Very good morning, ladies and gentlemen. I hope all of you and your near and dear are safe in these very difficult times. The format that we will follow for this conference call is the usual format whereby, initially, my colleague, mister Hari Varai, will make a presentation. He'll walk you through the presentation. The presentation was uploaded on our website last night, and I hope that all of you have downloaded it from the website because he keep on referring to slide number so and so, slide number so and so.
After the presentation is over, we will open the session to question and answer. And with that, I would like to hand it over to Harish. Harish, go ahead.
Thank you, Mr. Mondal, and good morning, ladies and gentlemen. Once again, a very warm welcome of you into the Q1 FY21 earnings call of Lassen and Tubro Limited. I will move on to the next slide, which is slide number two on disclaimer. Essentially, this presentation contains certain forward looking statements concerning L and T's future business prospects and business profitability, which are subject to a number of risks and uncertainties, and the actual results could materially differ from those in such forward looking statements.
Disclaimers assume special importance in times like these. The remaining portion of the statement, I will take it as read and move on to the next slide, which is slide number four. Q1 FY21 an unprecedented quarter. There will be rare instances in history where you start the financial year with a lockdown. Our Group's performance therefore in Q1 FY21 has to be seen in the context of the macroeconomic environment we operate in.
Since FY21 started with the lockdown on account of the pandemic, it disrupted economic activities in the quarter. More than two thirds of India's economic activity was shut or working at reduced capacities during April, with progressive improvements witnessed during May and June. Happy to report that Group has secured orders of Rs. $236,000,000,000 in Q1 FY21 in an otherwise very challenging quarter And our order book at INR 51,000,003,000 is stable. Coming to revenues, the operations gradually resumed with requisite precautions during the quarter, given limited availability of workforce and disrupted supply chain.
There have been sequential improvements in execution in each month of the quarter. During the quarter, we have tried to prioritize those jobs that can ramp up faster. Negative operating leverage kicks in due to muted revenues in Q1 and the consequences of negative operating leverage have impacted EBITDA and PAT for the quarter. Surprisingly, due to ample liquidity in the system and the fact that both the central and the state governments have front loaded their borrowing programs for the year, our collections, therefore, in Q1 has been robust. We have not had to draw down on the cash reserves on our balance sheet to fund the operations.
This is also evident when you glance through the cash flow statement. If we were to summarize our performance, we could just say noteworthy performance in an unprecedented quarter. With those comments, I will move on to the slide on key financial indicators. Q1 FY20 numbers are on the left part of the slide and Q1 FY21 numbers are on the right portion of the slide. Our order inflows for Q1 FY21 as I said at R236 billion dollars has registered a decline of 39% over Q1 FY20.
Our order book as on thirtieth June twenty twenty at Rs. 51,000,003,000 is up 4% over June 2019. Revenue for Q1 FY21 at Rs. $213,000,000,000 has registered a decline of 28% over Q1 FY20. Our EBITDA and PAT at 16,000,000,000 and Rs.
3,000,000,000 respectively have registered a decline of forty seven percent and seventy nine percent respectively. For the reasons mentioned in the previous slide, the results of this quarter is not comparable with the previous quarters presented. Some comments on working capital. Our net working capital to sales have moved up from 23.9% in June to 26.8 in June. As I mentioned in the previous slide, our cash flow management for the quarter has been good, thanks to the payments that have been regularly flowing from the public space.
Consequently, our operations have predominantly been funded from collections and our absolute levels of networking capital has marginally moved up from March 20 to June 20. NWC2 sales at 26.8% as on June 20 is largely on account of the fall in the denominator. The trailing twelve month sales, as you know, has moved lower because of our Q1 FY21 performance. Coming to return on net worth, consequences of negative operating leverage impact EBITDA and flows into PAT as well, which impacts our return on net worth. Our return on net worth on a trailing twelve month basis stood at 12.7% for the June.
With those comments, I will move on to the next slide, which is Q1 FY21 order inflow order book. Order inflow numbers again on the left, order book on the right. Although order inflows for Q1 FY21 at R236 billion dollars is down 39%, it is good to note that ordering activity has continued despite pandemic concerns, though with some time delays. Our Q1 FY21 domestic order inflow of Rs. 147,000,000,000 has largely been contributed by the infrastructure segment in areas like water, heavy civil and power transmission and distribution.
Our Q1 FY21 international order inflow of Rs. 89,000,000,000 almost flat compared to Q1 FY twenty twenty largely due to mine free consolidation. Having said that, we have seen some international order inflows in infrastructure, hydrocarbon and heavy engineering segments during this quarter. To conclude, it is heartening to note that order inflows both domestic and international have continued to flow in Q1 despite pandemic and lockdown. At the June 2020 and for the remaining nine months of this financial year FY21, we see total bottoms up project pipeline of around Rs.
6,320,000,000,000.00 in our core businesses, of which about Rs. 5,070,000,000,000.00 is domestic and Rs. 1,240,000,000,000.00 is international. So far the government has ensured that project execution continues and payments to contractors are released. Now hopefully the government may turn its focus on new awards which will aid economic recovery and generate employment.
Coming to order book, portfolio diversity as well as our dependence on government and PSU investments definitely mitigates cyclicality. Today we have six business verticals where each of their order book is between nine-fifteen percent of the overall company order book. They are Buildings and Factories, Water, Power Transmission and Distribution, Heavy Civil Intra, Transportation Intra and Hydrocarbon. Diversity of order book helps and future revenue growth is not dependent on the fortunes of any single vertical. Again 82% of our domestic order book of Rs.
306,000,002,000 as on June 20 is dominated by Central and State Government as well as PSUs. In times like these, it is good to have government risk on the balance sheet. With those comments, I will move on to the next slide, which is group performance, sales and cost. This is slide number eight. Now pandemic shadows Q1 revenues across verticals.
On the other hand, IT and TS businesses smoothly transitioned to a work from home model. Consequently, our revenues for Q1 FY21 at 212,600,000,000.0 has registered a decline of 28%. Favorable MCO expense variation is largely due to higher proportion of IT and TS businesses including Mindtree consolidation and secondly due to cost control initiatives within the group. Large part of the cost of IT and TS businesses reside in staff cost and sales and administration expenses which are given below. Finance charge OpEx largely represents borrowing cost of the financial services business.
Staff cost at Rs61.5 billion for Q1 FY21 is up 35% over Q1 FY20, largely due to mine tree consolidation and resource augmentation in our service businesses. Staff cost of 21,955 minutees of Mindtree amounting to Rs. $12.77 crore have been consolidated in the Q1 staff cost. Excluding Mindtree, the staff cost is up 7% for the quarter. Sales and administration cost at Rs.
21,500,000,000.0, up 8% for Q1 FY21 is mainly on account of credit provisions in the financial services business. Secondly, Mindtree consolidation also contributed to increase in sales and administration costs partly mitigated by overhead expense savings at a group level. Consequently, our total OpEx at Rs. 196,400,000,000.0 for Q1 FY21 registers a decline of 26 over Q1 FY20. With those comments, will move on to the next slide, group performance, profit parameters.
For reasons explained in the previous slide, our EBITDA for Q1 FY21 at INR16.2 billion, as I said, has registered a decline of 47% over Q1 FY20. Finance cost at Rs. 10,600,000,000.0 for Q1 FY21 is commensurate with increased borrowings and interest cost on full commissioning of Hyderabad Metro. Higher depreciation charge at Rs. 6,700,000,000.0 for Q1 'twenty one is mainly on account of Mindtree consolidation.
Other income of Rs. 7,800,000,000.0 for Q1 FY 'twenty one is reflective of the level of treasury investments and higher returns earned during the quarter. As you are all aware, both the long term and short term yields have moved lower during Q1. Share of JV associated PAC largely comprises results of IDPL, Power Equipment and Forging JVs. NTI variation is largely due to lower Finserv profits partly offset by mine free consolidation.
E and A business, as you are aware, is classified as discontinued operations. Exceptional item of Rs. 1,100,000,000.0 represents gain on divestment of Wealth Management business by the Financial Services Group. Consequently, for reasons explained above, our PAT for Q1 FY21 at Rs. 3,000,000,000 has registered a decline of 79% over the comparable quarter of the previous year.
With those comments, I'll move on to the next slide, which is slide number 11, segment composition. This slide on segment composition is essentially for reference purposes. Based on the progress of the divestment process, the company continues to classify electrical and automation businesses discontinued operations and disclose the financial results thereof separately for the previous periods presented. Information technology mentioned within the IT and TS segment includes Mind Tree as well. Effective from first April two thousand and twenty, Smart World and Communications business has been transferred from Infrastructure segment to the other segment.
Concurrently, Military Communication business has been transferred from Defence Engineering to smart world and communications. Figures for the previous periods have been regrouped, reclassified to conform to the classification for the current period. With those comments, we will move on to the slide on Q1 FY21 order inflow composition. Again, this slide for reference purposes only, in a lockdown quarter, it is encouraging to see 48% of our total order inflows being contributed by infrastructure. Hydrocarbon and heavy engineering have also contributed 52% respectively.
For obvious reasons, the share of services as a percentage of total order inflow stood at 42% for the quarter. Moving on to the split between domestic and international, 62 of our order inflows are domestic and 38% international. A healthy chunk of domestic order inflows in Q1 is from infrastructure. Coming to International, a significant portion of international order inflows is from IT and TS businesses. Having said that, as I mentioned earlier as well, infra, hydrocarbon and heavy engineering have also contributed to international order wins during this quarter.
With those comments, I will move on to the next slide, which is Q1 FY21 order book composition. As you can see, 72% of our total order book of Rs. 51,000,003,000 is from infrastructure and 14% from hydrocarbon. Within infra, as I mentioned earlier, the order book is very well diversified across the five large verticals. Coming to geographical split of the order book, since we are predominantly an India centric company, 76% of our total order book is India based and within that 82% is from central government, state government and PSUs combined and the remaining 18% is from the private sector.
Our international order book is 24% of the total order book. As you are aware, over the last couple of years, we have consciously moved away from The Middle East. These efforts have borne fruit and about 42% of our international order book today is non Middle East. With those comments, we will move on to the next slide, which is Q1 FY21 revenue composition. This is an interesting slide in a way because services business, as you know, we have been mentioning for quite long that it acts as a good hedge in a portfolio of businesses which is dominated by core E and C business.
In a quarter like this, where pandemic shadows revenues across core businesses, services portfolio comes to the rescue. Of the total revenues of Rs. $213,000,000,000 for Q1 FY21, services and infra contribute 4730% respectively. Moving on to the geographical split of revenues, 55% of our total revenues are domestic and 45% of our total revenues are international. These percentages appear a little skewed towards international, primarily because of the contribution of the IT and TS businesses.
With those comments, I will move on to the next slide, which is the infrastructure segment, slide number 15. Infrastructure segment, as you are aware, is the largest segment within the group and obviously the financial fortunes of this segment impacts group performance. Quick comment on order inflows before we move on to other parameters. As I mentioned earlier, we have seen early signs of ordering activity pick up within this segment in both domestic and international space during this quarter. Areas like heavy civil, water, power T and D has done well, whereas we are yet to see pickup in other areas.
The empty list of order prospects exists at a ground level. Hopefully the ordering activity should pick up once the government has a reasonable fix on its finances, which again is to a large extent dependent on the progressive pickup in economic activity. Revenues for Q1 FY21 at Rs. 63,900,000,000.0 has registered decline of 53% over Q1 FY20. Execution was hindered by lockdown across all verticals and during the quarter we have witnessed a graded resumption with limited workforce and a disrupted supply chain.
Good news, as I said earlier, is that client collections have continued during the quarter and we did not have to finance this execution from our own balance sheet. Margins for Q1 FY21 at 6.3% have broadly remained stable as compared to Q1 FY twenty twenty, mainly attributable to the favorable input cost and expense control. With those comments, we will move on to the next segment, which is the power segment. Now, no prospects were being targeted for award in the power business in Q1 of FY21. You would recollect that in Q1 of last financial year, this business had secured a large order for an ultra supercritical thermal power plant.
Order book of this segment is at around 5% of the company's total order book and a couple of quarters of low order wins would not impact this business segment. Revenues at Rs. 3,700,000,000.0 for Q1 FY21 registered a decline of 33%, largely reflective of graded resumption of operations during the quarter. The high value order won last year, as I mentioned, is yet to cross the margin recognition threshold. This explains the margin variation from 3.3% in Q1 FY20 to 1% in Q1 FY21.
Finally, as you are aware, Power business margins appear optically low because boiler and turbine JVs as well as the other Power JV companies are consolidated at a PAT level under the equity method. We move on to the next slide, which is Heavy Engineering segment. Quick comment on order inflow before we move on to other financial parameters. Surprisingly, this segment secured orders during Q1 FY21 despite pandemic and lockdown. International orders constitute 70% of the total order inflow of this segment during the quarter.
Phased ramp up constricts revenues for the quarter. The decline in revenues was mainly in the refinery business, which in the previous year includes simultaneous execution of multiple high value reactor orders as well as due to lower manufacturing activity during the current lockdown period. Revenues for Q1 FY21 at Rs. 3,800,000,000.0 registered a decline of 57% over Q1 FY20. Coming to margins, margin variation between Q1 FY21 corresponding quarter of the previous financial year is largely explained by low capacity utilization and under recoveries.
We move on to the next slide, Defence Engineering segment. Policy bottlenecks, fiscal constraints and lengthy MOD procurement procedures have continued to beset investment momentum in this sector for many years now. Consequently, large order inflows are missing and order inflows in the current quarter comprises of multiple small value orders. Having said that, the recent government announcements on time bound defense procurement procedures and faster decision making awakens hope for the future. Announcements around separate budget provisioning for domestic capital procurement is also a positive.
Not sure at the moment if the recent skirmishes around the border areas result in an immediate benefit to domestic manufacturers. Having said that, I would like to mention here that for the first time in the history of defence, online remote inspection was initiated enabling milestone clearances ahead of our end. Revenues for Q1 FY21 at Rs. 4,700,000,000.0 registered a decline of 49% over Q1 FY20 largely due to delay in procurement of materials on account of nationwide lockdown. Margin variation is largely explained by job mix and under recoveries.
We move on to the next slide, which is slide number 19, the Hydrocarbon segment. Slowdown in order inflows in Q1 is largely due to muted tendering activity in a low oil price scenario. Order inflows during this quarter is driven by international wins. This business today is sitting on an order book which is around two point five years of revenue. Revenue for Q1 FY21 at Rs.
30,600,000,000.0 registered a decline of 19% over Q1 FY20 mainly due to low utilisation at yards and constraints on execution at job sites. Cost provisions and under recovery of overheads in a restricted execution environment has impacted margins for the quarter. We move on to the next segment, which is the Developmental Projects segment. As you know, this developmental project segment comprises of power development business and Hyderabad Metro. Here again, roads and transmission line concessions, which are housed in LAT IDPL, are consolidated at a PAT level under the equity method, so obviously the numbers presented in this slide do not include roads as well as transmission lines.
During Q1 FY21, the revenue of this business segment at Rs. 5,500,000,000.0 registered a decline of 53% over Q1 FY20. The revenue decline in this segment is largely attributable to the power development business. Lower power demand during the lockdown leads to revenue decline in the power development business. As far as Metro is concerned, you are aware we fully commissioned the Metro in February.
Operations of the Metro have remained under lockdown for the entire quarter. There has been under recovery of fixed OpEx, depreciation and interest expenses during Q1 FY21. We move on to the next slide, which is the IT and Technology Services segment. As Mindtree was consolidated from second quarter of FY19-twenty, the previous period Q1 FY19-twenty does not include the performance of Mindtree Limited, hence the current period is not comparable with the previous period on a like to like basis. Therefore, the revenues of this segment at Rs.
60,300,000,000.0 for Q1 FY21 has registered a growth of 58% over Q1 FY20. However, we would like to mention here that even excluding Mindtree, this segment has recorded positive growth in Q1 FY21 over the comparable quarter of the previous year during these challenging times. All the three companies in the IT and TS segment are listed companies and they had their earnings call as well. So all the numbers in detail are available in public domain. An array of business verticals have contributed to the growth within each of the companies during Q1.
The details are mentioned in the slide. It is important to note that each of the listed IT subsidiaries have smoothly transitioned to a work from home environment right at the onset of the pandemic with encouragement and support from customers. Margin variation is an outcome of some headwinds in pricing and staff furloughs. With those comments, I will move on to the next slide, which is the other segment. Other segment now comprises of construction and mining equipment, rubber processing machinery, industrial walls, reality business and smart world and communications.
Q1 FY21 revenues of this segment at Rs. 7,100,000,000.0 has registered a decline of 51% over corresponding quarter of the previous year. Q1 revenues have been impacted by significantly lower handovers in our RLT business, low demand environment impacts industrial walls as well as construction and mining equipment revenues and smart world and communications revenue have been affected by lockdown. Margin drop is largely explained by under recovery of overheads on low volumes. We move on to the next slide, which is the L T Finance Holdings Group.
L and T Finance Holdings again is a listed company and they had their earnings call as well, so all numbers are available in the perfect domain. Income from operations for Q1 FY21 at Rs. 32,800,000,000.0 has registered a decline of 5% over Q1 of FY20. Now the strategy for the Group during these challenging times has revolved around recommencement of on ground operations, further tightening of credit measures, steady resumption of disbursements and maintenance of adequate liquidity on the balance sheet. The Group, over the last couple of years, has demonstrated tremendous resilience despite the challenges surrounding the NBFC space.
L and T Finance Holdings and all its lending subsidiaries have been reaffirmed AAA from all the four rating agencies. The business continues to focus on retailisation of the loan book, prudent asset liability management, improving asset quality and increasing diversity of the funding sources. Profit after tax for Q1 FY21 has largely been impacted by increased statutory and macro prudential provisions, partly offset by gain on divestment of wealth management business. We move on to the next slide, which is Electrical and Automation, slide number 24. As mentioned earlier, E and D business has been classified as discontinued operations in FY20.
You would have observed in the earlier slide that PAT from E and A business is being aggregated as a separate line item in our profit and loss account. Q1 FY21 revenues at Rs. 7,100,000,000.0 registered a decline of 48% over Q1 FY20, largely reflective of lockdown conditions. Secondly, fixed overheads of manufacturing units charged of the manufacturing unit charged to the profit amidst low capacity utilization impacts the margin for the quarter. I will now hand over the presentation to my senior colleague, Mr.
Anand Mandal, to take you through the slide on environment and outlook, post which we will take the q and a. Thank you.
Thank you, Harish. Before getting into the actual slide on the environment and outlook, I'd just like to give a few comments. As Harish said, of course, it is a very unusual quarter and it's not to be construed as representative of any normal quarter or extrapolated for the year. Think all of you realize that. Considering the uncertainty that is still prevailing in the environment, we have again decided not to give any guidance on either order inflows or revenues or margins.
One thing which I think I would like specifically like to mention, which is a defining feature of this particular quarter, is the significant headway that we made on our liquidity management. We managed to keep ourselves fairly liquid. We managed to raise resources. Of course, we will not use those resources or the funds used in funding working capital because that is one area where we are focused in great detail. Our philosophy was that as far as possible, we will try to restrict our working capital outflows to the extent that we collect, and I think we have done a very decent job on that front.
That I think is the defining feature of the current quarter. I think everybody realizes the impact that COVID has had on both revenues and PAT. As far as everybody, of course, has been asking many people have been asking about labor availability and operational sites, primarily because the issue of migrant labor was highlighted in so many different forms of both mainstream as well as social media. Yes, sometime during May, the availability of after sites a large number of sites became operational, availability of labor became a question. The labor workforce plummeted significantly, but we have seen a steady increase thereafter.
It fell to around 70,000 labor at one point in time from a peak of 220,000 labor. So obviously, we were hand strung by that, but fortunately we have seen steady increase in labour and we've still been adding labour at around 1,500 additions a day or so. Currently, we are at a total cent of around 190,000 labour, which is a reasonable cent to work for, particularly in Q2, which is normally beset by monsoons in any case. Another small thing which I would like to amplify on something that Harish touched upon, if you see the total order book of three lakh five thousand crore and you take out the 75,000 crore or so, which is order book attributable to international projects. In the domestic market, total uninsecuted order book is 2 lakh 30,000 crores approximately, of which 82% you mentioned was public sector.
Yes, that's correct. Now within this 82%, around 50 is by center and state and 32 is on PSUs. As you would all be aware, the PSU revenue models are different. They're not directly dependent on tax collections and things like that, so they have their own revenue generation models. The 50% of the domestic order book, is on which we are dependent on central and state, obviously, will depend upon, to some extent, the fiscal resources, the liquidity resources, I won't say fiscal as such.
Another thing that needs to be considered is that out of this 50%, close to half are multilaterally funded, so there again that gives us a measure of comfort. Harish also mentioned the contribution of IT and technology services business, and this is something that we've been talking about for a long time. At least in the last five years, have been reiterating that this business lends a lot of stability to the cyclicality of our core business, in addition to the fact that it has much healthier much healthier bottom line and return profile. That has clearly been bought out by the current quarter where even if you take out Mainte, IT and technology services businesses grew so recently, and along with Mainte, it has, to a large extent, contributed significantly to the revenues, close to 45% odd. Now one other thing which he also mentioned is that in financial services, we got some exceptional income from sale of the wealth management business, which is shown as an exceptional item.
However, for those of you who would have attended the call on L and D financial services earnings call would also realize that over and above the COVID provisions that they did, the COVID provisions of course centered around the increased statutory provisions mandated by RBI as well as the increased macro prudential provisions that they did because of the COVID environment, but over and above that, the gains that they got from sale of wealth management business were used to put in further provisions of a similar amount, and those further provisions are sitting in the sales and admin expenses and not in exceptionals. We have also had fairly significant savings in overhead expense control, and that has obviously contributed to better bottom line than what many people originally expected. Coming to the slide, again it's a bit of a complicated slide if you were to read the fine print. Would urge you not to dwell on the fine print. Essentially, what we have tried to do is that in this slide, we have tried to put out in different buckets the various external and internal factors that have been affecting our operations, particularly in this quarter.
Obviously, the global pandemic is well known and countries like US, Brazil, India, and Russia are the most affected. While the pandemic has been tapering in many countries, in India, the curve, as it is called, is yet to show signs of flattening. Hopefully, that will happen. I think the lockdown everybody realizes that the lockdown administered both demand and supply shocks to the economy, and that is why we have had a phased reopening apart from the multi phase lockdown itself. We are yet to completely normalize because there are still many containment zones across the country including some facilities.
For example, Tamil Nadu has a larger number of containment zones including, for example, our hydrocarbon facility is also struggling there, obviously, because of lockdown conditions. Labor migration, I briefly referred to on what we saw, and this of course was the largest constraint that we faced in q one and from what I understand, this is a constraint that all construction companies and engineering and construction companies face. We are seeing steady normalization and hopefully within the next few quarters, this should normalize. Supply chain disruption was not as severe as labor availability issues, and that of course is steadily normalizing even though some imports and road transport bottlenecks will persist here and there. As far as input costs are concerned, it is a fact that we have been seeing lower commodity prices, particularly in areas of construction steel.
However, we are seeing a trend of increasing cost of labor migration, labor costs of migrating labor who are coming back, and we do think that will lead to an increase in labour costs overall. However, fair bit of the contracts that we have from the public sector particularly have labour costing inflation built in into the contract, we should hopefully be able to pass on some portion of the increased cost as well. In case of commodity price decline, even though cement has gone up, but steel has gone down a bit, maybe around five or so. In the case of commodity price decline, we obviously stand to benefit on our fixed price contracts. We have seen strong liquidity support from the government.
I think everybody is aware of the extremely large stimulus measures of which a small part was fiscal and a major part was monetary, but be that as it may, the government also realizes that this year is going to be a year when tax collections will fall short of not only what they are projected but is likely to fall short by I have no idea but maybe around five five to seven lakh crores so from even last year. Now what the government is doing is that because they have decent headroom on the debt to GDP ratio, they have increased originally budgeted borrowings program by around going by the reports which various economists have brought out in the past, the increased borrowing program would be around 9 lakh crores, around which 5 lakh crores would be on center and 4 lakh crores would be additionally raised by states and these would be front ended. For example, around 70% of the total borrowing program is expected to be complete in the first half itself. So that ensures that the government at least center and state has adequate liquidity and that is one of the reasons why we also see payments collections coming from both center and state in a reasonably decent manner.
Obviously, the government is focusing on infrastructure. I think during the lockdown, they released a 300 page report on the national infrastructure plan, which is a significantly large investment plan even though parts of the and they have also given some idea of the funding and even though 20 odd percent vis a vis from the private sector, this is up to 2025, may fall a bit shorter if private sector does not see bump up in investment momentum, but at least the center state and PSU spend should be by and large in line with the plan, so the plan doesn't appear to be visual thinking. Lastly, I think we realized that we have an economic moat, the organization has an economic moat, we have a healthy balance sheet, we have got a very large unexecuted order book, which gives us multi year revenue visibility. Our portfolio diversity to a large extent has been mitigating the impact of cyclicality. As Harish also mentioned, dependence on public capex at this point of time is not a bad thing to have.
If we are largely dependent on private CapEx, may have been badly affected and of course our execution track record is well proven and apart from that we carry strong liquidity on the balance sheet. With that, I would like to open the session to question and answer. Over to you Janice. Hello? Janice?
Yes, sir. Can we begin with the question and answer now?
Yes, please. Start with the question and answer session.
Questions. We take the first question from the line of Shubateep Mitra from JM Financial. Please go ahead.
Good morning, Arunabh. I have two questions. Firstly, you did mention about the labor situation improving. So my understanding, as per the last quarter's call, was that you were expecting to reach about two lakh, 2.2 lakh kind of labor by July. We're currently at 1.9 is what you mentioned.
So by when do you see, you know, labor reaching an optimal level? And how do you see, you know, probably education picking up in second and third quarter?
Shwoopi, I think there was a small misinterpretation misinterpretation on your part. What we said was that during peak period, sometime in q four, January, February, when typically execution obviously ramps up in q four, our total peak peak labor workforce was around two lakh 25,000. And at the end of the year or sometime during the quarter when we talked, that point of time our labor force was around 140,000, so it has come to 120,000. Of course, that would be probably around 70% of peak requirement, but one thing you must also keep in mind is that during monsoon season, labor requirement may be down a bit. But, yes, we the what we said was that it will take some time for us to come back to a normal operating requirement, not come back to peak.
So that could still be a couple of quarters away.
Understood. Understood. Secondly, you know, I was just referring to the slide on the balance sheet, and just looking at the borrowings part of it, you know, the other borrowings, which is extra financial services and development projects. So there's a sharp spike there, I believe, the borrowing spot. So just wanted to understand that this is, you know, provisional borrowings that we've taken anticipating, you know, working capital pressure in future or if you can throw some light on that?
Yes. It was essentially to the additional borrowings was essentially for two things. One was to of tank up on liquidity because we had in the month of April, the entire world was in turmoil and India was completely locked down and nobody had any idea of how long it would remain and how long economic conditions would pan out. So we raised a fair bit of borrowings during that period. Of course, 4 to 5,000 crores is earmarked for repayment of earlier borrowings which will fall due for repayment sometime during the course of the year.
Normally, tend to raise resources just before repayment, but in this particular case, we raise that money in advance. So it was essentially for two things. One is to raise money in advance to year back for repayment of borrowings, and the other was to increase liquidity on the balance sheet.
Understood. Lastly, by when do you see the proceeds of the ENA sale coming in?
See, I think we are very clear both Schneider and LMT are committed to the deal. The deal is still on, but the only problem is that in India, unfortunately, some of the documentation that needs to be completed has to be done in physical form and cannot be done electronically. For example, transfer of land to the new entity, they require signed documents. So we are all waiting for international travel to open up after which people can come to India and sign whatever documents are required for registration because without that, that is an essential part of the real transfer of the existing businesses and assets to the new entity. So till that happens, we are sort of keeping everything in the bins, everything else is in a set of readiness, but we'll have to wait to see when that happens.
I'm going by recent news reports where the government has said that they'll try to create air bubbles between different countries for dedicated flights to and fro. Hopefully, that will alleviate the international travel. So once that international travel gets opened up in a limited or full manner, I think we should see the deal getting concluded.
Perfect. That is from my side. Thanks a lot.
Thank you. We take the next question from the line of Mohit Kumar from IDFC Securities. Please go ahead.
Congratulations, sir, on a decent performance in a very, very challenging environment.
Thank you, Mohit. Sir, I
have two questions. The first on order inflow, of course, it's difficult to paint a picture, but you can throw some light on the international side and on the domestic side. And are you seeing any kind of deferral of execution, especially on the international side given the low oil prices?
And
second okay. I'll come to the second question later, sir.
Yeah. Okay. See, as far as order inflow is concerned, we have seen bit of a pickup bit of a pickup in ordering activity, but obviously, till things stabilize, I don't think you will see a rush of orders coming through and particularly since we are largely dependent on central state and public sector undertakings and many of the people in the senior people in these organizations are not so tech savvy, they would not like to approve everything electronically. So I think we will have to wait for things to stabilize even though the pipeline appears very recently. In fact, Harish mentioned around 6,300,000,000,000.0 rupees of prospect pipeline, collect 630,000 crores, which around 500 crores is in our intra segment power and MH is another 50,000, hydrocarbon is around 70,000 crores, heavy engineering and defense is around approximately 10,000 crores.
Oil prices, obviously, global low oil prices have put cost concern on ordering of international ordering, particularly in hydrocarbon space. However, please do understand that if oil remains at around $40 a barrel, of course, it's been moving up quite a bit. That is not a very good price point for oil producing countries to put out CapEx. However, once it process $50 a barrel, it certainly alleviates the fiscal equation in oil producing countries and people do start to look at CapEx and going by many reports, international reports, it does seem as they are predicting that oil will go back to around between 50 to $55 a barrel, so we will have to wait and see. Once oil comes back to a decent level above 50 rupees a barrel, I think we can expect to see some ordering.
So while the prospect pipeline is there, on international and domestic, Timelines for that is very, very uncertain and at this point of time it is anybody's guess on when these will actually get awarded. As of now, these appear to be on the horizon, hopefully they will not get dropped, so that is a situation on the ordering on the investment front going forward. But as I said earlier, the world is in world and India is in such an uncertain state of mind that we would not like to try to speculate or conjecture on timelines of when ordering, you know, can come back in a really decent manner.
Okay. So my second question is on the development projects portfolio. So did you book Nava Power revenues assuming 100% availability during the quarter, or we assumed a lower path? Related to that, what are the amortization provided for Hyderabad Metro in Q1 FY 'twenty one? And what kind of cash support the development business would require to meet all the commitments in FY in an environment where the revenues remain subdued?
See, Hyderabad Metro, they were shut for quite some time, and one of the reasons was that state of Punjab was not taking, there was no demand. I think during lockdown the demand was miniscule, so they did not have to resort to their priority list and ask for power from ITPs. So obviously, the PLF fell significantly in line with the following revenues. However, you mentioned PAF. PAF was at a fairly high level.
In fact, PAF was at around 87% level, which is more than the threshold required for plant availability, which is more than the threshold required for getting the capacity charges. So while there was a close to 50% fall in the total revenues, the plant availability was at a high level because we had adequate stocks of coal and we are ready to switch on at a moment's notice. So that was the situation as far as Nava is concerned. What was
your question on Hyderabad Metro? What was the amortization provided on fair collection rights for Hyderabad Metro in q one f y twenty one?
See, there is no collection whatsoever. It was under lockdown, it is still under lockdown. So for the whole of the quarter, there is no collection. There was in fact, we had to keep on bearing the fixed expenses. So there's a negative EBITDA, and you talked about amortization.
Amortization was around 70 crores 70 odd crores during the quarter. The amortization, that means the depreciation and amortization part.
Correct, sir. And the and the question was what kind of cash support the development business would require to meet all the commitments in FY twenty one in case the revenue remains subdued?
I would not like to speculate on that. What you're asking for is to for me to also build in some sort of a conjecture on the revenue and and EBITDA. Nava should not require If at all anything will require it will probably be required in Hyderabad, not in Nava.
Understood, sir. Thank you. Thank you, sir. Best of luck. Thank you.
Thank you.
We take the next question from the line of Venu Gopal Kare from Bernstein. Please go ahead.
Hi, Mr. Mandir. Firstly, congratulations on a well managed quarter, especially on the cash flow side. My first question, I just wanted to touch upon the labor availability part. Now from what I see, your revenues are primarily a function of both availability of sites, wherein, of course, there are some containment zones.
And number two is availability of full labor. Now looking at this commentary you made that roughly about two thirty or two forty k is what is the peak labor requirement, which I understand is usually, let's say, during a March quarter. But you're already at one ninety now. So post monsoons, which is a December ish quarter, you seem to have at least adequate labor available for a normal December quarter because that's not a big quarter anyway. So if containment zones are meaningful enough hindrance for getting back to revenue growth in a normal quarter because labor doesn't seem to be a challenge at least?
So that's my first question.
See, firstly, yes, you're right. Most of our sites are operational. Around 95% or more than that are operational. It's only a few sites here and there which are in containment zones which not operating, just a handful of sites. You mentioned labor.
I think we also need to recognize that till the virus is not eradicated from the face of the earth or until everybody in the country at least is vaccinated, we have to follow social distancing norms. Even during normal operation, it's not as if execution will go big bang back to what it could have been in a normal boom period. So those constraints are still there as far as the execution is concerned. So some constraints in execution in spite of visibly large labor workforce will still continue.
Got it. I think that is very clear. The, you know, the second thing is on the margin side, you know, wanted to really understand, we were actually very surprised looking at infra margins honestly, 50% decline in revenues and yet you have held up your margins on a Y o Y basis. You mentioned some margin levers, especially around overhead, where probably people underappreciated the ability to bring down overhead, etcetera. So can you give us some qualitative color on that aspect?
And more importantly, because we want to really see if that's a sticky thing, which can actually help you through the year? And also because I'm assuming that labor is also coming back at a higher cost, so is there any risk around margins because of that or everything is a pass through?
Everything is certainly not a pass through. It could have a bit of an impact on on margins as they increase labor, but I also mentioned that many of our contracts have labor inflation pass through, which are typically things formula. For example, some contracts would have formula linked to DNS allowance and pass through formula. However, at the same time, we do send to benefit from lower commodity prices particularly in steel. Even though cement has prices of cement have gone up a bit, steel should give us some benefit.
Has given us some benefit in q one already. So to that extent, I think we are not in a situation where input cost escalation will hit us in a big way. Secondly, across the organization, everybody has been focusing on number one, reducing discretionary expenses and trying to cut down on all sorts of overhead expenses, trying to change business models, so as to ensure that we operate in a more lean, mean and trim fashion. So just to give you an idea, this is one fruit in many respects. Obviously, big saving is on travel and convenience because everything is being done online just like today we are talking on an audio call instead of physically meeting.
Obviously, businesses have also been apart from corporate expenses, businesses have also been at the forefront of trying to curtail expenses. To give you an idea, in this quarter alone, we saved around 200 crore of normal expenses, which around half half was on travel, around 100 crores saving was on travel, but 200 crores is not a small number and this is in spite of the fact that Mindtree added another 100 crores even after taking that into account in the sales and admin essence, which people automatically assume that the large part of that is fixed. The fact is that at an organization level and obviously, infra segment has been able to save on their overheads as well as on the input costs as far as material conversion is concerned.
Got got it, sir. Thank you so much.
Thank you.
Thank you. We take the next question from the line of Abhishek Puri from Axis Capital. Please go ahead.
Thank you. Congratulations on a good set of results despite the challenging environment. Just wanted to check with you on the current quarter numbers. I mean, we have lost forty days of complete lockdown, and yet our core engineering revenues are down only 46%. So is there some catch up that we have done?
And would that catch up play out in the coming quarters also, I mean, you being skeptical about the labor availability and the containment zones? So would it be possible to see normalcy you know, earlier than expected is what I'm trying to understand.
We hope so, Vishay, please don't mistake my commentary for pessimism on the labour front. I think 190,000 labour workforce that we have is a very decent number which enables us to execute in a very decent fashion. We are not pessimistic, all we are saying is that we are cautious on when things will completely normalize. As I mentioned, some sites are in containment zones, but those are just a handful. In fact, the large projects in Mumbai are progressing, the coastal road, the trans harbour link and the metro for example, all are functioning in a decent manner.
So it is not pessimism, but at the same time we do think that it could take anything between two to three quarters of things to normalize. That is all we said. I must also say that we cannot just apply thumb rule saying that revenues are 45% catch up and stuff like that because every site had its own local conditions. Firstly, while some factories were allowed to start operating in a very limited manner from April 14 onwards, Sites started gradually reopening from April 20, but that doesn't mean that we suddenly opened up all sites on April 20. Depended on permissions at the local level, whether it be local DM or Ram Panchat or Taluka and stuff like that.
Obviously, reopening came with a whole lot of conditions. For example, some sites may have reopened with a restriction that we could only operate at 30% workforce. Some sites may have reopened with restriction that we could operate at 50%. So every site had its own peculiarities and obviously, these along with the gradual resumption of work the workforce would have led to imbalances across the board. So I do not think one can really apply any thumb rule or say whether we manage to get some catch up and whether we will I do not think we will be able to catch up on the revenue loss during the course of the year.
That is my personal opinion, it is not an organisational point of view, but the revenue shortfall in quarter and you mentioned forty day lockdown, it was not completely forty day everywhere as I said. So no numbers, but at the same time it may be very difficult for us to sort of catch up on lost revenues. These are not lost revenues, these the execution that is not postponed. That's about it.
Right. And a fair point. So could you also spell, you know, any segments that could do better than others in the near term? Like, saw hydrocarbon has fallen lesser than others in the current quarter, so more of international business here. So has that become 100 normal versus the others in India where you know we are facing a lot more challenges due to containment zone?
See to that extent, hydrocarbon has its own set of challenges. I think everybody knows that. Hydrocarbon also, their margins were to some extent affected because of change in the job mix. Last year they had a number of high margin jobs and the total proportion of jobs which had crossed margin recognition were almost double that of the current year, some foreseeable losses, lockdown costs, under recovery, so they had their own challenges, but yes, locations obviously have not been as badly affected as domestic, even though every now and then we have seen some partial closures or partial lockdown or partial restrictions in a number of international sites. Here again, would not like to speculate apart from the fact that businesses with a higher exposure to international, particularly I think the information technology and technology services is known to everybody even though their end markets are still very volatile.
Hydrocarbon and heavy engineering are also they get almost half their revenues from international sites, so international locations. Hydrocarbon of course means on the ground execution at those locations. In case of heavy engineering, is more export of equipment to those countries. Yes, they may be probably less affected by the domestic lockdown, but at the same time it is not that they do not have any domestic operations either. Heavy engineering of course is completely, the manufacturing is all domestic.
Pardon me for not giving you a clear answer, but that would be speculative on my part.
So fair enough. This is helpful to understand at least. And lastly, in terms of the order inflow, you mentioned order prospects of 6,300,000,000.0. If I remember correctly, my memory serves me right, I think last year it was about 8,500,000,000.0. So are we looking at 20%, 25% decline in prospects and maybe I understand order finalization can be very different, it all depends on how the market competition and, you know, intensity is.
So to that extent, are we looking at 20% odd reduction overall? And when we know the prospects, why can't we give a guidance?
No. Abhishek, two things. Firstly, I don't think it is a clear function of some arithmetical backers on one of calculation, number one. The reason being that even while trying to get a fix on the prospect pipeline, the fair bit of judgment is involved. For example, some business head may be looking at a prospect, but we think very very remote in under the existing circumstances and without any clarity on when things will resume back to normalcy.
To some extent, is a judgment call. There may be prospects which are not part of this, but at the same time, I think we also need to recognize that the economy has significantly decelerated. So in these times, I think people are not really talking to many who would many of the public sector customers particularly who would be maybe doing some drawing board calculations on some project would obviously put that in the background. So it is not unable to clear interpolation or extrapolation. So to that extent, it is not a mathematical science or an art I also mentioned that the timelines of ordering so called 630,000 crores of prospects, because we do not know whether these will actually get ordered out or when they'll get ordered out.
And the sheer uncertainty obviously precludes us from making any sort of projection as far as order inflow numbers are concerned. So that is why we have refrained from giving a guidance.
Right. Fair enough. But in terms of the some of the segments that you would be more keen or, you know, or or we should assume that high government exposure and PSU exposure sectors will do better than the private ones for sure.
Yeah, at this point of time, it does look as if sectors which are more exposed to government and PSUs, their prospects will probably look more concrete, let me put it, not necessarily better, but look a bit more concrete than those which are exposed to private sector.
Right. And any update on five gs deal? That will be my last question.
At this point of time, no update.
Okay. So thanks a lot for all that, and all the best, sir.
Thank you.
Thank you. We take the next question from the line of Aditi Pattia from Investec. Please go ahead.
Hi. Good morning, Anubh. Hi.
Yeah. How's going?
Anubh, just want to understand how significant the benefit of lower commodity cost is. I mean, because I there there are quite a few contracts which have a past due. And in that context, how is it that we've been able to hold up on to our intra margins despite such a sharp decline in revenues?
I think we already addressed that the large part of it was because of firstly, you also need to recognize that inside the segment which consumes a lot of material as well as subcontracted labor, and those typically tend to be variable. Forget about the twenty day lockdown period, but both labor and subcontracted labor and material tend to be variable, so to that extent the margins don't get affected. Where they did benefit obviously was on the margin front, on the overhead reduction front. To that extent, I think yes, it is not that we did not benefit from commodity prices. I did mention that, yes, we have benefited somewhat, but those are not humongously large benefits.
Not humongously large benefits.
You would say the bigger cost benefit would have come from SGA cost savings as opposed to commodity cost?
I would not like to get into that level of granularity, Aditya. Sorry to do. So, Panti, but also keep in mind that because of the lower revenues, obviously the material consumed was significantly lower as well. Revenues fall by 50%, material consumption will also fall by 50%. So savings savings on commodities will also be restricted to that extent.
True. True. True.
Regarding lower crude prices, I mean, you indicated that order inflows in The Middle East could get impacted if crude prices remain where they are and possibly above $50, things start normalizing. But could you explain us do these lower crude prices also impact execution pace or cash flow collection or cash collection in a material manner in in The Middle East?
Not really because Middle East countries that we operate in, clearly respect sanctity and contract. Yes, if some particular country is under official state, they may request us whether we can maybe elongate the execution timeline. So to that extent, one or two projects may go through that, but it is not with lower oil prices will directly affect execution. Ordering becomes uncertain, obviously, but execution may not get that dramatically affected.
Understood. From that perspective, as far as cash collection is concerned, whether domestically or internationally, we are not seeing any significant change challenges as yet.
Challenges are always there, but I mentioned right from the beginning that one of our main focus areas during this pandemic was on liquidity management. So our philosophy is that as far as possible, we will spend only as much as we can collect.
Perfect. Perfect. Thanks a lot, Anna.
Thank you.
Thank you. Next question is from the line of Sumit Kishore from JPMorgan. Please go ahead.
Good morning, mister Mandul. Thanks for the opportunity. My first question is that, you know, we had heard about conducive ongoing customer negotiation with regard to the cost overruns, which had happened due to the COVID disruption. We had also heard about a 5,000,000,000 rupee odd per month, you know, fixed overhead that you would have incurred through the lockdown period. My question is, you know, how are those negotiations progressing, and how much of the, you know, fixed overheads have actually been booked in expenses in in the first quarter, and how much is sitting in, say, work in progress?
Very difficult question to answer, but number one, as far as negotiations are concerned, those are ongoing and we have not yet had any significant number of customers agreeing in writing to reimburse us on lockdown the costs even though we are pursuing it and obviously till we get a formal commitment from customers or till we get the actual money, we don't account for it. Once they once they agree to it, we'll add that to the contract value, but in the meantime, values do not get increased. Yes. We were incurring around 500 crores a month on subcontracted labor workforce during lockdown. Of course, seven days of that, we see, went in previous quarter in q four and last year.
Whenever we are already working, whether it be joint working or whether it be import of equipment from China or even in some cases, don't know whether we are exporting, maybe one off cases we do, but like most countries which follow rule of law, India also recognizes sanctity of contract very clearly. I do not think those contracts will be allowed to suddenly nobody will change the rules of the game halfway through. So those contracts will play out going forward. Of course, going forward, we will obviously recognize the geopolitical equations that India is currently facing, so we will obviously look for alternate sources of supply and try to broaden the supply chain ecosystem. If you have been keeping track on geopolitical events and spin off effects of those, the consequential effects of those, you would also realize that many companies are now looking to India in a very serious manner.
So to that extent our supply chain sourcing ecosystem automatically increases as well. So I don't think that there is much concern on existing contracts. Going forward, we will have to be very very careful on on our international sourcing in the nation to geopolitical situation.
And in terms of opportunity because now they cannot participate?
Firstly, let the ordering pick up, and then I think we'll comment on that. I would not like to speculate on that beforehand.
Sure. And the potential loss of revenues quantified at INR 15,000 crores at the end of last quarter. Lockdowns continued till May. Obviously these revenues are not lost, they are postponed. So what is that number that has moved to?
See 15,000 crore was not last quarter was not 15,000 crore. In the current quarter, the revenues that impact of COVID has been approximately 12,000 crores.
Okay. Sure. That's it from my side. Thanks.
Thank you. Next question is from the line of Puneet Gulati from HSBC. Please go ahead.
Yeah. Thank you so much, and and congrats on upon good results and performance.
Have two questions.
Number one, can you give some sense of what is the fixed cost burn on Hyderabad Metro? Fixed cost would approximately be around 70 odd crores quarter approximately. K. And this is excluding interest. Right?
Yeah. Excluding interest. And any debt repayment during this year from 100 50 to 70. You know, high high level metro, we will build our moratorium actually. So Okay.
Okay. So so 50 crores per quarter plus interest cost is only 6 crores that you have on there. Yeah. Approximately. The interest, I mentioned depreciation would be around 70 crores and obviously the interest would be on the the interest charges to be accrued in any case whether we avail a moratorium or not.
Yeah. But but so cash cost is only 50 crore. Yeah. Approximately 50 crore.
Yeah. Yeah.
Yeah. Okay. Yeah. Can you give some sense of what percentage of your core business contracts are fixed price contracts and where there is a pass through? Approximately 55% of our order book, order book is essentially core business is variable contacts where the which have pass throughs.
Both both on labor and the material side? No. Labor would be a bit different. I don't have the numbers with you readily with me for the labor part, but these are essentially on material. Okay.
So, 55% of water book has passed through with. So, 45% is where you will typically benefit on the Correct. Field
Correct. Okay.
Thank you. And you know, so on the heavy engineering side also, the margins are quite good. Was it again largely a section of the material cost? Heavy engineering, not necessarily. Not necessarily, only material cost.
So so what would have resulted in a
strong number for for the engineering? This will be almost 17 and a half percent EBITDA. See, this is to a large extent, engineering as well, a large part of their costs are variable. So to that extent, the margins would not necessarily but there was still a 2% reduction. That 2% reduction is obviously because of the under recovery of fixed overhead.
But around 50% revenue,
it was actually quite good.
But I cannot give you granular level details on each business. And in case of heavy engineering, course, also keep in mind that depreciation is also fixed over it for all manufacturing for all manufacturing businesses. It will be heavy engineering or defense or electrical and automation. That's right. That's right.
And lastly, on the infra side, because of the lower commodity price, there and on the other side, there is a escalation of labor. Would you get to keep the margins that you made in 1Q or do you think there is a risk of it getting renegotiated when you go for other cost escalation getting renegotiate? I would not even like to speculate on something on for me. The current quarter Q1 was so unprecedented in nature and obviously the impact of a complete black swan event that has taken the entire world by surprise. So to that extent, I would not even like to speculate on whether the margin is sustainable, whether it will go up, it will go down, whether it will lead to different negotiations, all that is completely speculative.
So I'll I'll I have to disappoint you, but I cannot give you an answer to that question. That's fine. Okay. Great. Thank you
so much, Harini. Thank thank you. That's awesome.
You. We take the next question from the line of Apoorva Bhadur from Jefferies. Please go ahead.
Yeah. Hi, sir. Thank you for the opportunity. Sir, two questions from my side. Firstly, you said that we incurred at least INR 500 crores odd per month on subcontracted labor force during lockdown.
So now that 90% of sites are back on, are we still incurring roughly 50% 50 crore of this overheads? No. No. That was only during lockdown.
Obviously, that that was a very different situation from the current environment.
Okay. Okay. So we are not incurring this expense any longer? No. No.
Okay. And then secondly, if you could share give some color on any potential slow moving orders in the order book or there are any certain states which have not really picked up in terms of payments?
See, state governments obviously obviously do keep on keep on delaying payments every now and then and that is not something new. It is not peculiar to this quarter. So, is not much difference, but yes, in the past, MP and Rajasthan were lagging behind as far as payments are concerned. Some of those have started picking up again in the current quarter thankfully. I think the Andhra Pradesh part is well known, Andhra Pradesh part is well known to everybody.
So
so I think And on slow moving order part?
Slow moving see, there are some orders which are not moving, but I would hesitate to characterize them as slow moving as such.
Okay. So which would be the how large will this be will this part be which is right now not moving? If you could share that.
It should not be humongously large. Maybe between 5 to 7,000 crores or so.
Okay. Got it, sir. Thank thank you for the opportunity.
We take the next question from the line of Ashish Shah from Centrum Broking. Please go ahead.
Yeah. Good good morning, Anup.
Hi, Ashish. Hi.
So, you know, just a last bit on the margin discussion. I know we've spoken enough. Would the other income, which is up about 140 crores Y o Y, would a part of the other income, you know, been attributable to infra segment? Is is that could have I mean, could could that have pushed up the margin a little bit? I understand this.
What I am just saying when we I am just saying when we when we take the segmental margins as reported, they include maybe some portion of the other income attributable to the each segment.
Yeah some some portion of this. Okay. We would I am I am
just saying they can a qualitative judgment would that have been an influencing factor or you do not think that is a very material attribute attributing factor to the margin being you know flattish Y o Y.
No. That is not a very attributable factor.
Sure. Fine. Sir, second is, you know, we had spoken about some sort of a support to the Hyderabad Metro as well as the financing business out of the E and A proceeds. Have we you know, are we in a position to give any formed up numbers or any indicative numbers? What kind of support are we looking at now?
See, firstly, as as Hyderabad Metro is concerned, we don't intend to increase the debt from or additional debt on the HCV books. In fact, part of the debt is also, as I mentioned, from L and T and part is mezzanine debt. In fact, also have around 20 crores of income from ICDs who have met with the parent level, which gets eliminated at a consolidated level, but which shows up as part of the interest cost in the SPV. As far as funding support is concerned, either of that hopefully we will also get VGS from the government which has been pending for some time and that could be used to retain it to the parent. As far as funding support is concerned, will have to wait till the ANDA proceeds come in before we can give you a better color on how much of that we intend to use to reduce debt on the HCV books.
We'll have to wait a bit more.
Sure. Sir, lastly, in the other segment, indication on how much would have been the reality segment for the quarter?
The reality, obviously, has taken borne the brunt of the pandemic, and I think it's a very well known thing. Other segment reality is largely responsible, to a large extent responsible for the drop in segment revenues, but at the same time it is not as if everything is completely is responsible for around half the drop in segment revenues in other ways from the LT. It is not as if everything is completely soft. For example, we headed over close to between something close to 60 flats in Bangalore during the quarter, even during this situation. It is not as if everything has come to a sense, but yes, reality has been affected because revenues as you would recollect realize this upon handover of flats.
Sure. Sure. Thank you very much.
Thank you. We take the next question from the line of Ranjit Sivraam from ICC Securities. Sir,
I just wanted to understand this INR 500 crore per month, How much would have been actually incurred and how much is there in the results which we have disclosed of this 500 crore which we have actually accounted for?
Ranjit, I think that INR500 crores was a number that we talked about when the lockdown started on May 25, sorry, March 5, and we said INR500 crores per month, but we also said that sites started gradually opening up from April 20 onwards. Close to a month would be a I would say, guesstimate, but each project would have its own calculations. 500 crore was an estimate at that point of time and it would not be too far of the mark, but that would for me to give you an answer would be collecting this sort of granular level detail from seven to 800 sites. I do not think that is possible in the existing circumstances and even if we do get that information, we obviously cannot get into that level of detail. I will have to disappoint you on that front.
I did mention how we have treated the lockdown costs, but beyond that, request you not to ask for further detail.
But what would be the fixed overhead in infrastructure,
if
you can help us? Sorry? What will be our fixed overhead under infrastructure segment?
No. I don't think we'll be able to, again, give you that level of granular level of detail.
Okay. Because if the revenue fell down by 50%, so how much was the fall you told 200 crore. Is 200 crore the fall in the fixed overhead of the infrastructure segment, or is it 200
crores of fall? I mentioned 200 crores of reduction in normal sales and admin. So this is excluding the provisions that we make for provision, the non linear part that is provisioned for doubtful disables or the financial services provision. I mentioned that in normal operating level sales and admin expenses, saw a 200 crore reduction. In spite of a total increase of this after considering a 100 crore additional sales and admin expenses due to consolidation of Binetree.
I did not say that we save 200 crores on infra segment, please do not read that. Okay. The infra expenses, did mention that we charged off close to 150 crores of overheads during the quarter. Obviously, they have also saved. Apart from the overheads that have been charged up, they are saved.
Okay. So 150 crore is the reduction in the overhead in the infrastructure segment. Is that understanding correct?
No. No. No. I did not say 150 crore is a reduction in overhead. All I said is that the overhead charge to PNL was around a 150 crore in the infra segment.
Okay. Okay. Because so is there anything the provisions were lower, or was there any provision write off which supported us to show such kind of margins in infra?
See, I think I have answered the margin question of infra in fairly decent good detail. Beyond that, I cannot keep on repeating the same thing on factors which are said, please do not ask me to disaggregate the entire margin of insight into the minutest detail on overhead increase, overhead saving, travel increase, travel saving, increase in material cost on cement, reduction on steel, how much of it we were accounted for as pass through. So I will not be able to give you that that level of color.
Okay. Okay. Fair enough, sir. Because that has been one of the major element compared to what we were expecting. That's the reason why we
I know. I understand that.
Yeah. And, sir, we have yesterday, as per media reports, I think SMS has told that 8,000,000,000,000 prospects from government has come down to 4,000,000,000,000. So what was that?
See, actually, he did mention that normally an 8,000,000,000,000 worth of spending happens, but that is probably the spending that central and state governments do, which will obviously could come down in the current year. I would not like to get into that's a very macroeconomic level discussion, I clearly indicated earlier that on the macro front, central and state government, yes, they definitely see a shortfall in tax collections, but hopefully the additional borrowings program should be able to allow them to make up for a part of the tax shortfall collection. In addition to the additional resources that they will be getting by imposition of increases on petroleum products. In fact, that would lead to another 1 lakh rupees additional inflow in the central roads and infrastructure fund itself.
Okay. Okay. And any any large iconic projects like high speed rail or anything which is, which can be a large element in terms of, the order pipeline which you
look forward to? No. I can't be at this point of time, we'll not be able to give you any details on that.
Okay. Okay, sir. Thanks, and all the best. Thank be good also. Thank you.
Thank you. We take the next question from the line of Arun Pinotia from Ambit Capital. Please go ahead.
Hello. Can you hear me? Yeah. I can hear you. Yeah.
Hi, Arun. Thank you so much for taking my question. Just two quick questions. Number one is on subcontracting charges. So you said that, you know, that is like a variable cost.
So ideally, the proportion of that as percentage of revenues should remain steady, you know, over over previous year. But I see a steep decline in subcontracting charges as percentage of revenue, you know. So what is driving that? So if you can give some explanation on that. That was my first question.
No. I think in these times, we cannot apply normal marginal costing principles Okay. In these times.
Okay. Because the the proportion to sales, I thought, I mean, that should remain constant. So sales came come down.
It should come down. Upon see, again, subcontracting at times also, subcontracting with material. Okay. So to that extent, it's not directly.
So it it also includes some part of material cost as well in that particular heading. That's what you are saying.
Part of material cost would
be included as well.
Okay. Okay. And the construction material line item, you know, that also saw a steep decline. So that is largely driven by lower steel prices, or is there something else as well
as because of consumption. More because of consumption of material.
Okay. No. There are there is a line item called construction material consumed, and the consumption of raw material is a separate line. So that is fine. But the construction material line item, that's our steep decline.
So I think that is largely driven by lower steel prices or something else? Because there there is a decline of eight percentage points year on year. So does the steel price explain that portion, or there is something else as well in that?
No. No. It is not because of steel. Actually, you're looking at individual line items, construction material and raw material raw material is more for manufacturing, construction material is more material that is used inside. As I mentioned, you cannot directly attribute it to different businesses as such.
At the same time, when you are looking at revenues, you are also looking at revenues including services business. Correct?
No. So I removed that. I removed that. So I removed the services business from that to have a, you know, apple to apple comparison. So when I removed that, there is a decline of eight percentage points here on here in one q.
So wanted to get a sense
It would be to that extent, it would be depending upon stage of execution. Like, for example, in the early stages, it is more construction material or not early stages. In the middle of the stage, it is more construction material used, whereby towards the later stage stages, less construction material is used. So it would vary from project to project. It is not it is not amenable to a straight linear extrapolation.
Got it. Got it. Okay. And my second question is on the China part. So can you give, like, what portion of your order book is dependent on China supply chain as of today?
If there is a way to quantify that total amount of orders dependent on Chinese vendor.
I'm sorry to disappoint you, but I would not be able to give you that that sort of detail.
Okay. Okay. And in terms of going forward in on that, we will be finding alternative sources of those vendors either domestically or from other geographies. So that will be the way forward to deal with philosophy. Yes, that will be the philosophy to deal with that.
Okay, yes, that's it from my end. Thank you so much.
Thank you. Next question is from the line of Uttam Kumar from Spark Capital. Please go ahead.
Yes. Thank you for taking my questions. So first one is just to understand because of this more containment zones that are being defined, what percentage of order book is we are we can see in the domestic side all urban and all urban geographies?
International sites are all operational, it is not that those are it's only that the domestic sites where a few sites in some urban locations have got affected. That's about it. Yeah. I didn't I didn't didn't didn't understand your question. Actually, if at all any site would get affected, it would mainly be in buildings and factories, one or two sites here and there.
Okay. Sir, what show office when 82% of the government share of other board, what could be the share of state government owners of the total 82%?
Hello 37%
of the domestic order book is from the state government. 37% of
order book. The
Right right right in APP space sir. Sorry? Of the core business. Yes. Now, sir also on the All the business is all core businesses only.
Yeah. Yeah. Sir, what is this? Can we get
a split of EBITDA of
this development project between Nava and Hyderabad Metro?
Well, mister Uttank Kumar, I would request you to please hold on to your question. We are just trying to reconnect, mister Mondal.
Sure.
We have mister Mundal reconnected. Miss Uttank Kumar, you may go ahead with your question.
Yeah. Sorry. I got disconnected.
No problem. Yeah. So
can we get the EBITDA breakup of the development project between Nava and the.
Sorry. Can you repeat your question,
The breakup of EBITDA in development projects between Nava and Hyderabad Metro.
See, Nava was positive and Hyderabad Metro Metro was obviously negative because of fixed operational expenses even though we got some business income here and there. But Yeah. Largely that.
Okay. Yeah. And, also, on this Hyderabad metro, what could be the timeline for implementing getting this POD policy in action or and then monetizing this land bank that we have in unlock capital? What could be the rough timeline, like FY '22? Can we see that happen?
I would not care to speculate on that. We will definitely work towards FY22 for sure. Let's see how things normalize because commercial real estate has to again come back to near normal levels again in Hyderabad and we are obviously excluding all options for that.
Understood. Understood. On the defense orders, given that limited competition, what could be the action that we can see this FY at least? Are we seeing some preparation work happening on some new orders?
No. I think different ordering time and again we have told markets that timelines tend to get so elongated that it will be speculative to even try to give some idea of our timelines on when things can happen. In fact, we were expecting some orders in Q1 but because of the current situation, those have got pushed forward. Hopefully, we'll get that in q two. Hopefully, we'll have to wait and see.
Understood. Yes.
Thank you, sir. That's it.
Thank you. We take the next question from the line of Arjun Gabbat from Macquarie. Please go ahead.
Hi, sir. Thank you for the opportunity. Sir, I just had one question again on the margin. So you have talked about clearly about the commodity prices and other factors. Just one question, is there any contribution from, let's say, a number of projects crossing the margin recognition threshold in this quarter?
Because in the initial remarks, Harish mentioned that you did focus on on essentially those projects where ramp up could be done faster. So could that be one of the reasons why your margins have have surprised everyone?
Not really. Not not because I mean, large project has suddenly crossed margin definition. Not not because of that.
Okay. And can you can you just give us qualitatively what are these areas where you saw faster ramp up of projects? I mean, be it either the specific sectors where you were able to ramp up faster or maybe, you know, specific work components. Like, for example, just to give you an example, say design and engineering is something that can be done on a computer with a software, right, with an auto kind of software. So maybe less likely to be disrupted by a lockdown.
Are these nitty gritties or something that has helped the execution in INTRA?
Not so much. See, when you are executing anything between seven to 800 projects at any point of time, some projects going faster on the design front and some projects going slower would not really swing the needle to that extent. But very broadly speaking, sites which are bit more remote away from urban centres obviously tend to tend to bounce back in terms of execution a bit faster than those projects in urban or semi urban areas, that is about it. Beyond that, will not be able to give you further color. Yes, you did raise a very valid point that a lot of the design work fortunately we managed to transition to a work from home environment.
And sir, was there any I mean, it also just for my understanding, is it also possible that when you're facing worker shortage, is it possible to move additional machinery and ramp up execution? Is that possible in in many of the projects? Or can the man not really be substituted by the machine?
No. Man cannot be so easily substituted. This is a very short period of time. Most of our projects take anything between two to three years to execute and one quarter pandemic happens, is not that we can suddenly substitute a whole one. That is a very very gradual process.
At one point of time, the total workforce that we used to employ was in excess of 3 lakh crores. Obviously, we brought it down to 300,000 labour. We brought it down to around 225,000 at a peak. So, obviously, that that has happened over a period of time. It has taken a couple of years, but that is also an impact of the digitization initiatives that we have taken.
But it cannot be done so quickly.
Okay. Okay. Understood. Thank you, sir. That's it from my side.
Thank you. We take the next question from the line of Girish Achipalai from Morgan Stanley. Please go ahead.
Thank you, mister. Partly the question was answered in the last speaker. Just one bookkeeping number, 0.3 lakh crores. There any quantification that you can give on the
state side how big that number could be?
Oh, I would not be able I'm to sorry, but I'm not be able to give you those details.
Okay. But would it
be similar to the order book composition, or it could be very different? Could be could be a bit different obviously. For example, almost all the almost all the water projects, for example, are state. Most of them are state projects, Water is a large prospect even though part of the prospect is obviously international, but water is one area where we are seeing significant prospects. So large part of that would obviously be states.
Okay. Understood. Thank you, sir.
Thank you.
Thank you. Next question is from the line of Keshav Lahoti from Angel Broking. Please go ahead.
Thank you for the opportunity. Yeah. Is it possible for you to throw some color on daily revenue run rate per day? Currently, what would be your guess? We are at 90% plus revenue per day compared to the same year ago or some sort of range is also fine?
I didn't I'm sorry, but I did not understand your question. Your voice is also slightly indistinct. So could you repeat the question?
Yeah. So as you have given us the labor number, but probably the labor and the executions are not the one and the same thing. So my question is, what would be your revenue run rate? What would be the revenue you will be earning per day compared to the same period a year ago? Maybe some sort of range you can give, 80 to 90% or 90 to 100%.
I would not be able to give you that color. Sorry to disappoint you.
Thank you. Next question is from the line of Parikshit Katpal from HDFC Securities. Please go ahead.
Hi, Arnav. Congratulations on a decent quarter.
Thanks, Parishit.
My question is, sir, a large part of order book is funded by multilate multilateral agencies. So because of COVID, are we seeing any constraints on the funds coming in from there and delays in payment on those projects?
No. Actually, the multilateral funded projects, payments go according to milestones. So if we execute and we cross a particular milestone and the payment becomes due, that comes. So it is more on the execution front rather than on anything else.
Because there could be certification delays or site visits by the independent engineers or some coming from more on that where the manpower, which which is on that multilateral side, that engineers are not able to reach the site because of constraints, like in case of the Translar Link or some of the Mumbai project, it was coming more from that side. So those funds may be there, but because of constraints on certification, there could be delays in collections disposal of payments.
I completely agree with you, Palikshit. I think you have answered your question yourself. But yeah. But on a serious note, yes. If we have delays like that, until ultimately, the documentation is not complete, we will not get payment.
So in the current situation, there could be instances like that.
So the second question was more related to what the earlier participant asked. So what we are seeing so so in my coverage universe, I have a lot of ECC companies who have reached on an average around anywhere from 60 to 80% of labor labor availability, and execution is far a little bit more ahead than what is the labor availability. Constitution efficiencies in cases as high as, like, 90%, some cases at 60%. So it's almost like a one to one correlation. And there are studies that typically in construction labor so labor availability and execution is very more of a linear relationship.
So I do understand you have projects in containment zone, but the labor number which you have quoted, so despite social distancing, I would have thought this number to be much lower, but you are still at the normal monsoon level of 1.9 lakh. So what gives us this confidence that we should have such kind of a labor force? And is my assumption correct that though you're not giving any color on what could be the execution,
but it could be more somewhere around that range or maybe lower or higher, something like that you can touch upon?
I'm not asking any range.
No. I think your question was far too complicated for me to answer, number one. Secondly, I would not be able to compare Lenti's execution with that of peers. Many of the peers would probably be a bit more sectoral. We are much more broad based.
So to that extent, I will not be able to give you any further color on the execution front. On you're asking a bit of a speculative question in that.
Okay. But I'm saying you already have the numbers right now. So last month or, say, a couple of months average execution, so you have that number. I'm not asking about features or what is happening in next month or next week. I'm saying what you have already achieved a week back or on an average basis.
Pavixit, I upfront very clearly said that please do not go by a mathematical interpolation or an extrapolation. These are very, very different times, and these are changing on a daily basis. You cannot use a back of the envelope calculation and arrive at some execution run rate which you think will happen, that may or may not reflect reality. So I would refrain from any sort of interpolations or extrapolations on that front. Okay.
Now my question is, sir, we have seen in this month, typically, there have been rates almost we have seen L and
T in between 7 to 8,000 crores of order where we have bid significantly higher versus the the client cost as well as the lowest bidder. Is there any change in the trend on strategy of bidding? Because, off late, there was limited competition. We were way off than the cost of the project and even the l one bidders.
No. I would not speculate on that either. What competition does and competition may be significantly lower, some person may have been given an outlier bid, I would not be able to comment on that. The fact is we have not changed our bidding strategy. We still try to build up our costs at the most economic level at the minimum threshold margin for that particular segment and put in our bid.
If somebody bids 20% lower or 30% lower or 20% higher, that is something which I will not be able to comment on. We have not shown the bidding strategy.
This 150 crores which we have given to the PMKRS Fund, has it been
expensed in this quarter?
No. That $1.50 crore PM fund contribution was expense in q four itself. Okay. Q four itself. Okay, sir.
That's all from my side. Thank you, and all the best. Thank you.
Thank you. We take the next question from the line of Ambar Singh Ghania from Asian Market Securities. Please go ahead.
Hi, Arnaud. Thanks for taking my question,
and congratulations on a decent set of number in this online. Thank you. Just some some more color I wanted to understand from the prospects on domestic side,
as you mentioned about international some segments. If you
can give some color about this 5,000,000,000,000 rupees of domestic pipeline, which segments are there, a broad broad color on that project efforts?
I'll not be able to give you complete details, but very, very roughly speaking, water is one of the strongest segment both domestic. Are you talking only about domestic or domestic and international? International you already have given color
on hydrocarbon water and power clearly, so most from the domestic side
5,000,000,000,000 rupees of surplus. Domestic side, if you ask me water, heavy civil, power, T and D, all of them are approximately 1 lakh crore or so each and the remaining is almost equally divided between the buildings and factories and transportation infra.
Okay. And just just one thing that we are seeing that the tenders are getting delayed continuously, for example, like, for this, like, corridor and power TNG and all. So are you seeing the similar kind of situation in other segments also where government tenders are there and what is our outlook in terms of what kind of delays we can see in these large tenders or not?
Yes, obviously the tendering activity is getting delayed and power segment particularly. So I think you have touched upon something which is very common. In fact a number of power plants have been appearing on our prospectus for over a year now, but delay in tendering is practically there across the board in the current times. I think that is something which you cannot be avoided. Okay.
And in this pipeline in
this pipeline of building in the factories, are you factoring in any number from our own project on the
real estate side? No. These are these are external projects, sir. Okay. Fine.
That's all from my view. Thank you. Yeah. Thank you.
Thank you. Next question is from the line of Aditya Mangia from Kodak Securities. Please go ahead.
Yeah. Good evening. Thanks for the opportunity.
Hi. Good evening.
Hi, sir. First question which I had was more on whether you are seeing in the market place the ability to price in this working capital pressure in the margins that you can book. So secondly, the question I'm asking you is that are periods of yours and you starting to build up this high working capital cost in your bid margin?
I don't really know what you mean by high working capital cost. Working capital that we carry today are on projects that are already under execution, obviously. We managed to keep that under control even though as a percentage of sales it may have shown an increase because as Harish mentioned, the denominator has gone down. Obviously, this quarter revenues have fallen significantly. It is not as if that is really affecting our bidding pricing as such.
Okay. Typically at the time of bidding, we tend to look more at PVIT margins which does not include the interest and tax primarily because interest is a function of the central treasury and tax is the entire company by one single PAN number.
Fair Fair point. So a related question would be that so obviously, there's been some deviation. So let's say the customer has become much more demanding in terms of what kind of working capital he's put on the contractor's head. Which has been happening for some time I'm not talking about one point generally, the past two, three years it's been happening. Now, in this context, we obviously have a reasonably good liquidity position, and we also obviously are getting back labor at a fast pace, which peers of yours may not be getting.
Do you foresee scenario wherein attendees start getting some bit of a competitive advantage and start gaining market
I hope that what you say happens, but very, very speculative. For example, in future if Chinese people are if Chinese are not allowed to bid for on the ground EPC work, for example, in underground metro, then that could lead to a better chance. At the same time, please keep in mind that in this situation, everybody is desperate to get an order. One outlier bit can completely spoil the equation of it. As long as things are under L1 situation, it is not possible to really speculate on whether we can increase our market share or not.
As far as the working capital is concerned, yes it has increased, but I think that is also a function of our dependence on public sector to a very large extent. In fact, ten years back, proportion of the private sector was far higher, and that point of time, obviously, we used to operate on lesser working capital level. But today, with large dependency on public sector, working capital levels have gone up.
Fair point, sir. So the question that I have next was on so so we took a round of order cancellations in April, and that was more related to issues beyond COVID, which were there prior to COVID. We've obviously seen, let's say, now a quarter when we would have interacted with these customers and they've been much more informed now. If you could comment on the risk of any order cancellations happening out of the $3,000,000,000,000 backlog that you have at this point of time?
Yeah. I mentioned that we are not really we are not we are not seeing any cancellations as such. So what you're asking, again, is a bit of a speculative question, so I will have to let that pass, Vijay.
Fine, sir. Just a last clarification from my side. I think you or Harish talked about the domestic backlog share of state projects being 37%, three seven. I recall a lower number of about 27% at the end of FY20 as per the annual report, so I just thought I'll check with you whether both these numbers are in the kind of the same series or am I getting it wrong?
See, the current if you take the current domestic order book of 2 lakh 30,000 crores, share of state is 37%. State government. State government when I say state government, I also include local authorities.
Yes. So this number was 27%. That's for the annual report including local authorities inside the annual report.
Right. Are you looking at see, what you're looking at is a total order book. Total order book, the state government is 28%.
There. Now I got the linkage, sir. Thank you.
What I'm talk what I'm talking about is is a domestic part. If you take the total, 3 lakh 5,000 for 28% is the state government share total.
That clarifies. Those are my questions, Arnold. Thank you, and all the best.
Thank you.
You. Well, ladies and gentlemen, that was the last question for today. As there are no further questions, I would now like to hand the conference over to miss Adnav Mondal for his closing comments. Over to you, sir. Thank
you, ladies and gentlemen, for a very, very long and interactive session. Think I have already said what I wanted to say, but with that, wish you all the best and stay safe everybody. Thank you.