Good morning, ladies and gentlemen. I am Steve, moderator for this conference. Welcome to the conference call of RITES Limited, to discuss its Q2 FY25 results. We have with us today: Sri Rahul Mithal, Chairman and Managing Director; Sri Arun Kumar Singh, Director of Projects; Dr. Deepak Tripathi, Director of Technical; and Sri Krishna Gopal Agarwal, Director of Finance. At this moment, all participants are in the 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 the 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 Sri Rahul Mithal, Chairman and Managing Director, RITES Limited . Thank you, and over to you, sir.
Morning, everyone. I begin with the Safe Harbor Statement, the presentation and the press release which we uploaded on our website, and exchanges yesterday, and discussions during the call today may have some forward-looking statements. 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 materially different, and we do not undertake to update those statements periodically. To begin with, let me give you a brief overview of the quarter two, and then we leave the floor open for questions. Quarter two has been a tough quarter in terms of the execution. Some of our projects in different geographies were impacted due to various reasons, as you are aware of many infrastructure projects across various geographies being impacted in this quarter.
We are consolidating, and our focus has to be and will be in the coming quarters to continue increasing the execution and the sequential trend in terms of revenue, about 11%-12% from quarter one to quarter two. That is what we will consolidate upon in the coming quarters, so that the effort is to be able to reach as close as possible on an FY basis, as close as possible to the previous FY. In terms of the order inflows, we are quite aggressively moving forward in maintaining our track record of being a one-order-a-day company.
And this quarter itself, we got 90+ orders, totaling to about INR 700-plus crores. And this, in one quarter, was, in fact, equal to the more, in fact, much more than even the entire H1 of previous FY. So we need to keep consolidating our order book, and also, we will continue to focus on increased execution in the balance quarters of this FY. With these broad opening comments, I leave the floor open for questions.
Thank you. Now we begin the question-and-answer session. If you have 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 limit yourself to one question per participant. Time permits, you may join back the question queue. The first question is from the line of Shreyans Mehta from Equirus. Please go ahead.
Yeah, thanks for the opportunity. My first question is, as far as the margins are concerned, I see, sir, after a long period of time, the margins have actually come down below 20%. So just wanted to understand, are there any one-offs during the quarter? And secondly, in terms of how should we see the margin trajectory going forward? That is the first question.
Morning, sir in terms of margin, if you see, we are in the range of about just below 20% EBITDA margins, and PAT margins about 15% on a consolidated basis. We will continue to try and improve. As execution improves in Q3, Q4, there will be a slight uptick in the margin, but we will remain in this range. If you see H1 also, on an overall, our margins are EBITDA margin consolidated about 21%, and PAT margins are 16%. So in the range of about 20% to 21% would be the range that is the range of EBITDA and about 15% to 16% of PAT margin moving forward, even on an FY basis.
Got it. Got it. Sir, and the second question is, as far as our export orders are concerned, at what stage are we?
Please come back in a queue, please.
Sure.
Thank you.
Thank you. The next question is from the line of Vinamra Hirawat from JM Financial. Please go ahead.
Hi, sir. May I intervene?
Yes, go ahead, Vinamra.
I wonder what is the ratio of the order book where the share of nomination and competition orders will stabilize? We're currently at around two-thirds and a third. Where do you see this stabilizing? And are we seeing further margin pressure as nomination orders go up in any of the segments moving forward?
Yeah, Vinamra, so the ratio which you see in the order book is the ratio of the order book. If you see the fresh intake of orders, the ratio of competitors is even higher. It's now in the range of about 70-odd%+ . And this trend is only increasing from quarter-to-quarter. I see this only increasing. It will always remain, I think, 70%+ in terms of competitive on an average-out basis, and it will only increase. In terms of margins, yes, because of this and continuously trying to get more orders also, there will be a stress on margins. But I foresee, as I told the previous caller, that on an average-out basis, I see EBITDA margins hovering around about 20-odd% and PAT margins hovering around about 15-odd% on a consolidated basis.
Got it. Got it. Just another question. Looking a little further out, maybe in FY 2027 and further, I want to know how the export scenario looks. Do we still see?
Sir, you can come back in a queue for the second question, please. Thank you.
The next question is from the line of Viraj from Jupiter Financial. Please go ahead.
Yeah, good morning, sir. My question is about exports only. Can you give some color on how it has been panning out? I understand we got three orders so far, and the execution timeline? That's my question.
Morning, morning, Viraj. So we started breaking that hiatus of about three to four years of no export order. We got the first order of about INR 300 crores in Q4, second order of about INR 900 crores in Q1. In Q2, we got another order of South Africa for INR 35 crores. And in Q3 also, in the one month or so which has happened, we've got another order of about 50-odd crores from South Africa. So we are trying and breaking that gap. We are continuously now getting orders.
The average timeline, and some of these are locomotive and some of them are coach orders, like the Bangladesh INR 900 crore plus is a coach order. They have a finite timeline. What we are definitely expecting is that the first revenues from these orders will start coming in by Q1 of next FY. And most of these orders will generate a substantial revenue if you see the entire next FY. So the effort of trying to continuously keep on now getting orders, at least our aspiration is to get one export order, at least one in every quarter. And then by next FY, the existing orders start generating revenue.
Mr. Rahul, regarding export only, how is the Bangladesh export panning out because of the geopolitical uncertainties there?
It is an EIB-funded project, so there is no problem in terms of the funding. All necessary approvals, paperwork is in place. The design approvals are going on for the prototype. The setback was only temporary for a month or so. So the timeline has slid by about two, three months. So what we were aiming to somehow slip through some coaches by Q4 or early Q1 may slide by a few months, but it's on track.
Okay. Okay. Thank you, sir. I'll come back in a few.
Thank you. The next question is from the line of Parimal Mithani from Credential Investments. Please go ahead.
Sir, thank you and good morning.
Yeah, go ahead. Morning, Parimal.
Sir, I just wanted to know, sir, the reason for quality assurance is due to the competitive nature, or how do you look at it in that?
Yes, I'm glad you asked that, Parimal. You see, we were doing quality assurance for the good margin, high revenue source of revenue for us for the last nearly five decades, and more than two-thirds of this was from Indian Railways as a client, and this was on a nomination basis with a good margin. Early last year, the work was divided for the first time to an open tender between four players, so the volume went down by 30%, came down to about 30%, and the rates came down to about 20% of the rate, so you can see a double hit, and these orders, against the new contract, the inspection call started hitting in by the latter part of the last FY, and now that is the new rate, so that's why this has given us a hit.
Having said that, parallelly last year itself, from early last year, we started diversifying into a lot of number of other clients in the QA business. And if you compare from last year within one year, what used to be about 60%+ or two-thirds of IR as a client, in this Q2, it is down to about it's become reversed. About 40% as IR as a client and 60%+ as non-IR as a client. So we have taken work across a number of non-IR clients, both domestic and international. We got a first order from Sri Lanka. So with this, in the coming quarters, our aim is to come back, at least in terms of the total revenue from this stream, to the pre-early last year levels pre this tender.
Okay, and sir, just follow up on that.
Yeah, go ahead.
Sorry to interrupt, sir. The current participant has been disconnected. The next question is from the line of Manan Poladia. Please go ahead.
Hi, sir. Am I audible?
Yeah, go ahead.
Sir, just a question. Since you said that our split of business from IR to outside business has switched, is that also something that has a bearing on the margins? Were we getting better pricing for the railway business that we're now getting within the outside business that we're trying to do?
Yeah. So specifically talking of the QA stream of my business, right? We do a lot of other work for IR also. This is QA stream, the inspection stream of revenue, which, as I said, was about two-thirds IR and one-third non-IR. And obviously, now that we are diversifying and have been doing it in the last year or so, taking orders across non-IR, the margins have taken comparatively a huge hit. The rates have also gone down substantially. And if you analyze that, that is one of the main hits if you compare YoY.
All other streams of revenue, whether it is project consultancy, leasing, turnkey, etc., have been steadily growing. They have reached all-time highs, in fact, in some quarters. The hit has been due to contribution, a dip in contribution from this particular stream of revenue. As I mentioned to one of the earlier callers, the export revenue, which has not been there for the last few quarters, which is expected to pick up by next FY.
Right, sir. I understand that. Just a second question on the REMC bit.
I'm sorry to interrupt, sir. Please come back in the question queue for further questions. The next question is from the line of Shreyans Mehta from Equirus Securities. Please go ahead.
Yeah. Thanks for the opportunity. Sir, coming to FY 2025, as you said, probably export orders traction should start from FY 2026. So how should one look at FY25 in terms of revenues, given that export orders wouldn't be there? And second follow-up would be, once the export orders start trickling in, will the working capital cycle be similar to what we had earlier, or would there be any changes?
I didn't get your follow-up. When the export orders keep coming up, I didn't get that.
When the export orders start contributing to FY 2026 onwards, will the working capital cycle remain the same as we had earlier? How will the working capital cycle work?
In terms of FY 2025, as I said at the outset, the focus now is that normally Q3, Q4 gives the best execution for infrastructure projects. The aim is to really step on the gas and execute all our infrastructure projects. We've got a huge order book now, and we are growing not only in the order book, but as I said, the focus has to be increased execution, both in the consultancy as well as the turnkey, so that we come as closer to possible as the previous FY. As far as export revenue started, it will definitely start coming in by early next FY.
This large order book, which is now about 1,300-odd crores of export orders, plus some orders will come up also. In terms of that, they will start generating revenue in next FY. The working capital requirement for exports has been hardly any. That's been our traditional model, which we have been doing export of rolling stock traditionally. Working capital requirement has been minimal and will remain in that range.
Got it. Got it. That's it from my side. Thank you.
Thank you. The next question is from the line of Vinamra Hirawat from JM Financial. Please go ahead.
Sir, my question was regarding execution and sales. So can we know why execution has been low across multiple geographies? Like you said in the introduction, is there anything other than the monsoons and any possibility of our sales having been impacted due to lower government spending than expected in the first half of this fiscal year?
I don't think there is any substantial reason except the reason that you pointed in terms of infrastructure. There have been certain geographies which were definitely impacted due to the rains, etc. But if you see Q1- Q2 sequentially, we have tried to step on it, and there has been about 11%-12% growth in the operating revenue. But yes, if you compare YoY, it is definitely lower, about 7% or lower. So we need to, and as I said, Q3, Q4, we will be able to definitely the visibility is quite clear in terms of execution at the ground level. There doesn't seem to have any major finite substantial reason why they should not get these projects. The execution level should not improve in Q3, Q4.
So it's not because of low government spending. It's more because of just monsoons and geographies?
No, no, no, not at all. We have got all our we have about 600+ orders of consultancy and turnkey across totaling to the 6,580 crores. And this definitely is these are just in terms of, you see, the factor which you saw across certain geographies across the country. And so I don't see any problem at all in stepping up and seeing at least minimum. We've already seen Q1- Q2 about 11%-12% growth. I see in terms of execution, even a bigger substantial execution growth moving sequentially.
Okay. Thank you.
Thank you. The next question is from the line of Viraj from Jupiter Financial. Please go ahead.
Yes, sir. My question is on the export order only. So you said INR 1,300 crores of the export order. Would you execute over what period of time, sir, once it starts from FY 2025?
You see, Viraj, normally locomotives take about, on an average, 18 months, and coaches about 15-odd months. These orders are locomotives and coaches. And the coaches one for Bangladesh got affected by about, let's say, three to four months. So putting that time frame of about 18-odd months, and these orders are already in our kitty, I think next FY we have a bright chance of executing a substantial chunk. Our aim would be to, I would say, rather than putting a specific percentage, but the 1,300-odd crores, we would like to execute a substantial chunk of it in the upcoming FY.
And to follow up on that, the margins on the export orders would be in range of 25% limit and 20% cut since it's export orders?
No. In fact, this is definitely in fact, maybe I've explained that earlier when we've got these orders for the first time breaking a hiatus of about three to four years. Most of nearly all the export orders which we have got in the last four to five decades have been through the line of credit through Exim Bank tenders, which were primarily more or less on a kind of a nomination mode. The line of credit has completely become dry for export of rolling stock in the last three to four years.
All these orders which we are getting are non-line of credit orders through a competitive global tender bidding mode. It is, like I said, the Bangladesh order is an EIB-funded tender where there was huge competition across countries. So obviously, those levels of margins are in no way possible moving forward in the export stream. The margins will definitely be better than the turnkey segment, but definitely not in the range of the traditional export 25%-odd margins.
So, what would be the margins in that case? Would be in what range? Would you some indicative range?
They would. It's premature. Each of these have been bid at different margins. And the aim would be to execute them quicker so that we get margins even better than what we bid at. So it will be very difficult right now to peg one figure. Each one of them has different levels of margins. But for sure, I mean, in terms of very clear clarity, they are definitely well below 25-odd%.
Okay. Thank you.
Thank you. The next question is from the line of Parimal Mithani from Credential Investments. Please go ahead.
Sir, in terms of follow-up to the quality assurance business, you launched this thing called RITES. So, how does it help in terms of, can you explain that, sir? Is it going to be margin attributable to us?
Yes. I'm glad, Parimal, you asked this question. This is a very important initiative from us for getting cutting-edge technology across our areas, and QA being a very important area, this is basically the use of AI for inspections of rail at our Bhilai plant, and this is a very good start. First of all, it improves the quality of inspection. It's a very important safety-related aspect, and these are early days.
It is to get in this technology to first improve the quality and then be able to use this technology not only in rail but other safety items that we inspect, and then that is a time when we'll be able to capitalize on this, both in domestic and international market, that AI-based inspection so that they start generating more and more profitable orders. Right now, these are early days. It is a very good initiative of try and have a breakthrough in using AI for this safety item inspection.
Okay. Thank you. I'll come in the future.
Thank you. The next question is from the line of Manan Poladia from MKP Securities. Please go ahead.
Sir, my second question was on the REMC business. You had said that we are putting out tenders for the 700-megawatt, I think, plant. I was just wondering if there is any update on that and if you could also tell me how they are thinking of the REMC business for, say, the next three to five years going forward, what sort of capacities are we looking at?
In terms of the REMC business, it has been performing well as you would have seen. It is successively growing and giving profits. It has given a dividend of about 20-odd crores profit in this quarter, also giving good dividend to RITES and IR. We finalized one tender for 900 MW. The 600 MW is also finalized. The PPA is being done. As of now, the 695 is being reviewed.
Okay. Understood, sir.
Thank you. The next question is from the line of Uttam Kumar from Axis Securities. Please go ahead.
Yeah. Yes, sir. Good morning and thanks for the opportunity. Sir, what is our current status of Zimbabwe order that we got around INR 500 crore? Any update on that?
Yes. Morning. So the Zimbabwe, as you would be recalling, the Zimbabwe was an agreement signed last year. It is about INR 800-odd crores. It's about INR 700-odd crores. We did not enter it into our order book. Considering that it was a clause in the agreement that it is subject to funding from the Afre ximb ank, we have been continuously having deliberations with the NRZ and Afre xim bank. We are quite hopeful that the way it has been moving forward, they have had some basic in-principle approvals in place. However, we are stepping cautiously. We don't want to expose or take any liability till the clear funding letter comes from Afre ximb ank. But the way things are moving, I am hopeful that this should mature in the coming months.
Okay, sir. Thanks a lot.
Thank you. The next question is from the line of Gaurav, an individual investor. Please go ahead.
Hello. Am I audible?
Yes, Gaurav. Go ahead. I can hear you.
Hi, sir. Thank you for taking my question. My question was on the export fund. Like you said, a major chunk of the order book will be executed during this year. So what number can we expect at the end of the fiscal year, and how do you see it going forward?
So as I said, Gaurav, our order book of export has been signed now. It's about INR 1,300-odd crores, and we expect that this will start catching revenue by early next FY because in the export stream of revenue, it's only when a sizable lot is manufactured and it's shipped out and we get the bill of lading that we recognize the revenue. So the recognition of revenue will start sometime early next FY. And considering an average lead time of about 18-odd months, 18 to 20-plus months for manufacture of locomotives and export and for coaches also, I see that the 13-odd crores, if you calculate backwards, would, as I said, substantial amount would get booked in the next FY.
Okay. Thank you, sir. Thank you so much. I'll get back in the future.
Thank you. The next question is from the line of Vishal from Antique Stock Broking. Please go ahead.
Yes, sir. Thanks for the opportunity. One question on the margin export. So, quarterly year share margin is a bit elevated. Is this the margin front? So, is it clear to see?
I can't hear you clearly. I've lost you.
Yeah. Is this better now?
Yeah. Yeah. Go ahead.
Yeah. So on the margin front, for a turnkey segment, on a quarterly basis, we are seeing roughly clocking in like 1.1%-odd. So is it fair to say probably this is kind of a new run rate for turnkey for us, turnkey margins for us?
You see, yes. Turkey business by itself hovers around about 2%-3% margin. This one has been substantially lower because most of these projects are now many of them are in the final execution stages, especially the IR projects that we were doing like electrification, etc. So at the latter stage where the execution is there and most of the material has come and the revenue has been booked, so margins go down. But then normally, on an overall basis, turnkey projects would hover around about 2-odd, 2%-3% maximum.
Okay. So this first half run rate of 1.1, so I mean, is expected to move up to roughly like two, two, maybe like three. Is that a fair way to understand?
Yes. As the older lot of turnkey projects finish and the new orders that we have get, as they start their execution, and there is some overlap also of some of the earlier projects coming into Q3, Q4, it will definitely creep up slowly. And on an average basis, if you see turnkey projects, they would hover around about 2-odd%.
Right. So if I may ask one more, I think you did mention your order book has 63% on a comparative bidding. So segment-wise, I mean, how exactly it will share? Where we have a nomination, where exactly the full order book is comparative bidding? So between turnkey, export, and consultancy?
You see, again, as I mentioned, 63% is the current order book. The fresh orders are all about 70% plus on competitive bidding. As I mentioned to one of the previous callers, all the exports are all on competitive. The consultancy also is hugely on competitive basis. So they average out around about 80% of these are competitive basis. Where we may be still getting some orders on nomination is in our leasing business, where traditionally there have been some clients who continue old PSUs where we've been working some. But that's also opening up, and there is now about a 50%-60% competitive. So on an average, it is fresh orders are all about 70%-75% on a competitive basis.
Sure. So yeah, that's all from my side. And thank you for all the answers. Thank you.
Thank you. The next question is from the line of Vinamra Hirawat from JM Financial. Please go ahead.
So sir, breaking our export orders high, it has been great news. I want to know how exports order inflows will look two, three years down the line. Are we still going to see close to 1,000 crore order inflows like we have this year? Or with our push on competitive orders, can it even go higher in a couple of years, our order inflows than it has been this year, which is the first year we've broken our export high it is?
Thank you. I'm glad you asked this question. A very favorite pet area of mine because it's required a huge lot of effort to do a lot of business re-engineering to be able to compete in the global market and get orders for the first time in five decades on a global tender basis, and having broken that and now tasted blood, we are moving forward and trying to get orders, whether big or small, in every quarter, so subsequent to that, we got some orders, 30 crores, 40 crores from two orders from South Africa. And these were for in-service diesel locomotives, which had to be modified to their gauge, Cape gauge, and exported. There's a huge potential in that for a large number of in-service locomotives lying with Indian Railways, where we are looking for markets to export them.
And now, getting the hang of how to gather market intelligence for global tenders, I definitely see this picking up again because we have re-engineered the way we are tackling the export business and not only waiting for the line of credit opportunities, which have hardly come in the last three to four years. There'll be no line of credit, export, or rolling stock opportunities. So I see this growing on a steady basis in the coming years.
Got it. And you expect margins to be around 20% in the segment, right?
I didn't mention any margin for export. I mentioned an overall margin that we are aiming that the current levels of EBITDA of around 20-odd% and PAT around 15-odd%. That's our aspirational targets, and we hope that even though with the changed business scenario and the extreme levels of competition, which within one year, the fresh orders we used to get about within a year itself, it has changed from about 50-50 to about 70%+ on competitive basis on an overall across my vertical. So that's the level of margins that we are aiming that we should be able to aim to secure.
Got it. Thank you.
Thank you. The next question is from the line of Viraj from Jupiter Financial. Please go ahead.
Yes, sir. With all these agreements and export orders all coming in, what will the FY 2026 look like? Any guidance on that would be?
You see, this year was and will be the toughest year for us, as we had said at the beginning of the FY. It's a year of consolidation. We are trying to increase and improve the execution in Q3, Q4 to come as close as possible on an FY basis to the previous FY. As you correctly said, with the export stream contributing in FY 2026, I definitely see a double-digit healthy growth vis-à-vis the current FY in the next FY.
You mean in terms of revenue, right? Top line with double-digit growth?
Yes. Definitely in terms of top line because that's, as you see, the order book from export itself will contribute a substantial amount with literally a zero contribution in this FY in terms of exports. So that itself and other streams have been continuously growing. Project consultancy has been growing. Turnkey has been growing. So in terms of FY 2026, we should see a substantial healthy growth vis-à-vis FY 2025.
Sir, color on Etihad? The MOU with Etihad will be for what?
Raj, I request you to come back in the queue for the next question.
The next question is from the line of Harshit Kapadia from Elara Capital. Please go ahead.
Hello. Hi. Good morning, and thanks for the opportunity. I know, sir, we are having some difficult times at this point in time, and I think you are doing a very good job sailing through this difficult time. Just a question from my side. Is the worst over as far as quality assurance concerned as far as in terms of growth? And if you can also give a number for the quarter in terms of what is the quality assurance number compared to Q1 last year?
Yeah. Morning, Harshit. Thank you for understanding the tough fight which our entire team was giving. And I think whether it is in quality assurance or export or in terms of all our streams of business, it is only upwards now, which we have been aiming at the beginning of this FY. Sequentially, as you see, we've been growing about 11%-12%, and definitely our sequentially growth will be higher as we move on to Q3 and Q4. In terms of quality assurance, this was quite a substantial business. It's part of our consultancy revenue, so it's not fair for me to break it down separately and be able to give you the figures.
But our internal analysis shows that the worst in quality assurance is over in terms of the fact that the new regime of orders as per the revised rates from Indian Railways has kicked in from latter part of last FY. So the last two quarters, three quarters, which revenue from IR we are getting as per the new rates. Parallelly, all our efforts last year of diversifying into non-IR clients, we have tipped the balance, and as I said, two-thirds-plus now is non-IR clients in terms of our revenue as well as order book. And vis-à-vis early last year, where it was the reverse. So our effort is that the levels of QA revenue, which you are seeing, which has now come. This will only increase now.
We got our first revenue, international QA from Sri Lanka, our revenue from PM Vishwakarma, revenue from GeM, and a number of non-IR across states, whether it is Jal Jeevan, whether it is solar energy, whether it is various other infra from various municipal corporations, which we are doing process and product inspection. This is only adding, and the QA revenue is also in an upward swing now, starting from this quarter itself.
That's great to know, sir. I have a few more questions. I'll join in the question queue. Thank you.
Thank you, Harshit.
The next question is from the line of Parimal Mithani from Credential Investments. Please go ahead.
Also, thanks for the opportunity. Sir, is it fair to assume that what the worst has to be done is over with in terms of quality assurances, export, and other line of business, and the traction ahead is going to be more, especially in exports?
Yes, for sure, Parimal. And I'm not saying it only just out of thin air. It is in terms of numbers that the worst in export is in terms of the number that we have now, about INR 1,300-odd crores of order book, which are the first of these was received in Q4, which is already now about seven, eight months. Sorry, about 10 months old. So these will, and considering even the most conservative lead time of delivery from 18 months+, these will start generating. These orders will start generating in the coming FY. And the strike rate of getting export orders is not only one order, which was in Q4, which was the first order after a gap of about three, four, four years. The orders we have been flowing in. So as far as export is concerned, as I said, definitely the numbers speak for itself. The worst is over.
In terms of revenue realization, yes, they will start generating revenue only next FY. In terms of QA, as I explained to Harshit just now, in terms of diversification of the order book, that effort has borne fruit in the last about three-to-four quarters. And these new non-IR orders have started generating revenue. And in Q3, Q4 onward, the QA contribution is only growing and increasing. Yes, obviously, not at the levels of margin which have been there traditionally for four-to-five decades, but in terms of total volume, this is now only an upward trend in the coming quarters.
And, sir, just to follow up, in terms of exports, if we get the Zimbabwe order, it will be INR 2,000 crore by the end of the year, right? If we add that to that entire thing?
The value of that was about $80 million-odd . So let's see in terms of when, as I said to one of the callers, that we are pursuing, it is moving on the right track, but we will only add it to our order book when the clear funding letter comes from Afre ximb ank, which we seem to be making a headway, but it is moving. Hopefully, in the next few quarters, it should mature.
Sir, thank you. And all the best, sir. Thank you.
Thank you.
The next question is from the line of Vivek Rathi, an individual investor. Please go ahead.
Hello, sir. Thank you for taking my call, sir. So just looking at the presentation, I see the consultancy, as you mentioned also in this conversation, that it has gone down revenue, but I see more dip in profit compared to revenue. I think revenue is somewhere down around 7.4%, but profit seems to be down around 20-odd%. Is this because, as you said, non-IR consultancy revenue is less as we got compared to last few decades? Or is there any other reason?
No, very correct. You see, consultancy has the. Shown in the presentation. So the terms of contribution from Indian Railways as a client, both in terms of value as well as in terms of margin, as I said, it got divided between four players. So that's when our revenue came down to about 30% from what it was about a year back from IR. The rates came down to 20% of what were the earlier rates. So that's a double hit in terms of revenue as well as rates. And the deployment for inspection across the country for the various orders remains more or less the same.
So that's why a hit on the bottom line also from this stream of business. However, as I said, having said that, we have managed to generate a large number of non-IR clients and our first international order also on QA. So to that extent, that has been the hit in the consultancy, both in the top line and the profitability in the, if you see the overall consultancy figure.
Yes. Thank you, sir. Just a follow-up. So I mean, as you said, we are moving in the right direction. So do you have any timeline or any expectation where the margin may revert to the previous figures, or that is not really known currently? We can foresee.
Not only in QA, but overall because of the various factors which I pointed out, like the huge increase in competitive bidding, both domestic, including our export competitive global tenders, the current levels of EBITDA of about 20-odd% and PAT margins of about 15-odd%, that is the realistic levels of margin which we see a visibility, which is what we'll aim for.
Okay. Thank you. Thanks a lot.
Thank you. The next question is from the line of Vinamra Hirawat from JM Financial. Please go ahead.
So sir, you spoke about AI-based quality assurance, which can increase our consultancy revenues going forward. Is this a USP that we have, or are our competitors also getting into this? And if they aren't yet in AI-based QA, is there anything stopping them in the future? So do we have a moat of any sort? Any color on this?
You see, Vinamra, AI is a technology which every entity is using in various facets. There are a large number of our competitors in the QA business, and I'm sure they will and are working on AI. We gave a lot of importance and, as a first-mover advantage, started applying this for inspections of rails, which is one of the most safety-related products.
So at our inspection with the SAIL Bhilai plant, we have introduced this, and the experience that we gave, we are already wanting to extend this to other products and keep safety processes and products, and I think this early-mover advantage will give us advantage, but I'm sure others will definitely opt for it. There is a competition in that. But you see, AI-based inspection coupled with our technical experience of four to five decades of these, whether it is rails or wheels or many such safety products, this definitely gives us an edge in terms of QA business as a whole in terms of our USP.
Got it. Thank you.
Thank you. The next question is from the line of Viraj from Jupiter Financial. Please go ahead.
Yes, sir. My question is about this MOU with Etihad Rail. Any color on that in terms of what is it for this IMEC corridor, or any color on that would be helpful?
Yes, Harshit. So Etihad Rail is now, in the last few years, very aggressively expanding, not only the rail network in UAE, but across the Middle East, whether it is Jordan, Qatar, Oman, etc. It's comparatively a young organization, but in the last few years, it is expanding and executing a large number of not only, as I said, UAE, but cross-border rail infra projects. So this was a very good, important strategic breakthrough for us. We have entered into an MOU with them for about five years for rail infra projects, not only for consultancy, not only in UAE, but across the Middle East, as well as they expand in other geographies also. So I see a huge potential for leveraging this MOU in the coming months.
Is this in the field of consultancy? Not exports, right?
Yeah. This is consultancy for so it's an overarching MOU, which covers all areas of our expertise, whether it is consultancy in rail infra network, whether it is export of rolling stock as their requirement increases because they are expanding. The rail network is very young. For passenger, there is hardly any rail network. For freight, now they have started connecting their key ports for container movement in a big way. So the requirement of rolling stock for both UAE as well as other geographies is also an opportunity which is covered in this MOU.
Okay. Thank you. And all the best, sir.
Thank you.
The next question is from the line of Harshit Kapadia from Elara Capital. Please go ahead.
Hi. Thanks for the opportunity. Sir, just to check, we had tied up with BEML for the Bahrain Metro project where we were going to do the consultancy part. Any update on that, sir? Where are we in that particular stage?
No, I think there's some factual error in that. We didn't tie up with BEML for Bahrain Metro. We had done a consultancy for Bahrain Metro. We have an MOU with BEML for various metro rolling stock projects. We are working closely with them, exploring various opportunities across other geographies.
Okay, and sorry to hop in on this margin question, but if you look at even last few quarters when your quality assurance business was falling, your domestic consultancy margin business was about 40%. But in this quarter, it went down below 35%. So is there any projects on consultancy side on the domestic side, which is also moving towards a lower margin? Is that a correct understanding? Or maybe this quarter is some one-off, and from next quarter will again may rise to 40%+ ?
No. Consultancy all streams of revenue, whether it is consultancy, whether it is export and QA, whether it is turnkey. The fact of the matter is, at every quarter, the percentage of bids which we are getting on a competitive basis is increasing steadily. It is now inching up nearly up to 75%, 70% plus. And even the balance about 25% toward orders that we are getting on nomination from overseas clients, even they, for every nomination order, there is a huge amount of revisit of the overseas agreements for lower rates and lower.
So that's why, and as I said at the outset, we are maintaining a rate of one order a day. There's a huge inflow of orders in quarter two itself, and even the one month of quarter three, we have got orders of INR 650 crores already in one month in this quarter three. So for being able to keep on expanding the order book, yes, the margins of even in consultancy of 40%+ on a competitive mode is definitely not possible to be maintained. Hello?
Hello, Harshad?
Hello. Sorry. Yeah, sorry. Thanks for the answer. Just on the employee cost has been on the.
Oh, I think you'll come back in at Q4.
No problem. Yeah, sure, sure. Okay. Thank you.
Thank you. The next question is from the line of Vivek Rathi, an individual investor. Please go ahead.
Thank you again. Also, just follow-up, sir, on my last question. I mean, you said there are now consultancy revenue divided among four different entities. So who are the other ones, sir? I mean, now they are a new competitor, right? Because previously, it was on nomination basis. Now there's four other entities.
Yeah. So it was divided. It's a tendering process between three or four players. The other player that TÜV SÜD, Intertek, and Bureau Veritas.
Can you repeat that, sir? Is TÜV SÜD?
There are four players now in the QA business for Indian Railways. Besides RITES, which has got 30% of the total pie, it is TÜV SÜD, Bureau Veritas, and Intertek.
Okay. Thank you.
Very good.
Thank you. The next question is from the line of Harshit Kapadia from Elara Capital. Please go ahead.
Yeah. Hi. Thanks for taking my question again. So just you have recently got an order from DMRC for INR 35 crores for retrofitting of this O&M business. Can you just elaborate on what is this order and what is our scope and any more future orders expected?
Yeah. So you see, we are our expertise in design and export of rolling stock. So we have a very strong rolling stock vertical, which has been customizing, designing rolling stock over the years for various clients. And that's why we leveraged this expertise and experience as DMRC was looking for retrofitment of its first coaches, which were the earliest about 20-year-old coaches, which came in early 2000. These are about 22 rakes, about 176-odd coaches, which require now mid-life refurbishment for upgradation to the latest, whether it is in terms of technology, latest in terms of the interiors, and all over.
So that is a very good potential for us, and we have got this through a competitive mode and in partnership with expertise entities who have certain areas of expertise in the total pie. So our share in that is about INR 36-odd crores. We see this as a good opportunity because DMRC, being one of the oldest metro systems, more of their rolling stock will require this mid-life rehab in the coming years and definitely moving forward other metro systems across India.
Understood, sir. Secondly, on employee cost, we have seen a rise.
Can you come back in a few, please?
Yeah. Sure, sure.
So if there's no one else, Harshad, you can come. Yeah. Moderator, is there anyone else, or if there's anyone else?
No, sir. There's no one else. Harshit can.
Harshit can come back again. You're asking a follow-up question.
Yeah. So, hello.
Yeah. Go ahead, Harshit.
Yeah, sir. So basically, on the employee cost, we have seen a rise. Would that be correct to say that since you're getting more consultancy orders or one order per day, you are increasing your headcount? And if you can also highlight which areas are these employees being added to within the four or five verticals that you have?
Yes. I'm glad again you asked this question, Harshit. You see, that's a very strong strategic call that we have taken that, in spite of the tough pressures on top line and bottom line, because we are expanding our order book very aggressively, there is a certain time where this time where you're holding on, and you need to build up your strength to be able to execute the fresh orders. So if you compare, within a year itself, we have inducted about 300-plus people.
And besides the superannuation of about 100-odd people, our net addition in employee strength has been about net 200. So this 200 strength, we have increased, obviously increasing the employee cost, even though there have been, as I said, challenges on the top line and the margin. So these are all the engineers, graduates, post-graduates with areas of specialization ranging from design, from architecture, from town planning, etc. And these are primarily very carefully identified based on the order visibility and the future visibility of orders that we have in our order book.
Understood. Understood, sir. Thanks for answering the question, sir. Wishing you all the best.
Thank you. Thank you, Harshit.
Thank you. As there are no further questions, I would now like to hand the conference over to the management for their closing comments.
So thank you all. And as I said at the outset, the focus on the H2 is to step on the gas to increase the execution to the maximum, to come as close as possible to the previous FY levels. And then definitely on this platform, see a sizable and appreciable growth in the coming FY. The trend of fresh order inflows is encouraging. As I said, in the quarter three itself, within a month, we have got orders up to 600 crores plus. And this is being possible by our increased partnerships, collaboration, diversification, both domestic and international. So in the last few months, we signed an MOU with Etihad Rail, domestically arrangements and MOUs with NHAI, NBCC, NMDC, DMRC, SAIL, HUDCO, across the board.
So with that, we definitely see we are confident that we will continue to leverage our strength for expanding our order book on a steady basis. And currently, the order book at 6,580 crores has a visibility of about two and a half odd years. Our aim would be in the coming quarters and the next FY, even with the increased execution, to keep on expanding the order book and aiming to have an order book of at least a three-year visibility. So that's, in a nutshell, the way forward as we see it. Thank you.
Thank you all for being part of the conference call. If you need any further information or clarification, please email at investor@rites.com. Ladies and gentlemen, this concludes your conference for today. Thank you.
Thank you.