Good evening, and welcome everyone to this earnings call post announcement of Q3 and nine months FY 2025 results of VA Tech Wabag Limited. On the call today from the management team, we have Mr. Rajiv Mittal, Chairman and Managing Director, Mr. Skanda Prasad Sitaraman, Group Chief Financial Officer, and Mr. Shailesh Kumar, Chief Executive Officer, India Cluster. Kindly note that during this call, the company may certain forward-looking statements concerning the business prospects and profitability, which may be subject to risk and uncertainty, and the actual results may materially differ from those in such forward-looking statements. This conference call will be archived and a transcription will be available on the company's website. The company's result update presentation has been uploaded on the website and stock exchange, which provides an overview about the core offers and analysis of results for this period.
We trust that you had an opportunity to look through the same. As a reminder, all participant lines will be in listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. We will start the opening remarks from the management, post which we will open up for an interactive question and answer session. I now hand it over to Mr. Mittal to take you all through the key business highlights. Over to you, Mr. Mittal.
Thank you. Good evening, ladies and gentlemen. We extend a very warm welcome to you all to this earnings call, post announcement of Q3 and nine-month FY 2025 results of VA Tech Wabag Limited. Your continued support and engagement are crucial to our growth journey, and we appreciate your presence today. Joining me today for this earnings call is Mr. Skanda Prasad Sitaraman, our Group CFO, and Mr. Shailesh Kumar, our CEO for India Cluster. I would like to begin with the great news. India Ratings and Research, a Fitch Group company, has upgraded Wabag's long-term rating to IND AA- with a stable outlook. This milestone further strengthens stakeholders' confidence and reaffirms our position as a trusted global leader in water technology.
We continue our growth trajectory into our financial performance over the past nine months, reflecting our focus on delivering profitable growth through expanding our presence in international markets, strengthening our foothold in industrial segment, advancing our expertise in cutting-edge water technology projects, growing our engineering and procurement business, and enhancing our focus on long-term O&M contracts. Consistent with our strategy, nearly half of this nine-month revenue has come from international geographies. Our operation and maintenance business contributed 19%, and we continue to maintain a healthy revenue mix of about 70/30 between municipal and industrial segments. As a global leader in advanced water technology, our order intake is primarily focused on desalination, water reuse and recycle, effluent treatment projects.
With our continued focus on emerging markets and efforts of our agile go-to-market teams, we have secured four significant orders in the last quarter, two from Middle East, one from Africa, and one from India. We have secured a significant consortium order worth approximately INR 3,251 crore for 200 MLD AI Haer Independent Sewage Treatment Plant in Riyadh, Kingdom of Saudi Arabia. This project is being developed by Miahona Company in partnership with Marafiq and NV Besix SA for Saudi Water Partnership Company, the principal offtaker for water and wastewater projects in Kingdom of Saudi Arabia. Wabag is a technology partner and also a leader of consortium, will design and build the plant while consortium member Mutlaq Al-Ghowairi Contracting Company will undertake the scope of laying the transmission pipeline and construction of reservoirs.
We were awarded this repeat order by Miahona Company Consortium, a respected client, recognizing our four decades legacy in Middle East, our technically superior proposal, and our proven execution capabilities. This order win marks another key milestone for us in Saudi Arabia and reinforces our leadership position in Middle East region. Wabag has further strengthened its O&M portfolio by securing seven years operation and maintenance order worth approximately INR 121 crore for BAPCO refining industrial wastewater treatment plant in the Kingdom of Bahrain. With this order win, Wabag has reinforced its technological excellence and unwavering commitment to deliver world-class water solutions to the oil and gas sector globally. We have secured a prestigious design, build, and operate order in Zambia worth approximately INR 700 crore from Lusaka Water Supply and Sanitation Company. This project is multilaterally funded by the European Investment Bank and KfW of Germany.
The engineering procurement and construction phase will be completed in 36 months, followed by 24 months of operation and maintenance. We have recently also secured an order from Chennai Petroleum Corporation Limited towards design, engineering, supply, fabrication, installation, and commissioning of desalination water pipeline will further strengthen our industrial water portfolio. The project is worth INR 145 crore to be completed in 12 months. During our Q2 call, we had informed you all that Wabag is a preferred bidder status for projects worth approximately INR 3,500 crore. We are pleased to report that we have already secured 75% of these opportunities into confirmed orders. We remain on track with our target and expect more orders in the coming months.
With a robust order book exceeding INR 14,200 crore, we maintain a healthy mix of 58% EPC and 42% O&M projects, and a 40-60 split between domestic and international projects, with most contracts having secure payment terms. Further, our strong order book and pipeline visibility instills confidence in our ability to continue to grow and create long-term value for our stakeholders in the years to come. Looking ahead, we are further enhancing our presence and efforts in the emerging markets like Middle East, Africa, Indian subcontinent, Southeast Asia, and CIS countries. I would also like to share some updates on our key projects. Our prestigious 400 MLD Perur desalination project in Chennai, funded by JICA, is progressing well. Engineering activities are in the advanced stage, deliveries of equipment have commenced, and civil work is progressing in full swing.
Year 2024 marked a milestone for Wabag as we celebrate our 100th anniversary. We commenced the centenary celebration with a grand event in Vienna in August 2024, followed by mega events in Riyadh in September 2024, and in Delhi in November 2024. The grand celebration to conclude the series of centenary events we held across the world will be hosted this month in Chennai, where we will honor our customers, business partners, bankers, stakeholders for their unwavering support. As we move forward, Wabag remains steady path on its commitment to build on its century-old legacy, driving excellence in water treatment sector by integrating innovation, cutting-edge technology, and strategic resilience. We continue to develop advanced sustainable solutions that address the world's growing water challenges. Our expertise in high-technology water treatment enables us to provide state-of-the-art systems for municipalities and industries, ensuring access to clean water and safe water.
With strong focus on sustainability, digital transformation, and operational efficiency, we are well-positioned to expand our global footprint, foster long-term partnerships, and contribute to a water secure future for generations to come. I extend my sincere gratitude to our investors, partners, and stakeholders for their continued trust and confidence in Wabag. Your support drives us forward as a global leader in the water sector. Now, I hand it over to Skanda to take us through the financial highlights. Over to you, Skanda.
Thank you, Mr. Mittal. Good evening, everyone. I hope you've had a chance to review our results update presentation, which has been shared on our website and with the stock exchanges. I'd like to reiterate and share the happiness expressed by Mr. Mittal about the upgrade of our long-term rating to AA- with a stable outlook. This upgrade strengthens our market perception, increases business opportunities, and reinforces stakeholder trust, positioning the company for sustainable growth and success. It is worth noting that we are already rated highest in the short-term rating at A1+. We have experienced consistent rating and outlook upgrades over the last four rating cycles, which reflect Wabag's leadership in the water treatment sector, strong revenue visibility, continued focus on profitability and carry, and an asset-light approach.
Before diving into the numbers, I am pleased to highlight that we continue to progress on our profitable growth trajectory with PAT growing at a rate faster than revenue in line with our long-term strategy. This reinforces the resilience of our business model, our strategic focus on high-margin projects, and our disciplined execution approach. Further, with a strong order book as of December 2024 and robust pipeline visibility, we are confident in our ability to sustain revenue and profit expansion while maintaining our net cash positive position as we enter the last quarter of this fiscal year. Now let me quickly walk you through our performance highlights. Our consolidated revenue for the nine months ended December 31st, 2024, stood at INR 2,138 crore, growing over 11% year-over-year. Standalone revenue for the same period stood at INR 1,835 crore.
Our consolidated EBITDA for nine months FY 2025 stood at INR 289 crore, which grew by around 11% year-over-year. Standalone EBITDA for the nine months stood at INR 264 crore. We have successfully maintained healthy EBITDA margins aligned with our medium-term outlook. This is a direct reflection of operational efficiency and disciplined project execution, a well-balanced mix of EP industrial and international projects, and a growing contribution from our high-margin O&M business. Consolidated PAT for nine months stood at INR 196 crore, with a PAT margin of 9.2%, growing at over 13% year-over-year. Standalone PAT for nine months stood at INR 172 crore. As part of our strategy to reduce our exposure in the European region, we have divested three European subsidiaries in the last two years, which has further enabled us to channelize our focus and resources to the emerging markets.
On like-to-like basis, excluding European divested entities, our consolidated EBITDA for nine months grew by 14% year-over-year, and the consolidated PAT for nine months grew by 17% year-over-year. We are proud to report that Wabag has remained a net cash positive company for four consecutive years, and this quarter marks the eighth consecutive quarter of maintaining a net cash positive position driven by our disciplined cash flow management and prudent debt control. As of December 2024, our net cash position stands at INR 262 crore, excluding debt of HAM entities which is commercially in nature. Considering asset-light strategy, our net cash stood at INR 379 crore. We closed nine months with a gross cash position of INR 659 crore. Our strong cash reserves enable us to infuse necessary funds into projects, expediting execution timelines.
You will remember that we have secured the approval of shareholders for borrowing limits up to INR 6,000 crore to meet the next wave of growth and order book expansion. We already have bank limits tied up for INR 4,000 crore, which we expect to increase to INR 5,000 crore within this fiscal year. We are currently in final discussions with our bankers, and we believe that the credit rating upgrade will further help us in this process. We remain steadfast to our asset-light model, delivering a return on capital employed, ROCE, of around 18%. We continue to create long-term shareholder value, generating a return on equity, ROE, of 14.5%.
With the recent order win of AI Haer 200 MLD independent sewage treatment plant, the order book now stands in excess of INR 14,200 crore and is well diversified across engineering and procurement, EP, engineering, procurement, and construction, EPC, and long-term operation maintenance, O&M contracts. With adequate payment securities, our order backlog is robust and provides clear revenue visibility for the coming years. International business continue to remain robust with 48% of nine months revenues delivered by overseas projects.
International projects now constitute 40% of the order backlog, reaffirming Wabag's strong global presence. Order business continues to grow, now making up 42% of the order book, reinforcing our focus on stable long-term revenue streams. We will continue our emerging market focus on advanced technology projects, particularly in desalination, recycle and reuse, and effluent treatment. We take this opportunity to express our heartfelt thanks to the bankers, investors, fellow Wabagers, and all other stakeholders for the continued support extended to us. With this, we now open the floor for the interactive question and answer session.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants, please limit your question to two per participant. If you have a follow-up question, I will request you to rejoin the queue. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Nidhi Shah from ICICI Securities. Please go ahead.
Yes. Thank you so much for taking my question. Firstly, I would like to congratulate you on the robust order inflow that you have seen this quarter. So my first question would be on the budget. Recently, in the budget, it was announced that the Jal Jeevan Mission project will be renewed till FY 2028. Regardless of this, we have seen minimal activity in this past year in Jal Jeevan. Do we expect any tenders to open up in this space soon? How do we expect this to pan out first? First question.
Okay. A good one. Just to reconfirm, we have spoken this in earlier quarters also. See, directly, a Jal Jeevan Mission project is not in our domain area because these are basically rural water supply, which consist of mainly laying thousands and hundreds of kilometers of pipeline. As we have told you earlier, that strategically we have moved away from sea. We are more into engineering and specialized procurement. So this is not a focus area for us unless there are projects where the groundwater which they are extracting, or the surface water which they are taking, needs some advanced treatment. Yes, we will take part, but most of the projects are basically borehole, some minimum treatment, disinfection, and then laying kilometers of pipeline. So it is not in our direct domain area.
Thank you. My second question would be on the execution on 2+ , Chennai and Bangladesh. Chennai, we can see that the execution has picked up this quarter. How do we expect the execution to pan out for the remaining quarter of the year and FY 2026? Similarly for Bangladesh, you had mentioned on the last call that there were temporary disruptions, but the project is back on track. We saw a lumpy execution of this in Q2. In Q3, again, we are seeing that the execution is significantly lower. Would we expect the execution of this project to happen in such a manner itself, or can we expect these numbers to change in the remaining quarter and then FY 2026?
Okay. As Mr. Shailesh Kumar is with us, I would allow him to respond to your India cluster question.
Two projects we talk about. One is our big desalination project that we are executing. As Mr. Mittal said, project is progressing well. We are getting more and more robust in terms of project outcome. On every compartment, we are working well, engineering, procurement, and construction. It is in advanced stage of construction. For the next year, the numbers what we are talking about, or what earlier we talked about, it would be on that line only. We do not see any change on that. It is steadily progressing, and we are seeing the end of the project as we had initially started. Coming to Bangladesh project that we are talking, yes, initially, we saw some impact because of the geopolitical situation that was emerging there, but we are coming to grips with that. We have tried to overcome that situation.
Things are getting normal there, and going forward, we will be again aligning some deployment. Some initial movement away from the expected project schedule was there, but we are getting back on track. Normalcy is returning, and next year we will be getting aligned with the number what we had projected.
All right. Thank you so much for taking my question. I will join the queue for further questions. Thank you.
Thank you. The next question is from the line of Anupam Goswami from SUD Life. Please go ahead.
Hello, sir. My first question is on the margins. We have seen margins dipping about 200 basis points from the last year-over-year and also quarter-over-quarter. What could be the reason in this, and going forward, how do we look at? Also from the execution point of view, where do we see execution picking up now that the order book is pretty much in full and pretty robust? Where do we see the growth in the numbers coming? That is all, sir.
Okay. Anupam, your first question on margins. We have spoken in the past. I will repeat, we are a project company. Please don't look at us quarter over quarter. There are a mix of projects, EP, EPC. Margins will sway, but we will remain in that window which we have committed for from a medium-term outlook. You see the 13%-15% window remaining clear. You see the nine-month number that we have last year to current year, we are at 13.5%. That remains steady. We have also grown our top line by more than 10% now, so execution is also picking up. Mr. Shailesh just mentioned about the two top projects which are getting into the peak of execution. In Chennai, the deliveries have commenced, civil work is in full swing. Panvel, next year, you will see expansion.
You have seen us announce the AI Haer project in Saudi Arabia. That is a large project which will also start execution. Already you are seeing that the top line is growing, and in the next year you will see that it will expand meaningfully. I think I have answered both your questions.
Sir, I just mentioned next year the execution will be far better. Did you mean that?
Absolutely. It has to be, because we have such a large order book. The revenues will be a consequence because we have to execute these projects within a two to three-year period, and all these revenues will pan out as far as EPC is concerned.
Okay. Given our order book is currently skewed towards international 60%, do we see a margin in the top range, let us say, you said about 30%- 50%, do we see about 50% given international order book?
Inshallah.
Mr. Anupam, does that answer your question?
Yes. I will join back in the queue. Thank you.
Thank you. The next question is from the line of Dhavan Shah from Unique Stock Brokers. Please go ahead.
Just wanted to understand on the Bangladesh project. I think the U.S. has stopped aid towards Bangladesh. Are we affected in any manner in that Bangladesh project?
Not at all. These are projects which are committed funding from World Bank, and committed fundings are not affected by any future decision which U.S. government or anybody will take. None of the multilateral agencies, unless there is something very serious governance issue, they never cancel the already approved fundings.
Okay. If you can throw some light on that Saudi Arabia order, I think, which got canceled for some technicalities. If you can throw some light, I missed out the earlier part of your conversation on this thing. If you can throw some light on that, and whether we can be able to bag it again or how it is.
See, first of all, there was no order cancellation. It was a tender which went into a retendering because the client wanted to change scope, specifications, et cetera. The tender has been, as we speak, reannounced. We are working on the tender. We have about eight weeks to submit the tender. We will make the submission of the tender, and please let us be very clear in our mind, there was no capability issue, there was no technical issue. It was only a customer-related decision.
Okay, great. Thank you.
Thank you. The next question is from the line of Kaushik Poddar from KB Capital Markets. Please go ahead.
Where is this Jal Jeevan Mission had nothing in favor of your company. The recent Delhi election, what was talked about and promised by BJP is that there will be a cleaning up of the Yamuna riverfront. Is it possible that there can be a big opportunity in such kind of cleaning up of the riverfront?
It's not only possible, it is, and we are already doing this Yamuna cleaning under the Yamuna Action Plan. Part of it is Yamuna Action Plan one, two, now three and four will come. We have built plants like Kondli, we have built plants like Keshopur, Pappankalan, and recently Rithala. All this is helping to clean the water in Yamuna by discharging treated sewage rather than untreated sewage in river Yamuna. This is right in the center of our domain capability, and this is the kind of projects we like to work on.
What kind of incremental tender that will be required to do the complete cleanup?
See, we won't guess. It depending on government how much money they allocate for this budgetary allocation of Yamuna. Whatever they allocate, we will be a strong contender for that.
Okay. We see a lot of contract that you get is from the developing countries, but is it possible that you can go to developed countries and get some orders also?
Why do we have to go to developed countries? It is question of survival in developed countries. Where the infrastructure is developing. They already have the infrastructure developed. Now, what incremental you can get, some renovation, some upgradation. You don't get greenfield large projects, what you get in the emerging markets where the infrastructure is developing. So why go to a crowded market with no margins, no scope for innovation? We are very happy with our strategy of remaining in the emerging markets.
Okay. Thank you.
Thank you. The next question is from the line of Aejas from Unifi Capital. Please go ahead.
Hi, thanks for the opportunity, and congratulations on the recent order wins. Sir, previously we had called out that the Perur Desal, Pagla Bangladesh, RIL Indosolar projects, which are largely EPC nature of projects, were to be executed in the second half, and we could see that margins have dipped a bit. How do we think about margin trajectory going forward from here on?
I think one of our friends has asked this question. Our CFO, Skanda, replied to that question. Is it something specifically you want other than saying quarter- on- quarter, don't look at margins because it's a mix of projects which determine the margin, and when you still look at a nine months, we like to be seen as at least two, three-year period company. Even if you see us as nine months, it is very steady margin. Some quarters, nobody will ask us last quarter, why did you do well on the margin. If 1% or 2% is less in this quarter, we are getting this question. At least see us on a nine-month period. Are our margins not good enough in the range what we have projected to you in May last year?
Sure, sir. Understood. Sir, second question was on the dividend policy. Sir, if we can elaborate on that part, please.
Well, we have said in many, many quarters, you are the owners of the company. You are the shareholders of the company. Our shareholders decide what is the best return on capital on the investments they do. As a management, because they trust us in our ability, in our judgment, we take a judgment that investing money into the projects is far superior and gives us better return than giving a dividend. That has been our judgment, and that is how we have worked over the last three, four years. Now, if our shareholders want dividend and say, "Don't invest into this kind of Namami Gange, HAM projects," we are fine with it. So it depends where you get a better return on your capital.
You have seen over the last two, three years how the company's performance has improved on every single metric, whether it is EBITDA, whether it is PAT, whether it is cash, whether it is ROCE, whether it is ROE. On all fronts, the performance has improved. I think we are on the right strategy to give this kind of return to the investors. Hence we believe-
Understood, sir. Thank you.
In this and the- Sorry. You wanted to say something?
No, sir. Understood.
Hello?
Thank you so much.
Thank you.
Thank you. The next question is from the line of Harshil Parekh from Acuitas Capital. Please go ahead.
Hi, sir. Thanks for the opportunity. Sir, my question was, I would like to know what is the order bid pipeline where we are the preferred bidders. For example, as of second quarter, that amount was approximately INR 3,500 crore, out of which 75% of them are already confirmed orders. I would like to know that value as of Q3.
Yeah. I think even after booking 75% of INR 3,500, we still fancy our chances to project in next two to three months in the range of INR 2,000-INR 2,500.
Okay, sir. Sir, my next question was that earlier we have communicated that we aspire to grow our revenues by around 15%-20%. If I look at our nine-month revenue growth, it was around some 11%. Are you still confident of achieving that 15%-20% growth in FY 2025?
First thing I want to remind you that these projections were not given for a quarter or nine months or a year. This was given for a medium-term, which is three to four or three to five years in our personal meeting, which we did in May last year. On that front, we are very confident, especially with the kind of order intake we have and the sector which is looking up, I don't see we need to doubt the projections we have given three quarters back. Short answer is yes, we are confident.
Sure, sir. Last final question would be, what is our like-to-like revenue growth on a nine-month basis, excluding the divestment of our subsidiaries?
I think this is given in our investor presentation.
Sir, EBITDA and PAT growth is given, but revenue growth is not.
Revenue growth. I think it is about 10%, 11% we have given.
11% is the reported revenue growth.
Yeah, like to like, revenue growth would be about 13%.
Okay, sir. Thank you.
Thank you. The next question is from the line of Jainam Jain from ICICI Securities. Please go ahead.
Thank you for the opportunity. My first question is, could you please give us some details on the recently won 200 MLD Saudi Arabia project? What is the execution timeline, and what kind of gross margins can we expect from these orders?
It is a 30-month order execution timeline. We have already taken two months during the limited notice to proceed. Balance, we have 28 months to execute this project. This is a very advanced technology sewage treatment plant similar to the one we did a couple of years back in Jeddah. Same technology. This is something very new for the Middle East market.
We are very confident after the successful operation of Jeddah that it is suitable for this climate and the region. That is one of our success factors for this project. It also gives us a very large reference in the GCC market, which is anyway our target market for us. We definitely see that such projects give us huge exposure and confidence to the clients to consider us for future bidding also.
Okay, sir. Sir, what are the payment terms for this contract?
I think we can take it offline because as we tell you, the payment terms are good because this is funded project. They also know it has to be performed. You can connect with any of my team because it will take a long time if I have to narrate the whole payment terms of this thing. Take it offline.
Okay, sir. Sir, my next question is on the 300 MLD Saudi Arabia order, which was canceled a few months back. What was the reason for the cancellation? Was it an operational issue or it has something to do with the Wabag? Do we expect the tender to be floated again?
I think you were on the call when one of our friends asked this question, and our CFO responded exactly the same questions you are asking.
Okay, sir. Sir, what is the order pipeline looking like for India and abroad for Q4 and FY 2026? Are there any large tenders on the horizon for India? What is your order inflow guidance for FY 2026?
We do not give order inflow guidance. We have already given a guidance for the medium-term on all the parameters. To get all the parameters, order inflow has to grow at that level. Today we have said, even in today's con call, that market is very bullish. Sector is looking up. We are well-placed. We are even preferred bidder. In short, I would say it is looking good.
Thank you. Ladies and gentlemen, please limit your question to two per participant. If you have a follow-up question, I would request you to rejoin the queue. The next question is from the line of Mihir Dhami from Sharekhan. Please go ahead.
Sir, last quarter you had alluded that second half could see revenues of around INR 2,000 crore. After the third quarter, do you see pickup in revenues in the fourth quarter, significant pickup or something?
Yes. Our fourth quarter revenues are always the bumper quarter. In all the four quarters, always fourth quarter is the biggest quarter, and I do not have any doubt that this year would be no different.
The guidance which you gave is maintained, right?
Yeah, obviously.
Okay. Thank you.
Thank you. The next question is from the line of Eshwar from iThought PMS. Please go ahead.
Hi, sir. Thank you for taking my question and congratulations on your strong order inflow this quarter. I would like to know how much would be the ratio of the bid we do for orders and how much would we have won. What would be the ratio, sir?
Ratio. Basically, if I tell you specifically, it varies on many conditions, very many conditions like win and bid ratio. But generally, we have 30%-40% is the range in which we are guiding the order, and that is by any industry standard, very phenomenal. But it depends on many conditions under which we are bidding, so it may vary. But generally, in that range we are talking.
Okay. Understood. Sir, can you talk a little bit about the R&D department, what they do? Because you earlier alluded that the emerging market, there is a chance for innovation, and plus you have 125+ IP rights. Is there any more in the pipeline or what is the status of that department? Can you throw some light on that, please?
I think the department still exists. They are still live and kicking and doing some good work, and they are continuously improving the existing technology, innovating new technologies, commercializing the pilot projects into a prototype. This is a continuous exercise. We don't stop this work. This is good work. It gives us an edge in the market with the advanced technology. We would like to be considered as an advanced technology pure-play water company. Further being a centenary year.
New IP in the pipeline?
Yeah. Sorry?
You're saying there is a new IP in the pipeline? Sorry for interrupting, sir.
Yeah, it's always there. We have an R&D director sitting in Vienna. He decides which of our developed technologies we need to apply for a patent or IP or a trademark, and accordingly, he's managing that on a day-to-day basis. It's not that we have a plan that 3 IPs this year we will take, or 10 IPs we'll take. He takes a decision based on the type of the project, type of the technologies we do. Plus, this being a centenary year, we have come up with an initiative called BLUE SEED. This is to help the new startups with the pre-seed and seed capital to encourage them, develop them, not only by giving money, but also sharing with them the water technology knowledge, help them to perfect their technologies, and also help them in commercializing.
Because we are present in 27 countries, so we can also help them in marketing in those countries.
Okay. Thanks a lot, sir, for taking my questions. That's all I have.
Thank you. The next question is from the line of Mohit Kumar from ICICI Securities. Please go ahead.
Yeah. Thanks for the opportunity, sir. My first question is, have you heard anything on the Mumbai desalination plant? I heard that it is re-tendered. Is that right?
Mumbai desalination plant, its last three years is off and on. Yes, it's not the first time it's going to be re-tendered. I hope they will find some interest in it, the way they have structured it. But as of now, the way they have structured it, there are no takers for that. We have to wait and watch how does it develop.
Understood, sir. My second question, sir, of course, you've done very well in the Middle East, but the Indian opportunities looks like doing very low. Are you seeing the pipeline for the Indian project building up? Are you hopeful that some of the new orders, especially on the Namami Gange 2.0, will likely to take off in FY 2026?
Surely it has to take off. What we have seen so far is just the tip of the iceberg because it's only we have worked on our Ganga as a river. But we have huge river fronts which we have to work on, and the government has made it very clear what they have started as a good pilot with Ganga. They will extend this to all the rivers, whether it's Godavari, Krishna, Brahmaputra, whatever. They are going to extend the same model to all rivers. Just imagine if they are extending to all these rivers. Also it was announced in the interim budget, 100 cities they are going to extend this HAM model, which they will make sure they are bankable projects. I think there's no dearth of opportunities, as I said before.
There's enough in this water sector which is looking up, and we remain very bullish about it.
But can I see in the medium term few tenders getting closed in India, large tenders?
Why not? Keep your fingers crossed. Yes, it will happen.
Understood. Thank you and all the best, sir. Thank you.
Thank you. The next question is from the line of Ashwini Singh from Stat Fintech Private Limited. Please go ahead.
Yeah. Hello, good evening, sir. Congratulations on your fantastic results. I had two questions, but you have already answered one, so just one question. I would like to know what is the goal of Wabag and where do you see yourself in three to five years' time in terms of business value, in terms of international expansion, and in terms of your business in India?
Yeah, we travel. What is the role of Wabag? Let me tell you and share, maybe take this opportunity to share a new vision statement which we have given to our colleagues in Wabag because it's 100 years. We have talked about, as a responsible water company, conserve water. That is a responsibility we have given to ourselves. That means do everything to make sure this limited resource, which we all consider is unlimited, which is not true, it's a myth. It's a very limited resource, water, we should conserve it. That's the first target we have given to ourselves. The second we have said is protect environment. Because if we do the proper treatment, we use the right technology, we use the green technology, we don't emit out greenhouse gases. All these things, if we do well, we are protecting the environment.
That's the second target we have given to ourselves. Third, we all have not realized what is the importance of water for a growing economy, for our GDP growth. That is another emphasis we have brought in. We have said we are the guys who are going to power the economy. How we are going to power the economy? By making sure water is available to commercial and industrial units, uninterrupted, reliable water source at an affordable price. This has been our mantra. That is what is our contribution to the society.
Thank you.
Thank you. The next question is from the line of Hardik Gandhi from HPMG Shares and Securities. Please go ahead.
Hello, sir. Am I audible?
Yes, sir.
Congratulations on a good set of numbers. Just one single query on the big order which we received from Saudi Arabia. Here the orders number is INR 3,251 crore. Just a small question on that. Is the whole INR 3,251 crore, that will be coming on our books? Or is that the contract and we will be distributing that amount with our other partners who is forming the pipes and infrastructure on the site?
Obviously, we have mentioned that it is a consortium order. It is not a Wabag order. The other partner is a partner, not a subcontractor. His revenues will not pass through our books. Neither we want it that way. That is to pass through our books and just to show our top line. We have organized that his revenues will be in his book, our revenue will be in our book. Our order, what will be passing through our books will be about INR 1,725 or something.
Correct.
INR 1,725 will be passing through our books and rest of it. About 55-odd percent should pass through our books.
Understood. Yeah, that is just what I wanted to know. Thank you so much, sir. That is it.
Thank you.
The next question is from the line of Siraj Ram from Ashika Institutional Equities. Please go ahead.
Hi, thank you for taking up my question. In recent times-
Sorry to interrupt, sir. I would request you to please use your handset.
Sure. Am I clear now?
Yes, sir.
Thank you for taking up my question. Sir, in recent times, there are few listed companies who are making close to 25% EBITDA margin, and they are in similar segment what we do. I do not understand what can be the take on this, and I would like to understand what is your take.
See, it is on a lighter side, my friend. We have to learn from this company. In my 41 years career, we have not seen this kind of thing. Maybe they are doing something which we are not aware of. Maybe they have to answer what they do to make this kind of thing. I think in our business, if you make around 14%, 15% EBITDA, we are doing well with generating free cash flow. That is our aim. That is our target. We are fixed to it. We do not look at what others do. I think it is their business. They know what is their business model.
Got it, sir. I understand we have plenty of opportunities in Saudi Arabia and other countries. But in U.S., there is something called PFAS initiative that is in government, grabbing a lot of orders there. Can we expect Wabag also going to bid for those projects anywhere in future?
If you are talking about U.S., no. We have been very clear and very focused on the direction we want to go, and that we will have no change of mind. There is no requirement to change the mind because the business opportunities in the emerging world is tremendous. This developed world, I think we want to stay away from till there is a need that we need to go. As of now, there is no need that we go to the developed world.
Got it, sir. Thank you.
Thank you. The next question is from the line of Nishant Gupta from Minerva Global Capital. Please go ahead.
Hey. Thank you for the opportunity. I just wanted to ask a question around the O&M part. Since the O&M would be a recurring kind of a revenue, right, to the EPC work. Will the margins on the O&M side be higher? I understand your guidance for the medium term, but typically, what are the margins of the O&M side after renewing your lens with the EPC?
Yeah, I will take this question. As you rightly said, O&M is a different business, not like EPC, lesser risk. As Skanda told you, we have a good mix of O&M and EPC, and that makes the business sustainable. As far as margin is concerned, rightfully said, it is more predictable, more in grip, so margin would be slightly higher than the normal EPC. That is the way we are performing over the years, and we foresee that the similar trend will continue to do. It is definitely better than EPC.
Got it, sir. Thank you. All the best.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Sani from Axis Securities. Please go ahead.
Yeah. Thanks for taking my question. My question is a little subjective. I do not expect a definitive answer to it. But we see that there is a lot of order inflow. Are there any constraints on Wabag side, how much you can execute in a particular quarter? Is there an upper limit given that resources like human capital or whatever you need? Is there any constraint on that end?
I would say not at all. If there is a concern, we will not even book the order. It is unfair for a customer that we take the order and do not execute it or do not execute it on time and to the requirement what we have signed in the contract. So far, we have grown from a company from a startup to what we are today as a globally number three. So we have always grown with the orders, and we believe that we have enough strategy in place in recruiting and hiring people, training people, developing them under the NATS, NAPS, all schemes which government has given us. We do run almost like a university to train water engineers, and so far it has worked for us, and we are very confident going forward it will work. One more thing, I will leave it for your digestion.
See, as the ticket size of the orders are going up, the number of manpower required to execute an order is definitely coming down, or per million revenue, the manpower required is definitely coming down. This is also helping us to focus on few large orders rather than tens of small orders. This is also making it more efficient and profitable for us.
Okay. The only risk on execution side is possible delays on approval from customers or unforeseen situations which are not equal to the business operations. Is that correct?
Let's have a separate session on risk. I don't think we can count in our fingers what are the possible risks. It's not about risk. Life is full of risk. It's your ability, your experience, your past track record in managing this risk. Risks are, I don't think you can count on your fingers. There are many, many risks, especially in project business. So the worth of a company is managing the risk and mitigating those risks.
Very good. Thank you, sir.
Thank you. The next follow-up question is from the line of Anupam Goswami from SUD Life. Please go ahead.
Sir, one question. What is the peak order book that we can go before we stop taking any orders? That is one. Are we selecting or choosing our order, and what are the criteria do we look for when we filter out the order intake?
So naturally, there's no limit to which we can go and stop taking orders. That's not the DNA of Wabag. As we said earlier, we have grown from a startup to where we are. From now to grow where we want to grow, I think we are aggressive, we'll remain aggressive, but very disciplined. That's your second part of your question, what is the criteria you select? Like we have told you a few years back that we don't take state government-funded orders. That's one example. We go for multilaterally funded orders. We go for orders which have payment security. We go for orders which have a good cash flow. We go for orders which have advanced technology. We go for orders which have operation and maintenance revenue. So these are some of the criteria which have been given to our sales and marketing guys.
They select the project based on that, not based on the size of project or anything. We remain very disciplined. If something we have to let go, we let go. Like Mumbai projects, we decided to let go. We worked on it for 11 years, but we decided to let go because it did not fit into the screen what we have kept. It did not pass through the screen. So I would say, yes, we have a capacity. Yes, we can build further capacity. There's no reason to say no to an order which fits into our screening criteria.
And sir, what is the internal IRR that we look for out of this order?
We work on EBITDA basis. We don't work on IRR. That we have given you already, 13%-15% and 9%-10% as PAT level. This we will maintain.
Last, rest of India, the order book where we see a sharp drop in margins, as well as how do we see the pipeline building up over there? Since we have seen robust Saudi and Middle East orders, how much of a sustainability can we expect out of this, sir? That is all, sir.
Your question is not at all clear to me, at least. Can you be very specific what you want to know?
Yes, sir. Sir, I wanted to know on the export orders, what is the run rate or what are the pipeline that we see? Have it built up from what we have seen right now, it is pretty robust, but going forward, how do we see it?
See, we are in the emerging markets, as we said, where infrastructure is required, urbanization is happening. So pipeline is robust, will remain robust for the decades to come. I do not even say years to come, for decades to come, it will remain robust.
Sir, does that answer your question?
Yes. Thank you.
Thank you. Before we take the next question, a reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Samrat from ICICI Securities. Please go ahead.
Hello, am I audible?
Yes, sir.
Yes. Little louder.
Yes, sir. Firstly, congratulations on a good set of numbers for this quarter, especially where there was a kind of CapEx dry up in Q2. My question is on the order that was canceled. I heard that the newer tender has opened up, and we have eight weeks to apply. If you could just share some color on the scope of the new tender that has come. Will it be the bigger size or what has exactly changed?
See, it just came a few days back. Our team is reviewing the scope and the changes. It's too early to give you. Maybe another week, 10 days, you give us. After we have reviewed, our teams have analyzed it, we can share that differences.
Okay, sir. Sir, second question is, I understand that we are shifting from an engineering procurement construction company to only engineering and procurement company. But we still are into construction of a few orders. On those orders, do we have a price escalation clause built in in the contracts that we enter or are we exposed to.
Always. Because our contracts are always long-term contracts, especially in India. Anything more than 18 months, we always have a price escalation built in where the Government of India, RBI indices will be the basis, and that more or less covers about 70%-75% of our cost.
And sir, lastly, just one clarification on the consortium order that you have received. In our scope, is there any part of construction that we are doing, or it is entirely engineering and procurement?
No, no. The treatment plant, we will do the construction within a boundary of our treatment plant. Anything outside the treatment plant boundary, which is laying of pipelines, constructing of reservoirs, we don't get in there because of all the issues of getting permissions, rights of way. We don't do that. That is what our partner is doing. We will limit ourselves within the boundary.
Okay. I understand, sir. Thank you. Thank you for answering my questions.
Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Mittal for closing comments.
Thank you once again. Friends, thank you for your active participation in this Q3 and nine-month FY 2025 earnings call. We have uploaded the analyst presentation in our website. In case you have any further queries, you may get in touch with our respective IR team, or you can also feel free to get in touch with us directly. Thank you once again. Enjoy the evening.
On behalf of VA Tech Wabag Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.