Ladies and gentlemen, good day and welcome to the Ahluwalia Contracts (India) Limited Q1 FY25 Earnings Conference Call, hosted by Ambit Capital. As a reminder, all the participants' time will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Yash Jain from Ambit Capital. Thank you, and over to you, Mr. Jain.
Thank you, Mia. Good evening, everyone. Welcome to 1Q FY25 Earnings Conference Call of Ahluwalia Contracts (India) Limited. From the management today, we have Mr. Shobhit Uppal, Deputy Managing Director, and Mr. Satbeer Singh, CFO of the company. I will now hand over the conference to the management team for their opening remarks, after which we shall open the floor for Q&A. Thank you, and over to you, sir.
Thank you. Thank you so much. Ahluwalia Contracts (India) Limited construction company has announced financial results for Q1 FY25. During Q1 FY25, the company has achieved a turnover of INR 919.35 crores and a PAT of INR 50.60 crores in comparison to a turnover of INR 763.61 crores and a PAT of INR 49.73 crores during Q1 FY24. The turnover of the company has increased by 20.39% during Q1 FY25 in comparison to Q1 FY24. EPS of the company for Q1 FY25 is INR 4.57 as compared to INR 7.42 in Q1 FY24. During Q1 FY25, the company's EBITDA margin is 6.58% as compared to 10.83%, and a PAT margin of 3.33% as compared to 6.51% in the corresponding period. Net order book of the company as of 30 June 2024 is INR 13,143.72 crores to be executed in the next two and a half to three years.
Total order inflow during FY25 is, till 30 June, INR 2727.93 crores from 1 July till date, INR 2217.61 crores. So, total order inflow during FY25 till date is INR 4945.54 crores. Thank you. We are open to questions.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Mohit Kumar from ICICI Securities. Please go ahead.
Hi, sir. Good evening, and thanks.
Hi, Mohit. Good evening.
Thanks for the opportunity, sir. My question was on this margin, this quarter margin. It was 6.5%, if I'm not wrong. Can you just tell us why it was such a low margin this quarter, and how do you think the balance of the year to pan out? If I remember correctly, I think we were guided for 11% margin for F25.
Mohit, there are a couple of reasons, three, four reasons for reduced margin. One, primarily, is reduced turnover in this quarter. We have been impacted first by the election. Then, so pretty much May and June have been heavily impacted, reduced manpower on account of election. Then, the CSMT project, that for a variety of reasons, the turnover that we had anticipated or planned for has not happened. We have done a turnover of about INR 30 crores from CSMT in this quarter. That is on account of design finalization from the client for a lot of changes because the design which was given, the concept which was given, was not as per the bylaws. That had to be totally revamped. And then there were tree-cutting issues in the buildings, which were greenfield buildings there.
Then June has been a write-off, especially in Mumbai on account of rains. July also now, even the rest of the country. So these are a few reasons. And then our increased staff cost, which is due to the fact that to execute the projects that we have in hand, we've obviously incorporated or taken in more staff. So that has led to an increased staff cost. So these are the reasons. And then there are a couple of write-offs totaling INR 6.20 crores, where a couple of our clients have been taken to NCLT. So we've had to put in those write-offs. So the sum total or aggregate of all these reasons has led to reduced margin. Did I answer your question?
Yes. Did you just partially say? What do you think about the entire fiscal year?
I think I did remember mentioning last time also that quarter one and quarter two will be impacted by elections and quarter two, to some extent, by monsoons. H2 is something Q3 and Q4 is something traditionally where the run rate is higher and the margins are also higher. So we still anticipate that we will cross double-digit margins in the full financial year. Q2 is also expected to be muted because monsoons have played havoc, as I said, not only in Mumbai or Maharashtra, but July has been quite muted in other states also.
Understood. And my second question is on the labour issue. Are you facing any labor issues because we heard from various developers that there are labor issues due to elections? Is the labor issue has got over, or you didn't face any challenges as far as the labor availability is concerned?
No, no. This is a so two parts I will answer this question. Yes, elections impacted labor in a big way. As I said, May and June, we were virtually working at about 40% labor across pan-India basis. This obviously now has improved the situation, but we expect that labor is going to be or labor shortage, skill shortage is going to be a perennial problem. With so many projects having been launched and continuously developers are launching new projects, infrastructure takes picking up once the new government is formed, labor shortage is here to stay. So we will have to find out ways and means to combat this collectively. All the constituents of the ecosystem will have to come together to see how we can mitigate this problem.
Understood, sir. Thank you. Thank you, Mr. Uppal. Thank you.
Thank you. Thank you.
Thank you very much. Ladies and gentlemen, before we take the next question, I would like to remind the participants that you may press star and one to ask a question. The next question is from the line of Sunny Roy, who is an individual investor. Please go ahead.
Hello, sir. Am I audible?
Yes, Sunny, you're audible. Hi.
Yeah. I just wanted to know the reason for the high subcontract work charges. I mean, it's about 40% year-on-year increase against a 20% increase in revenue. So what led to that high subcontracting work charges?
Just a second, Sunny. I'll come back to you. So this is, again, primarily part of the subcontracting work. This has two parts. One is subcontract with material, and the other is subcontract which we give on labor rate, say, for shuttering contractors, bar-bending contractors, stone contractors, which is labor. So part of this includes the labor also, and due to the reduced turnover, that is why these costs are higher.
Okay. So going forward, you expect this to normalize going forward?
As I said, in Q2, it will. It will. This will continue to be a little higher in Q2 because, as I said, 50% of this quarter has already gone, and monsoons have impacted us quite badly. But we expect that this will go down to normal levels in the second part of the financial year.
Okay, sir. And given the labor shortages, labor issues, so do you think, I mean, the way we are bidding aggressively for the projects and all, we should get to that double-digit EBITDA margin going forward and then for the future?
We think we will.
In spite of that.
Based on the order book in hand, as also the rates that we have managed to get, impacted in the increased costs and these new projects that we've won, say, about INR 4,500 or INR 5,000 crores in this financial year, I think in Q3 and Q4, these projects will take off and will contribute to an increased margin.
And so, I mean, how we are in the what is the thinking view regarding the future bidding for new projects? I mean, should we bid aggressively now that we have already bagged 4,000-plus in this financial year orders? So how are we bidding? Will we bid aggressively, or will we be much more conservative?
We are not bidding aggressively. Even in this quarter, we have not bid aggressively.
Okay. That's it. All the best, sir. Thank you.
Thank you. Thank you.
Thank you. Next question is from the line of Shravan Shah from Dolat Capital. Please go ahead.
Hello.
Yeah. Hi, Rohan.
Sorry, sir. Shravan here. Pardon me, sir.
I also was wondering whether you have a brother who's asking a question on your behalf. So.
Yeah. Sir, just to confirm, when we say that Q2 will also be muted due to monsoon, so can we see the similar kind of a margin, or it will be close to 8%-9% kind of a number?
Margin-wise, we anticipate the margin will go up because, as I said, May and June were almost total write-offs on account of elections and rain. So elections are behind us now. Labor has started, the position has started going up. So we anticipate a turnover to go up slightly. And there is some noise in the background.
Yeah, sir. Is it fine?
Yeah. It's fine. Yeah. So, and there is, in this quarter, July has been a write-off, but I think September Chhatrapati Shivaji Maharaj Terminus, also the progress should pick up substantially. So there will be an increase, but not a substantial increase in the margin. But H2, I think, will see a substantial increase.
So in Q2, then we should have a 10.5%-11% kind of a margin. So, will that run rate?
About 11% in FY25.
Yeah. So then that run rate will continue in FY26? So for FY26, how one can look at?
It should. It should because, as I said in an answer to the earlier question, we are not bidding aggressively. Our focus, which I mentioned last time, has shifted more to the private sector. There is greater demand for timely delivery, quality delivery. There are only a handful of contractors in the private sector side. The competition is less. The rates that we are able to get are far better than the government projects. So I'm quite hopeful that this run rate, which we are expecting in FY25, will continue to FY26 also.
Okay. And in terms of the revenue guidance that we maintain, so we maintain the same 20% kind of a number for 2025 and for the?
15. 15%-20%. Yeah.
For FY26 also, similar run rate can be maintained?
Yes.
And then inflow, how much more now we are looking at? So the workshop bid pipeline and so INR 4,950 crore we have received. So how much more now we can look at?
I think we can look at about INR 2,500-INR 3,500.
Okay. And the pipeline remains the same for INR 5,000-INR 6,000 crore kind of a pipeline?
Yes.
This is some balancing number I needed: inventory data, creditors, mobilization advance, unbilled revenue.
Yes. Yes. That is INR 811 crore.
Okay.
Retention is INR 327 crore, including non-current. Mobilization advance.
Okay.
₹511 crore.
Sorry, sir. Mobilization is?
₹541 crore.
₹541. Okay.
₹541. ₹541.
Sorry. INR 541. Yeah. INR 541. And unbilled revenue is?
₹764.
INR 706. Okay.
₹354 crore.
Sorry, sir. INR 354 is what?
Inventory.
Inventory. INR 354 is inventory. Okay.
Unbilled Revenue is ₹489 crore.
489 is unbilled revenue?
Yes.
Gross debt and cash is?
Gross?
Yes.
That is INR 100.
100 crore. And cash and cash balance?
Cash and cash bank balance also INR 400.
Cash balance is INR 248 crore? And bank balance is INR 456 crore?
₹456.
Yes. Okay. Okay. Got it, sir. Thank you and all the best, sir.
Thank you, sir.
Thank you very much. The next question is from the line of Vaibhav Shah from JM Financial. Please go ahead.
Yeah. Thanks for the opportunity. Sir, I wanted an update on a few basic details. So for India Jewellery Park Mumbai, when do we expect to start the work? Work will be started in about three months' time.
What kind of revenue are we targeting in the first year?
In the first?
Sorry. In FY25?
FY25, we're targeting a revenue of about INR 125-INR 150 crore.
It should be a material number in FY26?
Yes.
Okay. And sir, the second project is for Chhatrapati Shivaji Maharaj Terminus. So given the muted first quarter and also muted first two months of the second quarter, what would we be targeting for FY 2025 and 2026 from there?
We are targeting in FY25 between INR 450 to INR 500 crores. In FY26, we are targeting about INR 1,000 crores.
And sir, you were talking about run rate of around INR 100 crores per month from Kiran Nadar Museum of Art. So that is also not the case in FY26?
Yes. That will be from FY26, and as I mentioned earlier on in the call, virtually the entire design had to be revamped because the client had hired an international agency to do the concept, and they had not taken into account the local bylaws. So that has meant that we had to redo it totally, which the client has now accepted, and work has just taken off on the ground, but rains have impacted June and July, so we are, as I said, in H2, the progress would be substantial, almost to the tune of about more than INR 50 crores every month, and yes, run rate about INR 100 crores in FY26.
So this redesigning, does it impact our cost or margin for the project?
No. We've tried to optimally design the project, keeping in mind the various parameters or various items that were there in the original design. If at all, some specifications are changing, for that, the client will pay it as an extra item.
Okay. And sir, in the animal husbandry project, the execution was a bit softer in the first quarter. So earlier, we were targeting to complete by next year in the first quarter. So now, does it get ticked?
Yes. We have now almost 95% of the land because in this project, already a university existed. So by and by, they were vacating the old building, which we were dismantling, which we have to dismantle and construct new buildings. So almost 90% area has been handed over to us. So progress there also will pick up now. It's already picked up, but it will pick up substantially.
Any payment challenges from particular states given the election?
So yeah, there were challenges, but now there is movement in Bihar also. I think funds from the Centre have also started flowing. So we expect with the BASU project, with veterinary projects, funding has not been an issue till now also. But we've seen funding issues on the medical colleges and hospitals, which the feeling on the ground is that maybe in a month, month and a half time, our stuck payments should start coming in, and there is only about 10% of these jobs left, Chhapra and Nalanda, which we should complete in this financial year.
Okay. And sir, lastly, on Darbhanga and Varanasi Airport, which you have won recently, when will the work start for those two?
Both the projects designing is happening. Our interaction of our design team with Airports Authority of India has started. We hope to break ground on both the projects in about two months' time.
Okay. Okay. Thank you, sir.
Thank you.
Thank you very much. Next question is from the line of Raj Shah from Marcellus Investment Managers. Please go ahead.
Hello, sir. Thank you for the question.
Hi. Hi.
Sir, my question was regarding the labor shortage problem that you mentioned. Is it better now?
It's slightly muffled, but go ahead. I can make out what you're saying.
Okay. So my question was regarding the labor shortage problem. As you mentioned, it is a perennial problem, and it is here to stay, so the question is in two parts, so first, in our existing orders, at the time of bidding, we would have expected X cost of labor cost, and now it has been going up, so how do you make up for it? And second, for the new projects, how do you factor in this labor shortage issue?
Yeah. It's a good question. Out of the existing projects, some projects, labor factor or labor cost is definitely going up, right, has gone up. So that has impacted our margin. Labor shortage has also impacted our margin. In the existing jobs that we have in hand as a part of our portfolio, some jobs have escalation even for labor, so which are covering these costs. But some jobs do not have this labor escalation clause. So yeah, that is what has impacted our margin. Going forward, when we are calculating our pricing or doing our pricing and submitting our bid, based on the increase that we have seen over the past one year, we are extrapolating that and building that into our pricing.
That answers my question. One last question was regarding this. I heard somewhere that a large hospital is being redeveloped in Mumbai, and we have been one of the bidders over there. Can you confirm?
Hello?
Yeah. Sion Hospital in Mumbai.
Yeah. We have all we are doing phase one, and yes, we have bid for the phase two also.
Okay. And will this be a large contract, sir? So north of INR 1,000?
It is a large contract. Yes.
Okay. Okay. Thank you, sir, for answering my question.
Thank you very much. The next question is from the line of Rishi Kothari from Pi Square Investments. Please go ahead.
Hello. Thank you so much for the opportunity, sir. And I had a couple of questions. First was, in terms of the target that we are considering from public sector to private sector contracts, so how much margin difference does it make to go for a public-to-private back margin?
How much margin? There is, if all goes well, a difference of a couple of percentage points. Given today's scenario, where we are seeing increased competition in the government sector and private sector, the contracts being more complex, with high-rise buildings coming into play, with limited competition there, as things stand today, over the next one year, I feel that there should be a couple of percentage points difference.
We do have the technology and capability to execute a complex contract in private sector, right?
We're already doing it. We've done it in the past. We're doing it now.
Okay. And my second question is, I read somewhere in one of the industry reports that we as a company are also involved in the Data Centre segment. Is it true? And if yes, what exactly are we looking at?
Yeah. It is true. We are doing data centers: Adani, Google, RBI, some of the larger data centers in the country we're doing. But I mentioned in my last call that this is not a focus area for us.
Okay. So that's not a focus area eventually also?
Not really. It takes up a lot of bandwidth. We feel that the margins are not commensurate that we focus or develop this segment especially. Having said that, one or the other data centre will continue to do if it comes our way. But it's not a focus segment for us.
Okay. Got it. And in terms of the private segment, we are on the position of about around 40%-50% in between. So what's the target of getting that private sector more increase from public sector contracts? So any target that we have in the?
In the long run, 50/50.
In the long run, 50/50. Okay. Got it. Thank you. Thank you so much for the opportunity.
Thank you.
Thank you very much. The next question will be from the line of Uttam Kumar Srimal from Axis Securities. Please go ahead.
Good afternoon, sir. Thanks for the opportunity. Yeah, sir. What is the fixed price contract in our current order book currently?
24%.
24%. Okay, sir. And, sir, with 24 or 26?
24. 24.
Okay. Sir, given this order book of INR 13,000 crore, this includes the current INR 4,900 crore that we have won, or this is separate from that?
No. So this ₹13,000 crore is till 30th of June. So if you were to add these jobs of ₹2,200 crore, which will come after that, our total order book will be about ₹15,500 crores.
15,500 crore. Okay, sir. And, sir, any L1 currently where you are in terms of bidding and all? Any L1 orders?
No. Because the bids which have been won over the last couple of months, these are primarily private sector bids.
Okay. And, sir, all these biddings have been done in the range of EBITDA margin, in the range of 11%-12% or less than that, new orders that you are bidding for?
Yeah. The last three months, three to four months, yes. The EBITDA margin, that is what the target is. Yeah.
Okay, sir. That's all from my side and all the best to you.
Thank you.
Thank you very much. The next question is from the line of.
Yeah. Good evening, sir. Thank you for taking my question. So I have three questions. So the first question was, I mean, when I look at our order backlog today, I mean, we have two very large orders in our order backlog, I mean, exceeding INR 2,000 crore each. Would you say I'm more of a conscious decision of going to try and scale up on an average project size or to try and consolidate a number of sites and also, I mean, to address this labor issue that you spoke about because you won't be required to kind of spread too thin across a number of sites? Or is it, sir, that I mean, these opportunities are available, and you went for these, or I'm more of a conscious decision to consolidate a number of sites?
No, it is. It's consolidated, sorry, we want to consolidate. We want the average ticket size to go up. And this has been a conscious decision, and we've been kind of building towards it over the last four to five years. We've built in-house capabilities that an EPC company has to have or should have. We have different disciplines where we've developed expertise other than core and shell also. And that has led us to being able to qualify for larger jobs, both in the government and the private sector. So yes, it's been a conscious decision.
Sure. So in terms of, I mean, the risk profile, so how do you differentiate between, let's say, smaller order, multiple orders, wherein if one site stops, I mean, you still have three, four sites still continuing and giving you some numbers? Or do you tend to build higher contingencies when you get to have these sort of larger-sized projects? And also because of the fact that, I mean, theoretically, I mean, at least the competition also should be lower on, I mean, lower for these sort of larger projects.
There are a few factors that we focus on when we bid for a job aggressively or otherwise. If you were to track our company's growth of our company's geographical footprint, you would see that it's been a bit of an organic growth, planned growth. And we've tried to hedge our risks precisely by doing what you said, having multiple projects in a particular geographical location, right? So that is how, in each of the states that we are working in, 17 states that we are working in, we have multiple projects. And if I were to give you an example of, say, even Haryana or Gurugram or NCR, within a radius of about 15-20 km, we would be doing nearly 20 million sq ft. So obviously, the overhead can be spread. The cost can be reduced. So it's a conscious decision, yes.
There are a few steps that we take to bring that to pass. Yeah.
Sure. Sure. And any thoughts on distribution to share? I mean, we have INR 700 crore plus sort of cash balance on our balance sheet, and our operations continue to generate positive OCF, which essentially would mean, I mean, we would keep on generating more funds. I mean, any thoughts on, I mean, do we have any number in mind where, I mean, if the cash balance was to cross that number, you would start distributing? I know, I mean, we've always had giving out dividends, but then the number is still very small.
Yeah, as you know, I explained last time that the company, to build up its inherent capabilities, we're spending money by way of increased mechanization. Also, we have undertaken digital transformation exercise, one part of which is implementing SAP along with certain other IT initiatives. So all this will entail an expenditure. We are trying to make the company ready for a quantum jump, right? So albeit, we would continue to be a dividend-paying company. We haven't got beyond that.
Sure.
Direct distribution comes to the shareholders in this context.
Sir, how much are we planning to spend towards CapEx this year? And how much is already spent and shared?
CapEx.
CapEx.
CapEx.
CapEx.
CapEx INR 54 crore.
54 crores?
54.
FY24? And how much do we intend to spend over the balance nine months?
I'm sorry?
How much more are we planning to spend this year, sir? 54 is what you've already spent, right? In Q1.
We would be now spending in addition to this, we would be spending about INR 120 crores.
Sure. And just one last, I mean, small clarification. We were supposed to receive some money from Emaar towards that settlement in the month of August. So has that money come, or it is yet to come?
That date is 21st of August. So I'm not in a position to comment.
Sure. No.
But yeah, it's a signed and sealed agreement, so.
Sure. Sure. So thank you and all the very best of yours. Thanks a lot.
Thank you very much. Next question will be from the line of Mr. Sunny Roy, who is an individual investor. Please go ahead.
Thank you for the follow-up. I was just seeing your unexecuted order book, and the contribution from the hotel is only about 1.5% or 195 crore. Is this a conscious decision, I mean, not to focus on this hotel sector much, or it's just like that?
It is because what the hoteliers are doing, A, the size of the projects that are coming doesn't excite us. Secondly, the hoteliers are cannibalizing these projects. So it all comes down to scale. We feel that it takes up a lot of bandwidth. So we are not looking at this segment also very favorably.
Okay. And so lastly, given the buoyancy in the residential real estate market, don't you think this 13.7% in the residential market is, I mean, it can go much higher, or you want to keep it around this only, under less than 15%?
No, no. It will go up. It will cross 20%. As I said, the private sector, the share of the total pie will also go up to about 50%. That's what we are targeting and hoping to maintain an equal balance between private and public. So yeah, today the focus is on residential and commercial. So yeah, this will also go up.
Okay, sir. That's good to know. Thank you, sir. Thank you.
Thank you, Sunny.
Thank you very much. The next question is from the line of Kiran Jain from Abakkus Asset Manager. Please go ahead.
Hi, sir. So my question is on working capital. With big ticket size going for foreigners in the UK, are you looking at any working capital issues, or how are you planning for working capital?
No, we are not looking at it. I don't think there's going to be any working capital issues. As I said, we now focus more on the private sector. So with the demand and RERA coming into play, some of the developers that we are working with, blue-chip developers, cash flows don't seem to be an issue. And I think all the projects that we've taken on and are bidding for, they would need, as per RERA, they would have to be handed over in about three, three and a half years. So there is a robust demand for these residential units or commercial units. So I don't see a working capital issue. Plus, the reserves are healthy. So we are focused on not sort of it is virtually a zero-debt company. Whatever debt is there, little debt is there, we're focused on reducing it, not increasing it.
If that answers your question.
Understood, sir. Thank you. Yeah. Thank you.
Thank you.
Thank you very much. The next question is from the line of Vaibhav Shah from JM Financial. Please go ahead.
Thanks for the follow-up. Sir indicated that the CapEx would be around INR 175 crores for the entire year FY 2025. So this should further grow in 2025, or it may come down given the sharp growth in FY 2025?
In 2026, it will come down.
Any ballpark number around INR 120-130 crores?
It should be. Earlier on, I projected about INR 125 crores yearly. So it should be in that ballpark for FY 26.
Okay. And so secondly, out of a mobilization advance of around INR 540 crores, what would be the interest-bearing portion of it?
54%.
Okay. Okay. Thank you, sir.
Thank you very much.
Thank you very much. The next question will be from the line of Parikshit from HDFC Securities. Please go ahead.
Hi, Parikshit. My first question is on this gems and jewellery project. So I just wanted to understand, sir, who's funding this project, and is the financial closure achieved in this project?
So this is on the lines of the Bharat Diamond Bourse, the BDB project. It's a conglomerate of the gems and jewelry people. I think Vikas is connected on the line. Vikas, would you like to take this question?
You're okay. Hello? Can you hear me?
Yeah, Vikas, we can hear you. So my question was, who's funding the gems and jewellery? Because in the past, we have seen in BDB, there have been challenges because the project was funded by selling the real estate shops and other things to the members.
No, no. So this is an autonomous body under the Ministry of Economic Affairs. And the project is funded by a group of wealthy jewelers across India in India, basically based out of Gujarat, and some of them are from South. And there is some portion of equity with the government of India also. And the state government is also participating in terms of. So it's an autonomous, but it has a board. So there is a board member from the state. There is a board member from the center, and this is.
So, it doesn't involve the money coming in is not contingent to the sales of the units in the park?
No, no, no.
So irrespective of that, you'll keep getting your payment, right?
Yeah, yeah. So it is dependent on the board, how much board approves and some things there.
Okay. Got it. So my second question is on the Southern markets again, which I keep asking you every time. So we're not seeing any significant ramp-up in that market in terms of private orders. So what is the thought process right now? Because you did allude that the RERA is now there in place and looking to ramp up. So how do we see the pickup happening in the Southern markets in terms of new order flow coming in?
We've recently bagged a contract from Birla Estates, which is a company of the Kumar Mangalam Birla stable. We have a couple of private bids which have gone out. I would not name the developers. Not like to name them. So we are slowly growing in the southern market also. Our focus areas are Bengaluru, where we have a regional office, and Hyderabad.
So the issue is that, sir, since I track that sector. So what I hear from the entire supply chain of developers is that they want someone who will stick around. So in terms of business development, what kind of commitments you're giving more of a long-term presence in South now because you're making a comeback? You used to be there in the past. So how much confident the developed community is that you will stay here for long term?
That is reflected by the order that we've got now, Birla. Birla has a significant presence there. They've acquired large tracts of land, and it is one of the few corporatized real estate development companies. And we have, obviously, in the private sector, they invite you to bid. So we're bidding for three or four other large players there. We've also bid for a couple of private sector hospital projects, large projects. But from our end, we also don't want to grow indiscriminately. Given our experience there the last time that we were around, we feel that it's better to take a cautious approach. More so when our belly is full, more so when we have a healthy order book.
A question on the margin. I mean, every quarter, we talk about double-digit margins and some of the other factors impact us. Performance this quarter, there was, I think, a one-off plus most of other reasons which you gave. You also said that new orders have better margins. The competitive intensity is reducing, which is still not reflecting in margins. We used to be historically 12%-13%. We are now high single-digit. We have been like every quarter, the margins have been very volatile. Even in this year, you said that maybe you'll end up with close to about double-digit margins and next to 11%. What gives you confidence that worst is behind and either in terms of pricing, in terms of execution?
So how do you think, I mean, when do you think you'll be confident that you can say, "Now, we are there, and now probably these are the bottom margins"?
Our healthy order book, this will start reflecting in increased margins. And this is not something I'm saying now. I've said it during the last concall also. That H2 traditionally, both the margins, the turnover, the top line, as well as margin is always higher. And I had predicted what everybody had said, elections are going to impact both the productivity and the margins. That is what happened. Monsoons have also impacted our production in the last couple of months. CSMT, I mentioned the reason if you were there on the call earlier.
No, no, no. That's it.
Yeah, so all this now seems we should, in the second half of this financial year, we should have put this behind us. Labor, while the position on the ground is improving, it is always better in H2, but that will continue to be a bit of an issue in terms of because there is a skill shortage, right, but now that is something which the entire ecosystem is aware. What the contractors have been saying for the last couple of years, that this is an epidemic waiting to happen now. While we struggle with labor on the ground, this is something which the developers and the clients have realized. The government is also beginning to realize.
So the ecosystem, all the constituents are coming together to try and work together to mitigate this problem by standardizing design, by the clients also, especially in the private sector, agreeing to compensate for escalation. So all this will, we feel, yield results going forward. But labor shortage is here to stay. Let me qualify that.
This is the last question. I think you mentioned about some NCLT. We've taken a couple of clients to NCLT. I think you mentioned about INR 7.2 crores of run-off. What does that mean? So 7.2 is the number?
6.2.
Okay. And so what is the nature of this NCLT? Any more negative surprises to come in from one-offs or the rest of the order book? Or you have provided everything now?
We can't really say. What happens is that if out of the blue, a client is taken to NCLT, right? I had mentioned in my last call also that there should not be any more surprises. But this is a surprise. If there are certain clients who we feel are going to pay off, but if one or the other of their creditors takes them to court, takes them to NCLT, then we have to put this in our make a provision in our balance sheet. Some of them, in the long run, we still may feel will honor their commitments. But we have to make provisions.
Okay. Okay, sir. Sure. Thank you. Those were my questions. I missed you.
Thank you so much.
Thank you very much. The next question is from the line of Kiran Jain from Abakkus Asset Manager. Please go ahead.
Sir, just one follow-up question. The Emaar India receivables which we receive in FY 25, will it be booked as other income or how will it be recognized?
Financial Year 2024?
No, you say. JDA, where will be booked as other income?
That's only booked.
Future income. That's for telling.
That's regarding the Emaar India you are asking about?
Emaar.
Yes, yes, yes, yes. That has all in exceptional gains. That has been recognized.
Exceptional items. Okay.
That has been recognized in Financial Year 2024.
Ajar, okay. Already recognized. So there's no other exceptional items to be recognized in FY 25?
Right now, at present, we are basically that amount is INR 124 crores reflecting in outstanding. That's included in that tax, basically.
Oh. Understood. Okay, sir. Okay. Thank you, sir.
Thank you very much. The next question is from the line of Gaurav Gandhi from Glorytail Capital Management. Please go ahead.
Yeah. Thanks for the opportunity. Hi, sir. The government's efforts are towards making India a developed country. So there will be a lot of state-of-the-art construction buildings or structures will be on focus to build. How big do you think this opportunity will be? Because there is a lot of work to be done for modernizing the infrastructure. So can you share your thoughts about this? And I understand that we are taking a measured growth approach, but if conditions warrant more growth, are we looking for higher order inflows than currently projected?
I will not be able to give a specific answer. I'll give you a couple of general replies. Yes, buildings are becoming more complex. Based on our expertise of having delivered large building projects and continuing to deliver projects, we feel we are in a unique position to handle such projects. So say, for instance, we have done high-rise buildings in Mumbai. Now you see every other launch in NCR, in Gurugram especially, is a project which is in excess of 40-45 stories. So with our experience of having executed these jobs, we are continuing to build on this experience. We are continuing to take on more mechanization. And as I mentioned earlier, the digital tools that are available to us, wherein we can go to the client and offer an entire bouquet of services, we are doing that.
So yes, we are in a unique position, and we continue to develop our company to be able to handle more and more complex jobs. Does that make sense? Have I answered your question?
Yeah. And the second part was, if the conditions warrant for more growth, are we looking for higher order inflows than currently projected? I mean, we are just, I mean, more 3,000 crore orders you are expecting during the year. So if the conditions warrant for more orders, let's say 7,000, 8,000 crore, do we have capacity, or are we looking for such kind of things then?
At the moment, we are proceeding with a degree of caution, especially keeping in mind that we have a healthy order book. We feel that all the efforts that the various constituents are making of this ecosystem to overcome the labor issue, but it will still take some time, so we are proceeding cautiously.
Gotcha. All right. And just for clarity, do you think this India Jewellery Park project in Mumbai is a politically sensitive project? I mean, do you see any possibility of slow execution if the state government changes?
Mr. Vikas Ahluwalia will answer this question. Vikas, over to you.
Hi. No, this is not a political question. This is not a per se politically driven project. Hello? Can you hear me?
Yeah, yeah, yeah, yeah.
It has really no influence of politics on it.
All right.
I don't know.
Thanks. Thanks.
Like I said, it's an autonomous body, and largely the members of this body are private.
I think one of the deputy CMs pushed this project a lot, so that's why I was asking that if a slow execution of the government changes. But that's fine. Okay. Thank you.
Come again, come again. Deputy CM was? I didn't hear you.
One of the deputy CM, I think, is pushing for the project more. I mean, that's why I was asking that if the government.
Oh, that is because this project is scheduled to create at least 40,000 jobs in the area or maybe more. So that is why they must be doing like that.
All right. All right. Thank you. Thank you very much.
Okay.
Thank you very much. The next question is from the line of Parvez Gandhi, who is an individual investor. Please go ahead.
Hi. Good afternoon, sir.
Hi, Parvez.
Yeah. Thanks for taking my question. Sorry, I joined the call a little late, so please pardon if you've answered this question. Earlier, we had alluded to facing payment issues in some of the states like Bihar, etc. Now, after the election, what is our thought process about taking state government-funded projects, whether in Bihar or in other states?
Our thought process continues to be the same. Parvez, we've had this interaction before. We are wary of states which are at loggerheads with the center and are cash-strapped. That is why we do not have any new government projects in Bengal. Bihar, the project we were waiting and watching. Now, with the same government being there at the center and being a part of the state government, the fund position seems to be improving. So while over the last one year or so, we had not bid very aggressively. We did, in fact, not bid at all for state government projects there, but we are open now. So we see the position improving in Bihar. Assam has been a focus state for us. We have projects in excess of about 2,000 crores.
And the fund position there also seems to be okay, since both at the state and the center of the same government is there. So it's pretty much the same policy that we are taking forward.
Sure. And your views about bidding for projects in Andhra, especially the Amaravati Capital City?
Not a focus for us. I did mention to one of the participants who'd asked this earlier as to what our approach down south is. We are more focused on the private sector there. That also, we aim to grow cautiously. Our past experience being what it was last time around. Government projects down south are not a focus area.
Sure. And beyond the near-term issues on the margins, labor availability front, over the medium term, let's say FY 2026 and 2027, where do we expect our EBITDA margins to be?
Double digit.
Sure. Thanks.
Thank you.
Yeah.
Thank you very much, ladies and gentlemen. That was the last question for today. I now hand the conference over to the management for closing remarks.
Thank you, everybody, for participating. Whatever questions, the follow-up questions are there, so we'd be willing to take them. You can write to us. Thank you so much, and talk to you again for the next quarter. Thank you. Bye.
Thank you. On behalf of Ambit Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.