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Ladies and gentlemen good day, and welcome to H.G. Infra Engineering Limited Q3 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 afternoon, 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 Q3 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 Ji for his opening remarks. Over to you, sir.
Thank you, Rishav. Good evening, everyone. I hope all of you and your families are keeping safe and healthy. This quarter, we continue to witness robust execution and delivered a strong performance of 25% revenue growth year-on-year to reach INR [ 916 ] crores. Our commitment to execute projects timely and efficiently have continued to result in strong EBITDA and PAT margins of 15.9% and 9.7%, respectively. Before sharing the financial and operational highlights, let me take you through the opportunities and outlook of the sector. The recent budget has outlayed about INR 750,000 crore of capital expenditure which is higher by 35% compared to last year. A major part of this will be spent in development of infrastructure. The government's push to bridge connectivity across urban and rural areas under the Gati Shakti master plan is expected to expand by 25,000 kilometers during next financial year. During the 9 months of this financial year, NHAI has awarded over 2,400 kilometers of national highways, out of which 1,400 kilometers worth were awarded on HAM basis, while around 1,000 kilometers who were awarded on the EPC basis. We have witnessed good pace of awarding activity, while issues that were impacting the sector historically have drastically improved like timely payments and faster land acquisitions. NHAI robust CapEx target of INR 7 trillion over the next 2 years, bodes well for further awarding activity, with 5,000 to 6,000 kilometers being targeted annually during the period. Now let me share a few operational highlights. Our total order inflow for the year stands at INR 4,326 crores, taking into the consideration of the recently awarded Karnataka project. That includes 1 order win in month of January. That is the one which I'm talking about is [indiscernible] valued at INR 844 crores. Our order position stood at INR 7,950 crores as of 31st December 2021. And this doesn't include the PPP project, which I just mentioned. Taking this into account, it is now at INR 8,794 crores. We have achieved media milestone in several of our projects, which helped drive growth in this quarter. We are glad to share that we have received the PCOD of our Rewari Ateli Mandi HAM project, which is the first HAM project, which we have completed. And that is 147 days ahead of schedule and are to receive a bonus. Also, we have recently received PCOD for [indiscernible] is a state project in the month of January, and this is effective date for PCOD is 15 November 2021. I would like to brief the forum now on the progress we have made in our major EPC projects. We have executed close to 95% and applied for COD for Delhi-Vadodara Package 4, that is the EPC project. And we expect that during this month, we will be getting the COD. In DV Package 8, we have made good progress and have completed around 59%. In DV Package 9, we have completed around 42% and that is ahead of the schedule as far as the milestone is concerned. In Hapur Morradabad EPC project, which is the IRB 1, we have completed close to 70% of the work, and we expect to complete the project in first quarter of FY '23. In the Mancherial project of Adani, we have executed [ 60% ], and we expect to also complete this project in FY '23, that is the first quarter or maximum by second quarter. So there is a bit of delay in this project because of the [indiscernible] issue where the NTPC has banned the project supplier for a few months. And now it is always picked up, and we expect very soon it could be completed. In the latest EPC project, which we were awarded in the month of October, that is the [indiscernible] Delhi UER, the appointed date was declared on 28 October 2021. And as of now, 90% of the land is available in the said project. I would like to mention that due to NGT ban on this -- of the construction activities NCR, the construction has just recently started, and we expect now onwards, it would be picked up at a very faster pace. Coming to our HAM execution. The HAM portfolio where, they are all progressing well and as per the scheduled time lines. We are close to completion of Gurgaon-Sohna, which is the first HAM project which we got. And that is about 98% completed. We expect the PCOD may be issued by end of this February. In Namaul Bypass HAM project, we have made considerable progress on having completed 97% so far, in which PCOD is expected by February end or say first week of March. And lastly, we have the execution is going in the Rewari Bypass HAM project, which we have completed around 45%. Let me now touch upon the status of latest HAM projects, which we have added this year and 3 more during the last year in March 2021. In Raipur Vishakhapatnam Corridor project, AP1, which we have signed the concession agreement on 14 October 2021, the appointed date is expected very soon, say, likely in the month of March 2022, we would be getting that appointed date. In Khammam Devarapalle Package 1 and 2, though we have received the LOA of both the packages in month of September, but the agreement is yet to be signed for both the packages, which is likely during the month of February. The land status in these -- both of these projects is not that significantly, say, plus -- so thereupon, we believe that the appointed date which we are expecting in the month of April or May is likely to be delayed for 2, 3 months. So most likely in the month of August or September, we would be appointed date. Lastly, 2 new HAM projects, which are Raipur Vishakhapatnam Corridor project of Odisha, Package #5 and 6, which we received LOA in the month of October and signed a concession agreement on 14th of December 2021, we expect the appointed date in [ first ] quarter of FY '23. We are in progress of financial closure of all these projects. We have already received the entity of most of them. And some of the banks, the final sanction has been given to us. We expect that as per the time line, we are going to conclude the financial closure. For these 9 HAM projects, we have a total equity requirement of INR 1,137 crore, that is projected till FY '25. Out of this total amount, we have already invested INR 290 crore as of December '21. And we project to invest another INR 150 crore during the remaining part of this financial year. 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. Over to you, Rajeev.
Thank you, sir. Good afternoon, everyone. Let me brief you on the financial performance for the quarter. We are very pleased with the performance of our company. We have delivered excellent numbers. Stand-alone revenue stood at INR 916 crores, a growth of 25% year-on-year. We reported an EBITDA of INR 145 crores in this quarter, maintaining strong margins of 15.9%, while PAT stood at INR 89 crores with a margin of 9.7%. As far as 9 months performance is concerned, revenue stood at INR 2,577 crores, a growth of 72% from the same period last year. EBITDA stood at INR 416 crores with a margin of 16.1% and PAT stood at INR [ 240 ] crores with a margin of 9.6%. Our efforts to strengthen our balance sheet continue to remain our focus. Total stand-alone gross debt as on 31st of December 2021 stood at INR 313 crores. This includes working capital debt of INR 44 crores, term loan plus current maturities of INR 173 crores and NCD of INR 97 crores. Cash and bank balance on standalone level stood at INR 61 crores. Our consol debt stood at INR 1,054 crores, which includes project loans of INR 741 crores, cash and bank balance on consol level stood at INR 63 crores. That is all from my side in brief. I will now hand over the call back to Harendra, sir, for his final remarks.
Yes. Thank you, Rajeev. Finally, let me brief you on our guidance and outlook for this financial year. We have demonstrated a robust execution track record during this year and remain committed to our current year FY '22 year-end guidance of surpassing INR 3,400 crores revenue with INR 550 crores of EBITDA. Our focus remains on winning profitable projects without compromising on our margin. We currently have a big pipeline of INR 25,947 crores, both under EPC and HAM, and we expect to receive some of these orders during this financial year. Having already won over INR 4,300 crores order during the year, we remain on track to achieve a target of INR 5,000 crores to INR 6,000 crores of order inflow in this financial year. We are optimistic and believe that infrastructure sector has abundant opportunity which can be very well correlated with the recent budget announcement where government has envisaged Gati Shakti to gather its space with 25,000 kilometer highway expansion. The long-term visibility of awarded activity and government spending rightly positions us to tap into the various opportunities coming in our way in the road growth sector. And our major focus would remain in the sector to grow multifold. Now I would like to like the moderator to open the floor for the question-and-answers. 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. Sir, first question, the guidance for FY '22, given the fact that you've already done roughly -- around INR 100 crores by Q3, what be Q4 will be slightly higher numbers, so we should revise our FY '22 guidance? And secondly, on the FY '23, a large part of our order book is awaiting appointed date. Does it mean that the growth in FY '23 or FY '22 will be slightly -- will be a challenge? And all this goes will come in FY '24?
Yes. Sure. First question is that we have given a guidance of surpassing INR 3,400 crores, that is not that, that we would be targeting INR 3,400 crores. And we likely that during the quarter 4 of this financial year, execution is going on well. Only a few of the concern was there when I think that because of the acute winters and some rains in the north zone and some projects were stalled for NGT construction ban that has been the reason. But definitely, it is -- will not be less than the last year's quarter 4 number, not at all we expect during the quarter 4 of this year. As far as FY '23 revenue, if you see that whenever we have seen our balance order book, if you see into that, there are 5 HAM projects where appointed yet awaited and plus 1 recently awarded EPC project. This EPC project, which we're recently awarded where the land is going to be provided by NHAI in 2 phases. That is a 3-year duration project. In 2 phases means the first phase is already available, where we expect that about 50% land, given that the appointed date would be given to us very soon within a period of 2 months. And another, say, on the ECC -- this HAM project, where when I think if I'm talking about Raipur Vishakhapatnam, those 3 projects stays side-by-side, there land availability is very, very good. I think as Raipur Vishakhapatnam being the PM focused announced project, and there the land availability everything is approaching -- say, progressing very fast. Say, in the month of March, we'll be getting the AP1 project, which is almost INR 800-something crores of EPC value and some INR 2,200 crores of EPC value 5 and 6, though we have been -- were awarded in the current financial year only, but we will be by getting the appointed date most likely in April. So with that, I think it doesn't seem the big challenge that for the financial '23 we -- what we are targeting at about 15% to 20% year-on-year growth would be a big challenge for us.
Secondly, sir, you have won a order in Karnataka recently in EPC and that was a very, very competitive bid at a number of far, far lower than the NHAI estimate. Is that we are trying to enter into a new geography and we are sacrificing margin. Is this the strategy?
Well, nothing like that. This is our own estimate where we have kept profit impact, which is equivalent to about 13%, 14%, which is as per our rough guidance, which we've always taken to our estimate for any EPC -- NHAI project, and that is, again, in the same line. And while we have crossed check, again, our bid it is well in line as we've estimated, site visit deliberately conducted to recheck if anything is really gone wrong. But we are on track and we would be making good -- decent margin in that.
Lastly, sir, is impact of raw material inflation in this current quarter on EBITDA margin?
Yes, definitely, you have seen our EBITDA margin lowering down, which would have been expected, but we have experienced a hit of about [Technical Difficulty].
Participates, request you all to please stay connected in your loss line for the management. [Operator Instructions] Sir, you may go ahead, sir.
Yes. Sure, sure. Yes, I was just...
EBITDA margin, yes.
Yes. Next question, please. I think you can...
On the EBITDA margin there was -- asked -- what impact EBITDA margin...
Okay. Okay. I have just integrated the EBITDA margins, which has been impacted because of the commodity price, definitely, that's by 0.4% or 0.5%. That's why it's lower down to [ 15.88% ] on actual basis. But likely, I think it is now where the price variation -- and mostly where high commodity price, now they are substantiated and now they are well within the range and we will likely to improve upon the margin by, say, post -- plus 15%-plus in coming quarters, 2 quarters.
Next question is from the line of Alok Deora from Motilal Oswal.
Congratulations on great numbers. Sir, I just wanted to understand a little bit more on the order pipeline because the order book currently, which we are having and a lot of projects are not started. It's actually almost nearly roughly 1x to the current revenue run rate in terms of execution. So just wanted to understand the visibility on new order flows and how we are seeing the execution picking up going ahead in '23?
The orders already here as far as HAM already given the indications there exactly, we are likely to receive the appointed date. We are approaching very fast as far as completion of the all 3 HAMs or the fourth one and as well as the all 3 EPC projects, definitely, these private EPC projects of Adani and IRB, they are likely to be completed by June, max, say, by quarter 2. So with that -- that's the more visibility or there appointed date is availability, the execution in quarter 3 and quarter 4 would be picked up in all these HAM projects, which we believe that in quarter 4 of this, quarter 1 and quarter 2, we will be getting a appointed date of all the balance. So it doesn't -- we don't see -- it doesn't seem that we would be -- there would be a big challenge as far as the balance order book of INR 8,800-odd crores where what sort of execution would be there in '23. Definitely, as far as new orders is concerned, we are very much there, and we are bidding a few of our selected HAM and EPC project, where the land availability and everything is mostly there. So only a matter of bit concern where in project of Khammam Devarapalle delayed. Otherwise, everywhere, the HAM projects have been -- where the award to appointed date is about, say, 8 to 12 months. That is the standard time which we have experienced. But again, we are in -- say, as we are approaching completion for IRB and Adani, we are looking at opportunity in Ganga Expressway. They're already at an advance stage of discussion. So there again, if anything is there, I think, within 2, 3 months -- because there 90%-plus land is available. The post UP elections by April, the work would be commenced in these structure. Most likely, as we are approaching because its current order book is about just 10% to 12% is the private fleet as a current. So we are at an advance stage of any further orders, which likely we can get from these.
Sure, sir. And also, just if you could throw some light on the current competitive intensity in the EPC and HAM projects?
See, in EPC projects, you have already witnessed and we are also experiencing the same migration is quite high. But as far as HAM is project -- the HAM project is concerned, with the recent modification in the, say, giving or any -- giving any project to those bidders who have ample and say good amount of work in hand, there, the government is restricting them as for the building capacity being restricted based upon the way they already stoo[indiscernible] So with that, I think a few players would be restricted for the bidding activity. So with that slight of a correction or improvement plus would be likely to be expected.
Got it, sir. Just last question. So have we bid for any projects where the bid is yet to be opened? If you could just give the value there?
Yes, sure. There are many bids about INR 12,000-odd crores of projects which we already bidded. And HAM, it is about 7,000 and remaining are in EPCs, where the opening is yet awaited.
Next question is from the line of Shravan Shah from Dolat Capital Markets.
First of all, congratulations on a great set of numbers. Sir, first, as you are saying that you are looking at growth in the fourth quarter Y-o-Y, just trying to understand a little bit more on that front because as I can see couple of projects. We haven't started -- our execution is not picking up and most of the projects are near to completion. So how much are we expecting first, particularly on the recent one, the October where we got up on Delhi 1, Karla, how much execution are we expecting? Second, the bigger one is the Maharashtra projects. So there, how much execution our entire pending order book will be over by fourth quarter and the same is the PWD Rajasthan projects also because these are the smaller projects, but in terms of the overall execution, if I look at our next to pick up much in the fourth quarter to see the growth Y-o-Y?
See, the balance orders, as we have always say that few of the orders where the balance orders are from Maharashtra and PWD but not a big size as on just INR 140-odd crores of orders in balance. So no significant execution would be there as we can see. If you're looking at the quarter 4 execution, mostly we are at the stage of completion and when we are targeting about DV 4, say, just INR 70 crore left out and which would be completed during this quarter. Say, if we are talking about many of the HAM projects, where the all balance 2 and the further 4 HAM is progressing well, which we believe that some INR 100-odd crore execution is expected in Rewari Bypass 4, that is the fourth HAM project. So with that, mostly, if you see private projects like Hapur Morradabad of IRB, we expect that about, say, INR 170-odd crores would be executed during this quarter, and the balance would be completed in quarter 1 of next year. Then Mancherial Adani project, the execution is at a very fast pace as [indiscernible] small product transportation, which is there among other projects. So there again, we are expecting some INR 200 crores of execution. So with this some Delhi-Vadodara Package 8 and 9, we have a significant chunk is left out as of now, where their contribution was not less than the INR 300 crores, INR 350 crores during this quarter. And the Delhi project, which recently has been picked up with a fast pace. There again, not much, but some INR 70-odd crores of execution is expected from that. So if you see all together, we would be in the range of INR 1,000 crores-plus in quarter 4 and even more than INR 1,000 crore in quarter 1 of FY '23.
Okay. That's great. Second thing, just wanted to understand in terms of the -- previously, we were targeting 10% order inflow from other projects other than the road, but haven't received anything. So anything to mention in terms of the bid pipeline? Or are we expecting anything in this February and March in terms of the order inflow from other sectors?
No, see, definitely, we were looking at about, say, INR 500-odd crores from these 2, 3 sectors, but nothing moved as such very fast. And the railways the bids which we were expecting, which we are likely there would be next year only. But in JJM and water supplies, we have already tied up with, say, one of the JV players and looking for a few of MP and Rajasthan and these projects. But we do not -- we are not looking very aggressively into these sectors. We are looking very cautiously and may or may not this quarter, but definitely for the next year, we are keeping it.
Okay. Okay. Third is on the HAM, you mentioned that another INR 150 crore to be infused in this quarter. And how about the next year and FY '24, how much to be invested? And what about the monetization 3 HAM projects where we were talking to the investors. So what's the status on that front?
For the first time I'm talking about the monetization. The discussing which was at a very advance stage, which we, as of now, has, say, it hasn't put on hold just because a few things as we believe that once we complete the entire execution of these 3 projects, then -- and as our O&M in 1 of the projects has already started, then I think it would be a right stage where we would be getting a fair valuation rather than just looking at the valuation, which they are proposing us not -- we are not okay with that valuation. Number two, that we can just continue for a 6 months or 1 year period, and we do not want test tools to them desperately we do not require to be very eager with that. So balance, if you are talking about the equity requirement, which is already guided, this is INR 1,137 crores total equity of INR 290 crores already added, some INR 745 crores is required. During the current year, not much of the equity is required in the existing 4 HAM projects. It's just a INR 55 crores of equity, which would be added in these projects once we are -- as we complete these and balance Rewari Bypass some INR 25 crores, which is required. And 140-odd crores would be for these 5 HAM projects, wherein we are looking at Raipur Vishakhapatnam AP1, where INR 75-odd crores of equity, which is equivalent to 50% requirement of that. And in Khammam Devarapalle Package 2, where it is at an advanced stage. But see, this is quite an optimistic number, it can be same quarter, one-off next financial year. So next year, the total projection is coming at about INR 355 crores into the new HAMs and INR 16 crore in the older one, taking it to INR 371 crores and 24 projects means INR 214 crores likewise in FY '25, it is coming at INR 55 crore.
Okay. So broadly, what I understood in the terms of monetization, we are comfortable and most likely the deal can happen only at the end of FY '23 and maybe the cash can come in FY '24. Is it the right understanding?
Most likely, FY '23 we may expect that the transaction and entire cash transition at least 50% is expected and in any way post completion is required. So we will be in a better position to crack the deal and this transaction can be done within this financial year.
And we continue to maintain our stand last time we talk about that we can take another INR 6,000 crore HAM projects and till that we do not need any monetization or raising of equity?
Yes, correct. I think it is the guidance with a number which is a projection of FY '25 with the existing HAM and if we can add some INR 3,000 crores year-on-year, there would be not a big challenge.
Okay. Lastly, 2 things in terms of data points, CapEx, how much done? How much left in the fourth quarter? And last time we talked about INR 75 crore each in '23-'24, so is it maintained guidance? And numbers on retention money, mobilization advance and unbilled revenue?
See, the CapEx is required to only maintain [indiscernible] already done and some INR 25 crore to INR 30 crore more will be required, not a big number. That would be all within the range. [indiscernible] there is some voice coming? Now it's okay.
Okay, sir. You said in 9 months, how much have you done on the CapEx front?
INR 50-odd crores have been added and not more than INR 25 crores would be required for this quarter 4. So we are within the range as we have expected that we would be requiring. And we were talking about waht is clear this is the debtors and receivables, other things.
No. Retention money, mobilization advance and unbilled revenue for as on December? And if possible for as on September, what was the number for the same thing, retention money, mobilization advance and unbilled revenue?
So as far as debtor is concerned, it was -- it is at INR 556 crores in this quarter, increased from INR 445 crores, which was in September. There has been significant increase into it because we have not taken much of SPV, say, where earlier, there -- balance now it has been increased. Earlier, it was from INR 77 crores. Now it has gone up to INR 120 crores. Because, say, we are at the refinancing stage of all these 3 HAM and where we believe that I think we are getting refinancing at a very better attractive rate, so with that we have not taken. And if you're talking of the others like IRBs at INR 155 crores and if you take into account IRB total where IRB and retention money and -- of -- and debtor of IRB, this is coming at about, say, INR 235-odd crore, total altogether, and which has been decreased from early one of INR 269 crores. So there is a slight decrease in total IRB receivable, total retention and this. And NHAI is INR 155 crores. NHAI, all 3 DV projects and one of the older ones. And the ministry more and state project, it is INR 55 crores. Adani -- INR 55 crore is debtor receivables and, say, around INR 35 crore is total retention and unbilled. So that is all about INR 556 crore breakup. And retention, say, a few of the others are -- SPV retention is INR 35 crore. The NHAI retention, this is at INR 40 crores, including more and other PV -- this GVK and these are other about INR 35 crores. So unbilled is about same range as it was earlier about INR 300 crores. This not moved yet. But definitely, there has been some new unbilled as we have seen that these are all new projects where the mobilization and most of the activities we're crushing and the mobilization is going on. There's a INR 50-odd crores is from the lease new projects only. These are like Raipur Vishakhapatnam all 3 or Khammam or URE Delhi project. So where this is unbilled. And a few of the older projects were there, which are of NHAI older projects where the continuation is going on -- so these are some INR 40-odd crores from them. So INR 100 crores is that money. And remaining is all unbilled which is quite, say, we are getting it and some unbilled being created every month, like NHAI is coming at about INR 120 crore, like in these 3 projects.
Okay. So on debtor's front, previously, we said that by end of March, it will reduce to 400-odd level. So currently, as you said, INR 556 crore. So there, we are confident that it will come down to INR 400-odd crores?
As far as SPV concerned, the entire receivable is in our hands, that will be all received. If you are talking of IRB, we have received some INR [ 55 ] crore during the month of January itself. Because once their entire production, which we have done, they have done it, and everybody is aware of that. The money is flowing in. And we are expecting that by April -- they are also targeting by April we should finish this Hapur Morradabad project. So with that, there's not a big, big challenge, if you would be in the range of INR 400 crores of debtor and retention will be drastically reduced. Again, because in SPVs, the retention is to be released on completion as per EPC agreement. So again, there would be -- and then we are just submitted the bank guarantee to IRB and Adani for the retention. So we would be in the range of about, say, INR 800-odd crores of total unbilled retention by end of the financial year.
Yes. So, sir, broadly that the debt level will remain at the same current INR 300-odd crore debt level will remain?
Yes, sure. I think it is not going to increase even INR 300 crores. It could be in some range because we have seen that there is INR 185 -- odd crores of FDR plus cash and bank balance. And this is likely to increase because we have seen that if we are going to get some INR 200 crore-plus from these 3 assets, this would be a bit improved.
[Operator Instructions] Next question is from the line of Vibhor Singhal from PhillipCapital.
Congrats on great execution once again. Sir, just 2 questions from my side. So last 3 years, we have seen NHAI has failed to recently award more than 5,000 kilometers of orders. If I look at FY '18 -- FY '19-2021, of course, '21 was impacted by COVID. But even this year, as you mentioned at the beginning in your opening remarks, they've awarded some 2,400 kilometers in 9 months. So most likely, they would maybe end up at 4,000, 4,500 at the best I think 5,000 kilometers is what you're looking at. So I think last 3, 4 years, I think we'll have a very muted kind of a track record from NHAI. And given that this year also the total CapEx for the government for NHAI is flat as it was last year. And on top of that, I think there will be more and more, I think, the cost increase in terms of -- for NHAI in terms of steel and cement prices. Do you believe there is enough opportunity left from the NHAI's pipeline for players like us with the competition increasing, as you rightly mentioned, there are so many players coming in for us to be able to basically satisfy our 15% to 20% kind of a growth rate on a consistent basis for the next 2 to 3 years? So any light on that would be helpful. And second question was basically, sir, just wanted to take your -- so actually, if I can get that answer first, I'll probably come to my second question after that.
Yes. Sure. I think as you have -- having the concerns that regarding the existing year the order total, it would be in the range of 4,000 kilometers. So never it has been -- like for the last 2 years, it is in the same range. And even then most of the -- all companies, middle and large, they are maintaining good range of as far as ordering as well as execution. So that is not a big concern in this year as well, though definitely for bad year, so last, say, December to this December, it has been impacted EPC margins and EPC projects for almost dried up. They have been taken by most of those unlisted and predominantly small and midsized player. But again, if you are talking of HAM where the projects are all there. In this current year, they are again looking at about INR 1,200-odd crores of another bidding to be. And they already, say, they called the bid for many of the projects, which are likely, say, be awarded in this financial year only. And as they have guided for the next financial year also even next to next Bharatmala 1 balance and Bharatmala 2, significant some 13,000-odd kilometers to be awarded. So gives a fair chance of good opportunities coming in the future.
Okay, sir, sure. Got it. And sir my second question, just a last question from my side is we have worked with -- we are currently working with both IRB and Adani Group, and both these companies have basically won the huge Ganga Expressway contracts. So just wanted to basically pick your thought on what do you see in terms of opportunity of working with them again? Would we be willing to work with them again on those projects on an EPC basis? Are there any talks that have already started with them? And if at all, what could be the time line for the same?
For sure. I think the question is very much on. They are very keen and we are also that keen, but ultimately, the end that if we can see it to our total order put break up where the private order is not much of the significant, say, portion is left out. And within next quarter 1 -- say, by quarter 1, this will be almost 0 by all completed. So we believe that with the good associates with IRB [indiscernible] the project, we will be completing. And with Adani good experience. They are very much keen to award to a prominent player like us. So discussion is quite on. And but again, it is very much that without compromising and without looking at the discounting on the margin, we would not be very much interested. We will be looking into our intact that margins -- range of margin.
Next question is from the line Shreyans Mehta from Equirus Securities.
Congratulation on a very good set of numbers. Sir, as you have mentioned that around 147 days early completion in 1 of the HAM project. So -- and 3 to 4 projects are nearing completion. So how we are factoring the bonus on these projects? Like are you factoring in this bonus in this 4Q or 1Q or how we are doing about that? And any ballpark number that we have assumed or something like that on these 4 to 5 projects?
No. Definitely, as we are at a very advance stage as far as execution of the second HAM as well. Most likely, we would be in that range to see good amount of bonus in that. But again, if you're talking about Gurgaon-Sohna, it has already rolled out, but because of the extension of time already given for the COVID and whatever reasons the bonus is not applicable, right? And the Delhi-Vadodara Package also, though it is ahead of the schedule. But we are keen that how the NHAI stand will be there for the COVID extension regarding the project and Delhi-Vadodara Package 8 and 9, we are very much ahead of the schedule. And we believe that if at all possible, we would be targeting the core.
Next question is from the line of Manik Anand from MK Global.
Congrats on the great set of numbers. Just on the incentive side, the [indiscernible] studio of Rewari is also done. So there also our incentives are not going to be there?
It is there. It is there. Basically, there are 2 types of, say, saving in the days at 147 days. Out of that, around 75 days is where the eligibility is free, okay? And about, say, another 70 days, that is some EOD given for the COVID reason. So what exactly would be the NHAI stand that will again depend. Though we are eligible for the complete 147 days orders.
So even if it is for 75 days, what would that amount be? And when will that be accounted?
I think accounting would only be in the quarter 1 of next year only because once we achieve the COD, then only the entire -- COD, we expect that in month of March or April we will be completing an entire portion of it. So next year only, but amount we have not calculated exactly what would be the number.
Okay. Secondly, you did mention about some change in the bidding from the HAM, recent some bidding change where some of the smaller players which have HAM, there would be some difficulty. Can you elaborate on that?
Probably not much of a, say, idea about that -- those players, they are struggling definitely as we have we are getting the that because of that reason only, they are restricting those players who are exhausted bid capacity with the hang on status. And earlier, it was being calculated based about the appointed status. So with that, I think the struggle is going on. But we believe, I think with this sort of a restriction where -- and if the bidding and capacity is not there, they will not be able to bid. With that, we are expecting that genuinely those players would be bidding where they are having good appetite and capacity.
So you're saying that those players who have an L1 versus earlier, what was the difference, so those players would be restricted from bidding new HAMs?
Yes, it is very much there. Now they have given a new guidelines for calculating of the bid capacity where they can bid or say if anyone can bid or not. So if it is exhausted. Since anyhow of the bid capacity being exhausted. Calculated basis -- if -- earlier, it was a 40-day assignment. So if you speak to our number even if we are yet, say, INR 5,000 crores or INR 4,000-odd crores of order book is yet -- appointed date is yet to be cleared. So earlier, they were discounted. Now they will be considered.
Okay. Okay. So based -- your L1 minus your appointed date will be basically the number rather than just the overall number?
Capacity will be reduced then.
Okay. Okay. Okay. And secondly, I think you did briefly touch that this year, obviously, nonroad we have not been able to do much. But as you also rightly mentioned that Bharatmala 1 and 2, probably the next 2 [indiscernible] but if you have to diversify probably you need a few years of experience in those sectors because all of those sectors, whether it is railways or anything else have their own set of players. So how do you want to go ahead in [ FY '23 ] with at least some experience or inflows in some of the sectors like road and -- sorry, water and railways? What is the preparation that's what I was trying to understand?
I think, sir, for railways, almost 75% to 80% is activities, which we are doing in highways, so not much of a, say, strong expertise required for that. And definitely, in the market, if you see not many of the players are working for railways, all common ones who are looking for highways as well as railways. And not many of the projects have been in the, say, recent past being awarded by Railways. They are now very much likely to do rapid rails or, say, or if you have taken high-speed density network. So those are all -- bullet trains. So these are all the new opportunities which are coming, which is a similar kind of experience being required in that, which we are already having in the highways. As far as water sector, definitely, we ARE at good experience in completing some INR 450-odd crores of water supply projections in Rajasthan as a subcontractor. So with that, it's not that the expertise would be required as a technical know-how. We are having the design team to do so and execution we have done. So only a part of -- it's a matter of opportunity or, say, right opportunity with the right price.
And you feel the margins and EBITDA and working capital would be similar?
I think significant portion would not be there in these sectors for even next year or next year if we just take into our projection that within next 2, 3 years, it would be 20% or 25%. So it doesn't make much of an impact with that. Even if there is 10 days this or that side.
Next question is from the line of Prem Khurana from Anand Rathi.
Congratulation for very good set of numbers this quarter. Sir, my question was again with respect to the non-road orders. I think when we spoke last time, we were made to believe that place bids for water orders as well as in railway orders. Possible to share, I mean, what happened with these orders? I mean whether these orders have already been declared or I mean these the tenders have been kind of post forward? And then if declared, I mean we don't seem to have been able to kind of manage any of these orders. So is it because -- I mean, we were not able to kind of have our margins in place, which is why we were required in a settled without any order in non-roads either water or railways?
See, I think, already given the earlier question that we are bidding for railways as well as highway water sector. And say, in UP or MP and Orissa even Rajasthan, so there are not many bids which are likely to bidded, but they have been extended for last few months. Definitely in February and March, there are chances that we may get 1 or 2. But we believe that what very much we have projected given the guidance last quarter as well as before that, that we are very keen to add these 2 new sector opportunities. So had it be anywhere, but important is without compromising all the margins. So just we are looking at it at a very serious note. But definitely, there are big opportunities which are coming in these 2 sectors.
Sure. And when you say margins, I mean, you're not willing to kind of complement, I mean, you eventually are implying that you want to have a margin in line what you get to have it your blended margins or the margin that you generally get to a, let's say, NHAI EPC orders? Because I'm assuming I mean NHAI EPC as I think in your opening remarks you said you would be able to make around 13%, 14% with the Karnataka, which is lower than our blended [indiscernible].So when you say, I mean, you're not willing compromise, you're looking at 16% margin in these segments or settle for 13%, 14%?
No, no. So weighted average of each and every, say, sectorial if you see that the HAM projects which earlier are in the range of 30%, 35%. Now there are increasing, say, execution has increased to an extent of about, say, more than 40% likely in the coming year, it would be in the range of 50%, where the margins which we are taking as far as an opportunity that we -- is in the range of 18% of that range of margin. So with that, if you can take the weighted average of any of the EPC NHAI projects, where it is targeted at about, say, 12%, 13%, 14% range, that is there. And then private -- that is again at about the similar range. So with that weighted average is about 16-odd percent, which we are maintaining that only.
Sure. So even for water and railways, you would look for a similar kind of number on that?
At least 12% to 14%, that range.
Sure. And sir, on Ganga, I mean, assuming, let's say, hypothetically, I mean, let's say, IRB or Adani, I mean, because of you're all in discussion, let's say, I mean, if there were to agree to your terms, I mean, in terms of margin that you want or mobilization that you would need to be able to kind of go ahead with the projects, how much would your appetite be? I mean how much would you be willing to kind of take up in UP? I mean if they agree to our terms or not of the total number that they have?
So in any case, if you see to the total big opportunity, there's altogether some INR 20,000-odd crores with all 4 groups that they are having. And both of them are keen, and we are also very keen. But without -- say, the recent margin, we see minimal size of project will be INR 2,000 crores with anyone and maximum can be INR 4,000 crores.
Okay. So we won't go beyond INR 4,000 crores is what you're implying, right? And then I think in your -- somewhere in your comments, I mean you spoke about refinancing efforts which are already underway for the hybrid annuity assets. Possible to share indicative rates? I mean the idea was to try and understand whether, I mean, the bank rate has come down substantially, which is where there was this negative spread in bank rate and then our cost, right? So I mean, once these are refinanced, would you get to have any positive spread? Or will still be some gap between bank rates 300 basis points and then in your cost of debt?
No. No. Of course, I think we are getting -- at the present average, we are getting 7.25% for NHAI, refinance is much lower than that. It is coming on 7.15% or 7.25% of that range of -- and we are getting [indiscernible] on it.
Sure. And would you also be allowed to kind of take -- just to continue on this, so it's a continuation. We just want to clarify on this thing only. So would you be allowed to kind of take some top-up loan on this? I mean if you get to have the refinancing go through.
No. No. We will never be interested in let's say [indiscernible].
Next question is from the line of [ Dipen Shah ], an individual investor.
Congratulations on a very good set of numbers. Sir, most of the questions have been answered. Several people have asked questions. Just wanted some more insights into the next year? Like there have been various questions about how do we expect to grow at 15%, 20% next year? I just wanted to understand like say, whatever is the revenue of the next year, how much is the visibility from the existing and ongoing projects into the next year? Like how much would the existing ongoing projects contribute to the next year revenue? And what could be the proportion between HAM and EPC in the next year or whatever revenue you achieve, maybe 15% growth?
So if you take into consider the first I'm talking about the EPC and HAM. So EPC and HAM next year, I think it would be some 40% to 45% of the revenue would be coming from HAM and balance will be coming from any of the EPCs. It can be any private or government EPC NHAI, okay? And if you look into the total orders which are under execution, and with that, if we believe INR 1,000-odd crore of execution during the quarter 4. So with the balance order, which is likely -- which is to be executed at the total appointed say they are under execution, we expect that about [ INR 25 crores or INR 100 crores ] would be accreted from those projects only.
Okay. So if we are looking at a 15% growth, which is about INR 4,000 crores, of which INR 2,500 crores will be available from the projects which are currently undergoing and which are under execution?
Correct. Correct.
Next question is from the line of Veenit Pasad from Investec.
Just wanted to have your views on the competitive intensity in the road sector. Do you see that abating or given NHAI has further extended the relaxations up until March, we think competitive intensity should remain the same. When do you think this should subside?
So as far the relaxations are concerned, which has been extended till 31st March, it doesn't say for that reason, that is the aggression which is going on because of that reason. That is basically other factors, which are all there which we have discussed earlier that, say, being most of the -- those players who have been allowed with the eased out in the prequalification criteria that is something which is troubling each and every one. But again, if you see that with their appetite and with the whatever, say, size which they are -- getting capacity already squeezed means, limited capacity is available and already appointed date or say, earlier, it was appointed date now it is, say, L1 whatever, is being there. So with that, I think there would be limited number, which in coming bids, we would be seeing. And in HAM, especially we can see corrections in the positive way.
[Operator Instructions] The next question is from the line of Jiten Rushi from Axis Capital.
Congratulations on good set of numbers. Sir, my question was on the water supply project. So in the budget, the government has announced the Jal Jeevan Mission scheme strong support. So where do we see or where do we focus mainly in which region, like we're focusing only the home state of Rajasthan or we might be focusing in UP also?
No, no. We are looking at definitely in UP because of this code of conduct, I think the bids have been extended and they would be all now in month of March or April. But earlier, I think they were all due in month of January. Now with that, in MP, these are all adjoining states, which we'll be looking further apart from Rajasthan.
So what size is the opportunity in these 2 states, UP, MP and Rajasthan?
No, no, as per size is concerned, a number of projects are -- not many projects are there. As you see, there will be roughly, roughly some INR 40,000-odd crores in all 3, 4 states, adjoining states only. But then again, if looking to the size of this year, minimum size, we are taking on INR 300 crores to INR 500 crores to INR 700 crores that size of a project, where a single project or 2 projects would be good enough for us.
Okay. So basically INR 40,000 crore opportunity in these 3 states and a ticket size of INR 300 crores to INR 500 crores we are looking at to bid, right? And sir, on the Ganga Expressway project, so we are expecting we can get some subcontracting work at a good margin of, say, 18%, which we get it from HAM and from private contracts...
No. Let me correct it, it would never be 18. For any EPC project, it is rather difficult. It's not 18, but we are calculating at about 15, 14 that number.
Okay. So sir, don't you see competition from the regional players there because they would also be looking to get more projects, and we have seen EPC has seen a strong competition in NHAI? Probably this is a good opportunity for these smaller regional players to get more projects than probably we can lose out on being so strong with the Ganga Expressway. So what is just -- I'm just asking your view whether you see the competition or the likes of Adani or IRB approaching directly to contractors like you?
Definitely, there are 2 ways to look into it. One is the rate, which -- with the local regional players, they are having added advantage that they can bid lower. But again, I think with the good experience with IRB and those where they are finding it very much comfortable working with LG as well as quality and timely delivery. So we would be expecting not to compromise more on that at the rates they are getting lesser, but we cannot rule out. But again, we are at a promise -- we are kept keeping our rates. We are not going to compromise on whatever discount if the possibility they are getting on the regional players.
So sir, what is the order inflow we are looking in FY '23 and what could be the mix in between roads like EPC HAM and then newer segments?
I think if we can take on cards the INR 3,000-odd crores of HAM can be added in the next year, from HAM plus EPC roughly about INR 1,500 crores to INR 2,000-odd crores of EPC next year and some other sectors, again, INR 700 crores or INR 1,000 crores. Say, looking ahead some INR 6,500-odd crores to be added in next year.
Okay. Sir, last question from my side.
Mr. Rushi, sorry to interrupt...
Yes, I'll come back in the queue.
Next question is from the line of Parikshit Kandpal from HDFC Securities.
Congratulations on good numbers. Sir, my first question is on the 5 HAM projects, if you can give the timelines for each project in terms of month, when do you expect appointed date and also update on the financial closure of these projects if at all we have achieved for any projects?
Yes. So all these 5 HAM projects, NVG mostly done, we have received all the principle approvals for all 5 HAM project with even the recent one of OD5 and 6. And say, the financial closure or the financial attention, by 15th of February, we are expecting one of the projects where, AP1, where already the land is at a very advanced stage and NHAI, they are all insisting that as soon as we are getting the forest clearance where first stage is already cleared. There is about 8 kilometers being affected out of 33 kilometer. But with that clearance of second stage of forest clearance, as far as it is being cleared, we will be getting the appointed date. So with that by March maximum end of 15 March, we would be able to get the appointed date for AP1. And by the time, entire formalities would be done because, again, there are 2 banks, one is the Indian Bank and Bank of Baroda. So both we have received the final sanction letter and financial -- that document is under preparation. If you're talking about the same corridor, Raipur Vishakhapatnam with OD5 and 6, so they are the recent projects in the current year only. But again, they are considerable because of the same corridor, land availability is really good. And Odisha government is very supportive, providing the land. So that way only the forest is there and some private lands are there. But again, if we can just drag it to maximum 15th of April or end of April, where we will be in a position to get the appointed date. Here, again, one project has been written by a private bank under 2 of the public sector banks, they have closed the second one. In Khammam Devarapalle, financial closure, it is really advanced stage, even SBI is funded -- funding both the projects, but they are desperately waiting for the agreement to be signed as soon as it is going to be signed within a month, they are going to give us documents. So that is all about the appointed date and the SPs. But definitely, Khammam Devarapalle where earlier, it was very much, say, the problem. But now NHAI and they, they have all settled in some kind of amicable agreement they have raised the demand of the rate of the compensation of the farmer. And now likely within 2, 3 months, things would be sorted.
Okay. Sir, second question is on this you touch upon the last call that onetime price-to-book valuation were comfortable doing the deal. And now you have said that you will do it maybe by FY '23 end. So just wanted to know the bids which you got was how much below the book value, if you can just touch upon the valuation?
You're talking about the private orders?
No, no. HAM project monetization, sir. You mentioned that last time. if I get onetime price-to-book valuation, I'll sell that assets...
No. See, Parikshit, as for the valuation, I think anywhere if we are looking at your books, it really require money. So definitely, on a desperate note, you can sell them out. And if it don't require, it is your deal, which exactly 1 should come. Now with the recent trend, where not many, I think, best on a POT or, say, whatever mode they are coming, so it's not that it's the buyer's market as of now, which is believe better to wait and just keep continuing or, say, O&M for 9 -- or a year. So by the time 6 months of the timeline which is required for the transaction to happen that will be over. So it would makes sense. It makes sense definitely, as we have taken the stand.
Okay, sir. Sure, sir. Just just last thing, sir, on recently, you have seen a very high volatility in the stock price -- any reason...
I think you better understand. We are not very much aware of that what exactly has happened a negative to positive.
Next question is from the line of Anand Das from Das Capital.
I wanted to understand the impact of raw material inflation on the company's margin. So I think operating margin has very lived by a roughly 1 percentage quarter-on-quarter. But if I see cost of materials consumed or contract and site expenses as a percentage of revenue -- so that's keeping very steady. So -- but in the 2 quarters, raw material such as bitumen or even fuel expenses, the fuel prices are through the roof. So how does the company manage to sustain these margins without -- so is there a price -- I'm sorry, the costs are transferred to -- sorry, the cost action contract with customer? Or how does the company manage to keep the margins intact?
Yes. So the commodity price, it is there. It has been last year -- entire year, their big wallet impact is there. But it's not that equivalent to 1% hit has been -- we have experienced that from quarter-to-quarter. It is about hardly 0.3% to 0.4% looking to the EBITDA level. But we have been protected in all the contracts through a price position clause. But as you see that because of the various components, wherein I think you see the crude oil, the bitumen and then steel and then cement, these are various commodities where the index is -- doesn't cope up with same, price indexes doesn't cope up with the same as we are going to have impacted as far as execution or as far as procurement is concerned. So what exactly is there is not a big hit and on quarter-on-quarter basis, it is now stable. Things are not going to be, say, as far as we are not believing that more impact would be there. And again, as far as if you're looking at the total interest cost, which is now gone down if you compare large year-on-year, depreciation at a stable stage, if you see, but the turnover has gone high. So with that, we are looking at good PAT margin, that is what we...
[Operator Instructions] Our next question is from the line of Shreyans Mehta from Equirus Securities.
Congratulations on a very strong set of numbers. Sir, 2 questions from my side. One, as far as -- I mean, we are seeing a lot of heightened activity as far as DOT is concerned, especially on the bidding side. So are we actively looking at that space? That's one. Secondly, sir, into for, say, hypothetically for the earlier participants said on the OTC side. So will it be on a fixed price contract? Or I mean it will be a pass-through contract?
No, no. First is the DOT space, I think it is totally ruled out. We have never interest, we have never been interested in doing so. Second is, say, working for the DOT developers. So wherein I think it was a fixed price of existing whatever we are doing, wherever we are doing for Adani and this IRB, it's almost a similar model which we will be doing. But IRB is going with a target contract where they fit the target for [indiscernible] and then some of the price variation being provided for the diesel and a few of other commodities, that is well. And as for Adani, it's a regular EPC contract as the NHAI contract -- as the contract agreement of financial.
Got it. Got it. Got it. Sir. And sir, as per latest media reports, we are hearing that [indiscernible] International Airport will come up for tendering. So are we looking at the project?
No. Not yet.
Next question is from the line of from Anand Rathi.
My question is regarding equity requirement. I just couldn't get the numbers previously, if you can provide the yearly equity requirements for FY '23-'24?
Yes, it's a total INR 1,137 crores, out of that INR 290 crores already done. So during the current part of this year -- okay, so the balance part of this year, we are projecting that, say, about INR 150-something crores would be added. And then if you see the total projection for the next year, FY '23, is coming at about INR 370 crores, then next to next year FY '24 is INR 214 crores. So total balance requirement is coming at INR 745 crores.
Next question is from the line of Shikha Doshi from Axis Securities.
Congratulations for a great set of numbers. My question is regarding the working capital days. Could you let me know for what is the number for 31st December? And what trend is expected for Q4?
Yes. Sure. There's a bit increase in the debtor days, but inventory days are all stable. It is even lower than the last quarter. And the creditor is they are all stable. There's nothing -- not much of a movement as far as negative is concerned. But the total net impact is even now we are stable at about 42 net of working capital -- net working capital days, yes.
Okay. And for Q4, what trend? Like do you expect it to decrease?
Yes, obviously, we are looking at the receivable part, which is likely to go down which will be in the -- that range only as we have seen in the month of quarter 2. With that, I think some INR 900-odd crores of total receivables debtor form or any other form -- that gives us indication that we would be in the range where the correction on -- where the lowering down of the working capital days.
Ladies and gentlemen, that was our last question for today. I now hand the conference over to Mr. Harendra Singh for closing comments. Over to you, sir.
Thank you. So thank you, everyone, for your participation in our quarter 3 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. Keep safe. Thank you.
Thank you very much members of management. Ladies and gentlemen, on behalf of H.G. Infra Engineering Limited, that concludes today's conference call. Thank you all for joining us, and you may now disconnect your lines.