here immediately right now.
Will do. Thanks. The second question is about the rights issue. If you can update what is the status and what is the likely timeline when we would see it?
Saurabh, as I updated in the previous slide, our DLF is under SEBI approval. We have received approval from NSE and BSE, and we hope that SEBI will also approve it shortly. We are not in a position to commit a timeline because we are not supposed to, b ut you will see. Whenever there is some progress, you will get to know.
Okay. Thank you. My last question, we do see lot of order bills from other construction companies. I have a generic feeling, I may be incorrect, you may please correct me. I don't see much of the news of HCC winning various orders. What do you have to comment on this?
Saurabh, this infrastructure sector, clients have got a certain way of awarding a project. Okay, so there has to be a tendering process in which first you have to qualify for PQ and then tendering evaluation, all those things have to happen. There are long timelines for tender submission and all that since the day of this announcement of a project. So we do have, as I showed in the BD section of my slides, we do have very strong pipeline of the project, for which we have either submitted our bids or we are planning to submit our bids. However, almost INR 7,000 crore of our bids are under the process of evaluation, and INR 14,000 crore worth of projects are under the process of tendering.
May I just, Rahul-
Yeah.
Sorry to interrupt you, but may I just answer also the question in a slightly different fashion?
Sure.
To be very honest, it's been a while since HCC was in the regular mainstream of bidding on a quarterly basis. When we have been out of the market, the projects that we have identified, and certainly, we are very clear about the projects and the clients we will actually bid on. We will certainly not basically bid like it is a dartboard. As far as we are concerned, the pricing of risk for us is just fundamentally important. And, when we have just started to get into the process of evaluating the projects that we want, t here has been a little bit of late, two or three of our projects that we were evaluating have got shifted by a quarter or two.
And like I said, I think that once we start having gotten into the mainstream of making those that you are actually observing today will actually go away. When we have this conversation one year from today, you will not see us not having actually won jobs on that quarterly basis because there will be some wins and there will be some stuff that gets preponed, some stuff that's got postponed. Because we've been out of the market for a while, I think that a handful of the jobs that we were looking at and certainly have focused on, and which we have made bids on, we will make bids on in the coming months, we're very confident that we will actually realize that. That's one.
Second, I think that we're very very conscious again, that we don't want to have so many jobs in our portfolio that are including a number of smaller jobs. We are looking at our sweet spot anywhere between INR 1,000 crore-INR 1,500 crore as being the average size of the project. There'll be other projects that will be much larger, be somewhere in the INR 2,000 crore-INR 3,000 crore range. When we look at our target, order backlog, over the next, let's say, over the next number of months, there will be a lumpiness because we're looking at fewer projects that are more material in size. Rahul, sorry, back to you.
No problem, sir. Thank you.
Yeah. Thanks for your candid answer, Mr. Arjun. We would look forward for that to be stated, you just told. Thank you.
Mr. Faisal, you must please start.
Yes, sir. My question is, that now that we have had so many rather bad experiences at the various diversifications that we made, Lavasa and so many others, which almost destroyed the company. The infrastructure segment now looks quite flush with orders, and we could probably have a pipeline for at least next four, five years. Why don't we divest the entire Steiner stake or this thing and get money into the company so that we can then survive for years together in our main line of business. Secondly, when we are executing so well and the sales are really at all-time highs, is it not a worry that we have only a INR 12,000 crore order book? What are the kind of EBITDA margins that we are going to now target going forward?
Let me take that again. There's a few questions there. I think Girish has already pointed out to you that we were always focused on those kind of projects with that level of complexity and where our edge is and where competition is limited, that would generate those sort of low to mid-teens EBITDA margins. That will not change.
Second, as far as the turnover of the business and the order backlog is concerned, yes, the order backlog is coming down, but I would imagine that the market and you would, in the coming months when you actually see the buildup of the order backlog, would look beyond, let's say, a few quarters in the short run where our turnover might actually stagnate, simply because it takes, let's say, one or two or three quarters for the fresh orders that we won to actually flow through our P&L and cash flow. But you certainly have the visibility of the company's success in the quarters and years to come. That's number two. Number three, you made a comment that I would like to respectfully disagree with.
I think that as far as Lavasa was concerned, it was, at the time, a project that was pioneered by the company with the hope of actually creating something very special in India, that would have, if it had been successful, might have actually generated such substantial returns for the company that no other construction company would have.
Your voice is breaking, sir.
That's part of business and that's part of business risk. So as I said, can you hear me now?
Yes, I can hear you, sir.
Hello?
Yes, I can hear you, sir.
Okay.
The voice was breaking again.
I think (audio distortion).
No, the voice is not at all clear to me, your answer.
That investment and that time and that pioneering with the (audio distortion). Okay. Is my voice breaking?
Yes, yes. We could not hear even one or two words clearly.
Okay. How much of the question do I need to repeat?
Can you just answer-
Or did you not catch the diversification?
My short point is that these Steiner funds should come into HCC, and we should be doing some complex projects with those funds, rather than keep some part of it there. Did I hear correctly that we have divested only a small portion of Steiner stake? What is the entire stake worth at its best case scenario?
Okay. I'm sorry, but I- Okay. First of all, I presume you heard clearly what I said about Lavasa.
Yes.
We're very clear as a company today that we're an engineering construction business, and that's kind of our core focus. As far as Steiner is concerned, I think that in various calls, and this one as well, we've talked about the need to return capital at the appropriate time, at the appropriate valuation. I'm afraid I can't share with you what that valuation is. That would be inappropriate. But I have indicated to you that as far as the business or the part of Steiner that we've divested happens to be a portion of the value of the company, and we expect, obviously-
Would it be at least 2x our market cap?
I'm sorry, I can't at all basically comment on that.
Okay.
I think the last question you had was Look, I think that if you look at our track record as far as our subsidiaries are concerned, for example, our PPP, our BOT subsidiaries, those were longer gestation period projects, and when we actually had developed them fully, and when they were realized for full value, generated a tremendous value for the company and the group. I'll stop there on the subject, and I hope that you will be patient with regard to some of the details we'll get you at the more appropriate time.
Okay, Faisal?
Yeah. Can I squeeze in one more question?
Yeah, go ahead.
What is the role of Mr. Ajit Gulabchand in the company now? How are we going to approach with just a 19% promoter stake, and that, too, a lot of it is pledged. We will have to now even subscribe to the rights. Is there some thinking within the promoter group also to raise their stake to a very respectable level from where they can enjoy the fruits of what they have actually sown? Mr. Ajit Gulabchand, we will all agree, is a visionary and how much does he now guide the company at this point of time?
Let me make something clear. While Mr. Gulabchand is the non-executive chairman of the company, this is ultimately his company. This is as close to his heart as anything is in life. Whether it is being a mentor or whether it is basically providing the wisdom that we need, as far as certain fundamental areas are concerned, he continues to be involved with the company. He is certainly not retired, I can assure you of that. At the second point that you talked about, I cannot and I will not basically comment on the promoter stake. But I will say that, as far as the family is concerned, the promoter group is concerned, we are entirely basically committed to the success of this company and to generating value for shareholders.
Okay. Thanks a lot.
Mr. Ashok.
I think I have already answered this point as part of the rights issue. I mean, the entire principle in the rights issue is the promoter group is putting in capital alongside basically every other shareholder in the company as well.
Ashok sir.
Good evening, sir.
Yeah. Ashok, you go ahead. Yes.
Congratulations for giving a good performance, reasonable performance. Actually, my question is only one as an investor. That how much land parcel this company owns as investment?
We have got four land parcels at different locations.
Okay.
In total, they will be somewhere around 50 acres.
Okay, 50 acres.
Yeah.
In the Navi Mumbai?
No, no. Different locations. Mumbai.
Different locations.
Thane, Pune, Navi Mumbai. Some different locations.
Okay. What will be the value of these land parcels?
As per our estimate, currently it should be.
Rahul, I mean, that's not something that we would actually probably like to comment on. I think that's something that the analyst community needs to do their diligence on. I think what would be quite fair is for you to provide some of these details offline to the community to figure out what that value would be.
Yeah. Right.
Otherwise, it would be a little unfair for us to speculate on that. I think that we can provide that information about that.
No, it is approximate value. No, I am not asking any exact value.
No. It' s difficult also sometimes to put a value, because for that you need to do lot of market discovery, to put a value, which we are yet to reach to that level.
What I suggest we do, and look, part of the land, for example, is our headquarters in Mumbai.
Yeah. Okay.
Why don't we actually prepare something and share that with you gentlemen.
Ashok (Kriplani). Ashok (Kriplani)
Yeah.
Okay.
Yeah.
Oh, sure. Okay. Thank you, sir.
Kunal, if you can please go ahead.
Hello, am I audible?
Yes. Go ahead.
I just had two quick questions. First is what is the strike rate for our order bids?
Kunal, can you repeat? We didn't get it.
All right. What is the strike rate for the orders we bid for? How many do we convert into actual orders?
I think, look, Rahul, I think you can certainly answer. Look, we've not actually won any jobs in the last couple of quarters. I think the ratio is not relevant, actually, when you've not actually won anything. What we've certainly done is actually over the last six to nine months, well, actually over the last year, during the fiscal year, there have been, I think, about INR 800 crore-INR 900 crore of additions to our order book by virtue of variations. But I think that this answer would probably be a little more relevant in the coming quarters when you see some of our bids opened and when you see some of the successes that actually come in the subsequent quarters. So it's a statistic today that is probably a little less relevant.
I think, Rahul, I'm not sure whether we actually share the amount of information in terms of the number of bids we've made. But I think maybe we can provide you a little clarity if you're a little patient in the quarters to come.
Yeah.
Pushpendu Chand.
I had one more question.
Yeah. Go ahead.
The big pipeline that you have identified for the future of more than INR 46,000 crore, what is the timeframe you expect to bid for it? Do you expect to bid for this amount over the next one year or longer than that?
Yes. The answer is over the next 3- 12 months. Obviously, one of the things that I wanted to add, I guess, was the fact that, I already pointed out that the stat should actually be a little more meaningful in the coming months. Rahul, do you have anything to add?
No, sir. That's the one.
Okay. I'm coming back to Pushpendu Chand. You are still there.
Sorry, Sandeep, one second. I just remembered one other important point to make. I think I'm glad that Kunal asked the question because it goes to actually indicate the predictability of exactly what our order books will be, considering the fact that we've not actually done something material in the last six months. Kunal, I think it would be very fair to say that the bulk of our bids will actually now start happening. I think that there's very few bids that we've actually made in the last six months. I guess we're not, how should I put it, not disappointed. Because the ability for us to actually put the bids in that we prepared have actually not really happened.
Okay. I am coming back to Pushpendu Chand. If you are still there, you may please start.
Yeah. Can you hear me, Sandeep?
Yes. Go ahead.
Okay. Yeah. So first question which I wanted to understand from you is that our approximate debt, by the end of September, was somewhere around INR 2,400 crore consolidated basis. And the quarterly interest payment, if I see, it is somewhere around INR 150 crore. I just was curious to understand the math that for INR 2,400 crore of our debt, our annual interest repayment would be somewhere around INR 600 crore. So what is our typical interest rate for the debts that we take for our works?
So weighted average interest, if you see, is close to 11% for our debt. When we say quarterly INR 150 crore, it includes some other financing charges like BG commission and all, apart from the interest that we pay.
Sure. The second question was, what is the utilization of fund that we are planning to do with the Steiner AG as well as the road assets that we have sold out earlier, to Cube?
I think we have already answered this question a number of times. We have used the proceeds in combination of working capital, debt repayment, and for growth, or actually have it on reserve for basically liquidity for growth.
Right. The third question is related to one of the questions raised by previous speaker. Is the land parcels that you have got, if you can put up in a slide, the different land areas that you have in different geographies, approximate areas. That itself will give us an idea that what are the amount of the land assets that the company holds.
Sure. We'll do that.
Yeah. Typically, real estate companies does that. If you can also-
We're not a real estate company.
Understood. I'm not-
I appreciate what-
I am not asking what-
I appreciate what you are saying because-
Yeah.
Some of this value is arguably material.
Yeah.
We will share something with you soon.
Right. Related to the real estate business that we have or the developmental business that we have with Steiner AG, I understand from your last call is that you also have a future plan to hike that off in the days to come. Is there any thought in that direction?
Again, I think we have already answered this question in all sorts of shapes and forms. Like I said, I think that (audio distortion).
Arjun, your voice is breaking. Arjun, we cannot hear you.
There is a difference between saying (audio distortion). Clear? Is that much?
Oh, no. It is dropping, Arjun.
Okay. Hello.
Yeah, it is just flickering. Yeah.
Rahul, why don't you take the question, please?
So with regard to Steiner stake divestment, basically, this is already answered while answering the previous question.
Yeah.
See, for us, HCC is fundamental, and it is not that HCC needs any money today, but we are in the process of evaluating. Right now, standard construction has been sold.
Okay. My signal is back. My apologies, everyone. Can you hear? Is that better?
Yeah, better.
Yeah. I hear you now.
Rahul, sorry, I am interrupting you again. Look, the return of capital from a subsidiary in which we have invested considerably needs to be well-timed with valuation and opportunity, and the return of capital can come in various forms. Whether it is in the form of a buyback, or whether it is in the form of a dividend, or whether it is in the form of even a partial or a material stake sale.
Yeah.
All of these options will be evaluated in the coming quarters to see what is the best. I hope that is clear.
Yeah. Partly, I got your response. I understood what you are planning to allude to.
And maybe on a lighter note-
Yeah.
I will actually have the team draft out a little paragraph, which is exactly the same and put it basically on our presentation so that our position on the same is actually very clear.
Sure. I appreciate it.
I wanted-
Yeah. I understood your point. Yeah. Thanks.
Okay.
Yeah. One more question, Arjun, is related to the pledging of shares by the promoter's group. Usually, what we have seen in the market is that market usually won't give right valuation if the promoter's shareholdings are in pledged condition. Is there any thought to coming out of the pledge from promoter side on their holdings?
Of course. Look, I think that as the company goes from success to success, there will be opportunities for us, whether it's basically via debt prepayment or a refinancing of the company, that will basically release any and all of these obligations. I think that is something that is certainly a focus area for us. We're doing this, like I said, step by step. As we actually continue to grow our business, get new jobs in, generate cash flow, pay down our debt, I don't think that this is not something that we will be able to achieve, obviously, in due course. I wanted to take the opportunity as time has wound down, to also thank many of you who've actually complimented us for. It's really heartwarming to get your thanks because it actually pushes us to do a better job. I appreciate that. Thank you very much.
Thank you.
There is a name called Del. If you are not going to speak, then I am going to move.
Yeah.
Yeah. Okay.
Hello? Yeah.
Yeah. Go ahead.
Sorry. My question is, we have realized some of our projects, and we get some money, some fund from there, right? What kind of debt we are currently on, and after completing all this, what will be our debt at the end of this financial year?
At the end of the?
This financial year.
Okay. As I mentioned that we have got outstanding OCDs of around INR 2,000 crore, and we keep on paying them at the end of year, along with the accrued yield as per the formula that has been agreed with the lenders. Accordingly, debt will go down slowly, like, in this financial year, when we make INR 340 crore of payment. So along with interest, that debt is on that day will go down by that number. But at the same time, this wheel also would have accrued around INR 200 crore of yield. So net debt reduction could be around INR 100 crore at the end of this financial year.
In the similar fashion going forward, when we keep on making repayment, we can see debt reduction year- on- year. Our debt repayments are bullet payments at the end of year, so in between there will not be any debt reduction.
All right. Thank you. That's it for me. Thank you.
Incidentally, sorry, I want to qualify what Rahul said. There will be, obviously, as I've talked about, our focus on refinancing, which is something that we'll focus on once we actually build our order backlog and our operational cash flow basically grows, and that's something we'll focus on. But there will be an opportunity for us to also prepay debt selectively where we're able to actually see a yield waiver for our debentures. And as basically we utilize some of the arbitration awards that we actually have monies deposited in court for. So if there are basically opportunities for us to avail of monies against our awards and actually prepay debt, we'll certainly do that. And the market and you will be informed of that, as and when that happens.
Is there any internal target for the same?
I think there is an internal target, but I can't share that with you. I think that our goal is very very clear, that we want to prepay debt, and we want to be debt-free as early as possible. That's what I can say as a goal.
Right. With this kind of fund, how big order we can tender for?
I'm sorry. Look, first of all, we have the capacity to bid for more than to take on new orders of about INR 15,000 crore. As I think the opportunities continue to become visible to us and as we scale the organization, I don't think that stops us if opportunity exists and the capital exists for us to take on many more jobs as well. But again, I don't want us to get ahead of ourselves in an analyst call. What I would like to do is, on a quarterly basis, just discuss that as we start to kind of walk, jog, and then run, and then sprint.
All right. Thank you for that. Thank you.
Thank you. Fair Value Capital, you may please start.
Hi, Arjun. Rakshit here. Can you hear me?
Yes, go ahead.
Yep, thank you. Arjun, first of all, echoing what a number of other investors have said, we would like to place on record our appreciation for what you and the team have done in turning things around at HCC. Truly commendable, and we applaud you for it. Just a little sense, if you could give a little flavor that I also noticed that the rights issue size has been increased. So I am presuming that there is some visibility in order of take in front of you. What sectors are seeming a lot more interesting? And typically, I know it can be lumpy, but what size of projects are we more inclined to bid going forward? Thank you.
The board today has approved rights of up to INR 350 crore. We still have to take a call as to whether it is INR 300 crore or INR 300 crore plus or minus. I think that INR 50 crore is not going to really move the needle much b ut I think it is something that we will decide most likely, probably close to INR 350 crore. But again, I think that is a decision the committee will make in the coming weeks, simply because we have had a lot of investor interest. I think that is one. Second, when it comes to jobs, in our sort of core area of expertise, u nderground metros, transportation works, including bridges, more complex transportation infrastructur, a nd then you have got hydro, where we are actually seeing now a fresh pipeline of hydro projects being tendered in the coming months.
That' s perhaps part of the reason why some of our wins will be a little lumpy because hydro, the permissions taken, the clearances required, especially the security clearances that are required to bring hydro to market, sometimes can actually be a little complicated. So three months in the grand scheme of bringing a hydro project to market is not a big deal. But once we actually see many of these projects that have been planned for many many quarters come to market, you will see a flurry of them basically come in. And I think with the prime minister's goal, and the government's goal to actually push our 2047 goals of net zero and green power, I certainly expect a huge amount of renewable push to come from hydro and pumped storage schemes, et cetera. That is a huge and evergreen area for us.
So I think that basically covers it. Nuclear, while we have contributed towards over 60% India's nuclear reactors, that's a very small portion of our order backlog. But it again, it's something that we have a tremendous edge in and qualifications and credentials in. So when you see that happen, that'll come in, but again, that'll be lumpy. So for us, 50%-60%, and I think in the very near future, the next six months, you're going to see our bread and butter in largely transportation. Then you'll see that odd hydro project hopefully that will come in basically every quarter or so. So I hope that answers the question.
Yes, t hanks, Arjun.
I forgot, there's also irrigation. So there are dams and barrages for the purposes of irrigation that are also in the pipeline. Santosh Rai is unfortunately not here. He'd probably be able to give you a lot more color. He is busy preparing for the inauguration of our Coastal Road, which we're very glad and honored to have our prime minister come and inaugurate in the next few days. So that's why he had to actually excuse himself from this analyst call. But I think that we'll give you a little more color in our next call as well.
Appreciate it, Arjun. Thank you.
Sure, (Sharada), you may please start.
Hello.
Yeah, go ahead.
Yes. Thanks for the opportunity, and congratulations on good set of numbers. I wanted to know in three to four years' time, where do you see HCC in terms of turnover and size of business, and what areas you would do? I am not asking for guidance, but would you be in ballpark INR 10,000 crore, INR 15,000 crore kind of turnover, or would you be at INR 5,000 crore, INR 7,000 crore kind of thing?
Let me put it this way. I think it would be a shame if we have only basically grown at modest double digits. We are privileged to be part of one of the largest infrastructure programs in the world, which will actually continue to be for the next few decades, just transforming India completely. I think that if we are going to be part of that opportunity, and if we are going to have to compete, frankly speaking, as project sizes get bigger, more complex, there is no question in my mind that we have to consider multiples of where we are in terms of order backlog and revenue. So I will leave it at that. I think that we have to do that responsibly. We have to do that in a way which does not basically compromise our work ethic, our pricing of risk.
There is no question as we've actually worked so hard to actually get where we are, where even one project for us shouldn't actually be a compromise in terms of the quality of our execution and our free cash flow.
My follow-up to this is, what kind of challenges do you envisage? Because I believe for contracting companies, bank guarantees become very critical. That becomes a determinant of how much you can actually bid. Also the manpower, because if you're doing complex projects, then having good manpower is critical. So where do we stand there?
I think as a company actually shows off its track record, I don't think that bank guarantees and capital from banks is an issue at all. I think the quality of the company and its execution is a testament to the bank supporting it. I think that that's not something that HCC will have a problem with. I think that's first. Second, there is no shortage of quality projects in the country led by very quality clients. So that's not a concern for me either. There will be, in certain areas, fairly ruinous competition, and we are not going to be basically chasing those kind of projects which are a little more commodity type. So HCC is going to continue to take on projects which suit its engineering edge. Yes, I think the point that you made on labor is a constant focus area for us.
I think that as we see, I think a more perennial crop planting in India as agricultural basically demand increases. You have a migrant labor population that's starting to be squeezed, and especially in urban areas where cost of living is actually especially high. So it's obviously very important for us to have very quality relationships with our supply chain, and with our stakeholders to ensure that we have a continuous supply of very quality, skilled manpower. As large and populous as our country may be, I think we all understand the quality of education and skill among a substantial portion of our workforce.
I think that as India grows, this is going to be probably one of the biggest concerns for the construction industry, is that how we skill people and how we actually harness that kind of manpower so we are able to actually scale an infrastructure program that this government wants to achieve.
Okay. Thank you, and all the best.
Thank you.
Chirag Shah, you may please start.
Hi, am I audible?
Yes. Go ahead.
Yeah. This question was repeatedly asked, I think over the last three or four quarters. Just wanted to ask once again, as you know, at that time, this Vivad se Vishwas scheme was announced, the second version of it. The company, as in the finance team or whoever was answering the questions back in the day, they had basically shared with us that is under consideration, under contemplation, whether or not we want to participate. Because it depends on what are the kind of returns we are expecting and what is our success rate, otherwise, in the litigation that is ongoing. Is there is any development on that front?
Okay, I'll give you the very quick answer there. HCC's awards are actually very— arbitration awards and claims are very boring, actually. They're not equity awards, and they're largely basically extension of time awards. Basically, these are claims that are very precisely calculated on the basis of escalation, idling equipment, so on and so forth, that we have at site for when a delay takes place on a project. These are projects that we've completed years ago. Like I said, they're not termination.
When we look to do a Vivad se Vishwas, especially where if it's not crossed one hurdle in court, for us to leave 35% on the table, and in addition to that, there's a simple interest of 9% that's applied in the calculation from when an award has been given, versus in many cases, our awards carry with them post-award interest of 12%- 13%. If it's an old award, for example, that's five years old, and the spread between what Vivad se Vishwas basically offers is 9%, and what we have, let's say, is 13%, requires for us to give up an additional 4% a year for five years, then I'm not only giving up 35% on the principal, but I'm also giving up another 20% on interest. That ends up making it unviable for me to, in some cases, do Vivad se Vishwas, n umber one.
Number two, there are certain awards, for example, that have crossed a stage in the court process, which are 85%+ , and in those cases, it is attractive because we want to just reduce litigation and move on with life. We have applied as a company for a VSV for a few of our awards. At the time that we actually have a result and an outcome on the settlement, we will inform you with regard to what those are. The process is taking a little longer than expected because, as government is responsible to the taxpayer, there has to be a reconciliation to the last decimal point in terms of what we think the number is and what they think the number is, and when you have interest that is being calculated over many years, that's also one of the reasons for the delay.
I think that in summary, is Vivad se Vishwas something that HCC is going to rely on hugely? The answer is no. But yes, we will basically be selective in terms of where it makes sense for us, and there are, I think, four or five awards where we have approached the government to close those litigations out. As and when they basically conclude, we will let you know. There is one other aspect that's important. We've also got sanctions from our lenders for special bank guarantees for court, which are (audio distortion).
We're losing you, Mr. Dhawan.
Percent money out. Yeah. I am so sorry. I am actually on the way to actually for an important meeting. Am I clear now?
Yeah, it is better now. I think in between was a bit of a blur. Yeah.
What I would like to end by saying is that-
Yeah.
We have special bank guarantees which our banks have sanctioned to us for the procurement of monies that are in court against our arbitration awards, which are effectively 100%. So those are far more attractive to us at this point in time than, let's say, a VSV settlement where we would actually leave a considerable amount on the table. These are various considerations. As the government continues to extend the scheme, or if it becomes available in the future on an ongoing basis, depending on the needs of capital for the company, we will take a very clear call in terms of when and how to kind of pursue that decision then.
Thank you. I think basically, this is what I wanted to understand, because what has been identified, because that was under evaluation stage at the relevant time. It's good to be pragmatic. As a practicing lawyer, I can only say that these things take so much more time than originally envisaged. That's about it as far as my question, and congratulations. I think we are making nice and steady improvements. And congratulations on the good results. Thank you.
Thank you very much. We appreciate it.
Thank you.
Thank you, everyone. We understand there are no further questions, so we will be closing today's call. Thank you for joining. Look forward to connecting in future. Thank you.
Thank you. Thank you.
Thank you.