RITES Ltd

NSE:RITES

Q1-2026 Earnings Call

[Operator]

Good morning, ladies and gentlemen. I'm Karthikeyan, moderator for this conference. Welcome to the conference call of RITES Limited to discuss its Q1 FY '26 results. We have with us today, Mr. Rahul Mithal, Chairman and Managing Director; Dr. Deepak Tripathi, Director, Technical and Director of Projects, additional charge; and Mr. Krishna Gopal Agarwal, Director Finance and Chief Financial Officer. [Operator Instructions] Please note, this conference is being recorded. [Operator Instructions]

Now I would like to hand over the floor to Mr. Rahul Mithal, Chairman and Managing Director, RITES Limited. Thank you, and over to you, sir.

[Rahul Mithal, executive]

Morning. Thank you. Let me start with giving the safe harbor statement. The presentation and the press release, which we uploaded on our website and exchanges yesterday, and discussions during the call today may have some forward-looking statements. These statements consider the environment we see as of today and obviously carry a risk in terms of uncertainty because of which the actual results could be different, and we do not undertake to update those statements periodically.

So let me give you a brief overview of the quarter 1 results. It's been flat. The results have been flat. The order book, as you see, about INR 8,800 crores, bulk of it, in fact, about INR 3,500 crores from about 300-plus orders was added in the last 2 quarters of the last FY. So now we are at the stage where we have to focus on expeditious execution, which we foresee starting from the latter part of this FY, and the guidance which we gave at the beginning of the FY that we will try and definitely surpass the previous year's performance, we are on track. All these orders are at the various stages of finalizing the design, fixing of the executing agencies. So the revenues will start floating in -- flowing in by latter part of this FY. So that's the opening broad where we have been in quarter 1 and where we see moving forward. And I'll go into more details as I answer individual questions. Thank you.

[Operator]

[Operator Instructions] The first question comes from Harshit Kapadia from Elara Securities.

[Harshit Kapadia, analyst]

So just one question right now. On the consultancy side, we have seen the growth coming back. Now have we seen a broad-based growth? Or is the consultancy also seeing growth only from certain sectors? And followed to that would be the quality assurance, is that now normalized? Or are we going to see a price on the quality assurance?

[Rahul Mithal, executive]

So the first part of the question, yes, the consultancy has shown an overall growth of 7%. And in fact, that is what has helped us see a growth in the EBITDA by about 8%, a focus on the high-margin consultancy orders. So you see the orders which we have been getting in the last -- latter part of the last FY, the consultancy portion of those orders, those have started generating revenue, and those will continue to generate revenue because the initial milestones are in the designs, et cetera. And as the execution starts the latter part of the FY, the other elements of the turnkey and top line will keep adding on.

As far as -- and this is across sectors, not only one particular vertical, this is broad-based across -- because since the orders were broad-based, covering all the sectors, about 13 different verticals that we have. As far as quality assurance is concerned, quality assurance has been showing a regular uptick. And the worst to my mind, as I had mentioned in the beginning of this FY also is over. We will definitely keep on growing both not only sequentially in terms of quality assurance, in terms of getting more orders, in terms of revenue realization from the recent orders, which we got in quality assurance from the non -- on the newer clients, the non-India Railway client, so quality assurance will only show an uptick both sequentially and the entire FY vis-a-vis the last FY.

[Operator]

The next question comes from Anand B from Ksema Wealth Private Limited.

[Anand Bhaskaran, analyst]

Yes. Regarding your export orders, I remember in the previous con call, you mentioned the 10 locomotives by around 70% to 80% of the execution is done and deliveries will be starting from Q1 of this time. So I think in the press release, you mentioned that the deliveries have already started. So is there a confirmation that the deliveries have already started. And can we see a realization of the revenue by this quarter or the next quarter?

[Rahul Mithal, executive]

Yes. So yes, it's correct. The -- I had mentioned that the 10 locomotives to Mozambique will start -- the deliveries will start. And the first 2 locomotives have got shipped out in the first week of July, early July. So the revenue booking happens when the actual shipping out takes place, the bill of lading. So these 2 locomotives revenue will definitely figure in Q2. And the other 8 locomotives are also on track in various stages in the pipeline. So definitely, in the coming quarters, these will start generating revenue. So yes, they -- the booking of revenue of these 2 shipments did not happen in Q1. They will happen in Q2 because the actual shipment took place about early July. But yes, the shipments have started.

[Anand Bhaskaran, analyst]

Okay. Okay. And you said like in Q2 or Q3, we'll be able to see realization of the impact in locomotives or just 2 or 3?

[Rahul Mithal, executive]

No, no, no. These 2, which have already got shipped out, these for sure will get booked in Q2 and each of the balance 8 are in various stages. Successively each quarter, they will -- as the bill of lading gets made, as they get shipped out, Q2, Q3, Q4, we will try and definitely complete the entire order.

[Operator]

The next question comes from Shreyans Mehta from Equirus Securities.

[Shreyans Mehta, analyst]

Sir, my first question is, can we expect -- is it fair to assume in terms of margins the worse is behind us because now we are talking about export contribution to kick in. So hopefully, that will also add to our margins going forward?

[Rahul Mithal, executive]

Yes, you are correct in your assessment. If you recall in the guidance which I gave at the beginning of this FY, I was saying that we -- the worst seems to be over, especially in terms of execution coming in, in this FY from the export orders also. And we have said that we'll aim at overall, on an annual basis, an EBITDA margin of about 20-odd percent and PAT margin of about 15-odd percent. And in Q1, because of the uptick in the consultancy contribution, in fact, has been higher both in the EBITDA and the PAT margin. And so I think, yes, definitely, we should be able to maintain those levels on a minimum on an overall annual basis.

[Shreyans Mehta, analyst]

Great. Great. And sir, secondly, if you can help us with the cash on the books as on date?

[Rahul Mithal, executive]

The cash balance is about INR 800 crores, and client fund is about INR 2,400 crores.

[Operator]

We have next question from Viraj Mithani from Jupiter Financial.

[Viraj Mithani, analyst]

My question is, what would be your guidance for this year and next year since things are -- like you're saying the worst seems to be over. Can you give some color on that?

[Rahul Mithal, executive]

So work has just started. We have got the orders now. We have to really expedite the execution, these are very young orders. As I said, out of INR 8,800 crores, about INR 3,500 crores are very young. So these are young orders, which need to be executed. And yes, in terms of the only sequentially uptake and on an annual basis, whether in terms of which I had given the guidance at the beginning of the year, definitely, we will surpass by a substantial amount the top line vis-a-vis last year. And as I said, we'll be able to maintain, on an annual basis, EBITDA margins of about 20% and PAT margins of about 15%.

[Operator]

[Operator Instructions] We have a follow-up question from Harshit Kapadia from Elara Securities.

[Harshit Kapadia, analyst]

Just wanted to check on the margins on the consultancy side. They have been something above 40, 45x (sic) [ 40%, 45% ] if you look at last 2, 3 years. Now we are in the vicinity of 35%, 40%. Now should we look at this to be a more sustainable number? Or is there a possibility that we can move towards 45% margins?

[Rahul Mithal, executive]

No. I think you see, you must appreciate that these 40%, 45% margins traditionally included the QA contribution, quality assurance contribution also, which was definitely earlier on a much higher contribution. So the levels of about 35% is what is -- now especially a large percentage of our orders now across verticals are on a competitive basis, and there's huge competition. Even in our international consultancy orders, which we are getting, if you compare the trend of margins in that vis-a-vis earlier international orders are definitely much more competitive.

So realistically, the 35-odd percent range, anything between 30% to 35% is what on a consol basis, on a consolidated basis, the consultancy margins would settle down over a period of time. And that is what is contributing to the overall EBITDA margins of about 20% and PAT margins of about 15%.

[Operator]

We have the next question from Vishal Periwal from Antique Stockbroking.

[Vishal Periwal, analyst]

Sir, in terms of our Bangladesh order, can you give some color like where we are in terms of design and approvals? And second, related to that, like when that order can enter into revenue recognition stage?

[Rahul Mithal, executive]

So Bangladesh is a complex order in the sense that there are different types of coaches. There are about 7 different types of coaches. And now in the last few months, there has been a very substantial progress in that in terms of regular meetings, interactions with the manufacturer and the Bangladesh Railway to finalize the design. Most of the design elements are getting finalized and the ordering of the detailed subassembly for the prototype has started.

So we are foreseeing that definitely the first rake of 20 coaches, we are aiming that before the end of the FY, we should be in a position with because it will require earlier individual prototype approvals of each type of coach and then the mass manufacturer will start. So our assessment is that we are aiming that the first rake of 20 coaches definitely before the end of FY, we should be aspiring to send it. And so that's the time when the first revenue bookings we are aiming for in quarter 4 from this order.

[Vishal Periwal, analyst]

Okay. And this order will conclude by when, sir, tentatively?

[Rahul Mithal, executive]

So the -- once the mass manufacture starts and considering that we have a huge manufacturing capacity, that's not an issue. I -- if we are on track in the first rake, we are able to push through in quarter 4, then we should be able to definitely aim to complete the entire order in the next FY.

[Operator]

The next question comes from Uttam Kumar Srimal from Axis Securities.

[Uttam Srimal, analyst]

Sir, currently, our turnkey order book stands at INR 4,209 crores. So sir, what is the execution paid for these orders, time frame?

[Rahul Mithal, executive]

Yes. So Uttam, the -- as I mentioned, a large chunk of these orders have come in the last 2 quarters and more so also recently and even in this quarter. So if you take an average time span of any infrastructure of about 2.5 to 3 years, the first about 6 to 9 months goes in the design and fixing of the executing agency. So we are very closely trying to ensure that the actual physical construction in most of these orders starts in the next 3 to 6 months, so that by quarter 3, when the actual construction at the site starts, the revenue booking in Q3, Q4 starts. So that's the broad -- on a bigger picture, you see bulk of the turnkey order book, the revenue booking should start coming in from latter part of this FY. And on an average, these projects have a time span of about 3 years.

[Uttam Srimal, analyst]

Sir, can you quantify how much we can book in this year for turnkey in terms of revenue?

[Rahul Mithal, executive]

That is -- that will be kind of -- it's too -- I don't want to give figures wherein it's, as I said, giving a mix of the orders, depending on the time frame, definitely on an overall basis, what we will aim is that they contribute -- the turnkey segment contribute substantially so that this guidance that we surpassed by a substantial amount, the revenue vis-a-vis last FY, that we will definitely ensure. But what will be the figure, I think that will be speculation at this stage.

[Operator]

We have a follow-up question from Anand B from Ksema Wealth.

[Anand Bhaskaran, analyst]

So I just want to know like what would be your estimated segment breakup between the different sectors like consultancy, export, turnkey and leasing in terms of percentage for FY '26?

[Rahul Mithal, executive]

Sorry, your first sentence, I lost you, sorry. Could you repeat, please?

[Anand Bhaskaran, analyst]

I'm asking for like a segment breakup between the verticals, the consultancy, export, leasing, turnkey in terms of percentage for FY '26. Do we have an estimate?

[Rahul Mithal, executive]

Yes. So you see, if you look at -- let's work out reverse. If you can see order book, consultancy is about INR 2,900 crores out of INR 8,800 crores, which is roughly about nearly 30% plus. So the turnkey element, which I mentioned in the last response, will start generating revenue by latter part of this FY. The export revenue definitely will start picking up as I answered. So to my assessment, we definitely aim that the high-margin, the contribution, which is primarily consultancy and export

[Audio Gap]

of the mix. And the balance would be picked up by turnkey. So the -- on a nutshell, the consultancy, export and leasing elements, which are primarily the high-margin contributors, that we would definitely aim to be at least 60% plus, so that we have a safe margin level that we have been guiding at. And then turnkey contributes to about 30-odd percent.

[Anand Bhaskaran, analyst]

I'm really sorry, in between I kind of lost you. Can you just repeat in terms of breakup or consultancy, leasing and export?

[Rahul Mithal, executive]

So that is -- again, as I said, would vary on a quarter-to-quarter basis. And again, what would be the element of each one of them, again, export, as I said, 10 locomotives would go, we would definitely aim at one rake from Bangladesh. So again, giving a mix of each one of them right now is not -- I would call it too speculative. Yes, definitely, we would keep tweaking with an overall aim at keeping the EBITDA margins at 20%. So focus -- as the quarters evolve, focus on the high margins even within the export, consultancy and leasing, so that at least 60% plus remains the mix of these and turnkey doesn't

[Audio Gap]

so that the hit on the overall margin is not substantial.

[Operator]

The next question comes from Sundar from Elara Capital.

[Nemish Sundar, analyst]

This is Nemish Sundar from Elara. Sir, I just wanted to understand the payment realization from the Bangladesh order? So would it be milestone-based or would it be at the end of the project? And have you received any advance for that?

[Rahul Mithal, executive]

Yes, we have received the advance and the -- like in all export orders, the revenue book -- is booked in the -- as the bill of lading gets made. So whether it is the Mozambique order or the Bangladesh order. And revenue realization normally is not an issue in them because all of them are covered by LCs. So -- and for Bangladesh order, we've got the advance also.

[Nemish Sundar, analyst]

Okay. And sir, any update on the Zimbabwe export order?

[Rahul Mithal, executive]

The Zimbabwe order is, as I said, we have not added it still to our order book. It's about INR 700-plus crores, it's not part of the order book because we were very clear, even though the agreement is signed, the funding is not fully in place. So while they are pursuing with us and the Afreximbank, it is yet to be fully in place. The term sheet is yet to be fully accepted. So we are still hopeful that it's been quite a long time, more than 2.5 years, that it sees the light of the day. But as of now, it's not part of the order book.

[Operator]

We have a follow-up question from Viraj Mithani from Jupiter Financial.

[Viraj Mithani, analyst]

Yes, sir. Can you give some color on our export? How are we doing on those fronts?

[Rahul Mithal, executive]

Sorry, Viraj. Could you repeat?

[Viraj Mithani, analyst]

Color on the export side, since you said we'll be focusing on exports this year. So how are we doing on this front? And sir, a follow-up to that, we have signed so many MOUs. So when the benefit of this MOU will come to us?

[Rahul Mithal, executive]

Right. So as far as export is concerned, there were 2 guidance, if you remember, which we had given. One was that we will aim for getting one export order. I'm talking of export of rolling stock, the Expotech portion and not the international project consultancy. So in the export of rolling stock, we have maintained that. I mean even in this quarter, we've got one fresh export order from African Railway Company. So that's as far as adding to the orders of export, which is about INR 1,400 crores now.

In terms of execution, the guidance which we had given that the Mozambique shipments will start by early this year, and they have started. The first 2 locomotives have gone in early July. And we are definitely aiming to execute the entire order in this year. The execution for the Bangladesh order will be, as I mentioned some time back that we will try and start aiming that the first rake starts by -- before the end of the FY.

As far as the question on MOUs is concerned, you see each of these MOUs start a collaboration, and these are all nonfinancial, nonbinding MOUs. They set a collaboration process. So giving an example, the MOU, which we signed with Etihad Rail late last year, gave us results, and we have already got our first order with business collaboration with Etihad Rail in Jordan. We are doing a consultancy order -- consultancy project in Jordan. And this collaboration, this interaction has already started -- has opened up a lot many opportunities, which I'm sure in the coming quarters will convert into orders. So each of these MOUs, this is just an example, our strategic collaborative MOUs, which as the opportunity comes up because you're collaborating and constantly in touch with the MOU partner, generate orders.

[Operator]

We have a follow-up question from Mr. Vishal Periwal from Antique Stockbroking.

[Vishal Periwal, analyst]

Sir, on the Mozambique order that we have shipped, so what sort of margins that is looking for the export now for us?

[Rahul Mithal, executive]

You see one thing is very clear that both these orders -- when we -- after a hiatus of about 3 to 4 years, when we got the first order early in '24, the Mozambique order and then in the quarter 1 of last year, we got the Bangladesh order. These 2 were the first orders in the last 5 decades, which were on a global competitive order, and they were not on the line of credit EXIM Bank EOI basis. So definitely, the margins are -- now you're competing on a global tender are -- the erstwhile export margins, which were about minimum 20%, 25% plus, they are nowhere near that.

But yes, they are competitive. And what we will try and maximize is that the more expeditious execution that you do even you inch up by at least 1 or 2 percentages more by the earlier envisaged margins. So I can only say that the overall Expotech margin will be definitely lower, yes, in double digits, but definitely not in the range of 25%, which are historically there.

[Vishal Periwal, analyst]

Okay. So maybe a range wise, if not exact, it will be more like 10%, 15% or higher?

[Rahul Mithal, executive]

You see every order, Vishal, will have a different margin. But I think, let me put it this way, it will be in a double digit, but definitely not above 20%.

[Operator]

[Operator Instructions] We have a follow-up question from Anand B from Ksema Wealth Private Limited.

[Anand Bhaskaran, analyst]

I just want to get a clarity on the orders that we got in the last 3 quarters, specifically the Ntokoto Rail Holdings and the Tsiko Africa Logistics, can you shed some light on...

[Rahul Mithal, executive]

Sorry?

[Anand Bhaskaran, analyst]

These 3 specific export orders that we got in the last 3 quarters. One is the Ntokoto Rail Holdings, that order, the 2 orders from there. And the Tsiko Africa Logistics, the order that we got in Q2, so can you shed some light on that and when we can get revenue realization this year?

[Rahul Mithal, executive]

Yes. So Anand, this is a very interesting initiative which we have taken and it opens up a huge potential. All these 3 orders, while from different clients are basically the similar orders. They are orders -- you see Indian railways now has a large number of in-service diesel locomotives, which are available for spare now because of the large-scale electrification. And most of these high horsepower diesel locomotives have a minimum of 15 to 20 years life left at least. And they are at a very good competitive price.

The challenge only is that this is on broad gage, Indian Railways is on broad gauge which is 1,676 millimeters. And South Africa is on Cape gauge, which is 1,067 millimeters. So these locomotives have to be modified to be able to run on that network. So considering we took this as a challenge because it's a win-win situation for all, for Indian Railways because these locomotives can go it's -- they're available at a competitive price for the client. So we have started work on that. We've gone into detailed designing on how to go about it. The designs are at a very advanced stage. They've got nearly finalized. We started inventing the requirement for it.

So the aim is to at least have one prototype ready. On paper, all the designs are ready and the sourcing has started. But the aim is to get at least one prototype ready and get it cleared by the African Railways by end of this FY. Once the first prototype is ready, then the mass manufacturer in the design win would have been done, and not only opens up these 9 locomotive orders which you've got, but it also opens a huge amount of potential for the more than 100-plus locomotives, which are available to be spared for export.

[Anand Bhaskaran, analyst]

Okay. And what about the Ntokoto Rail Holdings? Is that...

[Rahul Mithal, executive]

All of these orders, there are 4 different orders totaling to 11 locomotives, which are including the most recent 2, which we received in this quarter. So now there is 4 different orders of all similar, different clients all in South Africa. And this would not only open opportunities in South Africa, but there are about 11 different countries in Africa, which has the Cape gauge. So all of these -- once the first prototype physically runs on that system and gets all the necessary statutory approvals, will -- then the mass manufacture would not be an issue at all.

[Anand Bhaskaran, analyst]

Okay. So once one prototype is approved, so that will be a common base for all of these orders that will be going forward?

[Rahul Mithal, executive]

Yes, yes.

[Anand Bhaskaran, analyst]

Okay, in the last 3 quarters when we got these orders, when do you expect sort of a completion of the order?

[Rahul Mithal, executive]

Yes. So I said the first prototype, we are aiming to definitely see that it reaches physically by end of this FY. That's the aim. All designs have now been finalized, and the manufacture will start in the next few months. So then we should be able to send the first prototype of physical trials by end of this financial year.

[Anand Bhaskaran, analyst]

Okay. So you expect like revenue realization by Fy '27?

[Rahul Mithal, executive]

Anand, you could come back in the queue, please.

[Operator]

We have a follow-up question from Shreyans Mehta from Equirus Securities.

[Shreyans Mehta, analyst]

Sir, how should one look at the REMC part of the orders? I mean, especially from the scalability perspective, you think, I mean, it's largely INR 130 crores, INR 140-odd crores yearly or we can scale it up from here on as well?

[Rahul Mithal, executive]

Yes. So I think, Shreyans, the key point in REMCL scaling up are twofold. One is the consultancy, which it gets for the traction power procurement that it does for Indian Railways. So the challenge is in that more and more states opening up to open access. And as more states open up to open access, the quantum of procurement from them increases and our consultancy fee, which we get increases. So efforts are on, and we've got some headways in the last 2 months, 2 states, which we've -- last few months we've opened up.

So in the coming quarters, the efforts to get more and more states to give us open access for procurement, that's the scalability, which we are aiming at. And I definitely see a scope for at least a 20% scalability in the next 1 year or so. And that's the one broad area for scalability. Another area which now REMCL is working on is based on the experience of the last few years, which they have worked on, on the green energy area. For last 2, 3 years, they have been piloting the green energy initiatives for Indian Railways. So now they are in a position where they started getting small orders already in the last few months. And that's, again, a scope for a lot of scalability. For consultancy

[Audio Gap]

for other possible clients. So both these areas, as you would appreciate, have a scope of scalability. And definitely, REMCL can then reach up much above the current levels about INR 130 crores, INR 140 crores.

[Operator]

The next is a follow-up question from Harshit Kapadia from Elara Securities.

[Harshit Kapadia, analyst]

On turnkey, do you think since the electrification is completely done, not more EPC-related projects, which are likely to come this year or even in next 5 years, what's your view, let's say, a 5-year thing, is it going to go down? Or is it only going to go up? And would RITES share remain at that same 10% share or 30% of your revenue would remain to be turnkey construction? That's the question.

[Rahul Mithal, executive]

So Harshit, I'm glad you asked the question because this is something important, which we have been saying earlier, and we want to reiterate. We are not an EPC construction company and will not be an EPC construction company. We are a consultancy company. So whether it is pure project consultancy or the export portion, which is primarily design consultancy.

In turnkey also, the new orders which we are taking, whether it is in the rail infra sector or the building sector, et cetera, all of these are primarily consultancy work. It's not EPC tender, none of them. They are primarily consultancy. It's the method of accounting where the revenue is flowing through our balance sheet. So if, for example, the consultancy fee is INR 4 on a INR 100 project, then the revenue is INR 104 rather than INR 4.

So we are very clear. We -- our role remains the same, only for the certain clients for ease of dealing with one entity, single window, compliances, et cetera, they feel it more comfortable for the revenue to flow through us. So that's very clear. And that model, depending on the comfort of the client, we will continue to pursue because those are not really EPC construction contracts.

So whether, as I said, in rail infra, like you see, we got some orders. We've got some orders in the turnkey segment, in rail infra. We've got some orders in, for example, the IIT Delhi work we are doing. We recently got about 10 days back, the BEL work in Andhra Pradesh, which is also on basically a cost-plus turnkey model. So that's going to be there. And that contribution would depend again over a period of time as more and more clients, whether in the building vertical or rail infra vertical come up, wanting to work on this model as a client, and we would be okay with that.

[Harshit Kapadia, analyst]

Understood, sir. And just one follow-up on consultancy -- sorry, on the export side. On Zimbabwe, you said there's been 2.5 years. So how much more time would you think would take for us to get the order? Or is there a risk that the order will be canceled?

[Rahul Mithal, executive]

The Zimbabwe order, right?

[Harshit Kapadia, analyst]

Yes, the Zimbabwe order, sir.

[Rahul Mithal, executive]

So very frankly, the -- that risk is there, it was there from day 1, and that's the very reason we were very clear that even though a formal agreement has been signed, we will not include it in the order book. So the funding is always a challenge in these orders. And then -- since this funding was being arranged by the National Railways of Zimbabwe from various sources and they are quite confident that they may still get it from the Afreximbank. But yes, that risk definitely, you're correct. That risk remains.

[Operator]

We have a follow-up question from Anand B from Ksema Wealth Private Limited.

[Anand Bhaskaran, analyst]

A follow-up question from before. So since you mentioned consultancy and exports will be your main focus. So it is fair that turnkey construction, the share of revenue can go down in comparison to them?

[Rahul Mithal, executive]

Yes. So the turnkey contribution, as I said, would remain in the range of about 30-odd percent of the total pie. That's on an average on an annual basis. On a particular quarter, the mix may change depending on the shipment or the execution of a particular turnkey project or the shipment of an export order. But on an annual basis, what we foresee is that the contribution from turnkey would remain in the range of about 30-odd percent.

[Anand Bhaskaran, analyst]

Like not quarter basis, but like in next, let's say, 4, 5 years range on a long-term basis?

[Rahul Mithal, executive]

On a long-term basis, again, we are very clear, as I said a little while back that we are a consultancy company. And this turnkey segment is not really an EPC segment. So it depends on the comfort level of clients. For example, many of these educational institutions, which I mentioned, the orders which we have got like IIM Raipur, IIT Bhubaneswar, IIT Delhi, many of them prefer to deal with a single window. So the entire revenue flows to us. So even though it's -- primarily the scope of work is consultancy, but its concept to commissioning. So I gave an example, the INR 104 flows through us rather than INR 4. So that is what will maybe The extent of orders that we get on this model may change the percentage in the coming years. That we can only see in the coming quarters in terms of the fresh order inflows.

[Anand Bhaskaran, analyst]

Okay. Okay. Okay. But will it go, let's say, below 30-odd percent in the next 2, 3, 4 years?

[Rahul Mithal, executive]

No, it will not go below 30%.

[Operator]

[Operator Instructions] We have follow-up questions from Harshit Kapadia from Elara Securities.

[Harshit Kapadia, analyst]

Sir, on REMCL, we were expecting there will be a leg up because of the DFC. So we understand at least the East DFC section has started. So are we completely doing -- the REMCL is doing work for East DFC and West DFC, which is partly operational. Where are we? And is there a leg up if, let's say, the DFC gets operational maybe this year or next year?

[Rahul Mithal, executive]

Yes. So Harshit, as I explained, the REMCL leg up happens as more and more procurement of traction power comes from space which open up to open access. So the key challenge, and this is the target area which we keep pushing in every quarter to try and come out more states on open access. So about 7, 8 states still left, which are to come on open access. And recently, we had a success in 1 or 2 states, and we are hopeful that we are on talks and discussions to get more states open up to open access for procurement of traction power for Indian Railways in the coming months. .

As those -- so that is a leg up, which generates more revenue. Because in terms of electrification, the electrification is now more or less at its -- reaching its maximum 100%. So only in terms of more traffic that flows -- that grows and it moves on these corridors or Indian railway, that is the incremental portion that there will be more requirement of electrical energy. But the substantial growth is as you open up more states for open access for procurement of traction power.

[Harshit Kapadia, analyst]

No, even for DFC, it would be through state only, sir?

[Rahul Mithal, executive]

Yes, yes. All traction power you're buying from states, the electricity you buy through the grid through the open access, which is being generated -- which is covered by the individual regulatory issues of every state.

[Harshit Kapadia, analyst]

So we were expecting some 500-megawatt would be added via DFC, how much of that has been done until now, sir. Any color if you can give?

[Rahul Mithal, executive]

I would not be able to give you individual breakup figures of that right now. But definitely, the requirement of power, whether it is for the entire network, IR, et cetera is primarily sourced -- primarily or what the entire depends on the procurement from states and where there is no open access limits the probability from buying, and that's what reduces the possibility of the fee that we get, the consultancy fee. So the catch is that more and more states as we can get on open access opens up or gives us the leg up for larger scalability in terms of the revenue of REMCL.

[Harshit Kapadia, analyst]

Can you name the states which have already boarded in some states...

[Rahul Mithal, executive]

I wouldn't have the list ready right away, but I can -- we'll share that with you.

[Harshit Kapadia, analyst]

No problem. And lastly, on the rate side, you mentioned, is the rate at INR 0.05 per unit? Or has it changed?

[Rahul Mithal, executive]

It's about INR 0.07 per unit.

[Harshit Kapadia, analyst]

INR 0.07 per unit. Okay, okay. And lastly, on your wagons, sir, I think we have a separate joint venture on the wagon side. So -- and we have seen the procurement from the Indian Railways for wagons have increased, even the tenders were also floated. So if you can give any color on the tendering for wagons in future? And is there a capacity expansion plan for your particular joint venture that you have?

[Rahul Mithal, executive]

The joint venture at SAIL Kulti is, in fact, last year, when we started with the first major turnaround and then it maintained in FY '25, the profitability. And now also this quarter, we've got profits. In fact, it was after about first time it started generating giving dividend and now also it's giving -- it's generated profit. We have an order book of INR 480 crores as of 30th June. And this is -- so the interesting thing is that, that JV, SAIL Kulti, is not only getting orders from Indian Railways, it is also getting orders from private players, which it has executed successfully last year.

So we see a potential. We've also recently got the design approvals for container flat wagons from RDSO. So now we are pitching for getting orders or manufacturing of these type of wagons from not only Indian Railways, but from private players also. So this order book of INR 480 crores is only going to increase in the coming quarters.

[Operator]

We have a follow-up question from Anand B from Ksema Wealth Private Limited.

[Anand Bhaskaran, analyst]

I just want to get a shed on the dividend payouts. In the last con call, you mentioned the payout will be around 95% for the current FY '26. Would you maintain that dividend payout?

[Rahul Mithal, executive]

Yes, Anand. You see our basic business model is that we are a debt-free company with a low CapEx. So we are not a CapEx company. So with that, broadly our pattern of dividend if you see in every quarter and even if you see on the FY basis and even now the dividend that we have declared for quarter 1 is in that range. So we will maintain that trend in the coming quarters in terms of the dividend payout percentage.

[Anand Bhaskaran, analyst]

Okay. Okay. So I think in this quarter, you gave interim dividend of INR 1.3 per share. So at the end of the financial year, what would be a total dividend that you would to be able to declare?

[Rahul Mithal, executive]

Anand, that would be speculative, but getting -- you see by the trend and my guidance that we will maintain the levels of dividend payout ratio, which we have maintained. It also depends on what -- how much profit they're going to make, right?

[Anand Bhaskaran, analyst]

Yes, yes. Yes, go ahead, sorry, sir.

[Rahul Mithal, executive]

Yes. No, I said so we will maintain that dividend payout percentage in the range that we mentioned. And definitely, we'll -- that's our business -- basic business model. So depending on the way we are aiming for the profit levels on the entire FY basis. But this is for sure that every quarter, we will definitely declare some dividend. That's for sure.

[Operator]

We have a follow-up question from Harshit Kapadia from Elara Securities.

[Harshit Kapadia, analyst]

On turnkey construction, sir, we have seen in the last 2 years, it has been opened for even private sector. So can you just give some understanding on how has been the private sector competition in the turnkey project? And has it impacted your business for RITES and margin. Is there an aggression coming from private sector or it is still largely U3 guys, the PSUs, EPS getting the majority of the project, sir?

[Rahul Mithal, executive]

No, no, not at all, Harshit. I fact, this is all these orders across sectors. And as I mentioned, not the rail infrastructure alone, even the building sector. These are open to all players, whether private or PSUs. So we are very clear. We are not building -- as RITES we are not bidding for EPC tenders. Those are for construction companies to bid for, whether they are private players or other PSUs.

We are basically bidding for getting all on competitive rates on tenders, whether in rail infra or building where primarily the expected scope of work is on a cost plus PMC type of model where the revenue flows through us. So that's the basic difference between our orders and the other private players or other PSUs. So yes, even for this, there are a huge amount of competition. But our pickup on the turnkey segment is very focused and very specific and not going into the EPC model.

[Operator]

The next question comes from Parimal Mithani from Credential Investments.

[Parimal Mithani, analyst]

Hello? Do you hear me?

[Rahul Mithal, executive]

Yes, Parimal. Go ahead.

[Parimal Mithani, analyst]

Sir, this is regarding your JV with -- consultancy with DNV Business, can you highlight how the business is in terms of going -- and what's the way ahead from there?

[Rahul Mithal, executive]

JV with -- I didn't get you.

[Parimal Mithani, analyst]

The DNV Business with the Norwegian company for quality assurance which you had tied up.

[Rahul Mithal, executive]

So that's not a JV. That's basically a -- the partnership for that consultancy, which we are doing for quality assurance. Yes, that we are working on them, and we've got some particular -- we're just -- my director technical is here in front of me. So that's a partnership really, not a JV. And we had collaborated with them on some opportunities, nothing very substantial in terms of revenue realization. So it's there that -- it's kind of an MOU, which is there for collaboration. And we'll keep looking on for more opportunities if they come, whether domestic.

The aim of that collaboration was with them was, if you remember, recall, this was quite some time back more than a year back, where the quality assurance vertical was reinventing itself to come out of the crisis and we were looking at various domestic and international partners to complement our gaps which we had in our capability to try and target newer clients.

And for that, this was one of the initiatives and many such initiatives have resulted in the fact that the quarter that went by our quality assurance vertical, which I said sometime back, has seen the bottom of the barrel and it has come out of it. And now we have -- 2/3 of our quality assurance revenue is from the non-Indian Railways traditional clients. So steps like these have only helped us reach that stage now.

[Operator]

We have a follow-up question from Anand B from Ksema Wealth Private Limited.

[Anand Bhaskaran, analyst]

Just shed light on the competition nomination point of view, so the last couple of quarters, the trend has been going down from 63-odd percent to now I think it's coming to 53% competition versus nomination. So will you shed light on will this trend continue henceforth?

[Rahul Mithal, executive]

No. In fact, what you're seeing is a breakup of the order book. If you see -- if you analyze the fresh inflow breakup of the competition vis-a-vis the nomination in fresh inflow, a larger percentage, I would say about 65% to 70% are on competitive basis, and this trend is only increasing.

The order book breakup, yes, if you're seeing this is a slight reduction, but that basically depends on maybe some of the orders on the competition basis -- competitive basis have got executed. So that keeps varying. But in terms of an overall field, just to get you feel, most of these orders, like, for example, in the quarter 1 that went by, we got about 155 orders totaling to about INR 400-plus crores, INR 420-odd crores, a majority of them, 2/3 plus are on competitive basis.

[Operator]

As there are no further questions, I would like to hand over the call to the management for their closing comments.

[Rahul Mithal, executive]

Thank you all. I am glad that the questions which were asked really helped us give our detailed insights and in-depth analysis into what is -- where we are, how is the quarter 1 and what is the way forward for this FY. As I said in the outset, the focus now is on expeditious execution so that this young order book starts generating revenue, whether it is from the export vertical or the consultancy or turnkey. And definitely, by the latter part of the FY, number one, sequentially, you should definitely see an improvement and latter part of the FY substantial improvement so that overall, definitely, we surpass the figure of last year. That in a nutshell is, to my mind, the way forward for the coming FY. Thank you.

[Operator]

Thank you, sir. Thank you all for being a part of this conference call. If you need any further information or clarification, please e-mail at [e-mail]. Ladies and gentlemen, this concludes your conference for today. Thank you.

[Rahul Mithal, executive]

Thank you.