Ladies and gentlemen, good day, and welcome to the Q2 FY 2023 Earnings Conference Call of Power Mech Projects Ltd, hosted by Nirmal Bang Equities Private Ltd. As a reminder, all participant lines will be in 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 Mr. Prasheel Gandhi from Nirmal Bang Equities. Thank you, and over to you, sir.
Thanks, Steven, and good afternoon to all. Nirmal Bang Equities Private Ltd welcomes you all to Q2 FY 2023 Earnings Conference Call for Power Mech Projects Ltd. From the management team, we have S.K. Kodandaramaiah, Director Business Development, and Jami Satish, CFO. I now hand over the call to management for their opening remarks, post which we can take a Q&A. Thank you, and over to you, sir.
Yeah. Thank you. Good afternoon, friends. This is Satish. I have with me Mr. S.K. Kodandaramaiah, Director Business Development. We welcome you all to the earnings call quarter two and H1 FY 2022-2023. I'll take few minutes to update on the financial performance for quarter two and first half 2023. The performance for quarter two and H1 FY 2023 is in line with our target and continue to be healthy. The overall target set for the year is on track, and it's more likely and achievable. FGD ordering process and the project mobilization already started. Revenue booking from FGD expected to start from quarter four. The revenue from FGD, if any, will be in addition to our set overall target for this financial year. The reported total income for quarter two, FY 2023, is INR 774 crores.
This is all-time execution for Power Mech in its journey during quarter two of any financial year. The EBITDA is around INR 90 crores and PAT is INR 44 crores, whereas quarter two of previous financial year, the reported total income was INR 544 crores, the reported EBITDA was INR 63 crores and PAT was INR 27 crores. On a YoY basis, total income has shown a growth of almost 42%. With the growth of the revenue, the EBITDA has shown a growth of 43% and PAT has grown by 62%.
The revenue mix for quarter two, FY 2023, is as follows: erection business has contributed INR 161 crores, civil business, including railway, water projects, etc., contributed almost INR 367 crores, operation and maintenance contributed INR 226 crores, electrical business INR 17 crores and other income, it's around INR 3 crores. Whereas during quarter two of last financial year, erection business contributed INR 106 crore, civil business contributed around INR 223 crores, operation and maintenance INR 188 crores, electrical business INR 23 crores and other income, it was around INR 5 crores. Domestic business has contributed almost 87%, and the rest 13% has come from the overseas business. The mix between power and non-power stands at 63% and 37%.
We have seen growth across all the segments except electrical business, where the company is conscious of its growth in electrical space because of so many reasons. O&M business has grown by 21% and contributed almost 29% of the total business. Similarly, the total reported income for the first half, H1 FY 2023, is INR 1,523 crore. EBITDA is around INR 175 crore and PAT is INR 83 crore. Whereas during last first half financial 2022, the reported total income was INR 172 crore, EBITDA was INR 134 crore, and PAT was INR 59 crore. On a YoY basis, total income of H1 has grown by almost 30%, and with the growth of revenue, the EBITDA has grown by 31% and PAT has grown by 42%.
The revenue mix for first half, FY 2023, is as follows: erection business contributed INR 313 crore, civil business, including railway, water, INR 743 crore, O&M INR 422 crore, electrical business INR 39 crore and other income added INR 5 crore. Similarly, during first half of last financial year, erection business did around INR 243 crore, civil business contributed INR 507 crore, O&M contributed INR 361 crore, electrical business contributed almost INR 51 crore and other income it was INR 11 crore. During H1 of current financial year, domestic business has contributed 85% and 15% has come from the overseas business. Power sector, the revenue from power mix is almost like 62% and non-power is almost 38%.
Execution bandwidth has seen growing QoQ basis with the increase of in-house resources, manpower strength, equipment and robust order book. The company is also expecting good amount of order booking and execution cycle to improve in the, in the international market. Mr. Sajja Rohit is heading the international business, and with him, Mr. N. Srinivasa Rao, who has joined as MD and CEO for the international operations, who has joined from Shapoorji Pallonji. He's a good hand to strengthen the international operations, and the target is more on the operation and maintenance business to supplement both on the domestic and international businesses. The company is well set to execute projects now in a range of INR 750 crore-INR 1,250 crore in a quarter, and also expecting gradual improvement in QoQ basis, retaining its core competence in O&M and Mechanical, C&I.
Coming to the other line items, depreciation cost as a percentage to revenue remained lower side due to planned CapEx spending. Similarly, finance cost as a percentage and also as absolute number, remained controlled on account of improved working capital cycle and cash flow. Overall, working capital cycle still improving for the period due to change in the customer mix. Net current days, excluding cash and cash equivalent, now it's ranging around 138 to 145 days during the period. This is expected to improve further. This was around 150 days, 153 days, as on March 31st, 2022, and it was 205 days as on March 31st, 2021. So we have seen significant improvement in the net working capital days, and this is expected to improve further.
Moreover, the operating cash flow for the period stands at INR 62 crore+ , which is a positive development. The average monthly collection continued to be in the range of INR 262 crore-INR 300 crore, and this is expected to move slowly to INR 350 crore per month collection. Coming to the debt side, the gross debt and net debt remained controlled in spite of growth in the business and the robust order book increase. The gross debt stands at INR 481 crore, and the net debt is almost INR 292 crore. It has come down as against financial close to a gross debt and net debt, it was INR 320 crore. We have seen a reduction in the debt.
The order backlog for the company as included stands at INR 24,076 crores. This is including MDO. The order backlog, excluding MDO, it stands at INR 14,782 crores. Up to date, during the current financial year, the company added new orders of INR 7,445 crores. For the entire year, the company has set a target of INR 10,000 crores of new order additions. As included, the L1 status order book is around 964 crores, which is close to 1,000 crores. We need to plan for new orders of INR 1,600 crores during next four months. We are more confident we'll reach the target of INR 10,000 crores of addition this year.
The company has set strong visibility for its three years' growth because of the strong order book. Quarterly run rate is quite healthy. Quarter four of last year, we did INR 950 crore, and this year, the way it looks like, the bandwidth is well set to achieve INR 750 crore-INR 1,250 crore, so the reserves are in built. The present order book gives a clear-cut visibility for next three years. I now request Mr. S.K. Kodandaramaiah, sir, to add few more market opportunities before we get into Q&A. Thank you.
Yeah. Thanks, Satish, and thanks, Nirmal, for this, to call. That was for the fine input what you had given, for the first half of the results of the company. Satish, that was very nice of you. Coming back to some of the other developments, the business, business growth, then the marketing side, and also various opportunities and how the company will be taking forward, these opportunities. Let me give you a brief. I think on a broad basis, the order backlog, it was at the end of the last year, INR 8,854 crores, 55 crores, has gone up to INR 40,782 crores, a jump of nearly 67%.
I think this is mainly driven by the huge order, what we got from Adani for the INR 6,163 crore of 8,460 MW of, you know, IPP jobs in four, you know, plants. Now, in the segment-wise, you know, changes, you know, in the mechanical and installation business, what was INR 1,650 crore... you know, because of this Adani FGD orders, it has gone up to INR 7,796 crore. The civil, you know, the order backlog of INR 5,842 crore is more or less the same. On the O&M side, you know, it is, you know, from INR 1,244 crore, it is now around nearly INR 1,000 crore. Electrical has slightly gone up from INR 118 crore to INR 148 crore.
The business mix, you know, as Satish has said, domestic is still predominant because of the so many investments coming, particularly in the government sector, and then some investment in the private sector also. That is almost 97%, and the international business is 3% as per the balance of the backlog of the work is concerned, of INR 14,782 crores. Now, the power sector business to non-power sector, what was, we had predominantly made the growth in the non-power sector due to the shortfalls in the power sector in the last five years. It was standing power to non-power sector at 45%-50%, 41.5%-58.5%. Now, the things have changed in favor of the power sector because of these FGD opportunities coming up.
Now, the power sector business was 63%, and the non-power is 37%, at INR 9,487 crore, and INR 5,295 crore. These are the major figures as far as the order backlog and other aspects. The major orders we have received in the first half are the Adani order, as I told you, INR 6,664 crore, in a Kudgi coal handling plant about INR 191 crore, Godda balance works, which was awarded on a risk purchase basis to another contractor, INR 105 crore, FGD civil works in North Chennai, about INR 119 crore, and PEB sheds in the western region, INR 113 crore.
And then recently, we have taken some tracks and towers in the, Vedanta and also Central Railway, about nearly INR 41 crores, and one bridge repair work from Adani in the Telangana, about INR 50 crores. And more importantly, on the O&M side, there are many, jobs which were taken mainly on the repair, maintenance, capital overhauls, nearly, 50-60, packages in different plants, and these are all quick turnaround, orders. That is around INR 166 crores. Going down the line, what I can say is that, the O&M side, yes, we are handling major projects, and then, we have seen the first half, the revenue has come to about INR 422 crores.
There are opportunities we are pursuing in the Mundra, Tiroda for the renewable, and then opportunities in the, in the Odisha, 3 x 660 MW, 2 x 600 MW, then Ghatampur, 3 x 660 MW, then 1 x 800 MW, North Chennai, and, and also, a couple of other projects. And, there are, focus, as, Satish has said, Mr. Srinivasa Rao, who has come for the, supporting the, the O&M projects. The O&M side, we are trying to, give a lot of push in the Middle East. That has been seeing some uptrend in terms of capital overhauls, maintenance jobs, and, O&M job is in the pipeline.
We have already mobilized for Dangote, about nearly, about, nearly 100 crores, and that work is the agreement has to be signed shortly. And then the opportunities wise, we are also looking at non-power sector opportunities, O&M, apart from the power sector and various other sectors. And, as a input, which I have shared earlier also, the- there is a O&M component in the Adani order. After completion of the jobs, it's an additional 1,000, 200 crores, sorry, 1,021 crore. And the drinking water projects also, the... What we are handling as on today, that also will have a O&M component once they are completed. That about comes to 80-100 crores. Now, that is how we are going to further see how to consolidate the O&M business.
The major works, which is, the status of the major works are Udangudi, 2 x 600 MW, we have completed about 15% out of INR 345 crore. Buxar boiler job, 25%, around INR 176 crore. Bhusawal, we have completed almost 70% of the work. That is 2 x 660 MW, BTG, this one fuel work. Yadadri is going very well. That is a large project in Telangana, INR 813 crore. We have done 60%. Dangote is under completion, $76 million. Maitree in Bangladesh, 2 x 660 MW, that is also going pretty on a fast track basis. INR 855 crore, we have completed 75%. Ramay ampe t Canal is about 90%.
And now drinking water is getting a lot of fillip, and then the progress is pretty taken up now with the mobilization and the procurement activity started. And nearly 2,000 villages, the DPRs have been completed. And now about 3% of the work has been completed, and we hope to get a revenue of +100 crores every month in the next couple of months. And then further it can go based on the DPR's approval and the further orders regularized. Then the road projects, Hassan and Mizoram, INR 780 crores, 35% work has been completed. Now, Adani FGD, INR 616 crores, the initial orders we have received for the engineering and technological equipment on GA, on the site.
That should help us to focus on the engineering and then further ordering for the balance packages on civil, structural, mechanical, and also many of the other bought out items. The other input which has come recently is that their latest order which has come is BMRC metro project, that is a shed construction for the maintenance depot in Bangalore. That is about INR 427 crore. This we are doing it in JV partnership with the RITES, and that work also is expected to take off in this year, and some revenue will come. Now, what I can say is that the balance opportunities we are following, nearly around INR 15,000 crore in the current year, which includes the FGD packages in about 3,000 MW, for about INR 3,500 crore.
Water projects, around INR 2,500 crore in UP and other places. Railway maintenance shops, that is metro shop, metro jobs, maintenance sheds, about INR 500 crore. Railway jobs in Nellore, Surat and Kazipet, about nearly INR 1,000 crore, and about INR 6,000 crore of road projects are there. Therefore, the prediction what Satish has rightly mentioned about the future growth should be pretty strong. Now, with the current backlog of INR 14,781 crore and the L1 position about INR 960 crore, I think we are pretty well placed to reach a target of nearly INR 10,000 crore.
Assuming, with the projected turnover of INR 3,600 crore, perhaps the end of the year backlog will stand at INR 15,000 crore. I think that should give a good jump start for the revenue growth for the next year and the opportunities which will come up in the future also. Perhaps the focus will be on the FGD jobs, the infrastructure box jobs, railway work, then metro projects, because there is a lot of growth in the metro projects. And then, the maintenance jobs will come up in the FGD side also. The investment which is coming further in the drinking water schemes, almost 50% has been provided, and then a lot of opportunities coming. In drinking water also, we are pursuing many projects.
Railway, multi-modal terminals, and in material handling packages, there can be many number of opportunities. In fact, the National Infrastructure Pipeline has been a great booster for the investments. We, organization like Power Mech and many other similar organizations, have greatly benefited by these investments coming up, and this will continue to flow in the next couple of years also. That's what I can say. We should be able to maintain a sustained growth. Maybe next year, we should be targeting around INR 8,000 crore on a conservative basis, and that should be the trend in the future also. Thanks, all of you, and we can follow up with the question.
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 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. A reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The first question is from the line of Riya from Aequitas Investments. Please go ahead.
Hello. Thank you for giving me the opportunity. My first question would be in regards to, since our concentration of civil in the order book is increasing, what kind of margin profile do we look for the coming quarters?
Yeah. See, now, we have seen some improvement in margin profile, okay? So more or less this year, we are seeing this number to be continued for quarter three and quarter four, okay? There could be small marginal improvement, okay. This is a trend we're expecting going forward in the short run.
Okay. Okay. And... Hello?
Yeah, please.
In terms of working capital, well, since our execution will be higher in the next two quarters, what kind of stretch levels can we go up to?
Sorry, can you repeat?
What kind of working capital are we looking for, for the H2, since our execution would be higher?
Yeah. See, this, the receivable days, now it's ranging around like 75-80 days, okay? There could be some improvement, okay? In terms of the holistic, if you take the overall working capital cycle, now it's working around 143-145 days, okay? This cycle, we're expecting to continue, and there could be some improvement, maybe 135-138 days. That is the net current days. That's what we're expecting. The existing order book, most of the projects we have already mobilized. Normally we need two months working capital there to mobilize the project. Most of the projects we have already mobilized. For this FGD Adani project, which we have got recently.
We have got a provision for advance, which is interest-free 10%, so need-based withdraw. We'll see that this project is a self-sustained cash flow model. So going forward, it's expected to come down, the net current is maybe in the range of 130 or 135 days during the end of this year.
Okay. Okay.
Yeah, yeah.
Some of the execution, since we have a good order book right now, so what kind of execution can we reach up to? Is there any capacity constraints, like, in terms of number of people or anything like that?
Actually, no, we are adequately staffed. In fact, as on today, we are having nearly 30,000 workforce. That means total in-house. In the O&M also, we are having substantial team, nearly about 12,000 people, eleven thousand people. And then the direct labor and the indirect labor, the direct and HR and the indirect also is adequately staffed. In fact, the... As far as the staffing and redeployment of the manpower is concerned, you know, for incremental job orders, what we are getting, we have seen it. I think now Adani is going to be a major order, and then this BMRCL job, we have to take it up. And then other O&M jobs are already ongoing jobs, we are also staffed well.
This way, we'll be substantially able to fill up in the resources required, both on the manpower side and then supervision side and the equipment side. Some of the many of the jobs as we've seen, and I give the status of the work, many of these jobs is in later stage of 50%, 60%, 70%, 80% completed, and that is how this project gets redeployed. We don't anticipate any major problem in deploying all these resources, and we will be able to execute them.
Okay. So we have adequate resources in place?
Yeah, yeah.
So, all set for good numbers going ahead. Thank you.
Okay.
Thank you. The next question is from the line of Deepak Poddar from Sapphire Capital. Please go ahead.
Hello? Hello.
Yeah, yeah, yeah, Deepakji, boliye.
Yeah. Yeah. Yeah, thank you very much for the opportunity, sir, and very good set of numbers. So I just wanted to understand, first up on the execution front, now we were talking about FY 2023, and fifteen thousand crores is the order backlog we are targeting, right? And generally, in a particular year, we generally execute 38%-40% of our starting order book, right? So ideally, if I go by that calculation, we are looking at INR 5,600 crore-INR 5,700 crore kind of execution, FY 2024. So is that something that we are also kind of looking at in terms of execution level next year?
Yeah. Now, what I can say, see, there is a mix of orders where there are short duration contracts, long duration contracts, there are different type of schedules for different contracts, and that 40% norm can be there. What we can say is that from INR 2,720 crore we have achieved, we are going to achieve nearly INR 3,600 crore. That is because of the increase in some of the jobs where we are doing some materials also is included.
Uh-huh.
Many of these jobs, what we are going to do, has got some material content, particularly Adani job is there, and then this, BMRCL job also will be there. Some of the other, scheduling jobs are also. Therefore, what we can safely say is that, with the schedules committed to customer and the, resources available, we should be able to exceed at least INR 5,000 crore in the next year with a INR 15,000 crore backlog.
With a 15% what?
15, INR 15,000 crores.
Uh-huh. Yeah.
Revenue. We can exceed INR 5,000 crore of revenue next year.
Fair enough. Understood. Okay, understood. And, sir, I mean, if you see our order book, order backlog, I mean, we have seen a tremendous jump in our order backlog. Like, if you see our FY 2020 order backlog was INR 4,500 crores, right? And today, we are at about INR 24,000 crores. Obviously, it includes the MDO, which is 25 years contract. So how do we see that opportunity over next three years, if I have to talk in terms of order book backlog? Do you see more such MDO contracts coming into play for us? So some understanding, if you can provide, how do you see-
Yeah
... next three years in terms of the order book, like this INR 24,000 crore, can it go to INR 15,000 crore? So, something on that line.
Yeah, I think that is a very interesting question.
Yeah.
You see, the MDO type of jobs, you know, there is a lot of necessity in the country. For example, in Coal India, they have, they are going to scale up their production to plus plus 1,500 million tons by 2030, and from the present 7,700 million tons. There, many of the mine site handling plants, they are not mechanized fully, and MDOs are not there. And as on today, they have only done about 100 million tons, 100 million ton MDO operations, and Coal India is in the process of awarding another amount, 60 million ton. That only takes the 25%-30% of the entire MDO requirement.
Uh-huh.
And now, on the coal mining also, it is getting privatized. Lot of other players, private players also entered, and MDO is going to be an important operation. The present MDO, what we are going to do, is to take effect from 2024 end and 2025 beginning. We anticipate at least with another two to three jobs we can target it. And that is also strengthened by the fact that we are handling many similar jobs in terms of EPC and construction contracts in Kurnool, Talcher, and Kudgi, and we are acquiring a lot of expertise in these jobs. And by that time, we will be able to now start the working on the MDO and the Kotre Basantpur, and the further jobs, you know, we'll be well-placed.
Okay. So we do anticipate another two to three MDO kind of,
I think that is on a very optimistic side, at least one or two will definitely take it, because that will give a recurrent revenue generation for the 20, 30, 35 years. So I think I expect Satish also to add more points on this.
Yeah. Deepak, see, this year, INR 10,000 crore, so it will leave a good number of opening order book for next year. The order book target for the cash contracts, okay, for next year, may be in the range of INR 8,000 crore, because that will again leave a healthy order book for FY 2024. Thereafter, the MDO, KBP, Kotra Basantpur project will start. Now, the thought process is like, FY 2023-2024, we have kept a target of INR 8,000 crore and 2025, a number of INR 9,000 crore, okay? By 2025-2026, we'll see that this MDO also gets more, more materialized, and we see the ground via activity start and the revenue booking starts.
Okay, thereafter, because this project, it's been almost two, three years, so we have put efforts to get a decent, size project, after considering all the risk factors. So if all goes well, we may look one project, based upon the progress of KBP, but not immediate, because the order book is quite full. But given a chance, if we get at attractive price, we may add one more project.
One more MDO project.
Yeah, yeah.
Okay. But what you said, we are looking at order inflow of about INR 8,000 crore for next year, FY 2024.
FY 2024, we are targeting order booking of INR 8,000 crore-
Yeah.
and 25, maybe in the range of INR 9,000 crore, okay.
Similar to what we are, we are targeting order inflow this year, right? Ideally.
This year is slightly higher because of Adani, but maybe next year, we may not need INR 10,000 crore, okay?
Uh-huh.
This will leave, if I take even 36%-38% conversion, which is slightly higher side, and by the time the O&M, okay, the pie may go, may touch to, INR 1,400 crore-INR 1,500 crore, okay? If you see next three years, okay, the blended, we have got a very, clear-cut visibility and the backlog order book was INR 8,000 crore, and thereafter, INR 9,000 crore.
Uh-huh.
That will leave very good order book to execute. So I think,
Uh-huh.
FY 2026, we need to take a call, how to consolidate and where to grow and where not to grow. Yeah.
Satish, let me add a few things on this. You see, this NIP, which is going on, INR 11,100,000 crore of investments, we are seeing the benefits for the company, it will last for another three to four years, minimum.
Uh-huh.
There is a lot of investment going to come up in the private sector, in the steel segment, nearly $158 billion, and associate jobs will come, good jobs. There is going to be residual investment in the power sector to fill up the gaps for the base load operation, another 10,000 MW, CEA is planning, apart from the ongoing 24,000 MW of implementation. The infrastructure side and the rail, railways investments of nearly INR 1,000,000 lakh-INR 1,300,000 lakh overall, and every year, INR 1.5 lakh-INR 2 lakh, that is also continues to be there in the next seven, eight years.
Mm-hmm.
In fact, FGD, I mean, now the FGD investment has commissioning has been postponed to 2026. Therefore, that will come up more, also, and the new projects also where there are FGD, those jobs also will come up. Now, in the drinking water, infrastructure, roads, railways, and on the other segments, what we have done the diversification the last couple of years, we'll sustain that with better margins because of the expertise gained. And moreover, the international market, because of the variety of reasons, there was a slowdown in the investments, particularly in the Middle East. That investment is going to pick up, and there will be huge investment there.
West Africa, we have found out a good opportunity where we have started working in Nigeria, and then, you know, like Sierra Leone is there, and then Ghana, many places are there, and then Mozambique. Now, West Africa is going to be a good investment destination because of lot of growth needs, actually. Therefore, the export market, domestic O&M market, domestic infrastructure business, and then FGD residual work balance is there, balance ordering of 80,000 MW. And the drinking water, also new schemes will come up in surface drinking water also. That also we are going to participate. Therefore, there is no shortage of opportunities at least three to four years. And, as I said, you know, private investment is going to come in a big way later.
It has to follow the government investment in the steel sector, infrastructure sector, mineral, metals, and petrochemicals, various area. All these areas, we establish our presence, and that will give us a lot of leeway.
This extension of this FGD, okay, this will again, okay, opens up opportunities for next two years, okay. We can target some, some more projects, and on top of that, the, okay, the power thermal, we thought, like, there could be slowdown, but the way it looks like, there is at least a strong visibility for next five years, so this will also drop some good opportunity for us.
Yeah, yeah, yeah. That's quite interesting. But yep, I and my final small query, it's, I think we have mentioned in the past that due to our legacy orders, we are finding it difficult to improve upon our EBITDA margin. Now, assuming that by fourth quarter, all the legacy orders will get executed, so any thought process on what sort of margin uptick one can see in FY 2024 at a higher execution level and we are through with our legacy order book as well?
Yeah, see, there is high probability that the margin profile should improve, okay, which we are witnessing even quarter two, okay? There should be gradual improvement, okay. But having said that, the FGD, which is a large contract, okay, that we are expecting 10%-11%.
Correct.
Excluding FGD, we are seeing some growth in the margin profile with the, one is with the jump, with the quantum jump. Second is like, yes, some of the projects where we are losing the royalty for the PQs and all, okay, now we're quoting ourselves. That will also help to some extent to improve the margin profile. Okay.
Uh-huh.
Maybe 2024, 2025, 2024 first half, we'll see how the conversion of FGD is happening. So that will, that will the execution, we have to see in what extent we're converting and all, okay?
Uh-huh.
That will decide the blended margin.
Correct.
We are sure that there will be some improvement in margin profile, but the extent and all, we have to see, maybe six to eight months, how the FGD is getting converted.
Uh-huh. And that will happen in the first half of FY 2024, right?
No, we are expecting that to happen, quarter four, okay? If that-
Quarter four of FY 2024.
No, no. If the FGD, the billing bill, the billing is expected quarter four of this year.
Yeah.
If at all there is a slippage... See, we have kept a target of INR 3,600 crore for this year, plus some conversion happening from the FGD. If that doesn't happen, then it will spill over to quarter one of next year.
Correct. Correct, correct, correct.
So next two quarters, so maybe quarter four or maybe quarter one of next year, we'll have more clarity in terms of the conversion from FGD.
The INR 400 crore we are talking about.
Yeah, yeah.
Okay, fair enough. Yeah, yeah. Understood. Yeah, that's quite helpful, sir, and thank you so much for your time, and all the very best. Yeah. Thank you.
Thanks, Vipin. Thank you.
Thank you.
Thank you. A reminder to the participants, anyone who wishes to ask a question, may press star and one at this time. The next question is from the line of Dixit Doshi from Whitestone Financial Advisors. Please go ahead.
Yeah, thanks for the opportunity. Actually, most of my questions have been answered. Just one question, from when the MDO project will start recognizing revenue?
Sir, quarter four 2024, okay, FY 2024, okay, quarter four, we are expecting INR 40 crores-INR 60 crores of revenue booking, okay, taking the rate of INR 886 per ton, but now the rate has substantially gone up because of the escalation, okay. So that may go up to INR 70 crores or INR 80 crores.
Per quarter?
Yeah, yeah. And, 2024-2025, it may go up to INR 250 crores, and, 2026, we are expecting close to INR 400 crores-INR 450 crores.
Okay.
Yeah.
The margins in this segment will be higher, right?
Yes, sir, there is some investment and there is some CapEx. So we quoted at a price of almost like a 20%+ at EBITDA level, because there is some depreciation element also. But with the revised price, the margin profile will again improve. The price which we quoted at INR 886, today it stands at almost like INR 1,300-INR 1,400+ . So there is high probability that the margin profile may further improve, sir. We'll see how it's turning up.
How much we are going to invest in this CapEx?
It's 360 crores over 2.5 years, and it will be a combination of term loan and equity at SPV level.
Okay.
Yeah.
Okay, thank you for... That's it from my side. Thanks.
Thank you. The next question is from the line of Abhishek Poddar from HDFC Mutual Fund. Please go ahead.
Yeah, thanks for taking my question, sir, and congratulations on a good quarter. Sir, regarding this order outlook of INR 8,000 crore for 2024 and 2025, INR 9,000 crore for 2025. So if you look at this year, we had a very large order of INR 7,000 crore coming from Adani.
Yeah.
So, you know, if we'll take that out from INR 10,000 crore, then the rest of the order is about INR 3,000 crore. So I'm trying to understand that, you know, this bridge between INR 8,000 crore and INR 3,000 crore, INR 5,000 crore additional number next year.
Yeah.
Any large orders you are looking at, sir, or overall?
Yeah. No, no, I think Adani was an exception. But what I can say is that, you see, if you look at the opportunities, what we follow every year, we follow between INR 25,000-INR 40,000 crore. That is the type of a BD development various groups undertake in all the segments. And the eight thousand crores, the confidence is coming from the sustained balance ordering to be done in the FGD, nearly 81,000 MW is there. We'll try to focus on couple of those megawatts, maybe 3,000 MW-4,000 MW. Then water projects are also is there, that is drinking water projects and surface drinking water projects, and road and road and metro projects. See, for example, metro, we entered in a big way.
That is a major breakthrough what we have taken. There are everywhere, metro expansion is going up from, I think it will go up to double up the number of stations and their mileage involved, and also the maintenance shops needs and all. There we are already bidding for a couple of projects in Bangalore and other places also. Therefore, there is a mix of what I can say, traditional business in the new units, whatever is going to come up, maybe on the thermal side, and then the O&M continue to be. We are trying to enhance the profile in the O&M in the non-power sector also, and then in the international business also.
And then, in the infrastructure side, there is a combination of road projects, railway projects, drinking water projects, and then metro projects. Now, the basket has gone up, and then electrical, we are cautiously seeing where we can do, but we are not, we are not left anything, but we are recently, we have taken a job of maybe INR 80 crore also. Therefore, there is a scope for, we have established a benchmark of INR 10,000 crore. We are going to establish it. And, with more opportunities, perhaps, you know, we will be, we'll be looking at opportunities nearly, nearly INR 40,000 crore-INR 50,000 crore in the next year. To that extent, we will be focusing it, and that should not be a 20%-25% hit rate is not a challenge in all these opportunities.
Yeah. Just to summarize, sir,
Yeah.
The operation and maintenance, O&M, both domestic and international, with the orders which are going to be renewed and all, that put together itself is coming close to INR 1,000 crore-INR 1,100 crore. Plus, some of the FGD follow-up orders where we are negotiating, that may get spill over to quarter one of next year, because multiple inquiries are coming, negotiation is going on. That itself is anticipated to be close to two or three projects, maybe INR 1,500 crore-INR 1,700 crore. On top of that, last two years, we have been little slow in international mechanical space because of COVID. Now, the team is quite active. Mr. Rohit and Srinivas, look, they’re extensively traveling to see the, we can revise the opportunities. Multiple opportunities are there.
In the mechanical space in international itself, close to INR 500 crores-INR 600 crores of opportunities we have already identified. On top of that, the metro and railway, okay, we are already in discussion with multiple players, okay? We're expecting the way we did this year for Bangalore Metro. We're expecting to add one more project next year that will come close to INR 600 crores, okay. On top of that, water and STP, we had a good amount of addition. So maybe next year we may add INR 750 crores-INR 800 crores, okay, maybe two projects. And our regular the mechanical power related, it's expected to be close to INR 800 crores-INR 900 crores. So the opportunities is quite large. Okay, INR 8,000 crores seems to be 100% achievable.
Understood, sir. Sir, so if you look at, you know, your next year, you know, you're looking, guiding for revenues of INR 5,000 crore or in excess of that. So if we, you know, push a little forward and look at 2025, and given the order backlog will again increase in 2024 as well, could we look at, you know, INR 6,500 crore-INR 7,000 crore of revenue in 2025, and are we ready for it, sir?
It's quite possible, sir. The reason being is FGD itself, we need to add almost like INR 2,000 crore plus, okay? But we are well set now, okay. The quantum is large, but it's spread in five projects. So because of the supply component all, okay, it looks to be larger quantum, okay. That single contract itself, we need to execute both the supply and direction and the civil put together will add INR 2,000 crore. Yes, it's quite possible, sir. It's, it's we, we have to do that.
Understood. Sir, on the margin side, you know, if you can, little bit, help us understand, because you stated that O&M will double from here. How does that benefit the margin and this 11% EBITDA margin that you reported in 1H, how should we see that in 2024, 2025?
Yeah. Sir, I will, let's understand the margin, sir, how it works for Power Mech, okay? See, O&M, as we all know, like, this keeps higher margin compared to the mechanical, civil, and electrical pile, okay? Now, the experience been in erection, we used to work at 13%, 13.5%, but last two to three years, it has come down to 11%, 11.5% because of, the size has come down, okay. Civil, of course, we were losing 2%-3% to buy the PQs. Last three to four years, we have spent almost around up to 3%, which was a straight impact to our, EBITDA margin. But now, we are able to bid for directly, okay, so Power Mech is well sustained to bid for projects, so that can, that can be same, okay?
But having said that, railway, water, okay, and some of the civil projects, the competition intensity is a bit high, okay? Working 11% or 11.5% is, I could say, a bit of a challenge. Now, on top of that, FGD, we are expecting in the range of 10%-11%. That is possible for Power Mech, as it's been for some other players, maybe slightly low, because we have our in-house equipment, manpower, resources, and all, okay. Now, with the improvement of business and the top line, there is high probability that the margin profile should move forward to 11.5% to maybe 12%, 12.5% gradually. But what we're trying to say, sir, now FGD will play a significant role in our revenue profile, okay?
If it works at 10% or 10.5% or 11%, then the blended will again look to be 12% or, okay, 11.8%-12%. So what we are trying to say is, maybe next six months, this trend of existing margins may slightly go up, okay? And once the FGD starts, we need to see how much of margin we are able to convert, okay? So maybe next six to eight months, we'll have more clarity to what extent margin profile can be ramped up, sir. But we are sure that the existing profile should improve gradually.
Sir, the concern on FGD that you are stating, so the commodity prices have kind of softened in last two-three quarters since you have taken the orders. So there should be a tailwind only from the commodity side, at least in the FGD?
Yeah. See, what we have done in the pricing side, and we have got certain protections also from Adani Group for this job. One is that, you know, the per megawatt cost is nearly INR 23 lakhs. In fact, if you look at the pre-COVID level and other things, it has been INR 40 lakhs-INR 50 lakhs per MW. There is a quantum jump in the per megawatt cost. I think that has already been cushioned for the material. And the second aspect is that, you know, most of the contracts on the supply side, it's done back-to-back base. In terms of whatever we bill it is based on the billing, order specs, and the terms negotiated on a back-to-back basis with the suppliers, that is on the supply chain.
Therefore, therefore, in that way, we are, we are, definitely covering up the many of the risks in that, through the suppliers also. And, the other aspect is that, as, Satish has rightly said, we have got in-house capability for executing 25% of the work, 25%, 25% of the work on the site execution. That should, also help us. This is how we are structuring the SPV, and, we don't anticipate any major implications on the cost. Already the steel prices have reached the, below the, below the, peak levels what we had substantially. And, perhaps, you know, with the tie-ups, what we have made with the vendors, that protection should give us in executing this.
Understood, sir. So just one more question, last question. Regarding the Andhra project, there was a INR 60 crore stuck. Any status update on that, and when do you expect to recover this money?
The good part is now it's all been set. They've put in the budget, okay? The challenge is they have constraint of the cash flow, okay. Since few months, we are struggling that how it gets approved in the cabinet and they put in the budget. That part is completed. Now they need to release the payments, and this is not expected to happen in one single bullet payment. Maybe every month they'll show some amount, okay? We're expecting, if all goes well, December, we should expect at least INR 8 crores-INR 10 crores, and it would take at least six months to realize the entire amount, sir.
Sir, this will also help reducing this working capital days to 130-135 days you are talking about. That is also getting accounted?
No, sir, I've not taken that part because this is one line item where, in spite of our much efforts, the timelines, we don't have much control, okay?
Okay.
If this comes, it will help to some extent to improve further, but I'm talking about excluding the Andhra part.
Understood, sir. Okay. All the best, sir. Thank you. Thank you.
Thank you, sir. Thank you.
Thank you. A reminder to the participants, anyone who wishes to ask a question, may press star and one at this time. The next question is from the line of Sheena George from Geojit Financial Services. Please go ahead.
Hello?
Sir, you may please proceed with your question.
Am I audible?
Yes, sir. Yeah.
Good evening, sir. First question is, like, can you give us, like, exact... How much would be the exact amount, approximate amount?
Mr. George?
Hello.
In between, we lost your audio.
Audible. No, yeah, yeah.
Hello?
Yeah, can you repeat, sir? Sorry.
Yeah. My question is, like, for the FGD order from Adani, how is the revenue forecast for the coming quarters?
You see, the total contract is structured between 18-30 months after we individually start the kickoff dates for various projects. Now, we have started with one or two projects.
Mm-hmm.
Then other projects has to follow based on the advances what we have drawn, going to draw.
Mm-hmm.
Now we know, in a way, the first one or two quarters, the revenue will be low, actually, because engineering work has to be done, ordering has to be done. That's what Satish was telling, perhaps the revenue will start flowing from the end of this quarter, end of this year. But next year, we should be able to have substantial this one conversion on that INR 600 crores. And next two years, perhaps that should be the way we will be able to complete this major work.
Okay. So, for Q4, it is INR 400 crore, if I'm right?
No, what I can say is that, like, the two plants we have now taken up on board, other plants we have to take up because we have not drawn the advance. And then, the engineering kickoff has not started, zero dates have not started, and that is expected to start shortly. But once we start it, you know, these two projects will be in the focus. Therefore, in this year, end of the quarter, you know, it can... We don't want to give any firm figures on that, because there are many various aspects we have to project in engineering and ordering. And then, the documents have to be prepared for the site execution work also.
Therefore, that's how in the normal first 4-6 months, you know, the revenue can be low, and some revenue we expect in the last quarter.
Okay. So approximate, how much would be the amount? Any idea on that?
Yeah, it can be maybe around INR 200 crores-INR 300 crores. It may slightly go up, but it depends, sir, because we're expecting that conversion to happen in quarter four. But if at all there is a slippage, then it will go to quarter one of next year.
Okay, understood.
Yeah.
Understood. How about the Bangalore Metro order? The recent order which you got.
Bangalore Metro order is already, got it. Now, we have to sign an agreement by 25th of November. The initial kickoff meeting has taken place for INR 427 crore. As soon as the kickoff meeting starts, but revenue generation on that, we are not factored just now, but, some conversion should happen in the fourth quarter.
Yeah. It's a INR 490 crore size of the contract, and our share is INR 422 crore. And, the mobilization part already started, sir. We will be-- We'll start billing, revenue booking from, December, January onwards, sir. January, February, March, we could see INR 35 crore-INR 45 crore.
Okay. Okay, fine. Thank you.
Yeah. Yeah.
That's it, sir. Thank you.
Thank you.
Ladies and gentlemen, as there are no further questions, I now hand the conference over to the management for their closing remarks.
Yeah, Rama garu? Yeah, I think thanks, everybody. We are in a very interesting time, and a lot of expectations are also there, and we have got many things to do with the challenge of execution. But there are a lot of opportunities, and the company is well geared up for the execution model. And we have got the wherewithal, and we have demonstrated many cases where our peak enhanced estimates have to be done, we have done in the previous years also. And with the resources available and the opportunities available, I, I'm sure that the next two to three years will be quite bullish for our organization and both in the growth in terms of order booking and then conversion of the orders and also improvement in the margin.
I wish these things will go forward. Thank you very much.
Yeah. Thank you, all.
Thank you. Ladies and gentlemen, on behalf of Nirmal Bang Equities, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.