Dilip Buildcon Ltd
NSE:DBL
Earnings Call Analysis
Q3-2024 Analysis
Dilip Buildcon Ltd
The company revealed a strong financial performance, with EBITDA soaring by 27.55% year-over-year in Q3 FY '24, from INR 2,497 million to INR 3,185 million, primarily due to better execution of projects and decreasing construction material prices. Net profit followed this upswing, increasing by 19.87% from INR 795 million in Q3 FY '23 to INR 953 million in Q3 FY '24. The company also successfully reduced its net debt-equality ratio from 52 basis points at the end of March '23 to 36 basis points by the end of December '23, illustrating its financial resilience and competence in debt management.
The company looks to capitalize on India's substantial infrastructure investments as outlined in the latest CRISIL report. The government has committed nearly INR 143 lakh crores over the next seven years, nearly doubling the previous period's expenditure. With the infrastructure budget increased by 11% to a total of INR 11 lakh crores for the following year, the company is in an advantageous position to benefit from this expansion due to its diversified portfolio spread across eight major verticals, which includes roads and highways, irrigation, water supply, and railways, among others.
The company introduced DBL 2.0, a strategy to segregate its business into short-term (EPC) and long-term (asset) segments. The latter involves coal mining and road assets, with coal mining expected to generate potential annual revenues of INR 5,000 crores over the next 25-50 years and road assets expected to provide annual distributions of INR 400 to INR 500 crores. In partnership with Alpha Alternatives, the company is setting up an InvIT wherein DBL will own 74% stake. This InvIT will facilitate the divestment of existing and future PPP road projects, ensuring a steady stream of free cash flow in the form of distributions.
Financial projections for the InvIT indicate that it will be set up by the second quarter of FY '25, subject to regulatory approvals. With 8 out of 18 projects going online initially, annual distributions are estimated at around INR 400 to INR 500 crores for FY '26, with approximately half of that expected before FY '26. This aligns with the company's objective of becoming a net debt zero entity and deploying cash flow opportunistically for assets that ensure long-term financial visibility.
The company has adjusted its approach to prioritize measured growth, improving liquidity, and enhancing return on equity and capital employed. The planned capital expenditure (CapEx) for the year is modest, between INR 50 crores to INR 100 crores, demonstrating a shift from aggressive growth-fueled by significant capital outlays to a more controlled expansion. The strategy now is to optimize cash flow, reduce debt, and make strategic investments that cater to long-term sustainability rather than short-term rapid growth.
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Ladies and gentlemen, good day, and welcome to the Dilip Buildcon Limited's Q3 and 9 months FY '24 conference call hosted by S-Ancial Technologies. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Jill Chandrani from S-Ancial Technologies. Thank you, and over to you, ma'am.
Thank you. Good evening, everyone. Welcome to Dilip Buildcon and Q3 9M FY '24 Earnings Call. From the management, we have with us Mr. Devendra Jain, Managing Director and CEO; Mr. Rohan Suryavanshi, Head Strategy and Planning; and Mr. Sanjay Kumar Bansal, CFO.
Before we proceed with the call, let me mention the standard disclaimer. The presentation that we have uploaded on the stock exchange including the interaction in this call contains or may contain certain forward-looking statements concerning our business perspective and profitability, which are subject to certain uncertainties, and actual results could differ from those.
Now I request the management to take us through the pre remarks, after which we can open the floor for question-and-answer session.
Now I hand the call over to Mr. Rohan Suryavanshi for his opening remarks. Thank you, and over to you, sir.
Thank you, Jill. The results and presentation have been uploaded on the stock exchange, and I hope all of you have had a chance to look at it.
So to start, I would like to share our perspective on industry. As per the latest CRISIL report, India will spend nearly INR 143 lakh crores in the next 7 years. That is almost double we spent in the last 7 years. In addition to core infra, major contributor vehicles will be roads, railways, urban infra, et cetera. In a step towards this direction, the government has already increased infrastructure spending budget by 11% for the next year, bringing to a total of INR 11 lakh crores, which is almost 3.4% of the GDP. This is a testament to the fact that governments have complete focus towards improving Indian infrastructure on a long-term basis.
The timing of these planned investments could be varied due to elections or any other reasons, but we have full confidence of achieving these target for the country. The national infrastructure pipeline has outlined what the government is thinking, and we are excited about the opportunity that it is presenting.
From a DBL perspective, as you all are aware, we are now a fully diversified infrastructure EPC company, covering 8 major verticals: road and highways, irrigation, water supply, railways, metro, tunnels, special bridges, urban infra and mining. We had embarked on this diversification journey a few years ago to make ourselves not only ready for the future infrastructure needs of the country, but to also shield ourselves from any unforeseen circumstances in a particular sector. Due to this diversified presence, we would be the direct beneficiary of the planned CapEx by the government in the infrastructure sector, while also ensuring that our risk is spread over multiple sectors and agencies.
Obviously, to capitalize on these upcoming opportunities, over the past few years, we have developed a very strong team, equipment banks and the highest level of prequalifications at almost all the new verticals we have added over the last 6 to 8 years. With our judicious approach in tendering, meticulous planning and technology-backed execution skills, we are more than confident to achieve a profitable and sustainable growth journey.
Our another major endeavor, which I highlighted in our previous call, was of looking at and dividing our business/cash flow in 2 buckets, short term and long term. I have termed our new strategy as DBL 2.0. This strategy focuses on strengthening balance sheet, becoming a net debt-free company on stand-alone basis in the next 2 years, generating consistent and predictable cash flows, delivering a measured growth, improving ROE and ROCs, reducing concentration risk from any sector, client or geography, all of which we believe will help us in building a strong company capable of handling any disruptions.
Our short-term business will be our EPC business, while our long-term business will be our asset business, which currently consists of road and mines. I'm happy to report that our low-risk, long-term assured revenue portfolio is progressing well. This business is the coal and the road business. So our coal mining business has a potential annual revenue of INR 5,000 crores per annum for the next 25 to 50 years as it achieves full output capacity.
Just to share. Currently, we are overachieving our targets by almost 40% by extracting 7 million tonnes as compared to the annual target of 5 million tonnes in this financial year at our Siarmal mine. At this mine for the next year, we will be doing 50% higher than our target of 10 million tonnes, that is we will end up doing 15 million tonnes. At the other mine, which is Pachhwara mine, we are delivering a total requirement of 7 million tonnes to the government. With this run rate, we should achieve a combined revenue of about INR 1,500 crores plus in the next financial year from just these 2 mines. Now the second long-term business is the road that I mentioned. From all the things that we have set into motion, we are expecting to get annual distributions of about INR 400 crores to INR 500 crores from our 18 road assets as we set up the InvIT. This gives us a visibility for the next 15 years of cash flow. As I had announced in the last call, we are in the process of creating our own InvIT in partnership with Alpha Alternatives. In the proposed InvIT, DBL will be holding 74% stake, and the balance 26% will be owned by Alpha Alternatives. This InvIT will enable us to divest our existing and future PPP for our road projects with much ease and without much dilution, while ensuring free cash flows in the form of distributions.
As per this agreement, Alpha is investing, we -- is investing in our road -- 18 road assets where we are divesting the 28% for a total consideration of about INR 1,400 crores to INR 1,500 crores. Besides this, they are also investing in warrants of the company of about INR 500 crores additional. Tentatively in this year till now, we have received about INR 130-odd crores through just issuing warrants, INR 1.6 crores convertible warrants, in the last quarter. We are expecting to receive another INR 500 crores in quarter 4 of this year, which will total the year's total amount received from Alpha to about INR 630 crores, INR 650-odd crores.
In the next financial year, we are assuming another amount in similar nature and what limited balance, we are expecting in FY '26. And these are all tentative time lines which are based on construction time lines and other deliverables. Alpha has taken rights for almost 9.99% of the paidup capital. They have the right to exercise these warrants in the next 18 months at an [ exercised ] price, which is determined by the safety process of INR 328 per share.
For the InvIT creation, most of the initial contracts are executed. Due diligence of each project is underway and perquisite conditions, fulfillment work is nearing completion. We are targeting and are confident of creating the InvIT during FY '25. Besides this, long-term business, the current EPC business is going strength from strength. While ordering in this financial year, given it was an election year has been slow. There are in the road business alone, almost -- project was almost INR 1,30,000 crores, which have been floated, and we expect some of them to be awarded in this quarter and over the next couple of quarters. But the visibility of those projects is very clear.
With this update, I would like to hand over the call to our CFO, Mr. Sanjay Bansal Ji, to provide insights on the financials.
Thank you, Rohan Ji. Good evening, everyone. I welcome all our stakeholders to our earnings call. Let me present the results for the quarter ended 31st December 2023. During quarter 3 FY '24, the company has completed 1 HAM projects, that is Repallewada to Telangana-Maharashtra border worth INR 7,082 million. At the end of quarter 3 FY '24, the company is having a well-diversified outstanding order book of INR 218,429 million.
Now moving from business to financial performance. The revenue of the company increased by 8.08% in quarter end FY '24 on Y-o-Y basis from INR 23,788 million in quarter 3 FY '23 to INR 25,711 million in quarter 3 FY '24, this is due to better execution of the projects.
On EBITDA front, the EBITDA of the company increased by 27.55% in quarter 3 FY '24 on Y-o-Y basis from INR 2,497 million to quarter 3 FY '23 to INR 3,185 million in quarter 3 FY '24. The EBITDA margin increased on account of better execution of the projects and reduction in the construction material prices.
Profit after tax increased by 19.87% in quarter 3 FY '24 on Y-o-Y basis from INR 795 million to INR 953 million in quarter 3 FY '24. This is on account of better EBITDA margins. In terms of the milestone, the company has basically crossed the net worth of INR 5,000 crores at the end of December 31, 2023.
Now let me take you through these some important balance sheet items and order book positions. The company has reduced debt of INR 5,315 million during FY '24, which resulted in net debt-equity ratio improved to 36 basis points at the end of December 31st, '23, versus 52 basis points at the end of March '23. The receivable also decreased to INR 13,819 million in quarter 3 FY '24 from INR 16,018 million in quarter 2 FY '24. This is on account of better collections by the company.
Working capital days also decreased from 72 days to 67 days. This is, again, because of better collection of the receivables. So basically, after this, we are on target to achieve our goal set at the start of the year. Revenue growth is on -- in line with our between 5% to 10% EBITDA margins improving. CapEx is planned between INR 50 crores to INR 100 crores. Debt reduction already done in 9 months by INR 530 crores, and we are -- we will be achieving our goal set at this part of the year of INR 800 crores to INR 1,000 crores.
Now we can open the floor for the questions and answers. Thank you.
[Operator Instructions] The first question is from the line of Shravan Shah from Dolat Capital.
Yes. Thank you for the opportunity and congratulations on debt reduction. So that's the most important thing. Sir, a couple of just some clarifications and then the questions. So for -- we are seeing that a 5% to 10% revenue growth for this year. So fourth quarter, then at least to achieve 5% also, we need a INR 3,000 crores plus kind of a revenue. So this quarter, we have done closer to INR 2,570 crores. So are we confident that we can cross INR 3,000 crores plus kind of a revenue in the fourth quarter?
Absolutely, sir. We are confident that we will cross the INR 3,000 crores revenue for the second quarter full.
Okay. And in terms of now -- and also the margin now will be -- is there still a possibility that this margin will inch up to 13% plus kind of a number. So 12.4% this. And for 9 months also, it is a 12.4% EBITDA margin. So is there a possibility that maybe next year, we can see a 13% plus kind of a margin?
So currently, you should take the guidance that we've given in the past only as the current number only. Whatever improvement, let us keep it in the back pocket and if anything comes let us, hopefully, surprise you on the better than setting any aggressive goals right now. So let's just assume that's for now.
Okay. And in terms from now in terms of the order inflow, so that is for across the -- almost all road companies are facing because there is a slowdown from NHAI side. So there is a couple of things. So how much now so we have received just a INR 2,140 odd crores kind of an EPC value in terms of order inflow. So how much more we can look at in the next 1.5 months. Also, how much value of projects we have already bided where deals yet to open, and how much more we are planning to bid? And if you can broadly classify in terms of the where -- which sectors and/or water irrigation, metro, any other sectors?
Shravan Ji. So obviously, the orders that we have won which we have till now is about a little over INR 2,500 crores -- INR 2,600 crores plus order that we have won, year-to-date. We've highlighted those in our presentation as well.
There are another INR 10,000 crores worth of orders in the road sector loan, which we are awaiting them to open. Besides this, I mentioned there's INR 1,30,000 crores of road tenders which have been floated, but obviously, it has kept on getting delayed. The government has kept on pushing the dates ahead. So we are expecting some to happen then is, but then we are expecting a majority of it to happen in quarter 1 and then quarter 2 financial -- the next financial year. That is what we're expecting.
And the other sectors, we have -- we'll keep looking at it opportunistically. As you know, we don't give out numbers on that. But we are looking at it. So what is the planned irrigation projects, we are continuously looking and evaluating and building that as well. Those are more -- those are awarded by the state government, so different state governments have floated their contracts, and we keep looking at them.
Okay. So in water also, are we seeing other states where already the election is over, so MP, Rajasthan, Chhattisgarh or is there any scope even for UP also?
Yes, huge scope, there is a huge scope in this, and they are not dependent on the national election. So there's a lot of scope.
Okay. Okay. And then now definitely, it's a good thing that debt, we have reduced INR 500 crores plus -- INR 531 odd crores. So by this year, another we will see a INR 300 crore kind of a reduction in the fourth quarter. And hopefully, the last time as we guided, and we have -- this time also we guided that we will be net debt-free by FY '25. But in FY '24, how much more reduction can possible because -- in your opening remarks, you said that the Alpha Alternatives last quarter, we were looking at in FY '25, I think the higher cash inflow, now we are seeing some may pass or spill over to FY '26. So if you can help us with that.
Shravan Ji, you asked a bunch of questions, but I'll try and answer, if I miss out on something, do let me know.
So number one, you're right. We've already reduced our debt by about INR 500-plus crores in the first 9 months as we had indicated. And I think that has been the big sort of challenge when outside investors and all of you guys support other company and look that. And that is what we have addressed that we will now focus on building a lean, strong company with a very strong balance sheet.
The target that you're saying about INR 800 crores plus of debt reduction will do. What that will do is by the end of FY '24, we will have a debt-to-EBITDA of about 1:1. Debt equity of about 0.25 somewhere in that. And I'm giving you the ballpark figures right now, obviously, we don't mean the exact numbers. And in the next year, we are hoping to reduce it by another similar amount of what we are reducing in this financial year. So that is the target.
So it might not be completely, but it will be almost near -- we are net debt company that what we are kind of targeting. And that's the plan because while we are reducing our debt, we are also investing in new projects as we go along. So we are balancing out between both those things and do it. But our long-term agenda -- but in '26, like you said, we will completely be debt-free. Our long-term focus is on that only, and that's what we are trying to do as said.
Besides the debt reduction I have mentioned that we are also looking at dividing our business into long-term and short-term cash flows. So the short-term cash flow was the EPC, which I mentioned, and the long term is the coal and the asset business.
Now as far you asked how is that money kind of flowing, the money that we are indicating we have indicated last quarter or are we indicating in this quarter to you how it's going to flow, it's based on certain parameters of when projects are starting when are we first -- starting some projects and then when are we finishing those projects. So if there is any delay in any start, it will also end up in delaying. And if the government dates have not come to start, it might end up delaying the ending date. And that's why we -- as we go on, on an ongoing basis, we keep evaluating what are the chances of different projects. And when are they starting, finishing, when will we get the clearances from the government to split it into the InvIT and so on.
So based on those careful considerations, we eventually decide how the money flow at that point of time looks to us. So this is a, while obviously this is an exercise, which will keep on continuing, but you can take these as broad guidance towards how the money should flow or how the deal is looking. For us, most important thing was building this InvIT platform, which I kind of -- I would have mentioned over the last quarter call as well that the way that we have thought about it is this is a platform like Embassy and a Blackstone REIT that we want to continue building, investing in this platform and keep increasing the distribution of income that will come to DBL.
So a, not only does it give us a good platform to keep flipping our assets into, but it also gives us a good visibility of long-term revenue as we are already focusing on becoming a net debt zero company over the course of next year or so, in the next 2 years.
So after that, the cash that we will be getting and the stand-alone business, we will be looking to deploy that opportunistically in whatever assets or opportunities that we deem best for us, which will ensure long-term visibility, which will further ensure long-term visibility of cash flow for the company.
Just to understand further. So InvIT broadly, it will be by second quarter of FY '25, we will be able to set up and the INR 400 crores, INR 500 crores kind of annual distribution we are seeing. So if, let's say, this InvIT get set up even in the end of second quarter of FY '25, then also this INR 400 crores, INR 500 crores distribution can come? Or this is the annual number? So this would be our FY '26 level one can look at INR 400 crores, INR 500 crores kind of annual distribution?
Sir, out of the 18 projects, 8 will be going online now and then the 10 will be going. So this number, the total INR 400 crores to INR 500 crores, which is almost closer to INR 500 crores that will come from INR 300 to INR 500 crores, that will be achieved in FY '26.
Before that, it will be half of it, like, let's say, will come. And these are full year numbers that I'm talking about, obviously, the distribution income. Now you spoke about setting up the InvIT in the second quarter of FY '25, the endeavor is to do that. But obviously, this is not just singularly dependent on us and Alpha. It is also a regulator involved, which is SEBI. Based on their comments, observations, the back and forth that goes, we can only take a best estimate.
Typically, the full process takes about 9 months, I would say. We have embarked on it. So 6 to 9 months is the time that one should estimate for this kind of exercise. So we have embarked on that journey. So we are also expecting it to hopefully be done within that time frame.
Okay. And in terms of the -- obviously, it's great that slowly, slowly even our working capital also, we are reducing. So 67, 68 days. So -- and we see it last time also that 8, 10 days more reduction is possible. So even in fourth quarter also, we can see some further reduction is possible in working capital.
Shravan Ji, it is already improved around 7, 8 days. And further, when we will reduce the debt and we will get the cash -- more cash. So yes, there will be impact, but it will be in the range of 10, 15 days in a year, total. So if you compare March '23 versus, now it is already moved by 5 days. Further, basically, it will improve similarly.
Okay. So major possibility would be there in FY '25 and not maybe in this quarter, maybe 1 or 2 days possible. But if 5, 10 days-with if can look at, it would be possible in FY '25?
You are right. In total, it will be like 10 days reduction in the full financial year basis, so yes, 3, 4 days, about 5 days improvement will happen. And the next in the next year.
Okay, okay, okay. Okay. Got it. And sir, whatever the pending appointed date and we have already mentioned in terms of the likely this February and March, we will be getting received. So just trying to -- and getting understanding in the sense that just because of the election, we will be getting appointed date? Or will it be coming even post April, May? So there can be a further delay in the appointed dates? And so net-net, the revenue for FY '25, will it get impacted by that?
Shravan Ji, out of the total 4 [indiscernible] awaiting, 3 [indiscernible] will receive this month, Urga-Pathalgaon and 2 packages of Bangalore, Vijayawada, Package 1 and Package 4. And Package 7, Bangalore, Vijayawada will be received in March. So certainly, all 4 projects will receive the appointed debt this financial year by 31st March 2024.
Okay. And lastly, so broadly in FY '25, we can still, based on this and whatever, let's say, even the order inflow doesn't come fully this year, the next year, hopefully, post election, it will come. So we can see 8% to 10% kind of revenue growth in FY '25. That's the way we are targeting?
So see right now, the order book that we have gives us visibility -- enough visibility for the next year, in fact, almost through the next 1 year and 3, 4 months like -- I mean, sorry, 1.75 years when we look at a pure sort of back of the annual calculation of revenue and order book remaining.
For next year, we don't see any challenge. Our growth target that we have given is between 5% to 10% is what we had indicated. And based on that only we have kind of built everything on back. As we mentioned earlier as well, our focus right now is not on any kind of aggressive growth that you would have witnessed with us in the years of 2016, '17, '18 where we were focusing primarily on growth, and a lot of that growth was also getting fueled by taking our external capital for equipment and et cetera. Our focus now is to, we're not doing CapEx. Earlier, we used to do CapEx of INR 500 crores plus every year in equipments, and we consistently kept on doing that. But now we have brought it down to less than 20% of that. So it's INR 50 crores to INR 100 crores CapEx only per year.
So hence, focus on -- is on measured growth with it the focus is on cash flows improvement. Focus is on improving ROE, ROCE. Those are the kind of focuses that we've taken. Debt reduction, that is the focus that we have -- and because obviously, our business model is doing everything on our own, using our own equipment and people, if we are focusing more on that and reducing our cost and controlling them, improving asset turns, then we won't be focusing so much on growth because to get that higher growth, you need to invest again in CapEx, which we are not looking to do currently.
Okay. Got it. So it's the similar 5%, 10% kind of growth one can look at in FY '25 also. So and the CapEx till 9 months, we have done INR 104-odd crores. So INR 20 crores, INR 30 crores more one can expect in the fourth quarter? Or is it smoothly done and the 9 months CapEx is the full year number?
Maximum another INR 10 crores, INR 15 crores comes or something like that. We can account that.
[Operator Instructions] The next question is from the line of Narendra from RoboCapital.
Congratulations on all the positive things that are happening in the company. So my first question would be regarding our other expenses. So is there any one-off? Or is this a steady state rate for other expenses?
Sorry. I could not hear you. Can you repeat the question again please?
Am I audible?
Are you asking about other income or other expenses?
No. No. Other expenses.
Okay. What's the question, please?
So is there any one-off in that? Or is this the steady state thing that we can expect going ahead?
Just 1 sec. I'm just asking my team to listen to what the question that you asked, whether it is a one-off -- Any other question that you have till then, the current my team is looking into that, what you asked, what number exactly is that?
Okay. So I will ask my next question. Last call, you had mentioned that you are also expecting to reduce your depreciation amount. So any outlook on that? And how much savings can we expect in that thing?
Last quarter, we look to reduce our depreciation amount?
Yes, yes. We had a target to reduce our depreciation too. So is there any outlook on that?
Depreciation amount because we're not investing in new assets, I think that automatically, the depreciation amount will keep on reducing as that keeps getting going down and down as per the accounting standards. So I think -- and maybe you're indicating towards that.
Okay. Okay. Got it. And the other expenses side? .
Which is -- you are referring the total other expenses or specific 1 item?
No, no, I am asking that is there any one-off in that or?
There is one-off of INR 10 crores, INR 12 crores. That's it.
Okay. Okay. Got it. Got it. That was it. All the best for the future.
The next question is from the line of Sanika from Sapphire Capital.
Actually, I want to ask since you are on your debt reduction trajectory. So going ahead, what kind of interest rate can we expect, especially in quarter 4 and FY '25?
Thank you, Sanika, for your question. The interest rate will move basically in the range of 9% to 10%, because we have a large construction, and we are trying with every lender to reduce the interest rate, this is our significant positives. So there will be a reduction in near future.
So the finance costs can be in the range of?
9% to 10%.
Okay.
So it will be -- we're looking to improve from our current existing which would be a slight improvement. The idea is to also improve the rating of the company, which is also the company has started that process as well. So as both those things, the external things and as the negotiation with the banks started happening, we are looking to do that. But obviously, as you may understand and imagine, it's -- it's an ongoing process, iterated process and with a large consortium, it requires the approval of everyone involved.
Sanika ma'am, do you have any more questions?
No, no, no.
The next question is from the line of Prem Khurana from Anand Rathi.
Am I audible?
Yes, you're audible.
Yes. Thank you, Rohan.
so my first question was with respect to one of the press releases that you have given out on 8th of February. This pertains to some notice of claims with invocation of arbitration. And as you remember, this is with respect to the assets that we sold to Cube. Would you be able to share some more on this? And why exactly is this matter?
This is in regards to a claim that Cube has actually filed against us and obviously it is with regard to the 3 assets that we sold to them. We were quite surprised by Cube sending us that. And obviously, we have sent them a counterclaim. The thing was -- and Cube is already arbitrating against the government, against the wrongful -- against government winning NHAI, against the wrongful deduction in the annuity payment that Cube has. Government has claimed some deficiency in the maintenance of it, which is what Cube is contesting. And obviously, maintenance of any of those Cube assets is not part of our sort of agreement with Cube. They are maintaining on their own.
So given that it is a maintenance issue and they are already in the court with the -- against the government, and they've also gotten some kind of initial stay or something like that, I think they're also in receipt of that. So to send it to us was a little surprising.
And I mean if you look at -- we -- as a company, we are already managing more than 30-plus assets. So for Shrem -- and in all those assets that we are doing the maintenance, we haven't ever had any deduction of any annuities ever. There has never been any maintenance issue or anything else that has happened. And these are not just assets in geographically located in 1 state. They're in different states across the country, and it involves both national government assets and state government assets.
So the -- so we are very confident whatever we have done O&M, and there's a certain way of dealing with the government, maybe Cube -- because they are new in the O&M space and the asset bank space, maybe they have faced certain challenges. And they have diverted their responsibilities wrongfully towards us, but we are fairly confident that we -- because you can't be claiming to the government on 1 hand that the government is wrong in terms of reducing payment and they are entitled to all while also saying on the other side that it is our responsibility. So basically, Cube -- you can be on one side saying Heads is also mine and Tails is also wine and tails also. That's what's basically happening in this case.
Completely agree. But do we have any payments due from Cube? I mean I realize that you've received a large part of the payment, but generally, in most of these cases, you tend to have some of these deferred payments linked to some GST, change in law and all?
We don't have anything outstanding from Cube.
Everything is recovered yes, right? And on -- so the prospects pipeline it is spoke about INR 1,30,000 crores, would you be able to kind of break it out into how much of this would be EPC, how much HAM and BOT and given the fact that I'm buying next year, I mean, it would be as good as the zero-debt company, would you be willing to kind of go and explore BOT toll? Because there, I mean I'm assuming the competition will be a little lower than I mean, compared to EPC or HAM, so would you be willing to kind of go and explore BOT toll once the balance sheet has delevered.
So, sir, the first breakup between those projects in that INR 1,30,000 crores that I spoke about, it's about 20-odd-percent is EPC and the rest 80% is in PPP. So about INR 1 lakh crore of PPP projects are there in that breakup. And for the second thing that you spoke about, whether we would be open to BOT, of course, we are open to BOT as is HAM project. We are completely open. And as we are getting lighter, we have no problem.
Along with that, our own balance sheet getting lighter, we also have a partner here who is also willing to invest and grow that pie of the InvIT that they're going to be part of. So we have all sorts of options open to us. We evaluate all projects individually on their own merits. In the past also, we have done BOT toll projects, one of which was an Guna-Biaora project, which was on NH3 or Agra-Bombay road, so it was part of that. And that has done very well for us. While obviously, we've divested that to share, and it's a good part of the portfolio.
So even in future, we will be continuing to evaluate projects wherever we feel the traffic numbers justify the economic cost of building the project. And we see enough safeguard building for the long-term traffic sort of comfortability that you need.
Sure. And the [indiscernible] you're planning to create would have made to kind of acquire any sort of PPP projects, right? It is not restricted only to -- I mean I know your company, but I'm not sure about Alpha Alternatives, whether they would be comfortable with BOT toll or not. So when -- I mean, if you have any mandate in place wherein it restricts the asset addition only to a single category, let's say, HAM, or is it open and you can consider BOT as well?
So it's an open-ended thing. We are looking both Alpha and us, we are people who have taken a call on evaluating opportunity as they come. As long as they're meeting our hurdle, IRR hurdle, we will be open to looking at them. We have no other sort of hiccup or restriction on any of that to not look at something. We are open to buying it from other players. We are open to look at both BOT and HAM.
Got it. And I mean, the fact that the balance sheet has become very, very light now and it is supposed to go lighter even further. Any thoughts on accelerating growth, I mean, in between because we want to conserve cash, the idea was to delever. We went a little slow in terms of growth. I mean even this year, we have 5, 8-odd-percent sort of number in terms of growth. Could you think of accelerating? And would that need you to kind of invest more in capital or other equipment or, let's say, working capital? And all -- what should be the ideal number when you look at growth? I mean, I'm sure you won't settle to 5,8-odd-percent and the idea will be of grow better than that number for sure. But I mean, any thoughts there?
So our focus is on free cash flow that the company is generating at the end of the year. That is my biggest focus currently. And that is our biggest focus inside the company that we want to make sure that we get that. Now when it comes to -- so when we -- like -- if you speak about why the growth and everything, our growth is always based on; a, the company's own current strength, which is an internal factor and the external factor, which is how the external market, the opportunity from the government is looking.
Now in our case, if I'm sure since you follow the sector very carefully, the road sector has seen a lot of competition of late. And it's not -- when you look at from 2014 to 2019, we have a number of bidders in any bid would be about 6 or so. 6 to 8, we didn't find more than that in that era because all the earlier erstwhile companies had one BOT. So all of younger guns whether it was us or any of our peer sets who are in the listed space currently, all of us had a good run at that time.
Currently, the number of bidders in the road sector has increased quite a bit. And if you look at it, in the last years, the number of HAM projects that have been won by the smaller players, has been actually 2/3. So a lot of the smaller players have come in. So you don't want to chase growth at the expense of your profitability and at the expense of your cash flow.
Our idea is that when we started diversifying a few years ago, we knew the sooner or later, this is an industry which suffers from the same issues globally. We wanted to make ourselves more resilient to such shocks. We wanted to be able to be operating in different areas. Wherever we find good opportunity, take those opportunity. And that's how kind of we've done this.
If you look at our peer set as well, they've also struggled to build order books currently because they are primarily focusing on a single sector or certain geography, maybe primarily -- so with all of those [ strategy ] of people who have consistently remained in the road sector might be affected, all of them are also facing those challenges far more than us. But at least for us, what's the good that has happened is because we diversified much ahead of the pack, we built teams in all those sectors that we diversified, we built capabilities, we built the required credentials. We did all those things, equipment bank.
So we are on a good strength, and that's why we are reevaluating projects across geographies, across sectors. And that's what is most concerning for us right now, chasing growth as when the opportunity arises, when you see that, oh, this is the right opportunity to strike if we find a new project, which really excites us and we get it at the right place. Sure, we'll do that when we get the right opportunity.
But the idea of growth dictating every of our strategy is not there anymore. We would probably, as a young upstart my father and Devendra bhaiya both are first-generation entrepreneurs, both of them came from very humble middle-class background. So for them, when they were growing the business, the idea of a big diversified business, a listed business, growing size with it in different sectors and geography were the sexier idea at the one point of time.
As we have gone through our own journey and they've gone like through their journey as a company, as entrepreneurs facing the shocks of COVID, there were certain realignments of link that we felt of how we want to sort of go forward and what we want to do. And that is basically why we have identified how we want to take forward this company. And those are the metrics that we are currently focusing on. And growth, the measured growth is the focus, not aggressive stance on growth. Any opportunity come, we look at the opportunity, but it's not dictating our overall strategy.
Sure. I have 2 more questions, may I please? So one -- I mean, both these are bookkeeping sort of. So one is we have some exceptional gains during the quarter. What's the tax implication of this exception gain? How much would be the number in our tax for the quarter, which would pertain to this exceptional gain? And second is, I'm not sure if you gave any inflow guidance for the year FY '24. I mean you spoke about some of these tenders kind of getting bid-out in Q1 or Q2, but then do we have any target for this year because it's been only around INR 2,600-odd crores?
The exceptional gain, basically, these are the long-term capital gains. So the long-term capital gain rate that is 10% plus surcharge will be applied, but we have passed capital loss. So there will be no cash outgo very significantly.
The second, for the order book, originally, we have targeted about INR 8,000-odd crores of orders this financial year. Until now we've only done about INR 2,600 crores. And as we mentioned, there are some projects which are still awaiting to be opened. So I can't finally say how much will open and how much do we end up getting this year. But our order book is still, as I mentioned, 1.75 years or still forward-looking. So we have enough visibility for the next year and for majority of this, we are after as well. So yes.
The next question is from the line of Vishal Periwal from IDBI Capital.
Sir, on the footnotes, there are a couple of clarification if you can provide. One is like in the Shrem units that we have sold. So is this the first such transaction we have done? Or have you done this before also?
So this is first time we have sold certain units for around 1 crores -- 10 lakh units we have sold. This is first time.
Okay. And I mean will it be fair to say like it's more of an opportunistic point of view or any such things planned to the parties to whom we have sold in FY '25 or anything that you can provide color?
This is opportunistic sales, we were getting good price. So -- and the units were free. So basically. And on the other side, we are reducing the debt also. So the idea is to basically capitalize everywhere. So that is what this is completely, completely opportunistic sales.
Okay. Okay. So is it like to individuals or institutions, sir, I think without naming it?
Majorly it is 1 institution. It's a global institution, which has bought it.
Great, sir. And then secondly, I think there is one more note wherein you mentioned that incurred a loss of some amount, so is that fair to understand like the total amount received is something like INR 57 crores or INR 67-odd crore, loss is like INR 44 crores. So something like we have done this transaction on a price-to-book basis at around 0.6x. Is that fair to understand that?
No. Actually, we just sold total 10 assets to Shrem InvIT. Out of 10 assets, in one asset, while transferring 51%, there was a loss of INR 40-odd crores. And that is because only there are valuation model. And on second closing, there are adjustments in terms of the agreed mechanism of valuation. So that is why it is lost. So it is not 0.6x or so. The overall deal multiple is more than 1.4x.
Okay. Okay. So basically, it's not for one particular project, one should look, it's a portfolio. And the deal has concluded in 31st December. So maybe like in combined total, this is the probably that you have booked.
No, no. So the asset is transferred one by one. So once we receive 49% approval from NHAI, we transferred; after collection of first annuity, 51% goes. So yes, on overall basis, on 10 assets basis, the multiple is 1.4x plus. However, in this asset, specifically 51% transfer, there is a loss of INR 40 crores. So including this INR 40 crores loss, still the total valuation is 1.4x of the total investment.
Got it. Got it. And then 1 last thing. I think you probably would have covered this in previous calls. In the coal mine, when we do extraction, and we are probably doing a INR 1,500 crore in FY '25, what sort of margins that we can make. And as the mining increase in terms of the million tonne increase, does the margin also expand?
So we are expecting margins of around 20% in that business.
Okay. So that's the kind of peak probably like or INR 1,500 crores is the 20% that we are seeing.
Yes, we are looking at -- in that on an EBITDA basis on that.
Sure, sir. Got it. Got it. And then one last thing. I think you did mention initially that short term in construction business and long term is asset ownership business. So in terms of asset ownership, any sector's that you have probably like looking attractive to you, probably anything that you're hearing from ministry that we'll venture going ahead? Anything that you can provide color would be helpful. That's all from my side.
Currently, the 2 sectors that we mentioned, focusing on that. Other sectors that we might be looking at would not be right to speaking about our strategy over the call. But yes, we keep on evaluating, like I said, on an ongoing basis. And if anything starts for us, we will obviously share with our -- all our lovely well-wisher, such as you, once that gets executed.
[Operator Instructions] The next question is from the line of Manisha Agarwal from Middlecon Advisors.
Actually, I joined the call a bit late. But just one bookkeeping question. What kind -- what is the trajectory of our interest cost going ahead?
Manisha, if we keep on reducing -- as our debt keeps on reducing, the trajectory will be -- of the interest cost will also keep on reducing. In totality, it will keep on reducing and as also we negotiate better terms with the banks given that the outstanding liability would have reduced quite a bit, both those things should have a positive impact.
So do we have like any target going forward for FY '25 or FY '24 in terms of finance costs?
So in terms of the interest cost. So interest cost is between 9% to 10%, but there are other items like the infra business requires a lot of non-fund-based limits. So it is not just 9% on the fund-based outstanding. So yes, there will be a reduction in the interest cost in absolute terms. And in terms of the interest rate on fund-based facilities between 9% to 10%, and we are continuously negotiating with the lenders to reduce the interest rates.
The next question is from the line of Vaibhav Shah from JM Financial Limited.
Sir, we mentioned that we have received approval from the authority regarding the change in law of GST for 3 assets. So the claim amount is around INR 209 crores. So against that, we have booked income INR 64 crores. So when do we expect the actual cash to come in?
Can you repeat part of the question again because you're not very clear in between?
Yes. So we have booked the [ current ] value of the claim amount of INR 209 crores pertaining to the 3 assets that we have sold to InvIT. So when do we expect the actual cash to come in under the deferred consideration?
Sir, basically, the INR 209 crores, which is a total receivable to the SPV. And SPVs are already sold to Shrem InvIT. So they will be receiving till the time these overall annuities are not paid. But between DBL and Shrem InvIT, they will be discounting all the changing law on the financial model valuation model. So for DBL, the value accrues to INR 64 crores.
That INR 64 crore will be receivable by when, or we have already received the amount? .
We will be receiving this amount in near future.
Okay. Sir, secondly, when do we expect to receive the -- when do we expect to receive the balance amount of the warrants, 75% warrants?
As per the SEBI rule, the investor can subscribe the shares from -- within 18 months from the first subscription, which is December 21, 2023. So from there, they got 18 months. So balance money, as per SEBI guidelines comes after 18 months from December, but the investor may invest even earlier.
Okay. So we factor that around INR 500 crores, INR 600 crores, we're expecting from Alpha in FY '25. So do -- are you factoring anything from that front? Or that would be as per in '26?
It is from our 18 assets, 26%. So from first 8 assets, the first INR 500 crores will be coming. And from another asset 10 assets, 26%, the other money will be coming. But this INR 400 crore is not included in FY '25.
Okay. And sir, what is the tax rate that we can expect in '25 and '26?
So as Rohan Ji updated you during this call, we are targeting FY '26, March 31, '26 net debt zero.
No. I'm asking about tax?
Okay. Tax rate. The maximum slab, that is 35%.
Okay. And sir, lastly, for the initial 19 assets that we are under deal with Shrem and Cube, what is the amount sitting in our balance sheet as of third quarter?
So at the end of the third quarter, there is only one asset pending to be transferred, which is Pathrapali-Kathghora, 51% to be transferred. We will be receiving around INR 42-odd crores against that transfer. .
So our investments and loans in the books are for the current portfolio now, apart from that amount for Pathrapali?
Pathrapali, the exact invested amount, I will just check in. It is around INR 18.2 crores.
Okay. So apart from that, there's nothing for the other 18 -- 19 assets that we already sold or under the process?
So with the offer of 51% in Pathrapali-Kathghora, the entire 19 assets will be transferred completely.
The next question is from the line of Shravan Shah from Dolat Capital.
Sir, just a clarification. You mentioned that in other expenses, there was a INR 10 crores to INR 12 crores one-off. What was this related to?
We'll look into the details and we'll get back to you, Shravan Ji. I'll ask my team, I will ask all detailed thing and will get back to you.
Okay. Okay. Got it. So this 35% tax rate at that P&L level will be there for FY '25, FY '26 also this will continue or we will be moving to 26% tax rate in '26?
We will continue with this rate only because I think we still have some outstanding tax.
Net credit available with us.
Okay. And DBL infra debt as of December is how much?
It's the same as it was the last quarter, INR 670.5 crores. So it's the same. We haven't drawn any more money. We are, in fact, looking to reduce that also.
Okay. Previous 2 participants has also asked. So we are just trying to figure it out in terms of the -- of finance costs in terms of absolute levels. So this quarter was INR 129-odd crores. So by end of this year further whatever INR 300-odd crores, a debt reduction and next year also, we are looking at INR 800 crore kind of a gross debt reduction. So in that scenario in FY '25 at finance cost level and how one can look at how much more reductions? So this year will be a INR 520 crores, INR 530-odd crores. So will it reduce by INR 130 crores, INR 150-odd crores, at least minimum? So that's the way we are trying to understand.
So we expect that it will reduce at least by INR 100 crores of whatever financial costs will be this year. It will reduce by at least INR 100 crores even on the conservative side.
Okay. Okay. Okay. .
Because I don't want to give this outstanding but it will be on a very conservative side. And so it should be a decent high number. But probably on the conservative side, it should reduce by that much, at least.
Okay, okay, okay. Got it, sir.
As there are no further questions from the participants, I would now like to hand the conference over to Mr. Rohan Suryavanshi for closing comments.
I, on behalf of the whole DBL team, would like to thank all the participants for coming and asking questions about the company. As always, it was my pleasure to be able to share our journey till now and our thought processes going forward. I look forward to seeing all of you guys on the next conference call. At the end, just wishing all of you guys a very, very happy new year and in advance and hoping that this year may be the best yet for all of you guys. Thank you.
Thank you. On behalf of the Dilip Buildcon Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.