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Isgec Heavy Engineering Ltd
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Good afternoon, ladies and gentlemen. I'm Anila, moderator for the conference call. Welcome to Isgec Heavy Engineering Q1 FY '23 Earnings Conference Call. [Operator Instructions] Please note, this conference is recorded.
I'd now like to hand over the floor to Ms. [ Archana ] from ICICI Securities. Thank you, and over to you, ma'am.
Thank you, Anila, and good day, everyone. On behalf of ICICI Securities, I would like to welcome you all for the Q1 FY 2023 earnings conference call of Isgec.
The management today is being represented by Mr. Aditya Puri, Managing Director; Mr. Kishore Chatnani, Whole Time Director and CFO; Mr. Sanjay Gulati, Whole Time Director and Head of Manufacturing Unit.
We will start the call with the opening remarks on the results and outlook by Mr. Puri. Post that, we can have the Q&A session.
I would now like to hand over the call to Mr. Puri for his opening remarks. Thank you, sir. Over to you.
Thank you. Thank you. Good afternoon, everyone, and thank you for joining us on our earnings conference call. I hope that you and your loved ones are all well and safe. We look forward to a fruitful interaction. You would have seen the quarterly financial results that we have published on the 10th of August 2022. We've uploaded our presentation on BSE, NSE and on our website, www.isgec.com earlier today. There is also much more information about our business on our website. In the stand-alone results, the profitability in the Manufacturing segment has been impacted this quarter because of unexpected losses in one particular export job. The profitability in the EPC segment is better.
In the consolidated results, the profitability in the Sugar segment has improved because of higher sale of sugar due to some exports in Q1 and revenue and profits from the ethanol plant.
I will now talk about the order booking. The consolidated order booking for Q1 of FY '23 is INR 1,331 crores compared to INR 2,366 crores of order booked in Q1 of last year.
The consolidated orders in hand on 30th June 2022 are INR 7,736 crores against INR 7,924 crores as on 30th June 2021. The order book position is satisfactory. Of the consolidated order book, 73% is for project business and 27% for product businesses.
The order book includes INR 1,101 crores for export orders, which is just over 14%.
The order book for Isgec Hitachi Zosen is also good. It has INR 792 crores of orders as on 30th June 2022. The overall demand trend is encouraging as the inquiry position continues to be good. Export inquiries have also picked up.
Regarding the Cavite Biofuels ethanol plant in the Philippines, we have started construction this month and expect to complete the plant by July 2023. This is all from my side.
I would now request the floor to be open for question-and-answer session.
[Operator Instructions] The first question comes from Viraj Mehta from Equirus PMS.
Sir, my first question is regarding our Manufacturing unit. If we look at the order booking across a lot of segments and subsegments who cater to either power, either refinery or general industrial consumables. The order booking of some of these sectors have significantly gone up, but I do not see that kind of order booking going up for us.
Also, like -- if you look at the improvement in margins of some of these companies, especially over the last 5 to 6 quarters had been significant. And I'm not talking 1 or 2 companies. I'm talking a plethora of 10, 12 companies.
If I were to compare how we as a company behaved in 2010, '11, '12 to '17. And how we are lagging the sector, there is a significant difference in how we are operating in a particular environment.
Can you throw some light why that is happening with us?
So as far as the order booking is concerned, we are very comfortably placed in manufacturing in all the areas that we are in. Except for some parts of the business which cater to very short delivery orders where the cycle time is 2 months or 3 months. Otherwise, we are actually booked for maybe 12 months now. So in manufacturing, there is no shortage of orders.
The margin this quarter has got impacted because we lost money in one export order. And we lost a lot of money over there. But we expect the margins in manufacturing to improve from this quarter on. So our manufacturing order book is very good at this point in time. And we are very hopeful that profits should improve.
Sure, sir. Sir, my second question is, if you look at your commentaries over last 1 year, we have significantly -- our margins have significantly fallen because you had said that higher raw material prices, steel price had gone up and we had fixed price contracts. Now that steel has fallen and we have the same fixed price contracts or a portion of it at least, shouldn't the reverse work for us. Like what eroded 2%, 3% of our margin from a normalized margins, shouldn't that work for us, like shouldn't our margins be 2%, 3% higher than normal when the tide turns like this?
So when those orders move out and the orders that we have been booking in the last 2 or 3 months after the commodity prices have come down or the orders that we booked when we knew there's commodity prices were higher, once that do start getting dispatched, then the impact will come. Right now, we are still dispatching what was booked when the commodity prices were initially lower. Kishore, would you like to add?
Yes. So it's -- when the revenue for those orders comes in, margins will -- you will see the margins going up.
No. No. Sir, so steel price means -- are actually the lowest in last one year. So which orders are you talking...
As you know the cycle time for us, the shorter cycle time for any product is about close to 6 months. Many of the orders are close to 2 years or even 3 years, some of the orders are even 3 years. . So we may have bought the steel when the prices were higher. So for those projects, the revenue -- whenever the revenue comes in, the margins will look the same. But whatever we have booked in the last 6 months or so and which have been purchased recently or will be purchased going -- the materials will be purchased going forward, where you will see higher margins coming. So it will -- there will be a lag of a couple of quarters before you see higher margins coming.
Sure. Sure. Sir, last thing is, we, as investors, find it difficult to comprehend that when a company only does one segment or a few products, with much lesser technological tie-up and capability than us make significantly higher margin than us, like probably like 3x the margin than us.
But we, on a base of INR 6,000 crore revenue, and with the technology and the capability that we have make very low single-digit margins.
Is this -- and I've seen the factories and stuff, it is just very difficult to comprehend for an investor, why that is the case?
So we've explained to you earlier that we have faced challenges in the project business. We have explained that to you and the latest one was the commodity business. Commodity -- the uptick in commodity pricing.
So we are also becoming careful in booking orders. We have -- we started doing a lot of new things together like FGD and Material Handling and all. We've learned all that. We learned the tricks of the trade. And hopefully, things will improve in the years to come -- after a few quarters.
Sir, just my last question. Sir, are the capacity -- like -- are plant in Philippines, any progress on that? Because we are almost losing INR 15 crores, INR 20 crores a quarter on that plant. And our P&L, any update on that? When can we expect something with that capital allocation to go right?
Yes. So we've started construction on the plant this month. And we expect to finish it in 12 months' time. During this period, we are likely to get good offers for somebody to buy the plant.
If we are successful in that, we'll sell the plant. Otherwise, we shall start running the plant. So in 12 months' time, we would hope either the plant is sold or we started to run the plant.
[Operator Instructions] We have a question from Deepesh Agarwal from UTI AMC.
Sir, can you quantify the extent of the loss in the Manufacturing division, the loss in one export order which you mentioned?
So we won't be able to quantify that. But all we can say is that it's not something that is inherent in the Manufacturing division. So it's a one-off loss. .
So entire impact has been taken in this quarter? Or do you expect that impact to be also booked in the forthcoming quarters?
Entire impact of that particular loss on that particular order has been taken in the June quarter.
Okay. So sir, with the commodity price now settling, where do you see the manufacturing business margin going forward in a normalized scenario? .
It will improve. It will significantly -- it will improve. I can't give you figures, but it will improve. It should be between 8% and 9%. .
8% and 9%. Okay. But sir, one long-term question. If I look at your company since FY '19, your order book had been flat. Your revenues has also been growing in a very low single digit, despite the end market growing very well. I recollect you had a -- I recollect you were looking to grow the business in double digit. So what is your thought process actually to take it back on the growth track.
So in manufacturing, we are sort of increasing the -- our order book by doing very marginal investments, like debottlenecking and all. In one particular area, we invested some amount of money to increase the output. But -- we were hit by COVID and the project business is becoming increasingly difficult because of COVID conditions, labor shortages at sites a lot. So we've become a little careful in taking that sort of business, but we can hope to grow maybe the next year onwards.
Okay. Okay. And sir, for the Philippines project, how long do you expect that losses to continue? And is there kind of any impairment loss which you envisage given there is a lot of delays out there?
We expect if the plant gets sold, it should get sold at a reasonable value and there should not be a loss. So we have started construction so that -- it's going to be a half complete plant, and a 3/4 complete plant is very difficult to sell. Once we started construction and in a few months when people can see actual progress on the ground, we think that there will be a lot of inquiries for the plant. And we -- and if we have to run the business, it's a profitable business, quite a profitable business to run. So either ways, we don't see a huge financial impact.
Okay. And lastly, if you can share the borrowings number on a consolidated basis? And of which how much pertains to Philippines and the sugar business?
Yes. Give me a second, I'm just checking the figure out. We'll just get back to you.
Total borrowing on a consolidated basis is INR 1,194 crores, that is of 30th of June 2022. The total borrowings relating to the Philippines group of companies is INR 273 crores. It is included in this INR 1,194 total I came up.
Okay. Sir, but, I guess still FY '18, '19, you were actually more of a net cash kind of a position. So when would you attribute this increase in our leverage level? .
So as we have been mentioning, there are some large duration projects that we are doing. Some of the -- particularly, as you know, the PSU projects including the FGD projects. So -- and some of them have even got extended by a few months because of the COVID-related disruptions.
So many of them are going to be closing or close to completion in the first quarter of next year. So as many of the payments are milestone-linked, so our borrowings should be coming down progressively over the next year.
[Operator Instructions] We have a question from Digant Haria from GreenEdge Wealth.
Sir, in the earlier -- in the response to Viraj's question, you mentioned one thing that in the last 3, 4 years, we entered a lot of new areas like material handling or FGD, where there was a learning curve.
So if you could just throw a little more light on that particular thing that in those -- in new areas at the time of bidding, we thought we'll make 5% margins. But maybe you would have ended up making 2% margin. And going ahead, can these areas also start reporting, say, 6%, 7%, 8% margins because we've learned over how to handle those areas better.
So there's been a combination of 2 or 3 things. One is that site work has proved to be more difficult than we had envisaged, and inherently the site conditions.
Secondly, the COVID situation -- there was a COVID situation. I'm not saying it's behind us. But life is back to normal. But labor shortages have suddenly -- not suddenly, but over the last year or so, there are acute labor shortages at site. It may be because people have found work closer to -- because of the migration or whatever when COVID happened. They found work closer to their native places. And it's becoming very difficult to get labor. Getting labor is probably one of the single most important challenges.
And thirdly, in this sort of work, there is a lot of back and forth which happens between Isgec and the company we are working for. And so it's COVID at our end, it's COVID at their end because they cannot approve our drawings, there are delays there. As a result of which projects just get elongated.
So now we are learning to -- or we've learned that, we have to allocate more money for the site. We have to do engineering faster so that we have to account for delays at the customer end and all those things. So -- and if there is a lot of similar site work that's involved in relation to the value of the project, we probably we may not bid for it. So these are some of the learnings that have actually accrued to us. So it's mostly on the site work-related activities. There is nothing very significant in terms of engineering or procurement per se.
Got it, sir. Sir, would it be right to summarize this, that maybe when we had a very large kind of an order expansion in 2018, '19, maybe we were not fully prepared for it. And that is why we are seeing this whole working capital expanding, margin shrinking and all that.
And maybe now in the next cycle, you will be far better prepared and probably return back to those old days when we -- our working capital used to be very low. We used to be a cash-rich company and around 6% to 8% margin is what we used to post, even when the cycle was not so favorable.
Right. Right. So we hope that there will be improvements because we are learning and we are consolidating.
Okay. Okay, sir, all the best for that. My second question is a data question that. In that INR 7,700 crores of order book that we have, how much of those long duration, low margin or slow-moving projects would still be sitting there?
So I think you've seen most of the orders, which relate to the projects business, they are longer duration. So even today, if you look at the project business orders, there are about INR 5,600 crores on a stand-alone basis.
Okay. I get that...
No. So some of the recent -- sorry, I'm taking a little longer to answer that. But -- so there are orders which were -- when they started, they were 36 or 39 months, and we have already crossed 24 months. So the recent orders that we are booking are closer to at the most 20, 22 months, some of them are even 14 months, 15 months also. .
Okay. Okay. Sir like I think we used to say -- we have said over the last 4, 5 quarters that there are some fixed price contract in slow-moving projects, which are impacting the margins, working capital, both. So mainly referring to those -- that part of that INR 5,600 crores of projects business that -- and maybe when do they run off completely, so that the impact that we see is only of the new order book where we have better kind of margin?
So this is with what I was referring to earlier when I said that some of the FGD projects are going to close in the next 10, 11, 12 months. And of course, milestone payments are there. So that money will be released as those milestones are achieved. And we are hoping to -- our borrowing is going to come substantially down over the next 1 year.
Got it. Sir that June '23 could actually be like a point for us where working capital goes down and probably Philippines will also start. So some improvement in the balance sheet can start happening from there.
Yes. certainly on the balance sheet side. On the borrowing side, certainly.
The next question comes from Avadhooot Joshi from Newberry Capitals.
Three questions. First, in the manufacturing business, Manufacturing segment, what's our capacity utilization?
Capacity utilization going forward, we see about -- between 95% and 100%.
And this is including the debottlenecking that we have done, right?
Yes. Yes.
Okay. Okay. And about second thing. In the presentation, you have given geography-wise split. 90% to India and 10% to global. So going further, and as you mentioned in the opening remarks that there are export orders also -- inquiries for export order. So do you see this geography-wise split changing? And how would be the trajectory going further that I would like to know.
We are hoping and we are bullish on the fact that this percentage will move towards exports. Exports will increase because now travel is allowed. Our people have started moving. We've got some orders also. But we think that progressively, the order book will build up.
Understood. And lastly, on the EPC side, you said major money will come in from Q1 '24, but do we expect any payment which is milestone linked to come in this year?
Q1 '23, not '24. So next year.
Okay. Sorry...
Payments are going to be progressively as per -- there are various projects under execution at different stages. Not all of them require a lot of working capital. So as I mentioned earlier, our borrowing is going to go down over the next 1 year.
Okay. But are there any payments progressively coming into this year also? That's correct understanding, right? There are going to be some payments...
So our cash flow is fine. Our borrowing is not -- I mean, if you see stand-alone the borrowing is not very heavy, and we don't expect it to go up.
Next question comes from Khadija Mantri from Sharekhan.
In the last quarter, we had mentioned that the company plans to complete some of its PSU orders in the first quarter of FY '23. So that has not happened. So now is there any risk to the margin estimate that we were -- we had earlier? Maybe internally, as you have not disclosed, what are the expected margin in FY '23. But internally, also, if there has been any change in the margin expectation.
Also, since we have already burnt our lending, PSU orders because you said that there are the payment terms were not good and something like that. So I wanted to know whether we will be bidding for more PSU orders in future and whether the terms and conditions has changed now because now we have -- we are done with COVID. So what is the feel that you are getting from the...
Ma'am, I don't think we mentioned any specific orders getting completed in this first quarter because the longer duration orders, particularly those FGD orders are scheduled to get completed closer to next year, first quarter. . And secondly, on the PSU orders, yes, PSUs have payment terms which are milestone-linked. And therefore, they are not the same payment terms that we would agree with for private customers. But we are continuing to be -- because PSUs are investing a lot, and we are bidding for those orders as well. So we will continue to bid for PSU orders, but we always keep in mind what is the cash flow likely to be, and we cost the -- cost in case there is a negative cash flow, we caused that when we bid for that.
Okay. And sir, also, we have given sales guidance of 5% growth in FY '23. So are we maintaining this or there is an upside list to it?
There are still 3 quarters to come. So maybe we'll be able to give you a better -- more accurate...
Okay. And the CapEx guidance also remains the same?
As you can see, the orders are there in hand and execution on the manufacturing orders obviously depends on us. On the project orders, the execution depends on us, but it also depends on the customers and how the customer side is progressing. But I think we continue with the same view as earlier.
Okay, sir. And what about the CapEx guidance? It also remains the same?
The CapEx that we are doing, I believe we have mentioned earlier that we are implementing BPR-led SAP implementation. So there is a CapEx of close to INR 20 crores on that. . On the manufacturing side, we are -- we should be doing about INR 15 crores to INR 20 crores -- closer to INR 20 crores this year. So roughly, the CapEx should be about INR 40 crores this year.
Next question comes from V.P. Rajesh from Banyan Capital Advisors.
Just one clarification on the expenses that we are making for the overseas plant. So now that you have started the construction, should we assume that this amount will be more capitalized and it will not show up in the P&L going forward?
You're right. In terms of the interest, yes, it will be capitalized. In terms of the other smaller expenses, they will continue to be continue to be booked as if they are profit and loss expense, revenue expenditure.
So can you quantify what that split will look like going forward?
So the typical expenditure on every quarter, which is for the plant maintenance and salaries and insurance and all of that is close to about INR 4 crores to INR 5 crores a quarter.
So that will remain in the P&L and the rest will move into the balance sheet, work in progress item, right? .
That's right. Correct.
Okay. Okay. My second question, I did not understand when you answered about the slow-moving projects. You said the book is around INR 5,600 crores of those projects. And is it fair to conclude that you said that it will get all completed most likely by Q1 financial year '24 or did I misunderstand?
Or I'm sorry if we are not being clear, I did not -- I think we did not use the word slow moving. It was used by somebody else. They are...
Well, we know what you're talking about, right?
So let me clarify that. So different projects have different time scales for completion.
Understood.
So typically, for example, when we book a sugar plant order or a distillery order that is typically 12 to 14 months. When we book a large boiler, it can be close to 18, 20 months. Some of these FGD projects can be 36 to 39 months. So there are various projects going on at the same time at various stages of completion. So I'll say -- we did not say at all that there are any slow projects. What I was mentioning was in the context of milestones being achieved and milestone payments being connected. So I mentioned that there are some large projects in which there are large milestone payments to be collected. And they will be -- those milestones are expected to be achieved and the projects completed over the next 1 years' time.
Right. Let me just rephrase my question. So the projects which are in the order book that is currently being executed, which are, let's say, either low margin or which have had significant time delays -- what is the proportion of that in the order book?
They are less than half of the project's order book.
So out of INR 5,600 crores of order book, you are saying around INR 2,300 crores of this type that I just reply?
Actually, I don't have a classification like that or I don't look at it like that. But that's why I gave you a general sort of answer that less than half of the -- if you notice how many projects we have booked in the last 1 year, those are all projects which are booked at times when we already knew steel prices were up and so on.
So the older projects, which are going to be completed over the next 1 year, they are less than half, that's all I can say at the moment. I don't have a classification like the one you're looking for.
Right. Well, it will be helpful if you can share that information because then we'll at least have some idea of how long this underperformance for a company like you will continue, which is historically, as I said, investors have said, has had a very stellar track record before the cycle. So just trying to understand that.
Are you done with the question?
Yes. I'm done.
[Operator Instructions] We have a question from Ayush Jalan, an Individual Investor.
I had a couple of questions. Is it possible for you to share how much -- what percentage of your order book currently is having PSU orders?
It's already there, sir. It's about 42%.
And are we on track to get this down to 25% level that was guided earlier?
So it actually depends on the scenario of what orders are coming in the market at that point in time. But we have been careful in taking PSU orders in terms of cash flows and margins. More in margin than in cash flows. But we cannot, at this point in time, say that we will move to 25%. It depends upon how the market is behaving.
Actually, it's also a function of, as you are rightly saying, we have mentioned earlier that we would like export orders to go up as a percentage and that's what...
Yes, so the guidance for 20% for that. Yes.
Yes. That's what we are working on, but it's taking its own time. And we would like to reduce the PSU order book to 25%, 30%.
All right. Okay. And for -- you were mentioning that FGD orders generally take about 36 to 39 months and I think for an answer to a previous question, you also mentioned that most orders are now 22 to 24 months. So does this mean that you all are trying to avoid taking FGD orders now?
Or have your learnings made it that you're a little more efficient now in taking these orders? Could you please explain a little bit about that?
Let me just talk about 36, 39 months. In fact, I was reading a report earlier today from the Ministry of Power, which said that typically FGD orders are taking between 40 and 47 months. Even though when they were ordered by the power companies, they were at 36 to 39 months. So some of that extension of time can be attributed to COVID related disruptions as well. But we are bidding for the FGD orders. And though they may be smaller in value and smaller in timeframe.
Okay. But...
Learnings, as you said, there are learnings, and we hope to do better on those orders than early.
So we should see higher margins on these orders going ahead?
Hopefully, yes. Yes.
The next question comes from Mr. Manish Goyal, an Individual Investor.
I have a few questions, sir. On manufacturing, sir, what I observe is that when I look at the consol and stand-alone segment, the resultant subsidiary numbers have declined significantly. So if you can probably share some light as to like we haven't booked revenues on Hitachi Zosen JV or what is it if you can please share?
Yes. So in this particular quarter, we have not booked revenues on the Hitachi Zosen JV, particularly because there are some equipment which are ready to -- which are manufactured and ready to ship but end customer has paid us the advances maybe closer to 90% of the money, but he has not been able to pick it up. It is not because of reasons the customer has not been able to pick up the equipment, so he has paid us close to 90% of the value of the equipment, which is lying with us. It has not come in the revenue. So that is the reason why -- that is very low revenue coming from Hitachi [indiscernible] this quarter. However, for the year as a whole, things are looking good -- as of now things are good.
Okay. So ideally, do we expect that from current quarter onwards, we should be probably seeing more normalization revenue booking?
Yes. Q2, Q3, Q4, the -- it should be more normal because this equipment should also get shipped.
Sir, like at Hitachi, we are seeing quarter-on-quarter order book has been growing very strongly. So if you can guide what kind of revenue growth and margins we can see in Hitachi in current year.
Sanjay?
Yes. So in the -- Hitachi Zosen we have substantive as we have had -- we spent a good amount of money for expansion of the area we have -- and thereby increase the capacity substantially. So that is the reason that the order book has increased now and in the coming quarters, the revenue would be increasing.
So any growth number what we can probably look towards in the current year?
Actually, we don't want to mention a particular number but it will certainly, certainly be much higher than the last year's number.
Okay. And also on inquiry pipeline and which areas are we seeing inquiries? And what are the size of inquiries? Because lot many companies have been talking very positively on the outlook. So maybe if you can give your perspective for both domestic and international market.
So on the domestic side, we were talking about Hitachi or Isgec Heavy Engineering?
Both ideally.
I'll first ask Sanjay to talk about Isgec Hitachi Zosen, then I'll answer about the Isgec Heavy. Sanjay?
So there are a good number of projects coming up in the domestic sector and a lot of investments coming up from various refineries the 3 large refineries going in for expansions at the moment. Also we are seeing that there are some export projects also moving towards getting live. So -- but the bigger growth is in the domestic sector for this -- for the kind of equipment that Hitachi does.
So I think we can now talk about Isgec Heavy. So inquiry pipeline is pretty good for almost all our lines of business, including export inquiries, as we've been mentioning to you. Most of the -- for the projects business exports happen to developing countries.
And inquiry base for scores has picked up. Order finalization is still slow. A few orders have been finalized in the last quarter. We have also mentioned in our presentation about them. But there is enough inquiry and our teams are working hard to book export orders.
On the domestic side, I mean, it's just a number -- some inquiries are budgetary, some inquiries are serious and about to be decided soon. So there are more than INR 10,000 crores or inquiries. The situation is pretty normal.
As Mr. Puri mentioned, we are being a little selective about what orders we want to book.
Okay. Sure. And Mr. Chatnani, what was the order intro in the current quarter and in six months.
INR 1,331 crores for the group.
At consol level, okay. And sir, the order -- consol order book when we mentioned it doesn't include Hitachi JV, right?
It doesn't. include the sugar plant and ethanol. It includes but it includes all the engineering business.
So Hitachi, we take the entire order book into the consol order book.
Yes, because we own 51% of the company with respect to all the other JVs. And so that order book is nearly INR 800 crores as of 30 of June for Isgec Hitachi Zosen.
Got you. And sir, the caveat biofuel under construction plant, the loss number what we see of roughly INR 23 crores -- this is not entirely cash loss, right? It may include certain translation loss as well?
It is largely foreign currency translation loss because the Philippine peso has moved more than the rupee has moved.
So what could be, say, like you mentioned that there could be some INR 4 crores to INR 5 crores of quarterly loss. So this INR 23 crore may include only INR 4 crores, INR 5 crores actual loss and rest would be translation. Is it right way of looking at it?
That is right. But because the plant construction is starting only this quarter, it has started only this month actually. So INR 4 crores to INR 5 crores, I mentioned was going forward from this quarter onwards.
Okay. Okay. And -- this would get reflected -- this translation loss would be captured in P&L in the other expenses? When we look at the consolidated numbers, where would it get captured under other expenses or where's this because our...
You're right, within other expenses it's under other expense.
Yes, because the consol PBT is lower than stand-alone. So I'm just wondering, it is -- one of the affect would be this translation loss of INR 23 crores.
Right. That's right, sir.
[Operator Instructions] We have a follow-up question from V.P. Rajesh from Banyan Capital Advisors.
Just 2 more questions. What is the customer concentration in our order book if there is one single large customer that had, let's say, 10% of the order book?
Yes. I would say these exclusivity orders are all under the -- 2 major orders are under the under the umbrella of NTPC. Otherwise, I don't think there is any other customer who would have. In IOCL -- IOCL also had given us orders, mainly, yes. So IOCL order is also there, which would be about 10% -- 10%, 12% or something more than 10%, but not anyone in the private sector.
So is it okay to assume that these 3 orders are roughly 30%, 35% of the order book?
Actually, no. No, that's not correct. Because -- yes, because part of the order gets executed also. I mean the orders when they started, there were large orders left unexecuted. In the case of Indian oil, it will be more than 10%. In the case, 10% of our total order book, close to 10% -- and in the case of NTPC, it will be less than that.
Sorry, what is the number for NTPC?
It will be less than 10%. I don't remember the exact number, but it's less than 10% for sure.
Okay. So let's say, there will be around 25%, 30% combined of the order book, right? That's sort of the...
NTPC -- no, no, NTPC we are talking about both the orders combined. So a good assumption would be maybe about 20%, 18% to 20%.
Right. Understood. Okay, that's very helpful. My second question is what is the weighted duration of your order book?
We haven't actually worked it out ever in terms of weighted. So we like to think that we have orders in hand enough orders in hand to keep everybody -- all of our divisions busy for the next 18 months.
The next question comes from Ms. Archana from ICICI Securities.
Yes, sir for distillery unit, we delivered a 7% EBIT in the quarter. Would that be something we can look forward in the coming quarters as well?
Yes, that is about normal. The distillery started only in commercial production only in the beginning of January, though it was commissioned in last December. And we have -- we are running at full capacity, and we are -- we have the orders in hand, the allocations from the oil companies. So typically, we should be seeing INR 50 crores, INR 55 crores of revenue every quarter. And so 7% or so should be the normal number.
Okay, sir. And sir, in the previous quarter, you had mentioned that you're also maybe looking for some expansion for the same. So what is the take rate for that? And what you could also talk about the opportunity size that we are trying to capture.
No. So we were talking about the expansion to do more ethanol production. We've got our first line of approval from the central government. Now we are going to state government. So approval, the investment involved is not going to be very high. It's going to be less than INR 10 crores of investment. And we hope that maybe in about 8, 9 months, the expanded capacity will come into play.
Sir if you could confirm the capacity for the addition, what amount in terms of KLPD that you're looking for?
So right now, it is 100 KLPD, and we are hoping that we should be able to reach anywhere between 135 and 145 KLPD.
Got it, sir. And sir, but if you could also throw some light on the export orders outlook as to -- because we mentioned the previous quarter, also like something that you are targeting. And now that traveling has also begun. So from where is -- from what geographies and what key user industries are that we are trying to tap the export market specifically?
So exports come from a variety of products. They come from presses, they come from boilers, they come from sugar machinery, some come some castings also. And typically, the markets are all over Southeast Asia, Africa, Central America, sometimes Europe also.
Okay, sir. And sir, our EPC margins were quite strong in the quarter. So what has led to improvement in our EPC margins and going forward in the coming quarters given that the component has been more softened, if you were to state the numbers you can look at?
it depends -- surely, not on the remix between the old orders and the new orders, what is getting built at that point in time. We do hope that we'll be able to -- then the margin should look decent. But we'll let you know as they come -- we are not seeing any major surprises as of now.
Good to know, sir. And sir one last question. You mentioned that our manufacturing capacity is now almost 400%. So apart on the debottlenecking that we've already done, are we looking for any struggler capacity additions? Or how are we going to handle the increase in order book ultimately?
So we are waiting to see if this increase is going to be sustained. Also, we are looking at, again, some methods whereby, with low investment, we can increase the output, we are looking at that. It may not be the most efficient way of doing work, but we are looking at till demand stabilizes, and we are confident of the demand stabilization we are looking at some methods to increase output.
Okay, sir. Okay. And sir, you mentioned that the CapEx of INR 40 crores is what you're looking at for current year. If you could also give the pickup like as to where is this CapEx will be for anything specific?
So as Kishore had just mentioned about INR 20 crores of the CapEx is for the new IT system that we are implementing, which would be -- which will get implemented by the end of this financial year. Another INR 20 crores is what we are looking at investing at various places in the manufacturing businesses to debottleneck and to increase production.
[Operator Instructions] There are no further questions. I'd now like to hand over the floor to the management for closing comments. Over to you, sir.
Thank you. I would like to thank you once again for joining this call today. I appreciate your interest in Isgec Heavy Engineering. And look forward to interacting with you again during the next quarter. Thank you once again.
Thank you, sir. Ladies and gentlemen, this concludes your conference call for today. Thank you for your participation and for using Door Sabha conference call service. You may all disconnect your lines now. Thank you, and have a good day, everyone.