Good evening, ladies and gentlemen. It is my pleasure to have you all for this analyst presentation for Q2 FY 2024 of Hindustan Construction Company. From HCC, we have our senior management team on this call, including our MD and CEO, Mr. Jaspreet Bhullar. Our Vice Chairman, Mr. Dhawan, will join us shortly. I am Santosh Rai, Operations Director and Chief Business Officer, and will be taking you through this presentation. We will be happy to have your questions after the presentation. The key highlights for quarter two FY 2024. The consolidated group revenue are at INR 1,832.6 crores versus INR 2,257 crore in Q2 FY 2023. We have a standalone E&C turnover of INR 1,138.8 crore in this quarter versus INR 1,249.1 crore in the corresponding quarter of FY 2023. Net standalone net profits of INR 52.3 crores versus a profit of INR 312.8 crore in Q2 FY 2023.
EBITDA margin stands at 14.4% in Q2 FY 2024 compared to 18.3% in Q2 FY 2023. Some of the other highlights is prepayment of INR 65 crores of debt, inclusive of INR 24 crore of yield waiver, leading to equity gain. Company in the process of evaluating further such proposals. We have also received completion certificate for three of our important projects, that is Sone Bridge, Bistan Lift Irrigation, Tata Memorial Centre. The investor for our SPV company, Prolific Resolution Pvt Ltd, is on board. With this, PRPL has ceased to be a subsidiary of HCC with effect from September 30, 2023. As a result of that, INR 3,300 crore of debt has been reduced on a consolidated basis. You will also notice that HCC has picked up the pace of bidding for new orders on standalone basis, means we are bidding more projects on HCC alone rather than getting into joint ventures. Business development highlights.
We have submitted bids worth INR 6,000 crore, which are under evaluation, and we expect them to be out for results in next two to three months. In addition to that, a good bid pipeline worth INR 20,000 crore has been identified on which the company is working, and we expect to submit these bids in coming three to six months. During the quarter, the order backlog also increased by INR 900 crore through award of variations in existing projects. We also secured L2 position on Kanpur Metro bid, wherein we had nine bidders, and this was one of our recent standalone bid. This was a good performance by the bidding team and the company. What we look in terms of the business outlook, what we understand that whatever the National Infrastructure Pipeline was set by the government, it is expected that the government will achieve around 70% of those targets.
We are clearly seeing that renewable share is being enhanced, and as a result of that, we are seeing more and more opportunities in the hydropower pump storage projects, nuclear projects, which is a good news for the company. In addition to that, there are higher budgetary allocations in the National Rail Plan, which means more rail tunnels, which we have been doing a lot, and lot of other regional rapid transport systems plus metro transport systems in the offering. Order backlog at Q2 FY 2024 stands at INR 12,344 crore. Transport leading the pack, followed by hydro, water, and then nuclear and special projects. Geographically, Uttarakhand continues to be a state where we have our maximum order backlog as of now, followed by Maharashtra and other states.
We continue to focus on large value civil infrastructure projects in urban spaces also and as well as in areas where we are good at, such as hydro and nuclear. Operations update. What you see on the screen is the Mumbai Coastal Road project. The works are in full swing. You can see a lot of superstructure has come up, and we are equally pleased to let you know that the additional works which we got through.
[Non-English content]
Hello?
[Non-English content]
Nilesh, you need to put yourself on mute.
Oh.
The superstructure works are in full swing. The additional steel bridge work, which is a 136 m steel span bridge, the works have commenced on a good scale. A lot of job is being done offsite, and soon you will see a lot of progress in the month of November and December at this stretch, too. Mumbai Metro Line 3, which is again one of our major jobs in city of Bombay. CST stations, all structural works are complete, and now we are nearing completion of MEP and finishing works. Kalbadevi Station also, 80% of the work are completed. Finishing works are in progress. Girgaon, almost 60% job is done, and other structural works are being taken. Grant Road also, 75% civil works are done, and now we are concentrating both on civil works and as well as finishing works. Anji Khad Bridge, major bridge. All structural works are completed.
Slope stabilization works are in progress, and other miscellaneous works are ongoing. Track laying of this bridge, we can start seeing track laying in a month's time from now. That will also start. Delhi Metro DC-06, again, one of our signature jobs for DMRC. This is all civil works are completed, and now we are in the process of doing the architectural and finishing works. Numaligarh-Jorhat road project in the state of Assam, we have substantially completed the project. Other small works of service road and other works are in progress. This also will be completed very soon. Tehri PSP projects, majority of the civil work on the TRT outlet has been completed, and now finishing jobs are also in progress at this project. This is another view of the Tehri PSP. You can see the powerhouse civil works are completed. All the electromechanical works are in progress.
On the right-hand side, we have the penstock, which is a part of the hydromechanical works, and the liner erection is also in progress here. Vishnugad Pipalkoti, the HRT lining, the good news is the TBM operation has commenced here, and we are going at a very calibrated pace now. HRT lining has also commenced where we are doing on the drill & blast method. Nikachhu HEP, majority of 99% the job is done. The water impounding, I mean, filling of the dam reservoir, we can expect to start on 13 November. The water on turbines is scheduled on 17 December 2023, which is National Day of Bhutan. This is another of our railway tunnel project. Here also all the civil works are completed. Track laying is going ahead with full swing.
We have also received a variation order from the client for INR 135 crore, which are some outside works of slope stabilization and other things. That is also going on well. Sawalkote Tunnel, this is an access tunnel to the Sawalkote Dam. This job is also completed, lining done, and some minor firefighting and miscellaneous works are in progress. Here are the consolidated financial numbers of quarter two FY 2024 and the comparison on QoQ as well as YoY basis for the previous years. I will not go through the numbers. We can discuss them when we take the question and answers. Here are the HCC standalone financials. Some update on Steiner AG. The company is headquartered in Zurich. It is a leading real estate developer and TCGC contractor. We specialize in turnkey development of new buildings and renovation existing projects.
Closing order backlog as of 30th September is around INR 4,123 crores. Order intake of INR 277 crores. Here are the financials. On this slide, you can see comparing Q2 FY 2024 versus Q2 FY 2023. With this, we have come to the end of the presentation. We can take the questions as we go forward. Thank you.
There is already one hand up, Sanjeev Damani. Sanjeev, you may please start.
Am I audible, sir, here?
Yes.
Good evening, and happy to note a lot of good developments, sir. My one question was regarding our arrangement with the Steiner AG. How much percentage we hold there?
Girish Gangal. We hold 100%.
Okay. That company [audio distortion] continues, sir, in Germany. I mean, it is a foreign company, it appears.
It's a Swiss-based company having offices in Switzerland, Germany, France, et cetera.
Okay. So we own it fully, and that is also now a profitable company, sir?
Yes and no. In the sense, in this quarter, there is a marginal loss, but otherwise, yes.
Okay. Secondly, sir, you had announced intention of coming out with rights. Is there any thinking now about it or will it not be required?
See, we are considering that, and will come out at appropriate time.
Okay. Can you give one figure of the pending order as on September 30? The pending order to be executed and which have already started, which are ongoing.
INR 12,300 crore. INR 12,300 crores.
Okay. That much work we have got in our hand, and they are progressing, sir? There are no hurdles in the—
Absolutely.
—All sort of clearances are in place, and we have to only do execution. Sir, in the next quarter that is coming after September, that is this December and March, how much work we will be able to carry out, sir?
See, we have our internal budgets and targets, but unfortunately, we cannot make any forward-looking statements.
Okay.
That is not permitted under SEBI.
Okay.
I am restricted from making such statements.
Okay, sir. No problem. Thank you very much, sir, for guiding.
Thank you, Sanjeev.
Wish you all the best, sir.
Thank you.
Happy Diwali to all of you.
Thank you.
God should help us make this wonderful company go back to its green days. Thank you.
Thank you, Sanjeev. Thank you. Happy Diwali.
The next one is Prashant. Prashant, can you please start?
Yeah. Good afternoon, sir. This is Prashant. This is regarding the, I mean, about the order books, basically. Sir, could you tell me in details about the orders, means particularly it is possible to tell about the client-wise, the orders.
Prashant, I think, look, this we can share offline because that's a long list, right? But what we can definitely tell you is our majority of some of our key projects are like Mumbai Metro, for which the client is Mumbai Metro Rail Corporation. We have Coastal Road, which the client is BMC. Delhi Metro is the client. For some of the bridges and tunnels, railways are the client. Some of our hydro projects, THDC, Tehri Hydro Development Corporation is the client. So it's a long list. Should you need this, we can share this offline.
Okay, sir. Thank you.
Yeah.
Mahesh, can you please start? Mahesh?
Hi, can you hear me?
Yes.
Yeah.
Okay, cool. So two things. First is this Steiner AG. If one sees across the quarters, it has some volatility both in revenue and profit. I would like to have some insight into what leads to this volatility. That is one part. Let's say if one were to look into the future, let's say three, four years, do we still see ourselves owning this business, or at some point we'll be looking at divesting it? Meaning, is that a thought that has crossed the top management's mind?
Yeah. The first question, I did not hear you properly. Second question, I'll answer, and then you can tell me your first question once again.
Right.
As far as divestment concerned, yes, we'll look into it in future. There is no immediate plan as such to divest in this company. It depends on market condition, position of the company, and naturally, if there is a, what is the position in the market about the requirement of this type of a company, et cetera. So it's a futuristic decision.
Girish, let me just jump in. I've also heard the first question, so that doesn't need to be repeated. The lumpiness sometimes in the turnover and the profitability of the company is driven by the sale of our real estate developments. There's two parts to the business. One is the contracting business, which obviously is very steady on the basis of an order backlog that gets executed fairly steadily. But the developments that we do for real estate, as in when we actually see quality market conditions to exit a particular development, the liquidity of which can actually be reinvested into other opportunities, that's what tends to sometimes drive the lumpiness. So that's the answer to the first question.
Just to elaborate a little further on what Girish has said on the second part, I think that as far as we are concerned at HCC, at the parent company, the role of any subsidiary is to be able to either pay dividends or return capital, ultimately. There was certainly a plan to have that with Steiner AG. Unfortunately, with post-COVID and the war in Ukraine and some of the lumpiness that we've or some of the volatility we've seen in Europe, that has been a little delayed. I think that we are very sensible about looking at return of capital from our, whether it's our SPVs or our assets or our non-core assets, at what we consider to be a very good market value. Can we expect a return of capital from Steiner in the future? Absolutely, we can.
At this point in time, it would be a little premature for us to actually give you any kind of forward-looking statement with regard to when that happens. I will basically point out, and this was disclosed in our message to the exchange, that we were in exclusive talks to sell one part of the business, which is the construction business, to a French company, Demathieu Bard. That exclusivity and that intent to divest the construction part still continues. When that transaction reaches a stage where we can actually disclose the details to the market, we will do so. Obviously, along with that will come information in terms of what the use of proceeds, et cetera, will be.
But overall, I think at HCC, we're very clear that our responsibility to the shareholders is obviously for you to see a growth in earnings and to see our subsidiaries, very much like we had with HCC Infrastructure and our concessions assets, to see a tremendous return of capital at the right time and at the right valuation.
Thanks a lot, Mr. Dhawan, for a detailed answer. One small question. This SPV now ceases to be our subsidiary just at the end of this quarter. So in third quarter, what would the approximate interest cost would look like? Because second quarter, it happened at the end of the second quarter. So I'm assuming, and our interest costs are the same, approximately the same first and second quarter. So how would they look in the third quarter?
You are asking the interest cost for HCC or you are asking a consolidated interest cost?—
HCC.
—Or for what you are asking?
HCC. Because that, see, currently, once the debt SPVs ceases to be our subsidiary, I suppose the interest cost would come down, right?
No. See, as far as HCC standalone is concerned, which is exactly same cost of last quarter and this quarter, that will have no impact. One, okay?
Right.
As far as consolidated debt is concerned, since consolidated debt has gone down from HCC books, then naturally, the interest cost will come down. However, you will not be able to see it individually because the accounting henceforth will be under a joint venture accounting, wherein you do not have to consolidate line by line. You will only get proportionate to our share, which is 49%, the proportionate profit or loss getting accounted in consolidated books. There will be no separate interest booking on account of this Prolific.
I understood, Mr. Gangal. Which essentially means on the consolidated level, the interest cost we see in our P&L will come down, right?
100%.
How much? That was my question.
No, the entire interest cost will disappear from the interest column above, and the net result of this Prolific, suppose the net result of Prolific is INR 10 crore profit, then 49% of that profit, that is INR 4.9 crore, will get added as a profit. So you will not get interest separately included. That is what I was trying to tell you.
Yeah. So what will that amount be?
That is whatever the interest cost presently, 50% of that.
No, what is the reduction in the interest cost? 50% of that will come below the line. But in the interest cost, in the consolidated-?
Entire 100%. Entire 100% will go away. The entire 100% for Prolific interest will go away.
I understand, sir, but currently, the consolidated interest cost also has HCC interest cost, right?
That's right.
I just want to know the absolute amount of shrinkage in the interest cost that will happen. Currently, we pay about INR 130 crore interest in HCC standalone. Right?
Correct.
In consolidated, it is INR 130 crore plus XYZ.
Correct.
Actually, the numbers came up a bit late, so I do not have the consolidated interest.
No. See, Mahesh, it is like this. The consolidated will have not only interest on account of Prolific while consolidating,—
Oh.
—it will have for other subsidiaries also. Okay?
Okay, perfect.
Yeah.
What is the difference that will come now that it ceases to be our subsidiary? That was my limited question, sir. The current finance cost in the current quarter is INR 256 crore. Right?
Correct.
Last quarter, it was INR 246 crore. Before that, it was [audio distortion]. Around INR 250 crore is where we are at consolidated level. INR 130 crore is where, give or take a few crores, we are at standalone level, INR 130 crore, INR 250 crore. This INR 250 crore will move to which range? INR 200 crore? Which range? How much it will come?
I will not be able to give you the exact number, but it should definitely move down by at least INR 100 crores.
By INR 100 crores.
At least. I don't have the exact number right now.
No, that's fine. Exact, I don't want exact number. I just wanted to get a sense of the difference it will make to the P&L. I'm not looking for exact number. Okay. So about INR 100 crores is what you are saying?
That's right.
Okay. Thanks a lot. Thank you. My questions are done. Thank you very much, and all the best.
Anybody else, please put your hands up. Yeah, Neeraj. Neeraj . Okay, [Ravi Kiran]. [Ravi Kiran], go ahead, please. [Ravi Kiran], you can start. Ravi, we cannot hear you. Meanwhile, Neeraj has come up. Neeraj, can you please start?
Yeah. Can you hear me? I was muted by mistake.
Yes. Yes, Neeraj, you please.
You had given some understanding of Steiner, but I wanted more clarity on the Steiner side. The business that you sold, just wanted to get clarity, was that a large revenue value for Steiner in the, what was the earlier pre-sold part of the business?
First of all, we are yet to sell that business. We have not yet sold the business. Okay? That business still continues with the Steiner as set.
Okay.
However, next quarter, the actual sale would happen first.
Okay.
The construction business will separate and real estate business will separate. In present quarter, there is a loss in construction business of INR 9 crore with a turnover of INR 540 crore.
Okay. You have sold the construction business, which will be reflected next quarter, right?
No. The business will be sold in next quarter. However, presently, the results, it is reflected as a discontinued operation as per the requirements of accounting.
No, that I understand.
Yeah.
What I understand was the real estate business was a meaningful value for Steiner rather than the construction business.
That's right.
Am I right?
That is right.
Can you give some color on Steiner real estate business? Because this has not been discussed for some time.
It is like a black box to a lot of investors as well. Can you share more color on what is the value that can be sitting on the, or let me ask the other way. How much is the cumulative cash flow that you can get out of that business in the next, say, seven to eight years or five years? Whatever, you can share some data point on that.
No—
May I just suggest, Girish, that what we do is, I think in the coming weeks, and obviously the transaction is not yet closed, but in the coming weeks, when we do have a final closure or the signing of an SPA and there is further details shared, we will actually have a special analyst call or actually provide you with details that will answer these questions in the appropriate amount of detail that will give you comfort. If you can be patient with us for a few weeks, we will get that information to you hopefully before the end of the calendar year.
Okay.
Very happy to answer some questions now, but it would actually be incomplete, and it would not be comprehensive. There is a fair amount of data, and I think what we would like to do is have some information shared in advance so you can have a pre-read and then we can have an analyst call or meet to actually go through some of that and discuss some of the other HCC developments as well.
Got it. Okay. I understand that. The second question is on the potential industry orders that are coming up. You shared a large number of INR 120,000 crore. Can you share some color on those type of orders and how is HCC placed in the future potential orders that may come up?
Neeraj, for that, basically, we will continue to focus on areas which has been traditional HCC areas.
Right.
That is in line with you can also see what is the government focus now. We can see a lot of focus of government is going on renewables, which means more projects will be coming up into hydropower and pump storage projects, where we have a good amount of credentials, and we have good knowledge. That is what we will be focusing. Second thing are the rail infrastructure. When we say rail infrastructure, they are largely tunneling jobs for railways and some tall bridges. Again, that is an area where we have a good hold in terms of experience. Third area, which we see clearly is going to be the regional rapid transport system and expansion of the existing metro systems. That is also one place where we will focus more.
Coupled with that, some jobs in marine sector, they could be sea links, or they could be some expansion of marine facilities. That is the mix, what we are looking at, and we are also seeing that a lot of traction into those sectors. That is how we believe we have a good bid pipeline of around INR 20,000 crore in next three to six months, and we should be making proposals in those areas.
Okay, got it. Last question. Do you see the delay in bidding for hydro projects? Because hydro projects are large in number, which are coming up in next two, three years. Do you see a delay because of the upcoming elections?
Look, I think the traditional impact which comes due to application of Model Code of Conduct and some of the procedural things could derail these things by six to nine months, but that is what we see. Not much.
Okay. Thank you. If required, I will get back on you. Thank you very much.
Thank you, Neeraj. Thank you.
Thank you.
[Surya Rogers], can you please start?
Hello, am I audible?
Yes. Please go ahead.
I wanted to ask. Recently, there have been two accidents in hydropower projects like Subansiri in Arunachal and Teesta in Sikkim. How do these affect medium-term project launches by the central government? Does it affect adversely?
[Surya], what we are seeing is that this kind of incident naturally strengthens some of the pre-bid engineering practices which the owner has to do, and this will lead to them making a more robust proposal, doing detailed geotechnical study. Kind of method and everything is chosen to construct these facilities. As I said, with the given focus of green energy and everything, we do not see that this will completely stop such kind of projects. For sure, there is going to be more attention to these details. If we go by the record, there are so many hydropower projects. These are very unfortunate incidents, which I am sure the government and the concerned team members are strictly looking into what is to be done with that and how to avoid such things in future.
Okay. Thank you.
[Ravi Kiran], you may start.
Hi, sir. I had one question. I am not sure if it is already answered. The question is, have we got any orders for this quarter, new orders to the existing order book we have already?
Ravi, as we declared, we got some orders from our existing projects where we got some additional works, and that is to the tune of INR 900 crore. As far as any fresh order is concerned, no, we have not been successful in doing that. Though we turned out to be the second lowest bidder for a metro job, which we bid amongst nine bidders. There are a couple of bids now we are making going ahead, and we hopefully we would be securing some of them.
Okay. Thank you, sir. One more question I have, sir, on the status on the bullet train station, sir.
Yeah.
How is it progressing and—
It is moving as per the schedule. The preliminary activities largely have been. The site has been set up, the team is there, and we have commenced with the initial operations of secant piling and excavation in line with the program.
Okay. Thank you, sir.
Thank you.
[Chirag Shah]. [Chirag Shah], you may please start.
Yes, put this.
Sandeep, there is Sanjeev Damani. I think he—
Okay. Sanjeev Damani, you may please start because you had come again. Please start, Sanjeev.
Yes, sir. Sir, it was regarding this SPV where we have removed the debts. Is it the same SPV which was created to transfer our liabilities as well as awards, in the company? Is it the same SPV? Hello?
The SPV. Sorry. Are you able to hear me?
Yes, sir.
The answer is yes.
Okay. Yes.
Okay.
It is the same SPV. Yes.
Same SPV. Sir, can I know if at all it is nothing to, not a big secret. Could something got settled there, awards were realized there, and debts were reduced to that extent?
No, debts will get reduced eventually, but awards, yes, few awards got realized.
Got realized. So naturally, sir, physically also some loan amount has been, because it is a contingency in our case, so that much contingency will get set off once the awards are received and those loans are repaid. So to that extent, our company will be relieved. Am I wrong somewhere in my-?
No, not. Absolutely.
This is absolutely correct. Girish, let me interrupt.
Yeah.
It's very important, first of all, in the waterfall, that there's enough and ample liquidity for the next 12- 18 months to have best-in-class completion of our arbitration and our court matters. Free cash flow, as we evaluate it on a quarterly basis, could be considered for the pay-down of debt. We will certainly let you know when there is a material debt reduction that's happened. There has been cash that's been realized in the SPV. At this stage, it would be fair to say that there's no material reduction in debt of the SPV at this stage. We'll come back to you on when that is.
Sir, final question. Are we also going to get some more awards if at all we have raised our escalations or our demand with various government agencies? Are they being converted through arbitration or our persuasion with them? Any such amount that is realized or is likely to be realized, if you can indicate.
See, this is a process. Getting an award is a process, and that keeps on happening from time to time. Since it is a decision from our arbitration tribunal, which is an independent tribunal, we'll expect that it will happen at the fast. We'll ensure that it happens as quick as possible. Of course, we can't tell exactly the date or amount or whatever at this stage.
I wanted to be specific. Whatever awards were received were transferred on that day. Thereafter, have we received any such award for HCC?—
Yes.
—to get some more liquidity?
Yes. No, see, receipt of award doesn't bring the liquidity. The payment of award gets the liquidity.
Agree, sir.
Awards, we have got it. Awards we have got it after transfer of arbitration awards to SPV. Yes, we have got the award.
More awards have been received at HCC. Can you quantify them? That once realized, how much money we are going to get, because that will get transferred directly to P&L, if I am not wrong.
No. I think there is this little disconnect between the understanding what you have. Once you get the award, that, in any case, gets transferred to profit and loss account. Okay?
All right.
What is postponed is only the cash flow from that.
Agree, sir.
What is the amount of cash flow you will receive depends on at what time the client is going to pay the money, because the interest—
Agree.
—keeps accruing on that.
I agree, sir. But if at all we have received after transferring those, if at all we have received more awards, if you feel like quantifying it for our understanding, where—
I think, yeah, let me just interrupt for a second. We do have, on an annual basis, certain claims with our clients that have not been settled convert to awards. We have not traditionally, as you well know, on a quarterly basis, shared the specifics on that. Girish, correct me if I am wrong. Do our stakeholders have a sense on an annual basis as to what basically kind of award conversion that actually happens?
No. That is intrinsic part of our results. It is not generally available.
Yeah, look, it would be very fair to say that even after the transfer of, or the carve-out of this SPV, which deconsolidates about INR 3,500 crore of our debt, INR 3,300 crore to be very accurate.
Right.
There still exists within HCC a considerable amount of award assets which are north of about INR 1,000 crore. On an ongoing basis, we will expect, which is a reasonable, let us say, how should I put it? If you look at the turnover of the business and order backlog of the business, it would be a normal cost of business like any other E&C company, that we would basically have a generation of certain claims to awards.
Got it, sir. Actually, the only thing I wanted was that whatever has been transferred is a thing which is already done. Thereafter, if we receive any award, do we account for straightaway or on realization we will account for in our—?
The definition, Girish has already said this, we account for it. As conservative accounting practice, we account for it only when the claim is converted to award. Then, we actually then, as Girish said, the cash flow obviously is dependent on when the award either gets settled or when it gets paid or through court. But yes, I think that you will always assume that our accounts, the way we represent them on a quarterly basis, reflect the conversion of any claim to award.
Okay. Thank you very much, sir. Thank you for the time given and explanation given. Thank you.
[Chirag Shah], you may start, please.
Hello.
Yes. Go ahead, please.
I hope I am audible now.
Yeah.
I have three questions. Question one on Vivad se Vishwas. Any views, any submissions? Because your [audio distortion] have preferred Vivad se Vishwas for some of the project, and they are expecting 50%-60% kind of realization, including the interest part. Have you evaluated any thoughts over that?
Yes.
Hello?
We have been internally evaluating and taking appropriate calls. Incidentally, today only, the scheme, which is Vivad se Vishwas, has been extended by a further period of two months. The filing for this Vivad se Vishwas can be filed up to 31st December instead of 31st October. We keep on analyzing, discussing, and taking appropriate position depending upon the benefit available. Because as you know, it depends on the stage at which the particular award or a litigation is lying. Either you get 65% or 85%, so on and so forth. We do take appropriate calls.
Okay. Second, actually, just clarification.
Your voice is breaking.
[Chirag], your voice is breaking.
On this SPV order that is created, any [audio distortion] . Is it better now? Hello? Hello?
Your voice is breaking. We cannot hear you, [Chirag].
Is it better now?
Yeah.
Yeah. Second question is on this SPV that we have, which you have got now created. Any resolution of the arbitration or any claims or any receipt of orders, awards, does it have a positive impact on our outstanding bank guarantee limits or not? Just a clarification on that. If the settlement happens over there, our BG will go up, or able to bid for more projects, the dry powder goes up for us, or it does not affect? It is more of a cash flow rather than anything else?
Yeah. See, as far as the SPV is concerned, SPV has got awards and claims wherein we have not drawn any money against a bank guarantee. Our realization of those awards, it has no impact on the release of guarantee or otherwise, because at first place, they have not provided any guarantee to draw the money.
Okay.
Yeah.
Okay. It is more of a cash flow issue rather than anything else?
That is right.
Yeah.
That is right. Your understanding is right.
Yeah. Lastly, on this order bid. You said you submitted for INR 6,000 crore of order, and I understand from our previous interactions, you can bid up to INR 20,000 crore-INR 25,000 crore odd of projects if you wish to, right?
Yes.
When do we expect the pace to inch up? I understand that there could be some slowdown till the election, so I understand that part. But assuming it is a normal business scenario, when do you expect your bidding process to go? Because to win orders worth INR 10,000 crore, you may need to bid for INR 40,000 crore, kind of. I am just assuming 1:4 ratio just for convenience. Our depletion of order book, which is happening on an annual basis, let us say INR 4,000 crore- INR 5,000 crore, we at least need that much replenishment to maintain the order book. So when do you expect that you would be able to bid at a much faster pace, at to the level that you have the potential to go for the bidding?
Mr. [Chirag] , look, I think I can say that we have already picked up a good pace because we have submitted some bids, some results have been declared. There are some bids where we are awaiting results, and some of them are large bids. To the tune of INR 3,000 crore, INR 4,000 crore single bids are there. In addition to that, whatever jobs we are bidding right now are completely protected against any kind of, I can say, schedule impact due to elections or anything, because they have already been approved for bidding. So these bids are going on. I will say from, we have targeted 15- 20 bids, which we will make in this year, and we are well on track of doing that. You will see more and more of this becoming evident as we move on from this quarter to next quarter.
You can see more of HCC's bids into the market.
This is helpful. Just one small clarification. When you say 15- 20 bids, should we assume that for you, the sweet spot is around INR 1,000 crore of an average bid size, or today you are confident of putting up our bigger bids also? On an average basis, I am saying some bids would be big, some would be lower, but what is the average sweet spot for yourself that you look at today or for next two years?
I will say for us it would be INR 2,000 crore+ .
INR 2,000 crore+ ? Okay.
Yeah.
Thank you. Thank you very much.
Thank you, [Chirag].
Mahesh, you may please start.
Yeah. Just one small question. You mentioned the fact that we were L2 in a metro project. Now, I know some large cases, whereas in large projects, even L2 contractors get some work. Are we expecting some work there?
No, Mahesh.
But it does happen occasionally, right? If one matches the L1 price and the contract is large, you get some work. Not in this specific case, I am saying, but it does-
No, but I will say, we have not come across this unless it is some private entity bid which wants to split the bid into two parts.
Okay.
But normally the government procurement system goes by a very well laid- out process. Once you are technically qualified, and if you are the lowest bidder, they have to award the job to you fulfilling all the criteria.
Santosh, maybe the question is relating to a situation where you actually have a number of packages which are sequential on a similar line, and then the—
Yeah.
—client actually specifies a restriction that one contractor can't actually win more than—
Correct.
—a certain number, one or two, in which case there could be theoretically a situation in which an L2 bid could actually become—
Awarded.
—awarded the project because there is a restriction on any one contractor getting more. But those are very unusual situations.
Yes, sir. That is right.
Okay. Thanks a lot. Thanks for the clarity.
Thanks.
[Surya], you can start.
Yeah, I wanted to ask. I missed the first part of the presentation. I wanted to ask, what was the reason for such a drastic drop in profit on YoY and quarter-on-quarter basis? So just INR 6 crores odd?
You are referring to consolidated numbers?
Consolidated . Yeah.
Yeah. See, as far as consolidation is concerned, definitely, there are two things which have happened. If you have seen the consolidated results, few of the things got shifted from upside to down. That is as a discontinued operation, especially what we have talked about, sale of Steiner Construction. So the results, if you compare with YoY or quarter- to- quarter, it may not be exactly comparable. Because you will see even the turnover. For example, if you take example of this current quarter, you are seeing a quarter turnover of INR 1,800 crore, okay?
Right.
In the similar quarter last year it was something like INR 2,200 crore, correct?
Correct.
That is because the turnover of Steiner Construction, which is INR 540 crore, which is shifted below and reflected under discontinued operations. If you add up that turnover above, it will match with the turnover of INR 2,300 crore, again, INR 2,200 crore. So in short, unless we make it apple to apple, it will be difficult to comment on that part, or you will be able to understand on that part. However, yes, compared to last year, there is a lower profit or a marginal loss as far as our Steiner operations are concerned, which has been captured. That is why there is a difference.
Okay. Thanks a lot. Thanks.
Yeah.
[Kenil], you may start, please.
Sir, my question was, in our March press release, we are told that we will get around INR [600] crore from Cube Highways deal from quarter three FY 2024 to quarter one FY 2025. Is that deal on track now?
[Kenil], couldn't hear you very clearly.
One second. Is my voice coming again good now?
Yeah. Yeah, better.
We heard from quarter three FY 2024 to quarter one FY 2025, we will get around INR 900 crore from the Cube Highways deal. Is that deal on track?
You will get from where? We are not able to hear you.
Cube Highways deal, the road construction project which we had sold, Brahmaputra.
Correct.
Are we going to get the equity runs in the upcoming quarters, and which will lead to reduction in debt, or it will go into working capital for the business bidding?
Yeah, we are expecting something as a part of a contract what we have signed in March, which will, depending upon the cash flow, as you know, it is fungible, so either it will be the working capital or repayment of debt. We will take appropriate call once receive the money.
Any other divestment for existing standalone on the horizon, real estate or any other road projects?
No. In our concession business, we do not have any road project now to divest.
Okay. Understood.
Yeah.
And sir, one more question. We are bidding a lot over last four to five quarters, excluding the [Bandra-Kurla], BKC order for the bullet train orders. We have not seen huge increase in order book. Should we expect a huge conversion of bids into orders in upcoming quarters? Because our order book is getting over, if we say two—
Yeah, [Kenil], so we discussed this aspect in few of the other questions. To answer you, yes, we are hopeful that the bids what we make in coming quarters, we are successful in few of them.
And one more question, sir. If we see pre-COVID, the Steiner AG profitability was way better. Should we expect similar profitability in coming quarters as the business normalizes?
Girish, can you answer this question?
Yeah, any question. Sorry, my apology. Can you repeat, please?
Compared to pre-COVID levels or three to four years ago, Steiner AG was a quite a profitable venture for us.
Correct.
But over last three years it has been loss-making. So should we expect as you are divesting the asset, loss-making asset, so you will get more profitability from your real estate business going forward?
Yeah. We have been explaining this as a part of our normal investor conferences all last few quarters, that presently after post-COVID, due to affecting supply chain, plus war with Russia and Ukraine, so on and so forth, there has been a slowdown as far as European market is concerned. That's why there is definitely, compared to the profits what we had in past, there are something either marginal profits or no profits. However, things will improve. We expect that to improve with two things, that sale or divestment of construction business, which was making losses as you rightly observed, and naturally, the improvement in the overall market condition.
Okay. Could we get a big value from the divestment of construction business, which will help in reducing overall debt, or it will be a slump sale basis or low value?
Let's wait for a quarter.
Okay.
I can't make a forward-looking statement.
Okay. Understood. Thank you.
Next quarter I will answer you with numbers.
Okay. Thank you, sir. No problem.