Good evening, everyone. Welcome to the HCC's Investor Presentation for quarter one, FY 2024. We will start with the order backlog position. The order backlog position of the company as on June 30th, 2023, is INR 13,568 crore. Like the previous quarter, the order is still spread largely across the transport sector, followed by hydro, then nuclear and special projects, and water. We have submitted couple of bids during the quarter one of FY 2024, around INR 2,000 crore. There are more bids under evaluation to the tune of INR 3,000 crore. The focus of the company will remain, again, in line with what we have discussed in the past, that we are going to continue to focus on high-value jobs in urban infra, underground structure, and hydropower space, and couple of selective jobs in nuclear power sector.
The key highlights for Q1 FY24 with the consolidated group revenue is at INR 2,564 crore in Q1 FY 2024 versus INR 2,228.9 crore in Q1 FY 2023. We have a consolidated profit of INR 52.7 crore in Q1 FY 2024 versus a loss of INR 280.7 crore in Q1 FY 2023. This quarter, the Q1 of FY 2024, in fact, we have done the highest turnover in the Q1, and it is also almost 27% more as compared to Q1 FY 2023. We have a standalone net profit of INR 18.9 crore in Q1 FY 2024 versus a loss of INR 150.8 crore in Q1 FY 2023. EBITDA margins are standing at 12.6% in Q1 FY 2024 compared to 10.4% in Q1 FY 2023.
This top-line growth what we are witnessing is a result of implementation of various project streamlining initiatives, very tight control on operations, and all the good practices are being put into the projects to speed up the progress. We have also achieved the project completion certificate for Mayur Vihar Flyover. It is a project in Delhi. As a focus on the closing out of completed projects, we have been successful in closing two of our old projects called Sone Bridge and Sainj Hydroelectric Power Plant. The demobilization is completed at these projects. At the Pare HEP in Arunachal Pradesh, the demobilization is in progress. Few of the operational updates. What you see before you is the Anji Khad Bridge. Almost 85% of the job here is completed. You can clearly see in the picture that the bridge is now connected on the other side.
A very delicate portion of the construction now has been successfully completed. We are completing the remaining connecting portions, and we are targeting to complete this job by end of this year. Delhi Metro DC-06 is again our fourth project with Delhi Metro, and here almost 90% of the project is completed. The tunnel works are completed, and what we are doing is the final concourse slab, along with the other finishing activities. The picture on your right is about the cross passages, which connects the two tunnel together. This was little difficult in this project because of the very high water table, but our project team has very successfully completed this exercise. Tehri PSP. What you see here on the screen that electromechanical works are in progress and upstream search shaft lining is also in progress.
All the works of the civil and electro-mechanicals are progressing as per the schedule. Vishnugad Pipalkoti, which we have been discussing for last few months. The TBM drive here has recommenced successfully from 14th July. With all the technical precautions, we are moving ahead with the tunneling. This is a 12 km long HRT with 10 m diameter, on whose the construction by TBM has recommenced now. Nikachhu is in Bhutan, and you can see on the project that one of the radial gates is open. That is basically for the flood control. But two gates have been commissioned, and there is remaining one gate, which will be again completed by October 2023. It is progressing well. This is an important project, Tunnel T49A in Jammu and Kashmir, a part of Udhampur-Srinagar-Baramulla Rail Link project. This project is also nearly 90% complete.
We have completed almost all the tunneling and the lining works. Now some remaining ancillary works are in progress. This also, some variations have been added, which we believe we will be in a position to complete by March 2024. Rajasthan Atomic Power Plant. Now the handing over formalities have begun with Department of Atomic Energy. Project stands almost 99% complete. Mumbai Metro. This project is a part of the Line 3, and here you can see that now the MEP works are in progress at different stations. On your picture on the left, you see the CST station, where the mechanical, electrical, and plumbing works, along with finishing works, are in progress. Kalbadevi, which is an NATM station. Now we have started the OTE duct erection, and other finishing works have already started here.
These are the pictures of Girgaon Grant Road station, where now in the picture on your right of the Girgaon Grant Road station, where the final NATM works are in progress now. With this lining completion, NATM works will be completed here. Finishing works are going on in full swing along with ancillary building. Girgaon, the NATM here is still in progress. We have some 40 m-50 m of work pending, and that we are also targeting to complete over the next few months. Together with all the structural works will also be completed by August, and then the finishing works will start at this station also. This is the picture of Mumbai Coastal Road project. You can see on the slide that the superstructure erection and the bridge erection is in progress.
We are going to complete the bridge erection in this project by April- May 2024, followed by the finishing works. The surface level roads are also being targeted to complete by the end of this year. The works are progressing as per plan. Also for the variation work, which was the long span introduced into the project, we have been progressing as per schedule, and this will be also completed again in line with the targeted completion date of June 2024. These are the financial numbers of consolidated financials. They are on your screen. I am not going to read the numbers, but they are in line with what we presented in the opening slides. We can discuss this at the end of the presentation. These are HCC standalone financials. As you can see, Q1 FY 2024 revenue is INR 1,230 crore, up from Q1 FY 2023. Coming to HCC Concessions.
This is the BFHL project where the Bhagirathi Bridge is almost completed except the left-hand carriageway. Here also, the target of the company is to complete all the civil works by December 2023. Steiner AG. The closing order backlog of the company as of June 30th, 2023 is CHF 892.5 million equivalent to INR 8,054 crore, and for the Q1 FY 2024, the order intake of the company is CHF 59.5 million to INR 537 crore. Other key financials are given on the slide. Thank you very much, and now we will take questions.
You may please put up your hands while asking questions. Okay, Arushi Shah, you may please start.
Hello.
Yeah, Arushi.
Am I audible?
Yes.
Yes.
Yeah. Good evening, sir. Thank you for the opportunity. I just wanted to know basically that the unbilled revenue which sits in our balance sheet, what is it basically? If I could get a rough idea of that. Usually, the contract assets which usually sits in the asset side.
That's right. Yeah, Girish Gangal. What you're saying is right, but along with this result, we are not presenting any balance sheet as such. For the first quarter, we don't have to present any balance sheet. I'm not aware where you are getting these numbers.
No, sir. Per se from the other annual reports. Previously also. I just wanted to get an idea what it is basically?
No, it is the revenue complete work. Whereas work, I am unable to bill it because of the certain norms of a project. Unless I complete a particular portion, I cannot bill to the client.
Okay.
So that sits into unbilled revenue. Yeah.
Okay. Okay, sir.
Thank you.
Anybody else, please put their hands up. Mahesh, please go ahead. Mahesh, you can unmute and start.
The first question I have is, can you hear me?
Yes. Go ahead.
The first question I have is what is the revised timeline for this separation SPV? There were some small procedural things that were pending.
Mahesh, we lost some of your voice in between. Can you please repeat the question?
What is the revised timeline for the debt SPV that we are making? What is the revised timeline? When will the debt go off our consolidated balance sheet?
[Gangal]
Yes, Girish. Please go ahead.
The company is already separate. The debt will go from a consolidated balance sheet when the investor is inducted, which is pending some approvals from the bank. Majority of approvals have been received. We can expect by end of current quarter, we should be through with the separation of this debt from the consolidated balance sheet.
The second question is, if one looks at some of the construction companies, obviously, every construction company has its own profile. But there is a lot more order winning activity there. Are we actually, let's say last six to nine months, have we been a bit more internally focused trying to address the problems inside and have slowed down a bit on the bidding activity? I am talking of last six to nine months.
Mahesh, to answer your question, look, I think we have been through a period where we had taken a conscious call to first streamline our existing operations and focus on our projects delivery, coupled with the other set of requirements which were to be met with, especially the banking requirements. We have been working upon that. And what you see that the decline in order intake of HCC has been a function of that particular case. But as we are speaking now, we are fully geared up. In fact, you can see that already the company has submitted direct bids, which we are making for our metro clients and also for some of our road sector clients, plus some other sector also, we are completely focused. You will see actually a good amount of increase going forward.
As you rightly said, the previous journey, what you see was quite calculated and quite well thought of. As a part of our growth strategy, we are very well focused on bidding for new jobs. We have identified a good set of bidding pipeline for us, and we are working on that.
Thanks a lot. One last question. There is always some fluctuation in the profitability, but over, let's say long-term, six to eight quarters, what kind of net profit margins could one expect in Steiner AG?
Rahul, can you please take this question? Or Mr. Dhawan, if you would like to take this question.
Look, I think we've not generally given guidance on profit margins. But in the past, if you look at Steiner AG's business and what we expect to continue, I think that it would be safe to say that we should be doing 3%-5% margins going forward. That's because we've lowered the risk in the business. A typical construction third-party TCGC business in Switzerland has been in the range of about 2%-3%, you know, PAT. I think that we would be able to probably maybe see some of that increase as we go forward. But at this stage, I won't say anything further. We can talk about this perhaps in the coming quarters when there is something for us to actually communicate.
Thank you very much, sir, and all the best with your future.
Thank you, Mahesh.
Chirag Shah, you may please start. Chirag, kindly unmute and start.
Yeah. Thanks for the opportunity. Sir, the first question I had was, with respect to your order book, can you indicate the number? Because I missed that actually in the presentation.
Chirag, as of Q1 FY 2024, our order backlog is, I think, INR 13,700 odd crores.
INR 13,000 crore. Has there been any inflow?
No, not in Q1. There are bids which are under evaluation, which we have submitted now.
Okay. Sir, second question is, what I am trying to also understand is how much worth of orders you can bid today, given the amount of bank guarantee you have, plus networks, plus other criteria. So what is the kind of order you can bid today and how many worth of orders we have actually put the bid, waiting for the outcome?
Look, as we have presented, I think already bids worth INR 2,000 crore are already submitted, which are under evaluation. We are currently in the process of evaluating bids worth INR 3,000 crore. If you ask me in terms of our preparedness, we are prepared to submit bids to the volume of around INR 25,000 crore- INR 30,000 crore.
Okay. Is there higher competitive intensity or it is more inward-looking house correction activity? Because the amount of bids that you are putting across and the amount of bid that you can put across, there seems to be a reasonable gap. So when the traction of actually submitting bids, because you may not be alone in every bid, right? There would be some areas where you may miss out.
I think fairly, you put the point. As we said, we have right now, for example, in this quarter one, in terms of numbers, we have around five bids, which are directly HCC bids, which are under evaluation, which are already submitted. And we believe that we will be submitting another 15- 20 bids, going forward. You can see the activities picking up also in line with what we are observing into the market. And as you might have noticed, we have declared that we are going to focus on certain type of jobs, which are the inherent strength of the organization, like large-value urban infrastructure projects or projects in underground sector, hydropower space. So those are identified, and you can see this, I can say, a very constant approach from us from quarter two onwards.
Okay. And sir, one last question, or rather two. One question, one suggestion is that, can you make some comment on the announcement that you made with respect to fundraise? So what is the thought process? By when do you intend to complete the process, et cetera?
I will let Mr. Gangal answer this question.
Yeah.
We are looking for the right opportunity to announce that. Right now, immediately, we don't foresee. We have taken in-principle approval, but maybe during the year, sometime we'll come out with the exact plan.
Okay. It's more of an in-principle approval you are taking right now?
That's right.
Okay. One last request. If possible, if you can keep some time between the call and the uploading of results and PPT on the BSE, so we get a chance to just glance through them.
Kiran, well noted. Our apologies for that, because due to some technical issue, we lost actually one hour. But we certainly keep your point in mind. We will take care of this part.
Thank you, and onwards.
Thank you. Thank you very much.
Sunil Shah, please, you can start. Sunil Shah, you can unmute and start.
If Sunil Shah is not responding, I will go.
Hello.
Yeah.
Hello. Can you hear me?
Yes. Go ahead.
No, my question was the same. What about the second agenda of the raising of fund? I think so you have explained it. You have taken on in-principle approval. Nothing much to add. Thank you.
Okay. Thank you. Kinil Omkara, you may please start. Kinil?
Hello. This year, majority of your old projects are going to get completed, such as Tehri PSP, and there is Mumbai Metro, and there is Rajasthan one, and also Nikachhu HEP hydropower plant. Should we expect higher revenue booking in coming quarters due to the completion timelines, which will lead to some bump up in margins sequentially? Am I going correct? Hello?
Kinil, we can hear you. Look, I think our operational performance is going to be a function of the kind of projects we are into. We can say that our target would be to do better than what we did last year. We are all set in that direction because we can't make some futuristic statement here. You will appreciate that.
Okay.
Generally, yes, we will make an effort that we do better than what we did last year.
Okay. No, because majority of your contracts are old contract, which were at a cheaper cost when you had bid it. Due to higher raw material cost and everything, the margins are sequentially lower over the last few years. As your old contract gets out and new comes in, your margin will sequentially bump up as soon as you get order inflows. I was talking in that way. Am I correct?
Yeah, look, I think that is going to be a mix of what we secure and how it happens, but you'll also appreciate that the new projects will also take six, seven months to really come to a stage where they start generating margins.
Okay. Would like to know, for the Cube deal, have we got some equity consideration?
Yeah, I'll ask. Let my colleague, Atul, answer this question.
Hi, Kinil. Yes, we have received the consideration because the transaction in March of this year.
Okay. Have you received the full amount, INR 650 crore, or is it part consideration now?
A part of that is for the balance completion of the project. Except for that, we have received the consideration.
Okay. Sir, would like to know, in your result summary, you have written you have generated a good cash flow amount. Is it due to claims coming in, or is it due to general business operations, working capital getting reduced and operation margins increasing?
It is basically from claim account, plus it is on operational revenues.
Okay. What will be the amount, sir? Approximate, if you can provide.
Can't segregate that way, the cash flow available from the operations separately. I don't know from where you are getting these numbers also.
No. You have written you have generated a good cash flow amount during this quarter in your result summary, first page.
Yeah. It is a comment on the basis of the estimated revenues, what we are planning is higher by 27%. From that perspective, it's a comment that we have generated a better revenue.
Okay.
Yeah.
Okay. Understood. On the upcoming project bid, should we expect the bid amounts will be in range of INR 3,000 crore- INR 5,000 crore like AOR or even BKC bullet train orders? Or should we expect it will be around INR 1,500 crore, where majority of the competition is?
Kinil, I think, as we have said in the first slide also, we are going to focus on projects where we have inherent strengths. This is a little difficult question to answer that what range it would be. But I think we will be going to be more focused on jobs which fit our execution capabilities and our strengths. Now, I think INR 3,000 crore or INR 4,000 crore is a kind of number where we are very comfortable executing on our own. But if the sizes are big, we will also like to have right kind of joint ventureship, partnerships, and other things.
Understood.
But I think that is not a parameter. The size is not going to be the parameter basis which we will choose our projects.
Understood. No question further.
Thank you, Kinil.
Hello?
Yes, Surya, please go ahead.
In which segment do you see the most projects coming from in the next one year?
I will say urban infrastructure and roads, especially the greenfield expressways, will continue to drive the segment. To summarize, this will be the transport segment where you will see a lot of activity going on.
Okay, what is the total amount of hydro tenders coming up for bidding in the next six months?
To our knowledge, if you look at the hydro sector, it is a fairly. In hydro, we are going to consider pump storage and other things.
Yeah.
We are clearly seeing that at least bid worth INR 30,000 crore- INR 40,000 crore are there.
Which state should contribute the highest?
North and Northeast.
Okay. You mentioned underground structures. What do you mean by underground structures?
They are largely metro tunnels. Metro tunnels for metro train or, for example, even if you see nowadays, lot of tunnels are being made, which are below the mountain. That is what we mean by underground structures. Tunnels for transportation and also tunnels for hydropower projects or tunnels for any other purpose.
Okay. I have a last question for Mr. Arjun Dhawan, that in our resolution, the final step, which was transfer of SPV debt to the investor, has it been completed yet?
I think, Surya, that question was asked by someone a while ago also, and we answered that question, that there is some minor procedure pending for which these things are awaited for.
By when can we expect all the pending approvals to be completed?
We expect by this quarter end, we should have those approvals.
This quarter end?
Yeah.
Yeah.
Okay. And one more thing. What is our current debt on consolidated basis, on HCC consolidated basis? Current debt.
INR 5,200 crore.
Hello?
INR 5,200 crore.
INR 5,200 crore. And after the transfer of SPV debt to the investor, what will be the total debt remaining on the group?
Something around INR 2,600 crore-INR 2, 700 crore.
Okay. So it will be deduction of around INR 2,900 crore, correct? INR 2,700 crore.
50%, you can say roughly.
50%. Okay. That's all. Thank you.
Yeah, Saurav, please go ahead. Saurav, can you hear us? Mayank, can you hear us? Hello?
Hello.
Yes.
Yeah. Okay, my question is regarding Lavasa. After the approval of the resolution plan, how will it impact the liabilities which we have in our books?
Sorry, what is your name? Because we can read-
Riddhi. This is Riddhi here. Oh, yeah, it is my device. Yeah.
Riddhi, Mr. Gangal will answer this question.
Yeah.
As far as HCC per se is concerned, HCC has already taken a debt related to Lavasa's corporate guarantee. We don't foresee any change as far as HCC is concerned in its books.
There is no impact, what I mean.
I think there's a liability of INR 1,000 crore in our book, which is pertaining to Lavasa, right? Hello?
Yes, that is right.
Okay, so that won't go away?
That is accepted and is converted also already into NCD.
Sorry, I did not get you.
That liability which you have taken on HCC books.
Yeah.
Has already been converted into non-convertible debentures with a varied payment term, so that cannot go away.
Okay. Apart from that, there will be no other.
There is no liability. We have booked everything whatever we had.
Okay. Thank you.
Good evening, everyone. Mayank Desai.
Yeah.
I was going through the results. We see improvement on year-to-year, but we are not good at operational performance if we compare with quarter-on-quarter. If we compare the result with March, then I think there is a shrink in revenue and profit. Is there any reason, or is it due to the nature of this construction thing?
Mayank, that is largely the nature because, in fact, normally, if you see for almost all companies, the March ending quarter or the Q4 is normally something which is a very good one, right?
But it is not something significant. We are seeing this as a good progression over what we did last year versus this, compared to that nature. Nothing abnormal here.
Okay. Coming to Steiner AG, the profit is very less. Because it is only 11 crores, I think. I did not get time, but I think I have seen in that chart, whatever it is given. So it is very less, right? Because the amount of profit it generates, if we compare to that, it is very less. Is there any significant reason I can see?
I think, Mike, that is also a function of, I can say, the nature of those markets. Especially the nature of construction business in those markets, wherein we have fixed but quite less value of these profits, and then the results are reflecting that.
Mm-hmm. Okay. I think you have posted the rights issue for a value of INR 300 crores. Any price will be finalized in AGM, or how it works?
Girish, would you like to answer this question, please?
Can you repeat, please?
Sir, you have mentioned the rights issue for a value of INR 300 crores, but you have not mentioned at what value you will be issuing that rights. Would it be decided after that AGM, or is it something taken over after that?
We have mentioned already, we have taken in-principle approval right now. Whenever we decide finally go for it, that time all these things will come up.
Okay. Just the value is decided now.
That is it. Overall value, it is a value approval we have taken, in-principle approval.
Okay. Another thing, I think, instead of rights issue, you mentioned another case. I do not remember. It was like you were going to raising capital, right? Or something. I do not know.
When you take a in-principle approval, naturally, you would like to have various options which are available to raise capital through capital market. So it can be preferential share, it can be QIP, it can be rights issue. Mode can be anything.
Okay.
Yeah.
This amount will be used to further bidding the projects, or how it will be? Because you mentioned you have substantial cash flow, right? Still you require this? Or how it works? Or it's something the promoter is looking to raise equity share, or how is it?
A different thing. One, this is for working capital requirements and growth.
Okay.
What we have said, only that cash flow is good in the sense, because we have done a good turnover this quarter, the cash flow appears to be good. That doesn't mean that overall cash flow situation extent that we don't require any funding to come in through equity raising.
Okay. Got it. One last final question. We have gone through this debt restructuring, right? We are not seeing what we expected, like the interest servicing, right? You said interest servicing will happen, I think, another couple of quarters. But the benefit, it is not getting in results due to it is not getting transferred now. You mentioned it will be transferred by end of this quarter.
Linking two different points. As far as interest payouts are concerned, these interest payouts are only annual as per the resolution plan. That happens only in March every year.
Okay.
Now, the questions were raised about the investor, wherein we created a special purpose vehicle and where we transferred assets and liabilities to a separate company. The questions were raised by earlier investor that when possibly these liabilities or this company will get de-recognized from HCC Group.
Okay.
Since we are likely to get an investor in that company. To answer that is likely to happen by end of this quarter when the all approval process from all the lenders is completed.
Okay.
Interest payout and liability reduction is separate than the de-recognition of this special purpose vehicle from HCC Group.
All right. What is the difference in financial obligation? Is it going to reduce, or is it something? We are seeing very less profit now. We were expecting if the resolution is done, and we have passed a couple of quarters now, I think it is almost six months. six, no, nine months now. We are not seeing much improvement.
Take a little more. If you compare this quarter results, okay, turnover and quarter results, vis-à-vis June of last year, wherein we had a resolution plan. We had a loss of INR 150 crore, wherein this quarter we have a profit of INR 20 crore.
Okay.
Similarly, if you compare March of 2022 and March of 2023, March 2022, we had a loss of maybe INR 400 crore. I do not recall the exact number to the large digit. Whereas in March 2023, we had a profit of INR 250 crore. So there is a substantial difference which has happened post-resolution plan.
Okay.
I do not know from where you are getting this impression that we did not improve or we did not have any results which are reflected.
No, I am talking about finance cost.
Finance cost last quarter, if you say last June, it was INR 243 crore, which has come down to INR 137 crore. So it is a INR 100 crore reduction which has already happened.
Okay. No, because I was checking the consolidated basis, so there I don't.
No, but still, till the time the SPV doesn't get de-recognized after introduction of investor, that cost will remain in the console books.
Okay. Got it. No, because what happened, the result got published before this meeting, so that's why we couldn't get time.
Results have already sent. There is a little apology from our side, for there is a technical hitch while when you load the results.
Or else you can schedule the call at 6:30 P.M. if it is fine, because at least we get an hour of time to go through with it.
Sure.
Okay. That's it, yeah. All the best to you. Thank you.
Yeah, hi. Can you hear me?
Yes, Neeraj.
Yeah. Just one question on the order book. I think you said, when Chirag Shah was asking a question, you said you have capability of submitting INR 25,000 crore -INR 30,000 crore of order. But you have only INR 2,000 crore order being submitted, and by that run it will be another INR 7,000 crore-INR 8,000 crore additional. So what is stopping our company to bid on a larger number? Because capability-wise, we don't have an issue. Just wanted to understand your thought.
Yeah. So Neeraj, I think we are working on the bids which we have identified, and though you are rightly saying there are a lot of bids into the market, but maybe they are all not where we want to be. For example, we don't want to be on plain vanilla roads. There are a lot of tenders for that o r there are some other sectors where we are not present. So the sectors where we have identified the jobs, they are pretty large size jobs, and the work is already in progress. As I said, it is very difficult to say, will this be the thing? Maybe we are looking at a job which is in excess of some values, what we are used to. Right?
We are working on those projects, and you will see that our Q2, Q3 and Q4, we believe we will be in a position to submit this. We are also working on bids where we have a good hit ratio, so that we do a good job and we have higher chances of winning such jobs.
Okay. I am curious. We will not run in a situation where we have not bid for projects, assuming that we would want to bid on projects in which we have very high hit rate and higher margins, but those projects also may not end up coming in and we may end up with a lower order book. I am just thinking on that side. Is that a possibility?
No, because naturally when we are selecting a bid, I think one of the important parameter is also the bid timelines and the bid schedule risk. For example, it should not happen that, as you rightly said, you are working on something and it is not just going to come. We do this due diligence before finalizing our bid slate also. We are pretty confident that what we are working upon should be something which will get to an order in this financial year.
Got it. What is your internal estimate of-
There is a lot of time lost.
Got it. What is your internal estimate of the order inflow for this year?
We are targeting, you can say, anywhere between INR 6,000 crore-INR 9,000 crore.
Okay, which will be a jump from the last few years of average. Am I right?
Yes, and most of these bids are going to be for HCC on a standalone basis.
Okay. The second related question is, you have been bidding bids in a joint venture where I think you only require some financial capability from another party, not obviously the operational side. Do you intend to do joint venture bids going forward?
No. Just in the initial part of the presentation, we said that we are going to focus on bids where HCC has a much larger role in executing those jobs. We are focusing on jobs wherein we are fully controlling the project. Joint ventures, we will only look at projects where from a risk-sharing perspective, it makes sense for us to go into a JV. Otherwise, our effort is largely going to be to bid the jobs on standalone basis.
Okay. I think I'll come back in the queue if needed. Thank you.
Thank you, Neeraj.
Hello?
Yes.
Hello.
Yeah, Sanchita, yes.
Yes. Hi. Good evening, sir. I just wanted to ask that once this SPV stake sale takes place, on a consolidated basis, what would be our PAT margins once this deal happens?
Yes, I'll let my colleague, Mr. Girish, answer this question for you.
You can't make that statement, and transfer of stake, the profitability or whatever cannot be estimated now. Because it's a function of various things. It can't be estimated. It is a combination of operational result. It is a combination of arbitration and claim positioning, et cetera. It can't be estimated.
Okay. All right. Thank you.
Yes, sir. So just one clarification. I think initially you mentioned that we can bid for INR 25,000 crore-INR 30,000 crore worth of project. So, hypothetically, if we win everything, so does a bank guarantee allows to take that kind of project, that many project, or it's only INR 9,000 crore or INR 10,000 crore that we can do, that's what the target is?
Vishal, I think it is a highly unlikely situation that, yeah, there could be 0.1% probability that we secure everything that we bid.
I don't think that situation will arise. We do understand what kind of capabilities we have right now to take on our head as a simultaneous operation. We believe that INR 9,000 crore-INR 10,000 crore is a good number for us to handle for this current year.
Yeah. In a way, one can say that that's a kind of bank guarantee that is available with us to get the projects.
We are bidding for the jobs with a clear backup in our head.
Okay.
Look, I want to interrupt here. While I think that at any point in time, your existing sanction limits mathematically determine what your capacity is, it is also dependent on our rapid execution of our existing order backlog, the return of those guarantees, and that's actually proceeding well. Furthermore, it also depends on our access to capital. Obviously, it goes without saying our internal technical strategic capacity, execution capacity is to exist. But frankly, at this stage, the interest that we're seeing with regard to whether it's partnerships, whether they're strategic or financial, or for that matter, our ability to actually access capital once we start to actually generate that INR 6,000 crore, INR 8,000 crore, INR 10,000 crore of order backlog and execute, I don't think that that will be the constraint.
The goal is to be responsible about the kind of jobs we take to show the track record that this company is actually capable of executing, and that's something that we plan to do, not just when I use the word conservative, it doesn't mean that we will not grow fast, but we will do that in a sensible manner.
Okay, sir. Sir, one more clarification. I think one is-
By the way, sorry to interrupt. There was a question by a lady before, I think it was by Sanchita. I think that while our finance team is always going to be reluctant to give you that kind of precise mathematical answer in terms of the improvement in margins, it goes without saying that a company like ours, that has actually been shackled to some extent by restrictions that we had to undergo while we were going through our debt carve-out. Once we actually have all the parts of the business humming well, we have a freer access to capital, which we now do.
You will certainly see, I think if you compare kind of where our profitability has been historically, and I am referring not only to sort of our EBITDA margins, we have given that guidance, in terms of where we expect those to be in the low to mid-teens, along with the fact that now we are free to execute further. If we are able to acquire good jobs in the next year, you should probably see some expansion in margins, and you should see some of that actually flow to the bottom line.
Okay, sir. Sir, just one clarification. I think there are fundraise, you did mention in-principle approval that has been taken, and then there is a fundraise for the carve-out of the debt. So they are two separate thing or they are one and the same thing?
Yeah, they are two separate things.
Okay. What is the amount for the carve-out of the debt, the equity raise in that side?
Girish, back to you.
I think the approval what we have taken is only for the equity raise at HCC level. There is no separate approval taken for SPV for any equity raise. As far as SPV is concerned, only the investor will come in there. That is all.
I thought the question was regard to the invest-- Yeah, clearly they are two different things. The investor process, which is part of our resolution plan, and then obviously this is a completely independent HCC in-principle approval, which is for the purposes of obviously our growth opportunities that we see in working capital.
Okay. If I can ask, so in the carve-out of the debt, so the investor will come. So what is the amount that has been envisaged in that particular thing?
The expected investor is supposed to take 51% shareholding depending upon the valuation of the company on particular date. Apart from that, investor is supposed to bring in priority debt of INR 75 crore. This is the discussion what we are, or approval which is pending from the lenders.
Basically around INR 100 crore of capital is the basis on which we've proceeded and that covers at least a couple of years of budget expenses. Then, as we've discussed before, the commercials are such that while the investor is actually putting in a relatively modest sum compared to the assets on the books of the SPV, the investor's returns are also capped to actually account for the fact that these are largely HCC assets that will come back to it after the debts are paid and the priority debt is repaid.
Okay. Sure, sir. I'll come back in the queue for more. Thank you so much.
Sir.
Thank you for the opportunity.
My first question is regarding the finance cost. In quarterly results, there is finance cost is approximately INR 250 crore and consolidated debt is approximately INR 5,000 crore-INR 5,500 crore. Is it correct or something is missing which I am missing in this? As per this mathematics, the interest cost coming out around 18%-20% per annum. Can you explain?
Yeah. See, finance cost typically is not only the interest cost, what you have seen. It consists of all financial, like bank guarantee cost. It also consists of any finance, related fees, what you pay to various financial institutions for approval of loan or documentation. It is not only purely interest.
Okay. Interest will be going only on this INR 5,000 crore-INR 5,500 crore of consolidated debt, which is in our books only, yeah?
That is right. Yeah.
Okay. The second question is just a clarification, that right issue, we have mentioned that up to INR 300 crore, value of right issue will be there. This INR 300 crore is the face value of share, or we can say, will be the final price of this?
No, price, as I said, this is an in-principle approval.
Yes.
So price and all those things will be determined or discussed only when-
Yes, sir. That I got. I just want to know that these 300 crores of number of share, we can say, of INR 1 each can be issued, or total value of-
No, total. Including premium involved. Yeah.
So including premium, the value will be INR 300 crore?
That is it.
Okay. One more just request if it is possible. In our PPT, we are giving our project status by giving pictures and like that. If in addition to that, we can add a statement where we can see the particular project is there, where total project value we can mention, executed amount, and expected to be executed amount, and balance, we can say, amount which can be expected by some period like that. So that will be much easier. Right now, we are saying that we are having INR 13,000 crore of project in our hand. So if you can give that kind of slide, it will give a very good idea to us so that we will be having an idea that in a quarter or so, in coming quarter, how our revenue will go like that. If you think it can be done like that.
Yeah.
Just a request.
We will review that. Just for your information, in the presentation, what we are giving is only the important projects.
Okay, sir.
There may be four or five projects, whereas the order book which consists of maybe 40 projects. That way you will not be able to compare or find out what is the value executed and what is the balance.
In that way itself also, we can like for out of INR 13,000 crore, might be that our main project will be of INR 6,000 crore or INR 5,000 crore.
That's right.
So we can give detail only for those only. That will also, I think
We will review that interact.
Okay, thank you. Thank you, sir. Thanks for giving the opportunity, sir.
Hello?
Yes, Mahesh.
I had one question. In February sometime, the government had-
Yes.
introduced Vivad se Vishwas II, which had some sort of implications for construction industry. I am certain you would have analyzed it inside HCC. What is our take on that?
So, look, this Vivad se Vishwas scheme has been working in the industry for some time, and we are aware of that. We are going to evaluate this on a case-to-case basis rather looking at a full kind of situation. We believe this could be useful, but we are in the process of evaluating, and we will seek our board approval at the right point of time when we want to enter into that.
But prima facie, are there any cases where the scheme is relevant to us?
No, I mean, for the industry, if you really ask me, on a court order, let's say, on a court has upheld the arbitration award, the government is willing to pay you 85% plus 9% interest, and that will depending upon the function that how old or new the award is, I believe there would be takers for that.
No. I'm not talking of industry, I'm talking of HCC. Because one of the things, all the cases inside a project needs to be closed.
Mahesh, as I said, we are going to evaluate on a case-to-case basis because we have several arbitration awards, and they need to be studied in that fashion. Those which make sense for us to really take it forward, we will take our board approval, and then we will move ahead on.
Mahesh, the answer to your question is yes. We obviously have a lot of arbitration awards. It was definitely, on one hand, very attractive for us to consider the immediate liquidity that will actually come from Vivad se Vishwas, and that percentage settlement is ranged from 65%-85%. As you will appreciate that to the extent that we have to leave a lot of money on the table, we have also an impact on our books that we have to ascertain. So, as Santosh said, every award requires that analysis. We're in the process of completing that, and we will then determine, depending on our cash flow needs, whether we want to proceed with certain awards or not.
Because obviously, the implications of going for it is that we would actually also then have to leave certain money on the table, and it would actually have an impact on books. We want to do things in a way that maximizes, to some extent, the liquidity that would be generated for the purposes of growth alongside the money that we would be leaving on the table. We will, at the appropriate time, once we have evaluated this and taken board approval, we'll obviously be communicating that to you.
Cool.
But yes, it is certainly an option. It's a free option in our hand, in the industry's hand, to do something that I think that the finance ministry has been very bold about, coming up with a one-time settlement scheme, no questions asked, at the options of the industry. So we will come back to you, and we will give you an assessment of it in a responsible fashion once we've decided internally, and we will communicate it to after you.
I was probing into this mainly because in the past calls, we have always mentioned the coverage of our claims, plus awards, vis-a-vis the debt that is outstanding. So which is what I think, if I remember correctly, 2.3, 0.4 times. So that number mention of a 2.3, 2.4 times, I thought implicitly meant that we assume that some of it might not come.
No. I'm sorry. Are you implying that some might not come in the sense you believe that Look, first of all, I think that as we've said multiple times before, our arbitration awards and claims are in HCC quite boring. In the sense that they're all fairly repetitive. They're linked with extension of time, where a client has actually given us extensions because of delays on account of the client. Whether it's land, whether it's environmental reasons, whether it's other causes that are not the responsibility of the contractor. Very different from other equity-type claims or arbitrations and so on and so forth. So, in that sense, they're highly predictable, they're fairly repetitive, and that's actually been a function of why we've actually had the kind of support we've had to buy some time to get them.
The issue is really the process in courts, which, as you well know, is a painfully long process. As far as awards are concerned, I fully expect that all of them, unless, of course, you probably have some freak occurrence, to be largely upheld. When we actually consider taking a discount or write down against any one of them, we have to actually measure that very carefully against why we are doing so. The only reason we would do so is not because we do not believe in the strength of them, but it is actually a question of saying, okay, if we leave 20%, 30% on the table or 40% maybe in some cases, because a 9% interest is very different from, let us say, a 12% post-award interest that you have, perhaps on an old award. So, there is a further haircut that you need to adjust for.
We will need to weigh that against our opportunity cost of applying that money to either prepaid debt or for that matter, to growth. If it makes sense, in terms of a pro and con, we will consider it.
Fair enough. Thank you.
Thank you for the opportunity, sir. Congratulations on the progress that the company is making quarter on quarter to turn around the operations. I do hope that we are able to part away with the SPV as soon as possible and as indicated by the management. Just one clarification from my end. Last month, the NCLT cleared the Darwin Platform for the acquisition of Lavasa Corporation for some INR 1,800 odd crores. I just wanted some insights from you or maybe Mr. Dhawan, in the way that affects HCC or the SPV per se, like any quantitative or qualitative terms. Does it make the SPV much more attractive to a forthcoming investor or anything regarding that?
No. Let me get I think Mr. Gangal has already answered this question, but I'll give you a little color. First of all, the corporate guarantees that were given to Lavasa by HCC, which have resulted in debt-- Hang on a second, please. My apologies. Corporate guarantees that were given by HCC, in regards to Lavasa debt, have all fully been accounted for on the books of HCC. In fact, when we looked at the bifurcation of debt between HCC and the SPV, it's HCC that has actually got the Lavasa corporate guarantee debt holders on its books. The SPV has actually been largely effectively the working capital lenders, our HCC limit and our term lenders that was spun off along with our awards and claims. That's one, I think from a point of view of clarification.
Second, there is no commercial impact on HCC as a result of this resolution. In fact, when Lavasa went to IBC, we took the very painful and conservative decision to not only write off all our equity investment that HCC Group had in Lavasa, but also took the responsibility of taking on 100% of the debt obligations of the corporate guarantees onto HCC's books. It didn't matter what happened to Lavasa, whether the resolution would have actually happened high or low. The settlements that we'd achieved with our lenders achieved that. The reverse is true. In other words, now that Lavasa has actually been approved through NCLT, there will be no reduction in HCC's debt because the decision that was taken and the settlement that was achieved with lenders was basically understood that this is the fixed number in HCC and Lavasa and HCC are two separate items.
I can't-- First of all, we've not had any locus standi, as erstwhile lead shareholders on Lavasa. We've only just received certain details of what is in the public domain in terms of the order. I think once we actually look through it will just be a purely interesting academic exercise for us to actually, hopefully wish the best for all of Lavasa stakeholders to now, after such a long delay, see something that HCC Group had started, hopefully prosper in the future. But as far as HCC is concerned, we have no commercial relationship with Lavasa, including any potential liability in the future on account of whatever's decided in NCLT.
Okay, sir. That was really helpful. Thank you.
Hello.
Yes. Hello, Chirag Shah.
Yeah. Just a follow-up there. One question I had was that, given the nature of contracts you do and the risk of environment in general, be it any type of project you undertake, how are you ensuring that these escalation issues don't come up, or you are well protected against that? For that, you may need to inflate your initial application versus what you used to do in the past. If you can just help us understand internally, how are you ensuring or trying your best that these kind of issues don't come up again in future or are minimal?
Just a quick answer. Look, I think these are fundamentals of risk management. When we actually price our tenders, we do so responsibly. I don't think we chase the market. We obviously need to be competitive. But we're very, very clear in terms of the quality of our client, the quality of the contract, what the contract stipulates, and what the contract does not. Many of our clients are very reasonable in terms of their own interpretation of the contract. As far as escalation is concerned, it's a fairly reasonably mathematical exercise. Now, the question comes when projects get delayed. Clearly, if the projects have been delayed on account of the client, those escalations obviously will get paid. They're perhaps working capital issues. Again, all of these matters are priced very carefully here. Now, if you ask me what the learnings are, the learnings are very clear.
I think that if you look at the way the government in the last 10- 15 years has started to improve the quality of their detailed project reports, has started to procure the environmental clearances, the land right of ways. They've started to do that in a far, far more responsible manner than was done in the past. I think that's a learning that we've had in our India infrastructure evolution over the last 30 years. I think this government is very, very clear about execution, the quality of it, the pace of it, but they also ensure that the projects are set up to succeed. There's no point in trying to just have numbers and not actually have execution on the ground.
I think that our learning has been, as we scaled our business 20 years ago, you know, or 25 years ago to now, is that clearly we will not ever jump into a project. And certainly central government projects are at the highest levels of quality intelligence. At the state level, it depends on the state you are in and the client that you are working for. I think we have a clear learning in terms of understanding where, what, how, and we price that accordingly into the way we think about our execution.
And just to understand, what are generally the time durations of these projects or the project that you intend to build? They are generally two to three-year projects?
Anywhere between 30 months to 60 months. But on average, Santosh, correct me if I am wrong, we are looking at about 40- 48 months.
Yes.
40 to four. And last question-
That average is driven higher by a third of our portfolio plus being in the hydroelectric sector. Those projects are typically four to five-year jobs. Typically, transportation jobs are complexity. For example, including on bridges, are generally anywhere between 30- 40 months.
Yeah. Last question. So you explained to us very well on your thought process of how much you want to bid for orders and how you want to go about it. When do you think you will be prepared to accelerate the gears on that side?
When we execute.
Okay. As the current backlog starts coming in-
I think to be honest, what I can expect, and I thank you all for your support and encouragement and belief. But really, I think the proof in the pudding is going to be for us to actually have those jobs and have those very profitable jobs in our order backlog.
No. So yeah, because even if you look at last two to three quarters, the bids that you are submitting, in which you are participating are like INR 2,000 crore, INR 3,000 crore, maybe INR 5,000 crore range. Okay. Not more than so on and-
Yeah, but I covered that. I think that, to be very honest, I think it's going to take us at least a few years before we start to, on our own, bid for INR 3,000 crore- INR 5,000 crore jobs. I think that where we are in our stage of evolution, I think that our sweet spot is going to be between INR 1,500 crore- INR 2,000 crore. And if we do a job that's basically more than that, we'll probably do that in joint venture-
Yeah.
in order just for the purpose of diversification of risk.
So the way I understand it, and please correct me if I am wrong, that, say, for next two, three quarters or four quarters, you intend to bid for on quarterly basis, say INR 2,000 crore-INR 3,000 crore of orders, annualized INR 12,000 odd crore plus, minus.
No, I think that if I may interrupt, Santosh can give you the more accurate answer. I think we are trying to probably bid on twice that amount in order for us to achieve a result by the end of the year that would probably be closer to about over 12 months between INR 7,000 crore-INR 10,000 crore. Santosh?
Yeah.
Yeah. Exactly.
Yeah. I was under the impression that you are looking to participate in INR 10,000-INR 12,000 crores of orders.
No.
No. Double of that.
Double of that.
When do you expect the pace from government side to really increase or from the ordering, your client side to really improve so that you can participate in bigger orders in terms of aggregate value? Because even now, the pace doesn't seem to be that aggressive. Are the order flow orders not coming in or you are not choosing?
No, that's not. I think there are. So that's a little, to be very frank, we have to play catch-up. I think that the market for infrastructure jobs is very strong.
Okay.
Both at the central and state level, I think that we are frankly behind. We will play that catch-up. A hard question was asked last time. I think that this is going to be lumpy for us. Like I said, we're only going to be looking at four to five jobs a year that are highly profitable, that are well-suited for our needs. So you're going to have to hopefully be a little patient with us in terms of the lumpiness, in terms of how we achieve this.
Okay. Thank you. Thank you very much, and all the best.
Yeah. Thank you. Is there anyone for more questions? Because now we are approaching almost the end of the call.
Yeah. Hi. Hello.
Yes, Arushi.
Yeah. Thank you so much for follow-up question. Can I get a tentative timeline for execution of our projects? Is it possible to give me a tentative timeline? A ballpark number would do.
No, I think, Arushi, the order backlog what we have right now, we believe the average duration, if we calculate it, could be between 36- 40 months.
Okay. And just a last question. What would be a maintenance CapEx, if any, which we do on a regular basis for every project or overall for our business? Just like a maintenance CapEx as a percentage of sales or whatever, if at all.
No. I think this usually arise in NHAI contracts, which we have none actually, as of now.
Okay.
Normally, our contracts are, I won't say they have maintenance period, but they have something called as a DLP period. That is called defect liability period.
Okay.
I can said we try to do everything in a manner that our expenditure during DLP is minimized to an extent of keeping some manpower.
Okay.
It would be a very minuscule number.
Okay. Going forward, do we expect any kind of suppression in our cost side, like probably the raw material or the subcontracting? Do we expect a compression in any of those?
I mean, of course, going forward, we will take the advantage of economies of scale once we have these orders coming in, and that will help us slightly here and there. But these forces anyway are so much market-driven.
Absolutely.
Exactly. So it's very difficult to say anything on this at this stage.
Okay. Thank you so much, sir, for a follow-up question, and best of luck. Thank you.
Thank you, Arushi. Thank you.
Thank you.
Well-
Hello. Just one final question. Have we started increasing our team size of engineers and regulatory team? As over past few years, many employees would have left due to declining balance sheets.
Yes. Answer is yes. We have recruited a lot of our people whom were necessary for the business, and quite competent ones.
Okay. For our hydropower projects, are we going to bid on standalone basis or we are going with a joint venture partner? Based on track record, I think we have always bidded on standalone for even INR 2,000 crore-INR 3,000 crore orders.
You can expect a similar trend, except that if the job sizes are much bigger, and I can say more than size, also, the technicality demands for us to involve some other joint venture partners. But we would always be looking for a partner who is contributing equally and making the joint venture stronger for us.
Okay, understood. Thank you.
Thank you.
Hello.
Yes, Surya.
Yeah. You mentioned that in the next six months, we are expecting around INR 40,000 crore of hydro tenders coming up.
Yes.
I wanted to confirm, is it right? In the next six months? Did I heard right?
Yeah. If you take the announced jobs of. And whenever we say hydropower, I'd also said we are talking about pump storage plus hydropower. Both.
Right.
And they fall under the category of hydropower. This number will stand true.
Okay. And one last question. After the SPV debt transfer, supposedly by this quarter end, when will it reflect in our balance sheet? Whether it will be in the immediate quarter or in the next financial year?
I think, see, if it is completed in this quarter, then let me ask my colleague Girish to answer this question. Girish, can you throw some light on this? Hello?
Surya, what is the exact question? Sorry.
Surya, can you repeat your question, please?
Yeah. After the SPV debt transfer, supposedly by this quarter end, when will it reflect in our balance sheet? Whether in immediate quarter or in the next financial year on consolidated basis?
Same quarter. September quarter.
Same quarter. Okay. That's all. Thanks a lot.
Thank you, everyone. Thank you for your encouragement and your cooperation. We look forward to see you in the next quarter. Have a good evening ahead. We'll close this call. Thank you.
Thank you.