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Ladies and gentlemen, good day, and welcome to Q1 FY '23 Earnings Conference Call of KPTL and JMC hosted by DAM Capital Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Bhoomika Nair from DAM Capital. Thank you, and over to you, Ma'am.
Thanks. Good morning, everyone. A warm welcome to you to the Q1 FY '23 earnings call of Kalpataru Power Transmission and JMC Projects. We have the management today being represented by Mr. Manish Mohnot, Managing Director and CEO; Mr. Amit Uplenchwar, Director of Strategy and Subsidiary Operations; Mr. Ram Patodia, President, Finance CFO; and Mr. Vikram Singhvi, CFO, JMC. I'll now hand over to Mr. Mohnot for his initial remarks, post which we will open up the floor for Q&A. Over to you, sir.
Thank you, Bhoomika. Just before that we start, we're just trying to connect to S.K. Tripathi. He's been traveling overseas for an assignment. And hopefully, he'll also join the call in the next few minutes. Good morning, everyone. We heartily welcome you all to the earnings call of Kalpataru Power Transmission and JMC Projects for Q1 '23. Let me begin with a quick summary of the performance for the quarter ended 30th June '22, post which I will provide update on individual business and key strategic initiatives. We reported a strong growth of 15% Y-o-Y in consol revenue driven by robust performance on the execution front. Our consol EBITDA margin of 8.6% remained healthy in the context of the unprecedented high commodity and logistics costs. Our PBT before exceptions grew by 10% to INR 139 crores, and PAT grew by 13% to INR 88 crores. Our consol net debt has declined by 21% Y-o-Y to INR 2,301 crores. Our net debt in our core EPC business, excluding Road BOOT and Shree Shubham Logistics stands at around INR 1,500 crores. Our net working capital days is at 106 days at consol level. Our debt levels are in line with the requirement of 5 working capital in certain businesses, which is generally witnessed in the first quarter of every year. We expect normalizing of working capital getting into the second half of this financial year and have committed to further reduce debt by the year end. Additionally, our focus efforts to bring further efficiency in working capital, [indiscernible] and proceeds from sale of Indore assets will help us further in our deleveraging journey. We had a very good start to the year in terms of quarter end growth as we've already secured orders of INR 7,952 crores at consol level. Additionally, we have an L1 position of around INR 7,000 crores. The secured orders combined with L1 is almost 70% of our targeted consolidated order inflows of INR 21,000 crores for the full year '23. Moreover, most of the new orders secured till date in '23 are at better prices and reported at the peak of the commodity cycles. Hence, there is enough cushion on the margin front as these orders get into execution in later part of the year. Our consol order book without L1 of INR 36,880 crores is very diversified across businesses and markets. This gives us good visibility to achieve the targeted growth going forward. Now coming to individual businesses. First, in our T&D business. Our growth was impacted, given lower order inflows in '22 last year. Our international T&D order book for the first time has crossed the USD 1 billion mark. We have secured orders of INR 3,355 crores till date in our T&D business. Most of these orders are from international markets. We continue to strengthen our consol in T&D market by strategically targeting large-sized projects and ensuring superior project delivery. Our markets continue to be in Africa, Middle East, SAARC, America and India. We expect growth momentum in the T&D business to improve going forward, given that we have secured significant orders from the current year, and execution of this order will start in later part of the current year. We have acquired the balance stake of 15% in LMG Sweden last month. We see tremendous potential for growth in the Nordic and European market, given the push for clean energy and need for upgradation of power transmission infrastructure. LMG has reported revenue of INR 266 crores in Q1 and has an order book of INR 1,178 crores at the end of June '22. In Fasttel Brazil, we have strengthen our automation with deployment of senior resources from India. We remain watchful in our efforts to scale up our operations in Brazil, given the volatility in commodity and other input costs in Brazil. From the longterm perspective, Brazil and Latin America remain one of the largest infrastructure markets, and we're confident to building a sizable business there. Fasttel has reported revenue of INR 123 crores in Q1 and has an order book of INR 934 crores at the end of June '22. In the B&F business, we have achieved revenue growth of 35% Y-o-Y in Q1 '23, given robust execution and healthy order book. During the quarter, we have also secured our first data center project. Our total order intake in the B&F business was INR 1,046 crores. We have added new clients in the commercial and residential building segment. In the B&F business, we continue with the strategy to strengthen our leadership position in the select B&F markets with select clients across India. Our Water business recorded a strong growth of 72% with significant ramp up in our execution capabilities, especially in the large-sized projects. We have secured orders of INR 2,193 crores till date in '23. And additionally, we have L1 position of over INR 1,500 crores. Our order book in the Water business is at a record level of INR 8,600 crores. Our Railways business grew by 8% Y-o-Y to INR 360 crores in Q1. We have made foray in the high-growth Metro Rail Electrification space, thereby expanding our portfolio in clientele. Our order visibility has improved in the Railway business across both conventional and emerging areas like metro and high speed rail. Our existing order book and L1 of INR 500 crores gives us confidence to deliver sustainable growth in the Railway business. In the Oil and Gas business, we secured our first international project for an oil and gas pipeline in the Middle East. The business reported growth of 8% in Q1 '23. Our business visibility remains good in the business with tenders worth INR 18,000 crores to INR 20,000 crores to be bidded in the near term in India and international markets. In the Urban Infra business, we have reentered the metro rail business with an order from Kanpur Metro for elevated viaducts and station works. Additionally, we have L1 for EPC for large sized integrated airport development project in Asia. We are confident to significantly scale up and improve our market position in the Urban Infra business in India and international markets going forward. In case of our Road BOOT projects, we have witnessed a significant improvement in traffic across all the 3 road assets. Our quarter revenues increased from INR 40.2 lakhs per day in Q1 last year to INR 56.8 lakhs per day in Q1 this year, a growth of approximately 40%. Additionally, we have received consent from vendors for restructuring of the WEPL and expect the same to be completed in Q3. Simultaneously start looking on refinancing of WEPL, which we expect to complete this year.
As far as update on KPTL and JMC merger is concerned, we have received no objection letter from SEBI and stock exchanges. We filed petition with NCLT for which first level of approval is expected any time soon, maybe in a few days itself. Post that, we'll proceed for shareholder approval for meetings are scheduled in the first week of September. We plan to complete the merger latest by Q4 '23. Now moving on to our outlook. We continue to drive strategic priorities of financing growth in the core EPC business, expanding international reach, further strengthening our balance sheet and divesting noncore business and assets. The recent softening of select competitive price progressed well for us. And at this stage, it will sequentially benefit our margins from December or March quarter onwards. Our business visibility across all our businesses remains robust, both in domestic and international markets. We're confident to reach a targeted consolidated order inflow of INR 21,000 crores for the full year '23, and we might revise this target upwards in Q2 once we have some more target clients. Our current order book and well diversified business mix favorably placed us to navigate various challenges in the current operating environment. We are confident to deliver consol revenue growth in excess of 15% for full year '23. We will our imperative to further strengthen our balance sheet and maintain one of the best financial profile in the industry, we are working towards divestment of noncore business and assets. We expect to complete sale of Indore real estate project in the next 12 to 15 months. Also, we expect significant progress on resolution of road BOOT assets in financial year '23.
[Operator Instructions] Before we begin the question-and-answer session, we would like to announce that we have S.K. Tripathi's line connected to the call. [Operator Instructions] The first question is from the line of Renu Baid from IIFL Securities.
Congratulations for recent results. My first question is, if I look at the margin front, the stand-alone goal margins has been close to 8% and 8.5% level. So if you can help us understand, A, in terms of the standalone backlog, how is the mix between fixed price and variable price projects? And going forward, as you mentioned that the new order inflows have come at peak commodity prices, so how should we look at the core portfolio margins for KPTL moving ahead in second half of the year and for '24?
So if I look at the KPTL stand-alone order book, as of now, our fixed price projects are closer to 75%, variable is 25%. At a consol level, our variable price projects are 59% and fixed price projects are 41%. So that's how the balance is as per stand-alone and consol is concerned. On the margin front, Renu, clearly, I think we had targeted at the beginning of the year that we should be reaching margins closer to 9% at EBITDA level on consol. And we believe getting into Q3, if not maybe later part of Q2, depending upon the impact of monsoons on various projects, we should be reaching there. Clearly now, we're seeing that a lot of softening on all the 3 aspects, which have hurt us, right? Freight prices are coming down significantly, availability of containers no longer is an issue, that's the first thing. Commodity prices have one softened and, are not as volatile. So one is the softening issue, second is the less volatile issues, that's the second advantage we have. Third, from an interest cost perspective, we're not getting much impacted, because we anyway our balance sheet is -- that we don't have a negative in terms of interest rates going up. So from that perspective, we personally believe getting into Q3, we should be there, if not slightly earlier.
And on the whole at the end of 4Q, we had made some provisions for cost on completion on account of commodity inflation impact. Do you think there will be probably some of it provision could be reversed in the second half given that commodities have come off and prices would move comfortably compared to the start of the calendar year?
So Renu out of square our closing provision was closer to INR 150 crores at the end of the year in terms of CTC lot 145, 148 number, if I'm not mistaken. Out of that, we have utilized that we've done projects where we have reversed provision of around INR 40 crores in Q1. We still continue to hold a CTC provisioning of INR 100 crores plus, and you're right Q2, Q3, either the projects will get delivered or the softening will help. So either way you will see this provisioning coming down in Q2 and Q3.
Got it. And secondly, your overall commentary in terms of order pipeline prospects have been very strong, L1 has been at INR 7,000 plus crores. So if you can just give us some qualitative comments in terms of how the process and pipeline in the core T&D where EPC and other portfolio is not stacking up?
So when I look at L1 position, it's a mix across all divisions, right? We have significant portion of L1 in transmission and international. We have a couple of large projects in Railways. We have a couple of large projects in Water. We have one large eco project, which was L1 till a few days ago, and it should get converted to an order soon. We have orders across T&F. So if you ask me today, from a growth visibility perspective, I think these divisions, we see will do very well in terms of growth from a 3-year perspective and my definition of [indiscernible] 15, 20 plus with Water and B&F. PLD and Railways, you should see -- PLD, Railways and Oil and Gas, all of them should be in the range of 10% to 15%. But there is a lot of visibility. Even in T&D, now we're seeing a lot of state orders coming, a lot of BOOT tenders declared. It got deferred when the layman charges got deferred, but getting into maybe Q2, Q3, if you see those order books also improving. So today, across the board across our 6-7 segments, wherever we are, the visibility is good, one. Second, our focus of getting much stronger and international beyond transmission is also helped us. That 315 JMC developed a significant order book on international, whether it's on road and B&F. After 2 years of effort, we have secured our first order in oil and gas in Middle East, and we're planning to be bidding for 5, 6 more large projects. Railways, we had one order in neighboring country, but now we're bidding for 5, 6 orders and 5,6 projects in Africa. So with that visibility also, I don't think order book would be a challenge in any form, and that's why I was clear that we will revise upwards our order book target by the end of Q2.
Right. If I can ask just one more question. You did mention that you're re-entering within the urban infra in the Q1 of Rail segment. So any specific reason for re-entering the market or internal changes where we believe the past experiences of cost overheads and reimbursement adjourns to lot crop up again.
Renu you're right, our historical numbers in some of the metro projects were not so good, but we have learned from the lessons that we are not bidding very aggressive to take project. But at the same time, we need to maintain our requalification, which we have built a long time ago. So whilst we'll be selective in bidding for projects, but will bid in a manner that we have seen as a player across all segments, one. And second, I'm reemphasizing on the fact that we will also take that business international, because opportunities in Africa and some of the other interest this is very, very high. So it's a combination of 3 things, make sure that you have the Q1 credentials and a team to deliver across the segments. Be selective on clients who you want to work with a defined duration without significant CapEx and take this business International in a defined time frame.
[Operator Instructions] My next question is from the line of Bharat Sheth from Quest Investment Advisors.
Congratulations on good performance in challenging times. Coming back to our 3-year vision, which you have said. So where do, again we want to reiterate, because that was -- I mean, when we announced, I mean, it was challenging. So in terms of revenue, core EBITDA margin, and PBT factoring this merger benefit, and how much order book will lead, I mean, to achieve those kind of -- and you are currently you said we are in a 6, 7, sector but -- and are we looking also to add any sector or not? If you can revise your, I mean, 3-year vision.
Sure. Bharat bhai, I think we continue to be focused on achieving our targeted vision. And in the last 6 months, we are becoming much more confident and much more closer to achieving the vision of '26, '27. So we had a vision of '25, '26. Sorry, I correct myself. There's a vision of reaching a $3 billion revenue in the next 3 years. If I look at it sequentially, we were last year at around INR 14,500 crores. In the current year, we will be in the range of INR 17,500 plus crores, right, which means significant growth. And with order book visibility, that should not be a challenge. Second, with the entire sector infrastructure spending, whether it is Middle East, Africa, India and private sectors CapEx coming back, we believe that achieving what we have targeted should not be a challenge. As far as margins are concerned, yes, we are targeting 4.5%, 5% at the PBT level, which is what we had committed at the beginning of the year. And I believe that we should be there sooner than later. And on annualized basis, also we'll be targeting a number similar. EBITDA level, going back to the double digit, it looks difficult for the current year, because we keep a lot of inventory and projects. So even when the softening happens, by the time the impact comes, you would have lost 5, 6 months. But definitely going into the next year, we are targeting getting back to the double-digit levels, which we have historically done always. Pre-COVID if you look at our numbers, it was always there, we are looking at those numbers at consol level, right? It means something very, very different from a larger organization perspective. On the next question, are we diversifying beyond the sectors we are? Well, within the sectors we have -- we are. I think we have not yet done a lot. And our definition of lot is very simple. If you want to be among the 3 in the marketplace, top 3 in the marketplace where we exit. So across the sectors, we believe in the top 3, some of them we are not. So we anyway have a huge challenge in front of us with a good opportunity of reaching that and change the sector over the next 2, 3 years, if you ask me, we will continue to be focused on our core sectors, which is T&D, Water, B&F, Oil and Gas, Urban Infra and Railways. And within that a lot more plus on the international business.
Okay. Great. Sir, and one more question with your permission. We understand from the market that our promoters, I mean, financial problem has been resolved substantially and is expected to be over in a couple of months. So would you like to comment on the plates there?
So Bharat Bhai, what even to understand from the promoters and they take on the same ground, which we had spoken last time that we should see some good improvement on deduction of [indiscernible] placed shares anytime between September to November, as early as September and latest by November. Beyond that, I do not have any other data, but I've spoken to them before this call and they said September. And that's what we had committed in the earlier call also. I think it looks like we are on track as far as that commitment is concerned.
[Operator Instructions] The next question is from the line of Swarnim Maheshwari from Edelweiss.
So first one, if you can just give us some sort of understanding on our international businesses with respect to Fasttel, specifically on the margin side and what we are witnessing in Brazil is something where the interest rate, which have gone up quite substantially. So how are you looking at these businesses?
So Swarnim, as far as [indiscernible] is concerned, they have done better than what we have projected when we acquired them, right? And even today, even if you look at what they have done in the current quarter, their EBITDA continues to be in the range of 8% to 9%. We had targeted 6% to 7%, but they in the range of 8% to 9% and with reasonable PBT. We have good visibility of order book. Clearly, we are one among the top 3 in that space.
And we're seeing a lot of opportunities coming up there and in the neighboring Nordic countries. And we continue to focus on the neighboring Nordic countries also from [indiscernible]. The team is very strong there from where we have acquired to double the team. Right now, we have around 200 people there, which was closer to 100 when we had acquired it. And the visibility is very good on every aspect of the business, whether it's PL, whether it is substation, whether it is services. As far as Fasttel is concerned, we have taken a large order in the last quarter, right, from one of the Indian developers which has to be delivered over the next 2.5 years. That order is at the current price with the current interest rate and with tax flows, which are positive across. On the Fasttel number for the quarter, they have delivered a lot. They have done INR 123 crores revenue with an EBITDA of negative of around INR 4 crores. Fasttel, if you look at the business, from a business perspective, they are focused on working with select clients and select projects in geographies closer to that area where we expertise. We're still not expanding across Brazil. Because we see a lot of opportunities in that southern part where we are very strong. Finally, we have built some team. We have sent total of 10 people from India to Fasttel in the last 6 months, and we have recently gotten a new CEO, who's also joined us. So that business while we are cautious, we're growing with selective clients to make sure that at least we can work in segments which are strong areas. I believe Fasttel would get back to profitability next year, but the current year the losses would not be very significant, would be minimal. We have also been successful in Fasttel getting huge claims from clients over the last 15 months, which helps us make sure that our losses are very, very minimized. There are claims which are in the bank. We don't account for claims unless the money hits the bank. And that was to help us sustain the unprecedented rise in commodity in times. We don't have interest rate issue there. We have debt at minimal at the Fasttel level.
Okay Sir, secondly, now we have entered into railways if it's one of those new divisions. And Railways always has been, of course, a very big opportunity, but if you see with the working capital is a bit of a challenge over there. So how do you look to maybe get that part?
So Swarnim, we have been selective in building our order books. If you look at Railway last year, our order book inflow was very, very small amount. We continue to be very, very selective in building the railway order book wherever it is -- wherever working capital is very, very high, right? So there's a selective kind of projects, which are back ended, where we have said that let me be very, very cautious. That's the first thing. Second, on -- from a perspective of that division, as I said earlier, the focus will be, one, to bid for high-value project. If you look at our project declared of INR 500 crores plus, one more L1 of INR 500 crores plus. So that over the life cycle of the project, the working capital cycle gets balanced with the advance coming in at the beginning of the project. Third, on Railways, we've been in this business for 6, 7 years. And as I said earlier, I'm not bullish of growing that business like 15%, 20%, 25%. More in the range of 10% to make sure that we do not overleverage our balance sheet in any form. We've been successful in that till now, and I don't see that as a challenge even going forward.
[Operator Instructions] The next question is from the line of Parikshit Kandpal from HDFC Securities.
Congratulations on a great quarter. So my first question is on the international order book. So last year, we were clocking about INR 3,000 crores of inflow from the international order book. So in this, how do we see this international order book going up? Even at the full year numbers last year, you had a order inflow about INR 9,000 crores from international market. And now you are taking competencies in overseas market. How do you see this order book turning out?
Sure. So, let me answer this, and I'll -- so from a focus perspective, I think we're very, very clear. International is a big area for us, given that KPTL in 60 countries and JMC is only in 5 or 6, okay? So the focus to take JMC across a lot of markets continues to be one of our key strategic areas, and we've been very vocal about it. In terms of number, yes, as we were fabulous in terms of international order book. Are we going to replicate that same number? I don't know or I'm not sure, because that number is going to be same or similar or lower? Because it is at the end of the day, it depends on what opportunities and if you can get profitable orders. But while we say for today itself, with L1 and large international order and there are a few more, which we have bit which we are very hopeful of. At a consol level, I can confidently tell you that we are looking at more than 50% of our current year order book coming from international, if not making the range of 60%. So that defines the strategy, but would it be similar to last year, it is going to be difficult. Because please remember that getting orders is easier than executing orders, and we're building up the team. We're ramping up the team. So we just don't want to get into that scenario where you just have suddenly got into 25 countries and you're running around building teams. So it will be a growth-oriented strategy, but we're not able to give you an exact number of scene as how much it will be. Consol, yes, 50% plus will be international.
My second question is on the debt level. So we have been able to reasonably contain our debt level for the scale of business which you do. But this quarter, we have seen that increase in recent times, usual in Q1 as the churn increases. But are these the peak level of that for both companies, or do you see that debt level going up from there?
So Parikshit, if you look at our number, and I'm sure you've been looking at us for closely for long enough. Last 5 years, Q1 our debt levels always go up, right? Last year, it went up by INR 350-odd crores at the KPTL level, JMC also went up last year, but JMC has done a wonderful job of reducing debt in the current Q1, hats off to the entire team. So that's been the history for our business for long enough. But while it's gone up, we're pretty confident we stick to our target of further deleveraging by INR 300 crores to INR 400 crores by the year-end. So getting into Q3, Q4, you'll start seeing things improving again. Third, on advances, we are very selective, right, because we're still getting debt at a much lower level. So that's one area which again, we will revisit at the end of Q2, and that would further help us reduce the debt. So we're not worried. It's just one of the INR 400 crores, last year Q1 was INR 300 crores. That's the nature of our business. Q1 typically all clients have their budgeting process. Their CapEx cycle starts only by June, vendors need to be creative to make sure that they gear up for delivery over the next 9 months. So that's how the cycle is. So we are within our budgeted numbers as far as debt is concerned.
Sorry I want to know more. With debt reduction of INR 350-odd crores. This is on what Q1 level or Q4 level last year?
Q4 level, Q4. We had guided from Q4 levels at a consol EPC level of debt reduction of INR 300 crores to INR 400 crores. We're still sticking to that path.
Okay. And just one more thing on the per share because you said that between early September and November reductions in the share promotor pledges. Does it imply that directionally now the pledges will keep reducing from there on from September, November onwards? And is there a pathway to go below maybe beyond September, say, next 12 months beyond September any guidance there would be helpful.
Parikshit, what we've been given to understand from the promoters is that, yes, pledge will continuously come down. And a significant amount you should see in between September to November, itself. A number which they had committed to the shareholders to be done by December, which did not happen, will happen now. I would like to take this step by step. Let's first see that what's happening, and then we'll come back to you with the revised target of what's next. So right now, the focus is let's see the first bit can happen between September and November, which the promoters have committed to us.
Okay. And just the last thing, Indore thing how much of cash -- net cash we launched during this quarter. And for the old subsidiaries, if you can just quantify how much was been the last funding for this quarter? And how much meant amount for the full year?
So on that front, we were expecting OC of 1 of our buildings as early as April, which came in July. That got delayed by 3 months, but for our residential the OC came in July. So a lot of sales which were committed will get booked now. So you should see a significant amount of cash flow coming in this quarter itself. For the previous quarter, I think we just got a number, it wasn't significant. It was in the range of INR 15 crores, INR 20 crores, not more than that. I don't have a number in front of me, but not significant, but we expect the current quarter to be much, much higher. Because the OC got delayed by 3 months, but now we've got OC for tower 3 also. So which means OC for 4 towers is done only 1 tower left. In terms of our total value of investment today, we have around INR 290-odd crores, which is still invested in it. And as I said earlier, we expect INR 100-odd crores to be reduced in the current year itself out of that if not more.
On road subsidiaries?
Actually, you want to just brief on roads subsidiaries?
Yes, yes. So road, Parikshit, we have invested about INR 20, crores INR 21 crores or so. And majority of that has gone into the maintenance -- periodic maintenance, which roads are requiring. And as we have given the forecast for the whole year, it could be in the range of about INR 70 crores to INR 80 crores, because KPTL is already terminated. So cash outflow is already stopped there. And the rest of the things they are in the manageable range. Revenue has also seen some upsurge in the quarter 1, in all the projects. So I think the investment should be in the range -- in this range for the year.
And how much is the maintenance in this out of the INR 70 crores INR 80 crores.
Yes, out of INR 21 crores about...
Out of INR 70 crores to 80 crores sir.
Out of INR 70 crores to 80 crores, yes, about INR 35 crores to INR 40 crores will be towards the maintenance.
And I just want to add to what SKT said, sorry, that this was numbers based on our projections at the beginning of the year. If the traffic continues to improve the way it's improving, hopefully, we should be able to improve on these numbers also. But we'll commit that maybe at the end of Q2 or Q3.
[Operator Instructions] The next question is from the line of Prem Khurana from Anand Rathi.
Congratulation on good quarter. My questions are with respect to JMC. When I look at our order backlog and the commentary that you gave in your opening remarks on the way Water and B&Fs improved during the quarter. It seems as our other income in Infra than Water seems to growing a little strange given the fact that we have INR 3,000-odd crores of order backlog there as well. The INR 1,400 crores I get to have based on my calculation works out on INR 80 crores to 90 odd crores, which seems to be on the lower side. What would explain it? And is it that I mean some of these or a long-action projects or moving slow? If you could help us the way it is been with our Infra and Water.
SKT? SKT, are you there?
I lost in between. I had lost in between.
So I'll repeat the question. So what I want to understand is when I look at -- I mean, the way I mean, in your opening marks you said B&F has grown almost around 35% odd Y-o-Y and Water has grown 72 odd-percent. And when I do my calculation, the number that I get to have in terms of revenue contribution from your other Infra was around INR 90 crores to INR 100-odd crores for the quarter, right? And the run rate has been somewhat similar. So when I compare this number quarter of INR 80 crores, INR 90 crore, INR 100-odd crores with an order backlog of INR 3,000-odd crores in Infra segment, the number seems to be on lower side. So I just want to understand, what would explain this slow contribution or low-contribution given the fact that healthier order backlog in Infra revenue. Is it that some of these sorts are long-state or how is that?
Yes, yes. So your prognosis is right. All the international where we have seen revenue in the range of INR 50 crore, because these projects have 6 to 8 months of mobilization period post signing of the contract. This is by the design, because the logistics and the -- so these are 4, 4.5-year gestation projects as far as the international is concerned, and that is why we will see the uptick in the revenue starting from the quarter 3 and the quarter 4. Because the first 6 to 8 months goes into the design, land acquisition, mobilization and all those things. As far as urban infra is concerned this also the metro, which we have got, that will start contributing to the revenue only from the Q3. So you're right from the order perspective, it looks large, but the revenue contribution, we will see uptick only from the quarter 3.
Sure. Okay. And then...
Prem, sorry, can I request you to speak louder?
Am I audible now?
Yes. Much better.
Also share your thought and give some color on the L1 that you have almost INR 2,800-odd crores was it between various segments, and any large projects part that you could share with us? And then in terms of time and by when do you expect these or take a part of our order backlog?
Manish?
Yes. So I'm assuming mainly looking at a consol level, just to give a breakup of where are we in terms of L1 on the consol level, right?
Yes.
Where we are on L1, if I look at from a JMC perspective, there's around INR 1,500 crores in Water, there's around INR 1,000 crores in Urban Infra and there is around INR 250 crores in B&F. If you look at from a PBT perspective, there's a significant amount of INR 2,000 plus crores, which is on international. There is around INR 1,000 crores with the oil and gas division, and there's around INR 500 crores plus in railways. We have a few L1 in T&D and Fasttel and LMG.
And any timeline in since kind of when do you expect these going become part of our firm order backlog and add contributing some or the other forms?
So I expect this entire INR 7,000 crores to materialize within the next 3 months. I don't see anything getting into maybe INR 1,000 odd crores, but INR 6,000 plus should get materialized in this quarter itself. Besides this, we bid for a lot of projects which are opening up. As I said earlier, across all divisions, there are more than INR 25,000 crores worth of projects, which we have tendered, which have not opened up. And when I say INR 25,000 crores, it's a focused projects, it's not the large point of projects, because otherwise, it will be much higher. So those are projects which, again, we'll have a lot more clarity in the next few months.
Sure. Okay. And then the way we've been able to make progress with, let's say, restructuring or refinancing of some of our road assets and the traffic has also been making a comeback and we've been growing very good now. So any thoughts on asset monetization, because now it becomes lucrative for the site. I mean between there was limited clarity on whether the traffic would come back and when COVID go away or not. I mean given the fact that in refinancing and restructuring efforts are moving and the revenue of traffic, it has already come back. Any thoughts on asset monetization not going to get our capital release from the OT assets?
Sure. SKT, I'll take that?
Yes, yes.
So, Prem, we continue to be focused on declaring this as noncore, right. And we've been very upfront on it. All our EBIT from a long term are noncore and some of the other things Indore also the continuity. Currently, as we reentered the market exploring for that the answer is no, right? Our focus right now is, one, make sure that we -- the traffic, whatever improvements are there capitalized on that to create whatever is required to make sure that.
Second, do a restructuring sooner than later. And third, we have a lot of legal, we are at very advanced stages of awards, right? At all the 3 assets and 2 of them significantly. So currently, the focus is make sure that all of this happens. And hopefully, by Q3, Q4, we should be getting back to the market. And I agree with you that there is a market, which has opened up. We are aware of it, we kept our eyes and ears open, but this will not deployed a consultant, who can help us on the process. We've done that earlier, but that process stopped.
Sure. And any update on the project for an arbitration, where are we surrendered, right?
Yes. Yes, yes. So Prem, the first arbitration, the arguments are over, and we can expect some award in Q3. Similarly, the second determination also, the panel is formed and we will be getting into the proper arbitration settings maybe within 3 weeks' time.
And just one last, if I may, please, on CapEx side I think call you gave us a guidance of INR 40 crore to INR 50-odd crores. I was wondering, I mean the way we've been able to build our order backlog, would INR 40 crores, INR 50 crores of -- so we're looking to kind of take equipment on lease based on timing, stabilize operation, some of these newer geographies that you're getting into? And then did decide whether you want to buy equipment on your own books. And the current asset base that we have with us, what kind of annual revenue run rate -- I mean, is it possible to be able to take care of the existing asset base?
SKT?
Yes, yes. So CapEx base, I think we ourselves have an internal plan to the range of about INR 100 crores. That number, INR 40 crores to INR 50 crores, we need to correct in our perception. Because for this kind of growth, we can't manage with INR 40 crores to INR 50 crores. And this INR 100 crores minimum required to the lease rentals in order to keep the asset book in the normal levels. Now you -- what was your second question?
So the current assets base that we have with us what kind of annual revenue run rate is possible in this case?
So normal, the asset to turnover, if you see the 6.5 or 7 is considered extremely good ratio, right? And if you look at in our case, we have an asset base of almost INR 700 crores, and we clocked a revenue of about INR 5,300 crores, which is at par of the best in the industry. That also largely comes because of the Water business, improved number. So on the mix, it is healthy. But if you look at the specific sectors, maybe numbers were vary here and there. But as a company, we are on an asset to turnover ratio of 7 plus, which is good by any industry standard.
I just want to add to this, Prem. On the CapEx front, at the consol level, our budget is around INR 250 crores for the current year. And while INR 100 crores and INR 100 crores have been defined for KPTL and JMC, but we would be crossing INR 50 crores of CapEx for the current year given the new order inflows and given our low leverage on the balance sheet side, that would not be constant in any form. So the CapEx will continue to happen. And that where ever it is required for growth will be done. But our current year target is INR 250 crores at a consolidated basis.
Sure...
I am sorry to interrupt you. The next question is from the line of Bhavin Vithlani from SBI Mutual Fund.
So the question is on Indore. Manish, you mentioned INR 290 crores of investments in that and INR 100 crores of cash flow. Does that mean INR 200 crores of loss in that investment? If you can just help us little better?
Bhavin, thanks for correcting. No, I just made it clear that INR 100-plus crores we are going to collect in the current year expense and be much more than INR 100 crores, INR 100 crores is a bare minimum in the balance part of 9 months. Your 5th building OC's expected sometime maybe 6 months from now or maybe 9 months from now, so lot of cash in terms of the residential as well as commercial attached to that building will happen later. So on this INR 290 crores, we do not expect any further loss to come in. We had already taken an impairment of INR 45 crores in the previous year. So we expect this entire amount to be recovered. INR 100 to INR 125 in the balance 9 months and balance in the next year.
So IRR would be net negative?
Okay. IRR, on a project as a whole, because you charge interest on the debt across the project, it wouldn't be net negative even if we take that hit of INR 45 crores, because on the debt interest has been charged for the entire position of 6, 7 years. But yes, it would not be as attractive as what we thought at the time when we had got to the project.
Understand. So from now on, no further investments in the real estate. Would that be a right statement?
Absolutely. I don't think we've done anything in the last 5 years or maybe more than that, last 7, 8 years Indore and Bhopal for the last 2, except buying some small guest houses requirements or office requirements that's a different story, which is for our concern, it was a small one, not even big one. Otherwise absolutely no real estate developmental projects. Absolutely, that's a statement which can be taken as a motto.
The second question is on the monetization of road assets and last year during the same time you mentioned that you have digital down, and you were expecting a decision in the couple of weeks. So what -- and now you are saying there is a change in thought process. So -- can you help us what resulted in the change in thought process and while you are saying that you have classified it as noncore and the market but there is no intention to sell as of now?
Bhavin, I think we have corrected ourselves in Q2, Q3 by saying that, yes, we had a bidder who had given us a nonbinding offer on one of the assets, and we are very keen to look at it. But there was one of the conditions which is something which -- wherein we would have lost our opportunity on all the arbitration cases, which we believe are strong cases. And as SKT presented earlier, we expect arbitration award to come in the next 6 to 9 months, right? So at that point of time, a conscious call was taken given that traffic had improved and all of that to see that net focus on O&M, let's focus on improving traffic, let's get the arbitration awards whichever way. We are not sure what amount, whichever would come and then we would because any new buyer is getting into that space of saying that can we withdraw this, because to get the final approval, maybe the client might also ask you to do that. And that's where the call was taken saying that if things are happening the way they are happening. Let's just make sure that we focus on doing 3 of them and again revisit maybe in Q4 or Q1 of next year.
And just to add to this, I think in next 6 to 8 months, the pieces will fall in such a way that it will be a seller's market for us rather than a buyers market.
And last question...
You are not audible.
Am I audible now?
Partly better, yes.
Last question, where are we in the monetization for Shubham?
So Bhavin, Shubham we have taken a few calls. One, we had created 5 or 6 cool assets, which were giving very low returns. And any new people who are looking at that space are not cold warehouses. So we started exiting a lot of them. We sold is one of them in Q1. We are further looking at exiting a few more in Q2. So one, whatever assets which we believe are noncore for the long term within that, right, the exiting and that should happen in the next few quarters. Primarily, we continue to explore either strategic as well as a long-term buyer on that. But if you ask me today, do I have visibility of it happening in the current year, my answer is no. It might take some more time.
Next question is from the line of Rakesh Vyas from HDFC Asset Management.
My question is on JMC and particularly on margins in JMC. Correct me if I'm wrong, but around 90% or more our order book had price variation clause. And most of these projects had close to 10% margin, but it's been almost 5 quarters that we have been operating at suboptimal margins so far. So my question is in 2 parts. One, when should we expect this 10% margin to come back? And secondly, on the price variation that happened in the last 5 quarters, when should we expect it to get recouped beyond this 10% as well?
So good question. So Vyas, if you look at the current quarter, the trend is visible, right? Otherwise, the first quarter always had been a strange quarter in terms of the numbers. Now the lag between the prices as well as the escalation what it gives, there is always a time lag as well as there is a differential to be capped within the numbers.
So precisely to answer your question when we will be in the 10 plus, we have already forecasted that this year we will be in the range of 9, right? And maybe toward the Q4 when we see the other things settling down, we should be in the range of 10 but as overall year forecast, we will still go within 9% forecast number. And let us see how the further this order book gets built up. We have aspiration to go to 10, but this is the reality today.
Got it. That's good. Just to clarify. So of the last 5 quarters when the margins have been lower, is it largely on account of the differential that is not getting accounted for? Or is it related the lag in the price variation versus how we are billing today? So what I'm trying to essentially ask is that is there any number that can get recouped from the last 5 quarters of execution into FY '24 as well?
So let us look at a little bit at a granular level. Once we are continuing with the projects, which they have to continue irrespective of the prices, we have to feed the projects. And as I said, there will be what super formula gives us and what is the commodity prices. There will be always a 20% uncompensated portion, right? That is the first piece of it. The second piece is the time lag. The time lag, as I said, is -- now this time, if you look at the whole cycle of commodity rises, was almost 6 months, and now it is going to take another 3 to 4 months to cool down, right? So maybe the quarter 3 onwards, these escalation numbers will start reflecting into the -- because the prices have to come down, we have to buy at that rate, it has to get into the work cycle to get converted into the sales and when the numbers will get into the reflexion. You're right, we can see towards the Q3 and Q4, these numbers improving. But always, due to the commodity rise, what we have -- we will lose about 20%, that is a permanent loss, which doesn't get compensated anywhere.
Got it, SKT. That's -- and just to clarify one more point, which is on the order book. Do we restate order book based on the price variations that addressed or we just only booked it in the P&L and the order book remains at the original value itself?
No, we -- order book, we keep it at the original level.
For the group as a whole, order book remains as it is.
The next question is from the line of Arafat Saiyed from Reliance Securities.
First question can you quantify opportunities and tender pipeline in T&D in business segment over the next 2 to 3 years?
On the T&D front, clearly, as I said earlier also, we -- good visibility of pipeline is visible both in India and overseas. In India, we're seeing a lot of traction coming from projects on BOOT on select state electricity boards as well as select regions, whether it is northeast or Leh or Ladakh. So from that perspective, visibility is there. Although some tenders in part delayed by a few quarters. But if I look at it from a 2- to 3-year perspective, earlier we used to say T&D might go at the range of 5% to 7%. Now we are staying in the range of 10% plus.
As far as it is concerned, we have seen a pickup happening across all geographies, whether it is Africa, whether it is Latin America, whether it is Middle East, whether it CII. And we have strong presence in 70-plus countries, out of which we have 30, 35 countries, we actually have local offices for more than 5 years. We believe that, that's an area where we'll continue to grow. Even today, in our L1, the highest component is international TL order. As far as Railways are concerned, while we see visibility coming across the nonelectrical segments, on the electrification, we're not seeing much, but on composite work, on expansion, on RPS, on high speed or metro electrification, we have seen a lot of tenders coming, but we see competition also there. So from a strategy perspective, we would be targeting some high-value projects there, but focus on more international projects where we're seeing opportunities in the Railways front also.
Okay. And the second question is on the seasonal logistics. So just want to check how the business shaping now after pandemic? And what's the outlook on that? And any plans for IPO in the coming days?
So on the sea freight logistics, we spoke about the sea freight, right?
Seasonal Logistics.
I'm sorry. So I think...
Shubham Logistics, we've had a challenging last 2 quarters, right, because with the hike in prices the storage across the country has come down. FCS storage itself has come down by 50% over the last 6 months. So last 6 months have been challenging time for Shubham in terms of storage. Luckily, our operating cost is a lot more variable which is not suffered so much. But we believe that coming back to the storage levels, which we have seen for 3 years might take some more time, maybe by Q3. Our own storage space has come down by around 40% in the last 6 months. So -- and we believe the next 3 months might be similar. Once prices stabilize on commodities and once government improves the MSPs, then storage should come back. So Shubham, we believe next 2 quarters, we still have challenging times, but we continue to reduce whatever is noncore within Shubham also, right? As I earlier said cold storage, we sold one of them, 2 more getting -- 2 or 3 more getting sold in the next 3 to 6 months. But next 6 months are challenging times for Shubham far as revenue and margins are concerned.
That was the last question for today. I now hand the conference over to Ms. Bhoomika Nair for closing comments. Yes.
Thank you, everyone, for being on the call and especially the management for giving us an opportunity to host the call. Thank you very much, sir, and wish you all the very best.
Thank you, everyone.
Thank you, Bhoomika.
Thank you.
Thank you very much. On behalf of DAM Capital Advisors, that concludes this conference. Thank you for joining us. You may now disconnect you.