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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
To keep you all addressed of what is happening in the company. We could not schedule any physical meeting. As I'm going to understand the last physical meeting interaction was way back in 2019, March -- it's right? March. And unfortunately, the COVID had taken a -- toll. And now that we are behind the effects of COVID, we are here. And it is my pleasure to meet you all in person.
I'll try and restrict my opening remarks to the minimum, so we can interact more and I shall attempt to answer all your queries to the best of my ability. Before we go on to the financial performance, I'll give you a glimpse on the physical performance of the company because I believe it is a physical performance that translates into financial results, and also touch upon the current order book position.
Major milestones achieved during the last 9 months, the broad expectations in terms of the order book that is on the annual and our execution plan. As on the 31st December 2022, our order book stood at a very healthy INR 22,242.42 crores. Of this, almost 98.5% -- to 98.5 percentage comes from our core business that is warship-building. This INR 2,242 crores comprised of 6 shipbuilding projects. These 6 shipbuilding projects in turn when I break up, that comes to 3 projects pre-shipped for the Indian Navy. That is 3 projects of the Indian Navy, the P-17 Alpha Advanced Frigate Trade Ships, another project for the Indian Navy. That is an 8-ship Antisubmarine Channel Water Craft project and a 4-ship Survey Vessel Large project. So this makes it 15 ships, 3 projects.
We are also executing a project for the cooperative Republic of Guyana, which we have almost completed a project for the government of Bangladesh, an export project. And another project, it is an electric vessel, a passenger vessel for the government of West Bengal. So total 6 projects, 23 platforms.
Actually, we had a very happening 9 months period in terms of physical performance, as I mentioned earlier. In the shipbuilding parlance in addition to delivery, a major milestone as a launcher for vessel. When I say launch of a vessel, that is the first time when a ship is put to sea after we call a ship she, after the ship takes a full shape. She's put to sea for the water for the first time.
So we had the proud privilege of launching 6 warships -- 6 ships during this period. There is one P-17 Alpha, one Antisubmarine Shallow Water Craft, 2 Survey Vessels, a Fast Patrol Vessel and the vessel that we have just exporting to the Government of Guyana.
We also completed a project for the Indian Coast Guard. The Fast Patrol Vessel project was completed during the last 9 months, and we delivered the ship on 31st of December 2022 to the Indian Coast Guard ahead of schedule, thereby completing this project. This project actually comprises of 5 warships, 4 of them were delivered earlier. As I mentioned, the last ship was delivered on 31st December 2022, a month ahead of schedule.
Also happy to inform you that we have completed the technical acceptance of the vessel that I mentioned, being exported to the cooperative Republic of Guyana. This was done during the mid-December. And presently, the ship is under voyage to the Caribbeans. We expect the formal delivery after the ship reaches there. We expect the formal delivery to take place in March, early April. Again, this is ahead of schedule. One of our -- okay, in addition to the launch and delivery, we also had the key laying and the various production milestones that start production of over 7 platforms during this period.
As you may be aware, in addition to shipbuilding, we also have a business vertical, the portable bailey-type steel bridges. This particular division has been doing very well. We have signed a memorandum of understanding with the Border Roads Organization of one of our major customers for 27 bridges. This was signed during the last 9 months. And we already started supplying the bridges to the BRO, that is a Border Roads Organization. Happy to inform you again that we are the only Indian organization to be awarded the green channel certification for supply of bailey-type portable steel bridges. For information, green channel certification means we don't go in through the normal quality assurance procedures, which the DGQA follows, we are self-certified through a stringent selection process, and this was awarded to us around 4 months back.
Again, on the exports front, the Bailey bridges division has obtained an order for export of Bailey bridges to the Government of Bangladesh. That is the Bangladeshi Army through a defense line of credit port route. We have another business vertical. There is a Diesel Engines division. This is located at Ranchi, Jharkhand. We have recently signed a memorandum of understanding with Rolls-Royce MTU. This is for a localization of the particular type of diesel engines that has got huge business potential.
Just to give you a background, we already had a license agreement with Rolls-Royce for assembly and trials of these engines. But now we have taken it to another level. Until now, the components, the entire assembly used to come from abroad, they used to assemble it here and conduct the trials and pass it on to the customers.
With this model, which we intend translating it into a license agreement within a span of 6 to 9 months, we will be localizing x percentage, a substantial percentage of these engines. And these engines are expected to be used onboard medium and small vessels of both the Indian Navy and the Indian Coast Guard. So just to inform you all that there is a good business potential that is expected out of this venture.
On the Ship Repair vertical, some of you may have had an interaction with me during the last 2 or 3 conference calls, I had mentioned that this is an area which we are focusing upon. As a part of the initiative towards building up the vertical, we had taken over 3 dry docks from the Kolkata Port Trust on a strategic lease that is a 30-year lease period. The results are here to see. And we almost had 100% occupancy of the docks ever since we took over this facility.
And as of now, we have completed 4 refits, which we have won on competitive bidding, both commercial and from the Indian Coast Guard and 2 of them are currently in progress. This division is doing well, and we expect good returns on this division in the future.
As far as the execution of the current projects go, I had mentioned that currently, we are executing 6 shipbuilding projects. We intend to completing these projects by FY '27. We have a very clear execution plan for this project. And as I just stated, we intend completing these projects by FY '27.
The P-17 Alpha project between FY '25 and that is between August '25 and mid of '26. The Survey Vessel Large project, the deliveries will start commencing during the calendar year 2023 and will be then completing this project by end of 2024 calendar year. The Antisubmarine Shallow Water Craft project from end of this calendar year, that is -- 2023. And by end '26, we be then delivering the 8 ships of the ASW Shallow Water Craft [indiscernible] Shallow Water Craft project.
As far as the other 2 small projects, the Guyana vessel, as I mentioned, it is already enroute Guyana, and we'll be tethering the ship in March, early April, once it reaches Guyana, and other 2 projects for the one -- the next generation electric ferry that we are constructing for the government of West Bengal by end of this calendar year, we'll be delivering and the Bangladesh boat project will be completing by mid of this calendar year.
Just to give you a broad idea, while I've given you an overview of when we're going to complete the projects. The first of the P-17 Alpha project is almost 50% of construction. With the third one -- the second and third one closely following, third one is almost at 40% of physical construction and the third one is at about 20% to 25% of physical construction. The Survey Vessel, the first ship that we intend delivering this year. We already crossed around 75% of physical construction. So that is the level of production maturity that these ships have achieved.
Of the Survey Vessel project, we already launched 3 of the ships, and the fourth ship is expected to be launched during the first quarter of the next financial year. As far as Antisubmarine Shallow Water Craft project is concerned, they are at various stages of construction, and we already launched one of the vessels and the second vessel is expected to be launched next month, that is in March '23 in this financial year itself.
Now coming to the -- I have now given you -- in the last 5 to 7 minutes I've given you an overview of the physical performance, including the current order book execution plan. I will now touch upon the financial highlights of the company.
As I had stated or commented during the last few conference calls, we have managed to maintain the tempo that we generated in the first and second quarters and the third quarter and the 9-month period ending 31st December 2022, the results have been equally encouraging. As a matter of fact, the revenue from operations and the profit after tax has been the highest ever in the history of the company, both for a 9-month period or for a particular quarter.
As far as the revenue from operations go, we have gone up from INR 1,212 crores, INR 2,960 crores, that is registering a growth of almost 62% when we are comparing a 9-month period between FY '23 and FY '22. The total income correspondingly has gone up from INR 1,333 crores to INR 2,092 crores.
Just to put things in the right perspective, our revenue from operations during FY '22 was INR 1,757 crores. And as on 31st December 2022, we are already at INR 1,960 crores. That will give you an understanding as to what path we are taking.
As far as the profit after tax is concerned, it has gone up for a 9-month period from INR 142.33 crores to INR 172.83 crores that is registering a growth of 21.5%. The earnings per share has gone up from INR 12.4 to INR 15.09 again for a 9-month period, registering a growth -- similar growth of 21.5%. Share price, you're more aware then I would not well up on that.
This, in a nutshell, gives the financial performance of the company for both the quarter ending and 9 months ending 31st December '22.
Now coming to the orders in the pipeline. Now both Indian Navy and the Indian Coast Guard, both these forces are on a huge fleet expansion [indiscernible] with very clear perspective plans to raise their fleet level from the current strength to almost 200-plus ships in the next 5 to 7 years. On the indigenization front, as of now of the 43 platforms that the Indian Navy is constructing, 41 are being built within India by the Indian shipyards.
As far as the Indian Coast Guard is concerned, all the 9 ships that are under construction for the Indian Coast Guard are being built by Indian shipyards. So this is the kind of indigenization or the making India levels that our nation has reached.
From the GRSE perspective, that is a background. I had stated before that we had been declared L2 in now that is second manner in our next-generation OPV project. This is a 11-ship project. The L1 takes 7, the L2 takes 4. We are the L2. So 4 ships are coming to us. We are in the final stages of contract discussions with the Indian Navy. And we expect the contract to be signed during the current financial year. This translates to an order value of approximately INR 3,400 crores.
So in a nutshell, with respect to the order book position at the end of the current financial year. We are confident of maintaining a minimum level of INR 25,000 crores plus.
Now coming to the orders on the anvil. This is very encouraging. The numbers are very encouraging. Again, I'll put things in the perspective where we all have a very clear understanding. As of now, we have 4 shipyards in the Defense segment, I mean I would say 4 DPSU shipyards. That is the Mazagon Dock here in Mumbai. Us, GRSE, [indiscernible] shipyard at Visakhapatnam and the Goa Shipyard, plus the Cochin Shipyard another PSU under the Ministry of Shipping. So 5 of us. The pilot players have definitely been very active in the warship-building arena in the recent past. The last one Toubro Shipyard at Kattupalli. A couple of small shipyards on the West Coast, the SHOFT, the Chowgule and again, a few more small shipyards. So the major shipyards that will be competing for the major orders that are on the annual are 5 of us that is 4 plus 1, 5, plus LNT plus you put the others together, total 7 shipyards.
Now currently, in addition to the project that I mentioned which we already won and which we expect the contract to be concluded. RFPs have already been issued by the Indian Coast Guard for 14 Fast Patrol Vessels that translates to approximately INR 1,000 crores to INR 1,200 crores and 1 cadet-training ship. Logically, the contracts for these 2 projects are expected to be concluded sometime early next year -- the first half of next year. Further, this -- for these 2, the RFPs have been already issued. In addition to these, the Coast Guard is expected to come out with a 6 Ocean-going Patrol Vessel project.
The RFP is expected anytime soon. For this particular project, the approval of necessity, that AoN has been already accorded by the defense acquisition council sometime a month to 2 months back. Indian Navy is expected to come out with an RFP for 5 next-generation survey vessels.
Another, our pet project, the next-generation corvette for which the DSC had already accorded AoN. We expect the RFP to come out early next year. This is a big project. The AoN value is approximately INR 36,000 crores. Here, I would like to mention that -- I've stated this, but I'd like to reiterate that in India today, only 1 shipyard has delivered 8 plus corvettes. 9 corvettes have been delivered by GRSE til date, and all of them are in active service with the Indian Navy, both the missile corvettes and the antisubmarine corvettes. So we would be bidding with our kind of experience and expertise in constructing these corvettes. We'll be bidding in such a way with a very clear and to win the bid. This project, INR 36,000 crores project will be split between 2 shipyards, the [indiscernible], the L1 shipyard gets 5, the L2 shipyard gets 3. So we can assume the order value that is likely to emerge out of this.
Navy again, is likely to come out with an RFP. The RFP is already out for 21 waterjet FACs follow-on waterjets FACs. Order value approximately INR 2,000 crores, the RFP is likely to come out in 2024. Coast Guard is likely to come out for with an RFP for 18 next-generation Fast Patrol Vessels. RFP expected 2025, approximate cost around INR 5,000 crores.
Indian Navy likely to come out with 7 next-generation fast attack crafts, 4 LPDs, again, a high-value order, 120 fast interceptor crafts and so on. So in -- I mean, the list is pretty long. So I would not bore you with the details. But in a nutshell, between Navy and Coast Guard, around 100 platforms are likely to come out in the next 3 to 5 years. When I say 3 to 5 years, that is for the contract conclusion. That is the entire game of RFI, RFP for the further process still the contract conclusion, it will take approximately 3 to 5 years. And the order value on a conservative front, it would be approximately down somewhere.
It will be approximately INR 85,000 crore to INR 86,000 crores. And on a very optimistic, figure would be around INR 1,20,000 crores. So this is the kind of the [indiscernible] that is available. And my first statement, when -- before I started rattling out these figures was that the number of players in the field to get these orders are max 7. That again, the customers, both the Navy and the Coast Guard have categorized these shipyards that X is eligible to get a particular class of ship or up to a particular class of ship. So there we stand -- we stand at [indiscernible]. That much I can tell you.
I think I've given you an overview of the current order book, the execution plan, the orders on the anvil. And I'd like to close my opening remarks that we have a very good order book at this moment. I, as a CMD, can assure you that we have a very, very clear execution plan, adequate capacity and reasonable order visibility, actually good order visibility. Our focus areas at this moment is timely execution of the ongoing project, we cannot afford to delay the projects. Timely execution of the ongoing projects, enhanced operational efficiency because there was a stage when we were getting -- well before we got listed, we were getting orders on a nomination basis. That phase is gone. None of the orders that are coming to us today, of course, we are fighting for nomination orders. But none of the orders that are coming to us today are on nomination. As a matter of fact, among the 3 named projects that we have, the Antisubmarine Shallow Water Craft project and the Survey Vessel project have been won on competitive bidding, including against private shipyards. Both the export projects, of course, they are small projects. But both the export projects have been won on competitive bidding. So now that competition is in our blood. With that background, our focus is to enhance our operational efficiency, both through technology adoption is, of course, is a very broad statement and also through internal processes improvement. Target-aggressive bidding strategy to win the projects, which are likely to come up in the next 2 to 3 years. While maintaining focus on ship repairs, an attractive segment, Bailey bridges, our core strength in that engineering field, diesel engines, we still would not like to dilute our 62 years of experience in domestic warship-building. We are also into new products. The first foray we had made to new products was when we won an order with the -- we conclude a contract with the Government of West Bengal for a green platform. That is electric ferry is a passenger vessel for the Government of West Bengal. Here, we see a lot of potential, both within India and for -- on the exports front. So this will be an area, which we'll be focusing upon. We're also in tie-up with several start-ups. I had the opportunity to interact both personally and with my teams with a host of startups during the -- both the defense exhibition that we had Aero India and the last def-ex, where was it? Lukhnow? Gandhinagar. The phenomenal kind of talent that exists in our start-up industry. So we intend tapping that talent for getting new products, both the investors, of course, we already made up foray and for autonomous platforms. So that, ladies and gentlemen, in a nutshell about the company, including the performance and what is in store. I'm open for questions.
What are the system you're following in...
Sorry, sorry. I thought I'll show this last, but the flow is that people ask me, what is the vision of the company? Just for information, every officer, I have a strength of -- I have a very modest strength of around 2,000 permanent employees because as a business strategy, now most of our non-core areas are being done by the outsourced person. The core captive manpower is around 2,000, which comprise around 500 offices. Every officer in the company knows the vision of the company. This has been provided to every officer. So every executive clearly understand what he or she has to do for the company to exist.
So this is Rohit Natarajan. I'm from -- represent Antique Stockbroking. It was quite insightful. You said that there is some 100 platforms in the next 3 to 5 years, and you find the order value will be somewhere between INR 86,000 crores to INR 1.2 lakh crores. Sir, let me give you 2 critical projects where the value itself will be like INR 1 lakh crores. So for instance, next-generation destroyers or repeat of P-17A. So is that included in this? I mean because that's probably something you have just left out? Or how do I reconcile it?
Thank you, Mr. Rohit. I had given a conservative figure and very optimistic for that. Within the [indiscernible], I think I had given a figure of INR 86,000 crores. INR 36,000 crores is the order value for the entire next-generation corporate project. That is for 8 ships. So a shipyard who become L1 will get 5/8 of INR 36,000. I have not -- I had kept that follow-on P-17 Alpha in the reserved category. We understand that the customer -- that is our most valued customer, the Navy has the requirement of similar platforms. And as you are already aware, 7 of these ships are being constructed as of now. Both Mazagon Dock 4 ships and GRSE 3 ships, and this project is expected to be completed by mid of '26. So if the Navy is taking this project forward, the order for this ideal contract conclusion for a follow-on would be somewhere in '25. Naturally, you know the order value for the current project, 3 of the ships which we are building currently, the order value is INR 19,293 crores. So if 3 more ships come or x number of ships comes, it will proportionately increase. I have not factored this P-17 Alpha follow-on in the figures that I just mentioned.
So the next-generation destroyer orders, you haven't touched on that aspect as well, if you could touch something on that part.
Next-generation destroyers is a project which Navy will be going in for. We expect the RFP to come out for this project sometimes RFP because they may go in for an RF -- I don't have clarity on that at this moment. RFP is expected to come out end '24 calendar year or mid of 2025. Here, we have been -- see, for every -- I had mentioned in passing that if various categories of ships are there, maybe that's a capacity assessment, both in terms of expertise, the infrastructure and facilities. Happy to inform you that GRSE has been -- our capacity has been so assessed that we would be eligible for contesting from this order as and when the RFP comes out.
First that you want to highlight, the figure part that what is the potential size of NGD?
It will be around 40,000 -- figure as in the cost? INR 40,000 crores. This is a project which currently Mazagon Dock is executing. Two of the ships have been delivered, 2 of them [indiscernible].
Sir, I just wanted to check the -- you generally work on fixed price contracts or like, for example, the P-17 Alpha, that is the largest project for you just now. So is it fixed-price? And about the others, are there other generally fixed-price contracts?
The -- again, ma'am, I had mentioned earlier that 1 -- we have gone through a complete transformation. First from nomination to competition, and second, from cost plus to fixed price. The contracts currently being executed are fixed-price contracts.
Is that the reason why the EBITDA margins in the third quarter took such a sharp dip because actually, the raw material line is where the hit came. So is this the reason why the third quarter margins took a hit?
Margins seriously, I don't think they've taken the dip, the dip is the perception. Now yes, the contracts are all fixed-price contracts. Both the last 2 projects that I'm talking about, the ASW and the Survey Vessel have been one on competition with very, very tight profit margins, very tight profit margins. And I have stated this before, and again, I would like to reiterate because this is a very common question that we face, the profit margins. I'll answer this so that we're all on the same page on this. In shipbuilding, the conventional profit margins, which is considerably healthy, is anything which hovers around 7.5%. That is the profit margin, which I get from the customer for a nominated project also. Competition, the margins, which I bid at and win at are much lesser. We have been able to maintain profit margins above 7.5% consistently. Even as on this -- the quarter that just ended, the 9 months that ended our PAT margin is 8.26%. For the quarter ended, it is 8.53%. So we are above this threshold. And how do we achieve this? It is purely by putting our efficiencies better, putting the purse tighter, cutting down the revenue expenditure. So this is the fact. The profit margins are not bad by any standards, one. Second, there is not a big difference, you mentioned the dip, there is no dip. Actually, our PAT margin for the quarter ending Q2 '23 was 8.12%, Q3 it is 8.53%. So actually speaking, there's a rise and the rise is 5%.
So when you say 7.5%, you're talking about PAT margins or EBIT margins or which?
I'm purely speaking about the PAT margin, I'm not even gone up to PBT or EBIT.
And sir, my second question was about P-17 Alpha project, which you won in 2016, I think. So since then, would you say your schedule in terms of delivering? Or you've been delayed somehow? Or what is the situation?
I'll answer this question, ma'am. P-17 Alpha is a developmental project. There was a project, a P-17 project, which got completed in, I think, 2012 or '13. This is a follow-on project where all the lessons that were learned by the Navy, from the P-17 project where presumably addressed in the P-17 Alpha project. And this is a time when the transition took place in letter and spirit from import to make in India. Most of the equipment of the P-17 Alpha project are made in India, developmental made first time. The design of -- the basic design of P-17 Alpha project is by the Navy, the shipyards to the detail [indiscernible]. Equipment selection is by the Navy. So it is a project which is a developmental project where the partners are 3 -- actually 4. One, the Navy, the customer, who's responsible for the design of the ship and the equipment selection; second, Mazagon Docks; third, GRSE; and fourth is the Indian industry, the Indian ecosystem. So there is a delay, but with this delay after realizing that this is a developmental project, the Navy has gone back to the CCS because they require the CCS approval. And it is with those revised time lines that I'm mentioning between 2025 mid and 2026 mid.
Okay. And sir, I have 2 more questions. Sir, on the balance sheet, you've got a large, very large current liability of INR 5,000 crores as of financial year '22, which if you read the note, it says this is a liability for delivering the P-17 Alpha project. So sir, if you could just please speak about this because if this liability keeps increasing, then your ROCE -- because the capital employed comes down, ROCE shoots up. So if you could just please explain what this is.
You say this liability, what we are showing, it is contract liability, we're telling. That means whatever money were collected against the contract. Against liability, we have an asset in form of bank deposit as a large inventory.
So now we are into a financial year '23. And the P-17 Alpha project last project will be delivered between 2025 and 2026. So till then the liability will keep going up or what is it?
Liability is getting adjusted gradually. So whenever we will recognize revenue, to that extent, liability will be adjusted. So naturally, progressively, it will reduce.
So progressively, it will reduce from here on?
Yes.
And sir, my last question is that, see, you have inventory days of about 250, 237 actually. And you've paid advances to suppliers were 337 days. So logically speaking, you should have no impact from the raw material increases, if at all. So I mean, would -- am I thinking on the right lines? Or if you could just please talk about this?
Well, this inventory, you have seen it has gone to almost INR 600 crores to INR 1,000 crores, INR 1,500 crores. Why? Because gradually, all 15 ships are in construction stage. When the sea will go to stage 2, at that time, we require our equipment -- the high-value equipment. And for high-value equipment, we'll have to procure the inventory. So that's how inventory has gone up.
No. But sir, your other thing that has gone up is your suppliers.
Advance to supplier, you see we have our payment turn. The advance to supplier, it is one kind of sometimes in the imported items, we'll have to pay the advance. In certain cases, advance, it takes adjusted because advance is one side and also liabilities on one side. It takes time. That's why in the day on which the financial result is published, on that day, whatever pending is there to that extent, both side in asset side and liability side, it will show higher.
Okay. And sir my last question, if you find -- see the EBITDA margins during the quarter, EBITDA margins have been very volatile during the last, say, 4 or 5 quarters. So I mean since -- actually since the fourth quarter of financial year '22, since the fourth quarter of the last financial year, margins have been coming down. So if -- and we are talking about EBITDA margins here. So if you could just talk about this.
EBITDA margin, actually, there is no downward trend. You see EBITDA margin -- are you considering the -- including non-operational or without only operational you're talking?
Only operational. So basically, it's the sales -- all operational sales, less all the operational expenses. So I'm not including other income in this, which is a substantial portion for GRSE.
Yes. I'll answer, you see this EBITDA margin, it depends upon the operational income. Operational revenue, what we are getting it, we have 3 projects. One project is a nomination basis, 7.5% other 2 projects are competitively less. When does this BOP composition will change, so at that time, the EBITDA will change. It depends upon the composition of sell.
And ma'am, you had mentioned that it is showing a dip again. I'd like to state that EBITDA as per the records available which is available with you also, the margins, if you're just comparing Q2 of '23, it was 12.32% and the current -- the last quarter, it was 12.96%. Yes, it has been a bit volatile if you're comparing with the last year's fourth quarter or the last year's 31st December. But certainly, our revenue has gone up. So I mean if the revenue is going up 100%, that doesn't mean this -- the PAT or the profit also goes up 100%. So just to say that it is not -- the dip what you mentioned is when you're comparing with the last year. But if you are comparing quarter-on-quarter between the quarter -- the second quarter that ended on 30th September, that's 12.32 percentage. As far as the quarter ending 31st December, it was 12.96%. So it is like what you had mentioned earlier about PAT. There is no -- the dip is not something.
Okay. So I'll take this up separately. And sir, my last question, like we were anticipating top line, from our perspective, sales of around INR 6,000 crores in financial year '25 and EBITDA margin of around 10%. So would that be off the mark -- I mean, EBITDA margin should be around 8% and top line should be around 5%. If you could just speak about this?
Okay. I'll answer that question, Ma'am. See, we have presently got an order book of INR 2,242.42 crores. And as I mentioned earlier that at the end of this current -- this financial year, we expect the order book to be around INR 25,000 crores, including the new order that is going to come in. Considering the execution plan for the current projects, including the expected or the planned deliveries during mid '25 to mid '26. Yes, the revenue from operations will go up substantially because we got to finish this, we've got to spend this INR 25,000-odd crores in the next 3 to 4 years. So from a figure of INR 1,757 crores revenue from operations in the last financial year, already, we are at INR 1,960 crores. And my opening statement was that we ended maintaining the tempo. So at the end of FY '23, you can expect the same momentum to be maintained. The maximum, considering the physical progress of the projects, the maximum revenue recognition, we expect it to happen in FY '25. That is when the projects reach that level where the equipment will go on board and the revenue recognition will take place. As far as the margins are concerned, we intend maintaining similar margins. We'll not go down too much, but we intend maintaining -- I'm coming to the PAT margins above 8%. That's what we anticipate.
This is Kunal from B&K. Sir, we have a large order book, and we have a pipeline that is also lined up. You mentioned a large number of pipeline. So can you highlight what are our CapEx plans to meet this plan? Are we geared up in terms of capacity and capability to meet this current order book as well as the opportunity that is coming by?
We had discussed this in brief during one of the earlier calls, I'll again, since the audience is larger. We have -- just for your understanding, we have 3 shipbuilding facilities at Takal Katta, 3 completely separate independent shipbuilding facilities. With the large dry docks, 2 small-sized dry docks. Plus, we have taken over 3 dry docks from the Kolkata Port Trust. So in shipbuilding, the biggest asset that any shipbuilder, be it for core ship building or for ship repairs, major ship repairs, is dry dock. So we are good with the dry docks. Then comes the support infrastructure. That is the cranes, the assembly halls, the transporters, the jetties, that is a berth where the ships are parked and the workshops. So with the facilities that we have today, after undergoing modernization over the last 10 to 5 years because we have solely leaned out the modernization process because we have reached a level of maturity with respect to modernization. We currently have the capacity to build 20 warships concurrently. Now when I say 20 warships concurrently that encompasses that you can be speaking to 8 large, large as in really large 150-meters plus or around 150 meters and small or medium. Now our current order book, if you're taking out the patrol boats because they can be built at parking spaces, that's not an issue. We have -- we are at around 80% of our max capacity. Now as the ships mature out, I had again mentioned that we will be the intent delivering 2 survey vessels this year, one is shallow water craft and so on. So considering the dynamic shipbuilding cycle, we have to answer your question in simple English, yes, we have adequate capacity to meet the current order book and adequate capacity to take on further order. And also as a strategy, now every customer wants the product yesterday. Lesson learned -- there is a lesson that we learned over a period of time. So we have gotten to strategic partnerships with capable private shipyards to utilize their spare capacity. So should that situation come and hopefully, it will come where we are busting at our seams, we have types with private shipyards to utilize their spare capacity. We already experimented this model and successfully. So does that answer your question?
Any absolute number in terms of CapEx that we'll be spending over the next 2, 3 years?
CapEx over the next 5 years, we -- 4 to 5 years, we expect to spend only around INR 200 to INR 225 crores, INR 250 crores. We then maintaining around INR 40 crores to INR 50 crores per annum. That's why I made a statement that we are pleased, a level of modernization maturity to meet the current loan. Now the infusion would be more for technology and new equipment but for facilities, we are good.
Sir, my second question is pertaining you did mention that most of your orders are now competitively bid rather than nomination basis. So what has been your experience in terms of margins that you're winning these orders? Are they substantially different from the nomination orders that you used today?
See, yes. Yes, depending upon project 2 -- project to project. The 2 projects that we have won, they were on the tight margins. Nomination naturally, they maintain a base profit of around 7.5 percentage. But this is applicable from now on for every shipyard in the business and every entity in the business. Yes, the margins are tight.
Sir, from the earlier question regarding the margins, so are you seeing this 12.5% to 13% EBITDA margins are new normal right now? Because if we compare 9 months versus 9 months last year, as a CDSD from 17% to 12%. So are you saying this 12.5% to 13% new normal as we go forward?
One very interesting point. 7.5% is actually PAT margin. Now PAT margin, to answer your question. But...
No, I'm referring to the EBITDA margin.
EBITDA margin, if you're mentioning, if you're comparing.
Let's compare 9 months versus 9 months last year.
Yes, there has been a dip. But you see the absolute. If I go to a restaurant, I'm just giving an example. If I go to a restaurant, I want to have biryani, I want to have good quality biryani and adequate quantity, and assured delivery of biryani for the next 3 years, 5 years, 7 years, you take it. I'm assuring you that whether I make biryani, I'm assuring sustenance and continued provision of biryani for the next 10 years, 5 years because I have an order book, which as my revenue goes up, my absolute figure of profit PAT, the investors should be interested in the profit and the share he gets, my net worth is increasing. All those things are going at. Very interesting that everybody is asking about the margin, why 3% dip, why 4% dip, I'm getting back to the example that I gave about a hotel and a biryani. The investors should be really interested in having good biryani, regular supply of biryani and assured supply of biryani for the period that is looking at investor. Market capitalization has gone up, the net worth has gone up. The absolute profit figures have gone up. The revenue will go up, automatically, the figures will go up. There will be fluctuations depending upon the kind of project maturity that we have.
If P-17 Alpha gives me maximum revenue in a particular quarter or a 9-month period or a financial year, the margins will go up during that period. If it is another project that we have -- that have won on a wafer-thin margin is maturing, there will be a dip. So I don't know whether I'm conveying it clearly or not, the -- you're all experts and not me. So your things should be getting sustained profit and in terms of the returns and visible growth in our net worth and associated financial parameters, as you raise.
My next question is that any product mix change could help to expand margin going forward?
Yes. Product -- you are asking about the product mix?
Yes, any possible product mix change, which can take the margin.
Yes.
So if you can explain that a bit?
Yes. See, we have been set up over -- of course, our history is almost -- we are just about 139 years young, 1884, 2023, brought in as a defense shipyard 1960, 63 years young. Our core business -- this is what I tell my team and the analysts and the investors in turn, is that the core business will continue to -- because we exist for that for the nation, for domestic warship building. Now -- but at the same time, we are also a business entity looking for profit where possible. In the products -- product mix, we have branched onto ship repairs, that is an area where the margins are higher. We will -- we have focused on that. The results are there to see in a modest way because we have just started giving impetus to ship repair just about 1.5 years back. We will be giving a trust on this. Second, on export market. Again, the beginning is good. We have tasted blood with -- by winning orders on competitive arena. One with an Asian country and with a totally diagonally opposite a Caribbean country. We are looking for opportunities that brought -- and we are very confident that this is an area that exports will be an area where we'll be getting it. Green energy and autonomous vessels. Green energy, we are made up for a, again, in a modest way with the government of West Bengal, huge opportunities for green platforms within India and abroad. There are countries the Scandinavian countries have gone completely green, not gone completely green. They're given directives to go green by 2030. I think they get a cutoff of 2030 opportunities exist there. Fourth is on autonomous vessels. With technology, cutting-edge technology platforms now no nation wants to expose their potent platforms to the adversaries. So autonomous vessels, which can be a risk to exposure will be the order of the day in the future. So 4 areas, just to answer your question, exports, ship repairs, autonomous vessels, green platforms. One I may missed out is a PAT project for us -- area for us, particularly the Bailey bridges vertical. So in a small vertical. The entire India's market -- overall market would be, let us say, x crores. We own our own -- our stake in this is around 65% as on date. So we are good in this sector. So 5 of them, not 4, 5, the Bailey bridge segment.
Akshay here from Envision Capital. Sir, do we have a treasury desk considering we have so much cash in our books? Do we have a proper treasury desk to manage the cash?
Could you -- sorry, could you repeat the question again?
Yes. Do we have a proper treasury desk to manage the cash we are having.
My experts, you can answer the question.
Whatever cash is available with us, it is a temporary period. It is not actually for investment purpose. So for this thing, there is a guideline issued by DP, and we are guided by the DP guidelines, and the investment is being made as per the guidelines.
So where do we invest generally?
Guidelines, permits, only investing on very secured portfolios like fixed deposits, mainly bank fixed deposits and mutual fund also it is allowed, but it was limited to public mutual fund. Now it is they have given also private mutual fund we can go.
Okay. Regarding the offshore patrol vessels, which are going to get signed in this year itself. So when would the execution for these vessels start?
Okay. There's 4 petrol vessel -- ocean going petrol, that's what you meant, right? We expect the contract to be signed during the current financial year that means in the next 45 days. If things go on well, we'll be signing the contract with the Navy. And the execution period, we are the L2 bidder, as I had mentioned earlier. The execution period is around 4 years, 48 months, if my memory is right.
Okay. And you mentioned that various RFPs would be coming in next 2, 3 years. So generally, what is the time lag between signing of an RFP and formal contract signing because generally it gets delayed somehow?
See, yes, there was a time again the gap between the RFP promulgation and the contract saving usually more than a year plus or 1.5 years or so. Now things have improved everywhere like we are accountable, the entities involved in the government are also being held accountable. So the pace has -- the gap has shortened. I just give you an example. This project what you just asked about the ocean going petrol vessel. And RFP, the bids are opened sometime in end of February 2022. We are one year from there. So it is one year as of now. We expect the contract to be signed next month. The endeavor of both the concern shipyard and the acquisition being of the government is to shorten this period. To answer your question, it's about one year from the time of the RFPs. Okay. And from the time the RFP is out of the bid opening, it takes around 2 to 2.5 months. 2 months, I think. So if to -- it would take around 12 to 14 months from the time the RFP is published to the contract savings.
Sir, your presentation is all encompassing. You have touched almost every aspect of the activity which you are doing intensely and intend to do going forward, I am referring to ship repair, which you say your focus has come only 1.5 years back. Going forward, will ship repair not only existing Indian Navy and Coast Guard, but even foreign ships, if we get, will it be a contributor to our revenue top line, say, 10% or 15% going forward 3, 4 years down the line?
I'll answer this question. Yes, it is true that real focus has come on ship repair is just about 1.5 years or 2 back. We started almost 2 years back, we got the contract concluded with Kolkata Port Trust 1.5 years back. Yes, we are starting a modest passion. Right now, the contribution of ship repairs in our overall revenue -- I mean, order book is just about 0.5%. It's miniscule. We are currently executing orders and winning on a competitive basis from both the Indian Coast Guard and certain commercial business. Yes, the next big opportunity exists with the Navy, but you may be aware, Navy unlike the Coast Guard has got a dedicated ship repair organization at every place where the ships are both Visakhapatnam Kochi or Mumbai here, Naval dock at Visakhapatnam sorry, Naval dock at Mumbai itself. Navy's got captive facilities. When their capacity is crossing only then Navy goes for ship repair to us or any of our counterparts, whereas Coast Guard does not have this facility. So the opportunities are phenomenal because every -- the advantage of ship repair is that a ship undergoes repairs -- refit, we call refits. Refits now, after an operational cycle, she will come back for refit again. So it's a continuous opportunity. At this juncture, since you asked me, we are not really looking at going for 10% to 15% of our revenue from ship repairs? No. We would like to cap it to around max 5% in the next 3 to 5 years. Why? I go back to my first statement. Our core business is warship building, and there is enough in that field for to give you all the returns that you expect.
I agree with you. And you have a capacity of 20 concurrent shipbuilding particularly war ships. So if you fully automate your shipbuilding, I think that will do the different -- the magic or the top line, bottom line, wonder which you are signaling and indicating. Thank you and all the best.
Just wanted to check, do you people get advances from the Navy and the Coast Guard?
We don't take any advances, no ma'am. This question I had answered once during the con call, we don't take any advance.
Okay. And sir, my second...
What -- I'll substantiate this point. Many of times, many -- not the analysts, many of time, an investor also has asked what happened to that advance you have taken. We don't take advance. As per the Defense Acquisition Procedure 2020, there are stage payments. There are 15 stage payments. This is a standard. It's available in open domain. There are 15 stage payments. One of the stage payments come with signing of the contract. And that stage payment is for the proprietary phase for building a ship. And that proprietary phases where the brains of a project gets injected. That is when the design takes place. Then the equipment are finalized. So ma'am, no advance only stage payment.
Sir, and what tax rate should we expect in the coming years, 23%?
Corporate tax rate you are asking? Yes. It is 22% and gross of it will be 25.17%.
Okay. And sir, my last question, like I mean what did you think about the budget with respect to defense spending?
I'll answer this question, ma'am. I actually prepared this for one of the interactions. Actually, the budget, what do you feel about it, budget on the whole? There has been only a 13% increase from the last year for defense allocation. from INR 5.25 lakh crores, it has gone up to INR 5.94 lakh crores. Whereas the overall budget has gone up from INR 39.45 crores (sic) [ INR 39.45 lakh crores ] to [ 45 point ]. So as the overall budget has gone up, the defense allocation has also gone up by 13%, which means there is no substantial increase in the defense project. What is interesting and good for us is that our -- the areas from where we generate -- we get orders and generate revenue, that is the Navy, the Coast Guard and the Border Roads Organization. Interesting, while I'll give the figures now, where Navy, the budget allocation for capital outlay has gone up, the modernization has gone up from INR 47,000 crores to INR 52,000 crores. Coast Guard has gone up from around INR 4,200 crore to INR 4,800 crores. That's again the maintaining the 13% rise. Interesting aspect is that the Border Roads Organization. From a very modest INR 3,500 crores, it has gone up to INR 5,000 crores. The leap is almost 43%. There we have opportunities.
Within this capital allocation, capital outlay that is for modernization, very recently, initially, what is an mandatorily to be given to the Indian industry. Initially, it was 48% from 48% it went to 64%, then now it has been increased to 75%. So there is enough room for us within this -- the allocation that is available. But on the whole, the increase has been very modest. 13% is nothing.
Okay. And sir, I just want to ask this question before. Like you were allotted the P-17 Alpha project in financial year '16. So since then, have you people always been on schedule to deliver? You were saying that the Navy change the terms of delivery. But otherwise, sir, have you -- on the part of GRSE, have you people always been on schedule?
I'll answer the question, ma'am. I'm to construct this building, this hall. You are my customer. You have to decide the light fittings. You have to decide the type of flooring that needs to be put. You have to decide the mic. And you say the mic has to be procured from him, who's developing it for the first time. You have to -- you say that the flooring has to be picked up from him, who's again developing for the first time. So when the contract was conceived, when the contract was conceived, contract is like a marriage. When the contract was conceived and then both the Navy and both the shipyards and the government, the intent is genuine. Everybody wanted -- want Atma Nirbharta everywhere. Good. It is with that intent that the contract was concluded. I am supposed to complete this building within 1 year as per the contract that we mutually agreed with the arbitrator that is a government giving the blessing. After 1 year, if you are not able to still decide the mic or rather you decide the mic, and then you say the indigenous firm who is developing it has flopped. You go to this firm. How can this building be completed? How can me as the shipbuilder or the building contractor complete this on time. So this is a point -- this is a perception point of view. Having fully understood the reality and the ground situation, mutually, mutually means the stakeholders, the shipyards, the Navy and the government are revising the delivery base. So there is no question of slippage of days. I mean GRSE, as the shipbuilder, has already launched 2 vessels, 2 ships have been already launched. One of the ships I have -- when I was just giving the narrative on the physical program, 1 of the ships has already touched 50% of physical progress. So we are moving in -- when we are doing Atma Nirbharta, these are all inevitable situations. But the end result will be a product that will last the Navy for more than 40 years. Since you asked me this question, we have -- we are constructing 4 survey vessels currently for the Navy. Navy still has got survey assets built by GRSE, which are 40-plus years old. So the products that we deliver will have longevity, meet 100% customer expectation and in term of the nation's expectations. So the contract is -- it's an arrangement or a okay, contract in whatever real sense. It is getting renewed means all the stakeholders, including the government, is privy to the fact that the delays are not because of any particular entity. It's a collective ecosystem development implication.
I've gone too deep into that this so the air is cleared once for all.
So but now you have to deliver the 3 ships. You're saying you've delivered one P Alpha, so 2 are remaining. So do you expect any delay because you're supposed to deliver by 2027. So given the way things work, do you expect any delay in that delivery?
At this juncture, no ma'am. At this juncture, no. It's like unless some force measure situation comes, like Turkey you have seen in the last 1 month, things have turned upside down. So unless something drastic happens to the Indian industry, we don't see any changes.
Sir, my simple question, sir, we have up to 27% order book of roughly INR 25,000 crores. Just, sir, can you guide us next 4 years, you know my question. '24, '25, '26, how this INR 25,000 crores will be fulfilled by us? And is there any risk in not fulfilling? And if it is, what is that risk?
Okay, sir. I'll answer this question. I'll make one slight clarification. The current order book, current order book is INR 22,242 crores. We are expecting a contract for the 4 vessels to be concluded that is by next month. So including that and what we are going to execute in the next quarter, the order book is likely to be around INR 25,000 plus crores. Now if you're adding the next project also, next project is a minimum 4-year project. I'm actually not getting the figure exactly, I think it is 48 months or 52 months. So that makes it from '23 to almost beginning of FY '28. Now if I'm taking that out of the equation at this moment, so INR 22,242 crores FY '27. Now I'll just go back, the last year, my revenue from operations was INR 1,757 crores. This year, the way things are moving, it is evident. The growth is evident. The next year, that is FY '24 and '25 are going to be the peak years, with the peak touching FY '25. Then it will be throughout and get padded up by the new orders that I'm getting. I'm purely speaking about the current order book. If I get another, let's say, on jumbo order, then naturally, the revenue generation will start from those orders also. I know I'm making it in a wishy-washy manner, but this is the best I can give you at this moment. FY '24, '25 will be our peak years.
So what will be in '25 peak? What is your peak means?
So that's what I told him in simple English. I'm going in a roundabout way.
I wanted a cumulative of INR 22,000 crores I don't understand how we can go to INR 22,000 crores. Just make me understand how we can go to INR 22,000 crores by '27?
Sir, the shipbuilding is not like -- it's not linear. I mean I had -- I mean, actually, my predecessor when we started getting -- when we got listed and the first interaction, a simple question was asked. Your order book was -- I'm just giving a figure, let's say INR 25,000 crores. Your delivery date is x. So each year, are you going to deliver. It is not linear. Shipbuilding follows S curve. So again, it is with that assumption and that product maturity that we are now in a state, starting from this year, the current financial year. Definitely, I'm already at INR 1,960 crores. You can infer the rate at which I'm doing. So '23, '24 and '25, will see a further growth.
But I fail to understand from INR 2,000 crores to -- by '27.
Sir, you want us to finish the order book, as an analyst and your investors also. You want us to finish the order book. We will finish the order book. Since you want us to finish the order book and the value is INR 22,000 crores and the number of years are only 4. Naturally, you can split it in this fashion. So I certainly can't give you the exact...
But sir, you got the phase wise, how much you are going to complete in '24, how much you are going to complete in '25. Sir, let us for investors. Let us understand by '25 whether INR 7,000 crores will be done. Absolute figure, sir.
Okay, sir. I'll give you a little more clarity. I certainly can't give you the absolute figures, but I'll give you a little more clarity. Now in shipbuilding, the maximum revenue generation takes place. When a ship is between 40% to 60% of construction, in a smaller ship, naturally, the proportionate values will be different. I'm taking you a big there because my biggest revenue owner is P-17 Alpha because that carries approximately 70% of my total order book. The first ship today is at 50% physical progress, thus which means it is the mid of the maximum revenue generation cycle. The second ship has just entered that phase, 40%. The third ship is at 20%, but moving very fast, 22% moving very fast. So again, I'm reiterating this year, we expect to touch anything more than around 25% more than the last year. We intend maintaining same tempo in the next few years also, with FY '25, the peak year. Not happy, sir?
Not at all. Sir, with 25% growth and INR 22,000 crores, I don't understand the maths.
And I said this year, we will be maintaining minimum 22%, 25%. So whatever we have assured at least over the last 1 year, we have only delivered more than what we have assured. We will continue maintaining the tempo, at least...
And sir, in '25, what will be the peak margin EBITDA level?
So margins should be more on the same, sir. What we are maintaining now. We don't see any major because orders are definitely on the margins what we get with the profit margins are limited. So whatever is today, we'll maintain that. I don't see any substantial rise or dip from that existing fillers.
And any challenges or penalty of not completing or delaying?
Yes, yes, yes. Every project has got liquidation damage in case the project is delayed. With the contract getting revised -- to answer your question, ma'am, with the contract getting revised, I think we are out of the LD bracket as of now.
Sir, I have one question here. Sir, the future orders, which we are talking about, the next generation Corvette 18 number, I think we're talking about some INR 36,000 crores. And with -- in that L1 is going to get 5 and L2 will be getting 3. So that's -- so assuming if we are L1 luckily now, it will about INR 22,000-odd crores worth of order, sir, that would be on a nomination basis or it could be on a competitive bidding?
No, sir. This will definitely be on our competetive bidding.
Okay. So if -- assuming if it was on a nomination basis, the margins will be 7.5%. And if it is on a competitive bidding, is it safe to assume it's like 5% margin, 6%?
Sir, it is project specific, sir. We see the -- we actually -- it's a pure business division at that moment of time, which depending upon the market environment at that time, the competitors order book at that point of time and our own order book position, sir. I hope you understand that. And so to answer your question yes, it is going to be on a competitive bidding. And my previous statement, we will be bid to win this because it is our forte. It is our initial product.
And sir, this is going to come in calendar of 2024? Or where are we in that journey, bidding?
So the AoN was accorded in May this year -- May last year AoN. CCS -- so we expect the RFP to come -- because RFP was already a long time back, the RFP to come out by early calendar year '24. So this works out -- actually goes well for us because if by early '24 the RFP comes out, I expect a year, 14 months for the contract to be concluded. So with our current order book, the small orders that we are getting in between. Actually, time and space faces matches good for us.
Okay. So it should technically match with peaking of our P-17 Alpha project, all 3 of them, and that would coincide with perhaps this order coming and just like timeline wise?
No, no, not exactly, not exactly from the -- not exactly because see, there is a okay, I can give a -- the really do I get an opportunity to meet you in person. I'll just give you in shipbuilding, there are 4 phases. One, of course, is a proprietary phase where we do the designing and the equipment selection, the ordering and so on. Then there is a phase where the ships -- when we start production until the launch of the ship where the blocks -- the mega blocks are constructed to various locations, they all get consolidated in a dry dock. Now coming to the dry dock. It is at that phase that the ship is going to be in the dry dock. 2 P-17 Alphas are already out of dry docks. I'm using the dry docks for construction of the other ships. So then if and when this project or any other project come. There is no collision with respect to clash with respect to the dry dock requirements of the P-17 Alpha. After the ship undocks, after ship is launched, she goes to -- or rather they go to outfitting jetties where the equipment buttoning up and outfitting happens. And it then goes on to the last phase, there is acceptance and trials. So to answer your question, there is no clash.
Sir, P-17 takes a tenure to kind of construct the entire P-17, the frigate, is about 5.5 to 6 years period. What is the tenure for this 18 number Corvette?
This, again, is going to be 6 years since it is going to be split between 2 shipyards, it will be a 6-year project.
Okay. Sir, so 2 shipyards, meaning L1 will commence first and L2 will commence second. That's the way the project will be going?
Normally in hybrid, hybrid mean as in 2 shipyards can -- constructing the ships almost concurrently. They maintain a gap between the commencement of the first ship even contractually and of the first ship of the L1 shipyard and the first ship of the L2 shipyard. Basically for the design maturity and to stagger so that when the delivery takes place at some subsequent state, the customer can take it in a staggered manner. Nobody would like to have 10 things coming to shore. That is the intent.
Yes. So thanks so much. Thanks so much for working towards the safety of our country. So really appreciate that. Thank you so much, sir.
Ma'am, I thought it was your last question, but bingo, please go ahead.
Apologies for asking so many questions.
No, no, ma'am. It's -- as I mentioned, it is my privilege to interact with all of you. Any question, welcome.
Okay. Sir, 2 questions. So one is that you -- I mean now commodity, I mean, basically steel prices, metal prices are going down. So does that benefit come to you? Or I mean, it somehow does not come to you?
Ma'am, it all even sought at the end of it. There was a stage -- see, steel is procured when you -- steel -- I'm talking steel as an example, applicable for many of the items also. Steel is required for the [indiscernible] ships [indiscernible] construction. And in a project, the total order value, for the cost of steel is approximately maximum around 5%. That's all. Second, we have a running an agreement with another public sector undertaking the Steel Authority of India, where we based on the global indices, we fix the price, we have an agreement for a certain period. So we have reasonable assurity of maintaining the price. There will be some states earlier, 6 months back, the steel prices were high. Now the steel prices are down. There could be a situation where the steel prices go up again. So seriously, it doesn't affect us much. And as far as all the running -- all the running projects are concerned, the steel procurement has already taken place. So 0 impact as of now. But definitely, yes, for the next projects, we need to procure steel, but we have a back-to-back type with steel.
Sir, I mean, during the phase of the ship, there will be different stages. So I mean, are the EBITDA margins of what you make different in the different stages? Or what is it?
Yes. It will be -- okay, since you are doing concurrent construction of ships, concurrent construction, like even today, we are building 3 types of -- I'm taking the other platforms out, the export platform and the boats and the FPV out of it. Just let us take Indian Navy. We are taking 3 different projects, comprising of 15 ships, 3 different projects, 1 are awarded on at different margins. And all of them are at various stages of production. So the revenue will come when the ship is reached to answer sir's question, when the ship -- maximum revenue will come when the ship rate is 40% to 65% of construction. The margins will fluctuate depending upon which project we are handling.
This is Mohit from ICICI Securities. I have 2, 3 quick questions. Number 1 is, though we acknowledge the fact that there has been new opportunity in the Naval fleets, like you said, and it's almost INR 1.5 lakh crores to INR 2 lakh crores in the next 4, 5 years. Okay. But does the government budget actually support this because why I'm asking is, apart from the last 2 years, if you take the average over the last 10 years, the average allocation to Naval fleet is about INR 12,000 crore to INR 13,000 crores. So even if you take that for the next 5 years, like recent allocation to the Naval fleet is about INR 20,000 crores, okay INR 20,000 crore, INR 25,000 crores. So if you take that for the next 5 years, the total opportunity will be about INR 1 lakh crores. So do you see any kind of like any kind of the delay in all those projects which you have been mentioning and other players have been mentioning?
See, Navy has got -- this year alone, Navy has got a budget allocation of INR 52,000 crores for -- that is a capital modernization budget for Navy. Navy already has got 43 -- when you say capital budget allocation for the Navy is the fund allocation for the Navy to spend on the projects which are in progress and for the projects for which the contract is likely to be concluded where the stage payments are to be released. Right now 43, I'm only taking Navy. I'll come to Coast Guard later. 43 ships are under construction for Navy. In my understanding, that the INR 47,000 crores which are for capital outlay, excluding the infrastructure project that the Navy is undertaking for their modernization. A majority of this will go for the various stage payments for the project which are in progress. With 11 -- 10% to 11% to 13% budget escalation coming up every year, if you just extrapolate, similar or more amount will be infused into the Navy capital outlay for the next year, next year and so on so. Some of the projects, which I have mentioned have already been approved by the AoN has been accorded by the DAC. For example, high-value order, INR 36,000 crores is a reasonably big amount. Some of the projects, the RFI has been already issued the RFPs on the [indiscernible]. So all put together, I have given 2 figures, a conservative figure and an optimistic figure. The conservative figure of around INR 86,000 crores I had mentioned over a period of next 3 to 5 years, the contract conclusion. Now when you say contract conclusion at contract conclusion as per the Defense Acquisition Procedure 2020, x percentage is supposed to be given, which is the x percentage of the contract value. So it's a running cycle. So I don't see any apprehensions in these orders, unless there is a government decision to suddenly stop all Naval projects, which is unlikely to come.
And sir, why there is a reduction in the naval fleet budget if we compare it with the last budget because last time it was like INR 30,000 crores, which has been reduced to INR 25,000 crores now? And there has been no major inflow in the last 2, 3 years?
There has been -- you're absolutely right. There has been a bottleneck with respect to the defense acquisition projects getting stuck at some level. Now in my understanding, the bottleneck has been cleared already. That is how the RFPs have started coming in such frequent fresh. As of now, I'm preparing the bids for how many 3 bids for the Indian Coast Guard. So yes, you're right. There was a bottleneck. Now it is opened up.
No, sir, why I'm saying this because I'm fearing if there is a level like when we -- we do not receive any kind of the order that we are investing now in the next 2, 3 years. So there might be like we have a lot of capacities. Like you mentioned, 20 warship building. But if that capacity is not getting utilized due to lack of the order because we have seen in the case of Mazagon Dock, there was a period when the submarine order was not there, like 10 years back. So then at that time, they made used losses, right? So if that is a scenario right -- the next question is...
Can I answer your this question once again?
Yes, sure, sir.
I mean, rather I can clarify. See, if you -- since we are speaking purely on Garden Reach Shipbuilders, the current order book for a company such as us is good. Second, where a reasonable assurance where RFPs are already out or where DAC is cleared, it's a count -- naturally, it's the government who is taking the decision. That itself, among the 7 shipyards, there is enough for all the shipyards. So we don't envisage any order starvation in the coming foreseeable future. Could you ask the next question, please?
Sir, we have been very low on R&D spend. What is the reason because we are the lowest in the defense public sector undertaking. If we talked from the research and development as a percentage of the top line.
Could you repeat it again?
So we have been very low in research and development expenditure as compared to any other defense public sector undertaking. So what is the reason? Aren't we doing any kind of the research for the new ships or the current existing projects?
Yes. As with the government, the focus now has increased on R&D and the projects that we are personally focusing the green energy project and the autonomous platforms development will be on -- through our R&D budget. Yes, R&D was focus areas but more trust will be given in the future.
Right. Because I think in FY '29 -- in FY '19, there was no R&D spend, and right now, it is less than 1%. If we compare it with the Mazagon, also they are doing 1.3. HL is doing 8%, BL is doing 7%. We have been quite low on the R&D part.
I'll give another answer for this. Unlike HL, okay, I'll keep Mazagon Dock right now out of the equation. I'll just compare 2 different sectors, HL and us. We have a platform -- primarily, we have platform integrators. This should be clearly understood. We are platform integrators. We procure equipment from renowned, acknowledged and perhaps nominated by the customer, the equipment systems, button them about our specialties platform integration. In case of HL, in my understanding, they develop new projects. So naturally, R&D focused by HAL or BL has been much, much more than for a conversional ship buildup. Now I'll bring MDL into the equation. Yes, MDL has been definitely, I understand it is on 1.3, 1.4 percentage on that -- and ours is also more or less similar, but what we with the present trust of the government and in turn, us being a government entity. The R&D focus will increase in the coming years. And I've given a couple of examples, R&D development will be focusing on green platforms, hybrid platforms and autonomous business.
Sure. And sir, the last question is on the indigenous content on your major ship building project as of now, if we can share the data? Indigenous content of the current shipbuilding projects.
See, again, I'll substantiate my statement with a rider. We are platform integrators. 70 -- in a shipbuilding scenario, if you're taking a conventional ship building project, around about 65% of the ships cost come from the equipment. And where does the equipment cost is high. One is the main proportion system. Second is a power generation system third is a weapon system and fourth is the electronics. This comprised the major cost carriers. And almost all of them are from a nominated pool of the customer. Now the question of -- now as a nation, everybody, including the customer is looking at indigenization, there are total bands on importing certain equipment. Now what is left to the shipyard, what was left to the shipyard a few years back was the steel, the yard material. When I say yard material, that's are the fittings, the fasteners, the installation, they're all 100% indigenized. Now with the government trust on every stakeholder that is the customers, the shipyards and the industry on indigenization with ban on importing a plethora of equipment, the indigenization content has gone up. The last platform that we -- the last project that we completed a major project that we completed, the anti submarine corvette project for the Indian Navy. Our indigenization content was plus 90%.
Sir, that you have mentioned that your primary focus is a shipbuilding, particularly warship building. And now there is your peers is also doing some kind of shipbuilding in the areas like commercial shape building, passengers building. So I want to understand as far as future growth is concerned, you have mentioned that your -- whatever the order book that can possible in a future time. So you want to also go in these other verticals?
Yes, we would be going in for other verticals also, that's the order of the day with no dilution in our focus on domestic warship building because that is our primary job. But yes, we'll be going in 5 areas, ship repairs because that is an attractive quick turnaround mechanism. Second is for the Bailey bridges, portable steel bridges segment where we have already made inroads and I think I mentioned that we own almost 65% of the Indian market. Third is for, again, a new technology adoption that is green vessels. Right now, the green energy platform manufacturers in India are 1, 1.5 and we have made some improvement to that. And fourth is the autonomous platforms. And fifth, of course, is exports. Towards exports is -- it's a national agenda. You are all privy to this, that's the Government of India's key focus, 1 of the key focus areas, and the team statement is making India make for the world. We, as a government entity, are carrying the team forward moving aggressively. See, but it is like one thing you must appreciate. When I saw this thing for 100 leads, we may get, we may one, we may get two. We have been lucky. We have started successfully, 2 orders already won. We have marketing representatives in the areas that we have identified as potential order earners and very confident of getting some commercial orders or warship export orders in the future. So these 5 areas are our diversified segments.
And last question, sir. That just to understand one math, that defense allocation total is somewhere close to you have mentioned INR 5.94 lakh crores, right? And in that particular and -- as far as your particular industry is concerned, including Navy, Coast Guard and the modernization, I have calculated somewhere close to INR 62,000 crores has been allocated. So may I understood 10.43% of the total budget is moving towards your industry by simple math, INR 62,000 crores divided by this something -- just if I'm wrong, just make me understand.
You're right. So I think that in a nutshell, you are right. See, the Navy allocation I had mentioned is around INR 52,000 crores for the current year. The Coast Guard is around INR 4,800 crores. And where we have some interest in the Border Roads Organization, which I mentioned, that is an attractive INR 5,000 crores. Of the INR 5,000 crores, majority of it will go to road construction. But where roads are there, bridges are also automatically there. So we'll be the collateral winners. So you're right, it is around that much personage whatever you mentioned.
Sir, do we get any incentive to complete project shipbuilding in on time?
Very interesting question. So whenever -- when next time the government asks for a suggestion for amending the DAP, we will definitely seek such an incentive. Unfortunately, in today's environment, no.
Sir, we are currently building around, I think, 15 ships. Out of that, 7 we are building, 2 with Titagarh and 7 or 5 is something with the L&T. So how the margin is shared between these transaction? So out of the 7.5%, does the some part goes to the L&T and Titagarh or what?
I'll answer this question in detail unless there be any ambiguity. The P-17 Alpha project has been completely constructed because that is our major order book contributor. It is being completely contracted at GRSE. No ship among this 15, no ship among this 15 is being constructed the small shipyard in Kolkata that you mentioned. Part -- I repeat part construction of few of the ship of both the Survey Vessel Large project and the Shallow Water Craft is being constructed by one of the other private partner, Shipyard, are what you mentioned L&T. We have contracted through a conventional tendering process to identify a suitable shipyard that has got capability and spare capacity through a proper contracting process, which is open to the industry comp. So there's no question of sharing anything with them. What I -- what means GRSE orders. As per what they have responded, if any competent shipped has won that thing, they'll get paid for that for the part construction, which they are carrying out. This is actually a very -- I mean, since you asked this question, sir, it's a beautiful concept, which we experimented in a very modest fashion with L&T itself around 4 years back where one of the ship was given, we found the model very successful. Because what the customer wants, I had made a shipment, the customer wants the product yesterday. So we have been able to -- of course, the project is now reaching maturity. I've got 2 of the Survey Vessels almost back-to-back competing with each other, a very successful PPP model. But no sharing -- there's no question of sharing anything, is with all humility, the other shipyard is my subcontracted shipyard partner for this particular.
Both these builder L&T and Titagarh are work on schedule or it's a late?
They're on schedule. In Titagarh, I have mentioned, there is no project among this 15 with Titagarh. 0 project with Titagarh. That was since you mentioned Titagarh that was another project for the Coast Guard, which has already been completed delivered and over and out.
Sir, our order book position is around INR 22,000 crores, approximately INR 22,000 crores to INR 23,000 crores. So it's going to be completed by year '24, '25?
Sir, this INR 22,242 crores will get completed by FY '27.
'26, '27.
'26, '27.
So last year, our sales was around INR 1,757 crores current year, do we expect around INR 3,000 crores next year around INR 5,000 crores and next year around INR 7,500 crores or INR 10,000 crores?
Sir, I will note down these figures. It is -- I really -- I mean, a very, very interesting perspective, the same question, which he also had asked. I tried my best to put it in a roundabout way. But again, I am reassuring. We will finish these orders by FY '27, unless a catastrophe happens or one of my industry partners pack up. We will finish this product. So in a natural scheme of things, the order book position will get translated into revenue from operations in these coming years.
Sir, we are -- for 90 minutes, we are discussing everything. So he didn't put the figure. So I'm putting the figure. So last year, it will be around INR 8,000 crores sales or what? Give me some rough idea.
Sir, I -- I'm not -- you wouldn't fully appreciate better than me. I'm a technocrat, but you are the specialist. You will understand very clearly that I cannot give an absolute figure. So it is your -- I'm bound by this very place. So you clearly understand this.
Thank you. We've reached actually to the end of the session, and we need to close. Thanks to all these gathering to come here and hear us. Closing remarks from Commodore before we end this session?
It was indeed a very pleasant, healthy and enriching experience for me interacting with each one of you. It has been a learning experience for me because it's the first time that I'm meeting all of you face-to-face. There's a lot of difference between a concall and meeting the specialist face-to-face. Happy to have interacted with you. It is my pleasure, and I will make it a point to interact more often with you so that we understand each other. What -- I hope you have understood the environment which we are working. And I also hope that you have now more confidence in what we do.
On the request of Commodore, we would request everyone to please have a group picture with the management.