I now hand the conference over to Mr. Prasheel Gandhi from Nirmal Bang Equities. Over to you, sir.
Thanks, Renju, and good afternoon to all the participants. Nirmal Bang Equities welcomes you all to one FY 2023 annual conference call for Power Mech Projects Limited. From the management team, we have S.K. Ramaiah, Director, Business Development, and Mr. Jamie Satish, CFO. Without taking much time, I hand over call to management for opening remarks, for which we can take for Q&A. Thank you, and over to you, sir.
Yeah, yeah. Thank you. Good afternoon, all. This is Satish, and along with me, I have Mr. S.K. Ramaiah, Director of Business Development. We welcome you all to the earnings call quarter 1, FY 2022-23. Let me take first to the financial highlights of first quarter 2023. Performance for quarter 1, FY 2023 continued to be healthy, in line with overall plan set for the company. The reported total income for quarter one, FY 2023, is INR 749 crores. Where EBITDA is INR 86 crores, and the reported PAT is INR 39 crores. Whereas, quarter 1 of previous financial year, the reported total income was INR 628 crores, EBITDA was INR 71 crores, and PAT was INR 31 crores.
The revenue mix for quarter 1, FY 2023, is as follows: erection business contributed INR 152 crores; civil business, including railway, water projects, is around INR 306-376 crores; operation and maintenance, INR 196 crores; electrical business, 22, 22 crores; and other income, around INR 2 crores. Whereas, during quarter 1 of last financial year, erection business contributed around INR 137 crores, civil business contributed around INR 184 crores, O&M business contributed INR 173 crores, electrical business, INR 28 crores, and from other income, it was around INR 6 crores. Domestic business has contributed almost 83%, and rest 17% business has come from overseas business. The mix between power and non-power business stands at 60% and 40%.
We have seen growth across all the segments except electrical business, whereas the company is conscious of growing in electrical business space. This is far the best and all-time high quarter one performance for Power Mech in its entire journey. Reported total income clocked a growth of almost 19% during quarter one, as against quarter one of previous year. Similarly, EBITDA has shown a growth of almost 20%, and PAT has shown a growth of almost 26% on account of controlled finance cost, depreciation, and increase in margin profile. Depreciation cost as a percentage to revenue remained lower side due to controlled CapEx spending. Generally, finance cost as a percentage has come down on account of reduction in overall utilization of limits.
Overall execution cycle expected to improve further on account of robust order book, stronger engineering skills, construction management, and strengthening first and second level leadership in-house. Power Mech is known for its execution capabilities. From a pure power sector play seven years ago, the company has transformed itself into a multidimensional infrastructure player, retaining its core competence in O&M and mechanical piping, as we foresee a slowdown in the thermal power sector years back. Post that, Power Mech has demonstrated its execution capabilities in every segment we operate so far, including railway, road projects, water projects, material handling, cross-country pipeline, international operations, etc. Another important point to note is that Power Mech has experience in operating in all tough areas, including international territories.
During this 23-year journey, including tough period of COVID, the company has built capabilities to deal with any adversity, where instances where we were awarded few contracts without government guarantee, which shows the confidence of our customer. On execution front, the company is much confident to deliver on schedule. We are also excited and happy to share new talent from reputed organization joining Power Mech across all verticals. New names include N. Srinivas Rao, MD, joined as the MD and CEO, International Operations, Africa. Earlier, he was associated with reputed company like Tata and Shapoorji Pallonji. Mr. Umesh Mehta joined as Chief Techno-Commercial Officer, having more than three decades experience. He was associated with some of the reputed companies like Vedanta, Sterlite, Warman Engineers. Mr. Vijay Bhaskar Rao joined as Vice President, Contract Management and Business Development, having 35 years of experience.
Earlier, he was associated with companies like, Tecpro, DGEN, APGENCO . Mr. Ashok Kumar Katta joined as Vice President, and he has almost 30 years of experience, and earlier he was associated with some of the reputed companies like Reliance Industries, Nirman L&T. This shows the confidence on the execution front and, the talent getting attracted from bigger organizations that gives lot of, confidence among the team in terms of execution. Going forward, the overall working capital cycle looking to be improved. The average monthly collections continue to be in the range of INR 250 crores-INR 300 crores, and the same is expected to improve going forward.
Net current debt, excluding cash and cash equivalent, continues to be in the range of 140-145 days during the period, which is again expected to come down during the year. Gross debt and net debt remained controlled despite growth in the business. Overall debt utilization and finance cost expected to come down during the financial year. As you all would have seen, recently, Power Mech has bagged a large contract in the space of FGD, which is around INR 6,100+ crores from Adani Group for its projects based at Mundra, Tiroda, Kawai, and Udupi, on a complete EPC basis. These projects are to be executed over a period of 30 months. Power Mech has created a separate unit to handle these projects, headed by senior professionals.
Also, Power Mech has tied up with well-proven technology partners for technology support and also for equipment supply to install these FGDs, and taken all necessary precautions to mitigate all contractual and external risks. The major thrust into FGD business is part of our forward integration and major diversification based on Power Mech's core competence of over two decades in power plant installation. Power Mech's vast experience and in-house core strength to handle any power plant will add a lot in terms of value addition in execution of these projects. This contract has 10% mobilization advance cost, which is interest-free. Therefore, we do not see any incremental working capital for executing this project. These projects are self-sustained. And the margins are expected to be around 11%+ at EBITDA level from the FGD projects. Of course, there is a scope to improve further.
This, because of our inherent strength in similar field. We will deploy needed equipment in-house and new, new with a mix of additional CapEx of INR 25-30 crore, which is part of our, part of our CapEx plan for this year. The order backlog for the company as on today stands at INR 24,000 crore+ including MDO contract, and INR 15,000 crore+ , excluding MDO contract. Up to date, during the current financial year, the company added new orders of INR 6,948 crore. For the entire year, now the company has set target for reaching INR 10,000 crore of new order additions. We expect to add new orders of INR 3,100 crore for the balance period of current financial year.
As of today, the company is already overrun for almost INR 1,500 crores of projects. The company has strong visibility for its three years growth. During the current financial year, the company is confident of converting order book to revenue of around INR 3,600 crores, plus conversion of revenue from the new FGD contract. We will come with the revised target of revenue for the year in couple of days based upon the FGD work schedule. For FY 2023-2024, the company is expecting to have opening order backlog of INR 14,000 crores+. This is excluding MDO contract. The company is planning to convert opening order book to revenue by around 38%+ during FY 2023-2024. The MDO project is going as per our original schedule.
After three years, the company is well consolidated—will consolidate its business model to sustain growth, and the focus will continue to be more on improvement of margins and cash flow. First 30 months, the company has opportunity of additional O&M contract of INR 1,000 crore, which will be executed over a period of five years. Yearly, it will add almost INR 200 crore+ in terms of revenue from these FGD orders and the O&M orders set to receive. In addition, the MDO contract will start generating revenue. Moreover, the company has built strong enough credentials and features in the field of railways, water projects, road projects, international operations, material handling, crop, concrete, pipelines, etc. Power Mech will align its business model, keeping opportunities in line with the NIP.
Of course, operational maintenance, both in power and non-power sector, including international operations, is expected to play a dominant role in our overall business plan going forward also. The promoters are intending to infuse funds into Power Mech by way of preferential allotments, subject to board and necessary approvals. Power Mech need non-fund-based limits, mainly performance bank guarantees from various banks. Increase in of equity from promoters will build a lot of confidence among the lenders, and will also help a lot, including the external credit rating. It will range around 1.3%-1.4% of pre-allotment equity base, and subject to consent of the board and necessary approvals, which will come within a couple of days. Now, now, I request Mr. Ramaiah to add few more developments before we move forward to Q&A. Thank you.
Yeah. Thanks, Satish, for your opening remarks and bringing out the various facts on the company's operations. Thanks, everybody. I think on the marketing and business side, as you know, the COVID is behind us, and that has obviously opened up the market in a big way, and it is - that is obviously reflected in the results and the opportunities and the new orders the company is bagging. Last year, at the end of the year, we had a backlog of INR 8,855 crores. In the first quarter, about INR 1,075 crores orders have been booked in the mechanical side, and then civil and civil side, and then O&M side, about INR 155 crores.
That has come taking into the backlog of conversion in the first quarter, the order backlog now stands at INR 8,883 crores. There is a modest increase based on the first quarter inflow of the orders, about 8.6% in the mechanical and EPC business. There is, of course, since the conversion has been taken place in O&M, the order backlog stands at INR 1,203 crores. Then civil and infra, the order backlog is now INR 5,789 crores. Then electrical, we are not adding much, it stands at INR 96 crores. Last year, the first quarter, the order booking was INR 343 crores. This year, it has gone up INR 1,075 crores.
The major orders which have been received are the Khurja Coal Handling. It is a very good opportunity. We are working with Thyssenkrupp in partnership, INR 191 crore. Then the Godda 800 MW boiler , Adani has entrusted the job to us because of the failure of the existing contractor, about INR 105 crore. That is going on a fast-track basis. Then there is the FGD chain works we have taken up at North Chennai, from BHEL, INR 119 crore. And then, Shed construction, doubling from the railway opportunities, INR 113 crore. O&M opportunity is about INR 155 crore that we have got from that. Bridge construction work of INR 50 crore, and other civil works, about INR 41 crore. That is what the breakup of INR 775 crore.
The major orders in the pipeline development status are the FGD orders for the civil and mechanical installation jobs. About 1,950 MW at Haldia, Chandrapur, and vertical department, CESC, Goenka Group. We are standing lowest at INR 870 crore for about 1,950. This is not an EPC job, but it is a balance site execution jobs are there. Bangalore Metro, one depot construction is coming up, and that is about INR 450 crore at Yelahanka. Railway electrification jobs in Bangalore and Hassan, about INR 88 crore. There is an O&M opportunity in Nigeria, where we are already doing the installation job in Dangote. It's about INR 94 crore. These are the orders in pipeline. Coming to the business segment analysis.
The domestic business stands now with the balance order backlog of INR 8,361 crore, compared to INR 8,012 crore last year. And the international, not much is happening, because our focus is now fully in the domestic side because of various opportunities, INR 523 crore. The power sector business is around 43%. The order backlog, INR 3,799 crore, and the non-power continues to play a role, INR 5,084 crore. Now, there are two distinct developments here, which is going to give a big vision for the company in the next couple of years. One is the mine development operation in Jharkhand. That is INR 9,294 crore for 25 years. With that, the backlog will stand at INR 18,177 crore as from June.
But barring this main development, now the new initiative which has happened in the FGD orders, as Satish was bringing out, 8,460 MW for about 15 units of 330, 660 MW Adani at various of their projects in Kawai, Mundra, then Udupi, etc. That is, the LOI order has been received, and taking that into factor, the backlog has gone up to INR 15,056 crore. And that also boosts up the power sector and mechanical job presence in the business. And the domestic business has ballooned to almost 96% with a backlog of INR 14,531 crore. And the power sector business has jumped, which has on the downward trend for the last couple of four, five years.
Now, the backlog goes to 66% of the total order book of INR 15,056 crore, and the non-power is 5,084 crore. Therefore, this is a very good ground to take off and then have a vision for the next two, three years. Major works we are executing in Udangudi, civil and structural job, INR 345 crore. Then Buxar Boiler for NTPC, INR 176 crore. Bhusawal, civil and structural work, INR 285 crore. Maitree major job in Bangladesh, INR 855 crore. Yadadri, for the 5x800 MW , many packages in civil mechanical, fuel handling, INR 813 crore. Ramannapet Canal, about INR 373 crore, and then Sambalpur Electrification, INR 350 crore. And the major water projects, which we are doing in UP, about INR 2,775 crore.
The present value, it can go up to +INR 4,000 crore. Roadworks, what we are doing in Karnataka and Mizoram, about INR 780 crore. The latest job, what we have taken from Adani, in the Khammam Khodad road project in Telangana, INR 645 crore. If we add up the FGD in the four projects, INR 663 crore. Therefore, this is where the company's focus will be the next two to three years. The O&M continues to play a role in our bottom line growth, and also contributes for the revenue generation. With a major presence in Singareni, INR 343 crore; Tuticorin, 2 x 600 MW, INR 391 crore. Non-power jobs also we've taken at JSPL, INR 66 crore.
Then Jharkhand, Jharsuguda, 4 x 600 MW, INR 387 crore. International also, now the focus is on O&M side, because we have done a lot of installation jobs that we are expecting about INR 100 crore. This is the presence of the O&M side. On the manpower side, the company continues to add people, as rightly said, both on the senior level and also the working level, to strengthen the execution and oversight of the project execution. It stands at about 32,000, with a contract labor of nearly 15,000. There may be some more additions that have to take place to take care of the new order, okay? As far as the opportunities are concerned, I, I... Without the FGD, we had a target of INR 4,000 crore.
With INR 1,500 crore in the L1 position and INR 775 crore, perhaps, you know, we'll still be able to achieve those figures without the, you know, FGD. If you add up the FGD, the order booking for this year can go up to INR 10,000 crore. Therefore, that should help us to understand at the end of 2023, assuming that the conversion of INR 3,600 crore can go up, slightly higher, of the Adani order, Adani FGD order, to + INR 4,000 crore. The backlog by end of the next year, it should stand between INR 14,000-15,000 crore. That is a very clear, you know, working model for the next couple of years.
The major areas of the work are the drinking water projects, INR 2,075 crore. Road projects, INR 1,650 crore, and FGD is about INR 6,163 crore. O&M jobs around INR 1,200 crore. These are the, I think, the business, as Satish has rightly said, we have aligned ourselves with the National Infrastructure Pipeline that is reflected in our order flow in the last couple of two, three years. If you look at the order flow in the last two years, in 2021, it was INR 4,638 crore, in 2021-2022, it's INR 4,231 crore.
As I based on the projects that including the Adani order, it is certainly possible we can get around INR 10,000 crore in the current year. Down the line, obviously, the NIP investments will continue to be bullish, with various investments in infrastructure, railways, then minerals and mining, then mine development. That is a major opportunity, since we already entered there. In fact, Coal India is planning to undertake mine development operations for about 1-2 million tons. And then drinking water projects continues to be funded well. Out of 91, 19.1 lakh crore of households, 50% have been provided for the last, the effects of the last couple of years. We are working in about 3,000 villages in UP.
The one more area for, perhaps, the long-term vision can be, the operation maintenance of the thermal power plants will undergo basic changes with increased capacity into renewable power... and, by 2024-25, it is expected to go up to 450 GW installed base. And the end of the decade, the PLF, present PLF, it stands at 58%. It has come down. It will further go down to 30%-40%. But in a way, the thermal plants will come under a lot of stress in operation because of the generation mix of the fuel. And that obviously calls for different O&M practices. The company is getting a further, it's huge presence in about 67,000 MW of operating base and working in about 30 plants.
In fact, it is not an opportunity for us to work under these adverse conditions in operating those plants, because in many of these cases, down the line, the power plants have to be operated on a day-and-night basis. That can add up to the O&M costs also. In a way, it can be an opportunity, and railways are coming with big investments, and we are already there. Perhaps with the INR 500 crore of working orders, what we are executing, another INR 450 crore expected shortly. Railways is going for 500 numbers of multimodal terminals, cargo terminals, and then station pre-developments. The new opportunities, what we are looking at is the metro project.
Today, metro is going to be there in most of the A&D grade towns, and the total length has gone up to 702 km, and is planned to go up to 700 km. The opportunity is INR 280 crore-INR 320 crore per km. Roads, I explained to you already, the investment in this year is nearly INR 200,000 crore, and there is a compounding growth of investment of 20%, and we are working in about 151 km of roads of INR 1,646 crore. As far as the electrical P&D transfer and distribution, yes, we are taking a view on that, how to proceed on that, because of the competition. We have successfully completed the four projects, and we are working another four projects in Northeast Bihar and Bombay.
We are watching the opportunities. There is going to be substantial investment in P&D also to strengthen the grid and bring down the transmission distribution losses, the investment of nearly INR 300,000 crore. Railway electrification is going to be a huge opportunity, and we have completed 640 km of railway lane in the southern port section, out of 527, and another 80 km we are bidding for that and hoping to get that. Therefore, this is what I can bring out about the opportunities, then auto, auto portion and the marketing side. Yeah, we can go for the next phase of the question- and- answer. Thanks a lot.
Thank you. We will now begin the question- and- answer session. Anyone who wishes to ask a question, may press star and one on the 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'll wait for a moment while the question queue assembles. The first question comes from the line of Abhishek from HDFC AMC. Please go ahead.
Yeah, good afternoon, sir, and congratulations on a very strong set of orders. First question regarding the FGD order that we have received. Some understanding on how the revenues will be booked in 2024, 2025? Also, if you could give some understanding on the payment terms, how much is the retention money?
Yeah. I think this 6,160 crore will be spread over the next 30 months, and the first year, we can expect about 10% of revenue, that is the maximum. Therefore, perhaps 2023 and 2024, you know, the revenue should, out of this, at least 50% should be converted, 30%-50%. That can boost up the revenue and the other backlog of products for the year 2023-2024, because by end of the year, as I told you, you know, 14,000-15,000 crore of backlog will be there. That should give a vision of 4,000-4,500 crore to 5,000 crore of revenue beyond 2023.
Yeah, and, so what is the retention money that we have agreed on?
It's around 10%.
Okay. After a year of completion, we'll be-
No, no, that is at the end of the completion, then, we can get that, payment time.
Okay. And, so this, commodity escalation clause and margins, how are those covered in this contract?
I think they are in line with the market expectations and the competition, about 11%-12%. Our, the advantage for us is we have more value addition for our side because of the, our operations are well-grounded with, in-house equipment, supervision, and, our own construction expertise. What we have to focus is on the procurement side. Then fund, well, working capital should not be a problem because we are getting the advances, and we are going to tie up on matching basis the payment terms to the suppliers also. That is how we are planning to execute this one.
Understood. I think the comment that was made earlier, that next year you are looking at 38% execution on a INR 14,000 crore order book, opening order book, which will be there. That would mean about INR 5,300-INR 5,500 crore of revenue in 2024. Is that understanding correct? If you could comment on the execution capability ramp up, how the planning has been done at the company?
I think that is a very interesting question. You see, how the execution comes out to be based on the expertise, as Satish explained, has been about over 23 years. In fact, in the last couple of years, and even the COVID period, we have managed the projects much better than our competitors. That's why one of the example I told you, you know, the Godda project, you know, customer has removed the job from the other agencies given to us... only the resource management what we are having it, and a strong supervision base of nearly, 6,000-7,000 engineers and supervisors are working online, on-site at time. And then we have got an SBU-based project management approach of focused project implementation, and then delivery management and customer relationship.
For us, handling these many projects is not a challenge at all, because we are quite used to working about 40-50 projects. What we may need in this case may be another modest increase of the manpower, about 5%-10%. As far as the resources are concerned, we have got a lot of resources in terms of the execution, what we built up for the coal-based power plants. In fact, we have got the excess capacity of the resources in the construction equipment that can be gainfully deployed for all these jobs. The in-house capabilities in the field works and then structural fabrication, erection works, that also stands good for us. The erection station jobs is already our basic strength.
O&M, we continue to play a leading role, that's why we are the preferred customer prefers us. Therefore, I think, from scaling up from INR 3,600 crore the current year, I think the existing resources, little bit of modest additions, scaling up to INR 5,000 crore is not a challenge. Because as you know, earlier, we were on the range of INR 2,000 crore. Now, we are expecting to go up to INR 4,000 crore in a matter of three, four years. That is how the company is scaling up its capability, resource management, and then optimal utilization of the resources.
Understood, sir. Regarding the operating margins, we had highlighted in the previous call that we would expect an improvement led by O&M, and also royalty costs are going to go down. When do we start seeing improvement in operating margins, sir?
I think there are many of the projects we are working on joint venture basis, consortium basis, are getting completed in another six months to one year. You know, we will be better qualified to bid the project on a PQR basis, on a standalone basis. That should add up to our operating margins much better when we bid for the railways in passenger jobs and many specialist jobs which we are working with others. That is an exact number, at this stage, we cannot expect it, but there's going to be some improvements in that.
Okay. Thank you, sir, and all the best.
Thank you.
Thank you. Next question comes from the line of Pritesh Chedda from Lucky Investment Managers Private Limited. Please go ahead.
Sir, a few clarifications. You mentioned that the revenue for 2023 will be INR 3,600 crores, and revenue for 2024 will be INR 5,000 crores, and bulk of the FGD execution, which means will slow down to 2024. Is that correct on the assessment?
I think that the INR 3,600 crore was based on the order backlog of INR 8,855 crore, what we built up in the beginning of the year.
Mm-hmm.
Taking into account, whatever orders we are going to build up in the current year also, excluding the FGD orders. With the FGD orders factored, you know, that should go up to nearly INR 4,000 crore +. Next year, obviously, the backlog is going up by end of the year because of the balance of the pipeline of the orders of INR 1,500 crore, plus the FGD orders, what has been backed, plus additional orders, what we are expecting it. That is how that projection has been given beyond 2023-2024.
So my second question is, you mentioned that on FGD, you got 10% advance, and there will not be any incremental working capital is the assessment. So which means-
Yeah.
When you move your revenue from INR 3,000-INR 5,000, the movement in your working capital, absolute working capital requirement is hardly any?
See, it is not much. Why, why I can say is that, see, in this type of business, you also tie a back-to-back terms with your suppliers, and the rest of the resources we are putting from our side itself, like in a construction side and all those things, infrastructure inputs. Therefore, that is already available. That, that doesn't need investment. What is required is the ordering on the supply packages, and those things we will tie on a back-to-back basis with matching advance and all. That is how we are able to figure out without much of increase in the working capital.
Okay. So, is this assessment correct, right? Whatever is the absolute working capital today, and when you move your revenue from INR 3,000-INR 5,000, the absolute working capital requirement will not rise in sync with the revenue?
It will not-
Satish, Molik has asked for, which is interest-free, need work to utilize. So see that this project is going to be self-sustained. So it all can cash neutral.
It will be cash neutral.
We don't anticipate any additional funds pumping into this project.
Okay. And sir, my last question is, are these FGD orders, one-off, which takes you to these kinds of backlogs and revenue? And post 2024, do you see a tapering off, or do you see, you know, this higher base, or, or what are the levers for this higher base sustaining?
I think, see, company has diversified a lot, you know, from what was five years back, 10 years back, and, we are quite confident, you know. Of course, these are all one-time retrofit jobs. Then 50% has been ordered, balance 50% is, in the pipeline, and there we are targeting under 2,000-3,000 MW, and that also-
3,000 MW, sir?
... about 169,000 MW is identified retrofits. In that, 50% has been ordered already in the market. Balance 50% is under the ordering process.
Okay.
This ordering will be completed in the next six months to one year, perhaps. That is to keep the deadline. Maybe the deadline of 2024 may not be fully possible. It can go up to another one, or 12-18 months, to take care of the balance order, booking, and execution and all. But what I—your question specifically, I agree, what will be without the FGD in future? I think, today the company is into infrastructure area, O&M side, we are expanding in non-power sector, in the international market also. And then, in the railways, we have made a big presence, and railways investments are going to be continuous, and we are investing more than INR 100,000 crore per year.
There are many jobs which are to our product or service profile, depots, maintenance depots, maintenance workshops, and then railway train works. Therefore, I agree, definitely, the opportunity is available. And then more importantly, the private sector will be coming with big investments in state infrastructure and then the mining and metals. And what I can say is that the mining is going to offer a lot of opportunities. Today, we have taken a mining development project of 5 million tons. Our plan is to increase it to 15-20 million tons the next couple of years, one or two years.
That should give us a lot of top line growth and also bottom line in terms of the O&M business. Perhaps, if this MDO is once implemented from 2024, it should add up to INR 400-600 crores of additional revenue on the O&M side. We are looking at another one or two projects, another 10 million tons, that should further take up the revenue to, say, INR 1,500-2,000 crores. So we are having plans so for filling up these gaps, but we know these are all the opportunities. Then the infrastructure side, I don't think there is any slowdown will be there.
It's always going to be the upside only the investment, and the company is rightly caught up with all these investments, and that is how the order booking is coming.
Yeah. This, this FGD has got a follow-up O&M of almost INR 1,000 crore, that's for five years. So that's almost INR 200 crore per annum. On top of that, this MDO project will stabilize. These two projects itself will add INR 1,000 crore top line after three years. So, that is, once the FGD is over, three, for those three years, we'll consolidate, plus this INR 1,000 crore will supplement. On top of that, the BoPs now, what we have built in-house, that will help a lot in terms of bidding for larger projects. So we'll see that, in terms of number of projects, because today we are operating 112 projects, including O&M, including O&M. So we'll see that, the size comes down. Of course, O&M will continue, so the number will be always larger.
Based upon our PQs, we'll target for larger projects. So this will help a lot in terms of our, in terms of sustaining the growth going forward, too. So we'll consolidate after three years where to, move forward. And of course, the, the focus will continue to be on margins and cash flow, because that is important. Yes, sir.
So lastly, sir, this, out of 69,000 or out of 80,000 MW which have been ordered, what is the MW that we have got? And our line of business here is largely mechanical, civil, and erection, including the equipment or without the equipment?
Now, this job is a complete EPC job, 8,460 MW for about 15 units of 330 MW - 660 MW. It includes engineering, procurement, construction, then civil, structural, mechanical works. The technology partner, we are going to open there, and there in the key equipment for the process, equipment for the absorption and the technology part of the FGD, that will be supplied, that will be sourced from them. The rest of the installation work and the sourcing, we will do it ourselves.
Cool.
The civil and structural installation, we do completely. That is how the plan is.
Cool.
Therefore, it is well fixed into our business model.
Okay. Thank you very much.
Thank you. The next question comes from the line of Rohit Natarajan from Antique Stock Broking. Please go ahead.
Yeah, thank you for this opportunity. Congratulations on this fantastic orders in hand. So my first question is related with the L1 that you have identified, it's almost like INR 1,500 crore. Can you highlight on what exactly these orders are and where are, when exactly it's expected to be part of the backlog?
Sorry, can you come again?
the INR 1,500 crore L1 order.
Yeah, I told you, you know, yeah. In this, there are about seven FGD orders, of course, not EPC orders, they're construction orders, about 1,950 MW for about INR 870 crore. That is from the Goenka Group of CESC, at Haldia, Chandrapur, and Birzebbuga station, 250-350 MW units, seven units. And then Bangalore Metro project, we are L1 for about INR 450 crore. And then railway electrification job in Bangalore, about INR 88 crore. And then one O&M job in Nigeria, where we are already doing the installation job for the Dangote, about INR 94 crore.
... Okay. And sir, you also said that additionally, you are finding INR 3,100 crore kind of opportunity over and above what we have won so far.
No, what I said was that we had a plan about INR 4,000 crore. In that, INR 700 crore has been already bagged in the first quarter. I'm talking about excluding the FGD, and then we are pursuing opportunities worth nearly INR 17,000-18,000 crore of opportunities in power, civil, non-power, electrical, OEM, water, and then roads, et cetera. Therefore, we are pretty confident maybe another INR 1,500-2,000 crore should happen apart from what is the orders in the pipeline, over and above the FGD orders what we are getting.
Got the point. One more question is on the fund infusion fund that you're talking about, professional development. How exactly can this improve, if at all, any credit enhancement that you're thinking, even in terms of bankers giving you better non-fund-based limits, fund-based limits? What exactly is the picture over there, sir, if you could throw some light on it?
Normally, we don't need funds. In fact, we are trying to bring down the fund base. So what importantly is required is non-fund in terms of bank guarantees and all. So we have got close to INR 1,650 crore of limit. Of that, the utility is around INR 900 crore. So we have kept the limits to support our growth. Any good project comes, so I should be ready to support the non-fund-based limit. So this will help in terms of inclusion from the promoters as a backup in terms of long-term equity, so that gives a lot of confidence to the bankers while they do the assessment for the non-fund limit.
On top of that, that helps in terms of improving the internal trade rating for the bank, so we can negotiate for better pricing. And will also help for the external-
Okay. So if I, yeah, if I understand it correctly, say let's say this INR 100 crore is the order, you would typically require a INR 20 crore kind of a non-fund-based limit. Is that the right way to look at the non-fund-based limit?
Now, today, it's ranging 3%-10%.
Okay.
-project to project, so on average, we can take 5%-7%, the PBG.
So 5%-7% would include what all things like your EMD, or maybe the performance guarantees?
See, the EMD, when we quote for the project, normally it ranges 1%, but once the go, contract gets award, so that EMD will be released. So what continues is the PBG, performance bank guarantee of so 6%-7% or maybe 5%-7%.
What about the mobilization advance? What the client gives you, you will have to give some guarantee to that as well, right?
That depends, sir, because if we wanted to draw mobilization advance, it depends on the customers to customer. Either it comes in way of a upfront mobilization advance or milestone-based advance. So because,
So, when you say that you don't require much of incremental working capital, I thought maybe you are looking more to do play with very aggressively on this mobilization advance. So which means your need for more non-fund-based limit will be much higher.
Yes, if we draw, yes, we need. For which-
So if I see the current annualized limit is maybe somewhere around INR 700 crore, and if I go by the 20% metric of non-fund-based limit, probably your limits are, like, largely exhausted, right? I mean...
Well, now, see, not all the contracts we take the advance. For example, BHEL, every contract has got a clause of availing 10% mobilization advance, which we don't draw, because it carries 14% of interest now, we don't take it. So it-
Okay, okay.
It ranges around 20%-30% or 35% of the total projects. Not all the projects we avail that, and not all the projects will have that clause.
Sure, sir. Got it, got it. Thanks a lot. That's it from my side. All the best to you.
Yeah, thank you.
Thank you. The next question comes from the line of Vivek Hinduja from Thrive Capital Partners. Please go ahead.
Hello, everyone. Thank you for the opportunity. Sir, I wanted to ask that in the first quarter, we heard reports of income tax raid on the, so I might say, of the company, including that of the top management and the promoters. If you could put some light on the same as we create, and also, has the IT department given any monetary claim on the company as a result of the raids?
Yeah, see, thirteenth July to seventeenth July, they had search under Section. It's a search, actually, so different premises. Now, the matter is going on. Income Tax Department, whatever the information they're asking, we have been providing. Which they have come regarding some subcontractors, pertaining to some projects where they had some concern, okay. Even they have gone to multiple companies, including Power Mech. So we are providing all the information search. Still, the matter is going on. It may take some more time. Of course, this will not impact, as far as our operation is concerned, and we don't see any impact measured on our financials.
Okay. Because, sir, as per the media reports, we heard about, I see some incriminating evidence being found on the premises. If you could throw some light on the same or maybe give some clarification?
... Yeah. See, media even, we have come across because I do not know where from they get information and all, but honestly, it's not that the case, okay? It is, yeah, it's completely speculative because the information sharing and all is still going on. It's a continuous process. It may take another three to four months. So we are supporting with all the required information with regards to contractors, projects, wherever they're needed, and the matter is going on. And no claim being made, okay, as of now? Because it takes time. It's the information flow and all, it will take time. We need to provide all the required information to the satisfaction of the department. So based upon the information flow, the case will be settled. So it will take some time, sir. Okay. Thank you very much.
Thank you. Next question comes from the line of Dixit Doshi from Whitestone Financial Advisors Private Limited. Please go ahead.
Yeah, thanks for the opportunity. Firstly, one clarification from this FGD order of INR 6,100 crore, does that include INR 1,000 crore of O&M?
No, it excludes. It excludes. So that INR 1,000 crore is in addition to INR 6,100 crore, that order is yet to get.
Okay.
That will be a follow-up opportunity to FGD.
After the commissioning. After the commissioning.
We have not received that order. It, it will be tendered, and, we, It's been tendered, we are, we are L1, but the awarding part, they're broken into two components. Even they've given the, the, FGD, the EPC part of INR 6,100 crore. The follow-up INR 1,000 crore, they will award later.
Okay. Okay.
That will be an opportunity of INR 200 crore per annum in terms of O&M.
Okay. Okay. My second question is regarding this MDO project of Coal India, MDO project. So from when the revenue will start flowing in?
2024, Q4 onwards, sir.
Q4, FY 2024. And, as on today, how much is the current and net debt or a gross debt and net debt?
Yeah. Today, we have got close to INR 490, and net is we have got deposits of INR 150, so around INR 340 crores net, which is expected to come down.
Okay. And one last question, as on today, how much would be the retention money on our balance sheet?
It's around INR 315 crore.
Okay. Fine. That's it from my side. Thank you.
Yeah, thank you, sir.
Thank you. The next question comes from the line of Ankur, an individual investor . Please go ahead. Mr. Ankur, please go ahead with your question. Mr. Ankur, if you have muted your line from your phone, please unmute yourself and go ahead with your question. Since there is no reply from the line of Mr. Ankur, we'll go with the next question, and it comes from Faisal Hawa from H.G. Hawa and Company. Please go ahead.
So my question is that, in the orders that you have now taken on, what is the ROC and the ROE that you are targeting, for the orders which have been taken in the recent one and half years? And will you be benefited, due to the current, commodity increase, in the recent three to four months?
Yeah. See, these are not pure cash contracts, okay? So in terms of margins, it will range 11%+. So definitely, we don't need to invest much except the CapEx of INR 25 crore-INR 30 crore. So it will help a lot in terms of improving both ROE and ROC, because we don't intend to increase any debt, so that will help to push ROE also.
What is the ROE which will come ultimately say, for one and half year, then someplace?
Sir, it will definitely, my assumption is it should cross 18%-19%+, sir. Blended.
I can't hear you, sir.
18%-19%+ , blended, sir.
Sir, we are looking like, you know, we are going into so many sectors, you know. What is the risk management, you know, you are now taking into? So that, you know, two or three projects going bad or some government intervention in that, in those projects, does it affect the company? Can you just list out the risk management, you know, say, I think, steps you have taken to really, you know, protect the company from, you know, going, going backwards?
Can you repeat, sir? Sorry, the voice is not clear.
So, we are now going into many sectors, and many of them are unrelated sectors. So, what are the kind of risk management measures you are taking to, you know, avoid the company going backwards?
Yeah. So for our industry, it's one, the execution, second is the service, and the third one is the material component. And we step in as a contractor, so normally everything in place, then we step in. So most of the risk gets automatically mitigated. Now, service component, of course, the manpower plays a key role. So we see that the price variation clause is well protected, so that for any changes in the labor and all, we are well protected. And the second part is the material component. Again, we have seen last two years very abnormal changes in the prices. So whatever little bit cost impact we had, we have observed that.
Now, going forward, the projects which we are quoting, we have taken a call, unless until it's well protected in terms of price variation, clause, escalation, we're not bidding for those type of projects. And more importantly, once we execute and the payment part, okay, the experience been, like, once upon a time, the receivable cycle used to be 45-60 days, that went up to 90-100 days. Now, it's coming down to 70-80 days. And we are very particular about the customer in terms of, the funding, the healthiness of the financials, so that, we, we are executing and we are getting paid on time. That's very important. So we're choosing projects, so wherever the payment cycle is in the range of 60 days maximum. Of course, it goes up to 70, 75 days.
The recent project has been always, like, all are, like, 30, 40 days maximum. So the idea is to bring down the working capital cycle as much as possible. That is one of the areas where we are more serious about it.
Sir, and what is the order book ratio from the government side? And how is the competitive intensity in government orders presently? You know, is it very competitive and, you know, articles, you know, even quoting less than the base price? And, you know, how many orders have you lost in the last three to four months to very, very aggressive bidding?
Now, I let me explain it. I think there are different segments in this. Mainly, the mechanical business, we are a leading player, and we bid based on the margins what we can protect it. And as I told you know, in some of the jobs, you know, customer has terminated the existing contract, given the job to us. That is happening for now. Then we have got leadership in this infra business , mechanical business. And then civil side also, there are a few players out there. But even in that case, you know, in one of the jobs in Udupi, a job has been terminated, we also found INR 275 crore. Therefore, the competition is there.
We are able to manage this competition, and we quote it, what is expected our cost, and then our margins are there. And, we also, particularly in the private side and the oil and gas side , we have got a preference because of our execution capability and, commercial capability. And that's why we get a preference in the case of oil and gas side also, and then in some of the private players also. But yes, the competition will be there in the government projects. We cannot avoid that. But, there are a lot of opportunities. Even if you can get a hit rate of 15%-20%, it is okay for us, and we are prepared for that type of hit rate.
That is what it is expected in the market when 78 players are there in the segment.
See, Power Mech, since inception, is quite conservative, so not taking any projects, okay, which can be a risk. We are quite selective, okay? And, the strategy always continues to be conservative. Okay, we are comfortable, we'll take the order. If we see, there are some risk elements where we are not comfortable in terms of execution in the customer or the location, left out of the project. So the approach of conservative, that will continue.
What is about our proportion from private orders to government orders?
Yeah, it can take around 50/50. Of course, with this, FDG order can change. We have to rework on that. That is how it is. Most of the infrastructure projects allow in government.
India also?
Coal India also, yeah. That country, because now they are, you know, doing pretty well.
Thank you. The line of Mr. Hawa got disconnected. We'll take Rishikesh now, from Robo Capital. Please go ahead.
Hello, I'm audible?
Yeah.
Hi, sir. One question from my side. If you could please provide EBITDA margin guidance for FY 2023 and FY 2024.
So now we are working around 11%-12%, and they're seeing that margin profile to improve further. And as we discussed, like, the projects which we are quoting directly, so it can help us to save in terms of for cost for borrowing the credits and all. That will also help for adding EBITDA margin. So we're expecting the profile, the margin profile to improve gradually.
Okay. Thank you very much.
Thank you. The next question comes from the line of Deepak Poddar from Sapphire Capital. Please go ahead.
Thank you very much, sir, for the opportunity, and many congratulations for the good result. So, we just wanted to check what's our current execution capability per month in rupees crores?
...Sir, now it's well set, it's in the range of INR 750 crore-INR 1,000 crore. It can be ramped, it can be increased even up to INR 1,200 crore gradually.
INR 750 crore-INR 1,000 crore, up to INR 1,200 crore per annum?
Per quarter.
Per quarter.
INR 1,000 crore per quarter.
Mm-hmm.
That is it. Now, for the FGD, we have created a separate unit headed by senior professionals. The team is well set now.
Mm-hmm.
Okay, so this should gradually move up.
Correct. So the reason I was asking that is because, I mean, given the revenue output that we have for this year, ideally, given the second quarter is generally lean, so our second half execution per quarter should be close to about INR 1,000 crore-INR 1,200 crore, right? I mean, unless we have that, we, we won't kind of execute our annual target, right?
In the fourth quarter, in any financial year, quarter three, quarter four will be our turnovers .
Okay.
Comparatively, if you see, it has moved quarter one, quarter two. It used to be in the range of INR 450-500 crores. Now it moved to INR 600 crores, and now this has moved almost INR 750 crores, which is all-time-
Mm-hmm.
Okay, in the Power Mech journey. Q4 last year we did close to INR 900 crore, okay? So this INR 900 crore-INR 1,000 crore is well tested now. So what we need to work is to improve further. Now, we are working on the creating of the resources, infrastructure to sustain the execution.
Okay. Okay, okay. Basically, since the INR 900,000 crore we have already done, incrementally, maybe INR 200-300 crore might be required by fourth quarter, I mean, by third, fourth quarter, to increase your execution capability, given the kind of output we have, right?
Right. It's now INR 900 crore, it's already tested at quarter four last year, okay? And this year, the target what we have kept is more or less, it's quite comfortable, because incrementally, you'll see quarter three, quarter four will add, okay, more volume in terms of absolute number, okay? Gradually, you'll see that number going up further.
Fair enough. I understood, yeah. I, yep, that's it from my side. All the very best, sir.
Yeah. Thank you very much.
Thank you. A reminder to all the participants that you may press star and one to ask a question. Once again, a reminder to all the participants that you may press star and one to ask a question. Next question comes from the line of Ankur, an individual investor. Please go ahead.
Hello, thank you. My question is with regards to the notification given to the stock exchange today, that there'll be a board meeting for potential issue to the promoters. Now, we know the company is at an inflection point. The profitability, revenue, everything is going to be very, very good over the next two, three years. So at this point, for the company to go ahead and get preferential issue to promoters is not really minority shareholder-friendly. What would be nice is to have a rights issue, which is given to all the stockholders of the company. If somebody subscribes, fine. If not, then promoter shareholding will go up. So that's my humble submission to the promoters.
Yeah, we've taken note of it, sir. Thank you.
Okay, that's it from me.
Thank you, sir. Thank you.
Thank you. As there are no further questions, we have reached the end of question- and- answer session. I would now like to hand the conference over to the management for closing comments.
Yeah, Raghuram, you want to add something?
Yeah, I, I think, a lot of things have been covered up. I think, we have got a very clear vision for the three years, and then, the issues which can come up of the third year, perhaps, we are geared up also, in both in the marketing side, business development side, and then the most important, the operations side. Therefore, company is well set for INR 4,000-5,000 crore of turnover in the coming years. And what is important is to sustain the growth, and then the new opportunities will be there in infrastructure, wind and mining, and then railway, and then international operations also we'll focus it now, as I told you, the India behind us. Therefore, I think this growth story will continue for the next couple of years.
The operations side, we are fairly comfortable with the present setup what we are having it, and adding the headcount, critical headcount, and also the capability, whatever is required in different areas. That should take care of our conversion and then overall thing of the project. Thank you.
Thank you. On behalf of Nirmal Bang Equities, that concludes this conference. Thank you for joining us. You may now disconnect your lines.