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Ladies and gentlemen, good day, and welcome to H.G. Infra Engineering Limited Q2 FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rishav Das from Pareto Capital. Thank you, and over to you.
Good morning, everyone. This is Rishav Das from Pareto Capital. We represent Investor Relations for H.G. Infra Engineering. On behalf of H.G. Infra, I welcome you all to our Q2 FY '22 earnings conference call.I have with me from the management, Mr. Harendra Singh, Chairman and Managing Director; Mr. Rajeev Mishra, CFO; Mr. Vinod Giri, Operations Head; and Mr. Sanjay Bafna, Group Finance and Accounts Head. We will have brief opening remarks from the management, followed by the Q&A session.Please note that certain statements made during this call may be forward-looking in nature. Such forward-looking statements are subject to certain risks and uncertainties that could cause our actual results or projections to differ materially from these statements. H.G. Infra will not be in any way responsible for any action taken based on such statements and undertakes no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances.I will now hand over the call to Harendra Singh for his opening remarks. Over to you, sir.
Thank you, Rishav. Good morning, everyone. I hope all of you are and your families are keeping safe and healthy. We are proud of the performance of our team who has delivered this quarter which has been delivered in this quarter. Along with the strong financial performance we have had major awards awarded, milestone achieved and significant execution progress in all our projects. We reported a stand-alone revenue growth of 60% to reach INR 750 crores while maintaining our strong EBITDA and PAT margins of 16.3% and 9.3%, respectively.Before sharing the financials and operational highlights, let me take you through the opportunities and the outlook of the sector. The Infrastructure sector has been witnessing strong tailwinds with the continuing focus of the government on infrastructure investment, budgetary support for the projects. NHAI has made good progress in its awarding and execution targets for expressways and highways. That has -- that was led positive measures on the policy and liquidity front.NHAI is currently commissioning 23 new highways, including expressways and corridors with a target to complete by 2025. Additionally, as NHAI continues to award the balance of Bharatmala, we see a total award potential of around 6,000 kilometers a year for the next 3 years, and this gives a good visibility on awarding activity for the years to come. Despite the onset of seasonal [indiscernible], execution capabilities have improved on account of rising availability of labor at all the project sites, which are back to pre-COVID level now. Ongoing timely payments from the government authorities and a general pickup in economic activity.Now I will share the highlights of the company's performance. Our total order inflow for the year stands at INR 3,846 crores. That is the EPC value, which includes 3 additional orders in the month of September and October. 1 order from PWD is in Rajasthan for development of sections of Beawar Masuda with an awarded cost of INR 448 crores and 2 major projects of HAM projects in Odisha for the development of section of Kaliagura to Baraja under the Raipur Vishakhapatnam Corridor for a combined awarded cost of INR 2,615 crores. Our current order book position stood at INR 6,843 crore as on 30th of September 2021.Please note that this excludes the 2 latest HAM projects, which we received in the month of October. Including this, the total order book as on date stands at INR 9,060 crores. We have achieved major milestones in several of our projects, which helped drive growth this quarter. And following is the progress which we have made on our major EPC projects.We had a strong execution on Delhi-Vadodara package for EPC that we have already completed 88% and looking further to complete by December end. In DV package 8, we have made a good progress, and that has -- is around 42% of the program that we achieved. In DV package 9, we have completed around 32%. And Hapur-Moradabad EPC projects of IRB, we have completed close to 51%.And the Mancherial project of Adani, we have executed 35 percentage of progress. The progress is being impacted by 2 -- because of the 2 monsoon seasons and the [indiscernible] supplies banned by CPC, which is now allowed and work is now in [indiscernible] up in full soon. And the later PPP project of Karala-Kanjhawala of -- in Delhi of UER 2 the appointed date was declared on 28 October, 2021. And with around 95% of the land availability, we will ramp up our execution in the coming months.Coming to our HAM projects under execution. We are close to completion in our first HAM projection of Rajiv chowk, Gurgaon -- that is Gurgaon-Sohna, and having completed around 91%, we have already applied for the [ PCOD ]. In the Narnaul Bypass HAM projects, we have made considerable progress during this quarter, having completed 85%. And very soon within a month, we would be applying for the PCOD there. We have completed around 80% of our Rewari-Ateli HAM projects. Again, the PCOD has been applied into that project, which we believe by December.In Rewari bypass HAM project, we have completed around 25%. Let me now touch upon the status of the latest HAM projects that we have added in the last 6 months.In Raipur Vishakhapatnam, that is AP1, the project, we have signed the concession agreement in the month of September. And Khammam Devarapalle, that is Package 1 and 2, we have received the LOA, Letter of Acceptance for the [ sales ] in the month of September. And very soon, we will be signing the concession agreement during the month of November. Lastly, in 2 HAM projects of Raipur Vishakhapatnam Corridor, that is Odisha packages of 5 and 6. We have recently received the Letter of Acceptance in the month of October.We are in progress of financial closure of all these projects. As we have already received in-principle sanctions from some banks and the sanctions are being expedited in all of the above 3, say, which we have received during the month of March. We are sure to conclude the financial closure of all these projects within the time line of the agreement. Of these 9 HAM projects, we have a total equity requirement of INR 1,194 crores that is projected in the mid of FY '25. Out of this total amount, we have already invested INR 276 crores as of 30th September 2021. And we are projected to invest some INR 187 crores during this remaining financial year, remaining part of this financial year.Lastly, I'd like to mention that we have received the PCOD of Banar Bhopalgarh, that is a Rajasthan project, World Bank funded and Morshi Chandur Bazar, EPC project of Maharashtra during this quarter.Before I share the outlook and the guidance with you, I would like to hand over the call to Rajeev Mishra to touch upon the financial highlights...
Excuse me, this is the operator. Participants, the line for the management has dropped. We request you all to please stay connected while we reconnect the management. Thank you.[Technical Difficulty]Ladies and gentlemen, thank you for patiently waiting. The line is reconnected. Sir, you may go ahead.
Thank you, [indiscernible]. Good morning, everyone. Let me brief you on the financial performance for this quarter. We are very pleased with the performance our company has delivered this quarter. Standalone revenues stood at INR 750 crores, growth of 60% year-on-year. We reported an EBITDA of INR 122 crores, maintaining strong margins of 16.3%, while PAT stood at INR 70 crores with a margin of 9.3%. For the half year performance, the revenue stood at INR 1,661 crores, a growth of 117% from H1 of last year. EBITDA stood at INR 270 crores with a margin of 16.3% and PAT stood at INR 159 crores with a margin of 9.6%.Our efforts to strengthen our balance sheet continue to remain our focus. Total standalone gross debt as of 30 June 2021, stood at only INR 274 crores. This includes working capital debt of INR 85 crores, term loans that are current at INR 189 crores, cash and bank balance on standalone level stood at INR 115 crores.Our consolidated debt stood at INR 923 crores, which include project loans of INR 649 crores. Cash and bank balance on consolidated level stood at INR 119 crores. We have seen further improvement in our working capital also.As on September 2021, we had debtors of 49 days. Inventory days were 36. Creditor days were 64. Overall, net working capital days were 21 compared to 33 days at the start of the year. Our debt to equity has also improved during this year with a further reduction to 0.23x as of September 2021 compared to 0.28x at the start of the year. That is all from my side for the financial highlights. I will now hand back the call to Harendra Singh for further remarks on the digital transformation and guidance on the way ahead.
Thank you, Rajeev. Let me now touch upon our digital transformation and initiatives undertaken during last quarter.In our highly competitive world of infrastructure development, having reliable, accurate and timely information helps us in achieving operational excellency. And on this front, digital transformation and upgradation is the need of the hour. We have undertaken several new technology initiatives in the company, and IT is working as a key enabler to implement these positions.We have installed sensor-based technology for fuel dispensing and fuel level management system to give us the real-time information on consumption and effective control on fuel costs, which are a major constituent in our material. We have already enabled this technology on [ 40% ] of our moving equipment as of now. And by end of this year, we will be completing the entire 100% of our fleet.There are also other initiatives like that to improve the equipment control, [indiscernible] management and inspection that will offer multifunctional applications to automate manual processes and many more. We have executed in our execution or monitoring software that helps us capturing on a daily progress report in the set and enables us to make timely actions across the whole project sites. Finally, let me brief you on our guidance and outlook for this financial year.We have time and again demonstrated our strong execution capability. Given our continuing strong performance in the first half of this financial year, we would like to update our current guidance to INR 3,400 crores of revenue and INR 550 crores of EBITDA. Our focus continues to be on winning projects with our calculated strategic approach. As mentioned earlier, our goal is to achieve INR 5,000 to INR 6,000 crores of order inflows in this financial year. We are well on track on achieving this target and having already secured around INR 3,846 crores of orders as on date. That is the EPC value.Going ahead, we plan to build for a total of INR 22,800 crores in growth projects under both -- EPC and HAM both. We are very confident of receiving good order inflows during the rest of the year. We are currently bidding for railway tenders with a cumulative value of INR 4,200 crores and our order supply tenders with a cumulative venue of INR 3,000 crores. We are optimistic and believe that the infrastructure sector is at the start of a long run ahead. The long-term visibility of awarding activity and government spending position us to tap up into the various opportunities coming in our way.Given our comfortable order book position, strong revenue activity and healthy financial position, we strive to keep improving efficiencies and further enhance our position as a leading infrastructure developer in this new decade.Now I would like to -- like the moderator to open the floor for the question and answer. Thank you.
[Operator Instructions] The first question is from the line of Mohit Kumar from DAM Capital.
Congratulations on a very, very good set of numbers. So my first question is, what is your revenue growth expectation for FY '23 and FY '24, given the current order book and strong order accretion in the H1?Secondly, sir, given the strong order inflow in the first half, do you see -- do you expect to beat the order inflow guidance? And the related question is that are you seeing higher tendering activity for NHAI? Do you expect a much, much higher now for NHAI given the first half has been very lukewarm? Those are 2 questions.
Okay. Your first question remains how are our order -- revenue guidance for the year '23 and '24. With the strong execution that we have already done during the first half of this financial year, we believe that we would be at about, say, 3,400 or [indiscernible] that level during FY '22. With that, we believe that at least 20% of growth year-on-year basis, we would be in a range of 4,000 plus for FY '23. And again, at about, say, 20% plus in FY '23 to '24.As far as NHAI awarding activities, since we already received some INR 3,850-odd crores of orders during the first half, and we believe that we will be adding at least 2,200 crores range of orders during the balance of this financial year. So taking all together, it was at about INR 6,000 crores. With the orders already 1,800-odd kilometers being awarded by NHAI, we believe that with the guidance given for 4,500-odd kilometers to be awarded during the current year, we believe that we would be adding that number very comfortably. And going further, it is -- I think it's [ all loans ] at Bharatmala, 2 [indiscernible] kilometers of Bharatmala, one, they all would be awarded in FY '23 and FY '24. So likely, we will be having good opportunities from highway.
The next question is from the line of Himanshu Shah from Dolat Capital.
Congratulations, sir, for a very good set of numbers and also upgrading the revenue guidance for FY '22. That's a great performance, and you already guided that you would be doing a great performance going ahead.Sir, a couple of questions. First, on the investment in -- equity investment in HAM, so you said INR 276 crores we have invested till date and INR 187 crores in second half. So in FY '23 and '24, how much more we will be investing?
For FY '23, we'll be doing INR 431 crores. So, yes, that's the plan projected for FY '23. And for '24, it will be close to INR 180 crores.
INR 180-odd crores. Okay. And secondly, in terms of the progress on the HAM monetization sir?
See, for the HAM monetization, the discussions are on and we have already discussed with 3 order funds and 1 in [ bid ]. And with that, they are having, say, very good interest and are all nearing completion HAM projects, at least 3 would be completed -- likely to be completed within the next 2 months. So with that, we believe that it will take time, definitely, within the next 6 months or so we would be in a position to conclude the deal.
Okay. Okay. Secondly, just a broader sense in terms of the further how much we have a comfort in terms of taking more HAM projects before we look for equity dilution.
For sure, I think we have calculated that internally. If we can add on a few more HAMs during the year or say next year, how much is the total capacity and looking to the total debt on a consol level. What should be the comfortable level of that. And again, the equity requirement, but -- so we believe that if we add, say, another INR 6,000-odd crores of HAM during next 2 years, and we would be safely -- without the monetization even we would be safely and comfortably managing our equity and that too, debt equity under control at the consol level.
That's a great thing. Just a couple of things in terms of the debt level. We are managing very well on the working capital. But any idea in terms of will -- the same thing will continue going forward?
Yes, definitely. The debtor, which are right now at about INR 45-odd crores, which with the increasing execution in the HAM, where right now, they make up about 42% our HAM and 58% our EPC. With that, I think it would be in the more comfortable position at the end of this financial year. We would be somewhere in the range of [ INR 400 crores ], even less than that at the end of this financial year. And with that, we believe that the working capital cycle, again, would be in a reasonably good range, which extremely it has been good in this quarter 2.
Okay. Okay. Okay. Anything you want to share in terms of the -- you said we have bidded for rail, INR 4,200 crores and water, INR 3,200 crores. In which states and how many projects are there? Hello?
Excuse me, this is the operator. Participants, we request you to please stay connected. The line for the management has dropped.[Technical Difficulty]Ladies and gentlemen, thank you for patiently waiting. The line is reconnected. Mr. Shah, you may proceed.
Yes. Sir, I was asking, we have bidded for railway INR 4,200 crores and water INR 3,200 crores. Will you explain in terms of which states and how many projects are there?
These are spread into 4 states like on railways. These are Gujarat, Rajasthan and 1 in Maharashtra. So they are spread into 4 states and water supply is definitely into 2 states only where we had taken initiatives. One is the Rajasthan and a few projects are from [ MP ]. All for water supply and in railway.
So the broader range in terms of the individual package would be INR 500 crores plus?
Yes. These are all in the range of INR 400 crores to INR 500 crores.
Okay. Okay. And then our broader thought in terms of adding and diversifying in terms of the railway and what are -- we were seeing a 10% kind of inflow [indiscernible] sectors other than the road, so that will remain intact.
Yes.
The next question is from the line of Ashish Shah from Centrum Broking.
Sir, the first question is that with this plan to get materially into railways and water, do you think we can maintain the 16% margin requirement? Or do you think that probably the margin will normalize a little bit, but obviously, then you don't need equity for those kind of projects? So where would you see the EBITDA margin for, let's say, next couple of years if this kind of an inflow materializes?
See, we have already given a guidance that we would be adding some 10% of the order during the current year of this new sector and taking it gradually to 25% over a period of next 3 years. So it is important how we are taking the call on these numbers. So they are not a very significant contribution to the top line. So we do not see much of an impact as far as margin is concerned. We would be maintaining that 15% to 17% range of margins. Going further, even if you add some 10% and then even to 25% over the period of next 3 years.
Fair enough. So also on the Karala-Kanjhawala EPC project. There, our good value was about INR 1,400 crores. Whereas the EPC value we see in the data is about [ INR 1,242 crores ]. So what can account for the difference there?
See, the internal calculation where the design is being done internally. So more important is any of the structure-based project, you will always find that there is a gap into, because we have already seen that in the UER 2 Kanjhawala package, we have seen the aggression, but the aggression is just because of the design.We are having an internal calculation. And we are very much sure that we will be making some 14% to 17%, 15% margin on this project. As already after 2 months of that awarding, we have designed our project, and we do not see -- we are looking at the significant decrease in the quantities rather than increase.
No, sir, that part, I understand from the bidding perspective. What I'm saying is that your bid value L1 was INR 1,393 crores and the EPC value, which we see in the order book is INR 1,242 crores.
Okay. You are asking for that. That is a net of GST. Basically, the INR 1,393 crores is inclusive of GST. So we have -- whatever number I have given that INR 3,800 crores, that is net of GST.
Right. And this INR 1,393 crores was including GST.
Yes, yes.
So in terms of the execution, Hapur is where we've seen some amount of slowdown? Is it only because of monsoon? Or is there anything else which is slowing down the progress?
There are 2 projects which we are working on. Adani we have already given the indication that because of the last year in [ August 17 ], we have received the appointed dates, so then not much has happened in the last year and during this year because of that again, monsoon it has impacted. Then NTPC has banned supply of pond ash into that particular -- say all the projects that span India. So ultimately it has impacted because of that reason. Now we are very much on to the -- and by May, we will be completing almost 95% of the project and within the time. It's not beyond the time even. And even if at Hapur-Moradabad, we believe by April, we will be completing this with 95%. And by that time, we will be reaching the COD of that project.
Right. But anything in particular which held up the execution in Q2 besides monsoon?
Yes. Mainly because of monsoon and some aggregates because of aggregate supply coming from a distant source in Hapur that has disrupted it. But aggressively, the monsoon has been the major reason behind it.
Sure. In the new HAM projects, the land status, if you can update for Khammam [indiscernible] and when do you expect the appointed date for these projects?
See, I can just take it point by point like AP-1, which is a Raipur-Vishakhapatnam corridor. And there the land is reasonably very good at about 70%. And we believe within the next 3 months, once we submit our entire formalities of [indiscernible] we would be in a position to take on the appointed date probably by February or so.And in Khammam-Devarapalle, Package 1 and 2, 1 is definitely a bit ahead of Package 2 is a very, say, a slow movement in the [indiscernible] situation because of some monsoon time and again COVID time. Now I think we believe by May or April, we will be getting to appointed date for Khammam-Devarapalle 2. And by March, we believe that KD-1 or Khammam-Devarapalle 1 will be -- we will be able to get the 90% or 80%, that range of land where appointed date can be declared.And Odisha, definitely, both the packages are really, really good land and [indiscernible] status. There, we believe that the position would be -- within next 6 months appointed date is expected by June, we will be taking on that.
So sir, basically, first quarter next financial year is when all the 4 appointed dates should be in place, accordingly?
Right, right. You're right. Yes.
[Operator Instructions] The next question is from the line of Seetharaman from Spark Capital.
So I would like to get an idea about how you expect your order book to change over the next 3 years considering that you are entering into the railway and water has been [indiscernible] to center a bit aggressively. Now the next question, as part of the same question, what is the CapEx that you expect for all these products over the next 3 years? The reason is the current year's order inflow seems to be INR 6,000 crores, and that is what you're expecting. And then FY '21, your overall revenues in EPC revenue is close to INR 2,500 crores. So what is the kind of order inflow you'll be expecting over the next 3 years? And I mean -- and what is the split that you will be expecting for the road on the other segments?
Yes. I could understand your question. Number 1 is how we are taking further as far as diversification is there. Let's say, already has told us that we would be taking on some 10% of the total order inflow during the year from other sectors like water and railways. And going it -- to take it up further to 25%. Say -- we buy, say, 24 or 25, we would be in the range of 25% of the total orders coming from these new sectors. But that is one part.And second is the CapEx. So a very logical way there is we are nearing the completion of the project as we are only a 5 more projects would be completed by March, so that we expect that not much of the CapEx would be required in all these 5-odd HAM. There is just a matter of churning and all that INR 75-odd crores, which we believe during the current year would be good enough. And for next year or next year -- again, year-on-year basis, we would be in a position to manage without much of a CapEx addition. That is about INR 75 crores to INR 80-odd crore.
Okay. Next year, I mean, FY '22 -- I'm sorry, '23 and '24, INR 75 crores CapEx?
Yes, that would be in a similar range only.
And the current year?
Current year is INR 75 crores. We have already done it -- during the first half of the year, we have already done INR 38 crores of CapEx addition, and it would be not more than that. And again, I would just like to point out that we are having the policies of phasing out the older equipment, which completes from certain age of 7 years and odd. And that is again included into this CapEx addition where we have...
Despite the strong revenue increase that you're projecting, you are having the same -- the CapEx seems to be a bit on the lower side. So I'm just curious on that front.
Yes.
Okay. And the HAM to EPC split on the road projects over the next 3 years, what is the split that you expect and what is the total order size that you that you foresee for the next 3 years, not for the immediate year?
See, right now, it is about 42% HAM and 58% EPC. Going further, it would be in the range of 50% HAM and, say, it would be a 50-50 balance. And looking further, with that balance of the 50%, we would be taking on new orders accordingly only.
Okay. And do you foresee close to this INR 5,000 crores, INR 6,000 crores in the next 3 years just like FY '22? The total orders?
Sorry, I couldn't get your question, the last one.
The total orders that you foresee in FY '23 and '24, will it be similar to INR 5,000 crores, INR 6,000 crores that you expect in FY '22? Or will it go even further?
No, no, that -- as we are increasing our revenue every year by 20%, we would be expecting to add on at least 20% to 25% year-on-year basis. Right now, if we are taking to FY '22 at about INR 6,000 crores. So going further, that could somewhere in the INR 7,000 crores and then INR 8,000. Year-on-year, it will be 20% plus.
Okay. Because the reason why I'm asking this question is in FY '21, there is the total revenue of around INR 2,200 crores. and in FY '22, if you are going to get around INR 6,000 crores and then '23 INR 7,000 crores sort of range. So the gap seems to keep increasing. Will you be able to fulfill the -- your contractual obligations with the current working capital?
Yes, of course, that would be all done. It is just a matter of only stagnation during the COVID times and all from reaching from INR 2,000 crores to INR 2,500 crores it took almost, say, 2 years and then from then, it is a basically correction this year. We are going to reach 3,400 that we are all having the potential and capabilities on CapEx and working capital to ensure that growth.
And just 1 more, what is the repayment plan that you have over the next 3 years on the plan?
Repayment plan?
Debt repayment and the plans that you have for the next 3 years.
We are having the INR 158 crores of total debt on books and repayment of INR 60-odd crore every year.
Okay. And INR 60-odd crore and you will continue to have the same thing.
Yes.
The next question is from the line of Vibhor Singhal from PhillipCapital.
Congrats on a great performance. Sir, 2 questions from my side. So 1 is I just wanted to get some color from you on the Bharatmala provisional 2. So what status is that right now? What is the kind of size that you're looking at? And when do you think you could see first orders from the Phase 2 coming through for us and for this industry as a whole.And sir, my second question was actually on the margins front. We have kind of maintained very stable margins in the past 2 to 3 quarters despite the spike in raw material prices. So just wanted some color on that, that basically are we passing on the higher cost prices to over HAM SPVs and the new projects that we have bid. What is the kind of buffers that we have built in so that we'll be able to maintain the similar kind of margins going forward as well?
Yes. As far as Bharatmala 2 is concerned, already you might be all aware of that, there's almost 3,500 kilometers are -- of Bharatmala 1 is yet to be awarded, which we believe by the end of this year NHAI has given the guidance that they would be all awarding those. Post that, I think almost 16,500-odd kilometers would be awarded in the next 2, 3 years. So that is a span of time where the DPR and land acquisition and most of the things are at a very advanced stage.So would that -- we believe that maybe year-on-year basis, it would be in the range of 4,500 to 5,000-odd kilometers by NHAI to be awarded in the next 2, 3 -- or '24 or '25 by maximum. And as far as the percentage margin is confirmed at [ 16% ] even with the commodities, say, next level at a very high price. It really we would be in the range of say about 17% or 16.7% to 17%. But definitely, the impact that everywhere we have seen that it is -- 0.3% to 0.4% that impact has been there even when every project is having this price duration, but it has impacted.But the margins still we could make is because of the larger pie of the project on the operational efficiency and certain automation and digitalization, certain new strategies being developed within the company and the -- on the project front. So that is one.And talking of how is the total from SPV value to EPC. So we are having that fair valuation. It's that what exactly would be the [indiscernible] and cost is a major maintenance as a regular yearly maintenance. So we are keeping it very reasonable at about 85%. That is from the project of 84% to 86%. That range is a reasonable range, which we are keeping at the EPC. We're not putting most of the, say, margins upfront to the EPC and then struggling while we are going to monetize those projects there, having a fair combination at both the levels for the major interest part of it.
Got it. Got it, sir. So sir, when we award an EPC contract from our HAM SPV to the EPC company, is it a fixed price contract? Or is it also a variable price contract?
Whatever is the price variation we would be getting from NHAI, that would be passed on to EPC.
Give that on to the EPC guys.
Yes.
The next question is from the line of Parikshit Kandpal from HDFC Securities.
Congratulations on a good performance, sir. My first question is on private debtors. So if you can just highlight how much is the pending debtors for [indiscernible].
See, the total of 445, if you see, it has been split into 3 parts that we have seen that. 1 is that Delhi-Vadodara packed EPC and the safety of the EPC of space that is about INR 158-odd crores from EPC Delhi-Vadodara and this. SPVs stood at about say INR 80-odd crore, and the private like Adani, IBR and PPP it's altogether about 185. And out of this INR 185, it is INR 142 crores, which it was initially in the start of this quarter, Phase 2, it was at about INR 185 crores, now reduced to INR 142 crores and Adani is [ INR 45 crores ] and [indiscernible] project is INR 12 crores. So this is altogether INR 185-odd crores.
Okay. And my second question is on -- given the guidance of INR 3,400 crores, does it foster in NGT which will happen because of rising pollution levels in NCR. I mean you know that NGT ban is [indiscernible]. So any sense on that?
No. See, INR 3,400 crores, what we have done till date ahead of quarter 2 INR 1,660 crores we've already done. So with that, it is a matter of only what we have seen in quarter 3 and quarter 4. Most of the projects are with Delhi-Vadodara Package 8 and 9 because in NCR only -- this is the only project which is -- definitely we can foresee there will be an impact of 1 month or so for the NCR -- NGT ban on construction.But post that, I think all Haryana projects they are all at stage of completion. They will be all completed and then Hapur is not having that big number. Where partially it is being impacted and the [indiscernible] side or Moradabad side is not impacted because of NGT ban. So with that, it is a fair estimation we would be doing that INR 3,400 crores.
Sir, third question is on HAM projects. So you have said that 3 HAM projects will get monetized over the next 6 months. So I just wanted to know how much is the total equity invested in all these HAM projects.
So this is total, till date, we have invested INR 278 crores, which is okay. So out of INR 278 crores, it is a total requirement of almost -- INR 375 crore is the total requirement in all 4 HAMs including Rewari bypass, which is at about -- say, right now about 32% [ aggregate ]. So once we complete those projects, we are in a stage where we would be able to take out some INR 280 crores of total equity invested in these projects.
Just last question, sir. We have taken on HAM projects -- 8 HAM projects in Rajasthan. So we had issues in the payments on the state project, ADB or World Bank funded project in Rajasthan. So why have we gone here in taking this HAM project to [indiscernible] HAM projects?
See, a very interesting part. It's not that difficult to take on the 50%, 50%, where the model is 50% payment during the construction and 50% as of 10 years of [ LD ] payments. That is one. And the strategic part is the INR 130-odd crores of payment will be made on the O&M part only. That varies they are -- that is the best part where we would be getting the [indiscernible].So it's not that difficult, which we believe, and these are all ADB funded, where the trendsetting has already been done. If we -- of the ADB projects of 3 HAM projects, 1 is -- and 2 of big contractors, they have already completed, they are regularly -- getting the regular annuity payments. So that is how -- but again, we are looking with a very caution that exactly we would be moving ahead to take on call on that or we can just refrain away from even there.
Can you just lastly say on the water you have said you did about INR 3,000 crores of projects. So what will be the typical size of these projects that you will purchase? And whether you are [ bidding ] or a little bit directly here?
It is all capital allies with the JV because we are not qualified for more than INR 100-odd crores with -- for bigger size. We are having alliance with a JV partner and that we have done accordingly.
And what is the size of these projects? It should be like how big?
Typically coming at about 350 to 500-odd.
And under the Jal Jeevan Mission, right? These are all JJM, right?
Yes. Typically, it is a JJM project only.
The next question is from the line of Hardick Bora from Union Mutual Fund.
So congrats on a good set of numbers. I just had a question more on the industry, and what is your opinion on this. So I think in the last 2 years, there have been some interesting changes. There is better availability of monetization options, talks about Gati Shakti and recently you also heard about this QCBS related development evaluation process that is being considered. So I wanted to have your opinion on whether these changes are likely to improve the competitive advantage of efficient players like yourselves. How do you view these changes? How do they not move the needle?
Definitely, whatever new changes that are with all sort of experience and struggle the government is coming out with a new Gati Shakti platform, which I think 15-odd different departments, they would be collectively sitting for the clearances of the project. We believe that it's going to move further where the further we have seen in the last 4 years, there is a trusted than in the movement as well as land availability of NHAI.So finally, they are moving on not awarding any or not giving any [indiscernible] not awarding any of the projects to some 3D or 3G at an advanced stage. So with that, I think the chief government is preparing sector -- the construction sector infrastructure and to take it further into a new mode of development.
So one can assume that the efficient players can probably keep getting market share. This changes only their outlook that will only improve year.
Yes, obviously. I think if anyone is having a lean, say, part of the balance sheet, not very stressed and most of the things under control. I think there will be fair, fair good opportunities coming on in the years to come.
Just 1 follow up on this. I think in the earlier question, you indicated that in next few months, you're expecting some HAM project completion. Post that, you're likely to have some talks on monetization of these projects, right? So how many projects should we be expecting completion over the next few months?
See, these are 3 projects, which all together are about INR 2,100 crores, that would be completed in December or mid-of-January maximum. The discussion is already on. We are having almost 3, 4 rounds of discussion done. So we believe that within 6 months of that completion, we would be able to monetize those projects. It's a fair valuation.
Okay. Understood. One other question was on the gain related to the new areas that you are entering to, railways and water you already indicated. My question was on the broad plans on return potential when you enter these areas. So on a stand-alone business, do you have an ROC, ROE threshold that basically can be indicated?
Yes, of course, I think we are not going very aggressively. It's only a balancing out and just moving strategically into the percentage part. And again, as far as ROE and ROCE is concerned, going with the railways, which is similar sort of opportunity of the experience that we're already having. So we don't see any big problem maintaining the same whatever equity on whatever [indiscernible].
The next question is from the line of Prem Khurana from Anand Rathi.
Very good set of numbers. Most of my questions have already been answered. Just 2 from my side. So 1 was essentially on the guidance that you've given us on revenue side. And I think you gave the guidance aroud INR 3,400-odd crores, which gives me a number of around 17, 15, second half. And when I compare this number with last year numbers, it looks like we're not targeting any growth in H2. And I am again given the fact -- I mean you were somewhat better placed than last year. I mean given the fact that last year Q3 still you had some after effects of COVID. This time around, we don't have that. Why is it that you're not targeting a higher number? Is it that, I mean, you're guiding conservatively because you still are not sure of the appointed date for some of these large projects or the recent addition that you have?
The projects which are already we have received appointed dated is about INR 4,600-odd crores. These are under execution, already under execution. With that, we are assuming that about another execution, further execution in the later half of this year, it's about INR 1,800-odd crore to be executed during the year [ on retail ].So that -- we will be having sufficient enough we have accounted it likely in AP-1, say, by March and say, by KD-1 by March. We believe that we will be having a strong position of [indiscernible] quarter 1 of FY '23 as well as going further, it could be in the same track.And as we have seen in the quarter 3 and quarter 4 of last year, the execution has been in the range of about INR 1,700, INR 60 crores, INR 70-odd crores executed. So with that, the INR 1,800 plus execution is almost doable.
So there is potential to your guidance is what you mean to say as if [indiscernible]?
We are not assuming any further execution from any of this HAM, there is likely opportunities yet to be declared and not much from those NCR project.
Sure, sure. And sir, second question was on -- I mean, the way we decided on getting to a new state. So we eventually till some time were confined to M&A NCR in Rajasthan and then we went to Andhra, Telangana because of Adani and now Odisha.I understand Odisha, again, is -- I mean, on the same stretch and the [indiscernible], which is eventually -- for you, it becomes [indiscernible] moving on the same stretch only but then let us say, I mean going forward to kind of try and get into new states because ultimately, which is how we would be able to grow that you would have to look for more states in terms of growth opportunity. How do you kind of decide on which states do you want to go to? And what will go into decision making? Just share your thoughts on this piece?
So typically, adding any new state or city, it's not that -- it's a very strategic move that we have already -- you have already explained that Odisha, so Package 5 and 6, very, let's say, very logically, they are -- it makes sense that it is all towards 125-odd-kilometer, and the INR 3,500-odd crores to be executed in those 3 packages only of Raipur Vishakhapatnam.That is a strategic move. So the area is quite good. Land availability is very, very good, and the local government is, say, any of the Odisha government is very much high on assisting NHAI for providing all sort of systems and doing these projects. So these are all made us -- that would be a logical move to take all that.O&M benefits were already there because it would be only 1 set up who is going to manage this 125-odd kilometers. That is one benefit we will be speaking on. And then again, if we are going to monetize it would be a factor which would be counted. And typically, adding Odisha, Telangana or Andhra is not only for NCR Haryana. So we have already taken 1 project in Delhi.So it's not that we are not able or not willing to take in UP or whatsoever. So again, it's a matter of fact. We are opening to -- as we've already given the guidance that earlier also, except for a few of the states, we are okay like [indiscernible] and Karala, some of the [indiscernible] watching months are much less in a 12-month period. So we are okay.
Sure. And you spoke about some INR 22,800 crores of bids that you're likely to -- I mean, tenders that you're likely to place bids for. Which of states would these be? I mean if you could share some top 3, 4 states that you're targeting to...
These are all spread across -- I already [indiscernible] about it is across most of the rates where we are already executing the project. Definitely in J&K, the Delhi-Vadodara part unless the [indiscernible] part is there. We have already bidded 2 of the packages near Jammu, that is 1 in those numbers.
Sure. And just one last one in bookkeeping, a small confirmation. So this INR 1,194 crores of equity requirement that you spoke about includes the Rajasthan state PWD project or it is excluding that?
No. We have not included that because there, the clarity is yet to be given from ADB. The proposal is already sent to ADB. Once ADB gives the positive word to it then we will consider that.
The next question is from the line of Alok Deora from Motilal Oswal.
Congratulations on great numbers. So sir, most of the questions were answered. Just 1 question. In the new projects or the new tenders we have built in railways and water, I just wanted to understand what could be the margins like in these projects? And also what kind of projects are there, particularly in railways? Which kind of projects we have bid for? If you could just throw some light on that.
In railways, these are typically either the doubling or tripling of the existing -- this track. That is 1 where almost 70%, 80% is a similar kind of nature, which we are doing in the highway. And water sector, again, as if you are talking about the margins, water sector. We have completed this sort of a project in [indiscernible] only. So as far as margin is concerned, we are keeping saying that about 11% to 13%, 14% would be the reasonable one, which we will be taking all with a very small share of these projects. It's not that we are going aggressive on cutting low margin.
And what would be the margin like in the railway projects that would be...
In the same range, it is a 15% range only.
Okay, okay. Because we have seen other players like these...
I can give the clarity with the water projects or, say, JJM projects. They are not -- say, even 0% CapEx is being required as per [indiscernible]. So depreciated if you see EBITDA level. So if there is not contributing anything for the [indiscernible] it is -- 11%, 12% is the -- except for the depreciation. It again will be in the same range only then.
Sure. And sir, we mentioned about these projects becoming 22%, 25% of the order book by '24 or so. So we are looking at nearly on these projects becoming like INR 3,400 crores, INR 4,000 crores projects in the order book by that time. Is that correct? Or could it be...
You are right. I think with the, say, next 2, 3 years of additional of -- in the range of about INR 15,000 crores, it would be coming at about INR 3,500 crores to INR 4,000, 25%. So that would be in the similar range. But definitely, these projects, which already government as well as stage of at least the concept and construction, DPR consideration, land acquisition. So most of the things are going back then. So as it has been almost 2, 3 years, it took in the NHAI, now we have seen the accretion in our ordering and awarding. And that will be the same, I think, in '23, '24 onwards, we'll be seeing much of our activity in the [indiscernible].
And just 1 last question. So sir, so till date, the ordering has been kind of lackluster from the authority side. So what's the competitive intensity right now in the projects and how it's expected in the next 4 to 5 months of FY '22, because we have -- a lot of companies will be sort of queuing up for orders. So how confident are we to get our order inflow in place?
We have seen in the last total entire year from November 2020 onwards and till now November, we have seen many more players who have participated and taken more than their appetite, most of the HAM projects over there. Definitely EPC aggression would be on. We do not see much of the correction in EPC. But for HAM, we believe that the correction is definitely visible and we have seen 3% to 4% already done and post that, I think it would be in the same range as we have experienced in '19, '20.
The next question is from the line of Chetan Vora from Abakkus.
Understand that in the news you are guiding that we will be making 14%, 15% margins. But the established players like KEC, Kalpataru, who have got a visible execution book also, their margin profile is the -- at the most is 10%. So on what basis we would be confident on saying that we would be making 14%, 15% margin?
Definitely with KEC working mainly in the transmission and electrification. I think you have seen that, that they are working typically into that domain. And we would be -- major transformation would be having the similar activities as we are doing in the highways that is a [indiscernible] structures and most of the things are like that. So a similar nature of projects in there.So we do not expect that the margins would be much lower in these particular zone as we have already bidded almost INR 5,000-odd crores of projects during last year. We could not stay in a single front project. That was the 1 which we were -- say, it was terminated or cancelled because a higher rates only. So we do not see much of aggression going by that. We would believe that this is the same margin, which will be keeping to take on these factorial change.
You're right. Sir, lastly, what I understood is that you say we don't require equity raising for the next or the [indiscernible] projection of INR 6,000 crores, right?
Yes. It is also a year-on-year basis.
Okay, fine. So the INR 6,000 crores of order inflow every year, we don't require any equity basis.
Yes, even if we could not monetize.
The next question is from the line of Vibha Batra from FairConnect.
Yes. My question is on the HAM project. You said you'll be monetizing over the next 6 months. Can you give a broad value of equity and loan term advances that you have given to these projects that get released because of that? And typically, when you have monetized the past -- HAM projects in the past, what your equity IRR?
These HAM projects, which we are coming out with nearing completion, there's almost INR 280-odd crores of equity, which would at the end of the stage of their completion. And in these, we are estimating about 280 to 300, that range of equity valuation as we have -- we believe it's a discussion going on with that. So we do not see -- it's not a big value addition, but it's not a correction on a discounting on the equity already done with it.
Sorry. So you had invested INR 280 crore, and you expect to get the same content there? Is that the thing?
Yes. Correct.
I'm saying equity IRR.
No, definitely, as far as equity IRR is concerned that we are not looking at any incremental. We look forward that we have estimated at about [ INR 330-odd crores ]. But further to say, looking to the buyers market or any of that sort of a feeling, if we could not see much of a sense monetizing, we will be putting on for another 1 year of [indiscernible] and then our 2 years of them. I'm just looking into that part, if we can get the valuation there, which is they are getting some INR 280-odd crores equivalent to the equity already done. So we would be fair taking calls about 10% of the equity IRR is good enough for funding.
Okay. And in the past, when you have monetized HAM projects, what have been the equity IRR, has it been in the similar range?
Okay, they have never been done. These are all...
These are first time? Okay. Okay. And the outlook that you gave on revenue and margins on a stand-alone basis?
Yes, these are all of standalone business, not [indiscernible].
Okay. And 1 more request in the financials when you gave, if you can put in -- because there were a lot of repeated questions on that, likely investments in the HAM projects over short term also next 2, 3 years and also likely monetization. Just you may hear a lot of questions upside to do that.
Okay. We'll discuss with the auditors, how it will be. You're talking about the -- it should be mentioned somewhere in the audit report, like you were saying that.
The investor presentation. No, investor presentation that you're giving out.
Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Harendra Singh for closing comments.
So thank you, everyone, for your participation in our quarter 2 FY '22 earnings call. In case of further queries, you may get in touch with Pareto Capital or feel free to get in touch with us. We look forward to interacting with you in next quarter.
Thank you very much. Ladies and gentlemen, on behalf of H.G. Infra Engineering Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.