Anup Engineering Ltd
NSE:ANUP
Earnings Call Analysis
Q3-2024 Analysis
Anup Engineering Ltd
The company achieved a revenue of INR 128.4 crores in Q3 FY '24, reflecting a robust 12% increase over Q3 FY '23. The company's EBITDA and PAT also witnessed significant growths of 33% and 45% respectively, year-over-year, indicating not only increased revenue but improved profitability. Year-to-date, revenue stands at INR 393.5 crores, which is 47% higher than the prior year, and the PAT up by an impressive 80%, demonstrating sustained growth and income improvement.
An efficient working capital turn of 4.3x is reported, highlighting effective debtor collection and advanced receipts, projecting a future expectation of 3 to 3.5 turns. The fiscal responsibility of the company is further established by a strong balance sheet, ending with gross cash of INR 146.4 crores and a manageable debt of INR 41 crores.
The company has an order book of INR 814 crores at the end of Q3 and aims to garner additional orders to close at INR 900 crores. This includes new orders worth INR 307 crores booked in Q3, with a promising 57% being exports. The leadership forecasts growth guidance of 25% to 30% for the upcoming year and boasts an inquiry pipeline of approximately INR 900 crores.
Operational efficiency was evidenced by the on-time dispatch of a large-sized equipment from the new facility and the booking of INR 150 crores worth of orders for the Kheda plant, expected to be executed by next year. The company is investing in a manufacturing bay extension at Kheda and has completed a 1 megawatt rooftop solar installation at the Ahmedabad plant, indicating a commitment to sustainability and scaling operations.
The company is keen on leveraging growth in industries such as Oil & Gas, Petrochemicals, along with emerging sectors like Fertilizers and Hydrogen, aligning with the global focus on energy transition and renewables . They anticipate maintaining similar growth momentum into FY '25, owing to strong business visibility, talented team, and reliable partnerships.
Looking ahead, the company is strategically calibrating order intake for FY '26 around a forecasted addition of INR 100 crores to INR 150 crores to the current order book while ensuring capacity for short-term emergency jobs. They are unaffected by the Red Sea crisis due to indigenous procurement and FOB delivery terms. For Q4, the company expects to outperform Q3 and aims to end the year comfortably over INR 530 crores in revenue.
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Ladies and gentlemen, good day, and welcome to Q3 and 9 months ended FY '24 Earnings Conference Call of the Anup Engineering Limited. [Operator Instructions]
Before we proceed to the call, let me remind you that the discussion may contain certain forward-looking statements that may involve known or unknown risks, uncertainties and other factors. It must be viewed in conjunction with our business risk that could cause actual results, performance or achievements to differ significantly from what has been expressed or implied in such forward-looking statements.
Please note that company have uploaded the result, press release, investor presentation and also outcome of Board Meeting on the website of stock exchanges and the website of the company.
I now hand the conference over to Mr. Nilesh Hirapara, Chief Financial Officer of the company. Thank you, and over to you, sir.
Thank you. Thank you so much. Good afternoon, and a very warm welcome to everyone. Thank you for joining us today for our quarterly financial update. This is Nilesh; and I have our CEO, Mr. Reginaldo Dsouza, here with me. I'll start with quick rundown on the number of this quarter and then Regin will give update on business and market outlook.
In Q3 FY '24, we have achieved the revenue of INR 128.4 crores, which is 12% higher than the revenue of Q3 FY '24 (sic) [ Q3 FY'23]. EBITDA achieved is at INR 30 crores at 23.4% of revenue, whereas PAT is INR 20.20 crores, at 15.7% of revenue. EBITDA has increased by 33% compared to the Q3 last year, whereas PAT has increased by 45%.
For the 9 month FY '24, revenue achieved is INR 393.5 crores versus INR 267 crores of same period last year. That is 47% higher compared to the same period last year. EBITDA is at INR 89.4 crores, which is [ 70.2% ] compared to INR 52.5 crore EBITDA of same period last year. In percentage term, EBITDA is at 22.7%, which is 3% higher than the EBITDA percentage of same period last year.
For the 9 months FY '24, PAT is at INR 60.40 crores at 15.4%, which was at INR 32 crores at 12% 9 months last year, showing growth by 80% year-over-year and improvement of 3.4% in absolute terms.
In Q3, we have achieved the working capital turn of 4.3x mainly on account of good debtor collection as well as higher receipt of advances. In the long run, we expect working capital turns to be in the range of 3 to 3.5 turns. Our other income is at INR 2.6 crores in Q3, which is mainly on account of higher treasury income. Same is at INR 4.7 crores in 9 months. On the cash front, we are closing at gross cash of INR 146.4 crores and debt of INR 41 crores. Just to add, we have paid debt of INR 20 crores in the month of January '24.
With this, I would request our CEO, Mr. Reginaldo Dsouza, to share an update on our business and market outlook before we move on for a question and answer session.
Thank you, Nilesh. A very good evening and a good day to all, warm greetings from team Anup. I'm glad to be part of this call to share our performance on quarter 3 end and also provide a brief on the future outlook.
As seen from the numbers presented by Nilesh, we have an unplanned quarter 3 with a good consolidation on margins and better working capital management helping our cash flows. I must say that the team at Anup has been doing a phenomenal job to maintain the momentum and consistent performance over the last 3 quarters into this financial year.
On the revenue for 9 months ending December, we have posted a 47% growth at INR 393 crores, with an EBITDA of INR 89.4 crores, which is 70% growth for the same period.
Here, I would like to mention the fact that in quarter 3, we executed some free issue material orders. Now if you put that into numbers, it was equivalent to about INR 12 crores to our revenue. So the INR 131-odd crores that you look at as revenue, apple-to-apple, we should add at INR 12 crores. So it would effectively look like a quarter of probably INR 140 crores plus. That's mainly because we executed some free-issue material orders in quarter 3.
We had a healthy PAT growth of 89% at INR 60.4 crores. Also good debtor management and better advances, I ensure that we maintain a very healthy working capital at 4.3 turns. On the industry-wide revenue for quarter 3, Oil & Gas and Petrochemicals is at 52%, Fertilizers at 14%, and interestingly, Hydrogen is at 33%.
On the product portfolio side, we have Heat Exchangers at 51%, 5-1, Reactors and Vessels at 30% and Piping and spools and Others that 15%. So when you see these numbers unlike the past, we see a more balanced product mix in quarter 3. Exports stood at 33%, which is very much in line with our guidance of 30% for the year.
On the order booking side, I must say Q3 was one of the best quarters with about INR 307 crores worth new orders booked, which makes a new order booking of INR 662 crores for the year, of which 57% is exports. So that should be very encouraging for us as it's in line with our guidance. This means a pending order book of INR 814 crores as we speak at the end of quarter 3. So considering our plan for this financial year, and if we put the numbers together, we have an order book of INR 675 crores to be executed in the next financial year FY '25.
Now this augurs very well for us, and perfectly in line with our growth guidance of 25% to 30% for next year.
Also, with an average Inquiry pipeline of approximately INR 900 crores on hand, we expect considerable order intake in the coming months. We are actually now calibrating our new order intake for the year that is FY '26.
On our new manufacturing facility at Kheda, I'm happy to state that we have dispatched yet another equipment, pretty large-sized equipment weighing approximately 200 metric tons on time from this new facility.
Also an encouraging fact that we have about INR 150 crores worth of orders already booked for Kheda plant to be executed in the coming period till next year. So in short, all in all, our Kheda plant has taken off very well, in line with our expectations.
As conveyed during my last call, we have already started the work on manufacturing bay extension at Kheda to complete the partial they built in Phase I. We expect to have this operational in Q1 of FY '25. So this means that we will have two full manufacturing bays, which would be approximately 10,000 square meters floor area at Kheda. This will be available almost for 9 months into the next year -- next financial year.
On the sustainability initiatives, we have completed the 1 megawatt rooftop solar installation at our Ahmedabad plant. It is expected to be commissioned in this quarter. Now with this operational and also the wind mill that we operate, we should approximately have 50% [Technical Difficulty] in Ahmedabad covered through renewable sources.
Taking this forward, we also intend to have a rooftop solar at Kheda plant in due course of time. And also, as I mentioned last -- on my last call, we have also started the afforestation project at Kheda open land because we have a vast land there to create a green belt and offset our carbon footprint.
On the market side, we see some encouraging continued investment plans in Oil & Gas, Petrochemicals and also Fertilizer and Hydrogen globally. On the Hydrogen business side, we are currently witnessing more opportunities coming from blue hydrogen, especially from the western part of the world.
Coming to India, at the recently concluded India Energy Week Expo, the government's clear emphasis on the road map towards energy transition with a strong focus on Gas, Petrochemicals, Renewables and Hydrogen economy was a confidence booster to us. We can surely hope for largest investment in the energy transition space.
On the supply chain, we are keeping a close watch on the geopolitical themes around the current shipping challenges due to Suez Canal movement concern, and also the volatile economic outlook in various parts of the world. We are monitoring closely and are building our strategies around to derisk.
To conclude, we've had an encouraging 9 months, and the momentum created with a good pending order book of INR 814 crores, along with a strong inquiry pipeline, augurs well for achieving the growth plan of 30% for this year and also sets the stage for a similar growth in FY '25. I'm confident that with a good business visibility into the next year, and at the strength of a strong capable team at Anup, and with the continued support from our reliable partners and suppliers, we will be able to deliver on our plans.
My sincere thanks to all our hard-working, committed team members at Anup, our partners, our suppliers and all our shareholders for standing by us and trusting the brand Anup. We are ever indebted for your trust and support. Thank you all for attending this call and for your patience listening. Happy to have your questions now. Thank you.
[Operator Instructions] First question is from the line of Abhishek Singhal from Naredi Investments Private Limited.
Sir, my first question, how many orders have we won since January to till late?
January to till date of this year, right?
Yes.
Yes. So there has been no order finalization in this month, January, but we hope a large portion of it to be finalized in probably next couple of weeks. So we are working on, as I said, right, almost INR 900 crores kind of an inquiry pipeline. There were many exports, which were about to get finalized. But as you know, because of the year-end and the western part opened up quite late into the year, so we expect those finalizations happening any time in February and March.
So what kind of order book are you expecting at the end of the financial year FY '24?
So for the order book that we have on record so far, we should be adding anywhere close to INR 100 crores to INR 150 crores to that.
Okay. Okay. And sir, second question...
And as I mentioned in my call, we are actually calibrating the order intake for FY '26. As you -- I'm sure you understand that our delivery timelines for any order is average 11 to 12 months. And looking at our plan for next year, and the pending order book on hand, we are calibrating it very cautiously because for us, on-time delivery performance is of paramount importance. And that's where I said that we are collaborating our order book for FY '26 actually now.
Okay. Okay. And the second question, what is...
Sorry to intervene. We need to keep some buffer capacity for short-term shutdown jobs, which we always keep about 5% to 7% kind of a capacity booked for that.
Okay. And what is the impact of Red Sea crisis on revenue and margin?
Sorry, sorry, come again. We couldn't hear it.
What is the impact of Red Sea crisis on our revenue and margin?
So practically, no impact for us because largely the orders that we executed, most of them had indigenous item procurement. And our deliveries were mostly either Ex Works or FOB. So from that perspective, I can confidently say we had absolutely no impact on our revenues or margins.
So on FOB, that is -- buyer immediately book revenue and delay for -- booked shipping?
So most of our equipments, which have gone have already passed and loaded and moved out of the ship. Now in quarter 4, we have some of the equipments where customer is already into booking the ship mode, and we should be able to move those equipment out from the shop. So largely, we were at a risk from the perspective of raw material intake, but I think we were able to maneuver that quite well, and we were able to get most of our raw material within time that we needed for project execution.
Next question is from the line of Atharva Bhutada from Purnartha.
Yes. So I have just 2 or 3 questions. First would be, will our revenue booking will be similar to what it has been last 2 years where the March has been a heavy revenue booking quarter?
Yes. So March, definitely would be better than quarter 3 for sure, because generally, quarter 4 is definitely loaded. But to be frank with you, it will not be as in the past because if you have heard us, we have tried to maintain a very consistent quarter-on-quarter performance through largely our focus on execution side. So it will be higher than quarter 3, but not the kind of loading that you would have seen in the past. So as I said, we should be ending the year comfortably just over INR 530 crores.
Okay. And so last quarter, order book -- that the order book was standing at INR 872 crores in October. And right now in December it's at INR 814 crores. So have we increased our execution? Or was -- or is there a slowdown that's going on in the market?
No, I would not term the word slow down. Largely, if you see, as you know, December is always a slow month because most of the exports in Europe and U.S. doesn't operate during that time. And also January, early couple of weeks, we lose on that. But having said that, this is a trend which we see every year. So we should see now the order booking, as I mentioned, INR 900 crores inquiry pipeline, which we have, which, as per our timeline, should get closed within next 2 months. And based on the strike rate, we should be able to book, as I said, INR 100 crores to INR 150 crores comfortably.
Okay. So there is one technical question. So I just want to understand how do you all reduce your scrap because steel -- like stainless steel will be our biggest material and heavy scrap would also like cause a lot of problems in new project deliveries. So how do you all manage to reduce the scrap project?
So I would not say we reduce. But what we do is, as you know, all our material procurement is the project specific. We don't have any common material probably which is just lying in stock and we use it for any project. For every project, once the order comes in and the engineering drawings are made, that is something called as material planning, which is done specific to that project. And based on that, we procure material. So for every project, plate wise layout some, we upfront know we have bought the material what would be the scrap percentage out of it because we use a software to do the perfect layouting on the plate.
So by and large, before even we start cutting the plates, we very well know what is the scrap percentage coming out of it because we try and utilize the plate to the maximum extent possible based on the shape and size of the components. So it's not about probably reducing the scrap, it's possibly -- probably of getting your yield highest possible depending on the shapes and cuts of the components.
Next question is from the line of Bhavya Sonawala from Samaasa Capital.
Am I audible?
Yes, very much.
Yes. So just a couple of questions. The first is, is it possible -- I mean, with reference to Heat Exchangers, are there any heat exchangers that we manufacture that don't kind of require any license and that are common in the industry?
Sorry, can you just come again, please?
So basically, just trying to understand like how we have a license -- the Helix license for a heat exchanger. I'm just trying to understand if there are any heat exchangers that don't require particular licenses and are common for the industry to make?
Yes, yes, there are many. In fact -- so what I understand is we are talking about referring to Helix heat exchangers, where we have a license tie-up with Lummus heat transfer. So I would say yes, there are many common heat exchangers, which does not need any specific licensee agreement. But, having said that, your capability and your plant needs to be qualified with the customer to be able to do that. So I would say, on an average in a year heat exchangers that we make, probably 20% to 25% would be a licensed product, and the balance would be the common heat exchangers with any of the qualified vendors into the customer list can bid for.
Okay. Okay. Understood. And just a follow-up on this. Like you mentioned that only 20%, 25% of our order book is kind of with license. So is there kind of countable number of licensees across the world where we can license them?
Yes. So there will be a lot of technologies, which the licensor will license out. So for example, Helix heat exchanger, there's only one licenser in the globe, which is Lummus Heat Exchanger, but they have many licenses around. So similarly, there are -- as you know, we have key technologies where we have tied up. One is Helix Heat Exchangers, one is EMbaffle technology for heat exchangers and one is polymerization reactor for reactors and vessels.
So there are many more such which are at the high end of the segment. As I mentioned in my last call too, we are in the process of discussions with those licensor to be on board, to be able to make those complex equipment. It takes time, of course, to get qualified, but we are on that path.
Okay. Just my last question. In our overall product portfolio, if we remove the heat exchanger, what kind of market size are we targeting?
In terms of numbers?
Yes, numbers, in terms of how big the market is?
So as I said, right, overall, the market that Anup Engineering that we are interested in, there could be something higher in the segment where we are yet not qualified, and we wish to get into. But there is a very large component of product segment, which is down the line where we don't intend to participate because they would to be small in size, smaller in thicknesses. And based on our kind of a capability put in place, we may not be competitive.
So if you look at only the segment that we wish to be part of it, roughly about INR 20,000 crores annually is the kind of opportunity that we see globally and out of which approximately about 50% to 60% would be heat exchangers and balance would be reactors and vessels.
Next question is from the line of Vijay Kumar, who is an individual investor.
Are you hearing me?
We can, but it would be great if you can be -- a little bit louder.
Sorry to interrupt Mr. Vijay, your voice is breaking. Please use handset.
Hello?
Yes, please proceed.
Sir congrats on good results. My question is, what kind of order book we are seeing in blue hydrogen? I mean can you give some picture on the EBITDA margin on hydrogen side?
Yes. So as I mentioned in my opening remarks, on the hydrogen side, we see a great push. You would have seen that almost 33% of our revenue for quarter 3 came from that. Also going forward, the order booking that we have, we see largely export orders coming from blue hydrogen side on the western side of the world, largely United States of America and Canada. So the equipment in those remains the same for us as we are making today. There are large number of heat exchangers, reactors and vessels. So the product portfolio remains the same, except that the designing is a little different. There are some different specifications that we need to apply. But from a capability perspective and manufacturing perspective, nothing much changes for us.
So we will have, from product side, heat exchangers, reactors and vessels. And on the EBITDA margin profile, we don't see much profile changing between Hydrogen and Oil & Gas and Petrochemicals or any other sector, except that we generally see a lesser number of competitor profile participating for those because you need to get qualified with those reputed customers. So the number of people competing would be a little lower. But on the margin profile, we don't see much change. So a short answer to your question, the EBITDA almost remains the same for us, whether it's Hydrogen or Oil & Gas.
Next question is from the line of Aditya Agrawal from Ambit GPC.
Sir, first is, I wanted to understand what will be our current capacity utilization? And what would be our CapEx outlook for the next 2, 3 years?
So when you talk about capacity for our kind of a business, normally, we will talk about in terms of tons of fabrication that we can do. So with our both facilities in Ahmedabad and Kheda, we roughly have about 15,000 metric tons kind of capacity. And the orders that we have are in the tune of 10,000 to 11,000 metric tons. So we are roughly about 60% to 70% kind of a capacity booking. We still can update about another 20% roughly to the capacity.
Understood. And...
In fact, as we said, we have already started the extension of our Phase 1, where we had left a 1-bay manufacturing, we partly build. So we are going to complete that. That would take about INR 15 crores to INR 18 crores or roughly about INR 18 crores kind of CapEx into the next year.
Okay. Understood. Understood. And sir, second -- the other question I have is, in terms of exports, so currently, it's about, I guess, 1/3, right, about 33%. So going forward, what kind of a number you are looking at? Would it be like similar to this? Or with hydrogen, the share going up probably exports could also go up forward from here?
So next year -- so this year, we will end at about 30%, around that number. Next year, we will be 40% to 42% kind of an export company.
And that's sure because we already have the full visibility of orders in front of us. So pretty confident that we should end just above 40%.
And sir, my last question is in terms of margins, I mean, the guidance that you have, so currently, we are roughly about 22.5% to 23%. So let's say, for FY '25, '26, would it be in the similar range? Or could this go up going forward?
So as I mentioned, in terms of EBITDA percentage, we would not see it going up too much. As we are growing, we will have to get into more and more product segment to fuel our growth aspirations. And what we feel is, as I've given our guidance that we would wish to grow at a 25% to 30% growth rate with a 20% plus kind of an EBITDA. So that's the profile that we want to maintain, growth along with a decent EBITDA.
Next question is from the line of Ajay Kumar Surya from Niveshaay Investments.
Congrats on a good set of numbers. Sir, my question is on -- sir, if you can just explain us the order cycle like do we win new orders from EPC players or direct customers? And also -- and which part of the cycle do heat exchangers get deployed on the maybe a refinery field. So is that towards the end of the cycle or towards the beginning of the cycle?
Yes. So to answer your first question, on the order booking cycle. So any orders that we take, on an average, our execution cycle time is 11 to 12 months. That's kind of a product portfolio we are in. Of course, if there are large size equipment, it may go even up to 14, but on an average, it is anywhere between 11 to 12 months kind of an execution.
And when do they get -- and the customer profile, largely, we get the orders from EPC companies or end customers. But having said this, if you look at probably a 3-year average, you would find a 50%, 50% kind of a breakup. That is 50% from tender business. which is generally PSUs in India like Indian Oil, BP, HPCL and others, And 50% would be from either end users, direct end users or EPC companies.
So that's -- of course, it fluctuates year-on-year. But if you look at a 3-year average, you would find this kind of a breakout, 50%, 50% kind of a breakup.
When does the heat exchangers go and actually get commissioned in the project cycle, of course, the civil takes the longest time, civil and other -- pipings and others. And probably, the heat exchangers would go and sit in the plant. Of course, it would, again, vary because it will depend on the sequence of installation, which part of the corner of that whole project depending on the accessibility. But largely, I would say, probably about 1.5 years before the commissioning or a year before the commissioning is where the heat exchangers would go and get installed on the foundation.
So sir a follow up, in last 2, 3 years, we have seen...
Sorry to interrupt Mr. Ajay Kumar, your voice is sounding low. Can you please...
Am I better now?
No you have to use your handset.
Hello? Is it better now?
Yes. Please proceed.
So follow up on this [Technical Difficulty].
Ajay Kumar, it is still not audible. Mr. Ajay, we are not able to understand the question. If you could be a little louder, it will help us.
Yes, sir, I'll try. Sir, if I look at the -- sir, you said that our heat exchangers get deployed during the end of the commissioning of any refinery. And in the Indian context if I see the Oil & Gas CapEx has been -- towards the last 2, 3 years have been pretty good. Sir, do we see any slowdown over there? Or what is that has given us confidence of this 30% growth?
Yes. So this confidence on the 30% growth comes from 2 fronts. One is, as I said, on the export side, the geographical spread that we are trying to get -- if you have heard my calls in the past, the precise reason why we wanted to have this geographical spread is because we know this CapEx cycle is cyclical in nature. So having a larger spread would help us derisk that cyclicity. And all the efforts that we've put into getting into exports is manifesting into real orders now. As I said, the 57% of our orders come from exports. So -- and what we are seeing is the projects and exports largely on hydrogen account and also gas account, is only increasing day by day.
So we see a lot of traction coming from the United States, and a huge traction on the gas side from Middle East side. So that's something which is fueling a lot of inquiries back home.
And second, on the Indian context, as I said, you would have heard the announcement in the India Energy Week. The largest investment is going to be in the energy transition phase for the next few years. That will be largely into doubling our refining capacity, which India wants to do it before by 2030. India wants to be a leader in petrochemical. So we are seeing a lot of petchem plants coming up, both in the public as well as private sector.
We see a lot of PVC, polysilicon, PTA plants coming up, which is a manifestation of that. And also on the energy transition towards cleaner side, be it in the hydrogen segment, where we don't have to do much difference. It is the same product portfolio. So for us getting into hydrogen business is a very seamless transition.
So on account of good visibility in terms of the projects globally, especially on Hydrogen and the Gas segment, and also back home, the projections and the investment committed by the government, we see a good traction on the investment at least for the next 2 to 3 years on Oil & Gas, Petrochemicals and Fertilizers side, including Hydrogen.
Next question is from the line of Romil Jain from Electrum PMS.
Sir congrats on a good set of numbers. I just had a couple of questions. One is, you guided about INR 530 crores, INR 540 crores of roughly revenue in FY '24. So just want to understand that would mean largely single-digit kind of growth on a Y-o-Y basis in Q4? So I understand we have met -- it will be more than 30% growth for the entire year. But is there any constraint or there's anything stop us from growing faster in Q4? Or that will get accommodated in the coming years, which is FY '25? So just if you can help us understand that.
So it's -- I would say it's more about rationalizing our entire revenue for the year with an equated quarter-on-quarter performance. And this is something which we've been talking about rather than having quite a high spikes in quarter. We had planned it, the project planning was such that we get a consistent performance on delivery because that is something very crucial to us. So the quarter 4, the plan that I talked about is largely based on the contractual delivery dates of the orders on hand to be delivered to the customers.
So it's largely based on the order input and the contractual delivery dates from the customers and also coupled with our execution in terms of how much we can execute in a quarter. And of course, this will see a little bit of change from next year onwards when Kheda really gets into full steam, which is expected to get into full steam from quarter 1 with close to about INR 150 crores kind of an order book for that plant already, you will see a change there from quarter 1 onwards.
Okay. So what kind of growth are we looking for the next 2, 3 years in terms of top line?
So as we stick to our guidance of 25% to 30% growth that we are looking at, and with an EBITDA of 20% plus.
Got it. Sir, next question is on we may -- that we are going to add about INR 15 crores, INR 18 crores. So as you mentioned, 15,000 ton -- metric ton is the capacity right now, how much will this new CapEx add in terms of the capacity?
So 15,000 -- so 16,000 metric tons on an average. Of course, it will again depend on the product portfolios that we choose, but it should take our capacity to about 16,000 metric tons.
16,000. Okay, okay. And lastly, on the INR 12 crore number in terms of revenue that you mentioned, actually, I was not very clear on that. Can you explain that part again?
So what happens is, largely, if you've seen our revenue generation would be on the order book that we take from the customers based on the material being procured by us. That is, we buy the material, and we execute the equipment. Now there was one order from a reputed EPPC in India, where the material was on free issue basis. So what happens is the material content is given free of cost by customers. So the value that we see is only our value addition. So we do all the work. We execute it, but it doesn't reflect in the top line is because the free issue materials content is there.
So just for an understanding of execution where we stand, I said is like-to-like if you add, if the material was in our scope, our revenue would have looked like plus INR 12 crores than what it is looking like today.
Okay, okay...
This is what is like-to-like comparison.
Okay. That material has been given by the client and hence it doesn't get reflected in our top line?
That is correct. That is correct.
Any impact you see on Red Sea going ahead in terms of exports because our exports are increasing. So maybe until now we have not seen much of an impact, but going ahead, do we see anything?
So we've been talking to customers. In fact, over the last month, we had some visits on the customers to discuss about it. So the point is even our customers know the fact of this. Customers know the fact that if they have to avoid this road, then they will have to take a longer route. They will have to book ships in advance, and they're already on that job. So based on our deliveries, they are planning, they are shipping either at Kandla or Mundra port.
And so it's a fact which is now known. It's not a hidden fact. Because -- and I think customers, based on their project importance, and what we understand from most of the customers is their project is very critical to them in terms of execution. And they are willing to go out and look at alternate shipping arrangements to take these equipment and be loaded there. Hopefully, this Red Sea concern should go off quickly. But having said that, if it continues, then I'm sure our customers have got alternate options to take the equipments.
So on and on, I don't see, based on my communication with the customers so far that we should be impacted much.
And when it comes to raw material imports, that's in our control. We are trying to indigenize as much as possible or buy from Asia alternate options wherever it is available for us.
Next question is from the line of [ Prateek Giri ] from [ Subh Labh ] Research.
Sir, can you hear me?
Yes.
This is Prateek. Congratulations sir on good set of numbers. Sir, I needed a little bit of assistance in understanding the domestic -- in understanding the order book numbers. So in domestic, this quarter, we have reported around INR 245 crores of order book vis-a-vis INR 259 crores last quarter -- in September quarter this year. Sir, I just wanted to understand, should I add the DE/SEZ order book also when I'm taking domestic order book? Because I can see there's a good downfall in domestic order book from INR 330 crores in June quarter to INR 245 crores in the December quarter. Sir, am I reading it right? Or...
You are comparing June versus September -- December?
No, I'm just trying to understand it sequentially. In June, we had INR 330 crores of order book in domestic, then we had INR 259 crores and then this quarter, we have reported INR 245 crores.
Correct. Yes, you are reading right. So the supply to our domestic market is higher than the order intake during this period.
Okay. You're seeing for the quarter, the execution of domestic -- sorry, sorry.
Yes, yes. Yes. What you are saying is right execution in the domestic is higher than the order, new orders. If you see in June quarter, the export DE/SEZ we were showing it combined, this time, we had shown it separately. So in 30th June 2023, stocking order book was INR 319 crores, which is now INR 570 crores.
Okay, okay. Understood, sir. So -- okay, I get that the execution for the quarter domestic business was a little higher. But are you seeing any softness in domestic demand?
Practically, I would say, no. Of course, it has not transpired into the order book account directly. But there's a lot of traction that we are seeing from private players towards the big private [ companies ] we see a huge traction in terms of order finalizations, probably in February and March. That will be pretty good. And I'm sure you would see in the results when we come out at the end of the year.
On the PSU side, yes, there was sudden rush off, so many project finalizations. We are -- we've not seen them in the past, but now we expect it to come because there are a couple of projects lined up. So by the time the tenders come out, it is going to take probably 3 to 4 months of time that we probably get that order.
Understood, sir. So is it right to conclude that there's some delay, but it's not -- the demand is there -- still there?
That's correct. That's correct.
Understood. Sir, because even if you look at this quarter, domestic top line, it is actually lower than the last quarter because in the last quarter, we did around INR 110 crores in domestic. And this quarter, we did INR 96 crores.
Yes. So it was -- as I said, it is all the orders which we had booked in the past. So they have a particular contractual delivery date, based on that we are executing. So depending on which projects CDD falls into that particular quarter, we can't compromise because there will be otherwise LDs on it. So we go exactly by the contractual delivery dates, and that's how it reflects in quarter-on-quarter.
But having said this, our manifestation of the demand should be what's the kind of inquiry pipeline that we are looking at, at any given point in time. So if you've heard me even in the last I had said that we were around INR 900 crores to INR 1,100 crores kind of a real-time inquiry on hand. So today, as we speak also, we are about INR 900 crores of inquiries.
Now it's a mixture of both export as well as domestic that is on the card. So it augurs well for us as long as the pipeline -- inquiry pipeline is looking good. Based on our appetite for the strike rate, depending on our order book and the capacity, we take the call to take it in a particular month or not. But overall, inquiry pipeline should give us a lot of confidence.
Understood, sir. Very helpful. My second question on EPC and end customer is already answered. I heard that probably the mix is around 50-50 on a 2-year, 3-year basis. Is that right, sir?
Yes. So year-on-year, it can -- because sometimes you would find PSUs to be almost 70% and private customers and if it is 30%, the next year, you would just see the reverse. So on an average, 3-year basis, you would find about 50% to 60%.
Understood. And margin profile is again -- is roughly similar?
Yes. It's roughly similar. That's correct.
Next question is from the line of Atharva Bhutada from Purnartha.
I just have one question. So since we are saying that from the last 3 years, there was a 50-50 between PSU and EPC, and because we need a lot of working capital, is there any cash flow risk in terms of getting money on time when you get PSU orders? Or have you seen a lot of delays?
No, we are pretty happy with the cash flows. We are getting our monies on time, whether it's PSUs or private customers. I think we are working with most of the reputed customers globally, and we are getting our payments on time, both advances as well as final dispatch payments.
And that's exactly the reflection that you see on our working capital terms. If you look at, we have 4.3 turns in this quarter, which is, I believe, very good, if not the best, and that's a pure reflection of collections of money and also receipt of advances.
Next question is from the line of Bhavya Sonawala from Samaasa Capital.
Just one question. When we talk about probably our expertise or strength or the skill that we have, is it possible to explain the importance of design and fabrication? Is one more important than the other? If you can just throw some light on that?
I would say both are important. Because, as I said, we don't have a standard product. We have -- every order that we get is a customized order, sort of make to order to customer requirements. So it all starts from engineering, which is an extremely, extremely important phase because it is quite technical in nature. You need to understand the details of the parameters that the equipment will operate in, which country it is located based on the ambience conditions that the parameters would change.
So design is definitely important. And added to that, manufacturing because, as I said, this is a manufacturing which we make -- the ASME Code and we need to abide by all procedures and processes that align with that. So the welding is extremely crucial entity that is you can't have any defects, it has to be defect-free. So I would say engineering and manufacturing both are equally important for execution of the projects on time.
Okay. And when we probably talk to our customers, is it on these 2 levels, engineering and probably manufacturing? Or is it one whole -- is it like a particular order given as a whole, there's no different two segments to it?
No, we get the complete order right from engineering to procurement of material, manufacturing and delivering to the point of your call.
Okay. And have we had any order where we have to only do the manufacturing and probably the design or the engineering part is given to us by the client?
Yes. Sometimes we do, especially when there is a repeat project, like, for example, if they have commissioned Phase 1 or Train 1, and they are putting an exact replica of the second, then they would give us the drawings and then we would make as per that drawing. That's possible, but I would say from 100, it could be 1 or 2 cases in that nature, rest all we would be doing designing to fabrication to delivery.
The next question is from Saket Kapoor from Kapoor Company.
Firstly, sir, for the Kheda part, you mentioned that we are preponing it as we mentioned in the press release that we are preponing the CapEx, and we will be ready by Q1 of the next financial year. And the order booking is to the tune of INR 150 crores. This understanding is correct, sir?
Yes. Order bookings so far for Kheda is approximately INR 150 crores.
And what would be the execution period for the same?
All would be in the 12-month period. So you should see INR 150 crores kind of a turnover coming from Kheda next year.
Okay. And that will cover our fixed cost, sir, the INR 150 crores? We will be profitable...
We will be surely profitable.
Okay. Sir, when we look at our Q-on-Q numbers, if we compare our December quarter with the September numbers, we find a deep in turnover. And I was just listening to your answer wherein some of the order that we have executed therein, we have not taken the impact of the material cost. So that is the only reason why we have seen a dip in turnover from INR 140 crores to INR 128 crores? Or is the order mix that has resulted in the same?
Largely, it is because of that. But historically, also, if you see, and I'm sure you would have heard me on the call that Q1 and Q3, these will be the 2 quarters, which will be marginally lower than Q2 and Q4. On account of a lot of things like, in Q1, it is more of holiday time, schooling and others. So we see an absenteeism of 30%, 40% of the skill labor -- so that's the reason why Q1 will be a slight dip. And Q3 also because we have Diwali, so the plant is shut for 7 days of the quarter. So Q3 and Q1 historically and also going forward, you will find it a little lower than Q2 and Q4, but not like what we've seen in the past that we had a very large spike.
We have moderated. We are planning such that we don't see a large impact. So on that count, if you look like-to-like, probably the Q3 has been better.
Whatever you have committed in terms of the -- in terms of the [ wagering ] in revenue quarterly that has now been evened out, and we are getting the same set of execution for quarterly basis, given the minor abrasion. So for the year as a whole, we are likely to close at [ INR 540 crores ] levels? This is what you have commented earlier in the call?
Yes, we said [ INR 530 crores ] plus, so around that number.
yes. Okay. So when we look at the last point on the other expenses part, that has gone up Q-on-Q basis. even on the lower revenue. So what explains this INR 4 crore increase in the other expenses?
So you are looking from Q2 versus Q2, or Q3 versus...
Q3 versus Q3, September '23 versus December '23.
Okay. So one major factor would be -- so sometimes on some of the products, which we sell, it is subject to a royalty.
Okay.
So Helix Heat Exchangers, whenever we make in supply, we have to pay royalty. So probably that's the number which is still a different in quarter 3, we would have not paid much royalty as compared to quarter 2.
Sir, I missed the point. Can you please repeat once again?
So the royalty -- so some of the equipment like Helix Heat Exchangers, whenever we make and deliver such equipment, we have to pay royalty to the licensor.
Right.
And that comes in other expenses.
Okay. So this was the case for this quarter. We have that Helix Heat Exchangers delivered for this quarter?
It's one reason and other than that power and fuel cost has gone bit up because Kheda operation has reinstated well. So these are the two major factors for higher other expense in this quarter.
And the finance cost part, sir, that has also been quite a bit different number, although very small base, but if you could explain?
Correct. So till now, on the loan part, Kheda plant was under commission, we were capitalizing the finances as per the accounting standard. If Kheda plant has commissioned, that course is now coming to a P&L. Right now, the debt is at roughly INR 40 crores, INR 41 crores, of which INR 20 crores is paid in the month of January. So now I assume like that cost would come probably the 50% of what it is in Q4.
And lastly, sir, on the cost of material consumed to the revenue, this percentage depends on the order mix part. What should [indiscernible] in terms of the cost of material consumed to the revenue profile?
Yes. So based on the current product portfolio that we are executing, we should see it in the region of 50% to 55%. Of course, as we keep moving up, probably next year and year after, we get into more and more niche segments, this percentage could go up. But as we speak, based on the current profile, it should be anywhere between 50% to 55%, depending on the product portfolio.
[Operator Instructions] The next question is from Naysar Parikh from Native Capital.
The first one is that in your order book, obviously, the domestic export mix is very different than what we have currently. So just can you talk a bit about between domestic and exports in terms of the kind of product we're selling or margins, et cetera? Is there a significant difference? Or how should we look at it?
Yes. So on the export side, we largely see the orders coming in from hydrogen projects, blue hydrogen, especially. And it is coming from the regions of the United States of America, Canada and Nigeria. That's a major inflow of when you look at the order book numbers.
In terms of margins, I would not say that there's much difference between domestic and export. But as I said in the past too, exports always gives us a percentage -- that too better margins at the end of execution on two counts. One is the advances are better. So advances are better as compared to domestic projects so we end up making some money there.
And also on the ForEx side, generally, when we estimate we are conservative on the ForEx side. So by and large, we tend to make money at the end of execution. So at the order book level, both would look the same. But at the end of execution, yes, export would turn out to be a little better than domestic.
Got it. And you mentioned that there is obviously some cyclic -- some slowdown on the order intake on the domestic side. And you obviously said that there is -- inquiries are good. So generally, can you just give -- can you talk about like are you seeing that the next few quarters, we will see separate demand on the domestic side, it will take some time to catch up? Or how should we think about it?
Because generally, for others, we're not seeing this kind of a domestic order book slowdown, at least on the capital side -- on the capital goods side.
Yes. So as I said, there's a big inquiry pipeline even for domestic, especially for petchem projects. And what we see based on our discussions with customers, we should be seeing them materializing in the month of March. Pretty large pieces of inquiry. The order intake should start flowing from March, that is next month onwards.
And most of it is coming from private players, large private conglomerates in India.
Got it. And between -- can you, on the heat exchanger side, what proportion of your revenue is generally replacement versus actually new clients, new orders?
Again, it would fluctuate year-on-year. But I can say firmly about 7% to 8% is replacement. The rest all goes for greenfield or brownfield expansion projects.
The next question is from Saket Kapoor from Kapoor Company.
Sir, a small point in terms of how we are closing this year? If we look at our quarterly performance, it has been more or less stable as we put it also. And Q1 and Q3, having a slight impact on the lower side. But when we just do the back envelope calculation, Q4 last year was closer to something like INR 144 crores, INR 140 crores. And this year also, we are contemplating and execution of [indiscernible] . So what are the constraints? Why are we not able to close the year on a growth rather than being very flat? If you could just explain that point.
So it is largely, as I said earlier, it's all about how we have planned at the beginning of the year because we had good overview of the entire booking for the year. So we have a suspension order book position based on the contractual delivery date we have planned the execution such that we don't land up into any delays. And that's how it has been planned. So we are very clear of what are the kind of equipments, which are the orders that we are going to execute in Q4. So it's a pure reflection of the order intake and our execution capabilities. So of course, having said this, it would be -- we would try, but as we see, this is what the number looks like based on the planning and the contractual delivery dates of those equipments.
Sir, you spoke about strong order pipeline in the petchem segment and also for the PVC part, sir, if I heard you rightly?
Inquiry pipeline, yes.
Both for the petchem and PVC segment?
That's correct.
Okay. And sir, so what kind of -- what could be the size of the order that we may be bidding for these -- and these are long gestation period, I think, so for both petchem and PVC. So if you could give some more color, what are we eyeing for?
So even for Petchem and PVC, the product portfolio that we deal with, it will be somewhere around 11 to 12 months kind of an execution for us because that's the product portfolio segment we are in. The overall inquiry bank, as I said, as we speak now, we are standing at an inquiry pipeline of about INR 900 crores to be finalized in a couple of months' period.
Okay. So on an order -- closing order book of INR 813 crores, and in executable of INR 140 crores for the next quarter, these will be replenishing our order book to that extent. I mean what should we contemplate to close the FY '24 -- 31st March closing order book to be in the likelihood of?
Yes. So as far as I said, we should be adding about INR 100 crores to INR 150 crores of order book based on the choices that we make because we also have to take care of our deliveries. So based on that, and if you look at the execution, we should be maintaining this pending order book position.
We should be closing somewhere in this level only -- INR 820 crores, INR 830 crores.
If you execute about [ INR 140 crores ] around we add [ INR 140 crores ] so it will remain the same. Only thing is out of which close to about INR [ INR 700 crores ] should be executable in the next year and the balance would go into the year after.
Okay.
We retain the growth -- we would maintain the growth trajectory that we mentioned. So we should be comfortably doing 25% to 30% growth even next year.
And this includes INR 150 crores from the Kheda facility?
That's correct.
That was the last question. I would now like to hand the conference back to Mr. Reginaldo Dsouza for closing comments.
Yes. So thank you, and I once again take this opportunity to thank my wonderful team, The Anup Pipes, I call them, and to each and every one who has contributed to this performance. Deep thank you to all of you, our shareholders for your trust and standing by our side always. Thank you. And on behalf of my team at Anup, I wish all of you a very happy, healthy and a prosperous life ahead. Thank you. Thank you so much. Bye-bye.
Thank you very much. On behalf of The Anup Engineering Limited, that concludes this conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.