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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, good day, and welcome to the Ircon International Limited Q4 FY '23 Analyst Conference Call, hosted by Perfect Relations Private Limited. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Ms. Mamta Samat from Perfect Relations Private Limited. Thank you, and over to you, ma'am.
Thank you, Dovin. Good afternoon, everyone, and thank you for joining us on Ircon International Limited Q4 FY '23 analyst conference call. Today we have with us the senior management represented by Smt. Ragini Advani, Director of Finance; Shri B. Mugunthan, Chief Financial Officer and Executive Director of Finance; Shri. Alin Roy Choudhury, CGM Finance.Before we begin, I would like to say that some of the statements that will be made in today's discussion may be forward-looking in nature. We will begin the call with the opening remarks from the management, after which we will have the forum open for the interactive Q&A session.I would now request Smt. Ragini Advani for the opening remarks. Thank you, and over to you, ma'am.
Thank you. Thank you, Mamta. Good afternoon, everyone. I am Ragini Advani, Director of Finance, Ircon International. On behalf of my team, I extend a warm welcome to you all, and thank you for your presence today at the Ircon's earning call for the quarter and year ended 31st March 2023. I have with me my CFO and ED, Finance Shri. Mugunthan; and CGM, Finance, Shri. Alin Roy Choudhury.I would like to express our gratitude to all our stakeholders for their continued support and trust in the organization. Our focus remains on a strong foundation for sustainable growth and maintaining a robust balance between long-term value creation and short-term profitability. We are committed to leveraging our expertise, resources, partnerships to drive and enhance our operational efficiency as well as have better outcomes for our investors.Our projects are progressing well. We have had a very good financial year '22-'23, and we do hope to continue the momentum for '23-'24. As you are all aware, we have crossed the milestone mark of INR10,000 crores in terms of our earnings. The company maintains a healthy order book of INR35,000 crores as on 31st March 2023. Many of these orders are on a competitive bidding basis. We continue to focus on railways as well as highways and execution will continue to be our focus for FY '23-'24.In terms of our financial performance of Q4 FY '23, the company has reported a total INR10,750 crore in FY '23. It's 42% up from FY '22. PAT has increased to INR765 crores as against INR592 crores in FY '22, almost an increase of close to 30%. Core EBITDA increased by 15% to INR735 crore vis-a-vis INR640 crore in the previous year. Our earnings per share has gone up to INR8.14 per equity share in FY '23 as against INR6.30 per equity share in the last fiscal year. And this is considering our face value of our share at INR2 per share.In the last few years, FY '18 to FY '23, we have had a CAGR of almost 20% in our revenue and a CAGR of almost 13% in our PAT. VOD has also recommended final dividend of INR1.20 per equity share on a face value of INR2 per share, thereby giving an overall dividend of INR3 per share, and this will be, of course, subject to shareholder approval in the ATM. Currently, Ircon has 11 subsidiaries, including 10 wholly-owned subsidiaries and -- this also includes nine roads and highways SPVs. Apart from that, we have seven joint ventures, out of which 1 -- out of which 5 are relating to coal projects.Without taking much more time, now I open the floor for Q&A session.
[Operator Instructions] The first question is from the line of Manish Ostwal from Nirmal Bang Securities Private Limited.
And my question, first on the order book position. So, sir -- madam, this has declined on Y-o-Y basis almost 19%. So one, what is the outlook for FY '24 in terms of order inflow? And secondly, how is the pipeline of the orders -- order book, so that we can get some visibility about the increase in order book in coming quarters?
So, yes, our order book was at a peak about a year back, almost close to about INR43,000, INR44,000 crores. As I've been maintaining on all our calls, we have had execution as our main area of focus in FY '22-'23. And therefore, it has gone down by almost INR10,000 crores to come into the range of about INR35,000 crores. We are going to go focus now in terms of getting more orders from the market because we do like to -- we would ideally like to get it back to levels of about INR45,000 crores to INR50,000 crores going forward and the efforts have started. But as I've been saying that up to March '24, our bulk of the team and management efforts would continue on execution. And we would continue now onwards to look at certain projects, where we see we have a niche or where we see the margins would be protected going forward. There is a lot of opportunity that is sitting in the market. That is not a problem. The issue is one that we have to execute it well and two, we have to maintain our margins. So rest assured, yes, we should be taking that target forward.
Secondly, on the operating margin side, we have seen the decline of operating margins, especially in quarter 4 and even full-year basis, there is a decline in operating margin. So, in your opinion, what is the sustainable margins in our business, where below that we don't want to work? So where do -- how one should think of operating core EBITDA margin for the business to sustain?
See, our core EBITDA margins, in fact, again, as we've been saying our EBITDA margins, where we like to sustain and we think we'll be able to maintain is 10% to 11%, a percent here and there can always happen. And right now also the overall decline in our margins on consolidated level is about 0.7% to 0.8%, so which is within that 1% range. Now that happens because of many factors. There are times when certain jobs are about to be ending or there are certain jobs where certain provisions need to be created because these are jobs spread over 3 to 4 years. But we will continue maintaining the margins of EBITDA in the range of 10% to 11%.
Madam, the core EBITDA margin has declined by 158 basis point on...
Actually -- actually that gives a wrong figure because in our annuity model, in all our HAM projects are part of our income comes in other income, but that is pretty much an operational aspect of HAM. So if you were to take that out, then our decline is about 0.7% to 0.8% only.
Understood. And revenue growth guidance for the next year? We have achieved our guidance for this year.
Revenue growth, I mean, we were expecting to close -- this time close to INR9,500 crores. We surpassed that and we've got, obviously, more than INR10,000 crores. As the base has grown bigger, our -- I mean, we will probably have a jump of about 5% to 7% on this number.
5% to 7%.
Yes.
The next question is from the line of Abhishek Maheshwari from SkyRidge Wealth Management.
Congratulations on crossing INR10,000 crore mark.
Thank you.
Yes. Ma'am, a follow-up on the previous participant's question. Ma'am as you said, you are focused more towards execution. Last year you were and even this year, you will be. Ma'am, but this whole bidding thing, the strategy we are not able to understand because other players are gaining a lot of market share. I mean, look other players like [ RV Energies ] [indiscernible] a lot of companies are gaining a lot of big huge ticket orders. So you -- are you -- whether it could lead to losing market share to other companies? And what's the strategy because INR2.4 lakh crores railways budget was announced. And how much are you planning to bid this year, ma'am?
Yes. So I've understood your question, there are 2, 3 aspects to it. First, it is not a limited market, it is not a market of INR100, where already people have taken orders of INR50. So I should be worried. It is a huge market sitting there and there are enough opportunities for all of us. Second, as I've always mentioned, we would like to maintain our margins and bid. It is very easy to get orders and say that we've got many orders, but ultimately in a long-term basis, it has to be at sustainable margins.The third thing is that I also mentioned that while execution was our focus in FY '22-'23. In this year, apart from execution, we will be going whole-hock on the order book front also or on the business development side also. We have already started initiating lot of business proposals. And we do hope to come back to the order book levels as we had previously. So we have a clear strategy in mind, it is just that we were not in a hurry to pick up jobs, which are being picked up at the losses.
Got it, ma'am. And then, ma'am, if you could give any guidance as to how much value of projects are you planning to bid this entire year or that's confidential?
It's [ suffice ] to say that because we are, as I said we are going hold off -- in the last 2 months only, we have picked up -- I mean, we are bidding for jobs, which are exceeding many crores. But then the point is, ultimately, everything is a competitive market, and it will really depend on the ratio in which we actually get up and then again, we'll revisit our strategy and accordingly take it forward. But overall, guiding factor should be that we should be able to come back to our order book levels.
Ma'am majority of it is railways only or some HAM also and UPC also?
So it would be railways and highways.
Okay. Ma'am one last question. So ma'am, this year -- because next year there are elections, has the tendering process quickened it's pace or are you still waiting to see that kind of activity from government's end?
So our tendering process has its own guidelines in every ministry, as well as company. So all that will happen. What would be more important as I see it from a government point of view is, if whatever are the existing orders and the existing CapEx that they've committed is what they would like to finish earlier in the election time. In terms of orders going forward, they will take that pace to come, but they will be coming. I mean, probably, it will not be able to do an extra fast forward on that side.
Okay. So, ideally, 3, 4 months before elections, they stop awarding any projects, right? So they have only 9 months of this year to finish the entire tendering, right?
No. It doesn't happen that way. They don't announce any major policies, but a normal tender, which is going on a competitive bidding in a sector like railways or highways, they don't stop.
Okay. Okay. So irrespective of elections, the tendering process continues from the railways end?
[Foreign Language]
[Operator Instructions] The next question is from the line of Dixit Doshi from Whitestone Financial Advisors Private Limited.
First question is how much order we win during the financial year -- current financial year?
Current -- as on the first quarter of '23-'24 as of May.
In FY '23 full year, how much orders we win?
In FY '23, we have won around close to INR500 crores.
Sorry, how much?
INR500 crores.
Full FY '23, only INR500 crores.
Yes.
Okay.
And as far as these 2 months are concerned, again, I think it is close to about INR360-odd crores for these 2 months.
Okay. And now you did...
Project which is subject to certain placements of advise.
Okay. No, you did mention that we have also bidded for the project and as we are awaiting the final approval. If you can just broadly give a range that how much value of the projects we have bidded right now and are awaiting the result?
It is -- actually it is difficult for me to say because lot of these projects, I mean, it would be a sensitive data for me to declare it right now. But on the whole, I think the guidance factor for all of you should be because ultimately it will also depend if [ I can L1 ] in any of these or all of these projects are not. So given all those probabilities and the fact that it's a dynamic market. I think the guiding factor for all our investors should be that we will be focusing on our orders now, and we should be getting back to the order book levels.
Okay. Because --
Typically, pinpoint it will be little difficult to me.
Yes, because the concern was that our execution is quite large because we almost execute INR10,000 crores, INR11,000 crores a year. So our order book will deplete very fast. So that was the reason...
Absolutely, I mean, we are also as concerned as you all are. And that is the reason that we are picking up our bidding strategy again in this year.
And can you give your -- just qualitatively, how is the bidding happening? I mean, do you really feel that most of the projects are bidded at -- by the competitors at such a low margin, and therefore we are staying away from those projects?
Actually, there are different types of projects like different bodies in India, and all pertaining to railways or highways. It could be many, many such clients. Certain projects maybe the values are lower, maybe the work is run of the mill, and therefore, you have many people picking it up and some of them probably at a very low margin, if I would say so. But at the end of it, the universe is large and there are many projects, which are coming up where we feel that we should be able to get some part of it and we should be able to maintain our margins as well. So we are basically continuing to focus on those kind of projects. There is good enough of value projects sitting there as well. So last year, the projects that you've seen, where we have probably not come forward, is because we felt that there was -- those were being picked up at very low margins or at losses. But currently, we are looking at a lot of opportunities, where we should be able to take it at a decent mark.
Okay. And do we look at anything other than the railways and highways also?
Related -- related work...
Like building construction or institute...
Yes. So we look at building construction, we look at PMCs, we look at airports, again PMC at airports. And anything related, we are open to it. And we are looking at some of these aspects. So tunnels, complex bridges, we are looking at all of these.
Okay. Now my second question is regarding the other income that we receive. So for the full year, on a standalone basis, it was around INR340 crore and on consol at around INR382 crores. So this has jumped significantly. So is there any one-off like income tax refund or any write-backs, which may not occur in the future?
So it's a small amount INR17 crore we have bought as interest on income tax refund.
Okay.
And the rest is all out of dividend and interest income. Basically the reason why it's gone up is, as I mentioned, 2 of our projects have been declared commercial and HAM categories. And as a part of that HAM when we get annuity, a part of annuity comes as normal turnover and a part of it goes as a part of other income.
Okay.
So that jump is because of that basically, and I mean, we will continue, I mean, that because HAM projects will continue to give me annuity in both these areas.
Okay. And how much it would be annual HAM project?
See, HAM projects, we currently have 2 commercial. And we are still to do another 4 to 5 projects. So it will keep growing. I mean, there is not a set number that I can tell you right now. But in the current financial year...
No. Let's say in this 340 -- yeah, current financial year other income...
For current financial year, the interest in -- out of other income, about INR127 crores pertains to interest relating to annuity model of HAM.
Okay. Okay. So, most of the increase is due to that only.
Absolutely.
So is it fair to assume that this kind of other income will be sustainable?
Yes, absolutely.
Okay. And now, my last question is, if I see the annual number, on the -- the revenue has -- the difference between the revenue of standalone and consol is around INR400 crores. So we have done INR9,900 crores in standalone and INR10,400 crores in consol. And if I see the PBT before the share of profit from JV, it comes down like INR883 crore in the standalone and INR860 crore in the consol. So obviously the subsidiaries are making losses. So how do you see them going ahead? Do you expect it to turn around in the near future?
Yes. So I mean, it is -- if I can say, so it is almost like a one-off entry I had in one of my subsidiaries called IIFL, I had certain provisionings to do, which is what I've done this time. And it was -- it was a one-time hit. So I don't see that number increasing going forward or coming again for that matter.
How much it was?
It was about -- close to about INR17 crores, INR18 crores.
Okay. Okay.
And in joint venture, of course, we've had a further risk, which we mentioned last time also, there's been some policy changes as well as certain losses, which have been incurred by one of my coal JVs, it's called Chhattisgarh CERL and I have taken a hit to the extent of 26% sale.
Okay. And other than the tax write-backs of any of the earlier year, our normal tax rate will be 25%, right?
That's right.
We have the next question from the line of Vishal Periwal from IDBI Capital.
Yes, ma'am. Thanks a lot for the opportunity and congratulations on good set of results.
Thank you, Vishal. Same to you.
Yes. So the first thing, ma'am, even like in FY '23, we saw that initially we commented like the revenue growth will be in the range of 10-odd percent. And finally, we have done pretty good. Even now we are conservatively guiding or probably like you think that could surprise on the upside or maybe this is the way one should see?
So, Vishal the point is, I think, even I didn't know that execution pressure from Government of India before the elections would give us this kind of revenue. So ideally speaking, if we would have moved that the kind of pace that we were moving, the numbers that we gave you is what we had envisaged. But believe me, there is a lot of execution pressure, and because of which, we've done phenomenally well this year.And, I mean, I can't say because again the elections are coming in March '24. So I don't know how much that much momentum will continue. But again, as of now realistically speaking, even after considering this number of this FY '23, I feel that we should be able to do another 5% to 7% on this number. I don't see that going very aggressive because right now we are peaking in terms of our execution capacity.Does that answer your question? Vishal?
Excuse me ma'am, the current participant seems to have dropped from the queue.
Okay.
We have the next participant, Shreyans Mehta with the next question.
Thanks for the opportunity and congratulations on a strong execution. A couple of questions from my side. One of the current order book, are there any slow-moving projects? Or is there any order book which is totally moving?
Pardon, I didn't get your question.
The current order book, which we have of around INR36,000-odd crores, so are there any slow-moving orders in that order book?
Slow moving, no, no.
Sure. Okay.
Slow moving in the sense, could be a year or 2 year, here or there in terms of the delay, but most of the projects would continue the way they are.
Got it. If you can help me out with that number, which is rumoring 1 to 2 years?
Sorry. See, our screening projects typically takes about 3 to 4 years to execute.
Right. Right.
So this particularly would have a project of bullet train, which will probably take a little time more than that.
Got it. Got it.
So that is what I'm meant to say. So there would be certain orders, which would be 2- to 3-years spread. There would be certain 3 to 4 years and there are certain, which would be spread about 5 years timeframe.
Perfect. Got it. Got it. Got it. Secondly, in terms of our execution, has the high-speed rail and the solar power started contributing in terms of the revenues?
Which ones?
The high-speed rail corridor and the solar power.
Solar power, we are under construction right now. I mean, in fact we are under land aggregation right now. It should start contributing from next year. Yes. Current year is partly over, but basically next year.
Next year means FY '25?
Yes, '24-'25 -- FY '24-25.
Sure. And if you could help me out with the high-speed rail corridor contribution during the quarter, and likely contribution next year?
What is the IP rail corridor?
High speed rail corridor. The NHS...
Okay, okay.
Yes.
High-speed, of course, will take time -- but then it's an EPC project. So I am basically booking my revenue every year on it. It should get completed by '26-'27, I think. Yeah.
Okay. So ma'am, can you just highlight in terms of contribution during say FY '23 and likely contribution in FY '24, particularly from this project?
So that I can tell you right now. I mean it is too much of a detail we can give you later. But overall, my numbers, as I mentioned in turnover will continue. There will be certain projects which will be declining, there will be certain, which will be picking up.
Got it.
So, overall the number would remain INR10,000 crores plus, about 5% to 7%.
Sure. So ma'am continuing in that fund. So 5% to 7% growth, which we are seeing is on consol basis. Can you help me out with the similar growth number for standalone?
In fact, I'm telling you from both perspective because we have a difference of about INR400 crore to INR500 crore in our standalone and consol, so yeah more or less similar levels.
Sure. And in terms of our investments. What are the current investments put together in all our JVs, road and the others?
Our current investments are about INR1,800 crores, INR2,000 crores.
INR2,000 crores, including the loans and advances.
Including the interest free loan.
And likely contribution over next one year.
[indiscernible] interest-bearing loan, then there would be close to 20 to 100.
20 to 100, sure, sure. And likely investment in next, say, 1 year or 2 years?
So next one year we expect our equity oblique interest-free loan investment in the range of INR600 crore to INR700 crore. And based on the existing HAM projects that we have as well as the coal JV projects that you have, another INR600 crores and the year after that. Total of about INR1,200 crores, INR1,300 crores.
Over next 2 to 3 years?
In this year and next year.
Got it, got it, got it. And in terms of our cash and bank balances -- our own cash and bank balance number?
It's about INR850-odd crores.
INR850-odd crores. So, sequentially that's declined?
Yes, because we are investing equity in our projects.
Got it, got it, got it. So...
One of our profit into the new businesses.
Got it, ma'am. We would have also, during the quarter, we've made profit as well which would have consolidated. So on a net basis, we've invested more than that?
Sorry?
I'm saying, Q3, Q4, we have also done execution and that would have translated into some profitability, some cash flows.
Yes. So, my overall profitability is about INR700 crores, INR800 crores on a standalone basis.
Right.
So, out of INR700 crores, I have -- in this particular year itself, I think I've spent about -- I think roughly about INR500 crores, INR600 crores.
That could be during Q4 itself?
Partly in Q4, I'm talking about the full-year results Q4, if you so. I mean the overall, my profit number is INR700 crores. I have something like about INR700 crores to INR800 crores is what I've already invested already. [Foreign Language] And then we've also paid out dividend, interim dividend during the year.
Right, right.
On the basis of which you get an overall number of cash of about INR850 crores.
Perfect, perfect, perfect. And lastly, on the JV, which we have, we have been guiding that they'll start earnings profit probably by FY '24. And so, are we on track on that front?
Sorry. Again, I didn't get your question -- actually your question tends to break.
So, basically what I want to understand, we've been guiding that JV profit will start accruing to us because some of our JVs are still to come into that phase. So are we on track that those forward JVs will start throwing profit in FY '24?
Yes, yes. So, again, in terms of my subsidiaries or SPVs, I've already had 2 commercial -- I mean 2 of my SPVs have been declared commercial in FY '23. So the full-year benefit should be visible in FY '24. And in terms of joint ventures, again, 2 of my joint ventures phase 1 each or both of these joint ventures, who is already commissioned.
Got it, got it. And if I may, one last question, in terms of monetization, do we need to go to deeper more, are we allowed to monetize the assets, which we have?
So that is something we have right now going to, we are in the process of hiring a consultant through which we will be taking all these clarities. I mean, there is no such written guidelines. We've had some series of interactions with [ DIPAM ] as well as DPE and our Ministry, on a very, very -- on a very informal basis. So we understand it should be doable, but let us have a formal report from a consultant on it.
We have the next question from the line of Vishal Periwal from IDBI Capital.
Yes. Sorry ma'am, my line dropped off. My second question was on, I think you mentioned FY '23 order inflow is INR500 crore. But I think, if we do a working that's implied basis, that the start of the year order book, and then what exactly it is. So it comes to around INR1,400-odd crores. So is it the project escalation that has lead to this...
There's been some variances on my existing projects as well.
Okay. Fine, thanks. And in a standalone, I think we can see for a full-year basis tax rate works out to be around 11%- and 12%-odd. So is there any loss making -- I mean what exactly is leading to this? And how do you see this FY '24-'25 tax rate?
No, our tax rate is 25%. It is just that we've had a couple of refunds and income tax because of which some deferred taxation effects have also taken place.
Okay. Okay. So is it fair to say that all these refund it has -- we have received it and probably for next year, we can have a normal 25% tax rate?
No, I think we should be having another good year of income tax refunds if all goes well. In terms of quantum, it may not be as high as INR80 crores or INR90 crores. But I am hopeful of getting another few crores again because we have -- this is one area where we stringently following up and getting all our funds.
Okay. Okay. Sure, ma'am. And then I think you did mention to a previous -- one of the previous participant questions that equity investment in various subsidiaries and JVs, INR600 crore FY '24 and same number for FY '25. Yes. But for, I mean like the construction work that we're doing, so any CapEx that is planned for that in standalone level?
Yes. At a standalone level, our CapEx number is limited to about INR100-odd crores. This would be more for equipments and plant and machinery, et cetera. But otherwise, our main focus is on equity investment for interest-free loan investment.
Okay. Okay. Got it ma'am. And then one last question, I think we have done at a standalone level if you see that we have done pretty good PBT, but when it comes to cash flow, so probably things are like see -- yet to see an improvement. So as we are moving toward a competitive bid project, is the working capital requirement different from the nomination project came in...?
Coming to do with working capital, in fact, we are pretty much poised on the working capital. As I mentioned, the cash flow improvement, probably, you wouldn't have seen because I've already invested a lot of money into my JVs and subsidiaries, in this year itself. So apart from the interim dividend, I've had some CapEx this time. And then I've had my equity investments and that is how my overall profit is getting utilized, but there is no working capital issue whatsoever in our standalone balance sheet.
The next question is from the line of Manish Ostwal from Nirmal Bang Securities.
Yes, madam, I have follow-up question on your guidance. So you said 5% to 7% revenue growth for the year 2024. If I take that number and your comment about the -- we are again working towards to achieve the peak -- previous peak order book. Then the order inflow for the year will be very, very large number. So, can you explain the both the -- your comments slightly...
So I'm saying that is -- the -- our idea is to get the target high and to achieve an order book -- closing order book of that number. One thing is that it doesn't come at the beginning of the year. And in our kind of industry, it will really depend on the number of projects and the size of the projects. So, you may get an order book, but it may not start yielding revenue immediately.
I got you, madam. Like for example, we -- starting point is INR35,000 crores, and we are guiding of INR11,000 crores of revenue. So if you knock off that number, the number is INR24,000 crores, and then you are talking about INR40,000 crores-plus...
So, when I meant INR45,000 crores, what I meant was that ultimately that is our target. We may be initially going for another INR10,000 crore, INR12,000 crore by this year end and maybe another INR10,000 crores by the next year. It's very difficult to actually put a number to it till you start getting those kind of high-value orders. So it is not that I'm saying that we will have a INR45,000 crores after another INR10,000 crore of turnover by the year end. It could well be that we've got another INR10,000 crores of orders and we have also executed another INR10,000 crore and net-net, we are at a level of about INR35,000 crores to INR38,000 crores.
So basically INR45,000 crores can bid by FY '25, right?
It can be even FY '23, but it's too preliminary for me to say, because we are bidding for some big ticket jobs, but one really doesn't know how the competition will shape up.
Sure, sure. Thanks a lot, madam. Thank you.
What I'm trying to say is that we will continue to focus on getting more orders at sustained margins.
The next question is from the line of CA Akash Dhanuka an Individual Investor. Please go ahead. Akash Dhanuka the line for you has been unmuted, you may proceed with your question. As there is no response from the participant, we will proceed with the next question, which will be from the line of Karan Mehta from Nirzar Securities. Please go ahead.
Hello. Am I audible?
Yes.
I just have one question. So we have got very healthy margins in our international business in Q4. So I just wanted to know what is the reason for these kind of margins? And are they sustainable? And what will be the outlook for margins for international business in FY '24?
So our margins have increased in international business in Q4. There were couple of reasons. We've had certain increase in our value of projects in Algeria, as well as one other in, I think we've had it in Malaysia. But as far as -- there's also been some particular provisions that we've written back because they had become time barred, and that is the reason this kind of percentage of EBITDA, you're seeing against international business. Going forward, in terms of what would be our sustained margins in international business, it should be in the range of 8% to 9% maybe, 11% is on a higher side because of certain one-off items.
Okay. Okay. Fine. Yes. So in Q4, we have been able to get around 44% of margin. So you are saying that on a full year basis that it will be only at 8% to 9%, is that so?
Yes, so for on a full-year basis, currently it is at about, I think 11% in case of EBITDA margins. But going forward, it will be 8% to 9%.
We have the next question from the line of Dipen Shah, an Individual Investor.
Yes. Thank you for the opportunity and congratulations on a good set of numbers. I had one question about the company's capabilities. In the past calls, we have been saying that we are focused on building capabilities, after which we will start bidding for relatively higher margin projects. So can you just throw some color on what's the kind of capabilities we are developing and what stage we are in?
Sorry, could you repeat your question?
No in the past calls, we have been saying that the company is building capabilities because of which it can take over higher margin projects. So could you just give us some color on what's the kind of capabilities that companies are building and at what stage we are in?
Yes. Yes. So the first thing is we are talking of sustained margins, not higher margins. The second thing is that we are saying that vis-a-vis a standard rail civil job or road civil job. What we've had is, we've had a wide experience, we've had some complex tunneling experience, especially in the hills, different difficult geologies. Then we have also done certain complex bridges. So given all these factors wherever such kind of opportunities are there, we should definitely have a niche.
Okay. And other question is like, could you just give us some insight on how do we compete with RVNL, which is another government company probably in a similar kind of business, and how do we differentiate with that company?
So we compete with many other players and RVNL happens to be one of them.
Yes.
In terms of our experience and expertise, I think we can take pride by saying that we've had a better mix of experience. We've done some very complex jobs, as I mentioned in your previous question. The second thing is that we are one of the initial ones who've taken the diversification initiatives. So if you see, we are well poised, even if the entire order book is not coming from railways, we've already got into highways. We are already into their commercial operations. We know the nuances and we understand the industry.And even in terms of our order book, I think we have almost close to 55% of our order book on bidding basis. RVNL, typically had most of it on nomination basis. And internationally, the kind of experience, [ we can't tag ]. I don't think others have that kind of a parallel experience. So those are the factors that we have. But in terms of actually going ahead and winning a job, it depends a lot on your business strategy. And yes, they are a competitor to us. And so, are we to them.
Sure. Understood. And lastly, on the core EBITDA margins, we current -- in the current year, if I'm not wrong, we did about 7.2% on a consolidated basis for the full year. We probably were targeting 8% to 8.5%. So on a poor level on a consolidated basis, what should we pencil in terms of margins next year?
So I was explaining that if out of other income, I was to take out the annuity-based interest income and club it with revenue from operations because in HAM apart of the annuity goes into other income.
Sure.
If I suppose to do that re-grouping, my core EBITDA currently is also at 8.31%.
Okay. Okay. Okay. And we should...
And we should continue to maintain that, yes, in the range of 8% to 8.5%. In fact, I mean, it could go down slightly going forward, but I think we've been always saying that our EBITDA would be in the range of 10% to 11% and core EBITDA in the range of 7.5% to 9%. So that is where we do business.
The next question is from the line of Abhishek Maheshwari from SkyRidge Wealth Management.
Yes, thank you for my follow-up. So a follow-up on previous participant's question only. He already asked about the core EBITDA margins. So, my question was more about at the PAT level, consol PAT level. So as you said, core EBITDA, you plan to maintain, if not -- it will marginally decrease. So PAT also, it should be in a similar range, right, 7% or so.
That is right. PAT, we, again, we will be in the range of 7% to 7.5%, I think, going forward.
Okay. And ma'am, now that the competitive share of order book has increased compared to nomination basis. So we would have thought maybe there might be a slight depreciation in margin, but the fact that you are giving a guidance of sustaining margins, we are very happy to hear that. Just wanted to compliment you on that. Thank you.
Thank you so much, because I think that dip could be more because of the life cycle of the project and also on certain provisions that we have to create from an accounting angle. So, as I've been mentioning it could go hit 0.5% here or there, but otherwise we do tend to hopefully continue maintaining it.
So steady state at 7% maybe.
Yes, yes.
We have the next question from the line of Jinesh Kothari from HDFC Securities.
Am I audible?
Yes, please.
Yes. So, my question was on the -- almost all my questions got covered. But one last question that given the niche that we are having and given the central elections coming up in the next year. So are we looking at some of the -- to get some nomination-based contracts from the government because we got some, as you mentioned in your previous calls, we got some Japanese technologies for the high-speed rail work and we are expertise in the tunnel work. So are we aiming at some of the nomination-based contracts more compared to competitive bidding?
As far as I know, there are no nomination-based jobs that have been given immediately. So, those are our experiences and our expertise, which will help us in competing, but per se I think the mood will continue to be competition. However, in [ EMEA ] kind of jobs where [ edge ] demands in EMEA are involved in [indiscernible] or direct one-to-one jobs are involved like something like Myanmar, for that matter. There may be yes, one can hope here and therefore some point in nomination. But by and large, it's going to be competitive tendering only going forward.
Fine, ma'am. And largely all our order wins that you mentioned that we'll be looking at in next 2 years that largely will be in the competitive bidding, I guess?
Yes, yes.
The next question is from the line of Shubham Shukla from Voyager Capital.
Actually my answers are -- my questions are already answered, so and -- just thank you.
The next question is from the line of Hiten Boricha from Sequent Investments.
So, most of my questions have been already been answered, ma'am. Just the one question, so you mentioned last year, we have order wins up only INR500 crore, and the reason for that is the competition. So, our orders were mostly into the lower margins. So just wanted to understand how is the competition looking right now? Are we going to see the margin pressure in the order inflow side point of view? I just wanted to understand the competition, how is it going as of now?
As I have mentioned, there are different categories of orders or business opportunities that one sees in the market. In the past year, lot of those opportunities were, where people were going cutthroat on the competition and going very low on the margins. There were certain players, who probably did not even understand the market per se but quoted very low, in fact below estimates also. So we did not want to get into that kind of a game. And we wanted to all those things to ease out. So, one that has started easing out.And two, there are certain jobs, which are large scale big ticket or do require past experience and expertise, the kind that we have. So there, we are hopeful that we'll be able to protect our margins and yet get orders, because ultimately, see, there's so much trust on infrastructure in India right now that you have all kind of possibilities coming from different doors, some of them may be taking time. But we are waiting for those ones where we genuinely feel we can take the orders and deliver, as well as can have some margins there own. We don't want to take orders [ so specific ]. So there is a spread out market and we are hopeful that we'll be able to get such kind of orders in this year.
So ma'am, just want to understand, is the competition easing now?
No, no, so what happens is that competition really it depends on the complexity of the job and the size of the job. So the orders which came last year had lot of [ plan ] even kind of people taking it also. Or certain people who are probably doing it as an increased strategy to diversify or to start showcasing that they have a competitive-based win in their order book.
So largely that is because of the smaller size of the orders, which is going to increase this year. Is my understanding correct ma'am?
Yes. So this year we will have all kinds of orders. Those orders are the kind of opportunities we need to focus on. We will seriously work on those ones and try getting those out of competitive basis only, but competition amongst the serious pattern.
Okay. Understood. Understood. And second is just a clarification, ma'am, you mentioned that 25% tax rate will be for consol basis or on a standalone basis, because I understand the tax rate was low on standalone side?
So on standalone, our standard tax rate will be 25.168%, but every time we get some tax refunds. I mean the tax refunds, it also has an impact on my deferred taxation. Because the percentage may go haywire slightly. Otherwise, we should be in the range of -- I mean, the rate is 25.168%, so maybe a 2%, 3% here or there.
[Operator Instructions] The next question is from the line of CA Akash Dhanuka, an Individual Investor.
Good afternoon, ma'am. Am I audible?
Yes, please.
Yes. Congratulations on a great set of numbers. Ma'am, I just wanted to confirm, 2, 3 things on the HAM side. In the Q4, we had INR173 crores of other income. And out of that is INR127 crore the annuity interest or on the total INR381 crores, INR127 crores is the annuity interest?
Out of INR381 crore, INR127 crore. I am actually talking on an annual basis.
Okay. So, out of INR173 crore ma'am, what is the breakup?
Out of INR173 crore, I think about INR88 crores is on annual basis.
Okay. So on the an annual basis ma'am, what can we expect in FY '24?
FY '24, you can say, it should be close to [ 8 into 4 ] about INR320-odd crores.
Okay. So...
INR320-odd crores, out of the existing 2 projects that we have in hand, which are already commercial.
This is only out of the 2?
Yes, the rest are under construction, anyways, and they'll take time.
Okay, okay.
So about INR300-odd cores. Yes. If INR80 crores for quarter, then it should be into 4, yeah.
Okay. And another question ma'am, the 2 months have already passed ma'am in this quarter. So can we expect you to deliver the same kind of results that you have delivered in the Q4 one?
See, there is always a difference between Q4 and Q1 for any company. So I won't say that Q1 for this year will be pulled to Q4, but nevertheless, the overall execution pressure is there. We have a lot of work to be completed by, in fact, most by December and some by March '24. So while I will not be able to comment anything further. But yes, Q1 should give me good results as compared to previous Q1, but I don't know how much it can really match the Q4.
Okay. I mean, but the difference is huge between the Q1 and Q4. I mean Q1 last year was pretty dismal compared to Q4 this year.
Yes. So we can't wait for some time and wait for our results to come because again what happens is, many of our projects somewhere in June, July, August, we have the rainy months.
Sure, sure. I understand that ma'am. Yes, just a last question on the tax part ma'am.
I'm not be able to comment on that part, yes.
Okay. Okay, I understand that ma'am. Just -- quick last question on the tax part. You had briefly mentioned about that the refund had tripled in and that had an effect on the deferred tax part and the normal taxation is around 25.168%. And it will be hovering around 2%, 3% below that this year. So can we expect you will be paying 22% tax or approximately this year compared to 15% you have paid last year?
No, I can't say that because I am expecting some more refunds in this year. So it could even go down further, but it is something, which I will only get to know when I have those refund orders in my hand.
Okay. So it will be below 20%. I'm just...
No, I cannot comment whether it will be below 20%, 22%, I cannot get into these numbers.
The next question is from the line of Manoj Sah from Laxgov Investments.
Yes. Thank you for the opportunity. ma'am. Just wanted to check in your orders, will be the raw material price increase? So there is an escalation clause pass on -- clause you can pass onto the customers or how does it goes, if you can comment on that?
Yes. So there is a price variation clause and that effectively -- we have it with the contractor, as well as with the clients. So typically I don't tend to take hit on that account.
So basically you don't take a hit in case of an increase in the commodity prices.
Yes. See, again, the formula is different from the actual procurement size that you will do. But at the end of it, at times, it could go plus, at times, it could go minus. So till date, we will have not taken any major hit on this account.
But there is an escalation clause, you can pass on the hire into your cost.
Yes. Yes. There is an escalation clause.
Okay. Okay. And like -- in case of like new and your company and RVNL are more or less in a similar kind of a business. Is there any chances are heavier anything around the merger or even in case the merger is announced? Do you see any kind of synergy between these two companies?
So one, we are not aware of any such process, which is going on in terms of merger. In terms of synergy, again, I mean that's an exercise, which we will have to do. The case is similar, but there are lot of other points that one will need to see in detail. Should this ever happen? And we will be examining it at the right time, if there is any such direction from the government.
Okay. And one more thing, you said like you might get order book, your order book which is currently at INR35,000 crores might shell to INR45,000 crores to INR50,000 crores, out of which you might execute INR10,000 crores, INR11,000 crores. So, by the year-end of March FY '24, you will end up order book of around INR35,000 crore. Is that the correct understanding?
What I was trying to correct the gentlemen to say that it is not that we will -- I'm commenting that we will have an year-end order book of INR45,000 crore. So this is what should be the likely scenario. But again, I mean it is -- we are sitting in May. And as I mentioned, we are having a focused approach towards getting orders. One order here and there could actually get you to jump quite a few thousand crores here or there. So I don't know where we'll end up, but that is where I'm saying that we should be there.
Okay. So what you're saying is this year order bids -- the pipeline bids are also very large ones from the size of the orders we've launched, it can mix in either way kind of...
It is mixed. So some of them are large. So if they get it then it could immediately increase in our order book. If we don't, because it's a competitive bidding after all, and obviously you don't get those kind of orders. So it's very difficult to predict the outcome, all we're saying is that we will continue to fight and hopefully, we should be able to get that kind of order book at the end of the year.
And regarding the execution capability. You are in a position to execute orders in the range of INR10,000 to INR11,000 crores. Are you trying to put on more resources towards increasing this execution capacity?
So, our execution capacity will never be a hindrance to getting a particular revenue, because we have the required skill sets also, and we can augment the manpower for it. But typically speaking, I mean based on the experience that we've had in this company, we are seeing that's the kind of level we should reach next year as well. But it does not in any which way mean that my revenue will come down because I didn't ask the people to execute. No, that will never be the way.
Okay. So execution won't be a hindrance to...
So, my manpower or machinery will not be a hindrance to execution.
Okay. But for next 2, 3 years, we will continue to expect the execution in that INR10,000 crores, INR11,000 crores range, or do you think you are over next 2, 3 years you may go much beyond that?
Let us see, what our order book is going to be by the end of FY '24, and then we will know the outcome, because see it also depends the kind of orders we do, there could be some orders, which we may be doing over a period of 2 years or 18 months. There could be some, which -- like, for example, the bullet train is a very prestigious project, but it has a very different technology, very different raw material, different kind of molds in this sector that we need to build. So obviously it has a longer time duration and basically to execute. So average revenue will also depend upon the complexity of the project, the size of the project, the geology of the location. So many factors, very difficult to say.
[Operator Instructions] The next question is from the line of [ Prasad Dhonde ] from Arcade Investments.
Hello?
Hello?
Am I audible madam?
[Foreign Language]
Yes. Madam, thank you for the opportunity, and congratulations for the great set of execution. I have a little different question, madam, because I heard all the participants so far on the order book. I have a little longer horizon questions. So recently I heard, our railway -- Honorable Railway Minister in Express Adda, wherein he made a point that India needs to invest something like INR3 lakh crore in railways for the next decade or so.
Yes.
So that's the kind of an opportunity he is saying basically as an investor and he is saying in railways and there is already a big CapEx happening in highways, the road sector. So I just wanted to understand Ircon again being very mission delivery in the highways, how is it gearing up to grab this opportunity for maybe 5 years to 10 years in terms of building capabilities? I mean, how would you build your company or build the capability for this opportunity? How do you look at these opportunities?
So I mean on our Honorable MR has mentioned a INR3 lakh crore kind of CapEx outlay. And he does expect even all companies to contribute to it, including the PSUs, which is our RNVL rights et cetera. And in terms of gearing up, see in our kind of an ECG -- the gearing up is 1, 2, 3 accounts. One is that we are doing as much complex work as we can, which probably the developed nations are doing and it is something new in India. So those are areas which we continuously monitor and we've tried to take a lead. That is the reason we are doing the bullet train project for example.Or in fact, we were one of the earlier ones who did play an important role in Delhi Metro project. So whenever we feel there is a particular kind of an opportunity, which is going to hit India or can come in India, we are trying to play the role. And so, it's a continuous learning process. So we have our experience from the last few years, we have the requisite team, the skill sets, even the right kind of contractors with them -- with us with whom we have built over the relationship.So all that is there. So on the input side, I don't think we feel that we will ever lag behind should we be moving ahead at a very fast speed. In terms of actually getting the orders, it is the space has been opened up to competition. And it's been opened up to all kinds of players. So there are players who may have that kind of experience, there may be players who will try to get that experience by picking on those jobs, which probably even a very low margin or at a loss.Now that is, of course, for survival of the fittest kind of an approach, which will happen, but considering our niche, as well as the fact that we have the right skill sets and that we have been always delivering on in terms of quality and efficiency, I think we are rated one of the highest. So given all these factors, as a long-term player, we are there to survive and continue to grow. But there could be small messes here and there, because you will have all kind of competitors around these.
Yes. No. That's quite comforting and great -- I mean, that's a great response. Just one follow-up question maybe I can ask. I have been hearing you for last many con calls and even today, you made a point, last time you said 10% to 12% top line growth, this time 5% to 7%. So given that opportunity is so big, why can't we -- why can't Ircon target or we target to grow at much higher double-digit kind of growth on the top line since the opportunity is there. I mean, in the past, there was no opportunity, but now you have railways and highways. So, are we really becoming conservative in those terms?
No, no. So what happens is the opportunity -- it is like a top-down approach, you said that India's growing at this much kind of in GDP, and oil and gas industry should be growing at this pace and [indiscernible] Indian Oil be growing at this pace. It doesn't happen that way because there is a INR3 lakh crore budget in railways, a lot of that could be of redevelopment of stations, for example. So those are activities, because we've been in this industry, we may know the nuances of it. It's not easy doing an existing station redevelopment and continuing to maintain margins and you will keep having extra work there on. And it will be a -- typically a very delayed project. I mean, I'm just giving an example.
Sure, sure. That's great.
So similarly, you have certain S&D projects, certain electrification projects. You -- there are -- these -- a lot of money is going towards supplies of Locos and Vande Bharat trains. That has not been a forte of Ircon. So Ircon has to go into such kind of industries, if at all, then one has to do a proper research and see to go ahead or not. But whatever is our domain, there is enough opportunity there and we will be pursuing. But to say, we will be galloping. It practically doesn't happen that way. We are geared up for it. Should that come to us that way, we will do. But [Foreign Language] that's a more of a top-down way of looking at things.
The next question is from the line of Dixit Doshi from Whitestone Financial Advisors.
Yes, thanks for the opportunity again. Just one clarification. You mentioned that out of the INR120 crores of revenue from the annuity other income, INR80 crore came in the Q4 only. So is it that these projects started in -- late Q3, and therefore, there was no income in the earlier quarters?
It only happened somewhere in Q3, you are right.
Okay. And...
[Foreign Language] there is a 6-month after which you get annuity. So some of it started in Q3 versus Q2. [indiscernible] finally, they started coming in Q4.
Okay. In this -- out of this INR380 crores, if I remove this INR120 crore and some interest on the income tax, still our other income, almost of INR200 crore to INR250 crore is a consistent other income tax predominantly an interest on advances or cash that we have?
Yeah, INR320 crores are [Foreign Language] standalone.
No. So INR380 crores of total other income of which, let's say INR120 crore was this annuity income from HAM. And another INR20 crore is interest on income tax refund. So if I remove both of that, then INR250 crore is normal other income.
Yes, yes, that's right. So out of INR250 crore...
That is predominantly income from the cash that we have?
Yes, yes. So what happened is, see, we have interest on FDs or mutual funds as the case may be. But we -- and we also have certain other interest income. So by and large till the time I haven't utilized all of this fund into equity investments. I should be able to get that kind of money here, but this is [Foreign Language] then that's the kind of level we should be able to maintain with the kind of interest rates, which are prevailing right now.
And in terms of the order book, so let's say, currently we have around INR35,000 crores order book and we are targeting 5%, 6% growth in next year. Now, whatever order either INR10,000 crore or INR15,000 crore, whatever new orders we received this financial year, it will take time to start. So considering the current order book and the phase of different projects must be at a different lifecycle. So, considering that, can we say that even in FY '25 will -- our growth rate could be around 8% to 10%?
I think that is something which we will like to say after maybe a quarter or so because I cannot give that kind of a commitment, we will ideally like to have that any company or its management would like to target that, but whether it really come or not will also depend upon the additions in order book that I have.
Okay. And this INR35,000 crore average execution timeline would be 3 years?
Yes, that's right.
[Operator Instructions] The next question is from the line of Sajal Agarwal, an Individual Investor.
Ma'am, I have a question. So there has been a recent announcement by the Karnataka government that they will be canceling some state orders and they will be deferring through payment. So just wanted to understand, do we have any current orders, which we are executing for Karnataka state government?
No, we are not.
Okay. And is there any -- anything in our order book?
No.
[Operator Instructions] As there are no further questions, I would now like to hand the conference over...
Just a second. Just a second. I think I'll just like to clarify the issue on interest income international. I think a gentlemen had said that we've earned something about 40% to 44% this year and -- which was true, we have earned about 40-odd percent this year out of our international business in terms of EBITDA margin. But going forward depending upon the kind of jobs we pick up going ahead, I think that number can drop down. But those would be very difficult to say how much would that number be. So I just want to stay corrected that currently the margin had been in the range of 40% in international businesses. Yes, thank you.
Ma'am, we have no further questions at the moment. So I would like to hand the conference over to you for closing comments. Over to you, ma'am.
Yes. Thank you. Thank you for moderating the call. Thanks to Perfect Relations for organizing this call. And thanks to all our stakeholders, business partners, analysts, investor friends, who have showed faith on us and supported us. We do hope to continue to have your support and we as management do continue to show our loyalty as well as our desire to grow the way we have grown till now.I understand the concerns most of you have around the order book, and that is something, which even we are focused on. We would be happy to connect with any or all of you on a one-to-one basis if required, for any further queries. I conclude today's con call. Thank you all for active participation. Thank you.
Thank you. On behalf of Ircon International Limited, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.