Ladies and gentlemen, good day and welcome to the Larsen & Toubro Limited Q2 FY 2021 earnings conference call. I now hand the conference over to Mr. Arnob Mondal. Thank you, and over to you, sir.
Thank you, Zed. Good morning, ladies and gentlemen. A very warm welcome to our Q2 FY 2021 earnings call. I hope all of you would have been able to go through the results. Last night, around 7:30 P.M. or so, our presentation was uploaded on the website, and hopefully all of you have downloaded that presentation since we'll be walking you through the presentation in some time. Today, we are very pleased to have with us Mr. R. Shankar Raman, Whole-Time Director and Group CFO. He will start the call with a few opening remarks, primarily because this time there are quite a few large numbers that need to be explained. After which, our IR team, Mr. P. Ramakrishnan and Harish, and I will walk you through the presentation. After that, we'll open it to question and answer. With that, I'd like to hand it over to Mr. Shankar Raman.
Sir, over to you.
Thanks, Mondal. Good morning, everybody. Thank you for participating in today's call. Always good to connect with you. As has been the practice, these performance update calls are hosted by our IR head and IR team. Since we are covering the results of a very significant quarter that has just gone by, I thought it fit to join you all today to share some perspectives. After my observations around some significant developments in the quarter, the usual format of performance presentation followed by Q&A will kick in. It is possible, depending on the duration of the call, that I might log out a bit towards the end of the call, maybe a little earlier than the scheduled closure of the call, depending on developments I'm expecting. If that were to happen, please excuse me for that. Now jumping into the purpose of the call today.
Quarter two has been a very busy quarter and full of activities for us. We had to first and foremost ensure the safety of our workforce, employing over 160,000 people across the group. We always had to deal with the infection touching someone or the other. Happy to tell you that despite close to 7,500 people across the group contracting the infection, most of them, majority of them have rebounded quickly and well and have resumed work. It's very unfortunate that about 17 of our staff succumbed to the illness. In most of the cases, barring one or two, they had some comorbidity which actually got accelerated due to the virus. While that is pretty sad to not have them with us, but the good news is all those who have rebounded are back to their full energy levels.
We also had to make sure that during the quarter, the workforce return to their respective places of work in some orderly fashion. Each city, as you know, had its own prescriptions around attendance and stuff like that. Public transport was very varied across cities and towns. Taking all of that into account, we had to make sure that the return is orderly and we are seen to be responsible employers. We also had to complete our labor mobilization at the sites. The challenges were very different as trying to get people back to offices to work. The challenge at the site is to make sure safe transporting large number of people. The sites being most of them in little relatively isolated locations.
It was not much of a problem in terms of transmission, the work practices in construction and project sites, as you know, is not really amenable to social distancing and stuff like that. There's a lot of modifications that we had to do. We had to readjust our operational plans and procedures to respond to this unfortunate pandemic and phased unlocking that the respective state administrations announced. We also had to catch up on lot of lost ground. Q2 was a pretty low quarter to our living memory, at least in the company. To make up for that required a fair bit of energy, enthusiasm, and commitment and will. I think the company had done most of these things with good measure of success.
As we started the quarter. There were a lot of trepidations because we didn't know how bad the quarter two was going to be and how quick the recovery is going to be, having lived through a horrendous quarter one. As we close the quarter, we're happy to share with you that we feel more enthused by the developments around. There are some green shoots, if I can say that, visible in the environment. The parameters that we track to measure whether this bounce back in the economic system are low volume of traffic. This is both goods and passengers. The port traffic, the road traffic, the rail traffic, all of them have significantly picked up. There's been a fair bit of demand for energy. The power generation got a lift up in quarter two. Coal production went up.
These were indicative of higher levels of activity at factories and other commercial establishments, which is a good development. Imports and exports picked up gradually. I think April and May were pretty low. Though they may not yet represent the full potential of the country to import and export, month on month, there has been marked improvement. The PMI, the Purchase Managers Index, have also been indicating improved confidence and sentiments. To top that, the GST collections for the month of September was a full 4% higher than the GST collection on pre-COVID September of the previous year. That's, again, a good sign about trade and commerce possibly trying to get back.
While the lockdown and the procedures around it is very understandable, and I think the government and the state administrations must be complimented for such stringent actions, it is equally important that we find the purpose of our lives back and try to, in a more responsible manner perhaps, get back to normalcy. If Q2 is of any indication, we are looking to Q3 and Q4 with more optimism. Having said that, the specifics of Q2 being so important for L&T is because it had to deal with two significant events. One, of course, was we had to complete the EAIC, the Electrical & Automation business divestiture. It has been in the works for quite a while now. This ought to have been done possibly by end of FY 2020, but for the disruption caused by the pandemic.
Somehow we managed to get back on track, the commitment of both the parties to the transaction, that we could almost remote basis on a virtual manner, complete all the pending documentation and close out discussions. That transaction has got completed. Secondly, we also had to reevaluate the carrying value of some of our investments based on certain developments that took place during the quarter. I would like to provide some perspective to these two significant events, and the rest of the parameters as to how we fared versus our plans and how we see the road ahead, the IR team would cover in their presentation. First, let me talk about the E&A IC divestiture. We've received the full consideration. As you know, the transaction was for INR 14,000 crore gross, free of debt and free of cash.
We received the entire consideration, barring some retentions that have been held back for some pending obligations and closing balance sheet adjustments, as you know, in such transactions. The pending obligations are largely to do with all the existing contracts, and there are thousands and thousands of contracts that we have with our customers. Getting novated each one of them painstakingly in favor of the buyer. We have certain thresholds for completing this by certain timelines. By the time on August 31st when the transaction long stop date concluded, there were some pending obligations. Close to INR 400 crore of retention amounts were held back for completing those obligations. I'm glad to tell you, as I speak now, the obligations have been completed, and we shall hopefully, in the current quarter, realize the balance retained amount as part of the sale consideration into the current quarter.
We also had to make adjustments for the debt. As I told you, it was a debt-free, cash-free transaction. About INR 350 crores towards both debt obligation and working capital adjustments had to be retained pending the closeout audits by the auditors. That is works in progress, and we hope to possibly complete that in maybe 30 days or so from today. That left about INR 13,250 crores to be available to us, and we had incurred close to INR 250 crores of expenditure on completing this transaction. Roughly translates to less than 2% of the transaction. Apart from the legal fee and the stamp duties and all of the various cess and levies involved in transfer of establishments, we also paid a handsome bonus to our parting erstwhile colleagues.
After all, this business has been with us for 60 years, and many of the colleagues have actually been L&T lifers. As a gesture and a thank you goodwill, we had paid a fairly generous parting bonus to all of them, and all of that accounted to that INR 250 crore. Consequently, the INR 14,000 crore of consideration translated into about INR 13,000 crore of net cash on hand. The value of the assets that we transferred is about close to INR 2,500 crore, and the taxation obligation is about INR 2,500 crore. About INR 5,000 crore had to be reduced from the net consideration to arrive at a profit of INR 8,000 crore, which is what you will see as having reported. I am rounding off for ease of conversation. The precise arithmetic is visible in the earning charts.
Now, this is insofar as profits are concerned. When it comes to cash, as I told you, net of retention and expenditure, we had about INR 13,000 crore on hand. A portion of that retained money will most certainly come back on closeout audits, et cetera. Of the balance INR 13,000 crore, INR 2,000 crore is the tax payout. In terms of book provision, that is INR 2,500 crore. Because of some carry forward tax advantages, the net cash outflow on account of tax cash-wise would be about INR 2,000 crore. That leaves about INR 11,000 crore of cash with the company. Now, the associated conversation around such a large cash pool with the company is how does the company plan to use the cash? There's been a lot of commentary, even in the media, about what use the cash can be put to.
Being a company who's completely committed to all the obligations from all the stakeholders, we have drafted out a plan for this cash utilization. Close to INR 5,000 crore of debt we would like to retire from the balance sheet. As you know, we had rather elevated debt levels in June quarter. The pandemic struck us in March end, one of the first things that we did was to beef up the liquidity structure in the month of April by borrowing additional amounts, just to be sure, because we had no idea as to how bad the pandemic was going to be and how strained the liquidity is going to be. We sort of beefed up our cash reserves.
Having seen through the pandemic and having sort of coming to a conclusion that Q1 could be the lowest in the cycle of the pandemic, Q2 has been indicative of some recovery, and Q3, Q4 could be, hopefully, stronger recovery than Q2. We do think that we should, in the remaining portion of the year, retire that excess debt that we accumulated. About INR 5,000 crores of the proceeds we have earmarked for debt reduction. We also need to make some investments in our business, and these are largely with services business. The businesses like financial services, et cetera, would require some capital allocation. We also need to grow our other services business, the IT Technology Services, which have done very well during this difficult phase, encouraging us to keep nurturing them and making them stronger and bigger.
An allocation of INR 2,000 crore for various business investments, including financial services, is what we set aside. We also were required to safe harbor the Hyderabad Metro project. As you know, just as the pandemic struck, we commissioned the project fully. Quite unfortunately, despite all the lines being commissioned, the traffic had to come to a halt because of the severe lockdown. The lockdown has got lifted in Hyderabad only on September 9th. We had some tail revenue coming in from the end of the quarter for the entire six-month period. Even then, the resumption of work from office is not complete. IT town that Hyderabad is, there is going to be a gradual pickup in terms of IT office going traffic.
The fact that social distancing norms have to be adhered in trains and there has been some staggered admission of people, et cetera, the traffic that we anticipated to ride on the trains before the pandemic is not going to be the same immediately. It's going to be possibly, in my opinion, a 12-month build-up at least before the traffic comes back to some normal levels, feeling safe all the while. This has forced us to restructure the capital. State Bank has been one of the largest lenders to the project and the lead banker to L&T as well. L&T and State Bank have sat down together and been trying to work a refinancing package. It is not a restructuring package that committee recommended to RBI. This is a refinancing package because we had to reevaluate the cash flows of the company based on the revised conditions.
Consequently, it's quite clear that there has to be some amount of sustainability brought into the debt. Being an L&T company, given our track record of debt servicing for the last 80 years, perhaps. We cannot afford to have any blot on that reputation. Consequently, we are discussing with State Bank, including capital infusion by third party, including some discussions with the Government for long-term financial assistance, et cetera. We need to rehash the capital structure and make sure that the revenues that will pick up gradually going forward will have sufficient wherewithal to meet all the financial obligations.
As a measure of prudence, and since Hyderabad Metro is very much a part of our portfolio as we speak, we have allocated about INR 2,000 crore for all such financial refinancing, restructuring options that will get finalized, hopefully by the end of this quarter or at best early part of next quarter. We have left with, after the debt repayment plan, after the investment in businesses plan, and after the Hyderabad Metro restructuring plans, we are left with about INR 2,500 crore of cash, which is what we have distributed as special dividend to investors at INR 18. The whole plan around the use of cash was just to make sure that we also use the proceeds to strengthen the balance sheet of the company and by the deleveraging and also strengthen the underlying business of the company.
It is quite clear that the infrastructure assets that we have built so far, including Hyderabad Metro, which is the latest, are monetizable assets. As part of the discussions with the bankers, we are also trying to work out a mechanism by which, in due course, after the traffic stabilizes, there will be options available for divesting our stake and de-risking our balance sheet from these exposures. Talking about de-risking on exposures, particularly on infrastructure assets, actually led us to a few more decisions in this quarter, and I would like to share that as well with you. One is we have a coal-based supercritical power plant in Punjab, where we have a PPA with the Punjab State Electricity Board. It's one of the most efficient plants, being a supercritical plant and one of the later plants in Punjab.
The plant gets priority in the consumption of power, both for the quality and consistency of availability from the Punjab State Electricity Board. It's a very important asset for the Punjab government and the electricity authorities. In the quest of moving towards asset-light business model, we had identified the infra assets as monetizable pieces, except that they are all in different forms embedded in our financial statements structurally. Some of them are in subsidiaries, some of them are in associate company joint venture form. One of the first things that in the course of the quarter, we crystallized our plans for an orderly exit from Nabha. We do not yet have any specific offers on table. Neither have we kickstarted a process as I speak today. These are subsequent steps that the company might have to walk in the quest of monetizing that asset.
Having said that, it became important for us to reevaluate the carrying value of this asset. We looked around at market multiples because once there is a plan for monetization, then it is important that the asset gets valued or carried in the books until monetization in an appropriate manner. Based on the multiples that are available for coal-based plants and looking at the nature of the asset, and it's a single asset company as well, doesn't have multiple power plants. We applied a prudent discount in consultation with our merger and acquisition and divestment teams. We had invested about INR 2,700 crores in Nabha Power Plant as our equity. Over the years, the Nabha Power Plant has been generating profit every year on year, and the accumulated profits have been come back, and we invested in that business.
The carrying value had grown to about INR 3,800 crore, and based on the market valuation, we assessed the realizable value to be around INR 2,200 crore, leading to an impairment of about INR 1,600 crore. The second asset that we closely looked at was another power plant, but this is a hydropower plant in the hills of Uttarakhand. It's a project called Singoli Bhatwari. We took almost 10 years because there were enormous amount of challenges to complete the power project. It took all of L&T's commitment to project completion to stay on course and complete this project despite a 10-year delay. Now that the project in September, the turbines were commissioned, and mechanical completion was certified. The project is up and ready for generation. We are in advanced stage of discussions of PPA with the Uttarakhand government.
Based on the regulations and tariff fixation norms of the Uttarakhand Electricity Regulatory Commission, it appears as though that the levelized tariff would be around Three and a half rupees per unit, with the obvious initial tariff being at INR 5 and then leveling off over the duration of the long concession period that we have. So reflecting the possibility of the tariff setting through the PPA, we reevaluated the carrying value of this asset, which is actually close to INR 1,900 crore, INR 1,890 crore actually. On the base of the PPA and the tariff's potential, we've carried the recoverable value at about INR 837 crore, impairing in the process about INR 1,000 crore from the carrying value. The third asset that we have been dealing with, and it is not an infra asset, but we have spoken about this at length in the earlier commentaries and conversations.
We have a nuclear power shop meant for nuclear power plants. It is a joint venture with Nuclear Power Corporation of India. We own 74%, and NPCIL owns about 26%. We've been battling with gross capacity underutilization in this plant ever since commissioning. The frequency of the ordering and the speed at which nuclear power plants orders out forging has been a steep learning curve for us. We cannot set up such an advanced and sophisticated forge shop with periodical orders. It has to have regular flow of orders. The nuclear power capacity addition today possibly has taken a bit of a back seat in contrast to the thrust that is being given to renewable energy. Regardless of the quality of the prioritization of the decision making, the hard fact is that the forge shop that we have is struggling for capacity utilization.
Recognizing the fact that the capacity utilization is going to be a challenge, we've been in deep discussions with the government and through NPCIL about converting the loans into equities just to rid the plant of the burden of having to service the borrowings. Despite almost two years of effort, we've come to the painful conclusion that there is no urgency on the part of Nuclear Power Corporation to resolve this issue, given their own constraints, et cetera. Not wanting to comment on that current stand of theirs, it was important for us to recognize that this asset is not going to justify its carrying value of about INR 1,000 crores in the consolidated books.
The funded exposure that L&T had on this plant was about INR 1,000 crores, and that we impaired it as well, because our conversations with Nuclear Power Corporation and Government of India came to a standstill. These three actually together led us to an impairment during the quarter of about INR 3,700 crores, and the results that we have announced reflects this impairment. I think I will stop here because I am sure you will have a lot of things to absorb and through the presentation and the Q&A thereafter. Before that, one of the most compelling reasons why I thought I should speak to you today is my long-serving colleague and friend, Mr. Arnob Mondal, who has been spearheading this IR activity for over 10 years, is retiring on the 2nd of November after 25 glorious years with L&T.
Like all L&Tites, he is very, very passionate about his work, and I have no hesitation in saying that he was able to lift the quality of IR practice that the company was adopting by sheer commitment, enthusiasm, and passion for the work. You've been a great support to him through this period. I just wanted to, in your presence, acknowledge the tremendous contribution that Mondal has made and the value that he has created to this function. I also want to use the chance to welcome P. Ramakrishnan, who along with Harish Barai will form the core of our IR team. P. Ramakrishnan has also been a very long-serving senior colleague of mine in L&T. Worked in several functions. The last function that he was, he was the CFO of L&T Technology Services, the listed company.
Maybe some of you have had an opportunity to interact with him in that avatar. I think Mondal has taken the effort to introduce P. Ramakrishnan and Harish Barai to you, and I seek all your support to the new team while wishing Mondal a very, very happy retired life. Thank you. I will hand it over to the IR team for the presentation moving forward.
Thank you, RSR, for the lovely words and sentiments and the clarity that you have brought to the very large items of both the P&L and cash flow that have been embedded in this quarter's results. I think that answers a lot of queries. Many people have been asking me since yesterday after we declared our results on these matters. Obviously, I told them that I would not be able to share details because it would be selective dissemination of information. I asked them to wait for the call, and we have very clearly clarified all those. Without any further ado, I will now hand it over to Mr. P. Ramakrishnan, who is taking over from me, and we affectionately call him P.R., by his initials. He will walk you through the presentation, and after that, the IR team will take the Q&A. P.R., over to you.
Thank you, Arnob, good morning to all of you. Some of you may have heard me during my previous stint as the CFO of L&T Tech Services. My name is P. Ramakrishnan, shortly abbreviated as Arnob talked about, P.R. I will take the presentation. Hopefully, all of you must have downloaded and probably went through it. I will probably summarize the presentation in the next 20 minutes or so. Before I start off, the standard disclaimer. This presentation and what we have spoken in this particular call does have forward-looking statements and conversation that may concern our L&T's future business prospects and profitability. These are subject to a number of risks and uncertainties, hence, the actual results going forward could materially differ from what we have disclosed in the analyst presentation or what we speak in the call today.
I come to the slide number four which summarizes the Q2 of FY 2021. As the title says, we have had a sequentially strong quarter. It is in the backdrop of to see our group performance in this quarter to be seen in the context of domestic macroeconomic environment that is India, where we primarily operate in. As we see, going by the month-on-month improvement in the high-frequency lead indicators, it appears that the Indian GDP contraction in Q2 FY 2021 could be less severe than the 24% contraction that we saw in the previous quarter, Q1 FY 2021. In this backdrop, we still managed to secure orders of roughly around INR 280 billion in the current quarter. Whereas in the previous quarter, the order inflow was INR 236 billion.
Despite the pandemic situation, we have had a reasonably healthy Q1 pickup in order inflow almost to the extent of 19%. Our order book at roughly around INR 300K crore, which is precisely INR 2,989 billion is relatively stable and is largely unchanged from that of the previous quarter of the previous year as well. Our group revenues for Q2 FY 2021 reported at INR 310 billion vis-à-vis INR 213 billion of the previous quarter Q1 FY 2021 demonstrated a growth of almost 46%. This is on the back of strong sequential improvement in revenue across most of our project businesses and also service businesses. Most of our sites were operational with the near labor strength of around 250,000 workforce. Our operational productivity or efficiency, as RSR also talked about, is yet to catch up to pre-pandemic levels because of work-related restrictions.
We believe that as restrictions are eased progressively, we do expect a sequential improvement in site productivity. Our operational PAT, that is before the exceptional item and the gain on the discontinued operations, has been reported at INR 11 billion for Q2 FY 2021, almost up multiple times from what we had in Q1 FY 2021. Coming to cash flow. We have had a reasonably good cash flow momentum, even stretching into Q2. More because of there has been ample systemic liquidity in the system and the fact that both the central and state governments have front-loaded their borrowing programs of the year. Our client collections in H1 has been reasonably robust. To that extent, we did not have drawn down on our cash reserves to fund our operations for H1.
Going by the government's borrowing calendar for H2 of the current financial year and also the fact that the economy is showing pickup across all areas, our outlook with respect to customer collections remains positive for H2 as well. To summarize the performance of Q2 with respect to Q1 of the current financial year, I would say businesses are catching up on lost ground aided by the government's actions to restore normalcy. I come to slide number five, which is the summary of the key financial indicators. Just to convey here, in this slide, the quarterly performance snapshot is presented on the left and half-yearly on the right. I will focus on the Q2 FY 2021 numbers, as H1 numbers are a derivation.
Please understand that the sequential improvement in performance on quarter-on-quarter, as I mentioned while I spoke on the previous slide, the Q2 FY 2021 and the H1 FY 2021 are not comparable with the corresponding quarter and the H1 of the previous year for obvious reasons. Our Q2 FY ordering flows are INR 280 billion, has registered a decline of 42% over Q2 of the previous year. As I said, the order book at INR 2,989 billion, there is a marginal decline of just around 1% over the 30th September 2019 number. Our Q2 FY 2020 revenue and EBITDA at INR 310 billion and INR 33 billion has registered a decline of 12% and 17% respectively over that of the previous year.
Our Q2 FY21 PAT, reported at INR 55 billion, is inclusive of the gains on divestment of the Electrical & Automation business and offset partly by exceptional items, which was highlighted by RSR during his call. To sum up the gains on the divestment of the Electrical & Automation business, post-tax is in the order of INR 8,100 crore. Just to convey the exceptional items, net of tax during Q2 FY2021 represent impairment of funded exposure in the heavy forgings joint venture, INR 10.7 billion. Impairment of assets in the power development business aggregating to INR 26.57 billion. Coming to working capital, as I said previously that our customer collections have been fairly robust. The gross collections across the group for Q2 aggregated to INR 29,000 crore, almost up by INR 4,000 crore as compared to Q1 of the previous quarter.
Out of this, the project business or the core business also show a growth in collections. We reported a collections of roughly INR 15,000 crore for the current quarter as compared to INR 12,000 crore of the previous quarter. The working capital position at roughly around 26.7% has remained almost the same as of June quarter, but has moved up when you compare with September 2019 position of 23.2%. We believe that given the current year, as this is being an exceptional year because of COVID, the intention of the company is to ensure that the absolute working capital as we progress and close the year March 2021 is at almost the same level as what it was in March 2020, without really measuring the working capital to revenue as a percentage.
Our return on net worth on a trailing 12-month basis is roughly around marginally less than 17%, but not comparable strictly because it does contain the divestment gains and also exceptional items. I move to slide number seven, which summarizes our Q2 H1 FY 2021 order inflow and order book. Here order inflow numbers are mentioned on the left and the order book on the right. Our order inflows for Q2 FY 2021 at INR 280 billion is down 42%. It is good to note that the momentum has improved in infrastructure covering both domestic and international, despite the pandemic concerns. The power generation continues to see some award deferments and the hydrocarbon CapEx is muted in the quarters due to soft oil prices.
In Q2 of FY 2020, we had large order wins in both power and hydrocarbons, which largely explains the decline in Q2 FY 2021 order inflows over the corresponding quarter of the previous year. As at September 2020, and for the remaining months of FY 2021, when we see from a bottom line prospect approach, the pipeline seems to be quite robust of almost INR 6 trillion, and out of which INR 4.7 trillion is domestic and INR 1.3 international. Coming to the later part of the presentation, Arnob would take us through the summarizing the outlook based on this particular metric. Coming back, the government has ensured in the first part of the year that project execution continues and payment to contractors are not withheld.
It looks like in the next part of the financial year, the government will now turn focus on awards, that is on new ordering, which hopefully should aid economic recovery and generate employment. As we speak in the order prospect pipeline does see a lot of opportunities in areas like water, power transmission distribution, metro and RRTS systems, railways, and as well as roads and expressways. Coming to the order book at INR 3 lakh crore. The portfolio diversity, what we show, and our dependence on government and PSU investments mitigates the cyclicality, and especially considering the current outlier event of corona. Today we have roughly six business verticals where each of their order book is ranging between 9%-15% of the overall company order book. They are buildings and factories, water, power transmission and distribution, heavy civil infra, transportation infra, and hydropower.
The diversity of order book helps and the future revenue growth is not dependent or not seen to be dependent on the fortunes of any specific sector. Out of the total order book of INR 2,989 billion as at September 20, 76% belongs to domestic and 24% in the international. Coming to the domestic order split, which is around INR 2,273 billion. The split between central government at 14%, state government at 38%, public sector units at 30%, and the rest private at 18%. As I stated earlier, 82% of our domestic order book is from the public space. We believe that in the current times, a larger proportion of public sector order book possibly mitigates credit risk. Coming to slide eight. This summarizes the group performance from an overall cost perspective, starting with revenue.
Here again, I will focus on the left side of the slide, which is the Q2 number. Our group revenues at INR 310 billion for Q2 FY 2021 has registered a decline of 12% over Q2 FY 2020. However, as I explained earlier, our Q1/Q2 revenues have registered a smart recovery of almost around 50%. The services portfolio of our business has done reasonably well in Q1 FY 2021. There is acceleration of momentum there as well in the current quarter due to FY 2021. Coming to the summary of the cost. The MCO expenses, which is nothing but manufacturing, construction, and other operating expenses, is largely attributed to the project parts of our business, is reflective of job progress, revenue mix, which is between core and service businesses, and cost control initiatives. The finance charge OpEx largely represents borrowings in L&T Financial Services. The Q2 cost is largely flat.
The overall headcount for Q2 for the group is around 161,000 as of September 20, as compared to Q2 of last year, that is September 19 at 165,000. Overall drop in headcount of around 4,000 people. The lower SG&A charge in Q2 on overhead savings, primarily resulting from travel, rent, and other miscellaneous expenses, is partly offset by incremental credit provisions in financial services business. You are aware the financial service business has been making prudential macro provisions over and above the mandated provisions as is required. Consequently, our total OPEX for Q2 FY2021, reported at INR 277 billion, declines 12% over Q2 FY2020. I move to slide number nine. For reasons which I explained in the previous slide, our EBITDA for Q2 FY2021 at INR 33.3 billion, it has registered a decline of 17% over Q2 FY2020.
The finance cost at INR 10.4 billion for Q2 FY 2021 is commensurate with the level of borrowings at the parent L&T level, also has gone up primarily on account of the full commissioning of Hyderabad Metro. At the current levels of around INR 16,000 crore, the finance cost of Hyderabad Metro ranges between INR 350 crore to INR 375 crore per quarter. You would recollect, as Mr. Shankar Raman also talked about, that at the start of the financial year, the parent company had almost borrowed INR 12,000 crore as an emergency liquidity buffer to act as a sort of insurance against the slowdown. Against that, we have almost paid INR 4,000 crore during the current quarter. The depreciation charge at INR 7.1 billion for Q2 FY 2021 includes the full impact of the Hyderabad Metro capitalization, which averages around, I would say, INR 75 crore per quarter.
The other income reported at INR 5.6 billion for Q2 FY 2021 is largely a reflection at the level of treasury investments and the yields that we have earned during the quarter. The share of JV associate companies largely comprises the results of our L&T IDPL, Power Equipment, and forgings JV. The non-controlling interest or minority interest reflects the profit share of minority shareholders across all the subsidiary companies. Coming to operational PAT. Our operational PAT for Q2 FY 2021 at INR 11.1 billion has registered a de-growth of around 52% over Q2 FY 2020, largely on account of drop in revenue and under-recovery of overheads due to corona pandemic in our core businesses. Under-utilization of Hyderabad Metro services in the current quarter. The Hyderabad Metro was put up for commissioning again, post-lockdown on 8th of September. We also missed mostly the second quarter as well.
Additional provisions, prudential provisions in the financial services business. As Mr. Shankar Raman talked about, that the E&A IC divestments, the profit from tax of the discontinued operations at INR 81.46 billion includes the gain on divestment of roughly around INR 81 billion of the E&A IC business. Whatever numbers which we have reported in Q2 against this may undergo some changes because of the explanation what Mr. Shankar Raman spoke, post-transaction closing adjustments and additional recovery of consideration post-completion of our obligation. We may see some amount of closure to this transaction as we go along. Hopefully by the end of FY 2021, this should have been closed. I move to slide 11. This slide summarizes the segment composition and one particular slide, which is the Electrical & Automation, has been highlighted because that's forming part of our discontinued business.
One important point which I would like to draw your attention to the segment composition is that the information technology segment, IT&TS mentioned here also includes Mindtree, which got consolidated into the L&T system from Q2 of the previous year. Effective 1st April current year, we had a Smart World & Communications business that has been shifted from the infrastructure segment to others. Similarly, military communications business has been transferred from our Defense Engineering segment to, in fact, Smart World & Communications, which in turn has been mapped to others. To that extent, the figures of the previous period has been regrouped in the segment results to conform to the new classifications in the current year. Having said this does not materially impact the performance of the segments to which these two segments were previously being reported to. I move to slide number 12.
This summarizes our H1 FY 2021 order inflow composition. This is more a slide for reference purposes. We just want to draw attention that 50% of the order inflows has been contributed by infrastructure in H1 FY 2021. Hydrocarbon and Defence contributed around 3% each and heavy engineering around 1%. For obvious reasons, the share of services percentage as a total of order inflow is higher at 40% for H1. Moving on to the split between domestic and international. 63% of order inflows for H1 were domestic and 37% international. Against this domestic order inflows, a substantial portion accrued from the infrastructure business. Moving to international, a significant proportion of international order flows is from the IT&TS business. Having said that, the infra hydrocarbons and heavy engineering has also contributed to international wins during H1. I move to slide number 13.
This is a summary of the H1 FY 2021 order book composition. As you can see, 75% of the total order book as of September 20 is from the infrastructure segment and 13% from hydrocarbons. Within infra, as I mentioned earlier, order book is well diversified across the 5 large verticals within that segment. Coming to the geographical split, we are predominantly an India-centric company and because of that, 76% of our total order book is domestic-based. Against that domestic order book, the public space will be around 82% and private at 18%. Our international order book is 24% of the total order book. As you may be aware, over the last couple of years, we have tried to move consciously from the Middle East where we had a predominant presence. As we speak today, 40% of the international order book is outside of Middle East. Moving to slide 14.
This is H1 FY2021 revenue composition. As you may see, the services business at 39% has acted as a good hedge in our overall business portfolio, which has been hitherto dominated by E&C. In a period like this, the revenue across core businesses in case there is a problem and which we have been witnessing, the services portfolio has come to our rescue. Of the total revenues of INR 523 billion for H1 FY2021. The services infra contributed, services contributed to 39%, and infrastructure contributed to 37%. Moving on to the geographical split, 59% is from India and the balance from outside India. This percentage of especially the revenue share of 59/41 may be a little skewed because in the current year, because of a larger proportion coming from the IT&TS business. With this, I have summarized at the company level.
The next few slides, I will take you through the segments of the company. Moving on to slide number 15, which is the Infrastructure segment. Infrastructure segment, as you may be aware, is the largest segment within parent L&T, within the group. Obviously the performance of this segment impacts the group's fortunes as well. Some brief comments on order inflows before we move to the other parameters. You would recall that in Q1 FY 2021, the Infrastructure segment recorded order wins of around INR 113 billion. In Q2 FY 2021, this segment recorded order inflows of INR 145 billion, representing a healthy sequential growth. Our bottom of pipeline in this particular segment, which covers both domestic and international, is almost to the order of INR 4.2 trillion as we speak as of, say, September 2020.
The Indian government is focusing on key areas like water, power transmission distribution, metro, railways, roads, and expressways. As we speak, the ordering momentum is expected to pick up in H2. Hopefully on the order inflow side, our Q3, Q4 order inflow should be better as the economic recovery and improved tax collections should give the sufficient comfort to the government to put more orders on to awarding stage. The Q2 FY 2021 revenues for this segment at INR 129.7 billion is up 102% on a quarter-on-quarter basis, primarily because of supply chain normalization in Q2 and also almost full 100% labor availability across the 700 sites. On a year-on-year basis, these numbers for Q2 FY 2021 would be down 20% over Q2 FY 2020.
We do expect revenues to pick up in the coming quarters on the back of further labor supply normalization and also sustaining, I would say, the logistics and supply chain. Coming to client collections, Q1 and Q2 has been reasonably good for this segment, and I did touch upon this when I covered the previous slide. Hopefully we should not be seen to execute the performance from our balance sheet in the coming quarters as well. The margins for Q2 FY 2021 at 6.4% represents a marginal improvement of 10 basis points over Q1 FY 2021. Kindly note that in Q1 FY 2021, the margin buoyancy, despite the lockdown, was largely because of a couple of jobs which should have ideally closed into the RSV or the margin threshold stage in the previous quarter, that is Q4 FY 2020, actually moved to Q1 FY 2021.
That's the reason the Q1 margin at 6.3% and now at 6.4%, which is a marginal improvement. On a year-on-year basis, our margins have dropped from 7.2% in Q2 FY 2020 to what it is reported at 6.4% in Q2 FY 2021. The margin challenges in H1 FY 2021 obviously were due to supply chain distribution and labor availability and productivity, and lastly, job mix. With now supply chain coming to near normalcy and overall improvement in productivity, the revenues from this segment are expected to move up. The margins, therefore, would be primarily a result of the way the job mix happens and not because of other factors, as we saw in H1. Coming to slide 16. This slide summarizes the performance of the power segment.
Although there were a couple of power prospects and flue gas desulfurization opportunities which were lined up, the H1 witnessed award deferments due to the ongoing pandemic. Having said that, we would like to mention here that the business is actually sitting on quite a healthy order book of almost INR 146 billion, which provides us a revenue visibility for the near future. The revenue for Q2 FY 2021 at INR 6.9 billion was up 42% on a year-on-year basis, largely driven by the execution from a large opening order book. A major part of the revenues of Q2 FY 2021 is yet to cross the margin recognition threshold, and this explains the margin variation of 4.1% in Q2 FY 2020 to 3.1% what we have reported in the current quarter.
As you may be aware, the power business margins are optically low because our power equipment businesses are actually joint ventures. If they were to be consolidated as subsidiaries, then the margins of the power segment would be up to almost 30%. Sorry, 10%+ . I move on to slide number 17, which is the slide covering the Heavy Engineering segment. The segment did see very, I would say, muted order wins in the current quarter, largely on account of order difference. The Q1 order inflows were good enough on the back of order wins in the international market. The orders got feedback in Q2 was roughly INR 323 crores as against INR 476 crores in Q1 of the current year.
The segment recorded revenues of INR 6 billion, registering a year-on-year decline of 3%, while sequentially it has increased by 59%, representing a substantial improvement over operations because of better capacity utilization post the lifting of lockdown. The EBITDA margins for the current quarter at 5.1% as compared to 24.9% in Q2 2020 is because of in the current quarter, a one-time prudential provision has been made towards the settlement with the client. We do expect going forward margins to be normalized in the subsequent quarters. I move to slide 18, defence engineering segment. We had a significant order win in Q2 FY 2021 from the Ministry of Defence, which replenished the order book. The recent government announcement on time-bound defence procurement processes and faster decision making hopefully awakens hope for the future.
The announcements considering separate budget provisioning for defense capital procurement and the list of 101 items released by the Government of India to be exclusively manufactured in India over a period of time is a distinct positive development for this segment. We do have some RFPs which are lined up, and we are constructive on the future outlook. The revenues for Q2 FY2021 at INR 7.6 billion registered a decline of 20% over the last year, largely due to the tapering of a large order in the current year and new orders which we had yet to gather execution momentum. Margins for Q2 FY2021 at 24.4% almost up from 18.1% in Q2 FY2020, largely reflective of the pace of jobs under execution aided with operational efficiencies. I move on to slide 19, hydrocarbon segment.
As I explained while we covered the previous slides, due to the uncertain oil price scenario, we are relatively seeing very relatively subdued tendering activity, and because of that, this segment recorded, I would say, very low order inflows during the current H1. The order book of the segment is extremely robust. It has almost two years of revenue execution, and hence, even if a couple of orders deferment, that should not impact the revenue trajectory of this segment in the near term. The segment clocked revenues of INR 40 billion during Q2 FY 2021, registering a Y-on-Y decline of 6%. However, sequentially, the revenues have increased 32% with all our fabrication yards up and running and most sites nearing normalcy. The international revenue constituted 53% of the total customer revenue, and jobs were primarily executed in Africa, Saudi, and Kuwait.
The segment margin reported at 8.5% in Q2 FY 2021 vis-à-vis 12.5% in Q2 FY 2020. Previously, margins were aided by a one-time favorable variation claim from customers that got accounted for in that quarter. I move on to slide 20. This summarizes the development project segment. The segment comprises of two portfolios. One is the power development business and the other is the Hyderabad Metro. Kindly note that other development projects business, which is IDPL, that comes under operations from joint ventures.
Here again, roads and transmission lines concessions which were housed in L&T IDPL are consolidated, as I said, in the equity method, so the numbers don't include in the development project segment in this slide. The segment registered revenue of INR 11.4 billion, down 22% of the corresponding quarter in the previous year. The revenues in this segment are largely contributed currently by the power development business, primarily from Nabha.
The performance of Nabha Power for Q2 FY2021 was very robust, mainly because of the record PLF of 92%. Hyderabad Metro, for obvious reasons, has not contributed to any sort of meaningful revenue and operations in the current quarter. The EBITDA margin for the segment at Q2 FY2021, 5.3% as compared to 10% of the quarter of the previous year. Largely impacted our Metro operations. As I stated earlier, the Metro operations have started in a phased manner from 7th September . As of September 30, we have a traffic of almost 50,000 passengers per day, and as we speak, it is touching one lakh in the current month. I move on to slide 21, the IT and Technology Services segment. As you may be aware, this segment comprises our three listed entities, LTI, LTTS, and Mindtree.
Since the details of the performance of these companies are already there in the public domain, post their board meetings and announcement of Q2 results, I will try to summarize the overall performance of the group as one segment. The revenues in Q2 FY 2021 at INR 61.7 billion. It registered a growth of 5% over the corresponding quarter in the previous year. All the three listed subsidiaries have done fairly well on a quarter-on-quarter basis as well. An array of business verticals contribute to the growth within each of these companies. The details are summarized in the slide itself. Happy to inform you that all the businesses have successfully adopted a work from anywhere model, thereby giving us the assurance that there are no supply chain disruptions from an execution perspective.
The international sales, as most of them are primarily export oriented, constitute almost 93% of the total customer revenue for the quarter ended 30th September 2020. The EBITDA margins for the segment increased to 23.2% for Q2 FY2021 as compared to 19.5% for Q2 FY2020, largely on account of improved manpower utilization, onshore-offshore revenue mix, and operational efficiency. I move on to slide 22, the other segment which is a residual segment, which comprises of the Smart World & Communication, the Realty business, the Construction & Mining Machinery business, the Rubber Processing Machinery business, and valves. The customer revenue of this segment during Q2 FY2021 at INR 13 billion registered a decline of 33% over Q2 FY2020.
This decline was mainly in account of the realty business, where in the previous year, that is Q2 FY 2020, included the monetization of a commercial asset in Navi Mumbai project and a higher proportion of handing over residential flats. The margins for this other segment for the current quarter, Q2 FY 2021, reported at 18%, has largely remained unchanged from what we reported in Q2 FY 2020. Margins continue to be healthy on account of cost efficiencies in the residential project in the realty business and cost saving measures undertaken across other businesses. I conclude the segment results with L&T Finance Holdings, slide number 23. This segment recorded an income of INR 33.4 billion in Q2 FY 2021, a year-on-year decline of 3% due to lower disbursements vis-à-vis corresponding quarter of the previous year.
The loan book was marginally lower at INR 988 billion as compared to INR 1,002 billion in September 2019. The business's focus is on an improvement on return on equity, realized through a strategy on retailization of the loan book, prudent ALM, improving asset quality, and increasing diversity of funding sources on an ongoing basis. The focus in Q2 of the current year largely centered on recommencement of rural disbursements, controlling credit cost, improving collection efficiency, and at yet maintains adequate liquidating buffers. The group over the last couple of years has demonstrated tremendous resistance despite the challenge surrounding the NBFC space. L&T Finance Holdings and all of its lending subsidiaries have a reaffirmed AAA rating by all the four credit rating agencies. Previous year Q2 FY 2020 profits were impacted by a remeasurement of a deferred tax asset under the new tax regime which was announced last financial year.
With this, I have summarized the performance of the company for the quarters for H1 and also the segment performance. We now come to the last part of our presentation, which is the environmental outlook, and I'm requesting Arnob to take you through. Thanks.
Thank you, PR, for a very elaborate and illuminating discussion on the performance of the group for this quarter as well as this half year. Coming to the last slide, it is obviously more macro, and I will obviously not read out every single word of it. I would just like to highlight a few things. Of course, PR has covered the results in detail, so I'll not get into all those. Mr. Shankar Raman also elaborated on the E&A divestments and impairments, so I'll not get into that either. Coming to the environment, I think it is clear that the government focus on infra remains unchanged, and it's very strong. In fact, those of you who have gone through that detailed 300-page NIP plan will clearly understand that it's a fairly detailed, it's a robust plan with funding also reasonably laid out.
While the private sector could probably fall short, it does appear that the public sector spends seem to be well on track, considering the fact that Center, State, and PSU cash flow on CapEx on an annual basis is typically around INR 15 trillion-INR 17 trillion. On a six-year timeline, the plan does not look like wishful thinking. Of course, the government focus on infra has been validated to a large extent by the big high-speed rail order which we received yesterday, and we have also announced it to the stock exchange changes as well. That is a clear demonstration of the fact that the government is focused on pushing infra. Now, just a couple of points on the liquidity support.
I think everybody realizes that there was a big tax shortfall collection in the first quarter and early part of the second quarter, even though September tax collections have picked up quite a bit. This has largely been sought to be mitigated through an increased borrowing plan by both Center and State. For FY 2021, apart from what they had originally budgeted, they are planning something around INR 9 trillion additional borrowings, five at Center and four collectively at States, to tide over the liquidity crisis that the government faced in the initial part of the year due to COVID. However, the gross debt to GDP could also climb to around 90% by the end of this year, which is okay compared to many other countries, but still something which needs to be also closely monitored.
I think the global pandemic, everybody has talked about it and countries which have been affected and the unknown variable right now is particularly with respect to resurgence in different countries in Europe. In fact, Germany and France have already announced a limited reimposition of lockdown, so we'll have to see. In India, obviously, we have seen the phased reopening that has happened and will hopefully continue, and we hopefully will not see a resurgence coming back. I think we have talked about the labor situation is back to normal. We're close to around 250,000 labor at project sites till around a week back. However, here again, I need to reemphasize that we have been facing productivity issues, primarily due to imposition of strict social distancing norms in our workforce. However, we are finding technology solutions and smart scheduling solutions to try to overcome that.
Hopefully, a few months down the line, maybe two, three, four months down the line, we should be able to be better placed on that front. As far as L&T, I think in this slide I've also shown an economic moat, and I will not go into details of that. I think we have multiple protective rings, even though I do feel that markets seem to have discounted some of these so-called rings. Considering the way our stable services business has been delivering quarter after quarter, I think there is a case to have a relook at conglomerate discounts in your models, but you are the best judge of that. As far as input costs are concerned, we have been seeing a decent period of relatively soft commodity prices, whether it be construction steel or cement or construction aggregates like brick, rakes, stone chips, sand, et cetera.
However, currently we are seeing some commodity inflation are coming through on multiple fronts. Hopefully, it will not spike, it will remain under control. As far as labor costs are concerned, a big question which we have been facing is that whether we are seeing strong labor inflation because of migrant labor coming back. Yes, we have had to incur quite a few one-off expenses in bringing them back on the transportation part to some extent. However, the labor inflation has been very moderate, and we have done a detailed analysis of around 70 odd sites at various states and our assessment is that from those sites, it is clear that if you take a base of January 2020 and going up to September, because that covers the pre-COVID and the current situation, the labor cost inflation is barely around 3%.
We have already been paying minimum wages at every site which is considerably higher than the MGNREGA wages that are prevailing today. It seems to be well under control, and of course, those one-time costs have all been washed through the P&L already, so they will obviously not be a recurrent feature. I'd just like to touch upon some macroeconomic trends because many people keep on asking us, how do you see the macro turning out? We do think that there's been an improvement from August and particularly a strong improvement in September. Some of the key indicators, I think manufacturing PMI going to 56.8 is a very welcome sign. Even though services PMI is slightly short of the mid-mark of 50, so at 49.8. Still a very small contraction, but obviously travel and hospitality sectors are also weighing on that, so that is not entirely unexpected.
Overall, the composite PMI seems to be fairly strong now. Going by IIP, there's been a good trend of improvement. In fact, those of you who track IIP will recollect that in the month of April, it contracted by 57%, and in May, it improved to 33%, in June to 15%, and in August it touched something around 8.5%. Power generation year-on-year, September, there's a 4% growth. For the first 25 days in October, it's very heartening that we are seeing a growth in excess of 10%. GST collections, all of you would have noticed that we crossed INR 95,000 crore in September, which is a very welcome sign. Some other indicators like tractor sales. August and September saw very strong tractor sales.
To some extent it was also due to very healthy, strong monsoons that we saw with reasonably good spatial distribution across the country. Road traffic is coming back, going by our IDPL roads, and we are back to, I would say, around flat year-on-year revenues in this quarter. Appears to have normalized to a large extent. Railway freight traffic has seen a growth of close to 4% in year-on-year in September. That's also very heartening. Exports has been strong, and it's seen year-on-year growth of over 5% in September. All of you would have also noticed that Forex reserves are in a very strong position. The last number that was given out was something like in excess of $510 billion. The MCLR marginal cost of lending rate is also moderated somewhat. It's around 7.4% in September compared to 8.75% in May last year.
Bank deposit growth has also shown a welcome improvement of around 10% in September year-on-year. One indicator of traffic movement is, of course, FASTag collections. That's also shown a decent growth. That's also seen decent numbers of nearly INR 2,000 crore in September versus average of around INR 1,500 crore in the December to February period. NPCI and UPI payments are back to slightly higher than pre-COVID levels. Net FDI is also fairly strong, close to $18 billion in September, positive. Even though the PLI thing is yet to fructify, we'll have to wait and see. Another thing is that going by the commentary which I keep on reading and hearing, the late pre-Diwali this year could also probably, it's not a guidance to me, could probably see strong FMCG and white good sale in November.
We have also mentioned the phased import embargo on defense equipment, and we do think that there's very positive news because as a company, in terms of the total count out of the 101 items, we can actually address more than 50%, even though the values could differ widely from item to item, but very welcome move. These are some of the macroeconomic trends which I thought I need to point out, and because we are still in a slightly volatile situation, we are still not giving any guidance, but we are positive on the outlook. Now, before I open the session to Q&A, I would also like to, on a personal front, this is the last time that I'll be addressing you in the capacity of an L&T spokesman.
I'm immensely grateful to both my side and sell side for the great support and strong interpersonal relationships that we have built over so many years. People have never hesitated to reach out to me at times, even at odd hours, which is a testimonial to the fact that they are very comfortable with the IR interchange that we have. I would also like to extend my profound and heartfelt thanks to L&T management for the faith and trust that they have reposed in me for all these years and for the constant support. In fact, it's very easy to go wrong if top management wants to continually paint rosy pictures, but we've never been under that pressure.
A special thanks to my long-standing boss, Mr. Shankar Raman, who has supported me through thick and thin, and for the valuable advice and insights that he has so freely given to me over the years. A large part of where I am today is because of that strong support and advice. The IR team, we've already briefly introduced both Mr. P. Ramakrishnan and Harish Barai, and I will sleep easy at night knowing that the IR function is in very sound and competent hands, and both of them are long-standing L&T employees. Both of them have been in L&T. Harish has been in L&T for over 22 years, and PR over 28 years. L&T is nothing new to them, that's a great relief, actually, for me.
With that, I would like to open the session to Q&A, and since PR and Harish are already in the room, so to say, I will request them to handle the Q&A. If required, I will jump in or intervene if I need to add anything to what they've said. Zaid, over to you.
Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. The first question is from the line of Mohit Kumar from IDFC Securities. Please go ahead.
Yeah. I'll start with congratulations, Arnob, for a very successful inning, and a very warm welcome to Ramakrishnan, sir. Sir, a very good quarter in a very challenging environment. My first question is, sir, why are we still not giving any guidance? Given the fact that we expect the deliverability has improved materially, and we expect some kind of normal run rate. Are we not confident of our H2? Also on the order prospects, we are reasonably INR 6 trillion kind of order prospect is there. What is stopping us from giving any guidance? That's my first question.
Okay. I will take that, Mohit. This is PR here. You must have heard Mr. Shankar Raman and you heard me, and you heard Mondal also closing with his guidance on outlook. See, in the recent past, we have always as a company, given a sort of a guidance on how we see orders and how we see revenue and also margins. At the start of this financial year, because of this COVID situation, the unpredictability in terms of when the ordering momentum will start is absolutely there, and it still lingers on. There are, as we have summed up across the three of us, what we have spoken over the last one and a half hours, we do see a good amount of traction or opportunities which are being put. As you are aware, these are all largely driven from the government side.
I'm talking first of India, and I'll come to the overseas part later. As far as India is concerned, the first part of the year was more to do with how to address the situation. It was more driven from a social and a health perspective. Having done that, the country still continues to witness turbulence as far as corona is concerned. At this time, the government also realized that it is important to keep the economic engine running. They kept the economic engine running in the first part by ensuring liquidity, and in the second part, as is evidenced by the prospects and the kind of tenders which are likely to be floated. The scene shifts more from a growth perspective in terms of kickstarting the economy onto the growth track.
Now, having said this, our internal discussions with all our businesses just point out that there are lots of opportunities which are coming up, and we are also trying to price it in a proper way and try to address those opportunities. The timing of contract orders, in the current situation, becomes a little, I would say, difficult for us to estimate. Hence, this is one of the reasons that we have refrained from giving a specific guidance. I believe if this whole situation stabilizes, hopefully by the end of March 2021, I guess we would be in a better position to articulate as to how do we see 2021/2022.
This year has been largely a year for us to ensure, as Mr. Shankara talks about in the initial part of the call, that ultimately safe and health of our employees, of all our stakeholders is primarily important. Then addressing, given the constraints, how do we execute? It's an important thing that since the large order book at least enables us to survive over the next, I would say one or two years in terms of how we execute. At the same time, it is important for us to also see the pipeline. The pipeline looks robust, but in terms of timelines for us to give an idea about what kind of order inflow guidance, I think it's a little premature for us to say at this juncture.
Okay, understood. Secondly, on this Nabha Power and Singoli Bhatwari. My question is, the valuation which you arrived for Nabha Power, $22 billion, does this account for the disputes on custom duty getting resolved in our favor? It doesn't consider these disputes getting resolved? Secondly, on the Singoli Bhatwari, is this completely funded by equity?
Okay. I will take, Mohit, there are two questions. One is Nabha. The Nabha, our belief is that whatever matters we are pursuing with our client, PSPCL, they're all clients where we have strong views on all these matters. In fact, in most of the matters, the arbitration of the courts have come in our favor. We do believe that these things are going to be positive for us. Hence, the way we have valued the company at what we expect to realize on account of a possible divestment does not factor into such matters going against us, number one. Number two, Singoli Bhatwari is currently funded entirely by L&T in terms of a combination of equity preference and loan assistance. We don't have any third-party debt into the company.
Understood, sir. Thank you, sir. Thank you, and best of luck.
Thank you.
Thank you. Before we take the next question, we would request participants to restrict your questions to two per participant. Time permitting, you may return to the queue for your follow-up questions. The next question is from the line of Renu Baid from IIFL Securities. Please go ahead.
Yeah, hi. Good morning, sir. My two questions would be, first, if you can help share some insight in terms of the overall net performance of Hyderabad Metro, in terms of how was it at the PAT level, and what would be the estimated timeline in terms of towards the end of the year expected numbers. Also, secondly, on heavy engineering, if you can elaborate what was the kind of warranty provision that you have taken on books for this quarter. Largely on the order inflow, although you have shared a broad aspect across couple of segments, if you can give some granular detail in terms of bottom-up across some of the key verticals in which you operate.
Renu, some earlier.
Yeah
Actually folded it into three questions. Anyway, Hyderabad Metro, we have in the current quarter our net loss at PAT level is around INR 450 crore approximately. Mainly constituting depreciation INR 75 crore, interest INR 25 crore, and underrecoveries at EBITDA level of around INR 25 crore approximately. 36 people interested. Pierre, would you like to take the heavy engineering?
Yeah. Okay. As I mentioned, in the heavy engineering segment, the provisions towards a potential settlement going forward is in the order of INR 120 crores for the quarter.
Renu, I think you also asked for some idea.
The prospect. Yeah, the bottom-up prospect across some of the key verticals.
Okay. I'll very briefly touch upon that, and obviously since it's very confidential information, we'll not be able to give out full details.
Sure.
If you take the core infrastructure business, and here I'm grouping power transmission, distribution under power and not under the core infra. The total prospect base is around INR 3,50,000 crore approximately, INR 3.5 trillion.
Yeah.
Covering Buildings and Factories, Heavy Civil, Transportation Infra, and Water. Power, which would constitute both coal and gas-fired EPC prospects as well as power transmission and distribution, is around INR 120,000 crore. A major part obviously is Power T&D is obviously higher than the EPC prospects. EPC also includes FGD. MMH, Metallurgical and Metals and Material Handling is relatively small at around INR 15,000 crore. Hydrocarbon, both offshore and onshore, including construction, hydrocarbon construction is around INR 110,000 crore. Heavy Engineering, Defense, and Smart World and Communication. These three together are around another INR 15,000 crore. That makes it around INR 610,000 crore as the EPC prospect that we are seeing as on the end of Q2. Yeah. Thank you.
Sure. Can I ask one more? I'll come back again.
Get to the back of the queue, please, Renu, if you don't mind.
I'll come in.
Thank you.
Sure. Thank you, and all the best.
Next question is from the line of Sumit Jain from ASK Investment Managers. Please go ahead.
Yeah. I have a quick question on the ROE. Takes off this exceptional gain, what is the ROE? For calculation net working capital, which is about 26%. What is the exact number in your numerator and denominator? Have you taken the last four quarters as a total of the revenues as the denominator, or you've taken FY 2020 revenues as the denominator?
Hello. Yeah, Harish here. For ROE calculation, we take the trailing four months, four quarters, sorry. The first two quarters of this financial year.
I'm sorry. You're barely audible. It is a problem on my end. I'll try to rectify.
Are you able to hear me?
Better now. Thanks.
The ROE calculation that is there is based on the trailing four quarters. Okay. It includes the two quarters of this financial year and the two quarters of last financial year. Right. Since this includes exceptional gains, if we were to remove that, the ROE would be in the range of 10%-11%.
Okay. The question for working capital. Again, here the base that is the denominator is last four quarters?
Yes, absolutely correct. It's the last four quarters only, and which is why the percentages look a little worse in the first six months of this financial year. Now, if there was not a problem of the denominator, our sense is that our working capital, net working capital to sales would have been better than 23.5% that we had reported in March. Essentially what we are trying to do in this particular financial year is focus on the absolute levels of net working capital as PR mentioned. Hopefully if we are able to maintain around these levels for the remaining part of this financial year, it would be a good achievement. PR also mentioned that in the first six months of this financial year, the entire operations of the company have been financed by client collections. That is a happy situation to be in.
For this you consider the standalone net working capital and the Hydrocarbons which is into a subsidiary, right?
Yes. The net working capital that we have reported includes all the businesses except financial services.
Okay, sure. Thanks.
Thank you very much. Next question is from the line of Ankur Sharma from HDFC Life Insurance. Please go ahead.
Hi, good morning. Just two questions. One, on the hydrocarbon orders. When I look at the last almost four quarters now, actually the hydrocarbon orders have been very soft. If you could just talk about how do you see the situation currently, both domestic, overseas, and also some of the larger prospects over there?
Yeah. You're quite right. I think we had very good hydrocarbon orders in the first six months of the previous financial year. You're quite right that the last four quarters have been a little muted, primarily because it is a function of oil prices and the petchem et cetera is also a derivative of oil.
Right.
That has been a little lackluster over the last couple of quarters for obvious reasons, both in India and in the GCC countries. If I were to share some information from the bottoms-up prospect pipeline that we have, because hydrocarbon sector has seen quite a muted ordering over the last couple of quarters. Our bottoms-up prospect pipeline suggests that close to ₹1 trillion of domestic plus international orders might come quickly. Very difficult to quantify which quarters, but it seems that a lot of bunching up is happening because of lack of ordering over the last couple of quarters, and let's see. We are hopeful if the tendering and ordering activity picks up quickly, and which we believe will happen once normalcy comes back in the world and oil prices revise. We are very hopeful and constructive in the coming couple of quarters.
Okay.
To add to what Harish just now told, in case of hydrocarbons, the opportunities going forward will be seen more on the mid and downstream, which is what we call the petrochemicals part. Because of obviously the muted oil prices and expected to continue, we don't see much of traction in the upstream side.
Sure. Just on hydrocarbons again, you have recently mentioned about some kind of provisions being taken there this quarter as well. If you could just elaborate more, I think it was on the domestic business, India business, so size of provisions, what does it relate to? Are you seeing some delays, et cetera? What exactly is it?
Essentially, I think the variation in margins that you see in Q2 of FY 2020 versus Q2 of FY 2021 is largely on account of certain claim settlements that we had in the previous financial year.
Okay.
There are no such major issues in the current financial year, and the margins are hovering between 8%-9% in the current quarter of this financial year, and it is more normal. Of course, the COVID pandemic has created some challenges as far as underrecoveries are concerned, but it's quite normal.
There are no provisions this quarter. 8%-9% is like a more normalized margin.
Yeah. If you look at the history and if you have seen the margins, the margins have remained in this band of 8%-10%. Last year, Q2 was a little bit of an exception.
Fair. Okay. Just the last question would be, are there any order cancellations during this quarter which you've taken out from the order book? Any significant number you want to share, or is it just business as usual?
There has been no significant order cancellations during the quarter.
Got it.
Actually, minor ones, but nothing to, as he says, order book what we have is relatively at INR 3 lakh crore is reasonably robust enough for us to deliver. There has been no significant cancellations.
Fair. Okay, great. Thank you so much.
Thank you very much. Next question is from the line of Ranjit Shivarama from ICICI Securities. Please go ahead.
Yeah. Hi, sir. Just wanted to check on if you look at the overall order intake pipeline, what will be the opportunity from the state front? We had enumerated this segmentally. In the states, which all are the states you are seeing activity and how much is the opportunity from the state segment?
Sir, large part of it is from states because water and power transmission distribution is obviously from states. These are fairly strong. While we're not able to quantify, a large part of it is definitely from the states. Mainly in water and power transmission distribution. Whereas the Metro and the RRTS and the roads and expressways could be Center-led. Metro, state.
Okay. In terms of the overseas market, apart from Middle East, are you seeing activities improving from the Africa and the other Southeast Asia kind of markets, or is it still some time away?
Out of the $1.3 trillion worth of prospects that we see for the next six months of this financial year from the international markets, it is fairly well distributed across businesses, be it infra or hydrocarbon. Infra, largely, we see some opportunities in the water space and the power transmission and distribution space. It is fairly well distributed across GCC, Africa, and Southeast Asia.
Okay. Sir, lastly, on the infra margin, it has been kind of subdued for quite a long time. Was there any provisions here, or can you throw some color on the infra margin?
The infra margins, I did talk about when I was covering the infrastructure segment. In the current quarter, it was at 6.4 as compared to 6.3 in the previous quarter of the current year. That is Q1, it was at 6.3. The important point here is as we have ramped up across the sites in Q2, the productivity challenges however continue to linger on. What we see as Q3, Q4 is that there will be, as there is absolute near normalization in terms of logistics of supply chain and also full 100% availability and with the lockdown restrictions easing, we do expect the momentum of revenue growth to substantially go up or significantly go up in the next two quarters.
As you are aware, all of you must be aware that our margins on the entire E&C project business is largely driven on the project mix, the way it is progressing. Each quarter to that extent, across all the segments besides infrastructure, it all depends on which project enters into some sort of a margin threshold. Like what we saw in defense, there was a particular order in terms of defense order, which we entered into a tapered stuff, because it entered into execution a major part last year, and whereas in the current year it tapered off. Margin movements across the sectors would be dependent on the progress of jobs and also on the mix, whether it's a cost job or an RSV job.
There's only one thing I would like to say, that despite the situation in terms of getting to get as much as orders are possible, we are being a little cautiously optimistic in terms of pricing. We are factoring all the attendant risks and trying to ensure that our bids which are going up for submissions do have what we call as acceptable margin thresholds, factoring into all kind of risk parameters. I just wanted to add to what P.R. mentioned. Yes, he mentioned about job mix and productivity headwinds. One thing I just wanted to say, yes, productivity headwinds are there, but to some extent, they also get mitigated due to lower raw material prices that Mr. Mondal mentioned and the operational efficiencies that we are trying to implement across the group level.
As he said, we will have to wait and see how it pans out during the next two quarters. A maximum two questions, Renu, per person.
Okay. Thank you.
Thank you.
Next question is from the line of Parikshit Kandpal from HDFC Securities. Please go ahead.
Hi, sir. Sir, just on the high-speed rail, have we concluded our negotiations on the project, and when do we expect to start the work?
Actually, I think this was announced yesterday. We have filed the stock saying we have got the letter of intent, so the project obviously is in our favor. We will have to enter into, I think, more detailed negotiations as to the commencement of work. It's a four-year project. That's the way I would put it. Just to add, the timelines between an LOI and the contract is a couple of months. Only after that the design work will start. Maybe couple of months away before we start working on it.
Okay. The second question was on Hyderabad Metro. We have an funding interest cost of INR 375 crores per quarter, and we have set aside about INR 2,000 crores, and we are also talking to government and trying to get in an investor. Just to get a sense on by when do we expect the cash flows from the project to start servicing the liabilities, which may be finalized over the course of time after refinancing and getting some support from the government or getting an investor. Any sense on that should be helpful.
Okay. As I did talk about, the interest cost per quarter would be in the range of INR 350 crore-INR 360 crore for this business. The point here is that it's a complex project, okay, in terms of the way it is structured. The key positives in this project for us is that it is a, in all the cities of the world, you have the entire metro transport as linked, commissioning one particular way, and that is entirely operational today. That is a key positive. The second key positive is the concession period is confirmed for 35 and further extended by another 25 years. You can technically say that it is a perpetual asset for us. Now, and as we commissioned this project early February, we managed to get what we believe in our internal estimates, almost four lakh passengers per day.
In fact, that's around two to three lakh passengers per day is the first milestone to cover entire operational cost. Okay? Beyond that, you start servicing the finance cost itself. Because of COVID pandemic, this is absolutely a black swan event in the traditional sense, which has impacted this particular project. Today, as a group, when you say as a group, we as the lead promoter, along with our lead banking finance institution led by SBI, along with even the Telangana government, we are absolutely discussing to restructure the project in a possible way so as to minimize the effect it will have on all its stakeholders. Now, such kind of decisions are not expected to happen so fast, but it is our intent that we should try to close it as early as possible.
It will be very difficult for us to comment at this juncture, a timeline. Having said this particular project in terms of the attendant, I would say, concern from L&T is no less than with Mr. S. N. Subrahmanyan, the MD CEO, and Mr. Shankar Raman taking their, at their levels, the discussions are happening. Hopefully, I think we should try to close it out soon. No timelines, please, at this juncture.
Okay. Lastly, I would like to thank Arnob sir for all the support he has given us and wish you all the best. Thank you.
Thank you.
Thank you very much. Next question is from the line of Abhishek Puri from Axis Capital. Please go ahead.
Hi. Thank you for the opportunity. Just wanted to check, one, on the liquidity that we raised during the pandemic was upwards of about INR 8,000 crore. Looking at the cash flow from operations in the current first half of the year, not much cash has been consumed on. I believe it's almost INR 500 odd crore. A significant amount of money is resting in current investments, low yields today. Why don't we use that for debt repayment instead of the E&A proceeds and use that INR 50 billion or INR 4,000 crore for the E&A proceeds for better purposes?
Abhishek, if you see our cash flow statement, first I'll throw some light on our standalone borrowings, which PR mentioned. We had raised about INR 12,000 crore in April, largely as an insurance buffer. By September, and if you observe our Q2 cash flows as well, we have repaid around INR 4,000 out of that. Secondly, there has been some repayments in our subsidiaries as well. If you see, in Q2, we have repaid close to INR 9,000 crore of borrowings. The allocation plan after receiving the proceeds of E&A IC has been well articulated by Mr. Shankar Raman. Cash flows, as you have seen, both Q2 and H1, operational cash flows have been very robust. PR also mentioned that we expect Q3 and Q4 to be more normal in terms of client collections.
If that happens, I think we will have a little bit of more flexibility to have maybe retire a little bit of more debt that we have on our balance sheet, and rest will remain as surplus. Having said that, I think it's very important, yes, we have done well for the first two quarters of this financial year, but the coronavirus still continues across the world, and you can never be very sure how the next six months will be. We are being guarded. Let me put it that way.
It's fair enough. When I'm looking at the INR 34,000 crore current investments, is that entirely into liquid funds or is it allocated into certain businesses? If you can just pick up on that. My second question is on, at the beginning of the year, we talked about payment terms getting adverse and the EPC contractors have to fund some of these projects. That doesn't show in your numbers yet, both of the other current assets and receivables are down. What has changed in the past six months on that?
Let me answer the second question first. As we said, broadly, our absolute net working capital levels have remained unchanged from March. The good thing is that we have been able to bring down our gross working capital levels close to INR 9,000 crores. It is a combination of reduction in customer outstanding and capital work in progress. More of capital work in progress moving into client billing and finally culminating into collections. That's the good part. Yes, if we have to continue our operations, we have to keep paying our vendors. The entire liquidation that has happened on the gross working capital side has gone into paying our vendors so that our execution continues. As you know, I think first two quarters have been slightly subdued, but operations will pick up in Q3 and Q4, so that's where we are.
What was your first question? Sorry.
On the INR 34,000 crore current investments.
On current investment or something else?
Yeah. If you look at our H1 cash flows, broadly, the net cash from operations is INR 36 billion. If you see March to September, our group borrowings are up by INR 5,000 crores. That makes it INR 9,000 crores, and the E&A IC proceeds, everything has moved into surplus investments only.
Abhishek, the current investments is largely into what we do surplus investments. All financial instruments across various classes. There has been no structural change in that. There's no investments into any other entity also. All is the normal course of business, parking your temporary surplus.
Broadly, the entire INR 20,000 crore has moved into surplus investments only.
Okay, got that.
Thank you. I would like to wish Sharna all the very best. I have benefited immensely from our interactions with you. Thank you.
Thank you, Abhishek. Heartfelt thanks from my side.
Thank you. Next question is from the line of Pulkit Patni from Goldman Sachs. Please go ahead.
Sure, sir. Thanks for taking my questions. My first question is this disconnect between, we obviously talk about a big prospect base, but at the same time, RBI talks about weak state government balances. How do you reconcile these two? Is there a concern that second half order inflows could be weaker given what's happening at the state level finances? If you could take that as the first question.
Pulkit, I think the first two quarters of this financial year, in terms of collections for us has been normal. The primary reason being that both the Central and the State Government, as you know, have front-loaded their borrowing programs for the year. Not only have they increased, but they have also front-loaded. When we do our calculations, the H1 borrowings are already over for the Center and the State. The numbers suggest that close to INR 11 lakh crores of borrowings have happened between the Center and the States for the first six months of this financial year. Now the Central Government borrowing programs for Q3 and Q4 is out. The States, we only have the borrowing program for Q3. Q4, we are yet to find out.
Basis some rough cut calculations, we believe that if central plus states raised about INR 11 lakh crores in H1, the H2 numbers seem to be around INR 9.5 lakh crores, which is not a far departure from H1, so to say, number one. Number two, why are we constructive? Because Mr. Mondal, Mr. Shankar Raman, they all covered the movement and the pickup in high frequency economic indicators and GST collections, et cetera, are moving higher. I think the government will be hopeful as far as its tax collections are concerned for the second half. I think the remaining borrowing plus the tax collection should get us there. Execution, I think the government was very keen that it continues and they have released payments. Ordering was a bit patchy, but not too bad as well, both for Q1 and Q2.
Going by the recent media news reports, I think there seems to be an activity pickup in tendering and ordering from the government side. I think we believe that Q3 and Q4, as far as ordering is concerned should be much better than Q1 and Q2. That's the initial first sense we have, but still refraining from kind of putting our neck out and saying that we are in for very good times.
Sure. Makes complete sense. My second question is on these write-offs that we've taken. Obviously in the last few years, we've been cleaning up our books. Now, as I think through the future, Hyderabad Metro is something where obviously we are in process of restructuring. The other one is our power equipment business. While it's been doing well, but we all know the future of BTG equipment. Is there any other business where in the next few years we could see the risk of some write-downs coming or impairments, or we are other than these two largely sort of done with the kind of readjustments we had to do? That would be my second question.
First and foremost, it is very difficult to talk about into the future as to saying that whether do we expect any further kind of a reduction, write-down or impairments in any form, I guess, right? As we see today, and in fact, just to once again comment that there has been a background in the current quarter as to necessitating L&T for us to take a sort of an impairment charge on all these three specific assets. The decision to try to see, it's a defocus kind of a business from a power development that portfolio is concerned. Mr. Shankar Raman also talked about that we are planning to divest from Nabha. It's an operational asset, and hopefully, I think we should find out a buyer soon. In case of Uttaranchal, the plant should hopefully come for commercial completion.
It has undergone mechanical completion in terms of the commissioning of the turbines and should go into commercial operations sometime this quarter, that is maybe December or so. We are in the advanced stage of trying to structure out the long-term PPA. Now, this was the event when we tried to talk about negotiation on a PPA perspective from a cost-plus approach. There is no way to justify the current carrying cost of that investment, and hence that was the reason for prudentially taking a write-off. He also talked about Hyderabad Metro. For us to even take an evaluation of the project, it is important that we see the project post its commissioning in terms of, because we have seen its commissioning, but again, because of this event, there is something, it is very difficult for us to estimate.
The same logic may come up for Uttaranchal, but Uttaranchal is a power project. You know its capacity, you know the base, so the output of that particular project is known. Whereas in case of Hyderabad Metro, it is impossible for us to factor what kind of an output we work upon. Today, we are in the process of restructuring that. It will not be possible for us to even refer to going forward, are there any sort of a write-downs impairments. The decision to evaluate a matter from a write-down impairment or even reversal of a write-down is a dynamic process, which has to be seen every quarter, depending on the developments and depending on each and every business and the sector to which it caters to.
My question was actually more on the BTG business, but I can take it offline in the interest of time, yeah.
BTG business also. First and foremost, the BTG business is a sort of a joint venture investment for us. Okay? We have invested as an investor, so it is not getting consolidated into our financials other than the share of profits. Yes, the amount of profits has come down because of lower order intake. Lower intake considering the, I would say, the lack of opportunities in the power sector, especially in supercritical space. Both the companies, both the joint ventures have an order book for them to execute profitably. Till such time, we keep accruing profits. In fact, as we speak, the boiler turbine actually had a dividend declared to the parent in this current quarter. Obviously there is a cash, there is a profit.
It will be difficult for us to even say at what juncture we will try to do the impairment because the company is in the profitable trajectory.
Even though we tested for impairment.
Correct
regularly as a casualty.
Just to add to what P.R. just mentioned, I think this year has been an exceptional year where, for the first six months, we have not seen any power plant ordering happening. Yes, thermal power plant ordering is down from what we have seen couple of years back, but I think even going forward, 4-6 GW of ordering should happen over the next couple of years or so. I don't think there is any kind of risk there. As P.R. mentioned, they are still having something like 1.5-2 years of order book to work on.
Sure. Thank you, sir.
Thank you. Next question is on the line of Priyankar Biswas from Nomura Financial Services. Please go ahead.
Yeah, good afternoon, sir. My questions are regarding the reinvestment of the Schneider deal proceeds. One of the thing, if I heard it right, around INR 2,000 crore would be invested in Hyderabad Metro, and another INR 2,000 crore would possibly be investment into the financial services. First question is the investment in Hyderabad Metro adequate to keep the servicing of debt levels adequate? I would like, going forward, do we expect more infusions into Hyderabad Metro? That's first. Secondly, for the finance business, based on media reports, it seems that the mutual funds business is getting sold at quite a fairly high value. There is cash there also. What is the need for fresh investment into the finance business? If you can clarify on that.
Priyankar, this is P.R. I will take that question. Two questions here. On Hyderabad Metro, just to state, the Metro project is complete from an investment perspective. There are no residual investments in terms of additional CapEx, which necessitate a combination of equity or debt. Okay. The only other part in the Hyderabad Metro project is the development of the associated real estate. To some extent, we have already done, and to some extent, we need to do, or we can do. It's not we need, it's more to do we can do. Okay. We have, I think, a total package of 18 lakh square feet, which we can develop in the real estate, but that is based on demand and supply requirements in the future. The Hyderabad Metro, from a perspective of completion, is already done.
In that context, we are only trying to see the restructuring the balance sheet more from a liability side perspective. Okay. One. Secondly, Mr. Shankara also talked about that when we talk about INR 2,000 crore, which we are setting aside, it was actually services. Which means it includes financial services and also our other portfolio. Okay, both put together. He gave a number of overall INR 4,000 crores, out of which INR 2,000 is for financial services in a special specific reference to. I wish to tell you that what we hear in the market or it's all media speculation, we don't have anything to comment upon whether it is actual news or not. The decision to infuse funds will depend on the requirements of the business of L&T Finance services businesses, and based on that call has been taken. Okay.
Sir, I think what I meant by the Hyderabad Metro question was, see, your per quarter interest is something like INR 350 odd crores. Broadly, almost like INR 1,400-1,500 crores is the cash interest cost for the full year. Now, if the eventuality, the traffic doesn't really pick up to, let's say, the 4 lakh passengers per day, will there be further equity or maybe subordinate debt infusions that may still happen in the future? Are you not expecting it post the INR 2,000 crores infusion that RSR has spoken about?
No, that is actually no. I think what Mr. Shankar Raman spoke to is based on our current level of discussions. We believe that a further fund infusion of INR 2,000 crore may have to be done into Hyderabad Metro.
Okay.
In what form, that is all based on our result of the discussions and closure which we will do with the lenders to the project led by SBI, and also the assistance which we are seeking from the Telangana government.
Okay? What we are telling now is that, in our understanding, there could be a commitment of roughly INR 2,000, but in what form that commitment will flow depends on the course of the discussions that we have with the other stakeholders.
Okay, sir. Understood that. Okay, that's from my side.
Thank you.
Thank you. Next question is from the line of Nishant Chandra from Temasek. Please go ahead.
Yeah, hi. Thanks for taking my question. I wanted to just understand the cash flow movement. The one presented in the analyst presentation is for the consolid business. If you were to look at the EPC business, can you talk through the impact of the cash flow statement, please?
Yeah. See, Nishant, I would request you to go through the cash flow statement that we have presented in the analyst presentation, because essentially, the one in the advertisement includes the disbursements that are attributable to financial services as well.
Right
it from the cash from operations and move it into financing activities. The one that we have presented in the analyst presentation will give you a better picture, and the net cash from operations that you see there is ex-financial services. If you want to refer to, you mentioned about core, right?
Yeah.
Do go through the advertisement on the standalone site to get a better sense on the core cash flows, which also will give you a good flavor.
Okay, understand. There it seems that even the EPC business has thrown up cash. That's at least the interpretation I had.
Yes, that is correct. Which is why I'm saying have a look at standalone. That will give you a good picture.
Understood. Just to be clear, in the analyst presentation, the INR 127.8 billion of net sale of long-term investments is essentially pertaining to the E&A sale, right?
Absolutely.
Okay, understand. That is a gross number without taking the cash tax into consideration, right?
Nishant, what is shown in the cash flow, you're referring to the advertisement, correct?
No, no. I'm looking at analyst presentation, page 29. It has INR 127.8 billion as net sale of long-term investments. I just wanted to check whether that is the gross inflows excluding the tax attributable to the sale of E&A.
Yeah. Nishant, what happens is that, Mr. Shankar Raman mentioned about tax of around INR 2,000 crores, Not all the tax gets paid upfront. It happens in installments. What you see there is roughly INR 13,300- INR 600 odd crores.
INR 75 crores.
Yeah, around that.
Installments.
Yes, of tax. The remaining part of the tax will actually flow in the subsequent cash flow statements.
Okay. Understand. Yeah, no, I was not able to piece together the INR 2,000 crore odd of tax payment in this statement, which is why I asked the question. Okay, I think this looks okay otherwise. Thanks, Mr. Mondal, for all your help over the years.
Sure, Nishant.
Thank you. Next question is on the line of Sumit Jain from ASK Investment Managers. Please go ahead.
Yeah. In relation to my earlier question, what is the net working capital for the EPC business? What you've given us is the net working capital position for the entire business, ex of financial services.
Yeah.
I'll just complete my question. Here, like you said to a previous question, if I look at the standalone balance sheet, and if I do the math, there's a INR 23,000 crore, because that is the right representation. I may have to add hydrocarbons business there, but there is a INR 23,000 crore working capital, and if I divide that by the last four quarters revenues, then that figure crosses 30%. If I divide that by FY 2020 revenues, then that figure is still 27%. We need to have a sense as to what is the working capital position in the EPC business.
Yeah.
In infra business.
Yeah. I'll give you a flavor on that. If you look at standalone, which excludes hydrocarbon, obviously. First thing I wanted to just tell you that don't look at percentages because of the fall in sales, the percentages look quite bad. If you see the absolute levels of working capital that were there in standalone as on March 2020, and compare it with what exists as on September 2020, there has been a marginal movement of close to INR 1,000 crores.
Let me chip in here. If you take core business, including hydrocarbon and ex-services, the working capital levels, considering the four-month chaining thing, is roughly around 28%. If you take services business, it's roughly around 21%, and that's how it averages to around 26.5%, approximately.
Okay. In the cash flow statement, as you were just mentioning to a previous question, page number 29, the net cash flow from operations of INR 27.6 billion, INR 2,760 crores or INR 3,650 crores for H1, is the representation of the business which is ex of financial services.
That is correct.
Okay, sure. One last question, and in correlation with the previous question, Hyderabad Metro, we have chosen to take write-downs in other businesses. Here there is no clarity, I understand. If you look at things, what was the rationale of giving a special dividend when that dividend, if I look at the current working capital of 25%-26% needed, for an additional INR 10,000 crores of sales, you require that kind of money, which is INR 2,500 crores, which you are giving as dividend.
The special dividend, as Mr. Shankar Raman talked about, is refers to the event which is resulting from the E&A sale. It should not be confused or intermingled with L&T's policy on dividend over the years. This because the exit from the E&A business is from an investment which has been one of the oldest business of L&T and eventually resulted in a value creation, thereby giving an overall, I would say, cash flow consideration post-tax around INR 11,000 and a PAT of almost INR 8,000-8,500. It is against that this particular dividend has been declared. If I have to put it, if there were possibly no E&A divestments we could have done, maybe we would not have declared a dividend in the first place. We are linking the special dividend only to the extent it relates to the E&A divestment.
Would you not require this money for Hyderabad Metro or for your working capital requirement for incremental business?
I think-
Does the business have room to actually give money back to shareholders when one can see easily that there is a requirement in the business itself?
At the start of the call itself, Mr. Shankar Raman did talk about that against the consideration, the post-tax consideration which accrues to the L&T parent, what is the proposal we have? How are we used? He did refer to the fact that out of this money, we are keeping an INR 5,000 crore of some sort of a liquidity buffer, which will be used for in case the COVID situation deteriorates or in case it stabilizes, we will use that money to either retire the short-term debt or possibly keep it as a liquidity buffer. He did articulate about setting some amount aside for Hyderabad Metro. That is having factored, the group felt that it is appropriate that we have around INR 2,000 crore-INR 2,500 crore of cash, which we should use it to declare a special dividend.
To answer to your question, the probable outflows because of our commitments into the projects like Hyderabad Metro, services, financial services, and also a liquidity buffer, that has been addressed before declaring the dividend.
Sure, thanks. Wish Arnob good luck and all these years great insight. Thank you very much.
Thank you. Thank you so much, Sumit.
Thank you very much. Next question is a follow-up from the line of Priyankar Biswas from Nomura Financial Securities. Please go ahead.
Thank you, sir, for the opportunity. Just one more question here. The state is, I heard, 38% of the L&T current order book. If you can highlight that within this, how much is actually funded orders? Essentially like multilateral or something like a power finance corporation or through some sort of a bank consortium loans. More seeing it from a payment point of view.
Yeah. Priyanka, roughly about our order book from the domestic market is about broadly INR 2,30,000 crore, of which around 52% comes from Center and State. That would come to around something like INR 1,70,000 crore is Center plus States, of which around 43% is funded by multilateral agencies.
A major part of that is from state projects.
Okay. Thank you, sir. That was the clarity I needed.
Thank you.
Last question.
The next question is a follow-up from the line of Renu Baid from IIFL Securities. Please go ahead.
Yeah. Hi. Thank you for this opportunity once again. My just last follow-up was, we did mention in terms of slight increase in working capital requirements by end of the year and targeted overall debt reduction. Would we have any number in mind that over the next 12- 15 months, what could be the level of core debt levels that you would be targeting after part of these reduction and working capital release from the next year?
See, now I think Mr. Shankaran articulated the capital allocation coming out of E&A IC. As we see today, I think as on September, we have debt levels of close to INR 34,000 crores on the standalone balance sheet. Now everything will revolve around the operational cash flow generation that we will achieve over the next two quarters. Hopefully, if it continues to be robust as it has been in H1, maybe we will retire more and bring down our gross debt-to-equity levels at the standalone. Having said that, because of the E&A IC proceeds, let me tell you that even as on September, my gross debt-to-equity at standalone is 0.59 and net debt-to-equity is 0.11.
I think things have worked according to the plan that we have in our mind, and hopefully, if operational cash flows are good for the next six months, a lot of things will come in place.
Sure. Probably by next year, we should be looking at close to INR 25,000 crores or similar levels of core borrowings for the business.
See, it all revolves around Renu, the operational cash flow generation, right? How do you want me to give you that estimate?
No, got it. We'll do that working. Thank you so much and best wishes and wishing good health to Mr. Arnob and others. Thanks for all your help and support.
Thank you, Renu. It's been a pleasure. The pleasure has been mine.
Same here. Thanks, sir.
Thank you. Next question is on the line of Ashish Aggarwal from Principal AMC. Please go ahead.
Yeah, thanks. Sir, most of my question has been answered. Just one thing. We indicated that we were looking at ₹2,000 crores for our services business, including financial services. Just wanted to understand for ex-financial services, why do we need that money? Those businesses are throwing good amount of cash. Why do we need that money for the other services business?
It is like this that the other services business obviously are on the growth trajectory, and you are right to say that they have reasonably large cash surpluses to justify that kind of acquisition by themselves. It is more like, I would say, put it across that in case if there is some good, reasonably large opportunity which probably necessitates some sort of a temporary kind of support. I think L&T as the parent may have to stand in good stead to lend that. Yes, to that extent, acquisitions for those businesses will be largely driven from their own set of finances.
Thanks a lot.
Thank you. Next question is on the line of Uttham Kumar R from Spark Capital. Please go ahead.
Good afternoon, sir. This is actually Bharani from Spark Capital. My question is on the order inflow. Now, there's a 36% order inflow in the quarter coming from international, but that is including services, et cetera. Can you give the domestic-international order inflow split on only the core construction order inflow of about INR 17,000 crore for this quarter and for the first half?
Broadly, I will tell you the numbers for the first half. Out of around INR 51,000 crores of order inflows that we have reported at company level, core business would be roughly around INR 30,000, INR 31,000. International out of that would be roughly between INR 5,000 crores-INR 6,000 crores.
Okay. Six on 30, 1/5 . The 20% is international of the inflow in the first half, that is on core construction.
Ballpark numbers, yeah.
Okay. This will be the same for the quarter also, like 20% in second quarter FY 2021 also.
The international orders have been slightly better in Q2 as compared to Q1. Out of the INR 5,000 crores of the international order inflows that I mentioned, close to INR 3,500-INR 4,000 crores came in Q2 itself. Q1 was a little lackluster.
Okay. This would be primarily in the power T&D and hydrocarbon, primarily.
Right. Yeah.
Water as well.
Infrastructure, heavy engineering, and hydrocarbon. These are the three core businesses which have international orders. Within infrastructure, obviously, power transmission and distribution and water are the areas where there is traction that is seen in the GCC countries.
Understood. That's it from my side, and all the best, Arnob sir, and I warmly welcome Ramakrishnan sir.
Thank you, Bharani. It's been a pleasure interacting with you all.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing remarks. Over to you.
Once again, thanks to everybody for a very interactive and a long call. In fact, this is our longest call that I have seen in the last over 11 years that I've been in this function. I thought it was very elaborate and exhaustive. Not exhausting, exhaustive. Be that as it may, wish all of you a very good day and stay safe, stay well. Thank you.
Thank you.
Thank you very much, members of management. Ladies and gentlemen, on behalf of Larsen & Toubro Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.