HG Infra Engineering Ltd (Part IX)
NSE:HGINFRA
Earnings Call Analysis
Q3-2024 Analysis
HG Infra Engineering Ltd (Part IX)
H.G. Infra Engineering Limited's Earnings Call for Q3 FY '24 highlighted the enhanced infrastructure sector prospects led by the Ministry of Road Transport and Highways, which received a 2.7% budget increase to INR 2.78 lakh crores for 2024/25. Substantial funds are allocated to NHAI for national corridors development, and projects worth INR 2.2 lakh crores are set for accelerated awarding and BOT module revival. A transition from Bharatmala Pariyojana to the region 2047 initiative is in place, with ambitious infrastructure goals set for India's 100th independence anniversary in 2047. The interim 2024 railway budget is INR 2.55 lakh crores, continuing aggressive capital expenditures and planning to upgrade 1,309 stations by 2030 under the Amrit Bharat Station scheme. H.G. Infra is positioned to capitalize on these opportunities with focused bids and the recent acquisition of Kanpur Railway station.
The company's order book stood strong at INR 9,626 crores across 11 states, with a diversified portfolio of EPC (51%), HAM (37%), and railway metro projects (12%). Prominent works like the Ganga Expressway, Delhi UER, and Neelmangala - Tumkur projects are progressing well, with completion percentages ranging between 10% to 84.8%. Railway projects are also advancing in accordance with planned schedules, and the Kanpur Central Railway station project has begun. Key milestones achieved include the PCOD for Maharashtra Pkg-7, COD for Rewari Ateli Mandi, and financial closures for Varanasi Ranchi Kolkata packages.
H.G. Infra shows an affirmative financial trajectory with a year-on-year standalone revenue increase of 18.3% for 9 months FY '24, reaching INR 3,487 crores. EBITDA margins sustained at 16%, yielding INR 557 crores. The PAT grew to INR 386 crores, marking an 11.1% margin. Q3 FY '24 alone saw a 19% revenue upswing to INR 1,346 crores, with a notable PAT margin at 15.3%. Consolidated figures echo growth, with the company's revenue rising to INR 6,670 crores, an 18.9% year-on-year climb and an EBITDA margin of 19.9%. However, the consolidated gross debt stands at INR 1,356 crores, with plans to infuse equity of INR 74 crores in FY '24 out of the INR 1,331 crores projected for 9 HAM projects by FY '26.
H.G. Infra has successfully monetized assets, with the first tranche sale of three SPVs to Highway Infrastructure Trust, finalizing 100% share transfer and receipt of consideration on 21st November 2023. This marks a strategic move to unlock value from existing investments.
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Ladies and gentlemen, good day, and welcome to H.G. Infra Engineering Limited Q3 FY '24 Earnings Conference Call, hosted by Go India Advisors. [Operator Instructions] Please note that this conference has been recorded.
I now hand the conference over to Ms. Sana Kapoor Go India Advisors. Thank you, and over to you, ma'am.
Thank you, [ Manuja ]. Good morning, everybody, and welcome to H.G. Infra Engineering Limited Earnings Call to discuss the Q3 and 9 months FY '24 results. We have on the call Mr. Harendra Singh, Chairman and Managing Director; and Mr. Rajeev Mishra, Chief Financial Officer.
We must remind you that the discussion on today's call may include certain forward-looking statements and must be therefore viewed in conjunction with the risks that the company faces. We now request Mr. Harendra Singh to take us through the company's business outlook and performance, subsequent to which we will open the floor for Q&A.
Thank you, and over to you, sir.
Yes. Thank you, Sana. Good morning, ladies and gentlemen. Welcome to the earnings conference call of H.G. Infra Engineering Limited. We are delighted to discuss the key milestones of our quarterly and 9 months financial performance, other accomplishments and future vision. The trust -- we trust you got the chance to examine our investor's presentation and the financial results. Let me start with a brief overview of the infra sector outlook and the latest budget update. The Ministry of Growth Transport and Highways has increased -- received increase of funding 2.7%, totaling around INR 2.78 lakh crores for '24/'25, out of which INR 1.68 lakh crores is designated to NHAI for development of national corridors. The government plans to accelerate new project award in the upcoming months and also reviving Build, Operate, Transfer module with 54 projects worth over INR 2.2 lakh crores. Additionally, there is a shift from Bharatmala Pariyojana to region 2047 initiative, a more ambitious plan aiming to construct 30,000 to 35,000 kilometers of access control highways and 50,000 kilometers of high-speed corridors before India's in 100th independent anniversary in 2047.
In the railway sector, the interim budget 2024 has earmarked INR [ 2.55 ] lakh crores sustaining its capital expenditure momentum compared with the INR [ 32.4 ] lakh crores allocated in '23/'24. Indian railways envisage a substantial 4.2 trillion plan to multi-track 7 high-speed density corridors, expanding 10,959 kilometers over the next decade. Under the Amrit Bharat Station scheme, the government has planned to remodel 1,309 stations by 2030. H.G. Infra has taken to set an opportunity considering new bidding in various station projects and already acquired Kanpur Railway station. We aim to secure high-value projects in this sector.
Recognizing opportunities in different sectors, we have actively pursued bids to broader our order books.
Let me start the journey of this quarter and give you the glimpse of operational highlights first. As of December 2023, our order book stood at INR 9,626 crores diversified across 11 states. Out of the total order book, EPC constitutes 51%, HAM constitutes 37% and railway metro contributes remain 12%. Talking of the ongoing projects, the execution progress on various EPC project is as follows: the Ganga Expressway project is progressing well and has reached a completion milestone of approximately 42.1%. In the Delhi UER project, substantial progress has been achieved and standing at around 84.8%. It is anticipated to be completed by March [ '24. ] Neelmangala - Tumkur project is advancing smoothly and has retained an execution status of 19.1%. Karnal Ring Road has achieved 10% completion and progress is well accelerated in the next few months. All initial impediments in the progress has been addressed.
The progress of all HAM projects are also running as per the plan schedule. The update is that the Raipur-Visakhapatnam OD5 project has progressed to 54.8%. Raipur-Visakhapatnam OD6 project is currently at 62.4% completion. The Raipur-Visakhapatnam AP P1 project has achieved a completion status of 61.3%. And in the Khammam-Devarapalle project Package 1 has progressed 33.6%, while Package 2 is at 38.4%.
Let's dive into the progress of our railway projects. The DMRC metro project has achieved a completion of 36.7% with execution progressing smoothly and in line with the expected timelines. The Bilaspur Himachal Pradesh railway project under RVNL delayed a bit initially because of extensive rains in Himachal, is now progressing well. The Kanpur Central Railway station project, which North Central Railways has reached a completion of 1.2%, just recently started. Let me now share other significant updates on quarter 3 FY '24. The appointed date for Kanpur Central Railway station was received on 16th of October '23. The PCOD of Maharashtra Pkg-7 and Rewari Bypass were received with [indiscernible] 2020 and 25th May 2023, respectively. COD of Rewari Ateli Mandi was received with effect from 311st of November 2021. Financial closure of Varanasi Ranchi Kolkata Package 10 and 13 was declared on 23 November '23 and 20 November '23, respectively.
In terms of the financial highlights of this quarter, we are happy to share considering our financial performance and robust growth story, the outlook on the long-term rating has been revised from stable to positive. The rating committee of ICRA has reinformed the long-term rating at AA- and the short-term rating at A1+. Our financial numbers of last quarter has been satisfactory.
At the standalone level, our total revenue for 9 months FY '24 has reached INR 3,487 crores, marking a 18.3% year-on-year increase from INR 2,949 crores in 9 months FY '23. EBITDA amounted to INR 557 crores in 9 months FY [ '21, ] resulting in EBITDA margin of 16% compared to INR 473 crores and [ 16% ] margin in 9 months of FY '23. PAT for 9 months FY '24 stood at INR 386 crores with a profit margin of 11.1% in contrast to INR 274 crores and a margin of 9.3% of 9 months FY '23.
In quarter 3 FY '24, stand-alone revenue reached INR 1,346 crores, indicating a significant 19% year-on-year, rose from INR 1,131 crores in quarter 3 FY '23. Standalone EBITDA for quarter 3 FY '24 was INR 214 crores, reflecting a year-on-year growth of 13.2%. The PAT and the PAT margin for quarter 3 FY '24 stood at INR 205 crores and 15.3%, respectively. Compared to -- that is compared to and INR 111 crores and 9.9%. Regarding the company's debt position, on a standard basis, the gross debt amounting to INR 470 crores including the working capital debt of INR 64 crore, term load and current maturity and trade limit totaling to INR 341 crores, along with the NCD of INR 55 crores. Moving on to the consolidated numbers. In 9 months FY '24, the revenue surged to [ INR 307 -- INR 670 crores, ] indicating an 18.9% year-on increase from [ INR 3,087 ] crores in 9 months FY '23. EBITDA reached INR 729 crores, resulting in an EBITDA margin of 19.9% compared to INR [ 590 ] crores and a 19.4% margin in 9 months FY '23. PAT for 9 months FY '24 stood at INR 349 crores with a profit margin of 9.5% as compared to INR 322 crores a 10.4% margin in 9 months FY '23.
Concerning the company's debt position at the consolidated level, the gross debt amounting to INR 1,356 crores. The total equity requirement for 9 HAM projects were estimated to be INR 1,331 crores until FY '26. As of December '23, INR 604 crores have already been infused, and there is a projection infusion of INR 74 crores in FY '24.
Let me now give updates on the key developments in the monetization progress of 4 assets. Pursuant to entering the share purchase agreement on 3rd May 2023, we have finally achieved the milestone of completion of first tranche sale of 3 SPVs, including Gurgaon Sohna, Rewari Ateli, and Ateli Narnaul. 100% shares of this company has been transferred on 21st November 2023 from H.G. Infra to Highway Infrastructure Trust, and consideration has been received against the share transfer. As far as [ PA, ] total consideration was INR 531 crores for all the 4 SPVs. Out of that, agreed consideration for first tranche of the SPV was INR 405 crores against with the final total consideration has been closed for INR 375.13 crores. Total consideration includes INR 313.07 crores against equity and INR 52.06 crores against subordinate debt. And that consideration has been received, except overlap of INR 59.56 crores being transferred in an [ exco ] account which will be released on receipt of approval for GST changing law on [ NBD ] payments from the authority. And the sale is expected to be received by March '24.
We would further -- we further would like to inform the variation in final consideration was majorly due to change in the price escalation amount on account of impact of change in law, a change in [ CPI ] guidelines. Because of this change, there was a negative impact of around INR 13.29 crore on the consideration value of these 3 SPV companies. However, the impact is positive in second tranche of fourth SPV with INR 2.87 crores. Additionally, during the period before closing of transaction within the agreed regulation date, unsecured loan of INR 16.7 crores was refunded back to the promoter company which was provided to SPV during the construction period as interim arrangements in general course of business.
However, in Rewari Bypass, we would like to receive INR 140-odd crore against consolidation of INR 126 crores as per the SPA. Thus, overall consolidation remains unaffected. Also, we would like to update that for second tranche of fourth SPV that is Rewari Bypass where PCOD declared with effect on 25th of May '23. Accordingly, we have applied for the issuance of [ NSV ] from the authority and lenders for the change in shareholding. Final NOC is given shortly, and we are expecting to complete the second tranche by March '24.
On completion of first tranche transaction in November '23, INR 106.74 crores of total capital gain has been recognized, which attracts a tax of INR 16.09 crores as per the Income Tax provision for the first tranche, 3 SPVs due to which the overall current component has increased for this period.
Let me now touch upon the future guidance. After the lukewarm awarding in this financial year until now, we are expecting aggressive bidding in the next 2 months, which will give us the opportunity to augment our order book. To date, H.G. Infra has bidded for 52 tenders worth INR 30,572 crores until January '24. Among these, 3 tenders were awarded totaling INR 1,199 crores including projects of NTPC, central railway project of [indiscernible] and South Central revenue project of Aurangabad to Ankai Package 9. Both the railway projects have been awarded in the month of '24.
I'm hopeful, after the addition of 2 major railway projects in the month of January '24, we would further add INR 5,000-odd crores more projects in the remaining part of this financial year, keeping total order addition during the year to around INR 6,000 crores. For future bidding H.G. Infra Engineering also plans to bid on about 8 more railway projects, that is around INR 6,000 crores in this financial year. We are also targeting high-value railway project as invited by Haryana Orbital Rail Corporation to further diversify orders. We have started [indiscernible] rising cost and doing preliminary discussions with diversification for the sector also to propel our way forward.
Regarding the revenue guidance in this 9 months, we have obtained a revenue of INR 3,487 crores and we would like to assure all our stakeholders that this year we'll be achieving INR 17 crores to 20% growth in revenue compared to last year, maintaining a margin of 15.5%, [ 15% ] flat. I want to ensure our shareholders and the financial partner to the company [indiscernible] and vigilance to enhance our growth narrative, demonstrating persistence in receiving forthcoming opportunity soon. We are meticulously focused on enhancing our operational efficiency and execution capacity to boost both our EBITDA and PAT margins. Digital transformation holds the primary support of our agenda [indiscernible] automation in our overall plant and machinery operation and various other verticals. The strategic group is poised to contribute significant value to our financial indicators, fostering a seamless and transparent real-time working environment.
That concludes my update. And now the floor is open for questions and answers.
[Operator Instructions] The first question is from the line of Alok Deora from Motilal Oswal.
Congratulations on pretty decent numbers and execution improvements. Sir, just again on the -- you -- although you gave a pretty detailed opening remark, but just on the order flow because we are already clocking nearly a run rate of INR 5,000 crores annual revenue and order book is at around 2x now. So how many projects we have built now where bids are yet to be opened?
And you also mentioned that there is a pretty aggressive bidding which will happen in the next couple of months. So what's the realistic number we could look at? Because most of the companies are talking or betting on these next couple of months to kind of get the order inflow in place.
Yes, sure. I see almost 16 bids are there where yet -- the results are yet to be declared, And there is totaling of about INR 14,000 crores. Apart from this, as we have seen that in February and March before prior to the model code of conduct input likely that they are awarding at NHAI Ministry and MSRDC and several railway projects, they are on the card, where we also betting upon it. And definitely, it looks like that during the next 2, quite a good pace of awarding would be done. And it's almost INR 70,000-odd crore, INR 60,000 crores to 70,000 crores in MSRDC on EPC projects and around INR 50,000 crores plus at NHAI and somewhat INR 40,000-odd crores at ministry. So these are all the highway projects which I was talking other than the railway projects are also there, so which we believe that definitely INR 25,000-odd crores of railway project [indiscernible].
Sure. And I think in your comments you mentioned about you bidding a lot of these railway projects. So what is the expected margins there? Because the railway margins would be lower than this 15%, 16% margin which you make in the road projects. So what is the margin profile would be there for those projects?
So we are keeping the same thing to say, if you are talking about the total projects, there's almost the similar kind of projects as highway, nothing of electrification or SMB. So we are seeking the same margins as we are doing in highway. Definitely, it can be not more than 1%. Because in a highway EPC projects, we are keeping ourselves at about, say, 13% range that we are keeping for them. And definitely, we are targeting about 18%, 19% as we have done in the past. So this now we are looking at any future railway project to be bidded.
The next question is from the line of Shravan Shah from Dolat Capital.
Congrats on a decent set of numbers. Sir, just to develop on that. So until now the railway orders, the EPC value for us is INR 1,200-odd crores that we have received.
The recent orders which we have achieved?
Yes, sir.
Net of GST would be around INR 1,100 crores.
Okay. Net of GST. So until now, the order inflow for us is INR 1,100-odd crores. And for full year, so by next 2 months, we are looking at the further INR 5,000-odd crores. So total would be INR 6,000-odd crores that we are looking at?
Yes.
So in this INR 5,000-odd crores, a railway would be how much more we are looking at?
See, we cannot just see that we already have bidded for almost INR 14,000-odd crores that were yet to be awarded. In this INR 10,000 crores are railway projects, which we expect definitely 1 or 2 projects from railways likely to be there, out of the INR 5,000 crores expected during the earliest part of the year.
Okay. So this INR 10,000 crores revenue project, so these are closer to INR 1,000 crores, INR 1,000 crores each kind of project?
No, it's not typically the same. It is INR 500 crores to INR 700 crores, INR 1,000 crores or even INR 1,200 crores, INR 1,300 crores also.
Okay, okay. Got it. So for the full year, you mentioned 17% to 20%, so slightly maybe a lower revenue that we are looking at versus the previously INR 5,400 crores. So for next year in terms of INR 6,000 crores, INR 6,200 crores revenue that we were looking at, so are we able to maintain the same guidance for FY '26?
For the current year, definitely because of the very, say, weather conditions and the erratic monsoons. So this is why the shortfall has been in the Jharkhand project, which we were supposed to looking at this, probably date of Package 13 which is yet not clarified as far as model [indiscernible] to be imposed. So this is the shortfall of our INR 200-odd crores likely to be there. But definitely, we are keeping the price intact for the financial year '25 with INR 6,000 crores.
Okay, okay. Got it. So now these 2 appointed dates, package 13 and package 10, so when can we expect appointed date?
So looking at the current scenario of Jharkhand, the state government as well as the model code of conduct, we believe that until May, definitely no chances there. And we also would not be taking this risk prior to this -- or only one project which we definitely would be looking at by June, a project, it can be there. The second project, as I am expecting that post-monsoon, that would be declared.
So package 13 will be by June?
Yes.
And package 10 will be October, November?
Not November, rather August onwards, sometime in September.
Okay. Okay. Got it. Also, you mentioned significant opportunities in railway, MoRTH, NHAI, MSRDC. Sir, out of total, how much are we planning to bid? If you can broadly help us then it will be great. So INR 30-odd crores that we will be bidding?
Roughly, there are INR [ 60,000 ] crores of odd bids, which we are aiming at to be bid in these 3 organizations.
Okay, okay. Got it. Sir, a couple of data points on the balance sheet side. So first is retention money, the unbilled revenue mobilization advance.
Mobilization advance is INR 308 crores, to be very specific. And the total debtors is INR 825 crores, including the retention and deposits, other deposits. And that is if we can -- we want the breakup, NHAI is around INR [ 740 ] crores, SPV is around about INR 250 crores, Adani INR 300 odd crores as we have done significantly good in month of December. That is the same for the month of December only, And others are very negligible at INR 135 crores. Until definitely around INR 700 crores, the INR 700 crores is unbilled of INR 250 from NHAI. And Adani is very negligible of INR 100 crores. The SPV again is INR 300-odd crore, remaining others.
Okay. Sir, total debtors you -- out of that, our retention money is how much?
Retention money is around INR 114 crores -- INR 115 crore.
And total inventory and total debtor value is how much?
Inventory has gone higher at INR [ 341 ] crores. What are you talking about?
Our total debtors...
INR 825 crores.
And payables, sir?
Debtors?
Payables.
Sorry?
Payable, creditors.
Creditors?
Yes, sir.
Creditors was INR 600 crore.
INR 600 crores.
[Operator Instructions] The next question is from the line of Nikhil Abhyankar from ICICI Securities.
My question was broadly regarding, we are seeing that the pace of CapEx increase for NHAI has reduced as well as for railways. And going forward, maybe to reduce the fiscal deficit, the CapEx might reduce as well. So do you expect higher share of BOT going forward, say, in the next 3 to 5 years? And how will we try to participate in that opportunity?
Sorry, I couldn't understand. You can repeat it, sir?
Sure. Sir, right now, as compared to HAM and EPC going forward, there might be a higher share of BOT projects from NHAI.
Understood. So definitely, NHAI is having, say, looking to the -- just the response of many of the lenders as well as concessionaires, we have the [ COD ] monetized. So looking into that, they have actually has figured out some 50-plus project of INR 2.2 lakh crore on BOT model. And we have certain concession -- modified concession agreement has been modified, which is quite friendly, which we believe is a positive move. And I don't know how it will definitely react on actual bidding rather than awarding.
But then definitely, looking to this opportunity as we are working with Adani, we have already worked with IRB. And Adani and IRB, they are the one who are very -- always try to take such kind of projects. And apart from this SKU and say, 1 or 2 concessions, they are also approaching us. They are also approaching [indiscernible] as a EPC player to them. So with that, I think this opportunity. If definitely with the government's trend likely to come, we would not be at a risk, so we would be, again, looking into such opportunity from the perspective [indiscernible] EPC to the developers.
Okay. So we are not looking to participate directly?
We will be taking trial of 1 or 2, not with very aggression, with very, say, whole numbers, keeping...
Understood. And sir, what will be the margins on this profile? Usually, what is the margin for BOT projects as compared to HAM, EPC?
BOT projects and HAM projects, they are all same as far as EPC is concerned. If you talk of the development, so the project being taken by the concession, they do will have definitely a consideration, toll total risk is there or in HAM there's no risk as such. So there is their calculation...
The next question is from the line of Jiten Rushi from Axis Capital.
Congratulations on a good set of numbers. Sir, my first question is on the [indiscernible]. From what I understand...
Can you speak a bit louder?
Can you hear me now? Is it loud now?
Yes. Now it's Okay.
So my question was on the equity investment [indiscernible] project, in which we have completed our monetization. So I'm assuming we have invested around almost INR 268 crores, against which we were supposed to receive INR 405 crores, which you said, we have received INR 375 crores. So sir, in this INR 375 crores, INR 59 crores, so almost INR 60 crores is still pending, right, sir?
Yes.
This INR 65 crores is related to GST for the change in law, which you will receive by end of month once [indiscernible]. That is what my understanding is, right?
Yes.
So sir, we have made a capital gain of almost INR 106 point -- 106 crores -- 107 crores. That is in the stand-alone, That is correct, right? Because overall, you said INR 117 crores, which is including the consolidated number, standalone -- hello?
Yes, yes, quite right.
So sir, so what was -- you said some negotiation is going on. So what is that negotiation that impacted the valuation? So what is the reason of the impact in the valuation in the first 3 projects?
See, this is the entire deal has been for all 4 projects. So individual project do not have any impact on it. Looking to that, say, I already have addressed like because of the [ CPI ], so there is a consumer price index, we have the later on guidance being issued by NHAI for calculation of the price index, [ price escalation ] rather. So there is an impact of our INR 13 crore, which is a net impact of INR 10 crores, taking consideration of Rewari Bypass as well. So net is INR 10 crore.
But in Rewari Bypass, looking to the equity which we have invested and the likely proceeds or likely [ NVT ], which we should be getting in the next 15 years, with all considerations, this INR 126 crores initially being considered in this overall valuation of 531, where it has now -- it would be a 140-plus. So this is INR 13 crore plus in that particular project. So the overall, [ INR 131 ] crore are intact. So we are not going to lose anything out of that. It's a matter of first tranche or second tranche.
And having discussed that, definitely the capital gain which we have considered in the stand-alone and the consolidation which we have, we have seen that these 3 projects where certain discounting is to be done in that tax -- in the profit margin, which actually has impacted the consolidated number.
Okay. And sir, so any CapEx for 9 months and what is the guidance for full year FY '24/'25? And what is the balance equity breakup, if you can give us -- like you said for INR 74 crores in Q4 this year? And what about the balance [indiscernible] broken down after the [indiscernible] report we share invested so far?
So post this, out of INR 1,331 crores, INR 601 crores already done, December 31. INR 730 crores is the balance and the INR 74 crores which we are considered for the quarter 4 '24, INR 465 crores is the number which we are considering for '25, and 196 crores is the balance from '25, '26 or '27, accordingly when [indiscernible] projects are particularly declared. So this is about equity. And as far as execution is concerned, for sure, we are looking at this current year to be closed at around, say, 5,000 to [indiscernible] that is rough number. And for '25, we are keeping our guidance about INR 6,000 crores.
Sir, CapEx so far, what is your targeted CapEx for FY '24/'25?
Our CapEx would not be a big number for the subsequent years. CapEx hardly would be in the range of INR 75 crore.
And this year?
Sorry?
FY '24.
This year already had done. Nothing has more to be added.
So almost like you have done more than INR 100 crores, what I understand.
Yes, yes.
[Operator Instructions] The next question is from the line of Sarvesh Gupta from Maximal Capital.
Just to confirm, so this year, we are expecting INR 6,000 crore order inflow. And what should be the expectation for the next financial year, FY '25?
Sure. I think for this current year, what we initially has guided around INR 8,000 crores to be added. And if we are at that stage where nothing big as being achieved as far as the awarding is concerned across infrastructure, especially NHAI and the higher projects are concerned. So we believe that whatever bidding pipelines they are having post this election, there will be not many projects, has opportunity would be available to us. So with that, we are expecting about, say, INR 800 crores to INR 1,000 crores being added next year.
Understood. And just to confirm the number for railways. So you said HAM, EPC, 18%, 19%. Highway EPC is 13%, 14%. And railways are at what margin, sir?
Yes. Almost similar, what we are keeping for EPC highway, that is around 13%. We are keeping the same number.
Okay. So with this mix change, do you expect overall margins to come down because we are getting much more in railways?
No, it's not that big number of railways. It's just around 18%, 20%. And for highway also EPC project which we are doing earlier was constituting this much. It is a replacement of NHAI EPC projects -- or rather highway EPC project by railway projects. So the margin definitely would not be impacted much.
Understood, sir. And sir, in the interim now if I look at your overall P&L., so of course, we have maintained -- broadly maintained the EBITDA margin, if you look at 9 months and all. But what is happening is below the EBITDA, we are using maybe much more of our own equipment. So that is we are paying less to maybe on the lease side. But then all those costs are hitting us on the depreciation and interest. And those have increased a lot much more than revenue growth, 50%, 60% growth. So because of which the overall PAT margin, PAT is not increasing, maybe 7%, 8%. And this quarter would be flat Y-o-Y or 2%, 3%. So despite a very healthy growth, 17%, 18% on the top line, it's not impacting our bottom line. So how do you see that, sir?
I think the PAT is -- at the stand-alone level, you can see the PAT is around 9.5% to 10%. With that, whatever interest outflow is there, it's now stable. The percentage, you can see last 2, 3 years, interest not increasing to that extent. And the depreciation definitely in the recent quarter has increased. But for sure, I think it's a part of cash accrual. So we don't see any challenge as far as PAT is concerned, it would be in the range of about 10%, and it can even go up to 11% in the coming quarters.
So going forward, our finance cost, let's say, as a percentage of revenues, et cetera, do you expect these costs to normalize further? Or I mean, this is the new normal. How do you see it? Because this has increased almost 70% on a Y-o-Y basis.
Finance costs is roughly -- roughly finance cost [indiscernible] INR 15 crores this per quarter. If we are talking INR 60 crores to INR 65 crores of finance costs, which is likely to be stable, Nothing more to be increased. Only depreciation which -- earlier it was INR 25 odd crores per quarter, now it has gone up to INR 36 crores to INR 38 crores. So which is a big number. But definitely, with the coming years, the CapEx is not going to be at that high level.
Okay. So this is not driven by any change in our model assets, wherein now you are doing more of this equipment on our own, because of which, even while seeing lower margins, we are maintaining EBITDA but falling in terms of the PAT margins.
No, no, nothing has been changed.
[Operator Instructions] The next question is from the line of Mehul Mehta from [ Nuvama PCB. ]
We have been exploring possibility to bid for underground metro rail projects. So has there been any progress in terms of JV with any organization?
We already have signed up. But the -- as of now, we could not see any project where this could be explored. We already have [indiscernible] about the tunnel project, some metro tunnel project rather. But for sure, we are not very aggressive as far as the coming opportunities in highways or in railways or railways, even high-speed density network corridor to be developed [indiscernible] construction and the [ VFCC ] corridor to be constructed. So we are keeping this but not very aggressively.
I see. As far as you have been focusing on, I mean, maybe like go on railway and road projects. But in metro, -- so if we look at like an out of operational metro network of about 800 kilometers and currently about 650 kilometers under construction, would you be sharing who are the major players kind of?
So definitely, we have seen the L&T a very high level and J Kumar is there, the [indiscernible] and then ITD. So they are the one, say, 5, 7 are the big numbers. They are having somewhat 70% of the entire metro construction.
Okay. And say, like out of the proposed network of about 1,000 kilometers, like are there new players entering or like the similar players like who have been so far in this segment?
Metro projects, mostly the CapEx being done for the costing and everything. So in these cities where already they are set up, having the setup, so they will be having at least advantage of taking this opportunity. But for sure, the upcoming Tier 2 cities like Agra, talking of Nagpur, even Kanpur, there are many more cities where metro -- Bhubaneswar to be very specific. So there, I think, there's opportunity lies for players like H.G., the other players --- the other companies would be interested.
Sure. Other question is in relation to working capital cycle, if we look at FY '23, and we had about 23 days working capital cycle -- net working capital cycles. And currently, it is at about 34 days and which has been mainly driven by 51 days of inventory cycle. So is it like that going forward, we can see like this reducing or we should continue to be like maybe about 30 plus days?
From the start of this last 3, 4 years, we have seen the trend of about, say, 35-odd days, not crossing 40 limit. So 30 to 40, this is the ideal one where we have seen this inventory going higher. Because if you see -- you can see this current month, in these months, high construction is at a very high pace. So because of that inventory is a bit high. But otherwise, the inventory more or less would be around -- you can see on the top line, around 8% to 10% of the inventory would be there, not more than that.
But as far as like this FY '23 was an aberration in terms of 23 days of working capital cycle?
No, it will be calling back to the same 30 odd, normal trend for the working capital. See, because of some unplanned and because of some debtor receivable at SPV, at the end of December, that we have not taken the funds from SPV -- from the lenders to SPV and [indiscernible]. So that is where the SPV, that has gone high.
[Operator Instructions] The next question is from the line of Parani Vijay Kumar from Avendus Spark.
You had mentioned in your opening remarks that you are looking to diversify also into solar projects. Can you highlight what are our target projects and what are our scope of versus we are trying to do here?
In the solar, the renewable energy, government focus is very specific in the state of Rajasthan, which is the state to up. So we have seen -- we have explored some of the projects in Kusum Yojana. Not big projects are there, very small projects, but the tariff is good, and power purchase agreement with the government is being done. So not going very aggressively, taking some opportunity in that projects, where doing EPC at H.G only, whenever only, rather than getting it done through any other contractor. So this will basically start a little bit of learning and doing with a secure model of the tariff. And it's good and the power purchase agreement being executed with the government only.
Okay. So as the capacity of developer, like we will be building these projects...
We will be entering not only into EPC, We will be entering as a developer, but not very high-value projects, very small. To start with, it would be roughly around, say, INR 100-odd crores project, but later on within 6 months if we feel like, INR 100-odd can be added. So this is where we are looking into this opportunity.
Okay. My second question is on -- in your opening remarks, you mentioned that Bharatmala is being converted [indiscernible] 2047. So what is the progress of this? What is the thought process of the Ministry behind this? Any more details that you can provide, like you mentioned, there is a 35,000 kilometer and then another 50,000 kilometers. So if you can elaborate more on this?
See, the government is looking into 2047 as the year where 100 years marked for this independence. So with that, I think government vision statement, where the every organization, it can be a highway to railways. So all has been given the task, consolidation of infrastructure development are to be done in this 25-year -- 23 years ahead. So with that, we believe that the coming opportunity would be as earlier as we were looking at '28, '29 or '30 rather, this highway opportunity will be tried, likely to be [indiscernible].
So now they have given this indication that Highway also would be there [indiscernible]. And where we are expecting 50,000 kilometers of the existing National Highway to be upgraded and some 35,000 kilometers to be awarded on the access control greenfield highway. So this is a vision document where detail of the projects has already been exposed. And I think it will take another 6 months or 1 year down the line when the clarity would be -- more clarity would be given, rather available. And then I think bidding in the coming years, say, '24, '25 would be in these projects only.
The next question is from the line of Vaibhav Shah from JM Financial Limited.
Sir, when do we expect -- this is the proceeds from [indiscernible] asset?
Likely to be by end of this financial year by March because this is already at the -- in advanced stage with lenders and NHAI. Within next 10, 15 days, we would be likely to -- we will likely to get this NOC. And then another 10 -- 30, 35 days for completing a [indiscernible].
And the receipts we received for the 3 assets. So where is the money being used? Because our debt has reduced around INR 127 crores on a quarter-on-quarter basis and cash is flattish.
So cash definitely is around INR 70-odd crores. You can see that the payments like -- which we like always receive from our SPV through lenders funding. So which we definitely -- keeping the cash at the company level, we are again looking into this particular arrangement, where we will not be taking the, let's say, loan from the lenders to SPV and SPV in turn to EPC. So there is one way we are looking. Again, we are now looking into some part of this fund to be used for our advanced payment procurement, advanced procurement to -- from the vendor. We are getting around, say, 1.5% cost benefit, where the dispatch response is being there. So there are a few other models which we are exercising where this cash with the company can be used. And definitely, all OD limits or such -- only the current accounts definitely would not be there. We will not be keeping our fund into this current account. But then OD limits will be all, say, free from utilization -- use.
So currently, where it is again, on the balance sheet?
Sorry?
Currently, when the cash is sitting on the balance sheet, the receipts we got from the monetization.
Majorly, which I've seen INR 270-odd crores which you are likely to be -- which are kept as a debtor receivable from SPVs. So this we have done intentionally. We have not taken an SPV. So this would be reducing the interest during construction to the SPV.
The next question is from the line of Vishal Periwal from IDBI Capital.
On the railway side, sir, the 2 different sort of work that we are doing. So relatively, where do we find the margins to be better, that is for station redevelopment or the new line that we are constructing for the Bilaspur?
No, Bilaspur is totally different project. Bilaspur last project is on wider construction. See, it's in the backwater of dam where this station and some other things are developed. These railway projects are on 50-odd kilometer broad-gauge, new line to be laid of INR 700-odd crores, which is central railway project. In South Central Railway projects, INR 447 crores that is a second line. The third line being developed as a [indiscernible] line. These are all new lines or the lines which existing, nothing is to be attached.
Okay. No. But then if I look at order book, so the Kanpur work that is there, station development and then there's Bilaspur that is there. So relatively, where do you find the margins to be better? Like...
Kanpur, definitely, as we have done, we are doing our all prepaid -- post -- prepaid to postpaid comparison design -- post design. So we are seeing good margins out there in Kanpur Railway station if we compare with railway project of Bilaspur.
Okay, okay. And then will it be possible to give some number like relatively how much better it is? Any ballpark range you'd like to share?
Right now, I'm not having it handy with me.
The next question is from the line of [ Pratik Bandari from Arete Ventures. ]
Sir, I wanted to know as to the exact number of order inflow in the Q3 FY '24, the recent quarter. What was the exact amount of order inflow?
In Q3, are there was any orders being -- only NTPC INR 37 crores of new orders? Then there's some variations, some change of scope variation being awarded by the authority. Like in Ganga, we have received variation on INR 100 crores, in some of the projects of financial year also they have a variation -- that is why the [indiscernible] also has contributed to the top line, INR 130-odd crores of price escalation also has been there.
Okay. So if I talk about 9-month FY '24, I mean, like this current year, up until December, what was the order inflow in the 9 months?
In the 9 months, hardly there were order of about INR 75 crore, both NTPC small projects, but the variation orders for about INR 300 crores being passed by the various authorities, so that is one. So you can see or compare INR 12,700 at the start of the year and say, having INR 6,000 -- 9,600 at the end of this year. So the difference is almost INR 500 crores...
What was the major reason for low order inflows in the 9 months FY '24?
As it is all aware, I think, NHAI awarding and highway awarding and other sectors because of the state election also, not much [indiscernible].
Okay. So there's no awarding from the organization, right?
Yes.
The next question is from the line of Shravan Shah from Dolat Capital.
Sir, these 2 new railway project, when we will be getting the appointed date?
One of the railway projects has been received 2 days back only, [indiscernible] project. So which we are checked upon with the authority, said that within, I think, 3 months likely that order date would be declared because the land is available with them. And the second project ultimately is third line to be developed along with the existing line, [indiscernible] is available. So very soon, we would also be getting the target date. Probably by April, both the projects' order date likely to be declared.
Okay. So by April -- And sir, if you can again repeat the equity infusion. So INR 74 crores, we will be increasing in fourth quarter. And the FY '25, we said INR 465 crores.
Yes, that we have kept INR 465 crores, looking into the both Jharkhand project requirement and all 5 projects which are our other 6 project, where the balance equity requirement would be there. So that [indiscernible] from 55%, 60% already invested, taking to 75%.
Okay. And so total balance requirement is INR 730-odd crore until today. INR 604 crores, we have invested INR 730 crores is to be invested.
Correct, correct.
Okay. And then the fourth quarter, when we received the entire monetization on the fourth project, the second tranche. So how much gain post tax we will be...
I think what you are saying that INR 140-odd crores, which we will be getting and INR 59 crores -- INR 60 crores, [indiscernible] already been, say, effect has already been considered in the balance sheet. So there is one -- both the project transition to happen. And look, for sure, I think whatever tax is there as far as the consolidated EPC is there, this is a calculation to be done once the transaction being done.
Okay. And the debt level will further reduce from here on?
Yes, definitely. We are keeping that about the debt level would be roughly around, say, INR 400 crores from now and better and -- but say, majorly effect would be in the debtors.
Okay, okay. So as you mentioned, sir, you have kept the money whatever we have received to fund the SPV so that the interest construction is on the lower side. So SPVs debtors on the higher side, so that's the major reason. But broadly, in terms of the working capital days, it will be back to the normal 30 to 35 days, will come back to the normal level.
That's right. Yes.
The next question is from the line of Jiten Rushi from Axis Capital. .
My first question is on the -- as you said, within 9 months, you had bidded for almost INR [indiscernible] of which we were able to give INR 1,200 crore, that win ratio is almost [indiscernible]. And now we are targeting there is a INR 14,000 crore open pipeline, which the bid are yet to open another INR 60,000 crores, which [indiscernible] and INR 6,000 crores in railways for the INR 80,000 crores, is kind of a bids which have bidded like INR 14,000 crores plus the new bids. So with this 4% win ratio [indiscernible] . So then as you said we are targeting around INR 5,000 crores of more inflow. So do you believe that we will be going aggressively to win the project...
I understand your question. The bid ratio normally depends sector to sector. In railway, we are bidding many projects rather than only selected project. And the highway, we usually are taking few selected projects to be bidded. And that's why the bid strike ratio is better in highway projects.
So how much [indiscernible]...
In the past year, we have seen that we were roughly at about 6% to 8%.
6 to 8 as a ratio and this thing, highway [indiscernible]. And sir, you are not targeting any projects in the water segment? Like...
Right now, these are the 2 state governments which are already now in place, state of Rajasthan where almost INR 15,000 crores of order, which could not be awarded by the earlier comment, where now they are looking at this opportunity. But definitely, we are looking into these 2 state government, MP and Rajasthan, and third, UP, where we would be adding these water sector projects looking for -- but definitely this year we are not keeping anything, because hardly few months of the year...
So next year, how much you're expecting from MP and UP in terms of bids [indiscernible] ?
Total -- at HG level, highway and all of the projects?
No, no. You said that water segment, [indiscernible] Rajasthan and some of the...
We would be looking at add at least INR 500 crores to INR 1,000-odd crores of single or two projects.
Renewal, you're newly setting up a solar small park and will be supplying to the -- under Kusum scheme to the farmers, solar pump. Is that understanding, right?
No, no, it's not that. Kusum Yojana is where the power purchase agreement, the government is taking back the power, and they are being installed near to the grid substation, already in operation, say, with all Bijli board. So nothing of that here, we'll supply to the -- but definitely, government subsidy scheme is there in that. Central government scheme is there. And the power purchase agreement, which a normal -- which is normally, it's about INR 2.5 or INR 2.6 unit, here it is INR 3.5 -- around INR 3.5. So there's a good gap in that particular. Margins are good.
[Operator Instructions] The next question is from the line of [ Abhishek Dikshit from HAIM Securities. ]
So sir, my question is on the consolidated level, what is the reason for debt and the margins in this quarter?
What margin?
Sir, dip in margin for this quarter, in quarter 3 FY '24?
Dip in the margin, in the -- Yes, I already explained. So this is the effect because of these 3 projects will say, it's to be very specific in Gurgaon-Sohna, there is a negative revised margin being there mutually. Because the entire, say, 4 HAM projects where this effective 1.55x of the investment which you have done. In SPV, whatever margins we have built up in the last 2, 3 years, we have a major effect in Gurgaon-Sohna. Otherwise, they are all same.
Okay. And sir, for FY '24, how much EBITDA margins are we seeing?
This current year?
Yes, sir, for current year.
You're talking about number or percentage?
No sir, percent.
Percent would be roughly around we are doing at 14.9%, roughly in that range only.
Okay, 15%.
Yes.
Okay, sir. And sir, for a major order book within the road segment. Are we targeting to diversify in more segments?
Which sector?
Sir, our majorly order book is in the road segment. So are we diversifying in more like what are metro projects?
Already, we have given the guidance that this year, we are having 18% of the orders, balance orders of railway other than road only. And keeping that in line, in '25, '26, we would be roughly targeting at about 25% to 30% of orders on the other sectors other than highway.
The last question is from the line of Sarvesh Gupta from Maximal Capital.
Sir, just one question. So going forward, what -- so out of your interest cost, let's say, INR 20 crores this quarter, what would be the overall split that we should assume between financial charges, which are levied by the banks and the interest cost? So what would be the split that we should assume in general? And secondly, going forward, given that you have, let's say, around INR 400 crores net debt on the balance sheet post the receipt of sale proceeds, then what should be the interest cost on a yearly basis?
See, interest costs definitely for this particular quarter as we have seen, there are a few quarters where the bank charges and commissions are a bit high. In this quarter 3 and quarter 4, normally in the past also, we have seen that good trend. But overall, if you see the interest portion in INR 22 crores as of this quarter, it is around the interest on OD and it's about INR 10 crores to INR 11 crores interest by the clients from the client advance. Major commission and these bank charges are a bit high. So this is very high about, say, [indiscernible]. So now looking into that trend once we receive this, roughly around INR 65-odd crore on a year-on-year basis would be the trend of interest including charges, bank charges [indiscernible].
Of which around 60% should be the financial cost and remaining would be the charges.
Roughly, you can consider that.
Understood, sir. And on depreciation, should we -- we are at INR 37 crores on a stand-alone basis per quarter. So what should be sort of the going forward rate we should assume?
This number is coming around INR 140 crores, likely to reduce because the CapEx what we have done in last year and this current 9 months to the very high CapEx being done. So just kept -- in the coming years, this CapEx is good enough to take the 15% to 20% year-on-year growth, just INR 70 crores, INR 75 crores of net, say, CapEx to be done in the next subsequent 2, 3 years. So this is going to likely to come down significantly, not in these 2, 3 quarters, but definitely later on.
Thank you very much. As there are no further questions, I would now like to hand the conference over to management for closing comments.
I extend my gratitude it to everyone who contributing their experience and expertise to the discussion. We value our presence on today's call and trust that we have addressed all your queries. Should you have any additional questions, please feel free to contact our Investor Relations adviser, Go India Advisors. Thank you for your active participation once again. Thank you.
On behalf of Go India Advisors, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.