Welcome to RITES Limited . Your conference is being recorded.
Good morning, ladies and gentlemen. I'm Karthikeyan, moderator for this conference. Welcome to the conference call of RITES Limited to discuss its Q1 FY26 results. We have with us today Mr. Rahul Mithal, Chairman and Managing Director; Dr. Deepak Tripathi, Director Technical and Director Projects Additional Charge; and Mr. Krishna Gopal Agarwal, Director Finance and Chief Financial Officer. At this moment, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. At that time, if you have a question, please press star and one on your telephone keypad. Please note this conference is being recorded, and in the interest of time and fairness to all participants, you are requested to restrict yourselves to one question per participant. Time permits, you may come back in the question queue. Now, I would like to hand over the floor to Mr.
Rahul Mithal, Chairman and Managing Director, RITES Limited . Thank you, and over to you, sir.
Good morning. Thank you. Let me start with giving the Safe Harbor statement. The presentation and the press release, which we uploaded on our website and exchanges yesterday, and discussions during the call, these statements consider the environment we see as of today and obviously carry a risk in terms of uncertainty, because of which the actual results could be different, and we do not undertake to update those statements periodically. So let me give you a brief overview of the Quarter One results. It's been flat. The results have been flat. The order book, as you see, about INR 8,800 crores. A bulk of it, in fact, about INR 3,500 crores from about 300-plus orders, was added in the last two quarters of the last FY.
So now we are at the stage where we have to focus on expeditious execution, which we foresee starting from the latter part of this FY, and the guidance which we gave at the beginning of the FY, that we will try and definitely surpass the previous year's performance, we are on track. All these orders are at the various stages of finalizing the design, fixing up the executing agencies, so the revenues will start flowing in by the latter part of this FY, so that's the opening broad where we have been in Quarter One and where we see moving forward, and I'll go into more details as I answer individual questions. Thank you.
Thank you. Now we begin the question-and-answer session. If you have a question, please press star and 1, the telephone keypad. In the interest of time and fairness to all participants, you are requested to restrict yourselves to one question per participant. Time permits, you may join back the question queue. The first question comes from Harshit Kapadia from Elara Securities.
Good morning, sir. Thanks for giving me this opportunity. So just one question right now. On the consultancy side, we have seen the growth coming back. Now, have we seen a broad-based growth, or is the consultancy also seeing growth only from certain sectors? And followed to that would be the quality assurance. Is this now normalized, or are we going to see an uprise on the quality assurance side?
Morning, Harshit. So the first part of the question, yes, the consultancy has shown an overall growth of 7%. And in fact, that is what has helped us see a growth in the EBITDA by about 8%. A focus on the high-margin consultancy orders. So you see the orders which we have been getting in the latter part of the last FY, the consultancy portion of those orders, those have started generating revenue, and those will continue to generate revenue because the initial milestones are in the designs, etc. And as the execution starts, the latter part of the FY, the other elements of the turnkey and top line will keep adding on. As far as the, and this is across sectors, not only one particular vertical. This is broad-based across, because since the orders are broad-based, covering all the sectors, about 13 different verticals that we have.
As far as Quality Assurance is concerned, Quality Assurance has been showing a regular uptick, and the worst, to my mind, as I had mentioned in the beginning of this FY, also is over. We will definitely keep on growing, both not only sequentially in terms of Quality Assurance, in terms of getting more orders, in terms of revenue realization from the recent orders which we got in Quality Assurance from the newer clients, the non-Indian railway clients. So Quality Assurance will only show an uptick, both sequentially and in the entire FY vis-à-vis the last FY.
Understood, sir. Wishing you all the best. I'll come for more questions. Thank you.
Thank you. The next question comes from Anand B. Shrey Marvel Private Limited. Please go ahead with your question.
Good morning, sir. Can you hear me?
Morning.
Yes. Regarding your export orders, I remember in the previous phone call, you mentioned the 10 locomotives, around 70%-80% of the execution is done, and deliveries will be starting from Q1 of this time. So I think in the press release, you mentioned that the delivery has already started. So is there a confirmation that the deliveries are already started, and can we see a realization of that revenue by this quarter or the next quarter?
Yes. Morning, Anand. So yes, it's correct. I had mentioned that the 10 locomotives to Mozambique will start. The deliveries will start. And the first two locomotives have got shipped out in the first week of July, early July. So the revenue booking happens when the actual shipping out takes place, the bill of lading. So these two locomotives, the revenue will definitely figure in Q2. And the other eight locomotives are also on track in various stages in the pipeline. So definitely, in the coming quarters, these will start generating revenue. So yes, the booking of revenue of these two shipments did not happen in Q1. They will happen in Q2 because the actual shipment took place about early July. But yes, the shipments have started.
Okay. Okay, and you said that in Q2 or Q3, you'll be able to see realization of, in fact, 10 locomotives or just two or three?
No, no, no. These two, which have already got shipped out, these for sure will get booked in Q2. And each of the balance eight are in various stages. Successively in each quarter, they will, as the bill of lading gets made, as they get shipped out, Q2, Q3, Q4, we will try and definitely complete the entire order.
Okay. I'll come back to you. I just have one question for you, and I'll come back to you.
Thank you, Anand.
Thank you. The next question comes from Shreyans Mehta from Equirus Securities.
Yeah. Thanks for the opportunity. So my first question is, can we expect or is it fair to assume in terms of margins the worst is behind us? Because now we are talking about export contribution to kick in. So hopefully that will also add to our margins going forward.
Yes. Morning, Shreyans. Yes, you are correct in your assessment. If you recall in the guidance which I gave at the beginning of this FY, I was saying that the worst seems to be over, especially in terms of execution coming in in this FY from the export orders also. And we had said that we aim at an overall, on an annual basis, an EBITDA margin of about 20-odd% and PAT margin of about 15-odd%. And the Q1, because of the uptick in the consultancy contribution, in fact, has been higher, both in the EBITDA and the PAT margin. And so I think, yes, definitely, we should be able to maintain those levels on a minimum on an overall annual basis.
Great. Great. And sir, secondly, if you can help us with the cash on the books as of late.
The cash balance is about INR 800 crores, and client fund is about INR 2,400 crores.
Got it. Got it. Got it. That's it from my side. Thank you and all the best.
Thank you, sir.
Thank you. We have the next question from Viraj Mithani from Jupiter Financial.
Yeah. Thank you for the opportunity, sir. My question is, what would be your guidance for this year and next year since things are, like you've seen, the work seems to be over? Can you give some color on that?
Yeah. Morning, Viraj. So work has just started. We have got the orders now. We have to really expedite the execution. These are very young orders. As I said, out of INR 8,800 crores, about INR 2,500 crores is very young. So these are young orders which need to be executed. And yes, in terms of the only sequentially uptick and in the on an annual basis, whether in terms which I had given the guidance at the beginning of the year, definitely we will surpass by a substantial amount the top line vis-à-vis last year. And as I said, we'll be able to maintain on an annual basis EBITDA margins of about 20% and PAT margins of about 15%.
Okay. Okay, sir. I'll come back in the Q2.
Thank you, Viraj.
Thank you. Participants, to ask a question, please press star and one on your telephone keypad. In the interest of time and fairness to all participants, you are requested to restrict yourselves to one question per participant. The follow-up question from Harshit Kapadia from Elara Securities.
Hi. Thanks for the opportunity. Just wanted to check on the margins on the consultancy side. There have been something about 40-45 times if you look at the last two-three years. Now we are in the vicinity of 35%-40%. Now, should we look at this to be a more sustainable number, or is there a possibility that we can move towards 45% margins?
No, I think you see, you must appreciate that these 40%-45% margins traditionally included the QA contribution, quality assurance contribution also, which was definitely earlier on a much higher contribution. So the levels of about 35% is what is now, especially a large percentage of our orders now across verticals are on competitive basis, and there's huge competition. Even in our international consultancy orders which we are getting, if you compare the trend of margins in that vis-à-vis earlier international orders, are definitely much more competitive. So realistically, the 35-odd% range, anything between 30%-35%, is what on a consolidated basis, the consultancy margins would settle down over a period of time. And that is what is contributing to the overall EBITDA margins of about 20% and PAT margins of about 15%.
Understood, sir. I'll join again for the Q2. Thank you.
Thank you.
Thank you. We have the next question from Vishal Periwal from Antique Stock Broking.
Yes, sir. Thanks for the opportunity. Sir, in terms of our Bangladesh order, can you give some color where we are in terms of design and approvals? And second, related to that, when that order can enter into revenue recognition stage?
Yes. Morning, Vishal. So Bangladesh is a complex order in the sense that there are different types of coaches. There are about seven different types of coaches. And now in the last few months, there has been a very substantial progress in that in terms of regular meetings, interactions with the manufacturer and the Bangladesh Railway to finalize the designs. Most of the design elements are getting finalized, and the ordering of the detailed sub-assembly for the prototype has started. So we are foreseeing that definitely the first rake of 20 coaches, we are aiming that before the end of the FY, we should be in a position with because it will require earlier individual prototype approvals of each type of coach, and then the mass manufacture will start.
So, our assessment is that we are aiming that the first rake of 20 coaches, definitely before the end of the FY, we should be aspiring to send it. And so, that's the time when the first revenue bookings we are aiming for in quarter four from this order.
Okay. And this order will conclude by when? Tell me the time?
So once the mass manufacture starts, then considering that we have a huge manufacturing capacity, that's not an issue. If we are on track and the first rake we are able to push through in quarter four, then we should be able to definitely aim to complete the entire order in the next FY.
Sure, sir. This is helpful. Thank you very much, and I will come back in the Q2.
Thank you. Next question comes from Uttam Kumar Srimal from Axis Securities.
Yes, sir. Very good morning, and thanks for the opportunity. Sir, currently our order book stands at INR 4,209 crores. Sir, what is the expected payment for these orders? Thank you.
Yes. So Uttam, as I mentioned, a large chunk of these orders have come in the last two quarters and in most also recently, and even in this quarter. So if you take an average time span of any infrastructure of about two and a half to three years, the first about six to nine months goes in the design and fixing up the executing agency. So we are very closely trying to ensure that the actual physical construction in most of these orders starts in the next three to six months so that by quarter three, when the actual construction at the site starts, the revenue booking in Q3, Q4 starts. So that's the broad on a bigger picture. You see, bulk of the turnkey order book, the revenue booking should start coming in from latter part of this FY.
On an average, these projects have a time span of about three years.
So can you quantify how much we can book in this year for Turnkey in terms of revenue?
That will be kind of it's too. I don't want to give figures wherein it's, as I said, giving a mix of the orders depending on the time frame. Definitely, on an overall basis, what we will aim is that they contribute the turnkey segment contribute substantially so that the guidance that we surpass by a substantial amount, the revenue vis-à-vis last FY, that we will definitely ensure. But what will be that figure? I think that will be speculation at this stage.
Okay, sir. Thank you a lot. I will come back. Thank you.
Thank you. We have a follow-up question from Anand B. from Shrey Marvel.
Yeah. Good morning, sir. So I just want to know, what would be your estimated segment breakup between the different consultancy, export, turnkey, and leasing in terms of percentage for FY26?
Sorry, your first sentence, I lost you. Sorry. Could you repeat, please?
I'm asking for a segment breakup between the verticals, the consultancy, export, leasing, turnkey, in terms of percentage for FY26. Do you have an estimate?
Yeah. So you see, if you look at let's work it reverse. You see, the order book consultancy is about INR 2,900 out of INR 8,800 crores, which is roughly about nearly 30% plus. So the turnkey element, which I mentioned in the last response, will start generating revenue by latter part of this FY. The export revenue definitely will start picking up, as I answered. So to my assessment, we definitely aim that the high margin, the contribution, which is primarily consultancy and export, percent of the mix. And the balance would be picked up by turnkey. So on a nutshell, the consultancy, export, and leasing elements, which are primarily the high margin contributors, that would definitely aim to be at least 60% plus so that we have a safe margin level that we have been guiding at. And then turnkey contributes to about 30-odd%.
Vishal, in between, I kind of lost you. Can you just repeat in terms of breakup for consultancy, leasing, and export?
So that is, again, as I said, would vary on a quarter-to-quarter basis. And again, what would be the element of each one of them? Again, export, as I said, 10 locomotives would go. We would definitely aim at one rake from Bangladesh. So again, giving a mix of each one of them right now is not, I would call it, too speculative. Yes, definitely, we would keep tweaking with an overall aim at keeping the EBITDA margins at 20%. So focus at, as the quarters evolve, focus on the high margin, even within the export, consultancy, and leasing, so that at least 60% plus remains a mix of these and turnkey doesn't 5% so that the hit on the overall margins is not substantial.
Okay. Okay. Thank you so much.
Thank you.
Thank you. Next question comes from Sundar from Elara Capital.
Yeah. Hi, sir. This is Nemish Sundar from Elara. Sir, I just wanted to understand the payment realization from the Bangladesh order. So would it be milestone-based, or would it be at the end of the project? And have you received any advance for that?
Yes. We have received the advance, and like in all export orders, the revenue is booked as the bill of lading gets made, so whether it is the Mozambique order or the Bangladesh order, and revenue realization normally is not an issue in them because all of them are covered by LC, and for Bangladesh order, we've got the advance also.
Okay. And sir, any update on the Zimbabwe export order?
The Zimbabwe order is, as I said, we have not added it still to our order book. It's about INR 700-plus crores. It's not part of the order book because we were very clear, even though the agreement is signed, the funding is not fully in place. So while they are pursuing with us and the Afreximbank, it is yet to be fully in place. The term sheet is yet to be fully accepted. So we are still hopeful that it's been quite a long time, more than two and a half years, that it sees the light of day. But as of now, it's not part of the order book.
Okay. Thank you, sir. I'll just.
Thank you.
Thank you. We have a follow-up question from Viraj Mithani from Jupiter Financial.
Yeah. Yes, sir. Can you give some color on the export? How are we doing on those funds?
Sorry, Viraj? Can you repeat?
Color on the export side. Since you said we'll be focusing on exports, how are we doing on that front? And sir, as a follow-up to that, we're signing so many MOUs. So when the benefit of those MOUs will come to us?
Right. So as far as export is concerned, there were two guidance, if you remember, which we had given. One was that we will aim for getting one export order. I'm talking of export of rolling stock, the export portion, and it's not the international project consultancy. So in the export of rolling stock, we have maintained that. And even in this quarter, we've got one fresh export order from African Railway Company. So that's as far as adding to the orders of export, which is about INR 1,400 crores now. In terms of execution, the guidance which we had given that the Mozambique shipments will start by early this year, and they have started. The first two locomotives have gone in early July. And we are definitely aiming to execute the entire order in this year.
The execution for the Bangladesh order will be, as I mentioned sometime back, that we will try and start aiming that the first rake starts before the end of the FY. As far as the question on MOUs is concerned, you see, each of these MOUs start a collaboration. And these are all non-financial, non-binding MOUs. They set a collaboration process. So giving an example, the MOU which we signed with Etihad Rail late last year gave us results, and we have already got our first order with this collaboration with Etihad Rail in Jordan. We are doing a consultancy project in Jordan. And this collaboration, this interaction has already started, has opened up a lot many opportunities, which I'm sure in the coming quarters will convert into orders.
Each of these MOUs, this is just an example, are strategic collaborative MOUs, which as the opportunity comes up, because you're collaborating and constantly in touch with the MOU partner, generate orders.
Okay, sir. I'm signing many. Okay. Thank you for that. Thank you, sir. Thank you.
Thank you. We have a follow-up question from Vishal Periwal from Antique Stock Broking.
Yes, sir. Thanks for the follow-up. Sir, on that Mozambique order that we have shipped, so what sort of margins that is looking for the export now for us?
You see, one thing is very clear that both these orders, when we after a hiatus of about three to four years, when we got the first order early in 2024, the Mozambique order, and then in the quarter one of last year, we got the Bangladesh order, these two were the first orders in the last five decades, which were on a global competitive order, and they were not on the line of credit Exim Bank EOI basis. So definitely, the margins are now, you're competing on a global tender. The erstwhile export margins, which were about minimum 20%-25% plus, they are nowhere near that. But yes, they are competitive. And what we will try and maximize is that the more expeditious execution that you do, even you inch up by at least one or two percentages more by the earlier in the charge margin.
So I can only say that the overall export margin will be definitely lower. Yes, in double digits, but definitely not in the range of 25%, which are rather too historically there.
Okay. So maybe a range-wise, if not exact, it will be more like 10, 15 or a bit higher?
You see, every order, Vishal, will have a different margin. But I think, let me put it this way, it will be in a double digit, but definitely not above 20.
Okay. Sure, sir. This is helpful. Thank you very much.
Thank you.
Thank you. Participants, if you have a question, please press star and one on a telephone keypad. Participants are requested to restrict yourself to one question per participant. We have a follow-up question from Anand B. from Shrey Marvel Private Limited.
Yeah. Thanks for the opportunity, again. So I just want to get clarity on the orders that we got in the last three quarters, specifically the Ntoko Rail Holdings and the Tsiko Africa Logistics. Can you shed some light on these three specific export orders that we got in the last three quarters? One is the Ntoko Rail Holdings, the two orders from there, and the Tsiko Africa Logistics, the order that we got in Q2. Give me a second. So you can give some light on that and when we can get revenue realization in a bit here.
Yes. So Anand, this is a very interesting initiative which we have taken, and it opens up a huge potential. All these three orders, while from different clients, are basically the similar orders. You see, Indian Railways now has a large number of in-service diesel locomotives, which are available for spare now because of the large-scale electrification. And most of these high-horsepower diesel locomotives have a minimum of 15-20 years' life left, at least. And they are at a very good competitive price. The challenge only is that this is on Broad Gauge. Indian Railways is on Broad Gauge, which is 1,676 millimeters. And South Africa is on Cape Gauge, which is 1,067 millimeters. So these locomotives have to be modified to be able to run on that network.
So considering we took this as a challenge because it's a win-win situation for all, for Indian Railways, because these locomotives can go. They're available at a competitive price for the client. So we've started work on that. We've gone into detailed designing on how to go about it. The designs are at a very advanced stage. They've got nearly finalized. We've started indenting the requirement for it. So the aim is to at least have one prototype ready. On paper, all the designs are ready, and the sourcing has started. But the aim is to get at least one prototype ready and get it cleared by the African Railways by end of this FY. Once the first prototype is ready, then the mass manufacturing and the design proving would have been done.
It not only opens up these nine locomotive orders which we've got, but it also opens up a huge amount of potential for the more than 100-plus locomotives which are available to be spared for export.
Okay. And what about the UntoCo Rail Holdings that we have for exhibition of these? All of these.
All of these orders, there are four different orders totaling to 11 locomotives, which are including the most recent two which we received in this quarter. So now there are four different orders of all similar, different clients, all in South Africa. And this would not only open opportunities in South Africa, but there are about 11 different countries in Africa which have the Cape gauge. So all of these, once the first prototype physically runs on that system and gets all the necessary statutory approval, then the mass manufacture would not be an issue at all.
Okay. So once one prototype is approved, everything is approved. So that would be a common base for all of these orders that will be going forward?
Yes. Yes.
Okay. Okay. In the last three quarters when we got these orders, where do you expect sort of a completion of the order?
Yeah. So I said the first prototype, we are aiming to definitely see that it reaches physically by end of this FY. That's the aim. All designs have now been finalized, and the manufacture will start in the next few months. So then we should be able to send the first prototype for physical trials by end of this financial year.
Okay, so you expect to get revenue realization by FY 2027?
Anand, we could come back in that detail.
Okay. Okay. Fine. Thank you.
Thank you. We have a follow-up question from Shreyans Mehta from Equirus Securities.
Yeah. Thanks for the follow-up. Sir, how should one look at the REMCL part of the orders? I mean, especially from the scalability perspective, you think, I mean, it's largely 130, 140 odd crore yearly, or we can scale it up from here on as well?
Yes. So I think, Vishal, the key point in REMCL scaling up are twofold. One is the consultancy which it gives for the traction power procurement that it does for Indian Railways. So the challenge is in that more and more states opening up to open access. And as more states open up to open access, the quantum of procurement from them increases, and our consultancy fee which we get increases. So efforts are on, and we've got some headway in the last two months. Two states which we've opened up in the last few months. So in the coming quarters, the efforts to get more and more states to give us open access for procurement, that's the scalability which we are aiming at. And I definitely see a scope for at least a 20% scalability in the next one year or so.
And that's the one broad area for scalability. Another area which now REMCL is working on is based on the experience of the last few years which they've worked on the green energy area. For the last two, three years, they've been piloting the green energy initiatives for Indian Railways. So now they are in a position where they started getting small orders already in the last few months, and that's, again, a scope for a lot of scalability for consultancy for other possible clients. So both these areas, as you would appreciate, have a scope of scalability, and definitely, REMCL can then reach up much above the current levels of about INR 130-140 crores.
Got it. Got it. That's really encouraging. Thank you, sir. Thank you very much.
Thank you. The next is a follow-up question from Harshit Kapadia from Elara Securities. Mr. Harshit Kapadia, your line is unmuted. Please go ahead.
Sorry. Yeah. Hi, sir. Thanks for the opportunity. On turnkey, do you think since electrification is completely done, not more EPC-related projects which are likely to come this year or even in the next five years, what's your view? Let's say in a five-year thing, is it going to go down, or is it only going to go up? I mean, would RITES share remain at that same 10% share or 30% of your revenue would remain to be turnkey construction? That's the question.
Harshit, I'm glad you asked this question because this is something important which we have been saying earlier, and we want to reiterate. We are not an EPC construction company and will not be an EPC construction company. We are a consultancy company. Whether it is pure project consultancy or the export portion, which is primarily design consultancy. In turnkey also, the new orders which we are taking, whether it is in the rail infrastructure or the building sector, etc., all of these are primarily consultancy work. It's not EPC tender, none of them. They are primarily consultancy. It's the method of accounting where the revenue is flowing through our balance sheet. If, for example, the consultancy fee is INR 4 on a INR 100 project, then the revenue is INR 104 rather than INR 4. We are very clear.
Our role remains the same, only for the certain clients, for ease of dealing with one entity, single window, compliances, etc., they feel it more comfortable for the revenue to flow through us. So that's very clear. And that model, depending on the comfort of the client, we will continue to pursue because they are not really EPC construction contracts. So whether, as I said, in rail infra, like you see, we got some orders. We've got some orders in the turnkey segment in rail infra. We've got some orders in, for example, the IIT Delhi one work we are doing. We recently got, about 10 days back, the BEL work in Andhra Pradesh, which is also on basically a cost-plus turnkey model. So that's going to be there.
That contribution would depend, again, over a period of time as more and more clients, whether in the building vertical or rail infra vertical, come up wanting to work on this model as a client. We would be okay with that.
Understood, sir. And just one follow-up on consultancy, sorry, on the export side. On the Zimbabwe, you said there have been two and a half years. So how much more time would you think would take for us to get an order, or is there a risk that the order will be canceled?
The Zimbabwe order, right?
Yeah, the Zimbabwe order, sir.
So very frankly, that risk is there. It was there from day one. And that's the very reason we were very clear that even though a formal agreement has been signed, we will not include it in the order book. So the funding is always a challenge in these orders. And since this funding was being arranged by the National Railways of Zimbabwe from various sources, and they are quite confident that they may still get it from Afreximbank. But yes, that risk, definitely, you're correct, that risk remains.
Understood, sir. Thanks for the opportunity.
Thanks. Thanks.
We have a follow-up question from Anand B from Shrey Marvel Private Limited.
Yeah. Thanks again. Just a follow-up question from before. So since you mentioned consultancy and exports could be your main focus, so you can say that turnkey consultancy, the share of the revenue can go down in comparison to them?
Yes. So the turnkey contribution, as I said, would remain in the range of about 30-odd% of the total pie. That's on an average, on an annual basis. On a particular quarter, the mix may change depending on the shipment or the execution of a particular turnkey project or the shipment of an export order. But on an annual basis, what we foresee is that the contribution from turnkey would remain in the range of about 30-odd%.
Not quarter basis, but in mix, let's say, four, five years range, in a long-term basis.
On a long-term basis, again, we are very clear, as I said a little while back, that we are a consultancy company, and this turnkey segment is not really an EPC segment. So it depends on the comfort level of clients. For example, many of these educational institutions which I mentioned, the orders which we have got, like IIT Roorkee, IIT Bhubaneswar, IIT Delhi, many of them prefer to deal with a single window. So the entire revenue flows through us. So even though it's primarily the scope of work is consultancy, but it's concept to commissioning. So as I gave an example, the 104 flows through us rather than four. So that is what will maybe the extent of orders that we get on this model may change the percentage in the coming years.
That we can only see in the coming quarters in terms of the fresh order inflows.
Okay. Okay. Okay. But will it go, let's say, below 30-odd% in the next two, three, four years?
No, it will not go below 30%.
Okay. Okay. Thank you so much.
Thank you. Participants, if you have a question, please raise star and one on your telephone keypad. So we have a follow-up question from Harshit Kapadia from Elara Securities.
Hi. Thanks for the opportunity. Sir, on REMCL, we were expecting there will be a leg up because of the DFC. So we understand that the East DFC section has started. So, are we completely doing? The REMCL is doing work for East DFC and West DFC, which is partly operational? Where are we, and is there a leg up if, let's say, the DFC gets operational maybe this year or next year?
Yeah. So Harshit, as I explained, the REMCL leg up happens as more and more procurement of traction power comes from space which opens up to open access. So the key challenge, and this is the target area which we keep pushing in every quarter to try and come have more states on open access. So about seven, eight states still left which are to come on open access. And recently, we had a success in one or two states, and we are hopeful that we are on talks and discussions to get more states open up to open access for procurement of traction power for Indian Railways in the coming months. So that is a leg up which generates more revenue because in terms of electrification, the electrification is now more or less at its reaching its maximum 100%.
So only in terms of more traffic that flows, that grows, and it moves on these corridors or Indian Railways, that is the incremental portion that there will be more requirement of electrical energy. But the substantial growth is as you open up more states for open access for procurement of traction power.
Even for DFC, it would be through state only, sir?
Yes. Yes. Yes. All traction power you're buying from states. The electricity you buy through the grid, through the open access which is being generated, which is covered by the individual regulatory issues of every state.
We were expecting some 500 MW would be added via DFC. How much of that has been done till now, sir? Any color you can see?
So I would not be able to give you individual breakup figures of that right now. But definitely, the requirement of power, whether it is for the entire network, IR, etc., is primarily sourced or what? The entire depends on the procurement from states. And where there is no open access, it limits the probability from buying, and that's what reduces the possibility of the fee that we get, the consultancy fee. So the catch is that more and more states, as we can get on open access, opens up or gives us the leg up for larger scalability in terms of the revenue of REMCL.
Can you name the states which have already boarded and some states who?
I wouldn't have the list ready right away, but I can share that with you.
No problem. And lastly, on the rate side, you mentioned, so is the rate at INR 0.05 per unit, or has it changed?
It's about INR 0.07 per unit.
INR 0.07 per unit. Okay. Okay. And lastly, on the wagons, sir, I think we have a separate joint venture on the wagon side. And we have seen the procurement from the Indian Railways for wagons have increased. Even the tenders were also floated. So if you can give any color on the tendering for wagons in the future, and is there a capacity expansion plan for your particular joint venture that you have?
The joint venture at SAIL Kulti is, in fact, last year when we started with the first major turnaround, and then it maintained in FY 25 the profitability. And now also, this quarter, we've got profits. In fact, it was for the first time it started generating, giving dividend, and now also, it's generated profits. We have an order book of INR 480 crores as of 30 June. And so the interesting thing is that JV, SAIL Kulti, is not only getting orders from Indian Railways. It is also getting orders from private players, which it has executed successfully last year. So we see a potential. We have also recently got the design approvals for container flat wagons from RDSO. So now we are pitching for getting orders for manufacturing of these types of wagons from not only Indian Railways but from private players also.
This order book of INR 480 crores is only going to increase in the coming quarters.
Understood, sir. Thank you for giving me the opportunity. I wish you all the best, sir.
Thank you. Thanks.
Thank you. We have a question from Anand B. from Shrey Marvel Private Limited.
Thanks for the opportunity. Again, I just want to get a sense on the dividend payout. So in the last phone call, you mentioned the payout would be around 95% for the current FY 2026. Would you still maintain that dividend payout?
Yes, Anand. You see, our basic business model is that we are a debt-free company with a low CapEx. So we are not a CapEx company. So with that, broadly, our pattern of dividend, if you see in every quarter, and even if you see on the FY basis, and even now, the dividend that we have declared for quarter one is in that range. So we will maintain that trend in the coming quarters in terms of the dividend payout percentage.
Okay. So I think in this quarter, you gave an increment of INR 1.3 per share. At the end of the financial year, what would be the total dividend that you'll be able to declare?
That would be speculative. But going by the trend and my guidance that we will maintain the levels of dividend payout ratio which we have maintained, it also depends on how much profit we're going to make, right?
Yeah. Yeah. Right. Right. Right. Yeah. Yeah. Go on. Go on.
Yeah. No, I said, so we'll maintain that dividend payout percentage in the range that we mentioned. And definitely, that's a basic business model. So, depending on the way we are aiming for the profit levels on the entire FY basis. But this is for sure that every quarter, we will definitely declare some dividend. That's for sure.
Okay. Okay. Thank you.
Thank you. Now, a follow-up question from Harshit Kapadia from Elara Securities .
Yeah. Hi, sir. Thanks again. On turnkey construction, sir, we have seen in the last two years, it has been open for even private sector. So can you just give some understanding on how has been the private sector competition in the turnkey project, and has it impacted your business, RITES' marginalization and aggression coming from private sector? It is still largely you three guys, the PSUs, L&T's are getting the majority of the projects, sir.
No, no. Not at all, Harshit. In fact, this is all these orders across sectors, and as I mentioned, not the rail infrastructure alone, even the building sector. These are open to all players, whether private or PSUs, so we are very clear. We are not bidding as RITES. We are not bidding for EPC tenders. Those are for construction companies to bid for, whether they are private players or other PSUs. We are basically bidding for getting all on competitive basis on tenders, whether in rail infra or building, where primarily the expected scope of work is on a cost-plus PMC type of model where the revenue flows through us, so that's the basic difference between our orders and the other private players or other PSUs.
So yes, even for this, there are a huge amount of competition, but our pickup on the turnkey segment is very focused and very specific in not going into the EPC model.
Understood, sir. Very much, sir. Thank you very much, sir.
Thank you.
Thank you. The next question comes from Parimal Mithani from Credential Investments.
Hello. Thank you very much.
Yeah. Go ahead.
Sir, thanks for the opportunity. Sir, this is regarding a JV with consultancy with DNV business. Can you highlight how the business is in terms of going and what the way ahead from there?
JV with?
The DNV business with the Norwegian company for quality assurance, which we are tied up.
So that's not a JV. That's basically the partnership for that consultancy which we are doing for quality assurance. Yes, we are working on them, and we got some particular.
Continued working with them.
My Director Technical is here in front of me. So that's a partnership really, not a JV. And we had collaborated with them on some opportunities, nothing very substantial in terms of revenue realization. So it's there. It's kind of an MOU which is there for collaboration. And we keep looking on for more opportunities if they come, whether domestic. The aim of that collaboration with them was, if you remember, recall, this was quite some time back, more than a year back, where the quality assurance vertical was reinventing itself to come out of the crisis. And we were looking at various domestic and international partners to complement our gaps which we had in our capability to try and target newer clients. And for that, this was one of the initiatives.
And many such initiatives have resulted in the fact that the quarter that went by, our quality assurance vertical, which I said some time back, has seen the bottom of the barrel, and it has come out of it. And now, we have two-thirds of our quality assurance revenue is from the non-Indian Railways traditional clients. So steps like these have only helped us reach that stage now.
Okay. Thank you. I'll get back in touch with you. Thank you.
Thanks.
Thank you. We have a follow-up question from Anand B. from Shrey Marvel Private Limited.
Thank you, sir. Just shed light on the competition and nomination point of view. So in the last couple of quarters, the trend has been going down from 63% to now, I think it's coming to 63% competition versus nomination. So when you said shed light on, will this trend continue and so?
No. In fact, what you're seeing is a breakup of the order book. If you analyze the fresh inflow, breakup of the competition vis-à-vis the nomination and fresh inflow, a larger percentage, I would say about 65%-70%, are on competitive basis. And this trend is only increasing. The order book breakup, yes, if you're seeing this is slight reduction, but that basically depends on maybe some of the orders on the competition basis, competitive basis have got executed. So that keeps varying. But in terms of an overall feel, just to get you a feel, most of these orders, for example, in the quarter one that went by, we got about 155 orders totaling to about INR 400-plus crores, INR 420-odd crores. A majority of them, two-thirds plus, are on competitive basis.
Okay. Okay. Thank you, sir.
Thank you. There are no further questions. I would like to hand over the call to the management for a closing comments.
Thank you all. I am glad that the questions which were asked really helped us give our detailed insights and in-depth analysis into where we are, how was the quarter one, and what is the way forward for this FY. As I said in the outset, the focus now is on expeditious execution so that this young order book starts generating revenue, whether it is from the export vertical or the consultancy or turnkey, and definitely, by the latter part of the FY, number one, sequentially, you should definitely see an improvement and latter part of the FY, substantial improvement so that overall, definitely, we surpass the figure of last year. That is, in a nutshell, to my mind, the way forward for the coming FY. Thank you.
Thank you, sir. Thank you all for being a part of this conference call. If you need any further information or clarification, please email at investors@rites.com. Ladies and gentlemen, this concludes your conference for today. Thank you.
Thank you.