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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good evening, ladies and gentlemen. I'm Stephen, the moderator for this conference. Welcome to the conference call of Ircon International Limited arranged by Concept Investor Relations to discuss its Q2 and H1 FY '22 results. We have with us today, Shri Yogesh Kumar Misra, Chairman and Managing Director; and Shri Surajit Dutta, Chief Financial Officer and Executive Director, Finance. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand over the floor to Shri Yogesh Kumar Misra for his opening remarks. Thank you, and over to you, sir.
Thank you. Ladies and gentlemen, good afternoon to all of you. I welcome all of you to this conference, which is happening to discuss the financial performance of the second quarter and the first half ended September 30, 2021. With the unlocking of the economy, we have seen green shoots of progress in the economy as well as in the infrastructure sector where we operate. However, we still need to be cautious and careful. We see that the recurrence for COVID doesn't take place, so we are still going in a cautious way.Without taking much time, I would like to present to you the highlights of Q2 and H1 FY '22, and then open the floor for question and answers. I think the investor presentation has already been uploaded on our website as well as the stock exchanges. I guess you have had a chance to have a look at it. I will go into the details of the performance later. I'm happy to inform that your company has entered into solar power segment with securing an order of 500-megawatt solar power plant costing approximately INR 2,579 crores. This was obtained through a e-reverse auction with the viability gap funding. This takes the order book value of Ircon to INR 34,900 crores as of September 30, 2021. During this first 2 quarters, we have completed 100 kilometers of track linking on our important DFCC project of Vaitarna-Sachin out of the total 372 kilometers. We have also emerged L1 bidders in one project of signaling in Sri Lanka, which is about costing about USD 15.47 million. And in the domestic market, we have emerged as L1 bidders in 2 high-speed projects. The total value of these 2 projects is INR 8,571 crores, which includes the project of INR 3,429 crores, which is awarded to a joint venture of IRCON with another partner. We have also been appointed as independent engineer for operations management and development of Guwahati International project, airport project for INR 11.74 crores. So now as on 30th September, 72% of our orders are on nomination and 58% on competitive bidding. The domestic order book now stands at 96% of the total and the foreign projects is 4%. So the highlights of Q2 FY '22 standalone. Our total stands at INR 1,503 crores as against INR 1,015 in Q2 FY '21. The revenues from operations stood at INR 1,421 crore as against INR 968 crores in Q2 FY '21. The core EBITDA reported was at INR 98 crore as compared to INR 68 crores in Q2 FY '21. Profit before tax stands at INR 173 crores as against INR 104 crores in Q2 FY '21. And profit after tax reported is INR 133 crores as against INR 76 crores in Q2 FY '21. The earnings per share of the company stands at INR 1.41 equity share of face value of rupees INR 2 per share. The Board of Directors of IRCON has -- is pleased to appoint -- to declare an interim dividend of INR 0.70 per equity share on a face value of INR 2 per share for the second quarter. The interim dividend is in addition to the INR 0.45 dividend that we had given in quarter 1 FY '22. Thank you.
We open with the Q&A, sir?
Yes.
[Operator Instructions] The first question is from the line Vishal Periwal from IDBI Capital.
Sir, on this solar project, a clarity -- I'm taking the clarity that we will be the asset owner of this project and EPC will be done in-house? Is that my understanding?
Yes, we will be both the asset owner and we will do EPC in-house. We have a joint venture with another company for this project, which has an expertise in setting up such solar projects. And we also plan to operate it. We plan to sign the power purchase agreement and operate it also for the commissioning of the project. We also have an option to exit from the project offloading our equity to our partner at a pre-agreed rate of return, which is around 14%.
Okay. So in this JV partner, what is our share in this? And what is the JV partner share?
Ircon's share is 76% and 24% is the other partner share.
Okay. And what will be the funding structure of this asset?
We hope get to funding with about an 80-20 debt equity, which is what has been achieved by our partner for some other projects. For us, it's a new project. So we hope that we'll be able to get that funding easily because this is a very attractive project, and it will not be difficult to set it up and to sign the PPAs. Once we sign the PPAs, our offloading is assured. So I think we will not find any faculty in arranging these finances.
Okay. And is there any time line for this offloading of our stake at -- I think the rate of interest you mentioned 14%?
This will be the equity IRR that we expect. We will get out only at that rate or whatever is the market rate available at that time. So we will go for some kind of a market discovery of the price. If it's higher than 14%, we get that, otherwise, we'll get 14% from our partner. He is assured to buy it back from us. So this is the mechanism.
Okay. And second is...
Sorry, you also asked that what is the time period. So this project has to be set up in 3 years' time, 36 months.
Okay. And this -- the 14% you're saying, that will happen from the day 1 of investment plus COD plus some period of performance, then only this will conclude?
Yes, yes. It will happen from the day the investment goes from our side.
Okay, okay. And secondly on balance sheet, what is the -- I mean, the amount of own cash that you have in the balance sheet?
Our own cash in the balance sheet is INR 590 crores. So our total cash, if you see is around INR 3,899 crores. Out of that, INR 590 crores is our own funds.
Okay. And in balance sheet, I could notice, there has been a reduction in noncurrent assets from INR 1,385 crore to around crores. Sir, can you clarify. I mean the reason I'm asking like with the own cash there has been not a major change because what we have reported earlier. So what exactly is the reason of the reduction in the noncurrent assets?
Okay. So I think this is basically because of the return of the loan of Indian Railway Finance Corporation, which is actually a pass-through entity in our books. It is not a loan taken by Ircon. This was a loan taken by us for the Bandra plot. And this is a pass-through entity. The repayment obligation is of the Indian Railways. So they are repaying that loan. And so that's why you can see this reduction.
Okay. But I think in the liability side, there is lot of sharp reduction of that I could see. That's was the reason I was asking.
Okay. So we have taken money.
[indiscernible]
So I think the second thing is that we are actually now, we had given some money to our FPV road assets. And now we are replacing our refund given by us with loans taken from the banks. So I think from one of the SPVs of Ircon Vadodara expressway, we have taken back some loans and we have replaced it with INR 589 crores. So it has been replaced with the bank loan.
Okay. But then, sir, to that extent, our own cash should have increased. Sir, can you explain it?
I think it has increased.
We have given the dividend also, out of that and we have invested also. You can see that it has increased. If you compare with the previous quarter, it has increased.
And last thing from my side is on execution targets. So first half has been in terms of execution, the momentum has been there with us. So what exactly that we are, I mean, like internally targeting to close this year at increase of revenue and margins if you can give some clarity.
Yes, yes. I think our third and fourth quarters are the best normally for any construction company, any infrastructure company and [Technical Difficulty] resources are fully mobilized, and we have no issues on any of the projects where we are working. So we hope to close the year with a total revenue of more than INR 6,000 crores at least. And a profit of maybe around profit after tax that is what will be our projection. We should be able to exceed that.
The next question is from the line of [Jainam Shah from Ikura Securities].
Sir, just a follow-up question from the last question about the revenue guidance. So we were given understanding in the fourth quarter con call that we'll be touching around INR 70 billion for this FY '22 and around 100 billion for FY '23. Wherein now currently, we are seeing that around INR 6,000 plus crores of revenue for FY '22. So how we are maintaining the FY '23 guidance? And considering that almost 1.5 months for the 3Q has already been passed [Technical Difficulty] so any color on that?
The guidance, I think I would still like to maintain the guidance, although we hope to really surpass that the guidance that I'm giving of INR 6,000-plus crores. We will definitely surpass that. And next year's guidance also would remain the same because still, our one of the -- some of the major projects would be in the final stages. So we would be -- next year also, our revenue guidance should be better. And now that we are securing -- we are able to secure some more projects from high speed and all, so maybe the future guidance also would remain.
Okay. So with [indiscernible] so when do we expect to start the application on this thing, like 1 year or something like that?
Are you talking about the high speed?
Yes, high-speed.
Yes, high-speed projects, we have 2 projects. One is going to -- we are going to get -- start getting the revenues from the next financial year itself. That is 4 years project. And we also -- we have a track project, which is yet to be awarded. So there also, the project is 4.5 years, but the value is INR 5,100 crores. So INR 1,000 crore revenue, we expect coming from the second year onwards, because our procurement from -- the procurement for the projects would start and many of these components are to come from defence. So we will be -- so I expect this from second year onwards. Now first year would be preparatory year, where we are going to mobilize, we're going to get our people trained for the track project. We are going to -- so the time lines are such that after 1.5 years, in fact, we'll get the first wind-up for laying track. So second year onwards, our revenues will start and maybe around INR 1,000 crores this year should come.
Okay. Now coming to the margin point like we are having the EBITDA margin of around 6.7% and 6.9% as [indiscernible] in 2Q. Like we are in understanding about the overall EBITDA margin, including other income of double digit. So what is the exit for EBITDA margin we've been maintaining for this from a balance of year and for over the next 2 to 3 years.
If you see our core EBITDA margin was about 100 basis points higher this quarter, but because we made a provision for 1 closed project where we suffered some adverse judgment from one of our closed projects. So we made a provision of INR 15 crores, which comes to roughly about 1%. So our margin should have been better this year, but this is how I think, this is a range in which we hope to close the year. It's the same 7% to 8% is what core EBITDA margin, we will close the year.
Okay. And sir, coming to the road as a portfolio. So you said that we have taken back the loan that has been given to [indiscernible] project. So currently, what amount of investment we have given in this -- all these projects? And what more amount to be invested over the next 2 years in particularly road projects only.
Just give me a second. See, the total equity that we have committed on road projects is INR 607 crore, out of which INR 554 crores is already invested. So the remaining will be invested in our -- the latest project that we have is around Diwali. In all others, whatever was the ECT requirement, we have already invested. And out of the loan of INR 1,511 crores, which we have committed. INR 1,000 crores is already paid, and the balance will be paid in due course now.
On this loan amount of INR 1,500 crores to SPV, Ircon has committed?
Yes, to our wholly-owned subsidiaries, these are all road assets. So this is a requirement of the national high authority to create an SPV, and it has to be funded through a mix of [indiscernible]. So that is what we have done. So we have 6 SPV road projects, out of which 3 are already completed. We are earning rolling on 2 projects -- 3 projects. And 2 projects of hybrid annuity, we are expecting to commission this year. So our annuity payments will start within this year itself. And another one, the last one, the sixth one we are -- it has been awarded last year only. We are yet to have the committing date. And this also we hope to commission on time. Our record is to commission all road projects on time. So our tolling has started on time. And now on the hybrid annuity projects also, our annuity payments are going to come on time.
Okay. Okay. Got it, sir. But the way we have taken back the loan from the [indiscernible] project by taking the external let into the subsidiary. So are we not planning to take back this around INR 1,000 crores or INR 1,500 crores back by taking the loan from the banks of financial institutions.
Yes, we are. We have planned to do that. In fact, one , we have a sanctioned loan from one of the banks. We have also taken approval from the National Highway Authority. The National Highway Authority of India. So we'll be doing that, I think, maybe within this quarter or next quarter. We don't need the money right now. So we are just delaying it a bit, but we are hoping to get 1 or 2 maybe more highway projects, and after that we'll be taking this money and then taking out our cash.
Okay. Sir, as of now there is not much requirement around requirement is there to be putting with these projects, the inflow could be at around INR 1,000 crores?
That's right.
Our next question is from the line of [Anuj Jain from Globe Capital].
Congratulations on a good set of numbers. So I just want to know, sir -- I mean, can you please give some color on the Bandra land? And I mean, what kind of approvals we have got and what kind of development we are eyeing for?
In which project?
Bandra.
Yes. Bandra, actually, we have had in principle approvals coming from MMRDA and the Maharashtra, the Greater Mumbai corporation. We have in principle approval from them. But then we have to process and sign a tripartite MOU between railways, MMRDA and Ircon. So that also draft we have submitted, it is under consideration by both the other parties.
Okay, okay. So what kind of revenues we are looking? I mean whenever it goes through?
See, right now, nothing can be said because the main issue with the development of that project was the entry and exit, which has to be permitted by MMRDA. So they have, in principle, given the approval. So once that happens, only then we'll be able to realize the true potential. Initially, we thought we would be hitting about INR 3,200 crores of revenue from the lease -- long-term lease or sale of the plot. But that depends on whether we are able to get good entry and exit points, and that remains the key element, which is yet to be decided. But principally, MMRDA has agreed. Now after that, there is a sharing of revenue also between the government of Maharashtra and railways. So that's why the tripartite MOU is to be signed. And that is under consideration. We have submitted the terms and conditions of the MOU to both, and they are looking into it.
What is the market value of that land approximately, sir?
Approximately, as I said, when it was given to us, it was expected to be about INR 3,200 crores.
Okay. Okay. And one more thing, sir. I mean, as we have read...
Sorry, it also depends on -- see, there are issues of FER also. So MMRDA has also indicated that they can permit a higher FER also provided we are able to share bigger revenue with them. So those issues are also there. So that also depends on what is the final approval that we get. And based on that, we'll be able to realize the potential of the plot.
Okay. Okay. And sir, just a few months back, we have read that government is looking to monetize the railways -- assets of the railways. So what kind of benefit that Ircon will get from those monetization, asset monetization?
See, earlier, the assets we have are mainly the road assets that can be monetized, so we have 3 roads where we are collecting tolls, they can be monetized. There are 2 roads which are on hybrid annuity, they can be monetized. So earlier in fact, we had also planned to monetize these assets on our own. And that is how -- that is why we were taking out our own investment into these projects and replacing it with a bank loan. That is what I think we are waiting for some clarity from DIPAM on this because they have said that we have to wait for guidance from them, whether these assets will be taken over -- I mean will be monetized by them. And then after monetizing what kind of -- out of these assets, what kind of revenue will be taken by them or it will be remained with the company, that is yet to be seen. We are not -- we have not received any broad -- and we have only received some broad indications. So it could be that the assets are monetized, taken over by DIPAM and then monetize. And then whether that money part of that is given to us or taken by the government, that is yet to be seen.
What you have said is for the road assets. I mean, I'm talking about specific railway assets. I mean, do we have some railway assets?
No. As of now, we don't have any railway asset, which can be monetized. See, the projects that we have, they are all EPC contracts from the railways. So once we finish those projects, we just hand over to the client. They are all owned by the railways. The railways or dedicated trade corridor, all the high-speed rail corporation or we are working for the National Capital Region Transport Corporation, NCRTC, all these projects are on EPC, where we are just going to execute the project and hand it over to them. So these assets is yet to be monetized that will be done by those authorities, not by us.
And it will not impact Ircon in any manner because we are not any way related?
No, no. In fact, we are not into asset creation. We went into the road asset because we also got the opportunity to do the EPC contracts and earn some EPC margins on that.
The next question is from the line of Venkatesh from LogicTree.
Two questions. One is actually was asked by another participant. But just a little more clarity. In the previous guidance, we were looking for INR 7,000 crore top line this year and INR 10,000 crores. And if you see the recent quarter, we are well on track to that. So is it safe to assume that on a stretch it could be INR 7,000 crores, but above INR 6,000 crores. And are we on track to also keep up with the goal of INR 10,000 crores.
Yes, we are. We are on that goal, but there is a slight setback on that in the sense that the Ministry of Railways have decided that they will not give any more work to us on limited competitive bidding or -- so we have to actually get now contracts on competitive bidding with private contractors, which we have already done in 2 high-speed railway projects. We have already won those projects on bidding. So that all now depends -- because earlier there was an inflow of projects from the Ministry of Railways also. So now it depends on this and -- basically because of COVID the last 2 years, we have not been able to secure any major projects abroad. So that is one, again, which we had factored in for the guidance of INR 10,000 crores. We are still hoping to get something between this year. So if we are able to get, say, 1 or 2 good projects in foreign countries, then I think we can still maintain that guidance. But if we are not able to do because now it is a slightly uncertain thing. Earlier, the Ministry of Railways used to give us some projects -- they had limited bidding amongst the PSUs where we were very competitive compared to any other PSU. But now that we have to go for an open bidding with private contractors, which in any case, we do. So our 30% order book now is that only. But now that is a slightly uncertain thing. So how much we are able to secure will determine that INR 10,000 crores guidance.
Okay. So of the existing order book, if there is no new major order flows, I'm just assuming a scenario. The current order book can this be executed over the next 24 months?
No, no, no See, our order book is at the start of the year was INR 34,000 crores. And we would be executing say, INR 6,000 crores of orders out of this. So -- and what we expect to get back within this year from where we have already become L1 or why we have already been awarded contracts is about INR 10,000 crores. That means we will be adding INR 4,000 crores to our order book of INR 34,000 crores, which is INR 38,000 crores. But the revenue guidance, if you see INR 6,000 crores, INR 7,000 crores range. It will mean that this order book will get executed in the next 4 to 5 years.
Got it, sir. Got it. Correct. But is it safe to assume that FY '22, we will finish with top line anywhere between INR 6,000 crores to INR 7,000 crores?
That's right. That's right. We will definitely -- we should be able to definitely reach that number.
Okay, sir. That's great. And the second question is with respect to the monetization of Vadodara, do you expect more road assets, the same thing to happen in the other projects as well, where you would as the -- you will withdraw from the JV and arrange for bank loans?
No. See, in all other JVs, other than the road assets, which are our wholly-owned subsidiaries, except for one, which was taken long back. What we have done is we have formed JVs with the whole companies. And with the whole companies, the project sizes are big. So there, we have not gone for any loan from our side. And so we have already arranged for loans for those projects. So we have moved ahead on those projects only after achieving the financial closure. So from those assets, we don't need to withdraw anything, we have not putting any of our money except for the equity.
Right, sir. Right. Got it. And in terms of profit margin, net profit margins. This quarter, we did about 8.82%? Is that something that we can assume for the future, 8.8% to 9%?
Next 2 quarters, yes. I can confirm next 2 quarters that we should be able to achieve. After that, we'll have to again see next year how it stands out.
Okay. So last one, which is in terms of the monetization of this one. We have some land or a commercial complex somewhere in Noida or something. And then we have a little land in BKC as well. When do you see this happening, so the monetization next year or any time frame for it?
Yes, the BKC land is owned by the railways. We were only asked to monetize it for the railways, right? So that is how it was. And so that will happen because a lot of complications with that because the state government is involved, the railway is involved, the central government is involved. So that is being done. And I think I said something sometime back. That is the status I just told you. The Noida asset, our Gurgaon asset, all these are owned by Ircon. So this is where we have invested, we have put in our capital. In fact, we had already awarded the lease to one of the mall owners, and we were expected to start getting revenues this year. But because COVID, most of those people have backed out. Again, we have open bidding for this. And within this year, we hope we see some offers. One of the buildings is also going to be put on rent shortly with the GST council, I think, in Noida. So we are working on that. I think the market is improving. So we hope to get somebody who can take it on lease and start earning revenue from there also.
Got it. Got it. And the Indian railways land at VKC, if it gets monetized, what is -- what will we get, sir, as a result?
We are going to get a fee out of that. We are going to get a fee out of that. That is not owned by us.
The next question is from the line of [Priyanka from Naredi Investment].
My question is regarding any steps that you might have taken to speed up the execution process -- you know can you consider constituting a dedicated team for monitoring of the same under the senior management leadership. Your views on this will be helpful.
See, as a project company, we already have a good mechanism in place for monitoring of the projects. And we do it regularly. And recently, we have -- I think last month only, we have gone live on one of the -- where we have implemented SAP S/4 HANA on our -- in the company. So that would -- and out of that, the finance module and the HR module is already functional now. And we will go into the project module and other things, which will also start working shortly. So we hope to increase our efficiencies, I think, after that because that is going to bring a big change in the way we monitor our service.
Okay. And secondly, sir, can you give the percentage of where your orders that are on a nomination basis? And where do you see this percentage going forward?
As I already told you about 70% of our projects right now are on nomination, 30% are now on competitive bidding. And I've already told you that we have become L1 bidders in some projects in high speed. So that will be -- whatever orders we have got this year are likely to get now, which is about INR 10,000 crores worth of orders. That will all come in the competitive bidding because railways is not going to give any more projects for nomination. So there, we don't see any growth happening. We have -- our share of the projects one on competitive bidding is going to grow moving forward.
The next question is from the line of Shreyans from Equirus Securities.
Sir, just 1 suggestion, if it's possible to share at least the project details of 10 projects -- your top 10 projects, which have come under execution, so that it would be easier for us to understand which projects are contributing, and at least arriving at that INR 6,000 crores or INR 7,000 crore number.
I can just tell you the -- I can tell you the top performing projects up to the H1 FY '22. So we have about INR 730 crores coming from our J&K project, INR 307 crores coming from DFCCIL project. From our Sivok-Rangpo railway line, we have about INR 290 crores, Katni-Singrauli doubling, we have INR 160 crores, Vadodara Kim Expressway, we have INR 135 crores, Katni-Singrauli grade separator, we have INR 120 crores [indiscernible] INR 90 crores. And so these are our major projects, which have contributed to the revenue in the first half. And these are the projects which are likely to continue, what it can contribute I think in the second half as well. So we are expecting major contributions coming from the J&K project, Sivok-Rangpo, DFCCIL, Vadodara Kim and Chhattisgarh projects. So I think that is where I think the major contributions are going to come.
Sure, sir. And sir, at the same time, is it possible for us to get -- what is the outstanding order book in these projects? That would be really helpful.
Outstanding order book that I have just mentioned, the INR 34,900 crores is based on the balance value of the work.
So sir, I just wanted to balance order book from the projects, which was just discussed. So what is left in the company? What is DFCCIL?
I think you can -- I will ask my CFO, you can mail it to them and ask them, and they will provide you the details.
Okay, sir. My second question is pertaining to the IRSDC. Now that the ministry has taken a call on winding up the operations. So what is the status out there?
The Indian Railway Station Development Corporation has been wound up that is now -- that will not be there. So all their projects will be handed over to the railways. So the owner railways will be executing these projects. See, what had happened was that the IRSDC was set up basically to develop the railway stations by exploiting -- commercially exploiting the land that was available nearby the stations or within the station premises, near that.Now only one station, which has recently been inaugurated, I think yesterday only, Habibganj, that is the one which could get -- there only the land would get monetized and that money was used to rebuild the station. After that, the response of the developers has not been very good. And so the IRSDC was also forced to do most of the projects like Gandhi Nagar or Surat, they were doing on EPC. So the railway thought that probably is better that the zonal railways themselves do the project rather than giving it -- if it is to be done on EPC, then railways are themselves are capable. IRSDC was expected to basically monetize the land and then use that money to develop the station. So now Railways will be doing it directly, and we can participate in those tenders. So we will participate in those tenders. We are doing some station development. One is the Safdarjung station in New Delhi, we are doing. There are 2 stations, 1 in Shalimar and Santragachi in Kolkata, which we are also doing. So we have the experience, and we will be -- possibly we will try to take some pie out of -- I think they are going to go in a big way, probably INR 10,000 crores is the money that they are going to invest in development of the projects. And zonal railways will be going for it, we will participate there.
Sure, sure. And sir, what happens to our investments which we made in this arm?
Our investment fee, if you -- I think if you remember, we -- our equity investment initially was around 51%, which we had already brought down to 26%, okay? And the rights had taken a part of that. So basically, after the winding down of the company and the -- we are appointing in the process of pointing a valuator. And so there are assets, there are a lot of intangible assets, which the company has generated. So the exact position will be known after all the valuation is completed. So we will get our equity back maybe with some profit or that we do not know, that will come to us only after the entire exercise is over.
Annually, what we were given to understand that there were certain percentage of IRRs, which are -- which are confirmed or likely to be there around 18% or 19%. So will this not be the case now?
No, this is for 18% to 19% in which projects you are talking about?
For the IRSDC investments sir, whatever investments we made, there were certain returns, which were guaranteed to us. That's what we were going to understand.
No, no, in IRSDC, there were no returns guarantee to us. We were expecting -- when we went for that company, initially, it was a subsidiary of Ircon. Initially, the Railways asked us to set up a subsidiary because they thought Ircon is best placed to do that. So we created that subsidiary. And when that investment was done, we were expecting to get a good return. But because the market did not -- the market -- the real estate market went down. So we -- basically, if we had been able to exploit the land to get more developers, probably that would have given an income to IRSDC. And that would have probably fetched the kind of return that you are expecting. But I think now that is not there. And in many cases, it is being wound up. So now we are only looking at getting back our -- whatever is the equity and whatever possible -- whatever return is possible, that will be known after the entire exercise is complete.
Got it. So my next question is pertaining to the high-speed projects. So just wanted to understand the rationale behind going for a JV? And what will be our quota for this project?
We have gone for a JV in 1 of the 2 packages. We have been awarded 1 package, which is INR 3,400 crores. This is an elevated viaduct of 18 kilometers in Ahmedabad area. Our company did not experience. This viaduct is to be built as a segmental construction for which we did not have experience. So our purpose was to get that experience because we wanted to use that for getting more projects. But because this project is very close proximity to the railways, it involved a lot of railway crossings, closing the station, building off the station building at Ahmedabad and all. So our partner basically approached us. In fact, it is not our qualification on the basis of which we got -- it is our partner's qualification. So we are providing the technical expertise to them. We will be sharing the cost for the plant and machinery and for the resources. And that way, we'll be there. But as a contractor, because we didn't have the experience, so he will be executing a large part of the work.
Okay. Okay. So in terms of revenue potential, so how much can we earn from this? From the INR 2,800 crores?
Would be -- our share is about 50%, and we expect about 5%, 5% to 6% return on this.
Okay, okay. And for the other projects of which is of INR 5,000-odd crores.
That is entirely of Ircon and we have taken it on, again, our competitive bidding. And there also, the margins are like that only because -- this was a very specialized kind of work, and we wanted to enter into this. So this particular first package, we have bid on a very competitive price. But there are second and third packages, which are going to come. So once they come or once more such high-speed projects come, then we want to basically develop that kind of an expertise. If we don't do that, we'll be simply out of the market. So this is more of a strategic work for us, and we have taken -- that's why we've taken it on around 5% margins.
So when you are saying 5%, you're talking about 5% PAT margins or?
Yes, 5% PAT margin.
Got it, sir. Sure. Sir, and now coming to you there are media reports of RVNL merging with Ircon. So what's your take on that?
As of now, I have only read it in the media. You read media reports. I have also seen it in the media only. There is no official communication regarding any such proposal. The only thing I can say is, yes, the government in entirety, there is a stated objective of the government. I think it has been stated in the parliament that they want to reduce the number of PSUs. So that may be the cause of this speculation that we are merging the 2 entities. But if it happens, it is going to be a win-win for both of us because both of us have a complementary kind of relationship and we can really build synergies, which will help both of us. So I think that is what I can say. But right now, there is no formal proposal, nothing is there from anywhere. We are not seeing anything from the ministry.
Got it. Got it. The last 2 questions from my side. One, in terms of CapEx, how much have we done till date? And what are the plans for the second half of next year?
Sorry, can you just repeat your question?
The CapEx we've done in the first half, what is the likelihood of [indiscernible]?
We are -- we don't have -- we are not expected to have a lot of CapEx for -- we have not been given targets for that. The target for the year is about INR 100 crores, which we have already done. Our CapEx is limited to the procurement of plant and machinery and some such things. So that's for our project. So that is INR 100 crores, which we have already achieved.
And nothing in solar that we have to invest?
Yes, solar when we do, yes, that will come in. But solar, it will come in the form of equity, not as a capital investment.
Okay. Okay. And sir, that is that -- I mean what would be the quantum out there in terms of equity?
The project cost is INR 2,580 crores, and we expect to fund it with an 80-20 debt-to-equity ratio. And we have a 76% share in that in a JV there. So 76% of this 20% is around 15% is what we -- INR 392 crores is what we are expected to put in.
Got it. And last question pertaining to our Noida land. So just wanted to understand what is the potential development as an area out there? And what are the investments that you made in this area?
See, these were basically done a few years back when the government of India also wanted us to put in our capital to good use and some money into that -- and when the real estate was really doing well. So at that time, we had purchased these slots in Noida and all these buildings are complete. One is for our own purpose. The other 3 are going to be leased out. One is a mall where we had already appointed a mall operator. But then because of COVID, ultimately, he backed out. One building is we are going to give it on a long-term lease. Another one, we are planning to put a data center along with Railtel. So we have plans to do that right now because the real estate market has not been good. So otherwise, the demand for it would have been really, really very good. And we would have got good returns on it. But I think we hope to see some better situation probably towards the end of this year or next year.
Right. So would you like to put any numbers, I mean, the 3 buildings which we are planning to lease out around 1 million square feet, 0.5 million square feet?
I don't have the details right now. But I think the total investment in these would be about INR 100 crores, INR 518 crore in Noida -- INR 418 crores in Noida and INR 100 crores in Gurgaon. So I'm really not sure because we are still in the process of leasing them out. We have invited bids. And earlier, we could not get good enough bids. So unless they come up, I cannot really tell how much revenue we're going to turn out of that.
The next question is from the line of [Rishikesh Oza from Robo Capital].
Sir, firstly, I wanted to clarify on the FY '23 targeted revenue that you said of INR 10,000 crores. So is it possible or only going ahead, you will be able to give us a correct figure?
So it was definitely possible when we put it out because we were continuing to get orders from the railways, both on nomination or limited competitive bidding. Now that the railways has decided to give it only on competitive bidding with private players, those projections we maybe need to be revised. We have to see how competitive we are. So within this year, I think we have done well. We have taken -- we will be taking orders worth about INR 10,000 crores. And maybe we have also become L1 in 1 Sri Lanka project, and maybe we also target to get 1 project in either in Myanmar or Bangladesh. So that it depends on how we really are able to work out this competitive bidding scenario. So maybe by next year, first half, I think we should be able to give a better projection. Yes, it is still achievable. INR 10,000 crores is still achievable. We may be able to do that next year.
Okay. So given -- assuming if we are able to achieve INR 10,000 crores of revenue in FY '23. So would it be fair to say that we can do around INR 900 crores of PAT?
The margins are not going to be going to improve dramatically because see, once we are going for competitive bidding only. The margins right now, if we see the kind of bids which are coming for NHI or for railways, you have 20 bidders, you have 30 bidders, you have 40 bidders in every tender. So it's not possible to take contracts on good margins. That's why my expectation is that our margins are going to be similar. Even if we are able to maintain the margins that we have been doing this year or earlier years, I think that will be good enough.
The next question is from the line of Vishal Periwal from IDBI Capital.
Sir, in our quarterly performance in the segmental international, I mean the revenue line item and the international side shows there is a loss. Can you clarify the reason for the same because the revenue has seen an increase on quarter-to-quarter?
See, although on our current projects, there is no loss. As I told you, our core EBITDA margin is affected by around 1%, and that is because of this INR 15 crore provision that we have made on our Malaysia project, which is closed long back, but there were some arbitrations going on. And in one of the arbitration cases, we had an adverse judgment against us. So we have provisioned INR 15 crores in that. That is why it is showing a loss.
Okay. So that's more like a one-off and may not continue?
No.
And second, I think you just mentioned around INR 400 crore kind of equity deployment will be there. For the solar asset, 500-megawatt. So is it fair to say it will happen over the next 2-odd years in terms of our investment in solar?
Next 3 years is when we have 2 agreements, 1 year we have for the financial closure. And after that, 3 years for implementation. So it will happen, I think, over the next 3 years.
Okay. And any other equity investment that we have that is pending in the subsidiaries or joint venture that we have, anything that we should model.
We have already planned for equity investments in our joint venture companies with coal -- for coal connectivity projects. So there, we have some investment spending. We have investments of INR 117 crores pending for -- for I think 2 of our subsidiaries. Of course, 2 of our -- sorry, not subsidiaries, the joint venture companies with coal companies.
Okay. And so that will happen over the next 2-odd years?
Yes, yes. No, it will happen, I think, within a year or so.
Okay. And last thing is on the solar project, can you name the JV partner?
INA a subsidiary of India Infrastructure Finance Limited, IIFL.
Okay. And so the reason of asking this, like of entering into this structure, Ircon...
Basically, what happened was it started with a signing of an MOU with IIFL, where we, together, we thought we will look at investment in assets road or solar, right? And because INA is a company which has a 51% shareholding of this IIFL,and I think 20%, 30% is from a British capital CPC, some other investors. So this -- and they had already -- they have already have experience of setting up 2 or 3 solar plants. So they approached us, and we thought, yes, because we didn't have any experience on our own, maybe we could not have just one and got this work. But this -- when we saw that there was a competitive bidding being done amongst the PSUs. So only the power PSUs were participating, NTPC, DHEL, Singareni, only power companies are participating. So we saw an opportunity and because they had the expertise, so we went with them. And that is how we were able to win this 500 megawatts because we are the only, I think, non-power player who is there.
Okay. And is the IRR that is committed, I mean, INA has to make sure that they have to shell out that much to you. It won't depend upon like at what time the market view will be?
No. See, this particular tender has been -- it's a government aided kind of a tender, where the government has also provided us with some kind of limitations like we have to buy it from Indian manufacturers The power purchase agreement has to be entered at a maximum of INR 0.45 and with EGS as provided by the government, which was the variable that we quoted. So based on that, our financial modeling suggests that in next 1 year, we have to go for the PPAs. And we have approved the railways and many other -- we have to sell the power to government organizations. And there are more than 500-megawatt is there, the demand is much more. So we'll be able to sign the PPAs. Once we sign the PPA, around 45 to 40 even -- our return on equity is almost guaranteed, right? So we'll be able to get that. In fact, we are expecting to get more so that the condition that if the market is able to give us a better return on equity after the completion of the project, INA will pay that. I mean or otherwise, they will let the other one buy it. So 14% is the guaranteed for us.
Okay, okay. And then can only happen after the continuation. So in the initial 2, 3 years, it will be investment and then the return will be there.
There is also a portion of the EPC contract that we'll be doing, like setting up of the power station, the setting up of the transmission line and some other assets, electrical assets. So we'll also be doing part of the EPC contract and the other will be basically only cost. I mean it will be cost neutral. So it will be like buying the solar panels and all, there will be no profit put in by any of us. But there is an EPC part of the contract where we will do the work and we will also earn some revenue from there.
The next question is from the line of Vipul Shah from Sumangal Investment. The next question from the line of Parimal Mithani from Credential Investments.
Congrats on good numbers, sir. So I just wondered, both of the questions you have answered. I just got clarity on 2 things, sir. One, in terms of the dividend policy. So is this -- are we going to go with quarterly dividend payout now, sir? Is it safe to agree with that?
Yes, because we have been instructed by DIPAM. It's not mandatory, but they have said that we -- they have said that it is preferable that we go for that. So as of now, we are planning to give a dividend quarterly, I think unless there is a reason not to do it.
Okay. And sir, secondly, in terms of your monetization of your assets, you have 3 assets we are supposed to monetize from -- and we are supposed to come from national pipeline for this thing, but I didn't get clarity on that. Is it -- are we waiting -- is the fund going to get to us or what's the status of it, if you can help us?
So I think I told you earlier also that we were planning to monetize them ourselves. But now we are waiting for a clarification whether we have to do it on our own or we have to offer it to DIPAM,and they will do demonetization. So once that comes, we will move ahead on that.
And yes, sir, 1 question that this competition among PSUs is more or less removed now. And -- so how do you see? I mean is there any clarity in terms of how do you compete in the market now, as the nomination will no longer be there.
See, for us, for other PSUs, it might be an issue. For Ircon has been competing. We have -- already we have 30% of our order book, which is on competitive bidding. So we don't see an issue there. In fact, we have already secured, as I said, we have become lowest bidder in projects in high-speed railway. So we will be doing more aggressive bidding in NHAI and other railways -- because railway is now going to do that. So in railways, amongst all the PSUs, I think we are the best place to compete and get the work, right? So I don't see any challenges there. As I said, the challenge would be on margins because with the nomination projects, some margins were assured. But now we will not have any assured margins. We'll have to see bid out and then do it efficiently to earn our margins. So that is where the difference will come. We hope that we'll be able to get a reasonable number of projects, both in the domestic as well as international markets.
Okay. INR 12 crores CapEx, and you have the bench strength and the expertise compared to all the PSUs. So how do you -- what makes you feel confident about that you'll be able to compete with rest of the PSU, sir.
Nobody secures any projects on bidding. We are the only one. You name any PSU, nobody either RVNL -- RVNL has just started. And you see REITS, but REITS is in a consultancy field more of a consultancy field. So in execution, again, they are not there. And if you see other PSUs as well, nobody competes in the domestic or international market. So we have been doing that for years now, and we can continue to do that. We hope to secure projects. But again, I would repeat, the margins are going to be under pressure.
[Operator Instructions] As there are no further questions, I now hand the conference over to the management for their closing remarks.
Okay. So I think I'll thank you all. Thank you, Mr. Stephen, and thank you, all the others who have participated in the conference. I would like to thank the analysts and investor friends who have taken time out of their busy schedule to listen to us today. As already said in the conference, you can get in touch with -- for any assistance or any information that you need. And we will be happy to provide that to you. Thank you.
Thank you all for being a part of the conference call. If you need any further information or clarification, please mail at gaurav.g@conceptpr.com. Ladies and gentlemen, this concludes the conference call for today. You may now disconnect your lines. Thank you.