Ladies and gentlemen, good day and welcome to Dilip Buildcon Limited's Q3 and nine months FY 2024 conference call hosted by S-Ancial Technologies. As a reminder, all participant lines 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 call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Jill Chandrani from S-Ancial Technologies . Thank you. Over to you, ma'am.
Thank you. Good evening, everyone. Welcome to Dilip Buildcon and Q3 nine months FY 2024 earnings call. From the management, we have with us Mr. Devendra Jain, Managing Director and CEO, Mr. Rohan Suryavanshi, Head Strategy and Planning, and Mr. Sanjay Kumar Bansal, CFO. Before we proceed with the call, let me mention the standard disclaimer. The presentation that we have uploaded on the stock exchange, including the interaction in this call, contains or may contain certain forward-looking statements concerning our business prospects and profitability, which are subject to certain uncertainties and actual results could differ from those. Now I request the management to take us through the key remarks after which we can open the floor for question and answer session. Now I hand the call over to Mr. Rohan Suryavanshi for his opening remarks. Thank you, and over to you, sir.
Thank you, Jill. The results and presentation have been uploaded on the stock exchange, and I hope all of you had a chance to look at it. To start, I would like to share our perspective on industry. As per the latest CRISIL report, India will spend nearly INR 143 lakh crores in the next seven years. That is almost double we spent in the last seven years. In addition to core infra, major contributing verticals will be roads, railways, urban infra, et cetera. In a step towards this direction, the government has already increased infrastructure spending budget by 11% for the next year, bringing to a total of INR 11 lakh crores, which is almost 3.4% of the GDP. This is a testament to the fact that governments have complete focus towards improving Indian infrastructure on a long-term basis.
The timing of these planned investments could be varied due to elections or any other reasons, but we are full confident of achieving these targets for the country. The National Infrastructure Pipeline has outlined what the government is thinking, and we are excited about the opportunity that it is presenting. From a DBL perspective, as you all are aware, we are now a fully diversified infrastructure EPC company covering eight major verticals, roads and highways, irrigation, water supply, railways, metro, tunnels, special bridges, urban infra, and mining. We had embarked on this diversification journey a few years ago to make ourselves not only ready for the future infrastructure needs of the country, but to also shield ourselves from any unforeseen circumstances in a particular sector.
Due to this diversified presence, we would be the direct beneficiary of the planned CapEx by the government in the infrastructure sector, while also ensuring that our risk is spread over multiple sectors and agencies. To capitalize on these upcoming opportunities over the past few years, we have developed a very strong team, equipment banks, and the highest level of pre-qualifications in almost all the new verticals we have added over the last six to eight years. With our judicious approach in tendering, meticulous planning, and technology-backed execution skills, we are more than confident to achieve a profitable and sustainable growth journey. Our another major endeavor, which I highlighted in our previous call, was of looking at and dividing our business/cash flow into buckets, short-term and long-term. I have termed our new strategy as DBL 2.0.
This strategy focuses on strengthening balance sheet, becoming a net debt free company on standalone basis in the next two years, generating consistent and predictable cash flows, delivering a measured growth, improving ROE and ROCE, reducing concentration risk from any sector, client, or geography. All of which, we believe, will help us in building a strong company capable of handling any disruptions. Our short-term business will be our EPC business. Our long-term business will be our asset business, which currently consists of road and mines. I am happy to report that our low risk, long-term assured revenue portfolio is progressing well. This business is the coal and the road business. Our coal mining business has a potential annual revenue of INR 5,000 crores per annum for the next 25- 50 years as it achieves full output capacity.
Just to share, currently we are overachieving our targets by almost 40% by extracting 7 million tons as compared to the annual target of 5 million tons in this financial year at our Siarmal mines. At this mine for the next year, we will be doing 50% higher than our target of 10 million tons. That is, we will end up doing 15 million tons. At the other mine, which is Pachhwara Mine, we are delivering the total requirement of 7 million ton to the government. With this run rate, we should achieve a combined revenue of about INR 1,500 crore- plus in the next financial year from just these two mines. The second long-term business is the road that I mentioned.
From all the things that we have set into motion, we are expecting to get annual distributions of about INR 400 crore- INR 500 crore from our 18 road assets as we set up the InvIT, which gives us a visibility for the next 15 years of cash flow. As I had announced in the last call, we are in the process of creating our own InvIT in partnership with Alpha Alternatives. In the proposed InvIT, DBL will be holding 74% stake and the balance 26% will be owned by Alpha Alternatives. This InvIT will enable us to divest our existing and future PPP road projects with much ease and without much dilution while ensuring free cash flows in the form of distributions.
As per this agreement, Alpha is investing in our 18 road assets where we are divesting the 26% for a total consideration of about INR 1,400 crore-INR 1,500 crore. Besides this, they are also investing in warrants of the company of about INR 500 crore additional. Tentatively, in this year till now, we have received about INR 130 odd crore through just issuing warrants, 1.6 crore convertible warrants in the last quarter. We are expecting to receive another INR 500 crore in quarter four of this year which will total the year's total amount received from Alpha to about INR 630, INR 650 odd crore.
In the next financial year, we are assuming another amount in similar nature and what limited balance we are expecting in FY 2026 and these are all tentative timelines which are based on construction timelines and other deliverables. Alpha has taken rights for almost 9.99% of the paid-up capital. They have the right to exercise these warrants in the next 18 months at an exercise price which is determined by the SEBI process of INR 328 per share. For the InvIT creation, most of the initial contracts are executed. Due diligence of each project is underway and prerequisite conditions fulfillment work is nearing completion. We are targeting and are confident of creating the InvIT during FY 2025. Besides this long-term business, the current EPC business is going strength from strength while ordering in this financial year, given it was an election year, had been slow.
In the road business alone, projects worth almost INR 130,000 crore which have been floated and we expect some of them to be awarded in this quarter and over the next couple of quarters. But the visibility of those projects is very clear. With this update, I would like to hand over the call to our CFO, Mr. Sanjay Bansal, to provide insights on the financials.
Thank you, Rohan. Good evening, everyone. I welcome all our stakeholders to our earning call. Let me present the results for the quarter ending 31st December 2023. During quarter three FY 2024, the company has completed one project, that is Vepalwada to Telangana-Maharashtra Border worth INR 7,082 million. At the end of quarter three FY 2024, the company is having well-diversified outstanding order book of INR 218,429 million. Now, moving from business to financial performance. The revenue of the company increased by 8.08% in quarter end FY 2024 on year-over-year basis from INR 23,788 million in quarter three FY 2023 to INR 25,711 million in quarter three FY 2024. This is due to better execution of the projects. On EBITDA front, the EBITDA of the company increased by 27.55% in quarter three FY 2024 on year-over-year basis, from INR 2,497 million to quarter three FY 2023 to INR 3,185 million.
In quarter three FY 2024, the EBITDA margin increased on account of better execution of the projects and reduction in the construction material prices. Profit after tax increased by 19.87% in quarter three FY 2024 on year-over-year basis, from INR 795 million to INR 953 million in quarter three FY 2024. This is on account of better EBITDA margins. In terms of the milestone, the company has basically crossed network of INR 5,000 crores at the end of December 31, 2023. Let me take you through the some important balance sheet items and order book position. The company has reduced debt of INR 5,315 million during FY 2024, which resulted in net debt to equity ratio improved to 36 basis points at the end of December 31, 2023 versus 52 basis points at the end of March 2023.
The receivable also decreased to INR 13,819 million in quarter three FY 2024 from INR 16,018 million in quarter two FY 2024. This is on account of better collections by the company. Working capital days also decreased from 72 days to 67 days. This is again, because of better collection of the receivable. After this, we are on target to achieve our goal set at the start of the year. Revenue growth is in line with our estimates, 5%-10%. EBITDA margins improving. CapEx is planned between INR 50 crores-INR 100 crores. Debt reduction already done in nine months by INR 530 crores. And we will be achieving our goal set at the start of the year of INR 800 crores-INR 1,000 crores. Now, we can open the floor for the questions and answers. Thank you.
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 touchtone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets only while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants may press star and one to join the question queue. The first question is from the line of Shravan Shah from Dolat Capital. Please go ahead.
Yeah. Thank you for the opportunity and congratulations on debt reduction. That's the most important thing. Sir, couple of just some clarifications and then the questions. We are saying that 5%-10% revenue growth for this year. Fourth quarter then, at least for to achieve our 5% also, we need a INR 3,000 crore plus kind of a revenue. This quarter, we have done closer to INR 2,570 crore. We are confident that we can cross INR 3,000 crore- plus kind of a revenue in the fourth quarter.
Absolutely, sir. We are confident that we will cross that INR 3,000 crore revenue in Q4.
Okay. Also the margin now, is there still a possibility that this margin will inch up to 13%+ kind of a number? So 12.4% this, and for nine months also, it is a 12.4% EBITDA margin. Is there a possibility that maybe next year we can see a 13% plus kind of a margin?
Currently, you should take the guidance that we have given in the past only as the current number only. Whatever improvement, let us keep it in the back pocket, and if anything comes, let us hopefully surprise you on the better than setting any aggressive goals right now. Let us just assume that for now.
Okay. Devendra, so now in terms of the order inflow, that is for across almost all road companies are facing because there is a slowdown from NHAI side. Just a couple of things. How much now, so we have received just a INR 2,140 odd crore kind of EPC value in terms of order inflow. How much more we can look at in the next one and a half months? Also, how much value of projects we have already bid where bid is yet to open? How much more we are planning to bid, and if you can broadly classify in terms of which sectors, HAM or water, irrigation, metro, any other sectors.
Shravan, the orders that we have won which are till now is about a little over INR 2,500 crores-I NR 2,600 crores, the approximate orders that we have won year-to-date. We have highlighted those in our presentation as well. There are another INR 10,000 crores worth of orders in the road sector alone, which we are awaiting them to open. Besides this, I mentioned there is INR 130,000 crores of old tenders which have been floated, but obviously, it has kept on getting delayed. The government has kept on pushing the dates ahead. We are expecting some to happen this year, but then we are expecting a majority of it to happen in quarter one and then quarter two of the next financial year.
That is what we are expecting. In the other sectors, we will keep looking at it opportunistically, as you know. We do not give out numbers on that. But we are looking at it. What is the plan irrigation projects? We are continuously looking and evaluating and bidding that as well. Those are awarded by the state government, so different state governments have floated their contracts, and we keep looking at them.
Okay. In water also, are we seeing the states where already the election is over, so MP, Rajasthan, Chhattisgarh, or is there any scope even for UP also?
Yeah, huge scopes. A huge scope in this, and they are not dependent on the national elections. There's a lot of scope there.
Okay. Now definitely it's a good thing that debt we have reduced INR 500 crore plus INR 531 odd crore. By this year, another we will see a INR 300 crore kind of a reduction in the fourth quarter. Hopefully, the last time as we guided and this time also we guided that we will be net debt-free by FY 2025. But in FY 2024, how much more reduction can possible because in your opening remarks, you said that the Alpha Alternatives last quarter we were looking at in FY 2025, I think the higher cash inflow now we are seeing some may spill over to FY 2026. If you can help us with that.
Shravan, you asked a bunch of questions that I'll try and answer. If I miss out on something, do let me know. Number one, you're right. We've already reduced our debt by about INR 500 plus crore in the first nine months as we had indicated. I think that has been the big sort of challenge when outside investors and all of you guys, supporters of the company had looked at. That is what we have addressed, that we will now focus on building a lean, strong company with a very strong balance sheet. The target that you're saying about INR 800 crore plus of debt reduction will do. What that will do is that by the end of FY 2024, we will have a debt to EBITDA of about 1: 1, debt equity of about 0.25x, somewhere in that.
I am giving you ballpark figures right now, obviously, so don't hold me to exact numbers. In the next year, we are hoping to reduce it by another similar amount of what we are reducing in this financial year. That is the target. It might not be completely, but it will be as to almost near net debt, zero debt company. That's what we are kind of targeting. That's the plan. While we are reducing our debt, we're also investing in new projects as we go along. So we're balancing out between both those things and doing, but our long-term agenda b y 2026 l ike you said, we will completely be debt-free.
Our long-term focus is on that only, and that's what we're trying to do, as said that. Besides the debt reduction, as mentioned, we are also looking at dividing our business into long-term and short-term cash flows. The short-term cash flow was the EPC, which I mentioned, and the long-term is the coal and the asset business. Alpha, you asked, how is that money kind of flowing? The money that we have indicated last quarter or we're indicating in this quarter to you, how it's going to flow, is based on certain parameters of when projects are starting, when are we starting some projects, and then when are we finishing those projects. If there's any delay in any start, it will also end up delaying.
If the government dates have not come to start, it might end up delaying the ending dates. That's why as we go on an ongoing basis, we keep evaluating what are the chances of different projects and when are they starting, finishing, when will we get the clearances from the government to flip it into the InvIT, and so on. Based on those careful considerations, we eventually decide how the money flow at that point of time looks to us. This is why, obviously, this is an exercise which will keep on continuing, but you can take these as broad guidance towards how the money should flow, how the deal is looking.
For us, most important thing was building this InvIT platform, which I would have mentioned over the last quarter call as well, that the way that you thought about it is this is a platform like an Embassy and a Blackstone REIT that we want to continue building, investing in this platform and keep increasing the distributable income that will come to DBL. Not only does it give us good platform to keep flipping our assets into, but it also gives a good visibility of long-term revenue as we are already focusing on becoming a net debt zero company over the course of next year or so, in the next two years.
After that, the cash that we will be getting as a standalone business, we will be looking to deploy that opportunistically in whatever assets or opportunities that we deem best for us, which will further ensure long-term visibility of cash flow for the company.
Good. Just to understand further, InvIT, broadly, it will be by second quarter of FY 2025 we will be able to set up and the INR 400 crore-INR 500 crore kind of annual distribution we are seeing. If, let's say, this InvIT gets set up even in end of second quarter of FY 2025, then also this INR 400 crore-INR 500 crore distribution can come, or this is an annual number, so this would be a FY 2026 level one can look at INR 400 crore-INR 500 crore kind of annual distribution?
Sir, out of the 18 projects, eight will be going online now, and then the 10 will be going. This number, the total INR 400 crore- INR 500 crore, which is almost closer to INR 500 crore that will come, INR 450 crore- INR 500 crore, that will be achieved in FY 2026. Before that, it will be half of it, let's say, will come. These are fully a number that I'm talking about, obviously, the distribution income. Now, you spoke about setting up the InvIT in the second quarter of FY 2025. The endeavor is to do that, but obviously this is not just singularly dependent on us and Alpha. It is also a regulator involved, which is SEBI. Based on their comments, observations, the back and forth that goes, we can only take a best estimate.
Typically, this whole process takes about nine months, I would say. We have embarked on it, so six to nine months is the time that one should estimate for this kind of exercise. We have embarked on that journey. We are also expecting it to hopefully be done within that time frame.
Okay. In terms of the, obviously, it is great that slowly, even our working capital also, we are reducing, so 67, 68 days. We said last time also that eight, 10 days more reduction is possible. Even in fourth quarter also, we can see some further reduction is possible in working capital.
Shravan, it is already improved around seven, eight days. Further, when we will reduce the debt and we will get the more cash. Yes, there will be impact, but will be in the range of 10, 15 days in a year total. If you compare March 2023 versus now, it is already moved by five days. Further, it will improve similarly.
Okay. Major possibility would be there in FY 2025 and not maybe in this quarter, maybe one or two days are possible, but if five, 10 days one can look at, it would be possible in FY 2025.
You are right. In total, it will be 10 days reduction in the full financial year basis. Yes, three, four days, about five days improvement will happen i n the next year.
Okay, got it. Sir, whatever the pending appointed date, we have already mentioned in terms of the likely this February, March we will be getting received. Just trying to getting understanding in the sense that just because of the election, we will be getting appointed date or will it be coming even post April, May? There can be a further delay in the appointed dates, so net the revenue for FY 2025, will it get impacted by that?
Shravan, out of the total four AD awarded, three ADs we will receive this month, Urga- Pathalgaon and two packages of Bengaluru-Vijayawada, package one and package four. Package seven, Bengaluru-Vijayawada, will be received in March. Certainly, all four projects will receive the appointed date this financial year by March 31, 2024.
Okay. Lastly, broadly in FY 2025, we can still, based on this and whatever, let's say, KK, even the order inflow doesn't come fully this year, the next year, hopefully post-election it will come. We can see 8%-10% kind of revenue growth in FY 2025. That's the way we are targeting?
Sir, right now the order book that we have gives us enough visibility for the next year. In fact, almost for the next one year, then three, four months. I mean, 1.5 years. When you look at a pure back of the envelope calculation of revenue and order book remaining. So next year we don't see any challenge. Our growth target that we have given is between 5%-10% is what we had indicated. Based on that, only we have built everything on back. As we mentioned earlier as well, our focus right now is not on any kind of aggressive growth that you would have witnessed with us in the years of 2016, 2017, 2018, where we were focusing primarily on growth, and a lot of that growth was also getting fueled by taking our external capital for equipment and et cetera.
Our focus now is we're not doing CapEx. Earlier we used to do CapEx of INR 500 crores- plus every year in equipment, and we consistently kept on doing that. But now we have brought it down to less than 20% of that. So it's INR 50 crore- INR 100 crore CapEx only per year. Hence, focus is on measured growth, which focuses on cash flows improvement, focuses on improving ROE, ROCE. Those are the kind of focuses that we've taken. Debt reduction, that is the focus that we have. Because obviously our business model is doing everything on our own, using our own equipment and people, if we are focusing more on that, and reducing our costs and controlling them, improving asset turns, then we won't be focusing so much on growth.
Because to get that higher growth, you need to invest again in CapEx, which we are not looking to do currently.
Okay. Got it. So it's the similar 5%-10% kind of a growth one can look at in FY 2025 also. And the CapEx are till nine months we have done INR 104 odd crores. So, INR 20 crore, INR 30 crore more one can expect in the fourth quarter? Or is it mostly done in the nine-month CapEx is the full-year number?
Yeah, maximum I expect another 10, 15 crores which comes or something like that, we can account that. Yeah.
Okay. Thank you and all the best, sir.
Thank you very much, sir.
Thank you. Participants may press star and one to ask a question. The next question is from the line of Narendra from RoboCapital. Please go ahead.
Yeah. Hi, thanks for the opportunity and congratulations on all the positive things that are happening in this company. My first question would be regarding your other expenses. Is there any one-off or is this a steady state rate for other expenses?
Sorry. I could not hear you. Can you repeat the question again, please?
Am I audible?
You are asking about other income or other expenses?
No. Other expenses.
What is the question, please?
Is there any one-off in that or is this the steady state thing that we can expect going ahead?
Hello. Just one second. I am just asking my team to listen to what the question that you asked, whether it is a one-off. Any other question that you have till then? Till the time my team is looking into that, what you asked, what number exactly is that.
Yeah. Okay. I will ask my next question. Last call you had mentioned that you are also expecting to reduce your depreciation amount. So any outlook on that and how much saving can we expect in that thing?
Last quarter we looked to reduce our depreciation amount.
Yeah. We had a target to reduce our depreciation too. Is there any outlook on that?
Depreciation amount, because we are not investing in new assets, I think that automatically that depreciation amount will keep on reducing as that keeps going down and down as per the accounting standards. So I think maybe you are indicating towards that.
Okay. Got it. The other expenses part?
You are referring the total other expenses or specific one item?
No, I am asking that is there any one-off in that or—
There is one-off of INR 10 crore-INR 12 crore. That's it.
Okay. Got it. Thanks. That was it. All the best for your future.
Thank you.
Thank you. The next question is from the line of Sanika from Sapphire Capital. Please go ahead.
Hi, sir. Actually, I want to ask since we are on a debt reduction strategy, going ahead, what kind of interest rate can we expect, especially in Q4 and FY 2025?
Thank you, Sanika, for your question. The interest rate will move basically in the range of 9%-10%, because we have a large consumption and we are trying with every lender to reduce the interest rate. This is our significant positives. There will be reduction in near future.
The finance cost can be in the range of?
9%-10%.
Okay. Thank you.
Thank you. We are looking to improve from our current rating, which will be a slight improvement. The idea is to also improve the rating of the company, which also the company has started that process as well. As both those things, the external thing and as the negotiation with the bankers continue happening, we are looking to do that. But obviously, as you may understand and imagine, it is an ongoing process, an iterative process. And it is a large consortium. It requires the approval of everyone involved.
Thank you. Sanika, ma'am, you have any more questions?
No.
Thank you. The next question is from the line of Prem Khurana from Anand Rathi. Please go ahead.
Yeah. Hi. Thank you for taking my questions. Am I audible?
Yes, sir, you are audible.
Yeah. My first question was with respect to one of the press releases that were given out on 8th of February. This pertains to some notice of claims with the invocation of arbitration. I assume this is with respect to the asset that we sold to Cube Highways. Would you be able to share some more on this and what exactly is this matter?
This is in regards to a claim that Cube Highways has actually filed against us. Obviously, it is in regard to the three assets that we sold to them. We were quite surprised by Cube Highways sending us that. Obviously, we have sent them a counter-claim. The thing was, Cube Highways is already arbitrating against the government meaning NHAI, against the wrongful deduction in the annuity payments that Cube Highways had. Government has claimed some deficiencies in the maintenance of it, which is what Cube Highways is contesting. Obviously, maintenance of any of those Cube Highways assets is not part of our sort of agreement with Cube Highways. They are maintaining it on their own.
Given that it is a maintenance issue and they are already in the courts against the government, and they have also gotten some kind of initial stay or something like that, I think they are also in receipt of that. To send it to us was a little surprising. If you look at, we as a company, we are already managing more than 30 + assets for Shrem InvIT. In all those assets that we are doing the maintenance, we have not ever had any deduction of any annuities, ever. There has never been any maintenance issue or anything else that has happened. These are not just assets geographically located in one state. They are in different states across the country, and it involves both national government assets and state government assets.
They are including their liability.
We are very confident whenever we have done O&M, and there's a certain way of dealing with the government, maybe Cube, because they are new in the O&M space and the asset bank space, maybe they have faced certain challenges. And they've diverted their responsibilities wrongfully towards us. But we are fairly confident that we because you can't be claiming to the government on one hand that the government is wrong in terms of deducing payments and they're entitled to all, while also saying on the other side that it is our responsibility. Basically, you can't be on one side saying heads is also mine, and tails is also mine. That's what's basically happening in this case.
No, completely agree. But do we have any payments due from Cube? I realize that you've received a large part of the payment, but generally in most of these cases, you tend to have some of these deferred payments linked to some GST, Change in Law and all.
We don't have anything outstanding from Cube.
Everything is recovered, yeah, right? Sure.
Yeah.
On the prospects pipeline that you spoke about, INR 130,000 crore. Would you be able to kind of break it down into how much of this would be EPC, how much HAM and BOT? Given the fact that by next year, maybe it would be as good as a zero debt company, would you be willing to go and explore BOT toll? Because there, I'm assuming, the competition will be a little lower than compared to EPC or HAM. Would you be willing to go and explore BOT toll once the balance sheet is de-levered?
So, sir, the first breakup between those projects in that INR 130,000 that I spoke about, it's about 20-odd percent is EPC and the rest 80% is in PPP. About INR 1 lakh crore of PPP projects are there in that breakup. For the second thing that you spoke about, whether we would be open to BOT, of course, we are open to BOT, as is HAM projects. We are completely open. As we are getting lighter, we have no problem. Along with our own balance sheet getting lighter, we also have a partner here who's also willing to invest and grow that pie of the investment that they're going to be part of. So we have all sorts of options open to us. We evaluate all projects individually on their own merits. In the past also, we have done BOT toll projects.
One of which was our Guna-Biaora project, which was on NH3 or Agra-Bombay Road, so it was part of that. That has done very well for us. While obviously we've divested that to Shrem, and it's a good part of the portfolio. Even now in future, we will be continuing to evaluate projects wherever we feel the traffic numbers justify the economic cost of building the project. We see enough safeguards built in for the long-term traffic sort of comfortability that you need.
Sure. In the InvIT you are planning to create, would have mandate to kind of acquire any sort of PPP projects, right? It is not restricted only to HAM. You are comfortable, but I am not sure about Alpha Alternatives and whether they would be comfortable with BOT or not. So, if you have any mandate in place wherein it restricts the asset addition only to a single category, let's say HAM, or is it open and you can consider BOT as well?
Sir, it is open-ended. We are looking both Alpha and us. We are people who have taken a call on evaluating opportunities as they come. As long as they are meeting our hurdle, IRR hurdle, we will be open to looking at them. We have no other sort of hiccup or restriction on any of that to not look at something. We are open to buying it from other players. We are open to look at both BOT and HAM.
Sure. The fact that the balance sheet has become very light now, and it is supposed to go lighter even further. Any thoughts on accelerating growth and in between, because we want to conserve cash, the idea was to delever. We went a little slow in terms of growth. Even this year, we are 58 %-odd sort of number in terms of growth. Could you think of accelerating and would that need you to kind of invest more in capital or other equipments or, let's say, working capital? What should be the ideal number when you are looking at growth? I am sure you will not settle for 58 %-odd , and the idea would be to kind of grow better than that number for sure. Any thoughts there?
Sir, our focus is on free cash flow that the company is generating at the end of the day. That is my biggest focus currently. That is our biggest focus inside the company, that we want to make sure that we get that. When it comes to, if you speak about why the growth and everything, growth is always based on, A, the company's own current stance, which is an internal factor, and the external factor, which is how the external market, the opportunity from the government is looking. In our case, I am sure since you follow the sector very carefully, the road sector has seen a lot of competition of late. When you look at from 2014 - 2019, the average number of bidders in any bid would be about six or so, six to eight.
We didn't find more than that in that era because all the earlier 12 companies had gone bust. All of us younger guns, whether it was us or any of our peer sets who are in the listed space currently, all of us had a good run at that time. Currently, the number of bidders in the road sector has increased quite a bit. If you look at it in the last years, the number of HAM projects that have been won by the smaller players has been actually two-thirds. A lot of the smaller players have come in. You don't want to chase growth at the expense of your profitability and at the expense of your cash flow.
Our idea is that when we started diversifying a few years ago, we knew that sooner or later, this is an industry which suffers from the same issues globally. We wanted to make ourselves more resilient to such shocks. We wanted to be able to be operating in different areas. Wherever we find good opportunity, take those opportunity. That's how kind of we've done this. If you look at our peers as well, they've also struggled to build order books currently because they're primarily focusing on a single sector or a certain geography, maybe, primarily. All of those study of people who've consistently remained in this road sector must be affected. All of them are also facing those challenges far more than us. At least for us, what's good that has happened is because we diversified much ahead of the pack.
We built teams in all those sectors that we diversified. We built capabilities. We built the required credentials. We did all those things, equipment bank. We are in a good strength, and that's why we are evaluating projects across geographies, across sectors. That's what's most concerning for us right now. Chasing growth as and when the opportunity arises, when you see that, oh, this is the right opportunity to strike, or if you find a new project which really excites us and we get it at the right place, sure, we'll do that when we get the right opportunity. But the idea of growth dictating every of our strategy is not there anymore. We were probably, as a young upstart, my father and Devendra both are first-generation entrepreneurs. Both of them came from very humble middle-class backgrounds.
For them, when they were growing the business, the idea of big diversified business, a listed business, growing size, with it in different sectors and geography was a sexier idea at one point in time. As we have gone through our own journey, and they've gone through the journey as a company, as entrepreneurs facing the shocks of COVID, there were certain realignments of things that we felt of how we want to sort of go forward and what we want to do. That is basically why we have identified how we want to take forward this company. Those are the metrics that we are currently focusing on. Measured growth is the focus, not aggressive stance on growth. Any opportunity comes, we look at it opportunistically, but it's not dictating our overall strategy.
Sure. I have two more. May I, please? Both are bookkeeping sort of. One is, we have some exceptional gains during the quarter. What's the tax implication of this exceptional gain? How much would be the number in our tax for the quarter, which would pertain to this exceptional gain? Second is, I'm not sure if you gave any inflow guidance for the FY 2024. You spoke about some of these tenders kind of getting bid out in Q1 or Q2. Do we have any target for this year? It's been only around INR 2,600 odd crore .
The exceptional gain, basically these are the long-term capital gains. The long-term capital gain rate, that is 10% plus the surcharge will be applied, but we have passed capital loss. There will be no cash outgo very significantly.
Okay.
The second for the order book, originally, we had targeted about INR 8,000 odd crore of order in this financial year. Till now, we've only gotten about INR 2,600 crore . As we mentioned, there are some projects which are still awaiting to be opened up. I can't finally say how much will open and how much do we end up getting this year. Our order book is still, as I mentioned, 1.75 years of still forward-looking. We have enough visibility for the next year and for majority of the year after as well.
Sure. Thank you. Thank you for taking my query and all the very best for future.
Thank you.
Thank you.
Thank you. The next question is from the line of Vishal Periwal from IDBI Capital. Please go ahead.
Yes, sir. Thanks for the opportunity. Sir, on the footnotes, there are a couple of clarification if you can provide. One is like in the Shrem units that we have sold, is this the first such transaction we have done or have we done this before also?
This is first time we have sold certain units, around 10 million units we have sold. This is first time.
Okay. And will it be fair to say it is more of opportunistic point of view or any such things planned to the parties to whom we have sold in maybe on FY 2025 or anything that you can provide a color?
This is opportunistic sale, we were getting good price and the units were free. Basically, and the other side, we are reducing the debt also. The idea is to basically capitalize everywhere. This is what, and this is completely opportunistic sale.
Okay. Is it like two individuals or institutions here? I think without naming it.
Majorly it is one institution. It is a global institution which has bought it.
Great, sir. Secondly, I think there is one more footnote wherein you mentioned that incurred a loss of some amount. Is that fair to understand the total amount received is something like INR 57 crore or INR 67 crore? Loss is like INR 44 crore. Something like we have done this transaction on a price to book basis at around 0.6 x. Is that fair to understand that?
No, actually, we just sold total 10 assets to Shrem Infrastructure. Out of 10 assets, in one asset, while transferring 51%, there was a loss of INR 40 crore. That is because only there are valuations model, and on second closing, there are adjustments in terms of the agreed mechanism of valuation. That is why it is loss. It is not 0.6 x or so. The overall deal multiple is more than 1.4 x.
Okay. So basically it is not for one particular project one should look, it is a portfolio, and the deal has concluded on December 31. So maybe like in combined total, this is the probably that you have booked.
No. So the asset is transferred one by one. So once we receive 49% approval from NHAI, we transfer. After collection of first annuity, the 51% goes. So yes, on overall basis, on 10 assets basis, the multiple is 1.4x plus. However, in this asset, specifically, 51% transfer, there is a loss of INR 40 crore. So including this INR 40 crore loss, still the total valuation is 1.4x of the total investment.
Got it. One last thing, I think you probably would have covered this in previous calls. In the coal mine, when we do extraction and we are probably doing INR 1,500 crore in FY 2025, what sort of margins that we can make? As the mining increase, in terms of the million ton increase, does the margin also expand?
We are expecting margins of around 20% in that business.
Okay. So that's a kind of peak probably like of INR 1,500 is at 20%, that's what you're saying?
Yeah, we're looking at in that at on an EBITDA basis.
Sure, sir. Got it. One last thing, I think you did mention initially that short-term is construction business and long-term is asset ownership business. So in terms of asset ownership, any sector that you have probably looking attractive to you or probably anything that you're hearing from the street that you will venture going ahead, anything that you can provide a color will be helpful, sir. That's all from my side.
Currently, the two sectors that we mentioned, focusing on that. Other sectors that we might be looking at would not be right to speaking about our strategy over the call. But yeah, we keep on evaluating, like I said, on an ongoing basis. If anything starts for us, we will obviously share with all our lovely valuers such as you once that gets executed.
Sure, sir. Thank you very much.
Thank you. Participants are requested to restrict their questions to two per participant. If you have a follow-up question, you can rejoin the queue. The next question is from the line of Manisha Agarwal from Middlecon Advisors. Please go ahead.
Hi, sir. Actually, I joined the call a bit late. Just one bookkeeping question. What is the trajectory of our interest cost going ahead?
Manisha, it will keep on reducing as our debt keeps on reducing. The trajectory of the interest cost will also keep on reducing. In totality, it will keep on reducing and as also we negotiate better terms with the banks, given that the outstanding liability would have reduced quite a bit. Both those things should have a positive impact.
Do we have any target going forward for FY 2025 or FY 2024 in terms of finance cost?
In terms of the interest cost, so interest cost is between 9%-10%, but there are other items like the infra business requires a lot of non-fund-based limits. It is not just 9% on the fund-based outstanding. Yes, there will be a reduction in the interest cost in absolute terms and in terms of the interest rate on fund-based facilities between 9%-10%, and we are continuously negotiating with the lenders to reduce the interest rates.
Okay. Thank you, sir.
Thank you. The next question is from the line of Vaibhav Shah from JM Financial Limited. Please go ahead.
Thanks for the opportunity. Sir, we mentioned that we have received approval from the authority regarding the Change in Law GST for three assets. The claim amount is around INR 209 crores. Against that, we have booked an income of INR 64 crores. When do we expect the actual cash to come in?
Sir, can you repeat part of the question again, because you are not very clear with me.
Yeah. We have booked the present value of the claim amount of INR 209 crores pertaining to the three assets that we have sold to InvIT. When do we expect the actual cash to come in under the different consideration?
Sir, basically, the INR 209 crores, which is a total receivable to the SPV, and SPVs are already sold to Shrem InvIT, so they will be receiving till the time all entities are not paid. But between DBL and the Shrem InvIT, they will be discounting all the Change in Law on the financial model valuation model. For DBL, the value accrues to INR 64 crores.
So that INR 64 crores will be receivable when? Or we have already received the amount?
We will be receiving this amount in near future.
Okay. Sir, secondly, when do we expect to receive the balance amount of the warrants, 75% warrants?
As per the SEBI rule, the investor can subscribe the shares within 18 months from the first subscription, which is December 21, 2023. From there, they got 18 months. So balance money, as per SEBI guidelines, comes after 18 months from December, but the investor may invest even earlier.
Okay, sir. We factored that around INR 500 crore, INR 600 crore we are expecting from Alpha in FY 2025. Are we factoring anything from that front or that would be expected in 2026?
No. It is from our 18 assets, 26%. From first eight assets, the first INR 500 crore will be coming, and from another 10 assets, 26%, the other money will be coming. This INR 400 crore is not included in FY 2025.
Okay. Sir, what is the tax rate that we can expect in 2025 and 2026?
As Rohan updated you during this call, we are targeting FY 2026, March 31, 2026, net debt zero.
No, I am asking about tax.
Okay, tax rate. The maximum slab there is 35%.
Okay. Lastly, for the initial 19 assets that we are under deal with Shrem and Cube, what is the amount sitting in our balance sheet as of third quarter?
At the end of the third quarter, there is only one asset pending to be transferred, which is Pathrapali-Kathghora, 51% to be transferred. We will be receiving around INR 42 crores against that transfer.
Our investments and loans in the books are for the current portfolio now, apart from that amount for Pathrapali.
Pathrapali, the exact invested amount, I will just check in. It is around INR 18.2 crores.
Okay. Apart from that, there is nothing for the other 19 assets that we already sold or are under the process.
With the transfer of 51% in Pathrapali-Kathghora, the entire 19 assets will be transferred, completed.
Okay, sir. Thank you. Those were my questions.
Thank you. The next question is from the line of Shravan Shah from Dolat Capital. Please go ahead.
Sir, just a clarification. You mentioned that in other expenses, there was a INR 10 crore-INR 12 crore. What was this related to? Hello?
We will look into the details and get back to you, Shravan. M y team will ask further detailed things. Look into it and get back to you.
Okay. Got it. Sir, this 35% tax rate at that P&L level will be there for FY 2025, FY 2026 also, the same rate will continue or we will be moving to 26% tax rate in 2026?
No, we will continue with this rate only because I think we still have some outstanding tax.
MAT.
MAT credit available with us.
Okay. DBL Infra date as of December is how much?
It's the same as it was the last quarter, INR 675. It's the same. We haven't drawn any more money there. We are in fact looking to reduce that also.
Okay. Sir, previous two participants have also asked, so we are just trying to figure it out in terms of the finance cost in terms of absolute level. This quarter was INR 129 odd crore. By end of this year, further whatever INR 300 odd crore the debt reduction and next year also we are looking at INR 800 crore kind of a gross debt reduction. In that scenario, in FY 2025 at finance cost level and how one can look at how much more reduction. This year will be a INR 520, INR 530 odd crore. Will it reduce by INR 130 crore, INR 150 odd crore at least minimum? That's the way we are trying to understand.
We expect that it will reduce at least by INR 100 crore of whatever financial cost will be this year. It will reduce by at least INR 100 crore even on the conservative side.
Okay.
I don't want to give this outstanding thing, but it will on a very conservative side. It should be a different high number, but always on the conservative side, it should reduce by that much at least.
Okay. Got it, sir. Thank you and all the best.
Thank you.
Thank you. As there are no further questions from the participants, I would now like to hand the conference over to Mr. Rohan Suryavanshi for closing comments.
I, on behalf of the whole DBL team, would like to thank all the participants for coming and asking questions about the company. As always, it was my pleasure to be able to share our journey until now and our thought process going forward. I look forward to seeing all of you guys on the next conference call. At the end, just wishing all of you guys a very happy New Year in advance, and hoping that this year may be the best year for all of you guys. Thank you.
Thank you. On behalf of Dilip Buildcon Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.