Ladies and gentlemen, good day and welcome to the Larsen & Toubro Limited Q4 FY 2022 earnings conference call. As a reminder, participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your telephone. Please note that this conference is being recorded. I now hand the conference over to Mr. P. Ramakrishnan, Investor Relations. Thank you, and over to you, sir.
Thank you, Steven. Good evening, ladies and gentlemen. A very warm welcome to all of you into the Q4 FY 2022 earnings call of Larsen & Toubro Limited. We have with us on the call today Mr. S. N. Subrahmanyan, CEO and MD, and Mr. R. Shankar Raman, Whole-time Director and Chief Financial Officer. The analyst presentation was uploaded on the stock exchange and in our website around 5:30 P.M. This time the presentation contains our Q4 and FY 2022 numbers and an overview of strategic plan ending FY 2026. Hope you all had a chance to have a quick look at the numbers.
As usual, instead of going through the entire presentation, I will walk you through the key highlights for the quarter in the next 15 to 20 minutes, and thereafter, I will request Mr. S. N. Subrahmanyan to take us through the key goalposts embedded in our group strategic plan roadmap.
Before I begin the overview, a brief disclaimer. The presentation which we have uploaded on the stock exchange and our website today, including the call proceedings now, contain or may contain certain forward-looking statements concerning our business prospects and profitability, which are subject to several risks and uncertainties, and the actual results could materially differ from those in such forward-looking statements. During the quarter ended 31st March 2022, the Indian economy displayed stability despite rising Omicron cases and the global headwinds emerging from geopolitical tensions. Our group performance can best be described as buoyant amidst this continuing global macroeconomic volatility. Let me now cover the various financial performance parameters for Q4 FY 2022.
Our group order inflows for Q4 FY 2022 at INR 739 billion registered a sequential and YoY growth of 47% and 46% respectively. Within that, our projects and manufacturing businesses secured order inflows of INR 611 billion for Q4, thereby registering a sequential and YoY growth of 61% and 55% respectively. Our Q4 order inflows are mainly from Infrastructure, Hydrocarbon, and defense. We have booked a fair share of international orders in this quarter. The couple of orders that we have received in Q4 have not yet been filed in the stock exchanges as we are still awaiting formal customer clearances or approvals. Now on a full year basis, our group reported order inflows of INR 1.93 trillion, registering a growth of 10% over the previous year.
Again, within that, our projects and manufacturing business secured order inflows of INR 1.44 trillion. You would recall that we had guided for up to a low- to mid-teens order inflow growth for the year. Whereas the domestic order pronouncements and tendering activity continued at a brisk pace during the year, the award finalizations were a little delayed. The award-to-tender ratio in the current year was 51% as compared to 70% for FY 2021. At a macro level, even though the central government and PSU CapEx continued at a brisk pace, the state government CapEx got deferred. On the contrary, major traction was seen from the international region, especially from the GCC countries, where the company bagged large value orders during the year.
We have an encouraging prospects pipeline of INR 8.53 trillion for FY 2023, which comprises of domestic prospects of INR 6.31 trillion and international prospects of INR 2.22 trillion. You would recollect that our total order prospects at the beginning of last year, that is April 2021, was at INR 9.06 trillion. I would like to mention here that the degrowth or the minor degrowth in the prospect pipeline over that of the last year is mainly because we have been a little selective in the opportunities that we are targeting for FY 2023. Moving on to the order book. Our order book at INR 3.58 trillion as of March 2022, is once again at a record high.
As our projects and manufacturing business is largely India-centric, 73% of this order book is India-based and the rest is overseas. During the year, we have been beneficiaries on some large orders in the Infrastructure and Hydrocarbon segments, and which is why our incremental order book has moved up from 51% at the beginning of the year to 27% in March 2022. Now, as of the international order book of INR 952 billion, which is a subset of the total order book of INR 3.58 trillion, around 76% of this INR 952 billion is from GCC countries and 13% is from Africa. Clearly, the GCC CapEx in infra and Hydrocarbon is on an upswing post-recovery in the oil prices.
The breakdown of the domestic order book of INR 2.62 trillion as of March 22 is as follows. Central government comprises 11% central government orders. State government orders comprise 29%. PSU or state-owned enterprise contributes to 45%, and the balance 16% is from the private sector. Approximately around 30% of our total order book of INR 3.58 trillion is funded by multilateral and bilateral funding agencies. As you can see from the presentation, 89% of our total order book is from Infrastructure and Hydrocarbon. Again, within Infrastructure, our order book is well diversified across various businesses, namely heavy civil, water, power transmission and distribution, buildings and factories, transportation infrastructure, and minerals and metals.
Finally, during the year, we have deleted around INR 70 billion of non-moving orders from the order book, and our slow-moving orders in the current order book is a measly 2%-3%. Coming to revenues, our group revenues for Q4 FY 2022 at INR 529 billion registered a sequential and YoY growth of 34% and 10% respectively. International revenues constituted 33% of the revenues. The IT & TS portfolio continued to report industry-leading growth in Q4 as well. In the projects and manufacturing businesses, our revenue for Q4 FY 2022 were at INR 400 billion, thereby registering a sequential and YoY growth of 47% and 9% respectively. The better execution in infra and Power segments during the quarter was to some extent offset by other businesses.
I will cover the details a little later when I cover each segment. Now for the year, both our projects and manufacturing, as well as the group's revenues, have grown at 15%, which is more or less in line with the guidance that we gave at the start of the year. Even going forward, and as a philosophy, we will continue to calibrate our execution in line with the cash flows that we generate. Finally, our current labor availability is around 263,000 as at March, which is near normal levels and more than 97%-98% of both our employees and contract workmen have received both the doses of the COVID vaccination.
Moving on to EBITDA margin, our group level EBITDA margin without other income for Q4 FY 2022 is 12.3% vis-à-vis 13.3% in Q4 FY 2021. However, for the year FY 2022, our group level EBITDA margin without other income at 11.6% is up 10 basis points over the previous year. The detailed breakup of the EBITDA margin business-wise is given in annexures to the presentation. You would have noticed that the EBITDA margin in the projects and manufacturing business for Q4 FY 2022 is at 10.2% for the current Q4 vis-à-vis 12.7% in Q4 of FY 2021. Also for FY 2022, that is the full year, our EBITDA margins in the projects and manufacturing portfolio is 9.2%, down 80 basis points for the year.
This drop of 90 basis points for the year is explained by job mix, cost headwinds, and delayed claim certification. All of you would recall that we had guided that we will maintain the margins in the projects and manufacturing portfolio in the current year at in and around the same levels of 10.1% for the last year. Although the cost headwinds were a known fact, the non-certification of client claims and the job mix pushed us behind during the quarter and impacted the annual performance as well. Our operational PAT for the quarter at INR 36 billion registers a growth of 6% over the previous year, largely aided by lower borrowing costs, depreciation, and tax expense.
The full year operational PAT at INR 85.7 billion registers a growth of 23% over the previous year despite the margin headwinds in the projects and manufacturing businesses. For FY 2022, below the EBITDA line item, lower borrowing cost, in-line depreciation charge and lower tax expense are contributing to improved profitability. The group performance, the P&L construct, along with the reasons for the major variances under the respective function heads is provided in the analyst presentation. Coming to working capital, our NWC to sales ratio has improved from 22.3% in March 2021 to 19.9% in March 2022. This is a significant improvement from the guidance that we gave at the beginning of the year, which was in and around 22.3% by March 2022.
The NWC sales moved lower during the quarter, primarily due to better collections, improved vendor payables management, and also due to the fact that the revenues moved higher. Our group level collections, excluding financial services for Q4 FY 2022 is at INR 0.43 trillion vis-à-vis INR 0.39 trillion in Q4 FY 2021. Similarly, for FY 20 2022, we collected INR 1.35 trillion vis-à-vis INR 1.26 trillion in FY 2021. The last quarter of any financial year is generally a seasonally strong collection quarter for customer collections, especially with respect to the project and manufacturing business portfolio. However, given the volatile cash flow in this segment, we do expect some variability in NWC to sales ratio in the coming two quarters of FY 2023. Moving on to the balance sheet.
If you glance through the balance sheet given in the annexures to the presentation, one will notice that at a group level, the gross as well as the net debt ratios have improved over March 2021. This is mainly due to the retirement of liabilities at the parent level, which was around INR 43 billion. Financial services saw a reduction of INR 23 billion, and development project segment reported a reduction of around INR 25 billion. Finally, our return on equity for FY 2022 is 11% vis-a-vis 16.2% in FY 2021. As you are aware, our ROE for March 2021 includes the benefit of the one-time gain on the sale or the divestment of the Electrical & Automation business, net of exceptional items.
Our recurring ROE for FY 2021 was 10.1%, so thereby there is an improvement almost 1% over FY 2021 on a like-to-like basis. We are improving progressively, and let me assure you that the return ratios will be pursued aggressively going forward as well. The robust business portfolio, including newer businesses, focus on cash generation and distribution and an eye on capital employed, and finally the divestment of some of these concession assets will lead up to better ROEs in the future. Very briefly, I will now summarize the performance of each business segment before we give our final comments on the guidance for FY 2023. First, Infrastructure. Coming to order inflows, our Q4 FY 2022 order inflows are well spread across various sub-segments.
Infrastructure segment secured orders of INR 451 billion for Q4 FY 2022, registering a healthy growth of 44% over the Q4 of the previous year, mainly with the receipt of a mega order in GCC country and other notable awards for metro, expressway, health, public spaces. On the domestic side, the conversion of tenders to awards continued to be on the lower side vis-à-vis Q4 of last year. We believe that this is a temporary, and ordering momentum will continue to pick up going forward. For the year FY 2022, Infrastructure secured order inflows of INR 935 billion, registering a degrowth of 9% compared to the previous year, which had witnessed the receipt of the large value Mumbai-Ahmedabad high-speed rail packages.
Our order prospect pipeline in infra for FY 2023 is around INR 5.72 trillion, comprising of domestic prospects of INR 4.57 trillion and international prospects of INR 1.15 trillion. The sub-segment breakup of the order prospects in Infrastructure segment is as follows. Power transmission and distribution 23%, water 21%, transportation infrastructure 19%, civil infrastructure 17%, buildings and factories 16%, and minerals and metals 4%. The order book in this segment at INR 2.61 billion as on March 2022 has a book-to-bill of around three years. The Q4 revenues at INR 297.3 billion registered a growth of 13% over the comparable quarter of the previous year, representing a normalized execution.
For the year FY 2022, the revenues at INR 724 billion registered a growth of 18% with a good pickup in execution momentum of the large orders that we have in this portfolio. Our EBITDA margins in this segment dropped from 11.5% in Q4 FY 2021 to 9.2% in Q4 FY 2022, largely due to job mix, commodity price escalation, and the non-receipt of claim from clients. Due to the drop in our Q4 FY 2022 margin, our FY 2022 margin for this segment contracted by around 30 basis points to 8.2% over the previous year. Moving on to Hydrocarbon. L&T Hydrocarbon Engineering, a wholly owned subsidiary, has been amalgamated to the parent with effect from April 1, 2021 in terms of the scheme approved by the National Company Law Tribunal.
On the performance side, the receipt of multiple domestic and international orders in Q4 bolsters order book for this segment. For the year FY 2022, Hydrocarbon business secured orders of INR 309 billion, registering a strong growth of 74% when compared to FY 2021, mainly due to the receipt of mega orders from GCC both in the onshore and offshore verticals. The order book for this segment stands at INR 364 billion as on March 2022, with an international order book constituting 60%. The Q4 FY 2022 revenues at INR 52.4 billion registers a degrowth of 3% over the comparable quarter of the previous year, largely due to temporary supply chain disruption in a couple of domestic and international jobs.
For the year FY 2022, revenues at INR 191 billion registered a growth of 13%, with onshore portfolio order book gaining execution momentum. EBITDA margin for Q4 FY 2022 is at 9.7% vis-a-vis 12.5% in Q4 FY 2021. The previous year Q4 margin had the benefit of cost saving upon job completion. The full year margin at 8.7% declined by 50 basis points, reflecting the input cost inflation and a change in the composition of the jobs amongst the sub-segments. Coming to Power, a subdued ordering environment continues in the thermal business due to the larger emphasis on renewables. However, opening order book drives healthy execution during the quarter as well as for the full year.
The Q4 FY revenue in this segment, the Q4 and the full year revenue in this segment at INR 14.8 billion and INR 44.2 billion registers a growth of 32% and 39% respectively. The EBITDA margin is at 5.2% for Q4 FY 2022 vis-à-vis 8.5% for Q4 FY 2021 that's largely explained by the release of cost provisions in few projects in Q4 the previous year. Consequent to the drop in Q4 margin, our full year margin is at 3.9%, down 70 basis points over last year. As you may be aware, the profits of the boiler combine and other JV segments, the larger other JV companies in this segment are consolidated at the PAT level using equity method. Moving on to heavy engineering.
The deferral of awards impacted order inflows for the quarter. Previous year Q4 had the benefit of a large value domestic order. The late receipt of orders in the current year impacted revenues for Q4 of this year. Revenues for Q4 FY 2022 at INR 8.7 billion registers a degrowth of 13% over the corresponding quarter of previous year. The full year revenues at INR 27.2 billion remained flat over the previous year as some of the orders are still in early stage completion. The EBITDA margin in the segment at 24.7% in Q4 FY 2022 vis-a-vis 29.3% in Q4 FY 2021. The Q4 of the previous year had the benefit of price variation and early completion bonus in a couple of jobs.
The full year margin at 19% registers a drop of 70 basis points, primarily due to lower export incentives in the current year. Coming to defense, let me mention here that on the back of the government's trust towards indigenization, we will continue to remain optimistic for securing decent order wins in this segment in the medium term. Having said that, the receipt of a couple of orders in the shipbuilding vertical of this segment helped us to increase the order book. Revenues at INR 8.9 billion for Q4 FY 2022 registers a degrowth of 21%. For the year FY 2022, the revenues at INR 32.2 billion registers a year-on-year decline of 5%. The tapering of large jobs under execution led to the fall in revenues in Q4 and full year.
The EBITDA margin for this segment for Q4 FY 2022 is at 23.3% vis-a-vis 29.3% in the Q4 of last year. For the year FY 2022, EBITDA margin is at 20.2%, a decline of around 200 basis points. Both the Q4 and the full year margin variance is explained by certain cost savings in the completed jobs in Q4 of the previous year. Moving on to development project segment. This segment includes the Power development business comprising of Nabha Power, Uttaranchal Hydel Power Plant up to the date of its divestment, which was August 2021, and Hyderabad Metro. As you are aware, the roads and the transmission line concessions which are a part of L&T IDPL are consolidated at an equity level. The majority of revenues in this segment is contributed by Nabha Power.
The lower PLF during the quarter due to routine maintenance explains the Nabha revenue degrowth, whereas subsiding Omicron wave led to improved metro ridership, thereby resulting in improved revenues for Hyderabad Metro during the quarter. To give you some statistics, the average metro ridership from 55,000 passengers a day in Q1 of FY 2022 to 146,000 passengers in Q2, 218,000 passengers in Q3, and around 199,000 passengers in Q4. For the full year, average ridership was around 155,000, as compared to 67,000 for FY 2021. We are happy to report that as we speak, the current ridership in Hyderabad Metro has crossed the threshold of 300,000 passengers per day.
The Q4 FY 2022 margin in this segment at 2.4% is contributed largely by metro operations, as Nabha margin is not being recognized from Q3 of the previous financial year. The Q4 of the previous year had an impact of the exceptional item in Nabha margin. The improvement in the average daily ridership has enabled Metro to report positive EBITDA for Q4 and FY 2022 as well. The Metro at a PAT level, we have consolidated a loss of INR 3.49 billion in Q4 FY 2022. The operating and amortization costs are around INR 0.75 billion each, whereas the interest cost is around INR 2.9 billion for the quarter. For the year FY 2022, the Metro reported PAT loss of INR 17.51 billion, as compared to INR 17.72 billion last year.
At this juncture, I would like to give a quick status update on the divestments of our concessions portfolio. As all of you are aware, our stake in the hydropower plant was successfully divested in Q2 FY 2022. For Nabha, various divestment options are being explored currently. Coming to IDPL, we are exploring the possibility of divesting our remaining 51% stake in favor of third-party investors. For Metro, we have a couple of updates. The government of Telangana has issued an order which outlines the various forms of support for the metro operations. The benefits will flow to the SPV, which is as follows. The refinancing of the term loan in Q3 FY 2022 helped SPV save interest cost of around INR 90 crore during the current quarter. These are recurring savings which the Hyderabad Metro SPV will also report going forward.
Coming to the government assistance, we are expecting an assistance of INR 3,000 crore from GOTS in three installments to be paid as INR 1,000 crore each year starting from FY 2023 onwards. The repayment of this soft loan would be done at the 16th anniversary from the disbursement. The concessional rate of interest on the loan will be known over a period of time. The concession is now confirmed to be available for the full tenure of 60 years, that is up to 2072. We have also received an in-principle approval for implementing an InvIT for the project in accordance with SEBI regulations. For the TOD rights, there is an approval for sublease up to 2072, independent of the metro operations. Fourth, discussions are also going on with third-party investors seeking a fund infusion into Metro.
However, it would be a little premature to comment on the likely closure date. Finally, to conclude on L&T's Hyderabad Metro, the prospect of improved ridership, a phased TOD monetization program, the confirmed government assistance with soft loan, and with the recently concluded debt refinancing, our performance parameters for Metro should look up in FY 2023. Coming to the IT & TS portfolio, our revenues for Q4 FY 2022 at INR 87.6 billion, equivalent to $1.18 billion, registered a growth of 30% over the corresponding quarter of the previous year. For FY 2022 as a whole, the revenues at INR 3,322.6 billion, equivalent to $4.4 billion, registers a growth of 27%, reflecting the continuing growth momentum in the sector with the surge in demand for technology-focused offerings.
The business outlook for this segment continues to be robust. Lots of spend today are being directed towards cloud, data security and intelligence. The margins for this segment is a function of bench cost utilization, onshore offsets, and operational efficiency. Finally, as all of you may be aware, the boards of LTI and Mindtree, in their respective board meetings held on May 6th, 2022, have approved the scheme of merger between the two companies that is subject to receipt of respective shareholders, creditors, and regulatory approvals. I will not dwell too much on this segment, as all the three companies in this segment are listed entities, and the detailed fact sheets are already available in the public domain. Moving on to the other segment, this segment currently comprises Realty, Industrial Machinery, Valves, Smart World & Communication, and the digital businesses.
As you may be aware, the L&T EduTech business was launched on October 15th, 2021, whereas L&T-SuFin was launched on March 7th, 2022. These are the two new businesses incubated under digital portfolio. During the quarter, the strong revenue growth in Realty and Industrial Machinery business was offset by subdued revenues in other businesses, thereby leading to a flat growth. For the full year though, this segment reported revenue growth of 2%. There is a broad-based improvement in margin across the businesses in Q4 of the current year. The benefit of gain on a sale of commercial property in the realty business in FY 2021 explains the margin variance for the segment on a prior year basis. Next, we move to financial services segment. Here again, L&T Finance Holdings is listed, and the detailed results are available in the public domain.
I would like to mention here that the strategic deliverables for this business revolve around higher retailization of its portfolio, a strong asset quality and improvement in return of assets. The Q4 FY 2022 revolved around disbursements in the focus areas, and the share of retail book has moved up to 51% by March 2022. Improved profitability in Q4 and FY is a function of lower credit cost. Finally, sufficient growth capital is available in the balance sheet. Coming to the last part, we remain optimistic on India recovery amidst the continuing global geopolitical uncertainty. Further, we are also confident around the CapEx recovery in GCC due to the improved oil prices. The supply chain disruption and the cost pressures are expected to continue into the near term.
For the year FY 2023, we are guiding for a 12%-15% growth in the group order inflows and revenue. We expect the margin with respect to our products and manufacturing businesses to remain around 9.5%. On the working capital at a group level NWC-to-sales, although we will endeavor to maintain around 60%. Given the inherent cash flow volatility in the EPC segment, we are guiding for a range of 20%-22% for FY 2023. Thank you, ladies and gentlemen, for the patient hearing. I will now request our CEO and Managing Director, Mr. S. N. Subrahmanyan, to take us through our strategic plan objectives up to FY 2026, after which we will take questions and answers.
Finally, when we get into Q&A, I would request all of you to restrict your questions to the economic environment and strategy to make the best use of our time. The bookkeeping questions can be addressed to me and the investor relations separate team separately. Over to you, Mr. Subrahmanyan.
Thank you, Ram. Good evening to all the analysts and investors who have logged on to this call. Hope all of you are doing well and are staying safe. Taking the opportunity here, I'll talk about the macro context as we see it and the group's strategic plan as we see it ending in FY 2026. On a macro level, as all of you are aware, there's been many challenges over the last 24 months, during which we could not achieve much physical progress in our EPC project business and manufacturing business for nearly eight to 10 months for various reasons. We also lost precious time in mobilizing and demobilizing our personnel. Despite all this, FY 2022 has ended on a strong note, something that is reflected in our financial results, characterized by the sustained effort that has gone in.
Here I would like to particularly emphasize on the fact that people have been our greatest asset, biggest asset. Engineering and people skill sets are the most valuable attributes across all our businesses. We will, let me tell you that, encourage and give these young and energetic people in the company all possible opportunities to grow. We have several reasons to celebrate, too. We won some important mandates across our businesses that cumulatively swelled our order backlog to never before seen levels, launched new business initiatives, and finalized our Lakshya 2026 strategic plan. Both the government and RBI needs to be complimented for the fiscal and monetary support during this time. Structural reforms carried out in India over the past couple of years will lead to sustainable and improved quality of growth in future.
Various incentive schemes with the government will lead to pickup in manufacturing and exports. India's FY 2023 budget focuses on consolidation with an Infrastructure CapEx thrust. Government's focus on CapEx is also clear from the various initiatives starting from the National Infrastructure Pipeline, the PM GatiShakti program, creation of developmental finance institutions and such. We remain optimistic on the return of private CapEx in India on the back of improved business confidence, better demand outlook, healthy balance sheets, and the PLI incentives in some of the sectors. The evolution of digital Infrastructure and the focus on ESG sustainability compliant businesses like renewables and green hydrogen are emerging trends. On the international front, one can see the emergence of a new world order. The world at large realizes the pitfalls of relying too much on one country for a bulk of supplies.
Though a shift away from this will not be immediate, many countries have adopted some or the other version of Atmanirbhar club, that is localization. One can see this in various forms throughout Middle East and certain parts of Africa. We see CapEx-led growth from the GCC countries in the medium-term to continue. GCC, as all of you are aware, is the second biggest market for our EPC project business.
Secondly, we expect growing Infrastructure opportunities in the African subcontinent on the back of enhanced bilateral multilateral funding support. Some of the major matters that we'll be monitoring would be high commodity prices and of course talent retention. The macro backdrop from FY 2017 to FY 2021 was subdued in the initial years, largely due to government reforms. This got worsened due to COVID in the final years. Our group performance can best be described as resilient amidst these macro headwinds.
Despite the lackluster public and private CapEx, our projects and manufacturing businesses posted noteworthy performance during this period. The IT & TS services portfolio outperformed over the Tier 1 and Tier 2 peers. We successfully integrated Mindtree during this period. The IT & TS portion of our services portfolio in a way helped us to counterbalance the EPC projects business cyclicality during the last five years. We also managed to unlock capital through the major divestment of the electrical and automation business. If I were to summarize our previous strategic plan performance in a sentence, I would say our expansive portfolio, a wide capability spectrum, multi-geography international presence, and a strong balance sheet helped us to deliver results in these times.
Now going forward to the strategic plan Lakshya 2026, let me now move on to the key themes around which the current strategic plan FY 2022 to FY 2026 is based. These are, one, value accretive growth in the current business portfolio. Two, exit exposure to transitions. Three, incubate and scale up digital and e-commerce businesses. Four, enable business sustainability through improved focus on ESG. We as an organization must constantly evolve, accept new ideas, revise our thought processes. New enthusiasm must prevail. We hope to practice this in the plan period. Our business portfolio will now comprise of EPC projects, high-tech manufacturing, and services. Let me elaborate on this. EPC projects will comprise of construction and the energy business. The energy portfolio encompasses the current business of Hydrocarbon and Power.
Additionally, the green EPC businesses targeting opportunities in the green hydrogen space will be part of this portfolio. We will be targeting order inflows and revenue growth of between 11%-13% in this portfolio. On the execution front, our focus will be on timely or early completion. Profitability will be driven by a combination of resources productivity, operational excellence, and digitalization initiatives. Further, we'll strive for lower working capital intensity over time. Value creation in this portfolio will be a function of margin improvement and lower capital employed. High-tech manufacturing will constitute heavy engineering, defense, and the new additions comprising electrolyzers and battery, which is basically grid batteries. We'll be targeting order inflows and revenue growth of 18%+ in this portfolio. Robust order inflow growth will be a function of various indigenization programs expected during the plan period.
Healthy execution will be driven by robust order book. We will target improved profitability in this portfolio through a combination of various initiatives revolving around digital excellence, automation, value engineering, Factory 4.0, and on timely delivery. To give you some perspective of the new portfolios, electrolyzers. We will be entering into manufacturing of electrolyzers. We propose to set up 500 MW capacity by 2026, which would be ramped up to 1 GW by 2028. Technology tie-ups will happen in due course of time. In phase I, we'll target alkaline, and in phase II, it will be PEM, which is membrane technology. Expected capital outlay will be around INR 11 billion-INR 12 billion for 1 GW. Project CapEx will be primarily equity funded, and we're targeting project IRRs of higher IRRs and high teens.
We also, as I said, would like to look at Advanced Chemistry Cell manufacturing. This will be with a technology partner. Technology tie-up will happen in due course. We'll be looking for 5 GW of cell manufacturing capacity and 3 GW of battery module capacity by 2027. Total capital outlays expected to be around INR 31 billion. Project CapEx will be majorly equity funded and high returns of IRR. The final details of the investments in electrolyzers and battery will be communicated as and when the plans get fructified. At this juncture, I would also like to clarify once again, especially in the manufacturing space, that once again, and I repeat it, some of the concerns around our defense businesses. Our defense business is nothing but an extension of our precision engineering capabilities, and it will continue to remain an integral part of our manufacturing portfolio.
We reiterate once more, our defense business does not manufacture any explosives nor ammunition of any kind, including cluster munitions or anti-personnel landmines or nuclear weapons or components of such munitions. We also do not customize any delivery systems of such munitions. Let's move on to the services business. It has two broad areas. IT & TS business portfolio will comprise of LTI, Mindtree, and LTTS. As stated earlier, the growing IT & TS business will continue to balance the risk and cyclicality associated with the traditional projects and manufacturing segment. The momentum from existing and emerging technology trends like cloud, digital, AI, and Industry 4.0 are expected to continue in the near term. This portfolio will target revenue growth in high teens during this plan period.
Augmenting digital talent holds the key to success. Inorganic growth opportunities will be appropriately targeted to grow this portfolio over time. This IT & TS portfolio will also include the recently incubated platforms, SuFin and EduTech, and the new additions of data centers. The data centers, we're looking to set up a pilot plant of 2.5 MW in the near term. It should get done in another month or two. We intend to set up capacity of 90 MW by the end of the current plan period. The financial services businesses will reorganize the existing lending portfolio and move towards retail very quickly. A growing digitalized retail portfolio should yield higher returns. The philosophy will be strength to grow. Our primary focus is to improve profitability and return over the plan period. This hopefully should result in vastly improved valuations.
There are some other businesses like realty, Smart World & Communication, industrial products and machinery. The realty business will target growth in residential and commercial through multiple formats, and it will be predominantly residential. The primary focus of development using our existing captive land banks. We will endeavor to touch order inflow and revenue of INR 80 billion-INR 60 billion in this business by FY 2026. Smart World & Communication will migrate from the current EPC owner format to a smart solutions provider. We will grow our industrial machinery and products portfolio comprising of construction equipment and Valves on the back of improved demand. The developmental projects and concession portfolio now largely constitute Hyderabad Metro, and we are unable to get out of it as this is a concession agreement. We will de-risk it, and this will be a business which is off balance sheet.
Hopefully, we should complete the divestment of L&T IDPL, a predominantly road concession for Nabha Power during the early part of the current plan period. In Hyderabad Metro, a combination of capital restructuring, improved operations and COD monetization will create value over time anyhow. Group financial targets would be revenue of about INR 2.7 trillion-INR 3 trillion by FY 2026, registering a compound growth of about 14% over FY 2021. Return on equity would be about 18%+ by FY 2026. Our focus will be to ensure sustainable growth through profitable expansion and execution of the current business portfolio and incubating newer businesses during the plan period as explained. Let me now cover the broad cash flow profile at a group level. Cash generation during the plan period will be a function of improved profitability and lower capital employed.
Further capital unlocking through sale of non-core assets will also boost cash balances of the group. We expect cash CapEx of around INR 100 billion-INR110 billion to happen towards our existing businesses comprising projects, manufacturing and realty. These are normal capital expenditures. Around INR 60 billion-INR 70 billion will be towards new businesses like data centers, green EPC and BOO electrolyzers and factories. IT businesses will have white space acquisitions of maybe around INR 70 billion- INR 75 billion from the cash surpluses on their balance sheet. Depending on how cash flows evolve and after necessary spends on CapEx, if possible, we will drastically reduce the debt on the parent balance sheet. Cash return to shareholders will be through a combination of dividend payout as well as buyback, post adequate cash buffers on the balance sheet. We'll also consider stepping up payout ratios over time.
Returning to cash to shareholders on a regular basis will also aid ROE improvement and will be the mantra as we go forward. On sustainability and ESG, as you're all aware, our company, L&T, Larsen & Toubro, is committed to water and carbon neutrality by 2035 and 2040 respectively. Our interim targets on various parameters of environment, social and governance up to FY 2026 are available as part of our strategic plan presentation and you can go through it. Finally, I would like to mention that we always practice the highest level of governance in this eight-decade-old group. We will uphold the value systems and integrity that has been the hallmark of Larsen & Toubro over the years. We will not shy away from improvements and strive to set up benchmarks going forward.
We are on the plus and positive side of things and should clearly and positively continue to be there. Ladies and gentlemen, thank you very much. Let me now hand it over to P. Ramakrishnan for his closing comments before we take questions and answers. Thank you.
Thank you, sir. Before we get into Q&A, I just wanted to reemphasize as to what Mr. Subrahmanyan also spoke in terms of reconstitution of our segments, pursuant to the formulation of a strategic plan. That is summarized in slide 47 of our analyst presentation. To quickly take you through, essentially what it means that the existing Infrastructure segment will continue to remain reported as Infrastructure segment. The same applies to financial services, development projects and others. The two changes that we are doing is as part of the overall energy portfolio, what we report separately as Hydrocarbon and Power segments will get merged to form what we call as a energy portfolio. Similarly, heavy engineering and defense engineering, the two engineering or manufacturing part of L&T, will get consolidated, to be reported as high-tech manufacturing.
However, we will continue to, while we report this as high-tech manufacturing as one segment, explain or report the numbers that is related to the revenues from the defense engineering segment as an additional information. The IT & TS portfolio that today comprises of the three listed entities, LTI, Mindtree and LTTS, will going forward also add the new businesses that L&T is chalking out during the five-year plan, and those are L&T-SuFin.
Which is a B2B e-commerce platform. L&T EduTech, one more a digital tech engineering skilling platform and the investment in data services. IT & TS will include the three listed entities and these three new digital initiatives. Other things remains the same. I hope you would have got all the relevant explanations regarding our Q4 and FY 2022 performance, and also heard Mr. S. N. Subrahmanyan take us through the objectives of L&T over the next four years, starting FY 2023 to FY 2026. With that, we can now get into Q&A.
Thank you very much, sir.
Thank you very much.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question, press star and one on your telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Please stand by and we will wait for a moment while the question queue assembles. The first question is from the line of Mohit Kumar from DAM Capital. Please go ahead.
Yeah. Good evening, sir, and congratulations on a very, very good order inflow and laying out such a big plan. My first question is on the high-tech initiatives, sir. You have said that you're going to enter into electrolyzer and battery manufacturing. Is there any aspiration to be a leader in this segment? Then you plan to explore. Are we restricting ourselves to electrolyzer and battery manufacturing and precluding like solar manufacturing or fuel cell? Is there any plan to set up hydrogen production system on our balance sheet? That's the first question.
That's a very good question to start with, so let me explain it like this. We want to be in the green hydrogen space because the black hydrogen space that we are in, which is a coal-fired power stations, we do expect that through the period of the plan and further, will not see much traction. We do not want to be in polysilicon or solar modules and solar production or all that. That's ruled out. We don't want to be in that area either as a developer. We will be there as an EPC, as you know, but we'll not be there as a developer. Now, the whole idea of green hydrogen is the fact that in the future we see, we do see green hydrogen coming up. It's imperative for the economy.
As a nation, India spends more than $180 billion importing crude. Green hydrogen is a possible offset for that, in the sense that we could reduce our dependence on crude and get into more hydrogen economy by fuel cells, hydrogen fuels, et cetera. That's a little futuristic, but it can happen provided the hydrogen cost comes down. Today it's not possible because hydrogen costs upwards of $4. It needs to come below $1. Sometime maybe. What are the two costs which is a major input to hydrogen cost? One is the renewable energy cost and second is the electrolyzer cost. We'll not be in the renewable energy. We'll have to depend on partners or joint venture partners or friends from renewable energy point of view. We'd like to be in the electrolyzer part.
We are talking to technology partners across the globe to get into fabricating electrolyzers. Whether it's alkaline, whether it's PEM, whether it is solid oxide, time will tell, but that will be in the future. We do hope to be in the EPC hydrogen. We hope to be in the electrolyzers. If there is a good opportunity with a decent return on take or pay contracts kind of contracts that are available, then we will also like to invest in hydrogen over a period of time. The grid battery is a little far away. At the moment, a good grid battery, storage battery costs upwards of $190-$200. This also needs to come down because at that kind of cost, the unit cost of Power will go up. It is not possible and it's not possibly affordable.
A few experimental things have come up, but if you want to do it on a large scale, it'll take time. This is a plan during the plan period. If this fructifies and if the battery technology is affordable and it's possible to do it under, say, $80 or $60, we would seriously look at it. At the moment, any organization like ours, which is forward-looking, which wants to be where the country is growing, which is evolving always, will always want to think about future technology and bet on it. That's what we're doing right now. We have put some teams of people to work on it. If these come technologically proper, if this comes price-wise sensitive to the environment around us, we'll definitely look at investing.
As you are aware, in all our businesses we are number one, except the services businesses. We are growing our services business also. Someday we will be a top player there. We're already the number five player. We'll hope to grow it faster. As you can see, when we enter a new business, the idea is to dominate the business over a period of time. Today is too early to say anything about it. Let's see how things work out. The idea is to be a technology player in that. If you are a technology player, you hope to lead that business space.
Thank you, sir. How on the private CapEx are you seeing any traction compared to, say, a few years back? Just the portion which is 16% private CapEx of the total book, do you think that will change materially over next few years? Are we seeing any more inquiry from the private CapEx side?
The private CapEx is also driven by the strength of the balance sheet for the private promoters. Over the last two years, due to various reasons, especially due to commodity price increases, and also due to the very good implementation of the NCLT program in India. That is the company law tribunals, what we call as the Chapter eleven cases in India. You have found that many balance sheets have got repaired. Some of the balance sheets which are very, very bad have also got acquired by better balance sheets. Now, as the economy grows, I expect private capital to start getting invested.
If you see the newspapers of last few weeks, you find a lot of big companies in India, a lot of big groups in India announcing major investments, whether it is in the metal industry, whether it's in Infrastructure space, whether it is in the factory space, et cetera. That means companies are reinventing themselves. The companies which are leveraged have come down on the leverage and are now thinking of possibilities of investments. We hope to capture that space. Second, there is an Atmanirbhar program. That is a self-reliance program which is gaining in importance in India. It's not only policy, stated policy of the government to look at Atmanirbhar self-reliance. The government has also incentives.
Has also come out with incentives like the PLI scheme, the Production Linked Incentive schemes, by which they're encouraging companies to take advantage of the incentive schemes to encourage more and more in core sectors and futuristic sectors of the economy. All this means that people will start investing in some of these sectors, and you've already seen announcements to various business groups on this. Third, due to the Russia-Ukraine war, the way the nations look at each other, there is a possibility that India being the only clean, efficient, democratic nation on this side of the earth, right from Middle East to Far East, if you see. There is a significant advantage people are seeing by putting up investments in India. We already see it in factories and certain other scopes that we are able to look at from our overall distinctive orders point of view.
I believe private CapEx will come back. To define whether it is 20%, 30%, time only will tell. There is a significant pickup in private CapEx investment in India.
Wonderful. Thank you.
Thank you.
All the best, sir. Thank you.
Thank you. The next question is from the line of Renu Baid from IIFL Securities. Please go ahead.
Hi, greetings team and reasonable performance. The first question is on the broad-based targets for the next year. If you see during the last plan period when we started, the broad-based revenue targets were 10%-12% range. If you work backwards, the data given in the presentation for the core manufacturing business or LNG portfolio, the five-year revenue growth number comes to approximately 30%. From the core inflows, extra services would be similar, 10%-11% kind of range. The question is, if you look at the last five-year plan, that was in the backdrop of a slowing economy, not much of a CapEx happening through, versus now when we look at the next five years, the broad-based growth outlook from infra, private investments, new opportunities have been very strong, including exports.
Is there any way that you can comment on how we look at the growth numbers? Have you projected while being conservative or the end-market growth outlook here? This is the first question.
Renu, what I would like to tell you is in spite of COVID, in spite of Russia-Ukraine war, in spite of commodity price increases, in spite of all the disturbance that we have seen, including inflation, our order inflow grew by 10%, which is a growth of 46% over the Q4 of last year. Revenue has gone by 15%. What it tells you is that there's a resilience in the company and thereby the economy. India is a developing nation. We need to bet on it. The government last two years has come out with a fantastic budget, which is aimed at propelling growth, which is aimed at fulfilling the basic needs of the common people. It is aimed at fulfilling the needs of the economy.
Moreover, the China border situation has also created an immediate sense of urgency, including the Russia-Ukraine situation, that we need to be more self-reliant. We need to do more things in India rather than depending on external sources for our consumption or CapEx or whatever it is. All this makes us believe that there will be huge CapEx in India, which we can take advantage of. Yes, the last plan we grew at a particular percentage, but as we have said, the next five-year plan, we expect that percentage to continue to grow and we hope to grow by 11%-13% in our sales in the domestic region. High crude oil prices will also help us to sustain our growth in Middle East, which is more or less our second market.
Oil being where it is, many of the countries have swelled up their sovereign funds and economic growth, and they are spending reasonable amount of money not only towards the oil economy, but also towards solar projects and other basic industries to develop their economy. World over, there is a feeling that unless you are self-reliant or Atmanirbhar, your economies cannot sustain yourself because what this war has done and by sanctioning many things on Russia, et cetera, it has clearly shown that if you are an externally dependent economy, you are in trouble. You've got to be an internally dependent economy not only for your self-respect, but for your growth, but also for your self-resilience.
I think there's a great advantage for organizations like us, which are in the basic Infrastructure sector and economy, and we are hopeful that this will be to our advantage.
Right. My perspective was, shouldn't the growth rate for four to five years be better and higher since the environment is more favorable today than what it was five years back?
You're absolutely right. We in Larsen & Toubro believe in a very simple philosophy, under commit and overachieve, and that's what we are trying to do.
Secondly, if we look, especially in the last two months, we've seen very steep inflation impact hitting us. Part of it, a good share of that was reflected in quarter numbers. Guidance was broadly flat. From a margin perspective, given the mix of orders, L&T has taken some guidance provisions on the conservative side, which is now in the quarter itself. Broadly, as the mix of orders and the new projects and input cost comes in, shouldn't we actually see that margin improvement from a two to three-year perspective?
Aren't you contradicting your own question? You're talking about inflation. You're talking about commodity prices. How can we talk about improved margin in this situation? We have to be careful. We have to be conservative. We have to give regard to what is happening in the world. There's nobody in the world who's able to predict what is going to happen. We are all praying to God the Russia-Ukraine war comes to an end. We're all praying to God that this side of the world, which is seeing turmoil right from Yemen to Middle East to Afghanistan to Pakistan to Sri Lanka to Nepal to Myanmar to Bangladesh, has seen some amount of stability. When such a world is there, and we are the only stable and decent and economically growing organi...
Country in this part of the earth, I think we have to look at various aspects of the world and be a little conservative as to how things go up. I think all our projections have to be conservative. I feel things will shape up for the better. There are, I guess, wise men in the world and wise leadership across the world, including statesmen, who will try to find solutions to all this. We'll take advantage of it as it comes.
One last question that I can ask. We've seen almost last one and a half year the consecutive delay in finalization of multiple government orders, despite the tendering pipeline being fairly strong. If you can help us understand when we look at a 10% kind of growth in inflows, in the next year, how would the mix of composition be? Would government be lagging, declining or, in other segments in terms of Hydrocarbon development coming up? Any broad contours in terms of, the [audio distortion]
Maybe government orders as a proportion may slightly go down and private CapEx, as all of you have been asking, may slightly go up. Middle East would be the same. We don't expect too much change. It will be more or less the same. Maybe private orders will slightly go up. That's what I would say.
Got it. Thanks a lot for your answers, sir.
Thank you.
Thank you. The next question is from the line of Ashish Shah from Centrum Broking. Please go ahead.
Yeah, thank you. Thank you for the opportunity. The first question is on the private CapEx side. You know, just wanted to get a sense from you that if you're looking at, let's say, a new steel plant coming up or a new automobile plant coming up or a refinery, what is the opportunity that L&T addresses? If every INR 100 proportionately rises. I know it may not be a very simple thing to answer, but any color can help us.
See, we have the largest market share of whether it's Hydrocarbon or a factory, whether it's a cement plant, steel plant, or an automobile factory. I don't expect too many automobile plants to come up in India because every major manufacturer is already represented in India. What is happening in the automobile industry is the conversion of diesel, petrol vehicles into some EV vehicles. We just built the Ola factory in Chennai. Maybe there'll be one or two more factories coming up like that. There is a huge increase in steel demand and cement demand. One, because those industries have done very well due to the commodity price increases. They're deleveraged, and they have plenty of cash flows in their hand. We do see a possibility of steel plants coming up. We do see quite a propensity for building of cement plants.
The prospects are pretty good. As the economy continues to grow, I feel more steel plants and more cement plants and some will come up in India, and we'll be in a position to take advantage of it because some of the core aspects of these plants are EPC'd by L&T.
Okay. On the process side, do we have a sizable presence on the process side of such a steel plant or a refinery? If any percentage, any rough ballpark you can throw us of what is the opportunity that L&T can address overall from a civil point of view as well as from a process point of view?
Those are details we shall not be able to answer. As an engineering, as the premier engineering and EPC company of India, we do have process knowledge of some of these aspects of the project. For example, cement plant, the cement companies themselves decide on one of these companies like FLSmidth or thyssenkrupp or somebody like that as a process engineer. The entire aspects of the detailed design and construction is handled by Larsen & Toubro, including manufacturing of some of the crucial equipment. Today, we don't make any cement equipment because we think that we have crossed this thing a long time back, and we do source it from other companies.
In a steel plant, certain aspects like coke oven or bar and rod mill, et cetera, we do process the knowledge and we do them. For certain other aspects of steel plant, like the blast furnace, et cetera, we do source technology from our technology partners like Outokumpu or SMS or Primetals and companies like that. We have very good understanding with all these companies. It's a question of the mix and manner how it goes about.
Let me assure you that we are one of the only companies in this part of the world who can put up a total steel plant or a cement plant and our various aspects of the steel plant, because steel plant is huge and complex, and we are very self-confident about what we can do in this space.
Got you. Sure. That helps. Second is, on the pricing, price escalation and the inflation environment. Currently, you know, to what extent in the domestic market these price escalation mechanisms and indices are covering? To what extent are they covering for the inflation, and what is the hit that we may end up taking on the domestic front end?
From your matter of view, you have to rest assured on the fact that 85% of the company's contracts are covered by some price escalation or basic prices or some other factor. There are about 15%-20% of the contracts which are not covered by price escalation. Okay? Now, this includes whether cement or steel or nickel or cadmium or copper or aluminum or solar modules and various other things that we buy. Now, what we have done is we have analyzed the situation very thoroughly. Where we have price escalation, we are going all out for it. It is a fact that in some cases, even the price escalation formula do not totally cater to the escalation that is happening.
There are provisions in the contract which we can go back to the client to help us reimburse it, including force majeure conditions. We are using that. In certain cases where we do not have price escalation formulas, we do take it up with the clients. We are looking at alternative designs. We are, for example, if steel prices are going up, think of using more concrete. We are looking at alternative procurement methods. For example, if the price escalation is more in steel plants using petcoke. We are looking at small scale rerolling mills using coking coals. Various alternatives are being tried out. We are also hedging materials like copper, aluminum, iron ore, coke, et cetera, to a very large extent. Many methods are being used to reduce the impact of the price increases.
The fact remains that everything is not solvable. There will be some pressure on costs due to this price increases and escalation. Therefore, we'll have to tackle it with a cool head and evolve the situation and evolve a solution to take care of the situation.
The 85% and 60% you mentioned is for the domestic order book, right? The international, I mean, there's a part of the order book which is overseas and which may not have any escalation. What is that percentage, P.R. sir, if you can give us?
What is that item?
The portion which does not.
Can you repeat that?
P.R. sir, my question is that what is the total order book which is, does not have, any escalation, which include the international orders?
About 15%.
That is of the total? Okay. My apology. It was a misheard.
Okay.
Okay, thank you.
Next person on the line.
Thank you.
Thank you. The next question is from the line of Sumit Jain from ASK Investment Managers. Please go ahead.
When we look at working capital guidance that you gave, can you give guidance on core working capital? Because as the proportion of services increase, sorry, ex of services that you gave, but as the proportion of other businesses, ex of core manufacturing increase, your working capital percentage actually improves.
See, working capital is nothing. There's nothing core and non-core, okay? Working capital is working capital. We'd like to keep it as low as possible. Whether it is IT services, whether it is manufacturing, whether it is EPC, if we have to put our money there, it is working capital. We, across our businesses, try to tell our clients that we'd like to work on your money. We will do all and everything that is possible to reduce this working capital. But, you know, as the world evolves and IT becomes bigger, clients will also expect you to invest there in some form or the other. As EPC manufacturing goes bigger and, as the, as the economy gets into inflation, there'll always be problems there of immediate payment and contractual payments. This is something which is heavily monitored within the company.
As you can see, we have brought our working capital to 19.9% in the last year. We continue to drive this with all efficiency. I think our Shankar Raman and team have done an efficient job there, a fantastic job there. We will continue to do that.
With our experience of developmental projects in the past such as Hyderabad Metro, et cetera, what is the strategic imperative and thinking to you know map green energy BOO projects as potential developmental projects in the future?
We are just wanting to get out of this concession business. Hyderabad Metro is de-risked. IDPL is going out. Nabha Power will move out. Now, if at all we are getting into green hydrogen, it will not be in the sense of a concession. It will be a take or pay contract, where we'll put up a green hydrogen for IOCL along with the money of IOCL, and IOCL will have to pay us every month for the green hydrogen that we produce. If we cannot enforce this, we'll not get into that business. BOO or developmental projects is not a priority for us. It's totally deprioritized, and we are moving out of the sector.
Sure, thank you. One last question about international projects. In the past, we've faced issues in the, you know, height of the cycle in Hydrocarbon projects. What, you know, safeguards you've put this time around in the projects, which one believes some of them could be fixed price projects?
See, the problems that occurred were not due to fixed price or item rate orders. They occurred because we got into contracts. We didn't have the right leadership team, we didn't have the right project team, and many of the projects, for whatever reason, we can keep thinking about it right now, but there's a lot of learning for the company, was not done on time and to the speed and the technology that was required. There was a huge learning within the company. The last four to five years, taking from the learning, we have built a very strong team in Middle East. We have brought in process people, we have brought in engineers, we have brought in very senior project management people. We have even done some localization to help us to do projects faster.
Thereby there's a lot more confidence within the team now that we can take on billion-dollar contracts and execute it to time and within the cost. That is how project teams work, and that is what we have brought on. We made some mistakes. We have learned from it. We improved ourselves on it. We are moving on further from that.
Sure. Thank you, sir, and all the best.
Thank you very much.
Thank you. Next question is from the line of J.P. Mundra from JP Morgan. Please go ahead.
Good evening, sir, and thanks for taking my question. Just two things from my side. Firstly, on the balance sheet, you mentioned about the project monetization, which has been on for a while now. In terms of the cash flow from this proceeds, outside of the CapEx initiatives you mentioned, it signals a significant amount of capital release. Is that all expected to come back to shareholders?
No. In this case, there is no capital gain. The only capital gain that we got was from the sale of the E&A business to Schneider, which has all been reflected up to last year. Now, what we're trying to do is a high-cost project like Hyderabad Metro, we are trying to de-risk it from the project, from the balance sheet. What are we doing there? We invested a lot of money, INR 20,000 crore. The traffic went down. Project did not make revenue. Traffic is slowly getting back. What is the biggest concern on the project? The biggest concern on the project is the debt. We have got a soft loan for 65 years from the government of Telangana, INR 3,000 crore, and that will help to bring down the debt.
Second, we are also talking to very serious investors who will bring in equity to the project. Thereby, we are right from 100%, we'll move down to 51%. It'll become a subsidiary. Debt will also come down. Cost of interest will come down. Thereby the project is de-risked. Second, we also got the in-principle agreement from the government to go for an InvIT. At the right point of time, the project sees some cash flow, we'll invite it, and we'll see the possibility of an exit. Second, Nabha Power. It's a running Power plant with about INR 6,000 crore of debt and profitable. It is pretty positive. What we plan to do there is move it out of our balance sheet. We are talking to some very serious players. As and when this occurs in a short while, we'll announce it to you.
Third is our L&T IDPL, which is our concession projects where we have 11 concessions and one InvIT. Here we have already signed a term sheet with a very serious investor. We are going through the conditions precedent and certain covenants which we need to overcome before we make the sale of IDPL. We'll do it shortly and we'll announce that also to you. With this, all the three concession businesses that we have, one is de-risked, another two are moved out of the balance sheet. Except for L&T Finance, we become a debt-free company.
Thank you, sir. Just on the growth that you mentioned for the project manufacturing business of 11%-13%. Could you guide us as to how do you see a significant leap faster growth in international given the commodity price cycle versus domestic over the next couple of years?
I already answered that question. I said there's not gonna be any significant difference between how we grow in domestic and international. It'll be the same percentage. Maybe in domestic there could be a little more preponderance of private projects compared to government contracts. There's no other significant difference.
Okay. Thank you.
Thank you. Before we take the next question, a reminder to the participants. In order to ensure that the management is able to address questions from all participants, please limit your questions to one per participant. For any follow-up, may please request you to rejoin the queue. Next question is from the line of Bharanidhar Vijayakumar from Spark Capital. Please go ahead.
Yeah. Good evening, sir. Could you give us a split of the funding by agencies of our current order book? For example, multilaterals from central state. What's the confidence you get from especially central and state in their plan to fund large CapEx plans like the last couple of years in the next two to three years, especially in light of increased borrowing pressures and their fiscal situation not going very fast way as last two to three years. Thanks.
I said earlier, the bulk of our orders are still from the government sector. Let's say 75%. In that, central government would be 25%, and balance 50-odd % would be state government or public sector. In the state government, state governments are negligible. It'll be predominantly multilateral funding agencies like JICA, JBIC, World Bank, and Asian Development Bank. As you can see, our projects are dependent on multilateral funding, public sector spending, central government spending, and private sector spending. We are not dependent too much on state governments. It's very negligible.
Got it. When it comes to competition, we have seen competition increase, of course, for L&T's bids. How do you see this playing out going forward? Is this also one of the reasons why margins would continue to be under pressure in the next two to three years?
Competition has been there, will continue to be there, will ever be there. I hope competition does not exist, but that is not possible, right, my friend? Coming to the analyst community, you have competition who ask better questions than you, more questions than you. That is a part of life. Now, there is a cycle of competition that happens in India. A set of competitors from Andhra Pradesh come, they are disruptive, they take jobs at any prices, and they disappear over five, six years. A new set of competition comes. We have looped through it over eight decades of our competitive life. Rest assured this, these kind of things happen, and we will know how to manage it. Now, what is the strength of Larsen & Toubro? It is its engineers. It is its highly efficient project management skills.
It is ability to do projects on time, to quality and to safety. We'll continue to stress on that. We will lose some, we'll win some. Today is a backlog of nearly INR 360,000 crore. There's no need to go hammer and tongs to win a contract. We will take contracts at our terms, at our price, and the way we want it. That's how we run this company, and we'll continue to do so as we go forward.
Sir, thank you. All the best, sir.
Thank you very much for your good wishes.
Thank you. Next question is from the line of Punit Gulati from HDFC. Please go ahead.
Yeah, thank you so much, and best wishes for your new plan. Can you talk a bit about what kind of capital allocation you are willing to do for SuFin and EduTech and data center security?
SuFin, we have spent about INR 150 crores, and EduTech we have spent about INR 125 crores, if I don't botch my figures. These are developmental activities. These are platforms. As new courses or new things get added, some more money will be spent. Right now, having done what we need to do, we are concentrating on having launched this, having gone to the market, we are looking at how to grow the market. For example, in EduTech today we have nearly 80,000 students already enrolled. SuFin we are doing about INR 10 crores-INR 15 crores per month right now. It is on the right track. It is better than we anticipated, because EduTech was on high-end engineering courses. SuFin was an engineering e-commerce, so that's not a normal e-commerce. It's engineering e-commerce, very specific.
Both are doing as well as we thought it would do at the moment. We can do better, but it's fairly very good as we see it. Let us see how it goes. Data center, as you know, is about INR 30 crores-INR 32 crore to megawatt. What we are planning now is two 30 MW. That is 60MW , one data center in Chennai and one data center in Panvel near Bombay. We'll see how it develops. As you're aware, in the data center space, we also signed a very specific agreement with Microsoft to be along with Microsoft to do joint marketing for sovereign cloud, public sector cloud, and public sector bank cloud.
I think with this arrangement, as Microsoft, one of the leading players in the cloud business, Azure, we hope that this will give us traction to improve our data center returns as we push into that business.
On electrolyzers, what sort of capital allocation should we think of?
I mentioned it, my friend. It's about INR 1,000 crore on electrolyzers, but battery is later part of the plans. I wouldn't want to stress on it too much at the moment because that's still evolving.
INR 1,000 crore will be over a period of five years, right? I mean, as you said, 500 MW and then scaling up to 1 GW.
Yeah. I guess. Well, you put a plan, you start producing, so nothing more beyond that at the moment. I don't think we have the capacity to absorb more than that from an electrolyzer production point of view.
Understood. Makes sense. Thank you so much, and all the best.
Great. Thank you.
Thank you. The next question is from the line of Atul Tiwari from Citi. Please go ahead.
Yes, sir. Thanks a lot and congratulations on very good set of numbers. Just one question. We had been hearing about this delay in finalization of awards for at least two to three quarters. Obviously, Q1 has a very large number. What is your diagnostic? Why is this delay happening? Why state governments are going slow on awarding orders? What makes you hopeful that this can change next year?
First of all, I want to thank you because the only person after one hour who said congratulations on our stellar growth in numbers, so thank you very much for that. I hope all your colleagues are listening to it. Now, coming to investments, it is like this. When you look at a government project, let's say a bridge to be built or a road to be done, the estimates for this was done by the government say couple of years back based on the SOR rates that they have. Let's say it's 100. Normally, when companies like us bid, and even if we have to be L1, we bid 110, 115 to be L1. Because the rates are old, they don't reflect the latest rates. As long as within 10%-15% of their original budget, the government normally takes it.
Today, because of the extraordinary increase in commodity prices, their 100% has already become 110% or 115%. Now, when we bid, we are going to be 120%, 125%. So some of the government departments who don't have the wherewithals for decision-making will tend to either pre-bid or re-scope it or tend to negotiate much more before placing an order. This is what my colleague Shankar Raman has said, will take some more time than normal to place some of these orders. It's not a general statement that all orders are going to get delayed. Some of the orders could get delayed because of this nature of the world is changing right now.
Okay. Now, I mean, these departments will have to go back and redo the project DPR or how does it work? Because, I mean, if all the project DPRs have to be redone, then probably we are looking at a much longer timeline.
Let me very clearly clarify to you. You're going back to the question. I said some of the projects could be delayed because of the reevaluation coming in. The governments have a method and procedure for it. They have to go back to the boards, or they have to go back to the departments, maybe recalibrate the budget and get back reflecting the latest. It's not. They don't need to do a total DPR again. What has gone up? The price of cement has gone up, the price of steel has gone up, the price of copper has gone up, price of aluminum has gone up. So they have to reflect the latest prices in their estimate and come back with a new budget and then take the project forward. This takes two to three months for the government organizations to do it.
In some of the projects we've encoded that, and we'll have to go through it.
Okay, sir. Thanks a lot and best of luck. Thank you.
Thank you. The next question is from the line of Nilesh Soni from Kotak Securities. Please go ahead.
Nilesh, are you-
Mr. Nilesh, your line is in mute mode. Please proceed with your question.
Thank you, sir. My question has been answered.
Thank you very much. You are the best guy.
Thank you.
Best guy in this today's conference call.
The next question is from the line of Sumit Kishore from Axis Capital. Please go ahead.
Good evening and thanks for taking my question. PR's remarks mentioned that the order prospect base for FY 2023 is lower than FY 2022 and, you know, in your guidance you're talking about a 12%-15% order inflow growth. There is an implied improvement in the win ratio that you have versus order prospect base. I mean, could you please speak about this? Also in fourth quarter, there seems to be a very lumpy order win which was not disclosed on the exchanges, and that seems to be coming from the Middle East. What is the sector in which that, you know, or what is that, what is the qualitative description of the job and the potential size, if you could talk about that? Thank you.
The lumpy order, I cannot talk about it because if I could talk about it, I would have spoken about it. The clients are still not allowed us permission to talk about it. It's a sensitive order, and as and when the clients give us permission to talk about it, we'll definitely talk about it. Please give me the discretion to take it forward in that particular manner. Now, the other question that you asked is in the prospects. You know, the prospects as we discussed today, what we see as of today. We don't have the full idea with us what's going to happen after 12 months. Naturally so, right? At the beginning of the year, as we see it, we see the prospects more or less same as last year.
Therefore, from that we are still projecting an increase of 12%-15% in order inflow. Let the year go by and maybe as we come across the first, second, third quarter, we will have more visibility in the geographies that we are in, the sectors that we are in as to what are the prospects. As we don't expect to increase the guidance per se. I think it's a strict guidance to achieve such a huge order inflow from the base that we are in. If the prospects increase, we'll definitely let you know. Thank you.
Sure. You also mentioned in our developmental projects that you will go for green energy on a build-own-operate basis. Is that restricted to green hydrogen or would you also look for other opportunities in renewables as a developer?
I think I clearly mentioned it, my friend, that this green opportunity is only with IOCL. IOCL, as you know, is the largest refiner in the country. They do have hydrogen plants, which is either gray or blue. They intend to convert many of these plants into green hydrogen. If at all it is, we invest along with IOCL and ReNew into this green hydrogen plant, subject to IRRs and calculations and such on. If it is viable and it's a proper contract take or pay, we'll do it for IOCL's purposes. Now, if normally in public sector IOCL does other refineries like BPCL, HPCL will follow. These are very good companies with very good governance and most of them are what is called as Maharatnas. It's a good contract to have.
If that comes, we take our EPC contract with proper agreements defined therein to protect our interests. If that comes, we'll take it forward. Now, we do not intend to get into solar or polysilicon or any other businesses which you already said before. Thank you.
Understood. Wish you all the best .
Yeah.
Thank you.
Ladies and gentlemen, we take the last question from the line of Nitin Arora from Axis Mutual Fund. Please go ahead.
Hi, sir. Thank you for taking this question. So generally on the tech side, which you mentioned that, you know, the green EPC, and I'm assuming it'll be more complex job. Does margin profile really changes in this particular kind of a segment for you? That's number one. Number two, you highlighted a point, you know, obviously, given the macro conditions of the country and globally, the government would be thinking on revising the project costs and everything. Is that the current order book also you see some slowness in terms of execution because of that?
Why I'm asking this question because, you know, in the last two, three quarters, you have been more confident on the order inflow and on the execution, where we were expecting that the bulk of the execution will eventually come on the core on the Q4. It has softened a lot. I mean, just 8%-9% growth not meeting a very strong quarter for us. Any reason because of slowness in the order book or just generally, it's slow because of any supply changes? If you can throw some comments on that. Thank you, sir.
My dear friend, we have gone through a very tough season wherein 34 months we have not worked for eight to nine months. We normally employ 290,000-300,000 laborers. There are about 65,000-70,000 people in our EPC and manufacturing business. When COVID came, all the workers went back to their towns and villages. We came down to 70,000. We remobilized to 220,000-230,000 laborers. Again, during COVID too, it went back to about 160,000-170,000. We have now again remobilized it to 280,000-290,000. The company has gone through great strain and effort in all these cases.
Just as when we thought COVID was over, the Russia-Ukraine war has set off an increase in commodity prices and supply chain disruptions across the world, including logistics. This does affect the project business because the steel prices are INR 79 or INR 80 per kg. We have also deferred certain purchases. The clients have been pressurizing us for going ahead, so we can't afford it at that price because we have quoted at some price, and the escalation also does not cover. We have deliberately slowed down some of the jobs. In spite of all this, we have had a revenue growth of 15%. The backlog that we have is stellar, very good, and it is moving. We need to put pressure on it much more to move it. That's what we are trying to do right now.
Rest assured, all and every effort is being made to push the backlog towards logical conclusion of sales invoicing and sales and profit thereon. In few selective cases, if the price increase does not cater to the escalation formula available, we will tend to defer or go slow so that we can afford these material input costs at the right prices to take it forward.
Sir, I respect the comment. Actually.
That is essentially being done to protect investors, shareholders and analysts' views like you.
Getting it. No, why I'm asking this, sir, I absolutely respect your comment on that. I was just wondering, because you said 85% of the backlog is pass-through. Generally I was coming from that angle then why to go slow when everything largely is a pass-through. I got it.
It's pass-through, but if a transformer from ABB does not come on time because their input costs of some copper, aluminum has gone above. This is a very big company, five times our size. Sometimes they also leverage me, "You give me more money, otherwise I won't supply the transformer." I have to tell them, "Okay, you go slow. I can't give you money and supply it two months later and manage my clients.
Got it. Any respect comment on the clean hydrogen EPC? Any margin profile there, Kirti?
You have heard it. There's no more to give.
All right, sir. All right. Thank you very much, sir.
Yeah. Bye-bye.
Thank you. Now I'd like to hand the conference over to Mr. P. Ramakrishnan for closing comments. Over to you, sir.
Thank you, Steven. Thanks for patient listening. We have to try to cover all the important points with respect to our Q4 and FY 2022 performance and also provided a color of our strategic plan for up to FY 2026. Thank you once more for taking your time. We can now close the call. Thank you.
Thank you all. Good night.
Thank you. Ladies and gentlemen, on behalf of Larsen & Toubro Limited, this concludes this conference. We thank you for joining us. You may now disconnect your line.