Power Mech Projects Ltd
NSE:POWERMECH
Earnings Call Analysis
Q3-2024 Analysis
Power Mech Projects Ltd
The company is on the brink of remarkable expansion, with coal mining operations expected to swing into action. With essential clearances projected to be granted in the next couple of months, mining activities would kick off by July 2024. A substantial investment in equipment mobilization has been completed, setting the stage for increased coal production pursuits. The company's order book reflects a robust backlog of INR 57,328 crores, illustrating deep market penetration and continual growth. This strong position is reinforced by the comfortable year-on-year growth target of 30% to 35% for FY '25, backed by stable margin expectations and a grounded order inflow strategy aiming for INR 10,000 crores for the year 2023-'24.
Focusing its efforts on infrastructure, the company eyes opportunities exceeding 2 lakh crores in power supply contracts. Railways and metro projects join the list, with significant anticipated investments fueling growth ambitions. The prospects in railway maintenance and road projects further underpin the target to achieve INR 40,000 crores to INR 50,000 crores. This multi-faceted approach positions the company to beef up its order backlog substantially, embracing a growth potential that could outshine current successes.
Not restricting its prowess to domestic affairs, the company is venturing abroad, securing new clients and expanding into territories like Qatar. With a footprint in Saudi Arabia's burgeoning power sector, the company is negotiating deals that could bring in more maintenance contracts. This international strategy could bestow additional growth, setting a global stage for long-term maintenance agreements with various power utilities.
The company has carved a dominant position within the power sector, slated to secure 50% to 60% of the market share. Unique synergy in offering end-to-end solutions that combine construction, maintenance, and civil work sets it apart. This competitive edge is highlighted by significant contracts with industry heavyweights like BHEL, reflecting a substantial market opportunity that could add INR 60,000 crores to INR 70,000 crores in orders for BHEL over the next 2 to 3 years — an opportunity the company is keen to capture.
With a net worth of INR 1,277 crores and a manageable debt profile around INR 499 crores, the company exercises financial prudence. Banks are ready to support its growth by funding up to 25% of projected turnovers, an affirmation of the company's expansion feasibility and financial health.
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Ladies and gentlemen, good day, and welcome to the Q3 FY '24 Earnings Conference Call of Power Mech Limited, hosted by Nirmal Bang Equities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Natasha Jain from Nirmal Bang Equities. Thank you, and over to you.
Thank you, Yashashvi, and good afternoon to all participants. Nirmal Bang Institutional Equities welcomes you all to the Third Quarter FY '24 Earnings Conference Call for Power Mech Projects Limited. From the management team today, we have Mr. S. Ramaiah, Director, Business Development; Mr. Rohit Sajja, President, Business Development and Operations; and Mr. N. Aravind, Chief Financial Officer. I now hand over the call to the management for opening remarks, post which we can take questions from the participants. Thank you, and over to you, sir.
Thank you, Natasha. Good afternoon to you all. This is Aravind, N. Aravind, the CFO of Power Mech. I have with me Mr. S. K. Ramaiah, Director of Business Development; and Mr. S. Rohit, President Operations and Business Development and Operations. I welcome you all to the earnings call quarter 3 and 9 months of financial year '24. The performance for quarter 3 and 9 months for the financial year continued as per our set targets for the entire year. Reported total income for quarter 3 financial year '24 is INR 1,115 crores and the EBITDA is INR 141 crores. PAT is INR 61 crores. During quarter 3 of last financial year FY '23, the reported total income was INR 912 crores and EBITDA was INR 106 crores, and PAT was INR 51 crores. So on quarter-to-quarter basis, Power Mech has demonstrated almost like a 22% growth on the top line. And with the growth of top line, EBITDA has gone up almost 34% and PAT has gone up by 21%. Q3 financial year '24 performance was satisfactory and on expected lines, despite a little slowdown due to 5 state elections. The revenue mix for quarter 3 as follows. Our mechanical business has contributed around INR 231 crores; civil business, including railways and water distribution, INR 596 crores; O&M INR 260 crores; and electrical business close to INR 21 crores; and other income close to INR 7 crores, whereas during the last year FY '23, quarter 3, the contribution for erection business was INR 144 crores, civil INR 492 crores and O&M was INR 260 crores, and electrical business INR 12 crores and other income was INR 3 crores. Mechanical and civil has shown growth almost like 60% and 21%, respectively. Electrical has grown growth of 71%. O&M more or less remained flat. But however, this number again will go up significantly going forward. During quarter 3 of financial '24, domestic business has contributed almost like 94% and the balance, 6% has come from the international market. Similarly, power sector has contributed 47% and non-power sector is almost like 53%. Similarly, the total reported income for 9 months of financial year '24 stands at INR 2,923 crores, and the EBITDA is INR 364 crores and PAT is almost INR 164 crores, whereas during 9 months of last financial year, the reported total income was INR 2,435 crores, EBITDA was INR 281 crores and PAT was INR 134 crores. On a year-on-year basis, for the 9 months, there is a growth of almost like 20% in revenue as compared to the last year. And with the growth of top line, EBITDA has significantly gone up by almost 30% and PAT has gone up by almost 22%. Revenue mix for 9 months is concerned. Mechanical business has contributed INR 518 crores. Civil business, including railway, water distribution, around INR 1,585 crores, O&M INR 756 crores and electrical business close to INR 47 crores, and other close to INR 17 crores, whereas during the 9 months of last financial year, the contribution for erection business was INR 458 crores, civil business, INR 1,235 crores, and O&M was around INR 682 crore and electrical business INR 52 crores and other income was INR 8 crores. Similarly, erection, O&M, and civil business has gone up by 13%, 11% and 28%, respectively. And electrical business is down by 10% because not much after booking is happening on the electrical business. And the mix between international and domestic, the domestic business has contributed around 92% during the 9 months of FY '24, and rest has comes from the overseas business, it is around 8%. And the mix between power and non-power business stands at 52% and 48% during the 9 months of this financial year. FY '24, because of the healthy order book and water business will continue to contribute close to 23% of the total business. Other civil works in both power and non-power contributes close to 34% and O&M will continue to be around 23%. And the mechanical will continue, both domestic and internationally contribute almost like 18% plus. And transmission distribution will contribute 2%. So we will see that FY '25, there will be a significant change in the business mix because of healthy order book. The contribution from O&M is going to be almost like 18% and erection business is expected to go up almost by 27%, and railway expected to go up to 1%. And MDO this year, we will start with a small number, and this is expected to go up significantly in the next 2 years. It is expected to be almost like 7%.
So there will be a significant change in the business mix because of the increase in the O&M pie and the MDO business. Improvement is also seen in overall margin profile, and same is further expected to improve gradually. And on reaching MDO to peak during FY '26, the margin profile will improve to a greater extent. So depreciation cost as a percentage remain lower side on account of control of CapEx spending and the finance cost, keeping aside interest on tax impact as a percentage to revenue remained lower side and continue to be controlled on account of improved working capital and cash flow. With reference to our income tax raid during July '22, as you are aware of the search operations conducted by the Income Tax department. And the company received notices under Section 148 of the income Tax Act. In response to the said notices, the company filed a return of income for the assessment year 2016-'17 to until 2021-'22 assessment year. And as a prudent measure to cooperate with the department and to avoid further protracted litigation, the company offered additional liability of INR 26.21 crores towards the income tax and INR 11.91 crores towards the interest on income tax and paid the entire amount during the financial year '24. We do not foresee any need for further frozening in the income tax matter is concerned. With a better deployment of our capital and improvement in margins, we have also seen improvement in the return on capital employed, and this is expected to again go up significantly. Other developments include the operating cash flow for the period is almost positive by INR 21 crores, which is quite healthy. We are working on the same to improve further. Also the average monthly collection of the company continue to be healthy. So net current days, excluding cash and cash utilization has substantially improved on account of improved working capital cycle, change in the business mix and change in the customer concentration. Net current days have come down to 125 days from 131 days and our stabilization of the MDO business from financial year '25 and '26 onwards, we can expect significant improvement in net working capital days, and this can help the system generate larger [indiscernible] and free cash flow, we can see quantum jump in free cash flow.
More importantly, the gross debt and net debt remained controlled despite growth in the business and the order book. As on 31st December '23, the gross debt is close to around INR 499 crores, and the net debt stands at minus INR 23 crores. But you can see, as on today, we can proudly say that Power Mech is net debt-free company. And the debt-to-equity ratio as on 31st December stands at 0.28, which has significantly come down because of the improvement in the cash flow.
But if you see net debt today is nil because of the net debt is almost 0. The status of the 2 MDO operations. Coming to the 2 MDO projects, a lot of developments and ground activities are happening in both the projects. The first project Kotre Basantpur Stage 1, Forest Clearance from the government we got in November '23 and applied for Stage 2 clearance and the report is passing through various levels to the External Chief Secretary, Jharkhand, and they've fared the file to [ MOEFCC ] on 13th February. And also consent to operate applications filed and awaiting the approvals from Jharkhand State Pollution Control Board to start the works. These approvals are expected to receive in the next 2 months, therefore, we can start the ground activity of OB removal from the month of May and coal mining will start from July '24. Coming to the second project, Kalyaneswari Tasra project. The major required equipment mobilization was completed for initial mining activities. Environment clearance for setting up 3.5 MTPA capacity of washery is under progress and expected to receive the approval by July '24. [indiscernible] Colony building construction of 190 units in [ 4 acres ] of land is under progress. Mining works have already started and OB removal and the coal production works are in progress. Since January '24, approximately around 80,000 tonnes of coal excavated and targeting to exclude 3 lakh tonnes by end of this year.
So regarding order book status. Coming to the order book, order backlog, as of 31st December is around INR 55,858 crore with both the MDO. And excluding the MDO, the backlog is almost INR 16,125 crores. Similarly, the order book backlog as of today is around INR 57,328 crores with both the MDOs. And excluding the MDO, it stands at INR 17,595 crores. For the entire year 2023-'24, the company has set a target of INR 10,000 crores order inflow. And we keep the target as it is. We have received orders worth of INR 6,768 crores as on today, plus 3 projects worth INR 1,780 crores are in L1 status and project worth of INR 5,500 crores, which are bidded and awaiting for the results. So we are likely to see the balance order addition in Q4. During FY '24, large order increase is expected from the power sector, both in the O&M and mechanical and civil construction. Our focus will continue to be an industrial plant, O&M, railway, water and MDO projects. All the existing projects are on track and moving as per the schedule. This financial year, revenues will be in the range of INR 4,500 crores to INR 4,700 crores, depending on the traction of FGD and MDO business. EBITDA margins remained the same as Q3. FY '25, we should be able to achieve 30% to 35% year-on-year growth. Margins will be stable. We'll see a bit of upside depending on the mix from FGD and mining. We do not foresee any decline in the margin. Similarly, order book target for the current and next financial year looks to be comfortable. Power Mech is well set to demonstrate execution and conversion in the range of 32% to 33% of its opening order book in a year. In addition to that revenue from MDO business also ramping up coke coal production plant. Going forward, O&M and MDO business will drive the substantial growth in a significant way and we have some more developments from the business side. I will request Mr. Ramaiah to add, please.
Yes. Thanks, Aravind. Thanks, Rohit and our team here, and thanks for the participants. Aravind has given the overall numbers and various aspects of the business, financial and other things also. But what is happening in the market is a substantial bullish approach in terms of the investments coming up and opportunities opening up, and we can also see a change in the product mix for the better. What was a downside in the power sector is looking up substantially, that has been reflected significantly in the mechanical business, the order backlog has gone up from INR 6,878 crores close to INR 7,034 crores with a 22% increase. Civil has gone up by 27% to INR 7,800 crores. And O&M is playing a major role because a lot of new projects are getting commissioned of the -- what was the backlog available by various private players and then NTPC and other players also.
And that is where we have made a lot of significant achievements in terms of substantial increase in the order booking there in the current year. Then, electrical, of course, it will have a subdued role based on the current situation and also the competition and other things. And from the overall perspective, what we are seeing is that, in all these sectors, there is going to be continued investment that is what is driving us the business. And the power sector, if we take it, there are 3 segments in which it is driving that business. They are new unit capacity -- means the -- projects which are already identified, plants of 19,000 megawatts by NTPC, mainly 6,000 megawatts. And then the utilities, around another 13,000 megawatts. And then private also is there, Adani is coming up at Mahan. And then if we add up the stressed projects of the 5,750 megawatts and 6,700 megawatts from the first stage and the second stage, all these things are under resolution and many of the orders -- many of these opportunities are getting converted and we have taken the benefit of that in JSPL Angul and then in Vedanta, Singhitarai. And then recently, in the case of Meenakshi also, both the revamping and the O&M job has come up. So that is a positive thing for the mechanical business. Installation, which is traditionally, we are very strong. O&M, the order backlog has gone up by 66%. And one more development is there on the O&M side. What we can say is the -- the conversion, which will come up for the O&M also in the drinking water scheme, where we are doing about INR 2,725 crores of job, the conversion is happening faster. And now the order status also is that whatever orders are, at least 3% of that will come as O&M contract for the next 10 years. For that, that is to be added as a part of the order and now that comes to INR 681 crores. Therefore, if we add up the total O&M profile in terms of the power, non-power and also the drinking water, the order bookings will go up almost to INR 2,500 crores by end of the year and that should give a significant growth for the O&M progress and also better margins in the coming year. Now apart from that, the new unit business also is looking up with orders grabbed from Mahan, INR 825 crores; BHEL -- INR 354 crores; and then Vedanta for the stressed project at Singhitarai is INR 396 crores. So that is a positive development. This will continue to happen. Another major thrust has been the railways apart from the roads. Railways, we have taken significant strides, on that recently, we have Nanded -- this one -- Yavatmal-Nanded job, about INR 375 crores. And with all these things, what we can say is that the present opportunities together with the L1 position of the pending FGD orders with the Goenka Group. And then [indiscernible] irrigation project and the railway project, we start to have around INR 1,500 crores to INR 1,600 crores of L1 position. If that happens, significantly improve the overall order backlog. And apart from that, around [indiscernible] of order -- follow-up is under progress in various segments for the different opportunities. Now coming back to the overall push in the power sector itself, BHEL has got orders of INR 55,000 crores. If we take the previous year also, which is getting some conversion in the case of Lara, Yamunanagar, which has been ordered recently to BHEL. Mahan, which has been ordered by Adani Group. Then Talcher, which is already ordered. And then recently, Talabira 3 x 800 megawatt. Altogether, BHEL's order book has ballooned like anything to almost INR 55,000 crores extra. And this -- we are hoping to get the conversions happening faster in the coming year also, and the last quarter also to some extent. And after -- the total projects which have been awarded in all these cases by NTPC, then there is -- 7,720 megawatts that leaves us more scope for the conversion Power Mech as the contractor and subcontractor. Our estimation in that is that something like INR 12,000 crores to INR 15,000 crores of order booking -- order opportunities will come up in the next year also. And some of the projects, we can see how much is happening in the current year also. Now coming back to the overall capacity addition in the power sector. The present position is that the coal [indiscernible] capacity stands at 214 megawatts -- 214 gigawatts, it will go up to 280 gigawatts. In that, about 27,000 gigawatts (sic) [ megawatts ] are implementation, another 30,000 megawatts will be under ordering and execution, which has started, as I told you, about 7,720 megawatts has been already awarded to various players, and then balance also will come up. That should help us -- that should throws overall supply and EPC contracts for the -- mainly may go to BHEL, unless L&T doesn't take a major call or some of the Chinese player, outside players will come. The estimated opportunity for the coming year in all these things for the overall supply is more than 2 lakh crores. Therefore, our own estimation is that at least INR 15,000 crores to INR 20,000 crores of opportunities should come up in the overall power sector in the coming year also. Then there is the railways. We have seen the annual investment is exceeding INR 2.5 lakh crores as part of national infrastructure pipeline, and that will continue to happen. And then Metro projects, the present milage of 870 kilometers will go up to doubling of the track, the Metro stations to almost 1,700 kilometers. And then the major investments, which are very much useful for us is coming in the railway maintenance shops, workshops and then maintenance depots for the Metros also, which we already entered there. So that will add up a lot of opportunities, which will be focused because railways gives good terms of payments with the privatization clauses and advances also. And that is a major focus for our opportunities. And then roads is there. We have already completing a major project for Adani in KK Road in -- Kodad Road in Telangana. That should give us a lot of track in terms of bidding for the good projects in the future also and there is unlimited opportunity in the road sector also. And then railways also should grow up. Therefore, the -- our assessment is that presently, INR 50,000 crores of opportunities are closely following. Some may also get close in the current year. We have to see how much would happen based on the election season also on when the Election Commission will give a date for this one, election. Then that depends on the ordering also to some extent. So what we can say is that next year, the way we are looking at all the opportunities in terms of power sector, O&M and then in non-power sector, particularly in the railways, then Metro projects, and then irrigation, and then of course, the road projects, perhaps it is easy to target INR 40,000 crores to INR 50,000 crores and should see the growth potential and increase in the order backlog. That is what is I can say. Therefore, further thing on the MDO and other things, the international operations and many other developments of the company, Rohit will [indiscernible].
Hello. Good afternoon, everyone. Thanks for having us on the call. This is Rohit. So as Aravind has touched upon our mining operations briefly. I'll give you the other data in detail. So we have already started mining in the recent MDO that we have won, and we have already mined around 85,000 tonnes of coal -- coking coal over the last 1.5 months. And we expect this capacity to touch 2.5 lakhs to 2.8 lakhs by the end of this financial year, in the next 1.5 months. So we'll be booking significant revenues from Tasra. And coming to the first mine, I think all of you are aware of the political situation in Jharkhand. So Forest Clearance Stage 1, there were some comprehensive points raised by the authorities. So we had to refile it. And after refilling, the Secretary and because of the political disturbances happening in the state -- it got -- there is a slight delay, I think, a month's delay, but we expect to break ground in the month of May as Aravind had said, and by July, we'll be starting mining here as well. So that's about both the MDOs. And coming to overseas operations, this -- we are making significant strides in overseas operations as well, and we have -- we have added a couple of new clients this year. We have also won a small maintenance project in Qatar. We have added Qatar as a new geography. And we are making significant strides, putting in some efforts in Saudi Arabia. There's a lot of spending happening in the power sector. They have plans to -- Saudi Arabia, in general, has plans to add more than 25 gigawatts of capacity over the next year. This is mostly combined cycle capacity. And Power Mech is -- we have that experience of executing combined cycle power plants in the past in the region. So we are one of the frontrunners. We have been talking to EPC companies, and they've already collected quotes from us. And the maintenance, I think this year, we have won a maintenance project in Bangladesh, and you'll see this going forward, you'll see this long-term maintenance contracts and this trend, Power Mech taking more and more long-term maintenance contracts for the years to come. And because a lot of public sector utilities, this was always -- they were always giving out contracts, but they have started giving out long-term contracts. So slowly, the trend is changing. And you'll see -- you will see Power Mech taking more contracts in the next 1, 2 years to come in the maintenance space with different power utilities. We have already -- we're already working with the likes of DEWA, Dubai Electricity and Water Authority; SEWA. Sharjah Electricity and Water Authority; ADNOC, Abu Dhabi National Oil Company, we are doing some work for the refinery and also the power plant there.
We are also executing a long-term maintenance project in Nigeria with the Dangote Group, where we have constructed the power plant and now we are -- consequent O&M order was also given to us. So this is an update on MDO and overseas business.
We can proceed with the question-and-answer session.
[Operator Instructions] We have a first question from the line of Nirav Vasa from ASK Investment Managers.
Yes. So sir, first thing I wanted to know is out of the pending order backlog that we have of almost INR 17,596 crores. What percentage of order backlog would be from BHEL? Sir, even if you have a rough cut number, it's fine.
No -- BHEL, that separately is there, but we have to compute and give that information. Separately, it is there.
Sure. Get your point, sir. And, sir, I wanted to understand about the competitive scenario, like what we have seen is that in the thermal power for a very long period, there was practically lull. So lot of EPC contractors and the supply chain which was operating in the thermal power system are not in the best of the financial and technical shift. So according to your assessment, as this scenario opens up in forthcoming years, how do you see competitive scenario panning out? Do you expect these smaller players to again bounce back or do you see a scenario wherein you along with some of the other small -- other peers would be the major players who would be benefiting from the consolidation of it?
Yes. No, there are 2 things -- 2 aspects in this. Let us first understand how the ordering will happen. As for the major competition for the EPC players, so BHEL stands for significantly. We have seen they have taken almost more than 5,500 megawatts of orders in the recent times in the current year, or income of INR 55,000 crores in the last 1.5 years. Now, L&T it is there, but we have seen some sort of -- not in their drift, maybe they're loaded with a lot of orders in Middle East and domestic market in first step, and they will be having a second look. Now another part from the EPC point of view, the third player, perhaps can play a role in general electric. Of course, an MNC, they've got consent in terms of bidding structure and the risk management perspective, they have to figure out for the Indian market because being MNC, they are more risk averse. But they are still pursuing to look at it, but they would need to have the partnership because of the undergoing of the many operational exchanges and also certain things which are taking on mergers and amalgamations with the various power sector in the international market also. For that they need some inputs also. Now, that is the -- unless the Chinese players come as a backup in the later stage, what Chinese numbers were in market in early -- 20 years back or 15 years back, unless that returns, we feel that BHEL continue to play a role and they've got a capacity of 14,000 to 15,000 megawatts of manufacturing capacity on the manufacturer to engineering. They can easily cater to 5,000 to 7,000 megawatts without any problem provided the working capital cost. Now coming to the contracting, subcontracting, if you look at it in -- there are 2, 3 segments. One is the main plant equipment and the balance of plant equipments and then the civil works. So in both the cases, we have got a significant presence as Power Mech. We're perhaps -- we're the leading player with a substantial market share in the main plant [indiscernible], turbine and [indiscernible]. And then the civil also, the main plant with the balance of plant, except for the cooling towers, and even chimney we have done one project. Most of the civil works in a plant we can do. Therefore, there are many players in the civil package, at least 7 to 8 players are there. In the mechanical also, players there. What has happened over the years, owing to the government trend in the market in the power sector investment and their inability to -- competitor's inability to grasp the opportunities to the balance of the market other than our non-power sector, there has been a downtrend in the appetite for many of the private players, and that is to be seen because recently we have seen, Mahan, we have taken a major job. And then with -- even BHEL, we have taken a job, but Talcher and [indiscernible] then with, we also we have taken. And the Meenakshi, also recently, we have taken. So that shows the trend, at least 50% to 60% of the market share of the power sector business, we should continue to get it if not more. That is mainly because the Power Mech has established a strong presence in distribution capability, which we can probably say, not many can match in terms of resources management, equipment resources, construction management, are the construction support services, what our team can gather, provides with our huge headcount, both in the installation business and other sectors also. The synergy, we are one of the few people, perhaps next to L&T, who can undertake the end-to-end solutions in the construction, then operation maintenance and then civil work, structural work, mechanical work. That type of synergies, there are not many players. You've got Simplex or JMC for the civil work. Or you can have Indwell and [indiscernible] for the mechanical work -- but they may not have a combination of the player who can do the civil, structural, mechanical, and that is where the advantage is what we have seen in Mahan recently by the Adani. And also we have seen even with BHEL also and then Vedanta Group also. Therefore, competition can be subdued -- there is appetite for so much -- the BHEL gets more orders, suppose next year, they get 7,000 to 8,000 megawatts, then that would add up to another INR 60,000 crores to INR 70,000 crores. Therefore, this will continue another 2 to 3 years at the rate of INR 50,000 crores to INR 70,000 crores for BHEL. Therefore, accordingly, there is a further scope for us to enhance our potential at the power sector, that is what our assessment is.
This is really helpful. So sir, if you can help me understand your scope of offering per megawatt can be how much crores? Like I wanted to compute your scope of work per megawatt in crores.
No, I tell you, the present market rate going is INR 8 crores to INR 8.5 crores. Of course, that is a comprehensive EPC job, it's a entrant solution of a total solution. That is engineering procurement construction. In that, 55% goes to the main plant equipment, 55%. That means almost INR 4.5 crores to INR 5 crores. And the balance of plant will be around INR 3.5 crores to INR 4 crores. Normally, the construction part of the business, the mechanical equipment for the EPC contract will come to about 10% to 12%, that we can say around INR 80 lakhs to INR 90 lakhs or INR 1 crore per megawatt. Now if it further comes down to the base level as a subcontractor, it can be something like 5% to 8%, 6% to 8%. Therefore, I can say roughly, suppose if it is -- customer is 80 lakhs to 90 lakhs for BHEL per megawatt for the services portion and the main plant only for the equipment, our portion can be something like 40 lakhs to 50 lakhs per megawatt. Of course, in the case of civil, that will add up another 10% to 15% based on the scope of the material available. That means if customers gives the material, like cement, steel, then the overall value of the contract will go to almost 10 lakhs to 12 lakhs per megawatt, 10% to 12% of -- per megawatt, that means, again, it is another 80 lakhs to 90 lakhs. I will say both together can go up to almost, equipment, erection, installation and then civil work, structural work, if we add up all these things for the services part of the work at site, out of INR 8 crores, you can take INR 1.5 crores to INR 2 crores per megawatt. Now that is as far as the new installation is concerned. Now as far as the O&M portion is concerned, once it comes operations, because all these plants [indiscernible] customer is outsourcing also. We have seen recently -- now the -- many new projects will come, most outsource it also. For that, we can take about INR 10 lakhs to INR 50 lakhs per megawatt. This is how -- therefore, in that way, opportunities are there for Power Mech installation, civil work, structural work once it is commissioned as an O&M...
Great, sir. This is really very helpful. Sir, my second question is pertaining to what is the amount of debt that you can borrow to fund your growth? End FY '23, the net worth of the company was INR 1,277 crores. So if you can help us with the banking limits available to chase this growth?
As of today, we are running with debt of around INR 499 crores. So we are running around INR 500 crores fund limits with the working cap lenders, roughly around INR 50 crores is our equipment loans. So more or less, we are maintaining within the existing limits only and with the -- we recently increased the fund limits from INR 450 crores to INR 500 crores. So out of which we are using only a 75% to 80% only working capital utilization we are doing. So we are getting the mobilization advance from the new works, and we are managing the working capital. So, so far, we don't -- we are not foreseeing any increase in the fund limits. We are maintaining with the existing mobilization advances from the customers.
No, my question was, because the growth can be really very high and sector has seen massive consolidation, the odds of order inflows for your company can increase exponentially. So I wanted to understand what is the maximum capital employed which can come? So INR 1,277 crores has -- is your net worth. So what is the maximum amount of debt, which banks are currently ready to lend to you, both fund and non-fund?
No, they are working to as long as the rating is good and if my projections are good, in line with the projections, up to 25% of my projections, they are ready to fund. And my top line of -- [ INR 4,025 crores ] if I'm doing business, they can able to fund up to 25% of that turnover.
25%?
We can borrow another INR 500 crores to INR 600 crores, it depends on my top line. So we are not planning to raise any debt, and we want to go with the low debt and we are managing [indiscernible].
Right. Sir, other point is like apart from power, what is expected is that the hydrogen-related CapEx can also increase exponentially. Any update? Are we chasing that opportunity? How do we intend to get into that entire ecosystem? Any updates can you share?
Yes. Actually, the government's plan is to have a capacity of [indiscernible] tonne per annum by 2030. Now, already some pilot -- pilot projects or experimental projects have been started by private players like Adani. Reliance is making a massive investment, INR 75,000 crores, Adani is making INR 75,000 crores. Now, a lot of players are coming up. Now as far as we are concerned, is a part of the service business. Suppose the annual investment comes to 5 million tonnes, I cannot -- I don't have the figures, but the ballpark figures of what private players have ventured already, Adani, Reliance and others, it can be substantial. It can be lakhs of crores. Therefore, again, what I can say is that in terms of doing the work, civil, structural, mechanical and piping work, there's no big deal in that. We can easily do that. It is consist of vessels, piping systems, civil work, structural work. And some inquiries have started coming, but we have to -- we have to see it should come in a substantial way. That means pilot projects are coming up, not in a big mass scale. I think that will take another maybe 1 year or 1.5 year. Once it comes, perhaps that will add up to the additional delta in terms of the opportunity. But we have to work out the real details on that because things are not very clear in the market.
We have a next question from the line of [ Mohit Bhansali ] from [ Aryan Group ].
Yes. My question is regarding your MDO. First one is Kalyaneswari Tasra, which you spoke about. Have you started mining? And when the billing will start? And what kind of coal you are generating, like coking -- it's a metallurgical coal or it's a normal coal? Please, sir.
Yes. Thanks for the question, Mr. Bhansali. So KT -- yes, Kalyaneswari Tasra is in short known as KTMPL in abbreviation. In KTMPL, we have started mining and we have already mined 80,000 metric tonnes of coking coal, this coking coal, which is used as raw material in steel plants and its washery grade coal. KBP, the second MDO, we plan to start mining in the month of May. So probably by FY -- yes.
Sir, I'm asking for 80,000, you have already mined and what is the future plan? So you will continue to raise it to what level, sir? I hope you -- you said that you will raise it to 3 lakhs by the end of this year, 3 lakhs tonnes per month.
We'll be mining 3 lakhs in total quantity, 2.8 lakhs to 3 lakhs in total quantity by March 31, 2024. But there is -- we plan to ramp up the production to -- slowly by next financial year, we plan to do 2 lakhs and then 3.5 lakhs because the mine -- [ pre-credit ] capacity of the mine is 4 million metric tonnes per annum. And we are also awaiting the environmental clearance for the washery, for which the Terms of Reference has been [indiscernible] and submitted. So once washery is up and running, that's when we want to achieve our peak, which is 4 million metric tonnes per annum by end of by end of FY '26.
Okay. So next year we'll be mining around 2 million tonnes, that's what you are saying?
Yes. Next financial year we'll be mining around 1.5 million metric tonnes.
So this will be then what -- because you don't have washery right now, what will happen to that then?
No, we are still billing. We have a different price until the washery gets commissioned. So we expect to raise our first bill in the month of February.
Okay. Okay. Fair enough, sir. Fair enough.
We have a next question from the line of Riya from Aequitas Investment.
My first question is in regard to the water projects of the Jal Jeevan Mission. So where are we looking at right now? And post election, how do we see the traction following up?
Water projects?
Jal Jeevan Mission.
Jal Jeevan Mission. Can you repeat your question?
So basically, I wanted to have -- yes, water projects, yes.
Yes, madam, still say, of course, overall kind of is like that [indiscernible] planned government investments started in 2019. It may go up to 2025, '26 also. And as on today, around 14 crore households have been connected, and we are about a presence. We are doing in UP, 3 major projects, about INR 2,729 crores for about 1,950 villages. Now some more projects are at bidding stage as it comes know. The investment is coming. We are continue to be there because we are focusing on the conversion of those orders now as on hand. Apart from that, many other water projects in urban infrastructure, sewage treatment plants, and there micro irrigation and other things because have one project we have -- we already bid, we have still L1 for irrigation projects in Madhya Pradesh for INR 600 crores. Therefore, we find drinking water is a very good market for us. And as the tenders come in different states, for example, Maharashtra, Madhya Pradesh, then Tamil Nadu and Karnataka and other projects also, we will definitely go for that. We'll try to see what more we can do that there.
Got it. But I was asking more in terms of post election. So we see a slowdown in ordering?
No, we are...
Riya, can you repeat your question?
I was asking in terms of post elections, do we see any slowdown? Or are we seeing any slowdown right now in ordering? I'm sure the execution pace has picked up.
No, I don't think any of the projects -- what we have done now 17,000 some order backlog, what we are having, all the projects are in progress. We are not in any stoppage of the work or slowdown of the progress or funding issues or local issues. As on today, it's not there. Everywhere the customers are outsourcing the projects aggressively. That type of any major hiccup we have not noticed. [indiscernible] the projects will come up.
And currently, what does the pipeline look like? .
Yes, there is an L1 status of roughly around INR 1,500 crores. Of course, the more FGD where we stand L1 for the [indiscernible] of projects about [ 1,750 megawatt ], around INR 870 crores, we continue to pursue it. They are seeking extension. And then there is an Irrigation project of INR 600 crores, INR 650 crores in Madhya Pradesh. And then a railway project is also there. The only thing we hope if elections doesn't come in a way, perhaps we can get some more penetration in that. Apart from that, the ongoing process, we have got about INR 5,500 crores of offer submitted out of the total immediate opportunity of INR 15,000 crores in infrastructure, in railways and then in power, et cetera. But we have to see how much we can get it converted immediately. But next year, as I told earlier, we can easily track projects -- opportunities of INR 40,000 crores to INR 50,000 crores, perhaps, if not more.
Got it. That's very encouraging.
We have a next question from the line of Anupam Gupta from IIFL Securities.
A couple of questions. Firstly, the guidance which you said that next year, you're looking at 30%, 35% growth, that is basically only for EPC [indiscernible]
I'm sorry, you're sounding muffled. Can you repeat your question, please?
Yes, Anupam, please tell again. I think there is some disturbance.
Yes. So what I was saying is the guidance of 30% to 35% growth, which you talked about for FY '25, that is prior to including revenues from mining or that includes revenues from mining?
That is including everything, sir. The margins -- depends on the mix of FGD and mining, that's what I have told you earlier. Should we -- between the range of 30% to 35%, including the variation between the FGD and mining. Depending on the mix from FGD and mining...
No, I'm not talking about margin, I was talking about the revenue growth, which you said, 30%, 35%.
Regular business, yes -- see, this current year, we have almost 20% year-on-year growth. 25% we'll touch this year. And we are -- because we received the more order book during the current year and additional new works also we received during the current year. So we are targeting 30% to 35% plus any additional -- yes, FGD, if there is anything additional, then it will touch might be on that.
Anupam, INR 17,000 crores of backlog, 40% conversion if we can take [indiscernible] that is INR 6,000 crores.
Understood. Yes. Understood. If you -- can you just update on the status of the FGD project or the Adani, which is somewhere around INR 8,000 crores of the total INR 17,000 crores. What is the status as of now?
Yes, I think the order [indiscernible] project. Now another INR 250 crores -- I think we have done almost INR 780 crores of ordering. Another INR 200 crores, INR 250 crores of ordering will happen in this month, if possible. Therefore, that will come some conversion, modest conversion this current year.
So we -- in Q3, we have recognized around INR 117 crores we recognized, sir. And whatever the orders we have placed on the customer, we may recognize some FGD orders by before March.
So basically, this part of the Adani order book will get executed over FY '25-'26 fully? Or what is the time line you're looking at?
Udupi project is going strongly into 2 x 525 megawatt. Now out of the total 8,460 megawatts, we have to see in other projects. There is [indiscernible] is there. Then we have got so many other projects. And there are so many other issues, environment and then local clearances and PPAs also. I think this is one of these things because they need to have a delta of PPA for the existing power purchase estimates and that should replace some factor in that. And that is where FGD is facing some -- yes. And then engineering integration because it's retrofitting which has to be done in a confined space, it is taking a little bit more time.
Okay. So ideally want to look at a 3-year sort of execution from now? I think that should be a reasonable assumption?
Yes. We can there for Udupi, it is going strongly. We have to see how it shape for the other projects also. There are so many other things and then the new -- not only that -- not only with Adani, with other customers also same status continues. Some sort of -- they are waiting for so many things, in the clearances, engineering, retrofit issues, and then the PPA issues. There are so many things are there, that's why a little bit of slowdown can be there.
Understood. And sir, coming to the mining side of it. So Rohit highlighted the target production for Tasra mine, which is 1.5 for next year and possibly reaching 3.5 in FY '26. What should one -- what are you targeting for the CCL mine in terms of product ramp-up over the next 2, 3 years?
Hi, Anupam. So CCL, so we plan to break ground in the month of May and perhaps the first year's contracted quantity is around 400,000 metric tonnes, and we will achieve 400,000 to 450,000 metric tonnes in FY '25. And the year next to -- in FY '26, the contracted quantities are around 1.5, and we plan to do around 1.6 to 1.7. So there is a ramp-up schedule for this -- ramp-up schedule. And then the subsequent year is around 3 and the [ pre-credit ] capacity is 5, which we are going to do in 2.5 to 3 financial years from today, which is FY '27 is when we achieve 5 million metric tonnes per annum. But yes, CCL is on its way, we'll start producing the first batch of coking coal and we sell it to CCL starting July onwards.
Understood. This is useful. And one question on the international projects which you are taking [indiscernible] have added and you're looking to take big step in Saudi as well. So those will be on the same lines as you did for [indiscernible]? So basically, it is an ETC contract which you are looking to do and not material risk on your books, right?
No, no, no. It's only ETC. We don't plan to venture out into the civil or any of the transmission and distribution space at the moment. All we want to focus on is ETC plus O&M, ETC plus O&M in all the sectors that we are present at. It's predominantly power and oil and gas.
We have a next question from the line of [ Mohit Bhansali ] from [ Aryan Group ].
Yes. Sir, I just want to -- you told me that in [ KT ], you are going to mine in a big way in the next 1 or 2 years, but your washery is still -- you're going to get the approval. I came to know that BCCL has just opened one big washery very near to your mine, that is known as Madhuban Washery. So management have any plan to send their coal like outsourcing for washeries to get the coal washed and again send back to the principal?
Yes. Mr. Bhansali, so the -- our contract says that we cannot use any outside washeries to wash the coal until we construct our washery. So there is a [indiscernible] of washery. And we are aware of this Madhuban. I think it's internal to say on what they do with this coal. So what we are currently doing is we are stocking it up at stockyard and now we have to deliver it at [indiscernible] washery.
Initially, if it's any other washery until we construct the washery, then we'll have to decide it -- [indiscernible] has to decide internally, let us know. If it's away from [indiscernible] more kilometers, it will be compensated as well.
Okay. And sir, once again, you said that next year from Tasra, you're going to mine around 1.5 million tonne to 2 million tonne coal. Is that correct, sir?
That's 1.5 to 1.6.
Million tonne next year. So it will be around 1 to 1.5 tonnes every month -- per month?
1 to 1.5. Yes, yes, yes -- yes -- 1.5 lakh, 150,000 metric tonnes per month -- million metric tonnes per month.
We have a next question from the line of Subrata Sarkar from Mount Intra Finance.
My question has been answered.
[Operator Instructions] We have a question from the line of Sabyasachi Mukerji from Bajaj Finserv AMC.
Yes. My first question is, you have currently about INR 8,500 crores of order book in the civil business. And similarly, if I look at the Erection segment, almost against INR 7,500 crores kind of backlog. What is the expected execution time line over here? And do we have capacity to execute at such pace?
Yes, I think this is doable based on the resources. We are having -- the headcount itself is 32,000. In that, of course, 10,000, we can take it for the O&M side, balance 20,000 is they are mainly focused on civil, structural, mechanical and EPC jobs. And then the cycle time on all these projects, based on the ordering what they have done is, it varies from 30 to 42 months, 40 months, something like that, average you can take over 3 years. Therefore, if you look at the order backlog as on today, for the civil and mechanical work together, it comes to around INR 16,000 crores. Therefore, what we have done, peak in many of the EPC business and civil work in somewhere in 2012 to 2015, a lot of orders came up and a lot capacity -- annually, the capacity increased from 15,000 to 20,000 megawatts. Therefore, at that time Power Mech played a major role. In fact, today, the largest number of the ultracritical projects we have installed about 27 units across the country. And also, as I told earlier, we have got integrated approach of doing civil, structure, mechanical, EPC and the post-commissioning O&M also. So we get a lot of synergy in terms of resources, and then capital, and then establishment costs, which we can do better than many others. And this is perfectly doable for us.
Okay. You said close to 3 years, that is almost 36 months, 12 quarters. So basically, if I just do a simple math of what would be our quarterly run rate in 12 quarters, you have to probably execute INR 16,000 crores to INR 17,000 crores, which boils down to somewhere around INR 1,300 crores to INR 1,400 crores quarterly. Is my math correct?
Yes, you are perfectly correct because the last month, we achieved INR 1,100 crores. Now this month -- this quarter for us, it will go to INR 1,400 crores to INR 1,500 crores. And now, of course, in the last 2 quarters -- you get a better output and better results because of all ideal conditions. Now taking that INR 1,200 crores to INR 1,300 crores is perfectly doable because of the enhanced order backlog, it will go up to 20%, 25% to each year. And with the conversion also, it will improve. And, in fact, it will add up to our better utilization of the assets, manpower and equipment also. That is a positive thing for us with this type of conversion for us.
Got it, sir. My next question is on the guidance. Just to clarify, you gave a guidance of INR 4,500 crores of revenue for FY '24. And on top of that 30% to 35% growth in FY '25. Did I hear it correctly?
Yes, sir. Yes, yes. Yes.
Yes. Okay. Okay. So the follow-up to this thing is that you have currently about INR 17,000 crores of order book, if I exclude the MDO contract. And let's say, you end around the same number, INR 17,000 crores, INR 18,000 crores of order book in FY '24, that becomes the opening order book for FY '25. If I do a 40% kind of a conversion, it comes to around INR 6,800 crores or something around INR 7,000 crores, which is, again -- I mean the growth number then it is very big if I look at from FY '24 to '25. Where am I missing?
Yes, yes. I think there are many large orders for us, railway orders then for example, road sector orders. Even the capacity -- the order size of the installation business has gone up. For example, Adani have this INR 825 crores, BHEL [ INR 350 crores ]. What we used to do, INR 100 crores, INR 150 crores orders, it has doubled up, tripled up. Therefore, that gives the -- on the shorter cycle time, more packages in the same period, civil, structural, mechanical. And then with the common establishment, it is doable.
So with INR 4,500 crores, assume that FY '24 is my turnover, then 30% it will be around below INR 6,000 crores. So my order book as of today is around INR 17,000 crores even if you reduce INR 6,000 crores of FGD. Further, I may have to add another INR 2,000 crores to INR 3,000 crores of orders expecting to receive. Around INR 12,000 crores, I said in my opening remarks also, we generally do on the 1/3 of my order book as a turnover every year we are executing. So it's easy, we can able to reach this number. And again, MDO operations also will add to this number. .
And the next year order booking also will come. First 2 quarters, whatever orders booked, that will come for conversion in the third and fourth quarter also.
So we can hit around INR 6,000 crores FY '25 ballpark?
Yes. That's what we are targeting, sir. 30% of the current whatever the turnover we are going to achieve in FY '24. Even if you take INR 4,500 crores as a minimum, then on that, INR 5,850 crores will be my top line number for the next year.
Got it. Last question from my side. What -- all these revenue numbers, what it will kind of have an impact on the margins? Do you have -- I mean we'll see some bit of operating leverage, how the margin should move?
Sir, if you compare to my Q -- we are more or less maintained with the Q2 and Q3 the same level. And compared to the previous year, there is an upside increase of 30% margins. Based on -- it depends on the mix of FGD and the mining, probably the margin will go up. Otherwise, we do not foresee any drop in the existing margins, it will continue at the same level.
[Operator Instructions] Mr. Gupta?
Yes. Yes. So, sir, just wanted some clarity on the CapEx. So what is the CapEx you'll do for the EPC business? And what is the CapEx, which will go towards the mining business in FY '24, '25, '26?
With reference to washery is concerned, approximately around INR 690 crores, which we projected the CapEx -- total CapEx, out of which INR 240 crores, we raised funds through QIP. And balance INR 450 crores, we are raising a loan at Power Mech level. So by over a period of '26, SPV level -- so by '26, the CapEx requirement will around INR 690 crores for the washery itself. Apart from that, SPV level, we are raising funds for the [ HEM ] requirement and other plant requirements. We are already -- bare minimum requirement, we have already procured the machinery and the mining activity is going -- it depends upon the requirement of the site, we may raise additional equipments at SPV level.
Okay. So let's say, if I look at the consolidated level, what will be the yearly CapEx, which you are budgeting broadly including SPVs and the EPC business?
EPC business level, probably at INR 450 crores is my -- INR 690 crores is the CapEx requirement. And at the SPV level, then it depends upon the availability of land and other issues -- we have to see that majority of the funds we can -- through internal accruals, we can fund those equipments. There is no challenge in terms of -- we are not raising any much major loans at SPV level. We -- based on -- depends on the requirement only we'll raise the CapEx.
We have a next question from the line of Riya from Aequitas Investment.
I would like to ask what is the current portion for international orders for us?
INR 113 crores.
Sorry?
INR 113 crores backlog as of today.
INR 130 crores?
INR 113 crores, 1-1-3.
INR 113 crores backlog, okay. And currently, in this quarter, you see that order intake on O&M has increased significantly. So what would be the top major orders that we received during the quarter?
Yes, there are many orders of what has come in the...
Any major ones?
Yes. We received one Ghatampur Thermal Power project around INR 263.57 crores. Another one is -- Meenakshi Energy, around INR 675 crores, we received order from Meenakshi Energy from Andhra. And another -- Rajasthan, we received 2 x 91.5 megawatt Dariba, Udaipur, Rajasthan -- Hindustan Zinc, around INR 229.2 crores. Yes.
So going forward, with the increasing contribution from O&M and with higher share of mining and new orders coming into our numbers, what kind of margins are we seeing for the upcoming quarters and next year?
With reference to MDO operations are concerned because initially, there will be a low revenue and COGS will be less. So we are expecting, -- there's a change in the mix during next year. It depends upon the mix probably between the FGD and the mining. Probably we can able to tell you in the next -- post -- after getting proper information from the client, we can able to exchange with you in next quarter. Based upon that plan only, we can...
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to management for closing comments. Over to you, sir.
I think thanks for your participation and the very interesting questions asked. I think we have continued to be bullish with the growth what Aravind has brought about and there are many developments Rohit has explained on the MDO and also international operations. I think the NIP, which is contributing immensely for the opportunities, National Infrastructure Pipeline, both in infrastructure, power sector, energy sector, and then which is getting converted and perhaps most of the customers and even investors, they are very bullish on all these investments with aggressive projects being followed implementation. We feel this profitability growth, EBITDA, enhancement and then the order backlog enhancement will continue to play in our operations. And one advantage for us, obviously, is that the more and more projects commissioned in the power sector, for example, 27,000 megawatts of power projects are under implementation. And that will come -- some sort of O&M opportunity to come next year also. That's why we have seen almost INR 2,000 crores of O&M orders coming as on today, which is a huge jump in our order booking in the O&M. And also the spot in the orders what we've got in the installation business and the civil works also, for the power plant also -- for -- that is what we expect to continue to be there in the coming years, at least 2 to 3 years.
Thank you, sir. On behalf of Nirmal Bang Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you.