Ladies and gentlemen, good day, and welcome to the Mazagon Dock Shipbuilders Limited Q2 FY 2025 earnings conference call hosted by Nirmal Bang Equities Private Limited. 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Jyoti Gupta, Research Analyst from Nirmal Bang Equities. Thank you, and over to you, ma'am.
Thank you, Rutvi. Good evening, everyone. On behalf of Nirmal Bang Institutional Equities, I welcome you all to the Q2 FY 2025 earnings conference call with the Mazagon Dock Shipbuilders Limited Management. We have with us Sri Sanjeev Singhal, Chairman and Managing Director, Additional Charge and Director of Finance, Sri Biju George, Director of Shipbuilding, Commander Vasudev Puranik, (Retd), Director of Corporate Planning and Personnel, and Director of Submarine and Heavy Engineering, Additional Charge. Without further ado, I request Sri Sanjeev Singhal, sir, to start with his opening comments, after which we can open the floor for questions and answers. Thank you, and over to you, sir.
Yeah, good afternoon, and I welcome all the participants to this call and wish you all a very, very happy Diwali, which is just over, and the results we have published, the results have been consistent with our recent performance in the past two years. We are open to all queries which the investors and the participants may have. We can start the conference, please.
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 will wait for a moment while the question queue assembles. The first question is from the line of Amit Dixit from ICICI Securities. Please go ahead.
Yeah, hi. Good evening, everyone, and congratulations for a good set of numbers. I have two questions. The first one is that, is there any element of, you know, reversal of liquidated damages in this quarter?
As far as this quarter is concerned, there is no reversal of any liquidated damages.
Sir, when we are expecting this reversal to happen in next quarter, or I mean, when?
Yeah, two of our requests for submarine number one and submarine number five, they are still being evaluated by the Ministry and the Indian Navy. So these two decisions are pending. The timelines would be difficult to assign, but we were hopeful that this would happen in the second quarter. It hasn't happened in the second quarter. We are hopeful that at least one of them should get settled in the third quarter.
The total quantum would be around INR 400 crore?
Maybe around INR 300 crores.
Okay. That's great, sir.
300 crores is the math, depending upon what is considered attributable to MDL. So minus that would be the reversal.
Okay. Got it, sir. Got it. The second question is, is it possible to just outline the delivery schedule of destroyers, frigates, and submarines for FY 2025, 2026, and 2027, maybe?
Right now, we have three projects being executed. That is P-75 Scorpène submarines. We have already delivered five. The sixth one is on the final stages of delivery. We were targeting October. Certain issues have cropped up, so we are addressing those issues. We expect the delivery anytime before 31st December. Similarly, for Project 15, out of four destroyers, we have delivered three. The fourth destroyer again was targeted for second quarter, but last-minute issues are being addressed. So this also, we are targeting delivery before 31st December. We are looking at delivery before 31st December. The first ship of 17 Alpha, again, we are trying to deliver it by 31st December this year. So next, we will be left with three large vessels. That is 17 Alpha, three frigates, which would be successfully delivered in 2025 and 2026.
Okay.
2025, 2026, and 2026, 2027.
Thank you so much, sir. That's it from my side and all the best.
Thank you very much. The next question is from the line of Atul Tiwari from JP Morgan. Please go ahead.
Yes, sir. Thanks a lot for this opportunity and congratulations on good set of numbers. So my question is on that now that we are very close to, you know, finishing the delivery of the submarines and the destroyer, could you outline for us, you know, the potential order pipeline over next two to three years? I mean, which are in the pipeline and what is the rough quantum where, you know, we are in the fray?
Yeah, I would request my Director of Shipbuilding to outline with respect to the shipbuilding projects and Director of Corporate Planning with respect to the submarine projects. So over to Director of Shipbuilding, Mr. Biju George.
Yeah. So we have quoted for certain projects like the Next Generation Corvette, and Navy is also right now looking at the Next Generation Destroyers, which will take time even if it has not gone to the AoN. So these are the two projects which are there. So then there are small naval auxiliaries, obviously. 17 Bravo is also a possibility, but it is not crystal clear. That is a repeat order of Project 17A we are right now building. So Next Generation Destroyers, 17 Bravo would be the big-ticket items which we are looking forward maybe in the next two to three years as you, that is in the horizon which is there. But right now, as far as the yard is concerned, we have not got any firm commitment from the Navy that is going to come to us.
But Navy is considering this, and they will be processing it at the Naval Headquarters.
Yeah.
I just wanted some idea about the size also if you could share. I know the size can change, you know, but rough, I mean, what is the quantum we are talking about here?
Yeah, what we can discuss is as far as the destroyer order is concerned, the destroyer order which we are executing currently of four destroyers, this is 2011 order. This was INR 34,000 crores. So based on this, you can estimate what would be the size of the order for next-generation destroyers which are bound to be larger and after a period of almost 15 years. Similarly, 17 Alpha project, as far as MDL portion is concerned, four number of frigates. In 2015, this was INR 27,000 crores. So similar or more advanced frigates, similar number. Today, what would be the value? This is we leave it to your estimate.
Okay. That's helpful.
With regard to the submarines, Commander Puranik would intervene.
Okay. We have two, three things that are happening. One is the project for additional submarines wherein we are likely to get an order for three submarines following this project.
We are nominated for this.
Nominated for this. It's Scorpène submarines. Then we have the P-75 (I), which is where it is in a competition. We have collaborated with the German designer, tkMS, builder, and they have submitted our bid. That is, we have been declared as qualified for the, you know, tender, and but we are awaiting the government direction on that. And then after that, we have got a couple of other things which are in the pipeline. We have also submitted our quote, and we will get an order for constructing the air-independent propulsion plugs, which have to be retrofitted on these Scorpène. So, and likely which is just in thought process as of now is the replication of this Scorpène program. These are the things which can happen in the submarines.
Okay, sir. And then, if I could check for these three additional Scorpène submarines for which you are nominated, what is the rough quantum of order size that we are looking at?
The AoN value for this is 27,000, but this AoN was obtained in 2018. So this would definitely have an element of escalation by the time the and depending upon if there is what is the gap between the specifications as per RFP and finally frozen and what the specifications were at the time of AoN.
Okay. And, sir, my last one on this is that, you know, obviously these are very large and complicated orders, so they could take maybe a few quarters to, you know, come to us. So in the meantime, do you foresee a period where, you know, the current large projects kind of run over and, you know, we have a slightly lesser quantum of order book to work with for two, three, four quarters? Is that a possibility, or do you see a smooth handover from current set of projects to the new set of projects so that our revenue keeps on growing without, you know, any kind of fall in between?
Yeah, so that's a good question. So between these two large programs, we have already taken three orders from the Indian Coast Guard and also one export orders. Put this together, the complete contract, if it is they're executing, it is 31 ships. So this is basically a pillar. This is basically a pillar for the time during which a large order may take some time to mature for which production has already commenced. And in addition, we are also having the offshore projects from ONGC. Approximately INR 7,000 crores worth of projects have already been approved and orders placed on us. So these are some of the initiatives which are going on parallelly.
Okay. So you don't foresee a situation where the revenue, you know, may notice even a small dip, you know, over the next couple of years, you know, you think that the current level of revenue will be maintained and probably even in interim we will have some growth on this base?
Yeah, yes. Because the offshore projects and the ICG projects and the export order put together will be able to sustain almost this kind of revenues.
There might be a dip, but very small. I mean, it will not be a big dip.
Okay. Good to know, sir. Sir, I will come back in the queue. I have asked quite a bit of questions. I will come back in the queue. Thanks.
Thank you very much. The next question is from the line of Rahul from Aditya Birla Sun Life. Please go ahead.
Yeah, this is Rohit from Aditya Birla Sun Life. My first question has got to do with the CapEx plans, the big expansion plans that we have on the cards. Is there any improvement, any color to what exactly the capacity we are looking to add, what kind of vessels will we wish to manufacture in the future, any color on those aspects?
Yeah. So we have already appointed consultants for two major CapEx initiatives. One is recently we had acquired 15 acres of land adjacent to our existing yard. That is, it will be developed into a shipbuilding-cum-ship repair facility. So there we are intending to have a graving dry dock and other ancillary facilities which can develop for both shipbuilding and ship repairs where the new dry dock size is approximately 180 meters by around 60 meters of width. Now, we also have a land parcel very close to the Nhava Sheva region near the JNPT, which is approximately 40 acres of land. That area also we have appointed the consultant for development of that area with a graving dry dock, hard stands, etc., where we can build very large vessels because there also we are envisaging a very long dry dock of a very huge capacity.
Sir, if I understand, in a very, you know, from the way we understand it, like the number of platforms you could concurrently work is 21 currently. Once this CapEx happens, how many platforms you can work concurrently?
This CapEx will come to fruition because there is environmental clearance, there is civil works. It will take a minimum of four to five years from now for making it operational. Once it is becoming operational, we will be able to build very large-sized vessels. For example, the hard stands will be there where we can take around eight vessels simultaneously. This dry dock can be used for ship repairs which can turn around the number of ships for repair and refit. That would be the kind of operations that we are envisaging.
Right now, with the existing yard capacity, we can handle 11 submarines and 10 warships at various stages of construction. So with the additional CapEx, the capacity would be practically doubling, not only doubling in terms of numbers, in terms of size of the vessels also. Much larger vessels we will be able to handle.
So, just to understand, 10 plus 11, 10 is warships, 11 submarines, and additional should be ships only, nothing on submarines run.
Submarines.
Submarines, whatever infrastructure is being created further, this is being created for large-sized ships, and as per the requirement, whatever submarines are required, that can be handled with the same infrastructure because submarines are smaller in dimension.
Sir, but [audio distortion], the P-75 Kalvari submarine, we are under the costing stage where we have submitted the cost to, I believe, the Indian Navy. What exactly is the further progress over there?
The voice is breaking. We are not able to get you.
Sir, the [audio distortion].
I'm sorry to interrupt you, Sir Rohit, but your voice is breaking.
Can you hear me now?
Yep. Please continue.
Yeah. So my question is more on the cost benchmarking stage of P-75, the three add-on submarines. We have submitted, I believe, the quote or the cost benchmarking parameters to the Indian Navy. What exactly the stage are we currently? I mean, when do you expect this to see a final conclusion of our order?
This can happen anytime. We don't have any official intimation with regard to completion of Costing Committee approvals. They do not come to us. It is internal to the ministry. So it can happen anytime. What happened till now?
Got it, sir. Thank you. That's it from our side.
Thank you very much. The next question is from the line of Atul Tiwari from JP Morgan. Please go ahead.
Yeah, sir. Thanks a lot for the opportunity again. So, sir, my question is on, obviously, you have been doing quite well on margins. So, the current full-year margin, say on a trailing 12-month basis, I mean, do you expect to maintain it over the next couple of years? Because these margins are anyways on the higher side. So, can these margins be maintained, or we are looking at some kind of decline from here?
The normalized margin for our industry would be something around 12%-15%.
Okay. Sir, you mean at the EBITDA level or at the PBT level?
At PBT.
12%-15% PBT level. Okay, and would you be able to comment on the EBITDA level margin? Is that something you kind of mention or track?
Primarily, we are focused on the PBT.
Okay. Okay. But sir, PBT would also include some other income that you earn on your cash balance. So these margins are including that, you mean?
Yeah.
Okay. And sir, my last question is on your capacity expansion plan. And you know, so and this is a slightly futuristic question. So I mean, as you know, I can see as of now, you are completing some of the very large projects right now. And obviously, a few large projects are in the pipeline, but they may come with some delay. So you anyways have enough and probably more than enough capacity, like 11 submarines being built simultaneously and 10 warships. So I mean, does this capacity expansion plan indicate to us that you are expecting even more orders in the future beyond whatever you have outlined in your answers so far?
Definitely.
With the way you will go?
Definitely. We are looking for export orders. We are looking for commercial, and we are looking for repairs of large vessels, which currently the yard is not in a position to undertake.
So there is domestic defense orders, then domestic commercial, export defense, and export commercial. These four segments will be there for new build as well as for repairs.
Okay. But I believe, sir, as of now, I mean, your non-defense work is pretty small, right? I mean, not too big in overall scheme of things. But you expect it to grow much faster from here onwards?
We have the capability. If we have additional capacity, we can scale it up.
Okay. But in terms of tapping into that market, are you in active discussion with clients, or you are still in very initial stages? Could you comment on where we are in that journey? I mean, how quickly we could see some orders being, you know, won on non-defense side?
On non-defense side, if you have to take right now, we have to outsource it completely because right now our capacity for commercial shipbuilding is almost full. So once the new facilities come up, that is, as I told, maybe four to five years down the line, then we will have captive capacity for taking these vessels and executing it on our own.
Non-defense has offshore also.
Yeah. We have made good progress there.
Okay, sir. Okay, sir. Thank you. Thanks, sir.
Thank you very much. The next question is from the line of Gagan Thareja from ASK Investment Managers. Please go ahead.
Yeah. I hope I'm audible, sir.
Yeah, please continue.
Yeah. Yes, sir. First question is on the operating cash flow. I mean, if I look at the first half operating cash flow this year, it's negative, if I remember correctly, negative INR 300 odd crores, rather INR 180 odd crores versus a positive INR 300 odd or more crores in the same period last year. Can you elaborate on that?
These are non-consequential as far as the cash flows are concerned. By the end of the year, my debtors do not go up. So these will even out. So negative cash flows, we have significant cash balance available. Negative cash flow on naval orders primarily. So there could be some delay, intermittent delays in realizing payments.
All right. And sir, out of the total capacity of doing 21 platforms concurrently, how many are you currently executing? Is it possible to give, you know, some idea on that?
Currently, we are executing six large platforms and some smaller vessels.
Yeah, 21 vessels for Indian Coast Guard and 10 vessels, so right now, we have taken up six vessels for export.
Okay. All right. Third one, Goa Shipyard has a very sizable increase in order flow. Their annual report talks of a good execution, of a good growth execution in the coming two, three years. Is it therefore reasonable, to surmise , to believe that, you know, your income, associate income that comes from Goa Shipyard will also grow at a very healthy clip in the next two, three years?
We are not participating in the management of Goa Shipyard. Primarily, we receive the dividend, and as far as the consolidated accounts, yes, part of their profit is preserved while consolidated accounts. Yes, Goa Shipyard performs good. Definitely, it has an impact on my consolidated accounts as well.
Right. And sir, final one on the Project 75I where you are bidding with tkMS. First part of the question: when do you see the final decision? I mean, any possible idea for the timeline to be given by you? And second one, I think if I have understood it correctly from media articles, tkMS was able to demonstrate a functional AIP on their 212 platform, whereas Navantia and L&T have not been able to demonstrate a functional working AIP yet. Is that true? And if so, is it reasonably logical to believe that the tkMS platform, you know, has demonstrated requirements or NSQRs of the Navy better?
We only have information that as per MDL, tkMS has been evaluated, and whatever evaluations were to be performed, all those have been successful. Regarding balance for any other thing, we are not privy to that information. We will not be able to comment on that, including the timelines.
All right. And for the air independent propulsion, which DRDO has designed and which, you know, is to be put on the existing submarine fleet, the existing diesel electric submarine fleet, is there, again, any, you know, RFP or RFI in the works in the near future, or is this something far ahead in the future from your perspective?
This is expected anytime. We have given the budgetary and RFP has been issued. He is trying to introduce AIP during the first refit of the first submarine, which is expected in 2025. In case it doesn't happen in the first submarine, then definitely for the second submarine. So first submarine, normal refit can be there without the AIP. Second submarine along with AIP.
You know, a normal refit, if I sort of go back to your statements of the last call, a normal refit on an average works up to a third of the value of the initial order value of the submarine. With the addition of AIP, how much incremental value gets added, you know, to the refit?
Another 30%-35%.
Another 30%-35%. Okay. So basically, if a refit with an AIP comes in, it's reasonable to assume that the total refit value would be around 70%, roughly 65%-70% of the original order value. Is that?
You will take it at around 55%-60%.
Okay. All right. And again, going back to your.
These are very rough estimates. This would depend.
I completely understand that, sir. I completely.
We are static. This would be a very dynamic figure.
Yeah. Agreed. And you know, on your statements in the previous calls or previous couple of calls that as and when orders, you know, come closer to their final deliveries, you know, there is, you get a better and a more clearer view of your costs. And therefore, like you did in 1Q, there was, as you indicated, cost came in lower than what you had originally budgeted in, like to a margin expansion. Have you seen something of that sort in 2Q as well? And is it expected in the second half also?
Depends upon we have a delivery planned. Two deliveries are planned this year. Once the deliveries are done at that point of time, only we will be able to take a stock of the budget spanned out.
All right. All right. Okay, sir. That's all from my side. One final one is on commercial shipbuilding. You know, there is a lot of policy emphasis on building, you know, commercial ships under the India flag with incentives, current set of incentives being extended further down the line with additional incentives also in the works in the pipeline. And there's also a lot of work or emphasis on, you know, green shipping or hybrid shipping both in Europe as well as India. Do you therefore see yourself actively participating? Is that a large addressable market for you and one where you would be interested in participating in a big way?
Yeah. See, the order which we are right now having with a European client, with a Denmark client, is already a hybrid. So the financial assistance is now getting revised. That benefit also in the future. For example, if it's fully green, there is a 30% incentive which the government is going to give. So this green market and short sea shipping market is well alive in Europe. And they are looking to this side of the world also. A lot of shippers already have received orders from Europe in the country.
I understand that, sir. But from your perspective, specifically from Mazagon's perspective, do you see these as being material sized opportunities and one where you would want to participate?
Yes, sir.
We have provided the sea because most of the clients would like these prices, which is not what prices are what they allow. Yeah. So if it becomes a profitable proposition, we will definitely look at it.
As per your peer, they are very profitable. Cochin seems to indicate the profitability on those is actually better.
But not all clients are inclined to give like that.
Okay. All right. I'll get back in the queue for more. Thanks for taking my questions.
Thank you very much. The next question is from the line of Abhishek Poddar from HDFC Mutual Fund. Please go ahead.
Yeah. Hi. Thanks for taking my question. Sir, first regarding the PBT margin that you guided of 12%-15%, just trying to understand it a little more. So if I look at FY 2022, you know, this number comes to 13%, and 2023 was 18%, but 2024 was the 26%. And I think you had some LD refunds in 2024. First half also has been very impressive, sir. It has been about 32%. So just trying to understand how to think about the margins from here.
We have already discussed this in quite detail in the last conference call also. And we still maintain that normal project margin would be around 12%-15%. Whatever margins you are looking at right now, these are on account of completion of projects where we have been able to complete the projects at costs lower than what was envisaged at the time of getting the project. So these certain efficiencies, which learning curves which we have traversed, certain efficiencies, process changes which we have done over the years. So these would be taken into consideration definitely by the customer when we negotiate for future projects. But it will always be a game depending upon what improvements we bring in further. There could be certain positives. In case we are not able to execute it with the same efficiency, there could be slight negative also.
Understood. So sir, these are after the settlement with customers or certain provisions which we made in the books, and we reversed it based upon our understanding of the project now?
Yeah. Depending upon the completion of the project, if the costs are not incurred, then they add up to our profit as and when the ship's guarantee defect period and deferred liabilities are done.
Understood. And sir, how do you foresee this, let's say in, you know, second half of this year and 2026? Some more benefit could come in, or these benefits are mostly realized, and we will see normalized margin now?
I said in my previous reply just now that we are targeting two deliveries. So based on the deliveries, we'll be able to assess when the deliveries actually take place and what kind of deferred liabilities are pending at the time of delivery.
Okay.
So with that, we would be in a better position to assess what kind of a cost the project is finally going to end at.
Understood. Sir, second is regarding these three submarines you mentioned where the AoN is approved. So once we get the order, if you can please highlight how the execution will be over how many years and how the revenue booking will happen?
The project timelines are six years for the first submarine and then one submarine each year, so this is roughly around eight to nine years.
Okay. And should we assume a linear revenue booking, or it would be more back-ended revenue booking, sir?
Oh, it is always an S-curve. During the initial stages of the project, the initial as well as the physical progress is a bit slow. Then it is pretty steep, and towards the end of the project, again, it tapers out.
Okay. Understood, sir. Thanks. And sir, just one last question on P-75(I). Any clarity, sir, whether it will go to one bidder only, or is there a possibility of consideration of the second bidder also in the same contract?
Whosoever gets the order, he gets the complete order for six submarines.
Okay. Okay. Thank you. Thanks a lot for taking my questions.
Thank you very much. The next question is from the line of Gagan Thareja from ASK Investment Managers. Please go ahead.
Yeah. Thanks for taking my question again, sir. Continuing on the P-75(I), while you know the tkMS has been able to meet all technical parameters, I presume there was some concern raised on their financial situation.
Concern raised on?
On tkMS's financial situation, at least in some media articles. Do you see that as a matter of concern, or if at all there has been a concern around that, has that been addressed?
We are not aware of this and, as of now, the collaboration is fully on track.
All right and on the delivery schedules, you've been indicating that for six years, you're targeting one and possibly two. Now that you've moved into, you know, the second half of the year, is there more clarity on whether two is a possibility to deliver this year?
Second is doubtful. Second may spill over the next financial year.
Okay. Thanks. Thanks, sir. I'll get back in the queue.
Thank you very much. The next question is from the line of Atul Tiwari from JP Morgan. Please go ahead.
Yeah. Sir, thanks for the opportunity again. So sir, on these three submarine orders for which you have been nominated, just trying to understand the revenue recognition in a little bit detail. So actual revenue recognition that you do, it is kind of percentage of completion because these are very long, you know, execution time projects, or you have to deliver the submarine and then only you book revenue. How does it happen as execution progresses?
Percentage completion.
Percentage completion. Okay. And is there a cutoff of completion before which you do not recognize any profit on the project? Is there some kind of cutoff, or you start recognizing the profit on the project from the very beginning?
Yeah. We start recognizing the profit right from the beginning itself, depending upon what is the cost of completion, estimated cost of completion.
Okay. And that percentage completion, you follow in all your shipbuilding and submarine building projects. There is no other revenue recognition, right?
Oh, considering the gestation period, until it's a small repair project, that is different. But for any new build programs, new build programs are fairly long.
Okay. Okay.
Completion.
Great, sir. Thank you. Thanks a lot, sir, for your answers.
Thank you very much. The next question is from the line of Amit Dixit from ICICI Securities. Please go ahead.
Yeah. Thanks for taking my question again, sir. Just one follow-up. We have three deliveries scheduled by end of December. Is it possible to highlight whether these are ahead of schedule or as per schedule?
As far as submarine is concerned, submarine is as per the schedule. As far as 15 Bravo destroyer is concerned, 15 Bravo destroyer, if it happens prior to 31st December, this would be ahead of schedule. 17 Alpha slight delay is there, which is beyond control. We are already in discussion with the Indian Navy. Once the delivery is made, then we will be requesting Navy to revisit the timelines and seek concession or extension of the time.
Okay. So this destroyer is how many months ahead of schedule, sir? If it happens before 31st December?
Roughly two months.
By? Sorry?
Roughly two months.
Okay. Great, sir. Thank you so much.
Thank you very much. The next question is from the line of Jyoti Gupta from Nirmal Bang Equities. Please go ahead.
Thank you so much for the opportunity. So my question is, these three deliveries that are going to happen, how much percentage of the revenue has already been realized? Is it 90%, which means only 10% will now be reflected in the next two quarters, or is it 75% till now that the company has realized?
Basically, it is not dependent on the ship only.
We have post-delivery warranty obligations. Then the spares also have to be procured and given. Warranty obligations are there. The ship will join the fleet immediately after commissioning. So during the operation of the ship, during the guarantee period, if something wears off, tears off, we need to replace it, repair it, replenish it. All these liabilities are also there. So we have a model.
Yeah. So then, during the period before completion of our guarantee obligation, we have to dry dock the ship once and inspect all the machinery, propulsion systems, etc., and take care of any deficiency if it is there, offshore deficiency if it is there. So all this has to be factored in while booking the entire revenues. Basically, what I meant to say that at delivery, the entire revenue will not get exhausted. There is further expenditure also visible in the order.
Okay. Okay. So my next question is then the expenditure that we have had. I mean, we've seen that since the costing is based on 2011, you know, based on 2011, and the new upcoming ones will be in 2016. Of course, the escalation for a 27 could become to 32. My next question is, will the raw material cost, obviously, since we are looking at a horizon of six years, and you know the cost that we would have, apart from revenue, we would have also allocated some cost escalation as well. So and with indigenization as well, don't you think that your cost of material will actually go down for the next, you know, projects?
Whatever factors you are discussing, these factors are known to the customer also. So the net value which is negotiated, that would be taking these aspects into consideration.
Okay. All right. Okay. And sir, there is this, you know, buildup of some procurement of this, and I also see some, you know, other expenses which are project-related, which I've specifically seen happens only in the second quarter of every year. What kind of these expenses are? Are these preliminary or something to do with evaluation or survey-related? Could you please explain this?
I'm not really very sure what expenditure you are talking of, which happens only in second quarter, because we are not aware of any specific expenditure which is happening specifically in second quarter every year. I don't think any such expenditure is there.
Except for some. So there are expenses, other expenses which are project-related. What projects are we talking about here?
It is for all the projects. Each of these is a project. P-75(I), Scorpène, this is a project. 15 Bravo destroyers, this is a project. 17 Alpha, this is a project. All these are projects. The project-related expenditure, this may be the heading in the accounts. Based on granularity basis, this would be assigned to different projects. Any of these projects would have utilized certain expenditures. But by design, there is nothing in a particular quarter every year, some particular expenditure is happening. Nothing by design.
Okay. Okay. Thank you so much. I'll come back in the queue.
Thank you very much. The next question is from the line of Kayvan Shah, who is an individual investor. Please go ahead.
Now, audible? Hello.
Yes.
Yes, please.
Yeah. So I have a follow-up question on someone who just talked about the incentive schemes and all which the government has launched. So I needed to know that if these schemes are beneficial and have you till now received any reimbursement or incentive or any financial assistance for the same?
These incentives, first of all, are not applicable for platforms which are having weapons. Now, our big ticket orders are all having weapons. These are all combat platforms. So these financial assistance or the incentives are not applicable to us per se. Now, when it comes to the commercial ships, at this moment of time, our order value is significantly much lower in comparison to the major warship and submarine projects which we are handling. So not only that, this assistance will be available to us only on successful completion of the project, that too within the time frame of three years. So we have not reached there. So right now, that is not going to make any significant difference to either our top line nor to the bottom line.
Okay. Okay. Thank you so much.
Thank you very much. The next question is from the line of Rau Thakkar from NVS Brokerage. Please go ahead.
Yeah. Thank you for the opportunity. Sir, you have mentioned that the normal margin in this business is 12%-15%, but for the quarter, you have posted higher margins. So sir, for H2, do we go with 12%-15%, or do we go with the margins you have posted, sir? Because since higher value-added products, you post better margins.
What is your core query for future?
So for H2, you had mentioned for normal value products, the PBT margin is 12%-15%, but you have mentioned higher margins. So for the second half, sir, do we go with the H1 margins you have posted or better margins?
As far as H2 is concerned, H2 would be similar to H1 only. We don't expect a significant change because this is based on the current projects.
Correct. Correct. 12%-15% margin is applicable to what?
For new projects.
for new projects. Okay. Okay. So whatever you have been doing, H2, you will be able to do the same thing. But going forward, then we will have to see that whether the margins could be similar or it could be tempering up 0% to 12% to 15% as you have suggested.
Margins can be different because the project mix would be different. Right now, I'm executing three projects: 75, 15 Bravo, and 17 Alpha. This financial year, it will be 17 Alpha only. We have to determine that project mix would be different.
All right. All right. Understood, sir. Understood. Thank you. Thank you very much.
Thank you very much. The next question is from the line of Shivam Parakh from Valuewise Wealth Management. Please go ahead.
Hi, sir. Thanks for the opportunity. I wanted to know the split between our cash and cash equivalents, that is, the free cash and the advance. And second question was of the estimated revenue outlook, if you could provide some numbers on the revenue front for the year, financial year 2024-25?
Yeah. We are looking at a growth of around 10%, 10% to 12% over last year as far as the top line is concerned. And as far as the cash is concerned, we are having our own cash around INR 4,000 crores.
Okay. Sir, the advance is from the Indian Navy?
Advance, whatever is reflected in the accounts, is pertaining to Indian Navy.
Okay. So, sir, around INR 200 of free cash is with the company. So the company has a profitable business, so the free cash will be generated year over year. So does the company foresee any special dividend or any bonus in future for the?
We have already the CapEx plans. We propose to invest around INR 5,000 crores over the next couple of years. We have already placed the orders for the consultancy for these large CapEx plans. We begin fully utilizing this cash balance for capacity enhancement.
Okay. Capacity. Thank you, sir. Thanks for addressing my queries.
Thank you very much. The next question is from the line of Sachin Maniar from 3P Investment Managers. Please go ahead.
Hi, sir. Good evening. So just one clarification. I need on this ONGC order of INR 6,000-7,000 crores you have referred to, what will be the timeline for this order for execution?
Two years.
So you'll be booking, I mean, almost INR 3,000 crores over the next two years for 2025 and 2026?
Yes.
Okay. And how about the margins on this product? You said 12%-15%. It'll be similar to that, or it'll be lower in this account?
It will also depend upon the mix because these are three different projects. Each one of them has a different margin. But definitely, yeah, something around 10%-12%.
Okay. 10 to 12. Thank you. Thank you. That's it from my side.
Thank you very much. Participants, you may press star and one to ask a question.
Yes. I think we are done.
The next question is from the line of Gagan Thareja from ASK Investment Managers. Please go ahead.
Thanks. So just want to confirm, when you indicated on schedule and delays, were you referring to destroyer is ahead of schedule in deliveries currently, and frigates are delayed? Or is it the reverse? I'm sorry, I couldn't follow that.
Ahead of schedule. Destroyer is ahead of schedule.
Destroyer is ahead of schedule. Right. And sir, in terms of margins, I think apart from the revision in costs towards the finalization of final delivery of projects, you also indicated that if you're able to deliver ahead of schedule, that also creates certain cost efficiencies. So potentially, between LDs, one possible delivery ahead of schedule and also some potential cost revisions, is it therefore reasonable to assume that you have enough margin levers to perhaps sustain the kind of margins you have demonstrated in the first half of the year?
For H2, yes.
Okay.
Thank you very much. The next question is from the line of Rakesh, who is an individual investor. Please go ahead.
Hello. Thank you for the opportunity.
I'm sorry to interrupt, sir, but your voice is not audible.
Hello?
Sir, can you speak a little louder?
Hello. Able to hear me?
Hello. Not very audible.
Sir, able to hear me now?
Yes. Yes.
Yeah. Sir, thank you. Thanks for the opportunity. In terms of the expense, the cost of material and also the procurement, whatever the material which is the costing now, that can be used only for this quarter, or that can be same material can be used for the different quarter also? Because what I see is that procurement base and the report has cleared cost, it's gone high, right, in this quarter? That's the question.
It is really whatever cost booking is there, it is all based on consumption. So whatever activities are carried out during a quarter, only those costs are booked. With regard to procurement, majority of the equipment for these projects have already been procured. So not much of an impact with respect to any change or fluctuation in the prices in the market.
Okay, sir. Thanks. Thanks for the clarification.
Thank you very much. The next question is from the line of Anirudh Murarka from Continental Securities. Please go ahead.
Sir, hi sir. Am I audible?
Yes, please go on.
Yeah. I wanted to just inquire that the cash balance remaining with the company's cash on books, how we are currently using it with some sort of fixed deposits and how much interest is being fixed right now?
Right now, it is fixed deposits.
What rate of interest, sir? It's a long-term deposits or it's a liquid deposit?
Liquid deposits. One-year max maturity, one year.
Thank you, sir. Congratulations once again for a beautiful set of numbers.
Thank you.
Thank you very much. As there are no further questions, I would now like to hand the conference over to Ms. Jyoti Gupta for closing comments. Thank you, and over to you, ma'am.
Thank you, Rutvi. On behalf of Nirmal Bang Institutional Equities, I would like to thank the management of Mazagon Shipbuilders Limited for the call, and many thanks to the participants for joining the call. Rutvi
Thank you. On behalf of Nirmal Bang Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Okay. Thank you.