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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good afternoon, ladies and gentlemen. I'm Belia, moderator for the conference call. Welcome to Engineers India Limited Q3 FY '23 Earnings Conference Call, hosted by DAM Capital Advisors Limited. As a reminder, all participants will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and Zero Anoto telephone. Please note, this conference is recorded. I would now like to hand over the floor to Ms. Bhoomika Nair from DAM Capital. Thank you, and over to you, ma'am.
Thank you. Good afternoon, everyone, and a warm welcome to the Q3 FY '20 Earnings Call of Engineers India. We have the management today being represented by Mr. Sanjay Jindal, Director of Finance; Mr. Suvendu Padhi, Company Secretary and Investor Relations; Mr. R.P. Batra, Executive Director, Finance and Accounts and Investor Relations; and Mr. Sunil Saxena, Executive Director, Technical and Investor Relations; Mr. Amanpreet Singh Chopra, General Manager, CMD Office and Investor Relations; and Mr. Vivek Midha, General Manager Marketing, Business Development and Investor Relations. I'll now hand over the floor to Mr. Jindal for his opening remarks, post which we'll open up the floor for Q&A. Over to you, sir.
Thank you, Amit, and good afternoon, everybody. A warm welcome to Eyal's earnings call for the Q3 of financial year 2023. We have declared our 9 months result for the financial year 2023 on 2023. With respect to financial performance for the 9 months ended 31st December 2022, the company has raised a tenor of INR 248 crores in comparison to INR 2,064 crores for the last 9 months ended with an increase of 17%. The turnout from consultancy and engineering segment stood at INR 1,036 crores from the Turnkey segment, it was INR 1,372 crores. In the current quarter, the company have achieved or of INR 831 crores in comparison to INR 782 crores from previous quarter ending 30th September 22, showing an increase of 6%, which as from consultancy engineering segment is INR 350 crores and INR 481 crores in Turnkey segment. During the current quarter, the company has a PBT of INR 65 crores and trade of INR 48 crores in comparison to INR 102 crores and INR 85 crores, respectively, in the last quarter. During the current 9 months ended, the company has PBT of INR 235 crores and a of INR 183 crores, which is INR 297 crore and INR 218 crores, respectively, for the previous 9 months ended 31st December 2021. In -- on the consolidated front, in this quarter, we have a loss of INR 34.5 crores from the RSL project, which is still under the stabilization stage. And for the 9 months, we have a loss of INR 30.68 crore, which it INR 160 crores for the 9 months of the previous financial year. So on the consolidated basis, we have net profit of INR 16.1 crores in this quarter. And for the 9 months, we have consolidated profit of INR 156.9 crore. For the current financial year, the company has declared interim dividend of INR 2 on the face value of INR 5 per share. On the business front, we have very good news. -- and still rate, we have secured business of INR 1,600 crores up to date, and we are in the finalization stage of contract finalization of INR 4, INR 1,275 crores, which we are expected to be concluded by the month end. So by the month end, our business secured position will be around INR 2,900 crores. Out of this INR 1,600 crores, which we have already achieved filled, we have achieved 2 landmark overseas project of INR 500 crores from the Ghana territory and the Nigeria territory. In the Nigeria creditor, we have received a contract of INR 320 crores for the EPM services for the greenfield 40 TPD urea and ammonia projects. And in addition to that, we are still in the finalization of other contracts, and we are hopeful to achieve further contracts by the end of this financial year. So this is from my... Thank you...Mika, are you online? Hello?
Yes, sir. Yes, sir. We will begin the question and answer. Please, can you please question.
Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions]. The first question comes from Mohit Kumar from BM Capital.
Good afternoon, sir. And congratulations on a good set of numbers, sir. My first question is on the -- can you please give some color on the order outlook on the refineries and petchem side over next 2 to 3 months?
Sorry. Okay. Can you repeat the question, please?
Can you please give some color on the order outlook on refineries and petchem side, to a next 12 to 18 months?
Expected from next 12 to 18 months, definitely, there is good opportunity list for Venes chemical projects in the outlook. We see that because we are doing various feasibility studies, and we see there are certain developments taking place out of which 2 could be in the private sector, 2 or 3 could be in the international market, which we have been discussing the petchem projects. And a very smaller refinery expansion and refinery modernization projects we are discussing internally. So we see that there is some possibility exists in the recent future.
Any update on the HPCL petchem project?
We are in touch with them. As of now, that is going on. Ability has been done. So we see that it is going to come in future.
Anything on the BP sale side? Are you seeing any CapEx in the near future?
They have some plans for a petchem polypropylene unit as well as expansion in petchem and BRL. So there are certain opportunities there.
Understood, sir. And secondly, sir, I think we are slightly more positive on the coal gasification consultancy order. Is it something in the pipeline which you expect over the next 6 to 12 months. We haven't seen any...
Clarification, you must be aware that we have already executed about home gasification project for Neville Corporation. As of now, we are doing the pre project activities. Later on, it is completed, then we might go ahead with the project implementation of the same. So we expect the P&C order next year in this regard. And then in whole gasification, we are doing various studies from coal to chemicals and coal-to-syngas for various clients' studies with respect in the private sector as well as in the government sector. So we see that these are positive, there are likely implementations in test bound. The mean not possible because the private sector clients and they have seriality issues so we cannot declare, but there are certain opportunities available.
When we have -- take this to happen over the next 12 months?
Yes... still happen because private sector moves very fast.
Thirdly, sir, on the -- of course, I see that you have won an order for owners ring services for Adani is, I think, 30,000 MTPA polysilicon. Is this -- what resolution has started? And can you expect booking on this particular order from next quarter?
Work has already started -- this is an engineering assignment, which we have got from them. So we are working -- our thing teams are working with them on this assignment. Implementation will go probably next financial year. So we are working on...
Understood. Thank you.
Thank you, sir. [Operator Instructions]. Next question comes from Rahul an individual investor.
Good afternoon. Can you hear me?
Yes.
I have 3 questions. First question is regarding RCL. In the last earnings call, the management had expressed confidence that in the next quarter, that is Q3, RCL will definitely return profit. It will work at 100% capacity with 100% production. So can you throw some light on why did it not happen?
So one of the reason was there was a scheduled maintenance that was going on in the plant. That is for every process plant, there needs to be a maintenance shutdown. So one was at that particular point of time, it was taken because it has already stabilized and during that particular period, there was some gap for the study maintenance shutdown that we've taken. So it has again started the operations and it will be continuing on that...
As I understand, the shutdown was taken in the month of September. And the quarter is for yes, September October, November, December. These are the 3 months, quarters for October, November, December.
That's right. But again, after the shutdown when you have again the startup of the plant, it takes a bit of a time to stabilize as it is a process plant. So it cannot stabilize in sent takes some gestation period is there. So that distraction period was from -- in the month of October. It has stabilized on that particular...
But... Are there any engineering glitches because of which it may experience problems in the future? Are we stuck up anywhere in engineering of the plant?
No, it's already commissioned and we -- the regular maintenance is being done. We don't see any engineering glitches in this particular front. That... Have already run the plant at 100% capacity. So there is no technical glitch.
Okay. We should be able to run it all the time at good capacity utilization. That is what everyone would expect, not just a month or not just a particular day.
Definitely, that would be.
Okay. Thank you for this answer. The next question is regarding our profits. In the last earnings call, we -- you had expressed confidence that on a stand-alone basis, we should be able to raise to a profit of around 3, 4 this year. Is it going to happen? Or would you like to scale down the target for this financial year?
Last time I also mentioned, we are working with our clients for the -- for some change or... Business. As you know, we are involved in the project implementation and their change order takes time because it is the client tendency to finalize the change order at the end of project. But our tendency is to get the change order at the earliest. So there is a negotiation of time also at what time change order should be process. But we are sure and we are confident that we will be able to bring some change order before the end of this financial year. And we are still hopeful of achieving the figure of INR 34 INR 40 crores.
Okay. You mean to say that the expenses have already been incurred and it will only add to the revenue, this change order...
Will be only tax figure will be less.
I understand. And the last question is regarding the expenses for construction materials and equipment in the Q3 results. There is a substantial increase in these expenses, almost INR 116 cr increase.
That figure has increased because if you see, there is a substantial increase in the figure of tenor from the Turnkey project. And from the Turnkey project, our -- in this quarter, our figure have increased from INR 436 crores to INR 480 crores. Whenever there is an increase in the turnout from the Turnkey EPC project. So it's 90% or 95% tends to increase their expenditure... So... Figure of the contract and materials because our on the Turnkey segment have also increased. So there is a corresponding effect on the expenditure side.
Okay. But you mean to say the revenues corresponding to this expense -- these expenses have already been registered in our statement, right?
Yes.
Okay. So...
The EPC business, there is a margin of only 4% to 5%. So is expenditure only. So if there is increase of fund fees in the ticket or not, then definitely expense side will increase by 95% as -- that's why you are priced in the figure of expenditure side.
I understand. Okay. That's all I have asked all my questions. Thank you so much for your answers.
Okay. Thank you.
Next question comes from Amit Avani from Prabhudas Liladar.
Sir, my question is with respect to the order intake. I think we were targeting based on the last call about INR 4,000 crores for FY '23. And I think now you mentioned about 2,900. -- Any slippage of order, which has happened?
No, I have already said in my statement, it till did we are in receipt of an order book of INR 1,600 crores. And for INR 1,300 crores, we are already in the closed finalization, which will be closed by the end of this month. And we are still negotiating with our clients for the further orders. And it is expected that we will touch the figure of INR 4,000 crores by the end of this financial year.
Okay. So you mentioned about INR 5,000 crores in take each year going forward, I think, for the next 2 years. So if you could just elaborate with what kind of key orders you are looking for the next 2 years?
With respect to the orders, we keep the target of INR 4,000 crores to INR 4,500 crores and maybe we'll touch for it is improving in between. Initially, there was an impact of the core, but it is going down. And a lot of projects are coming online and investments are increasing. So we see -- because the way we are doing various feasibility studies because that's the initial step of any project. The way we are getting inquiries and we are doing it. We see that out of investments are going -- the -- now we are submitting a lot of inquiries in the ammonia and green ammonia and all these sectors, people are thinking about it. So we see opportunities in all these areas, too. Apart from the petchem, which is going to be a future, a lot of investments are coming in petchem. We have a lot of investments in the green area also being ammonia and urea complexes as well as some of the fine refinery investment will not be much because it would be primarily focused on the modernization retrofitting and expenses would be less, but it should be primarily in petchems -- as well as some investment we see in an fares metallurgy as well as in fertilizer sector.
So refinery modifications could happen just to ensure that adequate feedstock is there chemical also. So those kind of opportunities will also exist.
Right. So we are expecting it's fair to assume 4,500 to 5,000 each year in FY '20...
We always keep that kind of target. So we strive towards it. Let's hope for the best, we should be able to do it.
Great. And sir, about the margins for this consulting in EPC. What would be the sustainable margins in this segment, considering there has been a significant intake of new orders coming in this year and in the next couple of years, how this mix will evolve and what kind of margins you are expecting?
In the current quarter, we have a margin of segment profit of 20% in the consultancy segment. As in the EPC business, it is around 2% to 3%. And as I said, we are working on the -- some change orders with our client and we are hopeful to achieve the segment profit of 25% by the end of this financial year.
Right. So can we just expect 2%, 3% EPC going forward also?
Yes. 2%, 3% margin is there… because it all depends upon the change order value, and we are working hard with our clients to increase our EPC margins.
Sure. Sir, my last question is on the recent budget announcement on the green growth and so much was talked about hydrogen policy and a few other things. So if you could just elaborate any opportunity which we are looking for in this space? And are we getting benefited from this policy?
Yes, definitely. Even right now, in EL, we have created a separate dedicated team, which is looking at the opportunities and working in the area of green hydrogen and related in all areas of energy transition as well. We are already executing some projects on greenhouse with the budget announcement also, that will be coming up in near future. And right now, with the credentials and with the work that we are doing not only for the clients, but also for the some motor studies that we are doing for the clients and some initial seeding on green hydrogen that we are doing. -- we are expecting a fair bit of order flow in this particular green hydrogen area because the engineering and the technical progresses of a are very well -- could be very well leveraged to -- in this particular area. So we are expecting a considerable amount of our inflows and our contribution in this particular aspect as well.
All right. One last question, if I may. On the coal gasification of Marc, I think we mentioned something about INR 300 crore, INR 35,000 crores for 5 years. So how much will be an addressable in this? And obviously, I think you mentioned about it. Are we expecting any significant orders in coal that you position...
This coal gasification is a new area. And right now, many of these studies are on. We basically -- if you see that already Coal India subsidiaries are carrying out real studies and they have formed joint ventures even IOCL, BPCL and Gale also for setting up of the coal to chemical projects. So this is just an initial phase. In this year, we have seen those agreements happening. But now the next step would be the studies to be carried out. And those becomes viable, then if we go into a drawing board and go into implementation. What we recently seen is the only the main project which is coming up with the coal to methanol project, which is elite India also involved. That's the recent project which is coming up. But otherwise, various small studies are on kind of pilot projects, everybody is looking for the pilot projects, studies to be done if the pilot studies are successful, they might go for the implementation. This being a new area, so everybody wants to venture into it. But after thorough study of it as well as CV based on the pilot project has been set up, if they are successful, then they will go for the implementation of the major projects. So it is going to come, INR 3,500 crore, INR 30 crores, INR 3,500 crores will be there from surface call gasification, but next 2, 3, 4 years... 5 years... Because everybody announces based on the -- what government announced, but later on, government agenda there for gasification. So all the public sector and oil coal gasification coal companies are working towards it, and they have to comply with it, but it will take some time because it's a new sector.
Thank you. Got it.
Thank you, sir. [Operator Instructions]. Ladies and gentlemen, -- we have a follow-up question from Mohit Kumar from BM Capital.
Sir, was clarification -- on the NLC India coal to methanol. -- has the commerciality been established? And does this require any sort of subsidy from central government?
I don't think any subsidy is required and it is commercially being viable, which go viable, that's how they have gone into implementation...
So you take the ordering to start from FY '24. Is that a fair assumption?
From FY '24, we can see that because right now, it is in the tendering stage for the contractors to be finalized. So we see it should come somewhere in early 25.
And sir, secondly, on the -- in the budget, there was a EUR 300 billion kind of investment was even for some energy transition to 2 oil companies. Is there any opportunity for us? And what kind of investments are these?
So the energy transition, it's a very wide area where a number of verticals, oil and gas sector is working on a number of verticals in the area of energy transition. One of is in the area of the green hydrogen, one of the energy efficiencies of the refineries -- so in the area of energy efficiencies because that's the way they are going to reduce their carbon emissions. So as a year, we have a considerable strength and a lot of fast-track record in undertaking this type of energy efficiency studies for our refineries on our refineries. So this will be definitely tapped as and when the refineries come up with their proposals. So we'll be definitely tapping on this particular area as well. And in the green hydrogen, we have already that what our strategy in the green hydrogen aspect would be.
So given the 30 already been announced, has there any color, any thought with these oil companies with the kind of investment they are looking at?
Yes, everybody is right now at a very initial stage, they are having their own approvals, and they are formalizing their internal strategies and internal investment plans. So once these investment plans are considerably strengthened, we will be pitching in and also a lot of some motor studies like what they don't even perceive, that lot of so much studies on these aspects also being done by end so that they are aware that in what areas they have to go on in this particular transition.
Expect another couple of months, you'll get the full clarity on the investment require... Fill...
Probably the -- in the quarter 1, we financially will you get more clarity on the investments by each and every OMCs and our etching on that particular...
Thank you, sir.
[Operator Instructions]. Next question comes from Kunal Mishra from Singleton.
Good afternoon, everyone. Am I audible?
Yes.
Yes, sir, I'm a retail investor, and I have one concern to raise at the kind of returns that the engineers India share has given, is management concerned about the kind of return this share has given over a period of 5 years, 3 years we, if we can see...
Yes, we are equally concerned. And you will appreciate that by way of dividend, we are already rewarding to our shareholders. And in the recent past, we have given bonus share also in 2 17, 2017. And in this quarter, in this third fab shareholder board meeting, we have already declared interim dividend of INR 2 on the face value of INR 5. So we are hopeful to continue with our legacy of paying dividend to our shareholders. And we are sure that in the coming time, our shareholders value, our share price will also increase because we have very good position in the form of order book as well as well as project aggregation front.
Yes. Thank you, San. I don't know the one question on... Thank you.
Thank you. Ladies and gentlemen, [Operator Instructions]. There are no further questions. Now I hand over the floor to Ms. Bhoomika Nair from DAM Capital for closing comments.
Yes, I would like to thank you for giving us an opportunity to host the call and answering all the queries. And thank you to all the participants for listening in and asking all the questions. Thank you very much, sir.
Thank you.
Thank you.
Thank you so much.
Thank you. Ladies and gentlemen, this concludes the conference call for today. Thank you for your participation and for using Dusaba's conference call service. You may disconnect your lines now. Thank you, and have a good day.