Ladies and gentlemen, good evening and welcome everyone to this earnings call post announcement of Q3 and nine months FY 2024 results of VA Tech WABAG Limited. On the call today from the management team, we have Mr. Rajiv Mittal, Chairman and Managing Director, and Mr. Skandaprasad Seetharaman, Group Chief Financial Officer. Kindly note that during this call, the company may make certain forward-looking statements concerning the business prospects and profitability, which may be subject to risks and uncertainties, and the actual results could materially differ from those in such forward-looking statements. The conference call will be archived, and transcripts will be made available on the company's website. The company's results update presentation has been uploaded on the website and stock exchange, which provides an overview about the core offerings and analysis of the results for this period. We trust that you had an opportunity to look through the same.
We will start with the opening remarks from the management, post which we will open up for the interactive Q&A. I now hand over to Mr. Mittal to take you all through the key business highlights. Over to you, Mr. Mittal.
Thank you. Announcement of Q3 and nine-month FY 2024 results of VA Tech WABAG Limited. Your continued support and engagements are crucial to our growth journey, and we appreciate your presence today. Joining me today for this call is Mr. Skandaprasad Seetharaman, our Group Chief Financial Officer. It is with immense pride and joy I share with you that this year, your company has completed 100 years of existence. I repeat, 100 years of its existence in the water sector. Last 100 years have not only been exciting and challenging, but also very rewarding. During these years, WABAG has transformed from a local startup unit to a large global corporation. We continue to be a pure play water company, focusing on emerging markets and remaining asset-light.
This significant milestone is a testament to our unwavering commitment, resilience, and enduring spirit of innovation that has defined our growth over the past century, the impact of which resonates across borders, touching life of communities, industries, and environment. For a century, we have been at the forefront of pioneering water solutions, driven by our unwavering commitment to quality, innovation, and sustainability. From the groundbreaking technologies to comprehensive water management systems, we have played a pivotal role in shaping the landscape of water sector. At WABAG, sustainability is just not a buzzword, it is ingrained in our DNA. We take great pride in being awarded the prestigious Energy Globe World Award 2024 in water category in Norway for our outstanding project, the Jubail Industrial City Wastewater Treatment Plant and Water Reclamation Plant, MARAFIQ, in Saudi Arabia.
Followed by another award where we were a national winner in KSA from Energy Globe in Saudi Arabia for MARAFIQ project, which was received a few months ago. Our commitment to environmental responsibility remains unwavering. As we move forward, we are dedicated to continue contributing to a circular economy. Recently, WABAG has forged a strategic partnership with Peak Sustainability Ventures to establish 100 Bio-CNG plants across India, GCC, Africa, and Europe. This partnership aims to harness the untapped potential of organic waste to generate Bio-CNG, meeting energy demands responsibly, and thus contribute to the reduction of greenhouse gases emission and also air pollution. This initiative exemplifies our innovation and environmentally conscious approach, transforming waste to renewable energy for a cleaner, greener, and more sustainable future.
Our financial performance in the last nine months reflect our focus on delivering profitable growth with a strategic emphasis on international geographies, industrial projects, advanced technology plants, engineering and procurement, which is EP business, and long-term operation and maintenance. We have continuously improved our margin profile and maintained a positive cash flow, underscoring our commitment to long-term growth in line with our strategy reveal. As the advanced technology business leader, our order intake majority compromise plants in desalination, recycle and reuse, and effluent treatment segment. With our continued focus on emerging markets and efforts of our agile go-to-market teams, we have secured 59% of our order inflow in this fiscal from international geographies. All these orders were won against strong international competition.
Recently, we secured an industrial order worth $33.5 million from SEPCOIII Electric Power Construction Co., Ltd., towards engineering and procurement of a 20 million liter per day industrial wastewater treatment plant at Ras Tanura refinery complex in Kingdom of Saudi Arabia. This order is being executed for NEOM and Saudi Aramco, which is scheduled to be completed over a 20-month period, is another testimony of WABAG's technology leadership in oil and gas sector, and enables us to further cement our presence in Middle East region. We have maintained a high quality order book of around INR 12,000 crore with a healthy mix of 57% EPC and 43% O&M, majority of which have secured payment terms. Further, our strong order book and pipeline visibility instills confidence in our ability to continue to grow and generate value for our stakeholders in the years to come.
I extend my sincere gratitude to all our investors for their continued confidence in WABAG. Your support drives us forward as we continue our journey of global leadership in water sector. Our commitment to delivering shareholder values remains steadfast. Now, we look forward in engaging in an insightful discussion during question and answer session. Before that, we move over to the financial highlights. I would now request Skanda to take you through the same. Over to you, Skanda.
Thank you, Mr. Mittal. Good evening, friends. I trust you've had a chance to review the results update presentation as circulated and uploaded on our website. Let's delve into some key operational highlights first, followed by financial highlights for the quarter and nine months ended December 31st, 2023. During the quarter, the execution speed of our ongoing projects remained commendable. New projects like Perur Desalination Plant in Chennai and Pagla STP in Bangladesh have commenced planning activities with engineering making substantial progress and thus enabling start of procurement and construction. Notably, our key industrial projects, Reliance desalination project in Jamnagar, Gujarat, and the AGCC project, SIBUR in Russia, is progressing well to be completed in H1 of next fiscal as anticipated. Our KMDA HAM project is now in commissioning stage, and we expect to finish the activities within this quarter.
STP HAM projects being built for BUIDCO at Digha, Kankarbagh and the 40 million liters per day Ghaziabad Nagar Nigam Tertiary Treatment Recycled Reuse Water project being built for GNN have been steadily advancing with engineering and procurement activities substantially completed and construction activities under swift progress. As we have consistently maintained, our focus on the MEA cluster as the next growth engine remains strong. We recently secured a 20 million liters per day industrial wastewater treatment plant at Ras Tanura refinery complex in Kingdom of Saudi Arabia, aligning with our growth story in this region. MEA cluster has tremendous potential, and we will continue putting in our efforts to convert a good amount of the opportunities in this region as we move forward. Also, a matter of great delight and endorsement of our efforts in improving margins, cash flow, reduction in debt, and general business progress.
Our credit rating was recently upgraded to A+ with a positive outlook on long-term basis, while we remain at A1+ on short-term basis, the highest short-term rating. Moving on to the financials, our consolidated revenue from operations increased by 8% year-over-year to INR 704 crore, owing to new and large projects commencing revenue generation and continued execution speed on other ongoing projects. Our revenue growth has been despite strategic divestment of two of our subsidiaries in the last year. Our consolidated EBITDA stood at INR 99 crore, maintaining a double-digit EBITDA margin as we have been indicating over our interactions. We achieved another quarter of profitable growth, that is, our PAT growing at a rate faster than top line. Consolidated PAT for the quarter stood at INR 63 crore, up 34% year-over-year. For the nine-month period, consolidated operating revenue stood at INR 1,922 crore.
The consolidated EBITDA improved to INR 261 crore with a healthy margin driven by execution efficiencies and reduced total cost of operations, TCO. The PAT attributable to owners stood at INR 173 crore on consolidated basis, up by 40%, 40% year-over-year. We closed this quarter as well on a net cash positive position, demonstrating our efficiencies in cash and debt management. Our return on capital employed also remains strong at around 20%, reflecting our asset-light and technology-focused approach. To our clients and partners, thank you for your trust and collaboration. Your support has been the bedrock of our success. As we celebrate 100 years, we renew our commitment to delivering services of the highest quality, meeting and exceeding expectations of the market. We also express our heartfelt thanks to our bankers, investors, fellow WABAGites and all of the 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 the touch-tone telephone. If you wish to remove yourself from question queue, you may press star and two. Participants are requested to use handsets while asking the question. Ladies and gentlemen, in order to ensure that management will be able to address questions from all the participants in the conference, please limit your questions to two per participant. Should you have follow-up questions, please rejoin the queue. The first question is from the line of Koushik Mohan from Ashika Institutional Equities. Please go ahead.
Hello. Hi, sir. Congratulations for the good set of numbers. Sir, currently we have around INR 12,000 crore of order book. What is the landscape and how much time will we take to execute all of this order book? What will be in the Q4 that will be executed?
As we said before, we have order book which is 60% EPC and around 40% is O&M. Generally, EPC orders take about three years, and O&M is long-term O&M, anything between 5 - 15 years. You can take 8 - 10 years as the average time to execute this order. Generally, this year, even after divestment of our two subsidiaries abroad, we generally would like to see a growth in our numbers. As we have shown you already at the YTD December, we expect the same momentum to continue for the fourth quarter.
Got it. Sir, my second question follows on trade receivables. Sir, currently we have a stock-up of INR 1,665 crore in the trade receivables. What is our kind of receivable days, and what are our contracts with our clients? When can we assume that this entire trade receivables will be converted into cash, and what time duration is needed? Is there any bad debt, or is not any bad debt on this?
See, as you have said, the quality of orders that we pick today are all payment security-backed orders. They are either multilateral, sovereign-funded, federal government-backed or LC backed. I don't think you should have any doubts around collectability of these projects. Receivables go through their cycle. Projects are in different stages. What we have done is we have been able to maintain a working capital, because usually we have a general back to back. If a vendor supplies and the customer accepts, they pay, we are able to pay the vendor. We also manage our working capital using various instruments like LC and LCBGs, various other instruments which allow us credit periods. We don't see any concern over there. Yes, we have consistently improved on the receivable collection dates, and you will see that even going forward.
But I would like to again underline that you have already seen the last three years, plus also all these quarters, how we have been able to maintain a net cash position and also generate operational cash flow. This is possible only through an efficient debt and cash management cycle.
Got your answer, sir. Thanks for that. Sir, and on the growth projected side. Sir, recently I saw one video-
Sorry to interrupt, sir. May I request you to follow back the queue as several participants are waiting, please.
Sure.
Yeah. Thank you so much. The next question is from the line of [Ashish Soni] from family office. Please go ahead.
Sir, this is regarding the future opportunities in green hydrogen and semiconductors. When do you think anything can materialize, and how soon?
Today, these both sectors hold a huge future potential. After COVID, everybody wants to be self-reliant. Whether it's Asia, U.S., or Europe, they're all setting their own manufacturing base for the chips. Semiconductor needs ultra pure water for chips making. We have already done a plant, we have a reference for that, but we continue to look for even advanced technologies are available because being a technology company, we always like to give the best to our clients. We feel that in next couple of years, we will see a good potential of semiconductor water requirement. In terms of hydrogen, especially for green hydrogen, we need water as a raw material, because with the electrodes, the hydrogen is generated by breaking water. A clean water is the raw material, which is what we specialize in.
We will like to secure our position with the various developers and technology providers to be a water partner. Still it is not economically viable. Still, lot of advanced world is going to invest in this hydrogen, which is going to reduce the greenhouse gases, which is a target they have to meet. But to be economically viable, my personal guess is anything between three to five years. Once it comes in, it's like solar. This will really take an exponential growth and will stay there for decades.
Just regarding the Bio-CNG, when do you think anything can float over revenues?
I think it is something which we expect immediate, because there are some plants we have in mind, and we believe in the first quarter, next fiscal year, we should be able to sign something, and generally, it will take about 9- 12 months to execute this project.
Okay. So basically semiconductor, you are saying indirectly that it will be maybe a near-term play and green H2 might be a longer term play, correct?
Yeah. At least three to five years is my personal guess.
Okay. Thanks. All the best.
Thank you. The next question is from the line of Amish Kanani from JM Financial Services. Please go ahead.
Yeah. Hi, sir. Sir, congrats on a very good set of numbers in terms of profitability. Sir, we observed that the nine-month revenue is about INR 1,900 crore, whereas our order intake looks like INR 1,761 crore. Any sense of whether we are happy and is it in line with our expectation? Generally, we would like to have our orders being more than the revenue. So can we make up in the rest of the year to be that as a case? In that context, how does the Middle East and India opportunity is panning out in terms of pipelines?
Amish, you are absolutely right. Any company would like to see order intake to be little higher than revenues. But today, we are very fortunate that we are sitting on INR 12,000 crore, which is already giving us a visibility of almost three years. So we are not concerned about it, and this will not take us to make some wrong decision or choosing a wrong order or bid desperately. Our priorities, as we said before in our speech, payment security, margin, cash flow, and technology selection remains a basis of selecting our order intake. We are very hopeful because the market is flooded with inquiries. It is just a matter of time, which it takes. Though India, because of forthcoming election, it will go little slow for the next few months.
We have shifted lot of resources in the international markets, and we are hopeful that some projects in India and lot more from international markets you can see in next couple of quarters.
Sure, sir. Sir, if you can give us some sense of how is the working capital panning out, both in terms of working capital, including the retention money that we are expecting some release from Qatar and Tunisia, if I remember correctly, and also our net cash position.
We are at a net cash positive position even for this quarter, Amish. We have already seen that we have already recovered the retention on the MARAFIQ project in the first half of this year. The other two projects are in advanced stages of closing. So through this year, we will see that we will finish the projects. In 2024, 2025, we will finish these projects, finish the capex liability, so that it is eligible for collection of these retentions. As I explained, from a working capital perspective, today with the order intakes, with our debt being in control, with the net cash position that we are maintaining, I am sure you understand that the working capital is fairly okay.
Yes. Sir, if you can give us the numbers as regards net cash as of December 31st, and also if you can give us the free cash flow for nine months at least, if not quarterly, we generated a free cash flow positive, sir?
We did generate a free cash positive for the nine months, and we ended with a net cash positive position of about INR 100 crore.
Yeah, that is very encouraging, sir. All the best. Thank you.
Thank you.
Thank you. The next question is from the line of Arun Kailasan from Geojit Financial Services. Please go ahead.
Yeah. Thank you for taking my question, and congrats on 100 years of existence. I just wanted to ask about the EPC municipal segment. For the last three quarters, on a YoY basis, we have booked a revenue that is lower than the previous corresponding year. Even the execution numbers also indicate that the executions have been on the lower side. Is there any stuck-up that we are facing in this particular segment, sir?
No. This is something, if you remember in the previous few quarterly discussions we have had with you, this was very expected because three of our large projects, whether it is Chennai desalination or Bangladesh Sewage Treatment Plant or the CIDCO water, these were all projects which were secured about nine months back. Generally, to do the contract signing and put the zero date in order, it takes about three to four months. After that, it takes about four to six months to finish the engineering. That is what, in these three projects, we are just in the final stages of engineering, which sets the stage for procurement and construction. We always told you that towards the third and fourth quarter only we can see some revenue flowing.
From the first quarter of next fiscal, we will see a momentum picking up, and we will see much higher revenues because construction and procurement would have picked up. So this was expected, and this will always happen when you get some large projects like this.
Okay. Sir, my next question would be with regard to the total cost of operations. If you look at the consolidated thing, we have had a lower total cost of operations. But on the standalone basis, we see the costs are higher. It is reported higher. Is there any specific reason there?
Yeah, I think you know India is an inflationary market. We all work in India. Today we are a growing company, and there is a huge pressure of people who aspire to get into water to pinch our staff. So we have to meet competitive salaries there. Plus, we are also growing in numbers because our workload is much higher. But if you see internationally, we are reducing it, which is a high-cost geographies. Some of these activities which were normally done in the international geographies, we are shifting those work to India to keep the overall cost in control, and that is a part of our strategy, and I think it is working well for us.
All right. Sir, if I can just squeeze in one more question. It is on the 100 Bio-CNG plants that we have. Can I know, because you had commented on an earlier question that you have identified a couple of water treatment plants. So these will be done in already existing plants. Do we mean to produce Bio-CNG from any of these waste from water treatment, like slurry or sludge, et cetera? Is that the plan? On a cost basis, how much is this going to cost for us? If you could comment on that.
I think you are very right when we have to say what is the low-hanging fruit. The low-hanging fruit, as you rightly said, is our existing plant, where we would recover the biogas and enrich it by removing the impurities and then compress it to be used as a fuel. This will be done in the next three to six months, and then it takes about 9 - 12 months to construct that purification plant and a compressor plant. I think this is the game plan. This is not only going to be for wastewater municipal projects, can be industrial projects, can be municipal solid waste projects, can be for fresh mud.
Any form of organics which can be converted to methane, we will use these technologies to convert to methane, so that a valuable product in form of a fuel, which is clean and green, is generated, which has a market value. So this is our game plan. Initially, to demonstrate this concept, we are going to set up about four to six plants in the next 12 - 15 months.
Sir, on the cost basis, how much are we expected incur?
Depending if the asset is existing, probably it will take a couple of million U.S. dollars to put this plant. But if the asset is not existing, probably it will take about $4 million per plant.
Okay. All right, sir. That would be all from my end. And congrats once again. Thank you.
Thank you.
Thank you. The next question is from the line of [Arun Chakravathy], an individual investor. Please go ahead.
Hello. Good afternoon, Mr. Mittal.
Good afternoon.
How are you, sir?
I am good. And you?
I am fine. I have got only one question about that TSGENCO arbitration award. Did you receive anything yet?
I think immediately after this award, there was election and there was a change in government. So I think the ministry and the bureaucrats are being now appointed. So we expect that in the first quarter, we should be hoping to get this, and there are some other legal things which have to be cleared by the TSGENCO legal team, which I believe in this quarter it will be cleared, which will pave the way for us to collect our money from first quarter next fiscal year. So maybe in two, three, four tranches, we should be able to collect the full money.
Okay. That is good news. And congrats for the good set of numbers this quarter.
Thank you.
Thanks a lot.
Thank you. The next question is from the line of Dhananjay Mishra from Sunidhi Securities. Please go ahead.
Yeah. Thanks for the opportunity and congratulations on excellent operating performance. As you said that this being election year, domestic market will be a little bit slow or even the current geopolitical thing. Can you give some idea in terms of bids which will order is expected in next 12 months, particularly the domestic one?
As I said that our focus today expecting this slowdown for about four to six months. We have shifted lot of resources in the international market. A lot of bids are under processing. Some of the bids we are already as a preferred bidder. We expect next four to six months, we should be able to announce a few more international orders. Some of them probably can be large orders, if we are lucky. We will still continue to work with the Indian clients, both on the industrial side as well as on the municipal side to set up a good order pipeline, which we believe immediately after elections, this also should be harnessed.
This Libya order has been as framework order for very long time. What is the reason it is not converting in actual order?
This is Libya. You know what happened to the geopolitical situation, the revolution in the country. Now the country is getting stable and slowly, based on their affordability, one by one project, they are giving it to us. We had told you that we have just finished Tobruk Desalination Plant, which is a drinking water source. Now they have started discussing with us this two or three framework orders which you are talking about. They have already escalated the price because the time has gone. We have arrived at a new number with the client knowing that its time has gone, so the prices are escalated. A new number has been arrived at, and as soon as this is passed in the cabinet, I think they will work on opening the LC. Without LC, we will not start. Once the LC is open, we will immediately start this project.
We are very hopeful in next couple of quarters, we should be able to start at least couple of these projects.
Okay, sir. That is all from my side. This year we are going to achieve highest ever EBITDA and PAT, and I hope in coming years we will be achieving highest ever revenue. Thank you.
We'll celebrate together.
Yeah.
Thank you. The next question is from the line of Nikhil Abhyankar from ICICI Securities. Please go ahead.
Hi, sir. Thanks, and congrats on a very good set of numbers. My question is again pertaining to the order inflows. You mentioned that most of the orders inflows that you're expecting are in next four or six months. Should we assume that there won't be any significant order inflow in the financial year?
No, definitely will be. You must have also heard telling earlier during my speech as well as some Q&A, that orders will come. Even in India it will come, but majority of orders in next four to six months are going to be from international geographies. We are not saying no orders. We are saying from international geographies, I repeat.
Okay. But domestically as well, you are expecting a significant-
Yeah, we are going to see a subdued activities once the code of conduct comes in.
Right.
You know that at least for four months nothing will happen till the results are declared and a new government is formed, and the ministers and the bureaucrats are put into place.
Right. Can you just share the number for the projects where you have already submitted the bids and what is the quantum of those bids?
More than $1 billion we have submitted the bid, and another $1 billion we are working on, which in next three to four months we will submit the bids.
Okay, so $1 billion. This is both you are saying international and domestic?
Yeah. Total as a group.
Okay, understood. Sir, final question on the HAM projects. If I am not wrong, we have got three HAM projects and we were also looking to monetize them. Any update on those?
Yeah. The first one, the Kolkata one, we expect to achieve the commercial production within this quarter. The other two should be in the first half of next fiscal year. Once the commercial production starts, the revenues will start coming in, and this is where we expect the investors who are a majority will take control. We would finish our EPC and we will continue doing a long-term O&M, which is about 15 years O&M. At that point of time, when the investors are comfortable with the performance, we can even think of monetizing our investments.
Basically, we have got three. Out of those, two will become operational, one will be still under construction, right?
Sorry, I missed your question. Can you repeat?
Out of three HAM projects, two will become operational and one is still under construction.
No. One will be operational in this quarter.
Okay.
The other two will be operational in the first half of next year, next calendar year.
Understood.
All three are in advanced stages.
Understood. Going ahead, just wanted to understand whether, say, in the next three, four years, if we generate a portfolio of these HAM assets, can we even look at an InvIT instrument to monetize these assets?
Yeah, this has to be, because we have continuously told you that we are an asset-light company. Our job is not to remain invested. Once we are a technology partner and we demonstrate the construction, the EPC performance, and then going forward, the O&M performance, I think then we can definitely monetize our portion of the investment.
Okay. Okay, sir. Thank you. All the very best.
Thank you. The next question is from the line of Rucheeta from iWealth Capital. Please go ahead.
Hello, sir. Good evening. Sir, my question is regarding the European subsidiary. Last year, what was the revenue and EBITDA for it? Same quarter last year.
See, we do not give out these numbers specifically. Just to give you a context, if you are referring to the European subsidiary that we divested. In the nine months, about INR 130 crore, INR 140 crore is attributable to these subsidiaries. On an annual basis, about INR 200 crore is the revenue of the subsidiary. That is like to like in case you want to adjust between the two groups. EBITDA will be hardly anything because that is one of the reasons why we wanted to divest these operations. EBITDA and profitability lower and revenue being higher. Strategically, we wanted to keep Europe as a tech hub and concentrate operations on the emerging economies.
Okay, sir. Sir, if we look at December to December, we have grown around 78% on our EBITDA level. Just wanted to understand that how much of this, how much of it was EP that we have executed and how much is EPC?
See, this will change between periods. This will certainly change between periods, Rucheeta. But generally, out of our EPC revenues, roughly about one-third has been running on EP. Sometimes it is higher, sometimes it is lower. These nine months would have a higher mix of EP, like from SIBUR or industrial from Reliance, and some of the other HAM projects, EPC projects. This mix differs. That is why I said, about 1/3 of our EPC revenues usually is composed of EP.
Okay, sir. Okay. Just one last question. What is the kind of order book growth that we envisage for the next two years?
I think 10%-15% is a fair estimation to make, but of course, you know the market is quite vibrant. The sector is very bullish, and we are very confident from Middle East, Africa, all these geographies are firing on all cylinders. So we'll see. These will probably We'll be happy to surprise the market, but fair assumption to make, 10%, 15% roughly.
Okay, sir. Okay. And this year?
See, I think don't go on a year-by-year basis. Our projects run for three years, so you can't basket us into a year-by-year basis. I gave you a CAGR number. We are above INR 12,000 crore, roughly around that level, and we'll be hopeful to maintain at least that. If we are lucky to get some larger projects, probably we'll grow it this year also.
Understood. Thank you so much.
Thank you.
Thank you. The next question is from the line of [Omkar Jahagirdar], an individual investor. Please go ahead.
Sir, thanks for taking my question. Congratulations to you and WABAG team for the highest operating margin in the history of WABAG. We were having INR 10,000 crore of order book since 2018. Finally, after winning two big projects of Chennai and Bangladesh, order book has become INR 12,000 crore. Unfortunately, letter of credit and other formalities took time, and because of that reason, no revenue got generated from these two large projects. My question is whether WABAG will do better in S2, whether yearly numbers will be more than last year in terms of revenue or not? And WABAG is confident whether they will beat last year revenue numbers or they will close revenue nearby last year's number, as our nine months total revenue is INR 120 crore less as compared to last year. This was my question number one.
Second question, I will answer later once I will get the answer for this.
See, you are looking at just absolute numbers as it is declared. Just now, one of our friends asked this question of the two subsidiaries which we have divested. You have to consider that our numbers should be seen with respect to the two subsidiaries which we have divested, which our CFO has said that on an annual basis, it will be about INR 200 crore will be their revenue. So if we do the same number as last year, we have to see that we have done INR 200 crore extra. This is the only message I would like you to note.
Sir, but just wanted to understand whether billing has not been done or the, you can say execution of the some of the project was slow because the order book has increased almost INR 12,000 crore and earlier we were earning INR 10,000 crore. Any specific reason or, as you mentioned earlier, the execution takes place after six months or nine months, little bit better than initial months.
Absolutely. You said it, you answered it. This is what we discussed earlier when our friend had asked this question. It takes about three to four months to establish the project. As you rightly said, letter of credit, contract signing, these are all multilateral projects. One is a JICA funded, other is a World Bank funded. There are formalities to be done, which is now over. The engineering then has to be done because this is an EPC, engineering, procurement, and construction order. So then E has to be done. Engineering has to be done, conceptual engineering, basic engineering and detail engineering. Once the detail engineering is approved, then it sets the stage for procurement and construction. We are at that stage now for the two projects which you mentioned.
From this project itself, we'll see some growth of revenue, but the real tick off will happen from next fiscal year.
Okay. Are we confident we'll beat FY 2024 revenue number this year, sir, or we'll close nearby as compared to last year?
See, again, I'm saying that even if, let's say, we take the second of your option, we close near to last year number, we would have still grown by INR 200 crore because two of our subsidiaries we have divested, where their total revenue was INR 200 crore. Please keep that in mind.
Okay, got it. Sir, the second quick question-
Sorry to interrupt, sir. May we request you to return to the question queue for follow-up questions as there are several participants waiting, please.
Sure. Thanks.
Thank you. The next question is from the line of Kaushik Poddar from KB Capital Markets. Please go ahead.
You just now spoke of having submitted bids for $1 billion and another $1 billion you are planning to submit in the next quarter or something. So in that case, of the $2 billion, what is your strike rate in the past?
See, generally on this international market, we have one in five or one in six. You can say average about 15%-20%.
Okay. If we take 20%, in that case it is $400 million, which translates into something like INR 3,200 crore. Will there be more in next year or how? Because your turnover will be around INR 3,000 crore this year, if I take it. So there may not be much growth next year, is it?
Why do you say that? We just now have been discussing with our friend that the projects which we signed and went from INR 8,000 crore -INR 10,000 crore, INR 10,000 crore -INR 12,000 crore, have now really taken off because the engineering is over. That itself will see the growth. Okay? Number one. Number two, the new orders which are going to come, that will also see the growth in the second half of next fiscal year. This is a continuous process that we will win projects, we will execute projects, then we will win projects and execute projects. So growth is inevitable for WABAG. You will see growth. Only question is what is going to be the quantum of growth. It has to be seen with the speed of order intake and speed of execution will determine the speed of growth. Growth is inevitable.
Okay. Can you accelerate to around, say 15% next year? I mean, can we look forward to such 15% next year?
We all can look forward to, there is no doubt about it. But we also have to be realistic. You will also have to make your models. We always believe in giving a little conservative outlook so that we can beat that outlook. So we would like it a little conservative in your outlook so that you can get positive surprises.
Okay. Thanks.
Thank you. The next question is from the line of Axay Shah from KRIIS PMS. Please go ahead.
Thank you, sir, for the opportunity. So I want to understand whether there is a difference in EBITDA margin in Indian project and international project.
Yeah. Generally, yes. Short answer is yes. That is the reason in our Wriddhi strategy, we have focused on international geographies. That's the reason we said in MEA, Middle East and Africa is going to be our focus in this FY 2025. Because the cash flows are likely to be better, advanced technologies will be used, and EBITDA margins will be better. We are also trying to see more international projects if we can go as EP contractor rather than an EPC contractor. Even the latest order which we have announced, it's an EP order, not an EPC order. So EP orders will have even better margins than an EPC order.
Okay. And sir, there are some competitors in the Indian market who are making 20%-25% margin. So whether technology is different in that case, or there is some other reason?
I will leave it as, I don't know. I think you should ask those companies, but that's not the market we are in. They may have some other smart reasons.
Okay. Thank you, sir.
Thank you. The next question is from the line of Rishikesh from Robo Capital. Please go ahead.
Yeah. Hi, thank you for the opportunity. My question is with respect to the mix between O&M and EPC, which is currently 18%, 82%. How do we see this mix going ahead two to three years?
Sorry, can you repeat your question, please?
Yeah, sure. Our current O&M and EPC mix is around 18% and 82%. How do we see this mix to change in next two to three years?
We have given you this number, but our immediate focus is 20/80, 20% O&M, 80% EPC. Going forward, we would like to move to 22% and ultimately to 25% in three to five years. We would continuously like to improve the mix between O&M and EPC because that gives us more visibility, more predictability, better cash flow, better margins, lower risk.
What is our EBITDA margins for both the segments, for EPC as well as for O&Ms?
We have given you an average about 14%, which we are getting. You can see EPC will be 12%- 12.5%, and O&M will be 15%-16%.
Just one more question. You said a bid pipeline, which is currently of $1 billion, and you will be planning to bid another one. Just wanted to get a sense how this number used to be, let's say, five years back. Just a broad sense, not an exact figure, but to get a broad sense.
It has to go up, because generally, both in India and internationally, the ticket sizes of the projects are continuously going up. So this number used to be much smaller in the past, and going forward, we would see these numbers to be even higher.
Okay. Thank you very much.
Thank you. The next question is from the line of [Sachin Jain], an individual investor. Please go ahead.
Hello. Hi, Rajiv. Thanks for the opportunity. My question is that water as an opportunity is basically getting lot of traction across the globe. I understand you have a INR 12,000 crore+ kind of order book, and you are expected to win lot in MEA. If you have to paint the picture the next three to four years, qualitatively, how big, in your opinion, WABAG can become? I mean, not to give a numbers, but just generally your aspiration if I have to decode how you think of WABAG in next five years.
Technically, if you even take 10%-15% growth every year, which is the CAGR growth we would expect to go, we would need something, our order book should be close to INR 20,000 crore. Our top line should be past INR 6,000 crore-INR 7,000 crore. This is what the company should be, that we should be more than double in the top line and close to double in the order books. The most important is, as we are growing, we are also seeing, and you are seeing, when we are taking the right steps, our valuations are also growing.
Right.
Not only our top line and bottom line is growing, but also our key multiples are growing.
Sir, as you indicated, over a period of time, O&M as a proportion, say, your aspiration to take it to 25%, then can it bring EBITDA margins in line of, say, 18%-20% kind of margins? Is it possible with that kind of mix?
I think I would like to definitely think about it like you are thinking, Sachin, but I would not like to comment. We'll take a step at a time rather than take quantum leaps. We always believe in taking a step at a time, seeing how the market is developing, how the competition is developing, what kind of projects are coming, what is the thought process at the customer's end, and take a step at a time. Today, from 8%, we went to 10%, 12%. Today, we are able to declare 14%, 15%. I think we have shown in the last three to four years that how the margins can grow. I trust we have a setup, we have the right strategy in place to keep this growth momentum.
And sir, one last question. Are there any projects where you not bidded, where you wanted to because of any constraint? Are there any projects you not bidded, sir?
Yeah. There are many, many, many, many. Not one. I cannot even name them. There are many projects we gracefully stay away. Something which does not go along with our strategy, does not go along with our customers, does not go along with many other factors, which we decide to stay away. And you-
No, sir. My question is the project which is meeting your parameters, but because of certain constraint at your end, you could not. I meant to ask that.
No, I think if it meets all our parameters, like they say in a marriage, So if we get everything, we would have got the project. Not only bid the project, we will win the project.
Sure. Basically there's no internal constraint at our end, either in form of balance sheet or any other thing.
Not at all. Today, we have one of the most healthiest balance sheet in the water sector as a pure play company. We have no issue at all. Today, we are one player who have got shortlisted and pre-qualified for Egypt more than 1,000 million liters per day desalination projects. We are bidding for 1,500 million liters per day sewer treatment plant in CIS countries. Quantum of the project is not at all of concern to us, and our balance sheet is good enough to support this kind of project. We have demonstrated over the last 25 years that we have grown from our internal approvals. We have not gone out and even generated funds. That is what, even if you read our credit rating, which just came two days back, you see that they are also agreeing with us that we have everything required.
That's the reason they have given us a positive outlook, that the company has all what is required for growth, and hence they have given us an A+ positive outlook.
Sure. Congrats, sir. All the best. Good to see company at inflection point. All the best.
Thank you.
Thank you. The next question is from the line of [Hemant], an individual investor. Please go ahead.
Hello. Congratulations on a very good set of numbers. Sir, thank you for providing me the opportunity. Basically, I have two questions. One is that we will be installing 100 Bio-CNG plants, which has a revenue potential of roughly INR 200 million. Right? I just wanted to ask, the current order book excludes this 100 Bio-CNG plant revenue potential?
Yes, definitely. It's just an initiative announced. We have not booked any orders. That's what I told earlier when the question was asked. We probably would start booking the orders in couple of quarters. Then we'll start taking those order value in our order book. At the moment, it doesn't have any value of those plants in this order book.
What will be the kind of revenue which we will be booking in FY 2025 from this contract?
It is not going to be a revenue driver. It is going to be major bottom line driver, a visibility driver, and above all, it is for a circular economy, green economy, reducing the greenhouse gases, our contribution to sustainability. That is what it is going to be. Of course, it will have a top-line effect. It will have a bottom-line effect. It will throw out cash. But above all, it will also have lot of other benefits to the globe at large and to the society.
And sir, what will be the tenure to install 100 Bio-CNG plants?
Initially, as I said, to set up the concept, we will go for four to six plants in the first year. Once the concept is set up, then I think it will have a meteoric rise, maybe 20, 25 plants per year, and over a five-year period, we can have 100 plants.
And then we are L1 in how many projects? Can you please specify those?
I will not say L1 because it is evaluated L1 and all that. I would say preferred bidder in couple of projects, which are likely to be awarded in next three to four months.
Can you please, sir, quantify the number?
Number in terms of the orders?
Number in terms of revenue.
It's about $100 million.
$100 million. Okay, sir. Thank you.
Thank you. The next question is from the line of [Sriharsh a KJ], an individual investor. Please go ahead.
Hello. Sir, this is with regard to the prospects of the Russian market. In the earlier few con calls, you have mentioned about the huge prospects available in the Russian market for the desalination projects. But till date, we have not received any order from the Russian market. Going forward, what are the prospects in the Russian market?
I think we all have to be very careful. We are a global player, and because of these sanctions becoming stronger and stronger, a lot of these products come from our developed world, and even the client side, they are little slow in awarding. We are also little slow in developing this project till we see some future in that, and the sanctions are a little bit being lenient. I think at the moment, we are little bit slow on taking any orders, and clients are also a little cautious in awarding because a lot of these products which is required for desalination come from the advanced European and U.S. markets.
Okay. Sir, thank you. Another question is, in the month of January this year, Mumbai had invited some tenders for their desalination project. Have you submitted the bid for this project, and do you expect the project to be awarded?
I would not comment on whether I expect the project to be awarded. This only Mumbai or Maharashtra government can announce that. Today, we have not submitted because these were a Swiss auction project, and we don't want to get into this till we are clear that they have intention to look at alternative contractors for the Swiss auction. Probably we will take a call after the election.
Okay, sir. Thank you, sir.
Thank you. The next question is from the line of [Prashantkumar Hazariwala] , an individual investor. Please go ahead.
Hi. Good evening, sir. My question is, how many plants we are going to install in our sites, this Bio-CNG plant we can install in our running plants or running sites?
There are some projects which we have in our sites, and our first intention is to install the plant there because that is going to be the fastest and the cheapest to demonstrate this concept. The concept selling has to take place first, and that is what, as I said before, the first year we will demonstrate the easy ones, which are more at our existing sites, and this will be about four to six over the next one year.
All right. What kind of revenue we can get from it? Is it any ballpark number from these four, five sites?
What was your question? What we can get?
What kind of revenue we can get from these four, five sites? Any ballpark number.
Not a lot. As I said, average maybe a couple of millions per site, even if you do six plants. Maybe it will be about $15 million.
$15 million. All right. What kind of cost it will have?
What kind of cost?
What kind of corpus do we need to do this kind of a plant?
It will be $15 million will be the cost, then the revenue will be depending on how we can sell this CNG or a compressed biogas as a fuel, that will be the revenue we will generate year after year for the next 20- 25 years.
Yeah. All right. Thank you very much.
Thank you for this.
Thank you. The next question is from the line of Tej Patel from [Niveshaay Investment]. Please go ahead.
Hello, am I audible?
Yeah.
Yeah. Thank you so much for the opportunity. My question is from the general sense, we have improved our margins from 8%- 9% from last few quarters from 12% - 14%. What are the major reasons for it? Is it a change in the product mix, like the EPC? Is it a change in the geographical mix, or any other reason? That is my first question.
Tej, it is a combination of all of those reasons that you mentioned, and this is part of our strategy. Looking at more EP projects, looking at more industrial projects, going more international, improving our O&M base, managing cash better, turning net cash positive, managing our borrowing rates. All of this has contributed both to the profitable EBITDA growth and the PAT growth.
Okay, got it, sir. One more question. Sir, if I see there are some of the projects which just involves building of the sewer networks, right? We have also taken those projects in the past. There are other projects which only involves undertaking of the creation of the STPs and the WTPs. I just wanted to understand what will be the margin difference between, let us say, sewer network projects and then EPC designing project of an STP?
Each project is unique. More importantly, we do not build only networks. That is not our business. We deal basically in treatment plants. Network can be an accessory, but it cannot be the core of our business. We will be a technology and process contractor, and not a civil contractor. We will not be also. The margin profiles, probably we will not be able to comment because we do not operate in the civil network space.
Okay. Got it, sir. No problem. Thank you so much, sir.
Thank you.
Thank you. The next question is from the line of [Arkopratim Pal] from Sanjay Agarwal Broking. Please go ahead.
Good evening, everyone. Am I audible?
Yes. Can you speak a little louder?
Yeah, sure. Am I audible now?
Better.
Yeah. First of all, congratulations for this good number. Most of my question is already answered. I just wanted to question about that. If the project remains the same, we will definitely see improved profitability. Do you think in the near future also we will keep on getting overseas orders to maintain margin at a higher level? Earlier our margin was 8%, 9%, and 10%, but now it is very good at 12%, 13% or 14%. Do you think this margin will be sustainable next six months as well as in the near future also?
See, we continue to follow our strategy where we are focusing on EP industrial and international projects, and also include O&M, and that is how the margin profile has improved over the years, as you rightly mentioned. We continue to remain committed to the strategy, so we don't see any reason why the margin should be anything different. If at all, over a period of time, we will only aspire to improve it with the better products.
Okay. All right. Just also trying to understand, let's take an example of the Chennai project, which you have recently won a big project. How do you break this down between EPC and O&M?
See, this is a composite bid. Whenever you are required to do a DBO, design build operate project, it's a composite bid. You have to produce the most effective life cycle cost. It is not just EPC or O&M that will win you, because this bid was constructing over 42 months and maintaining for 20 years. So it's a composite bid where a life cycle evaluation is done, and that is how it gets evaluated, both from a price and a technical perspective.
Okay. Thank you, sir. Thank you. Once again, congratulations very much.
Thank you.
Thank you. The next question is from the line of Akash Pawar from Sahasrar Capital. Please go ahead.
Hello, am I audible?
Yes, you are.
Yeah. I just had a couple of questions. In a recent interview, you had mentioned about growing your order book by around 15%-20% for next couple of years. I just wanted to understand what's the base we are talking here. Are we talking about YoY growth that is on the FY 2023 orders, closing order book? Or is it on the current order book that we have?
We have a current order book of about INR 12,000 crore, and that is what we will aspire to keep growing, not just for one year, but I think over a It is a CAGR. It will take three, five years is the range of growth that we are talking about. With the bullishness in the market, the bullishness in the sectors that we are operating. That's the CAGR growth we are expecting.
Okay. The next segment was on the issue of depleting groundwater. I just wanted to understand how big of an opportunity it is for us in the recharging of groundwater.
See, this is going to be huge. Especially, we have already demonstrated this in Chennai. We have a recycle plant which we have constructed and operating. We are building a recycle plant in Ghaziabad precisely for this reason, where the industries will be the off-takers of water. Not just restricted to India, even in overseas geographies, this is becoming more and more prevalent, where sewage or wastewater is no longer waste, but an economic resource. This is going to be key. We have already said there are three main sectors we want to concentrate on as a product. Desalination, which is high technology, recycle reuse, which contributes to circular economy, and industrial and international projects, which allow us to deploy advanced technology and mark key references in the oil and gas sector across the world. This is going to be a very good opportunity.
Okay. Thank you.
Thank you. The next question is from the line of [Ramanuj Chandak] from Chandak Brothers. Please go ahead.
Good afternoon, sir. Am I audible?
Yes, you are.
Okay. I have two questions. Question number one is, keeping in mind the way China is getting aggressive and political tensions are rising because of China, is any of our suppliers from China, or what is the status of WABAG's subsidiary in China? Are we exposed in any way to China? Second question is that, you have entered a partnership with Peak Sustainability Ventures for 100 biogas plants. Who will be the target customers? To whom will this biogas be sold?
I will take the second question first. From a biogas perspective, this is going to be our existing treatment plants, as well as organic waste from various other sources that will be used to produce biogas. Customers can be somebody who wants to use Bio-CNG as a fuel. Compressed biogas can be pumped into the pipeline. The off-takers are more and more that we see. There is no dearth of customers there. It is only a dearth of people who are able to produce high-quality plants with a good recovery of biogas. I think your other question was on China. We are an international organization. A good amount of our business is also exporting from India, as well as we buy from various European vendors whenever we go international. There is no dependency on China as such we have.
In fact, most of the vendors would be international vendors, as well as Indian vendors of very high quality. There is no dependence on China.
Sir, on the side of biogas, would it be sold in cylinders or will it be through any other means? We have seen that in the past, many biogas projects in India have failed, mainly because they are unable to find customers.
Sorry, can you be a little louder so that we understand your question and respond to you?
Actually, sir, in the past we have seen many biogas plants in small scale and medium scale. They have failed because they are unable to find customers to buy their biogas. What will be the medium in which you will be selling this biogas? Will it be cylinders, will it be pipelines, or how?
We have seen and we have a very good track record over the last two decades. We ourselves have set up biogas plants, and most of this biogas we have used for our captive projects to generate electricity, and with this electricity, we have run the plant and not taken power from the grid. We have a very successful track record of using this. Now what we are talking about is going higher up in the value chain.
Yeah.
Instead of burning it in the generators and generating electricity, we want to convert into CNG, which has a much higher value than the electricity, and that would need little purification of biogas. According to us, at least none of our plants has ever failed in this, and we are very confident that we will be able to generate value.
Sir, what is the difference in the price of biogas per kilo and LPG? What is the current market price?
It should be close to each other because that is what biogas is: compressed natural gas. What is natural gas? It is methane. This is what biogas contains, methane. So they are identical.
Okay. Sir, what is the current price of biogas per kilo? Is there a rough estimation in India?
This depends on where it is being used. It is used for boilers. It is for generating electricity. It is for fueling the vehicles. I think fueling the vehicles you can read on any fuel station what is the cost of biogas for fueling the vehicles. That is the price, which is today.
Okay. Sir, what is the criteria which you are taking for setting up the Bio-CNG plant? I mean, in which kind of areas will you set up a plant?
We have answered this before, that if we go for existing assets, it will be about $2 million-$2.5 million per plant, is what we are estimating. Of course, depending on the size of the plant. If we have to start a new asset, it will be $4 million-$5 million.
One last question. Let's assume China also invades Taiwan, what it has been saying from a long time. Let's say Chinese companies are out of this market. Will WABAG be benefiting from it directly?
Sorry, your voice is not clear. You have to come closer to your speaker and speak.
Sir, let's say-
Speak into the speaker.
Okay. Sir, the way China has said many times in the past it will be invading Taiwan. Let's assume that really China invades Taiwan. Will this create many opportunities for WABAG, or will it not make any big difference?
It will not be a big difference because our market is global, and we already see enough opportunities. To get one more opportunity will not make a big difference to us.
Thank you, sir. Thanks a lot.
Thank you. The next question is from the line of [Faisal Duber] from [HD Hava and Company]. Please go ahead. Sorry, you are not audible.
Your voice is not audible, Mr. Faisal.
As there is no response from the participant, we will take this as the last question. Due to the time constraint, we will take this as the last question. I would now like to hand the conference over to Mr. Rajiv Mittal for closing comments.
Thank you, friends, for your active participation in this Q3 and nine months FY 2024 earnings call. We have uploaded the analyst presentation on our website. In case you have any further queries, you may get in touch with our Adfactors , our IR advisors, or you feel free to get in touch with us directly. Thank you once again, and let the next century be even more remarkable than the last one. Bye-bye.
Thank you. On behalf of VA Tech WABAG Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.