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Va Tech Wabag Ltd
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Va Tech Wabag Ltd
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Ladies and gentlemen, good day, and welcome to the VA TECH WABAG Limited Q1 FY '21 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Mr. Rajiv Mittal, Managing Director and Group CEO. Thank you, and over to you, sir.
Thank you. Dear friends, good afternoon. Let me welcome you all to this earnings call post announcement of Q1 FY '21 results of VA TECH WABAG Limited. Mr. Sandeep Agrawal, our Group CFO, joins me today for this earnings call. We hope you all had a chance to go through the results update. To start, let me wish you all the best of health during this COVID-19 pandemic. Let us all hope that we return soon to normal times and carry the lessons learned during this pandemic into our daily lives to be stronger and healthier. COVID-19 pandemic, as you all know, continues to have an adverse effect on the economic and health impact globally. And the governments all over have been battling to bring this pandemic under control. As mentioned, during our year-end earning call, WABAG is very proud to have contributed in ensuring the water security during these pandemic times by making sure that our O&M sites are operated as normal. My sincere thanks goes to all our direct and indirect employees and all the stakeholders, including our customers, suppliers and the bankers for their continued support in this difficult time. The first quarter of this year was overshadowed by nationwide lockdown in India for most part of the quarter, and lockdown in some of the other countries where we operate. Engineering and procurement activities continue to operate during the lockdown with our employees working from home. Progress on manufacturing at our suppliers' location was dependent on respective country's restrictions. The pace of procurement activities are picking up now, and we expect to return to normalcy very soon. Activities at some of our EPC sites continue to operate as per the local directives. The site activities are also gradually resuming pace as the workforce is being ramped up at the project site with progressive relaxation of COVID lockdowns. We have implemented best practices on health and safety at all our sites, in line with the government directives and customers' advisories. We will continue to monitor the development and provide necessary updates regularly. I'm very happy to note that even during this tough economic conditions, we have achieved an order intake of over INR 440 crores in quarter 1, with a major repeat order of USD 48 million in Kingdom of Saudi Arabia, where we will design and build the 300 MLD independent sewage treatment plant at Jeddah Airport. The plant will be built by WABAG with the state-of-art Nereda Technology for the first time in the region, a sustainable and cost-effective technology. This order further cements our growth -- sorry, our growing presence in Middle East region, where we now have around 15% of our order backlog under execution. Our order book position remains extremely strong at over 3x annual revenue, with a healthy mix of multilateral funded projects from marquee customers with innovative solutions. Our O&M backlog at over 30% of the total order backlog is in line with our strategy of getting to 25% of overall revenue from O&M in the near future. It gives me immense pride to inform you that our 45 MLD tertiary treatment reverse osmosis, TTRO plant at Coimbatore, Chennai, recently bagged the distinction award under the category of Wastewater Project of the Year at the Global Water Awards 2020. This plant uses multistage treatment schemes and is the first reuse facility in India to use ozonation for disinfection. Plant will help to free up approximately 16 million-meter cube of freshwater each year, and also helps Chennai to become the first Indian city to reuse more than 20% of its treated wastewater. Following up on our commitment to focus on liquidity, our net debt position continues to remain flat from March 2020, at around INR 180 crores despite a tough quarter on cash flow due to COVID-19. I'm extremely pleased to inform you that as a significant development during the quarter, we have completed our defects liability period and fully handed over the Al Ghubrah 191 MLD desalination plant, which was executed through our joint venture entity in Oman, and all our guarantees have been returned. This project continues to provide us with one of our best technology references in the desalination segment. As a company, with technology focus, it is important that we focus on our core strategy of being asset-light, growing profitably and executing projects where we add value. In line with this, I would like to leave the investors, analysts and all the stakeholders with a few thoughts on our core business. In the past few years, you have seen that the impact of GENCO, which we considered as a noncore business on our profitability and financial position has taken the focus away from the fact that the core business has been going (sic) [ growing ] strongly. I repeat the core business has been growing strongly. I would like to put some key parameters, which will demonstrate the above for FY '19/'20. While our reported EBITDA was at 8.9%, the EBITDA of the core business was 11.5%. This shows that we are more in the 10% to 11% range of EBITDA and not in the sub-10% range. Also, you would have seen that reported working capital was at 130 days, but the core business operates at 78 days only, which is much better than many organizations in this EPC sector. Lastly, if we see the return on capital employed with the reported numbers, it stands at 12.5%. But core business is delivering 24.3%, which is a true reflection of our strategy to remain asset light. You will also see in our results update presentation, we have included detailed information on this aspect. As you can see, the 3 key metrics of profitability, working capital and return on capital investment have been on the rise, and it is important to recognize that core business, which is water technology, is intact and growing and growing strongly. With this positive note, I now would request Sandeep to take you through the financial highlights. Over to you, Sandeep.
Thank you, Mr. Mittal. Good evening, friends. First, you had an opportunity to look at the results update presentation as circulated and uploaded on our website. Now let me quickly take you through the key financial highlights for the quarter ended June 30, 2020. Our revenue from operations for the quarter stood at INR 431 crores on a consol basis and INR 282 crore on stand-alone basis. Our revenue for the same quarter previous year were INR 457 crores and INR 324 crores, respectively. The O&M revenue has increased by 20% year-over-year, with key contribution from One City - One Operator project. The growth in EPC revenue was deferred due to slower progress amidst the lockdown restrictions. EBITDA for the quarter stood at INR 29 crore on consolidated basis and INR 24 crores on a stand-alone basis. Now our net interest cost. This has reduced by 26% on consolidated basis and 17% on stand-alone basis because of our continued efforts on cash management and debt reduction. Our gross debt is reduced by INR 54 crores, which is about 10% reduction from March '20. But net debt remained flat because we consumed some of the cash also during the pandemic despite a tough quarter marked by COVID-19. Profit after tax attributable to owners for the year -- for the quarter stood at INR 5 crores on consolidated basis and INR 4 crores on a stand-alone basis. We will continue our strategy to wait-and-watch approach regarding the guidance for FY '21. And we will give an update when there is a reasonable stability and visibility. Going forward, we expect hygiene and sanitation to be one of more focused, and be the one of the first few sectors to receive increased government spending and revive in the forthcoming quarter. We are monitoring the evolving situation, and we will update as the year progresses. We continue to work close with our bankers and are thankful for their continued support throughout the quarter. With this, we open the floor for question answers.
[Operator Instructions] The first question is from the line of Mohit Kumar from IDFC Securities.
Congratulation on good set of numbers. Sir, my first question is, of course, you said that you are not giving any guidance as of now. But can you quantitatively or qualitatively comment on the recovery for Q2 and Q3? And how do you see the financial year with whatever information you have at this point of time?
See, I think your guess will be as good as our guess. The only thing you can take a guidance from are first quarter numbers that even under the strictest lockdowns, we have been able to post a decent numbers. We hope that going forward, with more relaxations coming in, we will be able to go towards more normal operation. But we also know that it is all going to be very slow, and it's going to move slowly. And we are prepared for it, and we have planned for that. And going forward, I think we should be on track of whatever we have demonstrated because a substantial part of our business, as I said in my speech, is coming from O&M, which is going to continue at 100%. Also, we are basically an engineering and technology company. A substantial part of our revenues also come from engineering and procurement. That part also should work. The only thing which will get affected slowly will be our -- getting the sites operational because the -- slowly the workers are coming in. But these are also a fantastic opportunity to look inside the organization, do cost optimization, improve the efficiencies, digitalize most of our operations, which we have been using this time to do. And I'm sure over a period of time, you can see the effect of this positively on our numbers also.
And sir, given that Q1 has -- Q1 was impacted by -- especially on EPC side. And Q2, your recovery must be swift as far as labor availability is concerned. Don't you see higher number going forward for EPC business? Can you quantify the labor availability as of now versus our requirement?
Yes. See, labor availability, we cannot generalize, as you all know. Even in our own country, we have a different levels of restriction at different city, different state. And there are some places where we are at 90% plus, and there are other states where we are still at 50%, 60%. Same way, internationally. There are a lot of sites where we have achieved 90% plus. But there are still some sites where we are at 70% only. And this is going to depend how the relaxation will come over a period of time. But yes, you are right, it is much better than it was in the first quarter.
Okay. Secondly, sir, we -- the significant -- have you quantified the impact of GENCO in the -- on the Q1 FY '21 profit and similarly for Q1 FY '20? Can you have similar number?
Yes, I think we always tell you, because today, a new Ind AS index is giving us a guidance that we have to make a provision for delay. And there is a clear policy and a guidance how to make a provision for delay. As long as payments are not coming in, every quarter, there is a provision for delay which is coming in. So this is as per a new Ind AS with ECL policy. We are following that policy.
So what is the number, sir, for Q1 FY '21 and Q1 FY '20? So we arrive -- we can arrive at core EBITDA.
See, we have about -- I think if you see in the Q -- FY '20, it was around INR 50 crores, INR 55-odd crores.
5%.
Which is 4%, 5%.
INR 5 crores. Q1.
And in Q1, it is about INR 5 crores to INR 6 crores.
For Q1 FY '21 impact is nearly INR 5 crores, INR 6 crores. Am I right?
Yes.
Then, sir, what is the reason for sharper decline in EBITDA margins, Q1 FY '20, especially I'm talking about core EBITDA margin?
Because some of these projects, which were high-margin -- because there's always a mix of projects, which decides your EBITDA. Some of the projects where there is a higher margin, if they have not had the traction, naturally the combined EBITDA will see a lower. Plus last year, when we had a Q1, our new projects were in the design and engineering phase. And when we are in the design and engineering phase, our direct cost is almost negligible. It's more of our manpower, which is involved in design and engineering. So the margins are always going to be better in the design and engineering phase rather than when you go to the execution phase.
Let me correct the numbers. The last year Q1, we had provided for INR 5 crores. And this year Q1, we have provided for INR 9 crores towards GENCO.
The next question is from the line of Renjith Sivaram from ICICI Securities.
Yes, sir, a decent set of numbers given the overall challenging environment, and congrats on your fundraising, so now we have some cash to deploy on our future projects. Sir, if you just go through this core and noncore, like what is the major difference, if you can? Because when I see FY '20, our reported PAT is INR 91 crore and our core PAT is INR 140 crore. So there is a difference of close to INR 50 crore. What is that INR 50 crore of noncore PAT?
I think one, Renjith, our core business, as you know, we are always proud to say we are a pure-play water company. So obviously, our core business is pure water business. Now of course, noncore, for example, is something like APGENCO kind of thing, okay, where we got into a water part of the balance of plant. But because of other 2 partners had financial difficulty, we had to take over the balance of plant, which is a noncore activity for us. It was not out of choice or out of our strategy. It was out of compulsion. So that is the definition of noncore. Like this, if we have 1 or 2 other instances, that's what we are doing. And the difference which you're talking about, whatever INR 45 crores, INR 50 crores is just now what we told to one of other friends here that we have to provide approximately the delay cost as per a new Ind AS requirement of ECL policy where every quarter we provide for the delay. So that about INR 40 crores, INR 50 crores was the noncore part, which we are providing for delay. And hence, if you remove the noncore part in water sector, we have nothing of this kind. So core business is definitely doing better than expected.
Okay. And sir, one more thing. In -- so if I rightly understand, once this APGENCO project is completed, then probably the noncore and core will kind of merge into rather the similar line. Is that right? Is there anything big apart from APGENCO in the noncore?
Not at all. Not at all. Nothing big. So you are right. After this is behind us, we will never use the word noncore. [indiscernible] is the only core.
So how much is that pending -- so how much of APGENCO is pending in our order book?
No, it's not much in the order book. It's more -- mainly in the receivables. That's where it is pending. And that is the reason we are providing a delay provision as per ECL policy. We just have to complete it and collect our retentions, which we have given a separate note in the investor's presentation.
Okay. And just wanted to just touch upon this fundraising, which you had recently done. Sir, the price at which it was done was discount to the prevailing...
How do you say it's discount? I'm sure you are all very knowledgeable about the markets. Now you can calculate, on the day we had taken it to our Board, we all are expected to follow the SEBI guideline. The SEBI formula decides a 2-week average price which was coming to INR 157, and we have allocated at INR 160. So how do you call it discounted? If post that announcement, if the market has gone up, this is -- we all should be happy about it.
Okay. So it was as per the SEBI formula we had done this calculation?
Absolutely, right.
Okay. So what are our plans for those -- the funds? Like where are we planning to deploy that?
I think just now our friend earlier question, he was happy to see that we are raising funds, which we can deploy in execution of our backlog. Our backlog is at a all-time high backlog. So the more funds we can deploy, we can speed up our execution. So it will help us in executing our projects faster and getting the revenues and profitability better.
Okay. So has the financial closure of those Namami Gange project, which were expected will get completed by this fund? Or is there anything more required?
I don't think we are waiting for the fund to close the Namami Gange HAM projects. There is a condition precedent, which a client has to meet. Everything they have met. The last one we are waiting for. And if keeping the fingers crossed in next 2, 3 weeks, we should achieve the financial closure.
[Operator Instructions] The next question is from the line of Dhananjay Mishra from Sunidhi Securities.
Yes, sir, just repeat of the earlier question of this ECL provision. So till date, what kind of provision we have done related to GENCO projects?
I think just now, we said, last year, it was about INR 5-odd crores. And this year, we have done about INR 9 crores.
See, quarterly you said, entire, I mean saying...
So Q1-on-Q1.
No, no, I'm saying for last 3, 4 years, what kind of ECL provisions we would have done related to this GENCO project?
Last year, we did approximately INR 40 crores, INR 50 crores. And before that, I think it was of that order of magnitude. So totally from the start of the project, it would be in the range of about INR 140 crores, INR 150 crores.
INR 140 crores, INR 150 crores. And once when we receive these amount, these provisions will be written back, right?
Yes, yes, yes.
The next question is from Vivek Ganguly from Nine Rivers Capital.
In the presentation, Slide #14, you all had given a commentary on TSGENCO, Tecpro and APGENCO. If you can please elaborate what exactly it means? And what is the status between the 3 of the company project status and recovery status, it will be very helpful.
I think I believe it's self-explanatory. If there is anything specific you have, you let me know because we have clearly said TSGENCO is in Supreme Court. And the first hearing itself, which was the -- decision was in our favor by staying this initiation by Tecpro to start arbitration. The Supreme Court had stayed that request, and they had asked them to submit that. After that, it was COVID, and there's no physical hearing in Supreme Court. We are very confident when the Supreme court opens up, this will be coursed. This is number one, INR 130-odd crores. The other one is Tecpro, which is INR 69.5 crores, which is in the NCLT.Please understand, and I repeat, please understand that this is a bailie or it's like money in the trust because Tecpro had received the money on our behalf as a consortium partner, and they had not paid to us. So this has been confirmed in NCLT by their own statutory auditor that this money is in their books as received, but not paid to us. So this will have a precedence over even a financial creditors. So we will be the first one when they start distributing any money or on liquidation if they start distributing any money, this should come to us first. So this is a fairly good case, and we are also waiting for NCLT to open so the hearing can start. And TSGENCO is basically mainly retention money because there's lot of work to be done. In the last 1 year, we have not got payment. So we have also not done the work. We are expecting from next month, they will give us payment, and we will resume the work. We'll finish this peripheral work because you know that we have already finished the work, the plant is in operation, producing power, selling power. So from the power production side, it's there, but there are a lot of other peripheral work which has to be done, which will probably take 8 to 10 months. And after that, we'll get a completion certificate, and then we will receive the first 10% of retention. And 1 year after that, which is a defects liability period, we'll get the balance 10%.
So in your debtors, how much of that is -- can we attribute to these 3 relationships, TSGENCO, Tecpro, APGENCO? And would that number also be inclusive of any interest penalty that you all would have been liabling on them?
There is -- I don't know, I have not understood your question. But [indiscernible]...
So let's say, of INR 100 that is, let's say, your debtors that is there, how much of that would be attributable to these 3 entities?
So you are saying of the total receivables, how much is attributable to APGENCO?
APGENCO, Tecpro and TSGENCO?
[indiscernible]
[Foreign Language] what is the total? And of that, how much?
Yes. So just, sir, what the final number is? And of that, of -- how much of that would have been principal? And was there also an interest element there?
No, there is no interest element.
Okay. So what is that number that is attributable to...
Because we provide interest for any delay payment.
About 30%.
So about 30%. If you say about 100%, 30% will be attributable to GENCO projects for this 3 heads.
These about -- approximately INR 450-odd crores?
Yes, yes, absolutely.
The next question is from V.P. Rajesh from Banyan Capital.
Just on the -- just a follow-up to the previous question. So if I heard you correctly, you're saying you will get INR 450 crores back from these 3 entities? Or is it INR 150 crore, 30% of INR 450 crores?
No, no. It's INR 450 crores. The previous question was how much of these 3 heads is part of our receivables?
Correct.
That's what we said is 30% of total receivable is attributable to these 3 heads. So total is INR 450 crores. Not 30% of INR 450 crores.
Okay. So you're expecting to receive INR 450 crores from these 3 entities, correct?
And we have said, what is going to be a preceding activity to enable us to receive this. One is that Supreme Court; other is that NCLT; and third one, the client has to pay us for us to resume the work.
Right. So -- okay. A little bit better as I'm getting on this call after a long, long time. So you are going to get INR 450 crores, assuming things work out for you in Supreme Court and in NCLT. And then you still have to finish some work. Is that right? There's more work to be done in the project?
There is the first project, which is in Telangana. The first 2 heads are related to Telangana, which we have finished completely. Based on NCLT and Supreme Court, if this happens, we have almost INR 200 crores, which we'll receive immediately.
I see, okay.
And APGENCO, yes, you are right. We have to do some work, which will take maybe 8 months, 9 months, something like that. After that, we'll be eligible to get a 50% of the retention. And 1 year after that, we'll get the balance 50%.
Okay. So INR 200 crores will come on the work which is already completed; and then the INR 125 crores, 8, 9 months after you have resumed the work; and then INR 125 crores remaining 1 year from the completion of the work, right? That's sort of the roughly the schedule?
Absolutely, right.
Okay. And then my other question is on the business. Your new orders are more coming from the municipalities. So is there a mix between municipality and industrial segments that you're targeting? Or how do you think about that proportion?
See, I think we never look at the mix or having any targets. We have certain factors like where we can use our technology, where we can have a better profitability, where our cash flows can be better, where risk is minimized. And based on that, we select our projects. Obviously, we are one company, which has a total water management capability, and we are equally comfortable doing projects for municipalities as well as for industries. And even if you go for municipal, we never take a risk on a state government balance sheet, we always would have. And you can see from our project backlog, we'll always have a payment security through multilateral funding like Asian Development Bank, World Bank, JICA, KFW kind of organizations.
The next question is from [ Shantanu Mantri from MK Ventures ].
Sir, just wanted to understand a bit on the balance sheet side. Sir, your trade receivables, the current portion was around INR 1,332 crores as of March '20. So just wanted to know, has this figure gone down? What is it right now? Any update on the collection side? This is purely trade receivables. I'm not including customer retention in this.
Yes. So as compared to March, it has come down, March, it was about INR 1,350 crores. In quarter June end, it is about INR 1,300 crores. So it has come down by almost INR 50 crores, yes.
Okay. Okay. And sir, the retention money, this was again, around INR 257 crores, right, the current portion?
Just a minute.
As on March '20?
So retention will be in the same range because quarter 1, we didn't receive any much collection on the retention side. So this will be in the same range.
Okay. So sir, I was seeing your presentation where you've reworked the working capital, excluding the GENCO. And it shows a completely different picture, right? The working capital days fall substantially, like from 127 days to 78 days. So can we take this like the going ahead probably, say, in a year or 2, once the GENCO thing is out of our balance sheet, is it safe to assume that we can work with these 80, 90-odd days of working capital? Is that sustainable?
That's exactly -- we have come out this time on the working capital side. And Mr. Mittal also, during in his speech, he said that the core working capital is about 78 days. And currently, it is overshadowed by the GENCO'S. So if we resolve the GENCO issues, then we will be well within that 75 to 80 days range in working capital, and which is a much better number as compared to many of the peers.
Right. Right. And sir, another thing was that can you help me -- excluding this GENCO bit, can you help me with what would be the working capital cycle, say, in our international operations? Is it much better compared to Indian operations? And if you could quantify the working capital days there?
So I think we can take it off-line if you want some more details on this. So you can...
Okay. No, just wanted it directionally. Will the international operations be better?
Directionally, yes. Directionally, yes. India being -- we are working with the states as well as the central government projects. So some legacy projects are also there with us, which we are executing. But overall, if you see, payment profile in overseas projects are, yes, better than India.
All right. All right. So are we going ahead -- like next 2, 3, 4 years, are we planning to increase our mix towards -- more towards international? As well as we do this Namami Gange and other domestic projects, is there an intention behind increasing international revenue?
That's the objective. Basically, right now, my entire order book, if you see, the majority is tilted towards India because of the HAM projects, et cetera, what is there on our plate. But going forward -- you must have seen that recently, we have announced one project in Jeddah which is -- again, it's a overseas project. And similarly, our focus is there that our revenue share from Indian projects should come below 50%. [Technical Difficulty]
Okay. Sir, last question. Sir, usually, there are these -- all these investor questions and something mainly related to your working capital. So see, if we see the working capital, net working capital, it comes down to 85, 78. But this is like after very high trade receivable days and very high trade payable days. So while I understand the accounting that there are unbilled trade payable and trade receivables, is there any way out that we don't put up the unbilled both on the asset and liability side? Does the Ind AS or accounting provisions have a way to not include that? And just...
I don't think so. We need to go by the accounting principles. And the accounting principle mandates us to show this in our both receivables and payables. So basically, you might have observed that unbilled revenue, which is unbilled receivable comes in other current assets, not in receivables. However, payables, since there is no different classification. So probably what we can do, we can do a little more disclosure for the investor community. That in our half yearly presentation, we will give the breakup of unbilled and billed payables also in our investor presentation. So that will, I think, clear the air.
The next question is from the line of [ Sunil Nair from Catalyst ].
Yes. Just had a quick question on your core EBIT. It's been hovering around 9%, 9-odd percent. Now once let's assuming all this cleanup goes through, your working capital is in place, where do you see your core EBIT settling?
See, as -- [ Sunil ], as we said in our speech, core EBIT, we have always been targeting more in the 10% to 11% range. And that's how, I mentioned, even if I remove the noncore, even in the last year, which is '19/'20, our core EBITDA comes to 11.5%. So this is the kind of range we expect a steady state. We should be able to achieve that once this noncore is out. And we just wanted all our investors to understand that just because of some one noncore project, we should not be colored by a lower number. It's just one-off. But our core business is intact and it's growing strongly.
Okay. And how long should that now come through? In the sense, how long should this history gets settled? These 3 issues of Telangana, AP and the Tecpro? These 3 project settlements?
I hope I can answer this. But about -- if you would have asked me 1 year back, I would have said 1, 1.5 year. Now COVID has taken about 6 to 8. So I don't know what can I answer you. Hoping the COVID things will be behind us, and we can start the work, I think with another year, 1.5 years, we should be seeing the back of such noncore business.
The next question is from the line of Jayesh Gandhi from Harshad Gandhi Securities.
Sir, just few confirmations. Currently, APGENCO and TSGENCO total project value is INR 400 crores, out of which you said you have already provided INR 150 crores. Is it right?
Yes.
Okay. And...
Not out of INR 450 crores -- this INR 450 crores is after provision of INR 150 crores.
Okay. So in total, it was INR 600 crores?
Yes.
Okay. And is it possible for you to give the breakup, how have you provided for? I mean, in TSGENCO, how much you have provided for? At APGENCO, how much you have provided for?
Yes, yes, I think we can come off-line. And I think our team will be able to provide you under all these 3 heads, what we have given you, what is the provision made so far.
No problem. And one more thing. In this quarter, what is the noncore revenue that we have done?
Noncore revenue, as I said, because of COVID, we have stopped the work until we get payment, which we expect from next quarter we will start. So you would say it's none.
0.
0.
Okay. So if I heard you correctly, you said...
See, only the provision we would have made, which we said we have made a provision of whatever, INR 9 crores odd, some provision we have made, and that's the provision we have made because of delay. As you would know that as for a new Ind AS standard, we have provide for delay. This is the provision we have made for delay.
Got it. And sir, if I heard you correct on the call, you said that APGENCO probably you will start working after, say, 8 or 9 months, right?
No, no. I said I will start probably from next quarter, which is from, say, October onwards, and then it will take 8 to 9 months to finish some of the balance works. And then I should get the first tranche of my retention money. And a year after that, I'll get the second tranche of my retention money. This is what I said.
Okay. And one last question, sir.
Go ahead.
Where do you show your provisioning, sir, in the accounting? I mean is it in the other expenses or...
It is in the other expenses, and you would have received our annual report. And you can see very clearly, this is in the schedule. It's very clearly demonstrated.
The next question is from the line of [ Aruna Chakraborty ], who is an individual investor.
I've got just 2 questions. One is for Mr. Agrawal. The INR 5.6 crore of translation reserves we have shown in this quarter.
Yes.
So I just want to know a little bit about that. What is this?
Means what you exactly wants to know on this profitability?
No, no. What is the meaning of this translation reserves of INR 5.6 crores?
Just a minute. These are the movement in the exchange rates of assets and liabilities. Basically, we have overseas subsidiaries. We consolidated that in our books of accounts. So that movement during the quarter is the -- kept under this translation reserve. And whatever other...
Okay. Okay. Basically, the ForEx rate -- exchange rate depends?
Correct. Correct.
Okay. And secondly, Mr. Mittal as well as Mr. Agrawal, there was a talk about a JICA-sponsored project desalination, I think desalination project in Chennai, the second one.
Correct.
JICA -- so any update on that tender?
See this tender is very much on. JICA has already approved the project. They have already appointed a consultant, a Japanese consultant. The DPR has been done. I think very soon, we can see the prequalification document coming out. After the prequalification, the request for bid submission will come out. So it is getting delayed by few months because of COVID, but it's very much on track.
Okay. So I think that project shouldn't be less than INR 1,250 crores?
No, no, it's much, much, much bigger than that.
Much, much bigger than that. Yes, because I'm hoping for that. Things get immediately -- because we did the first one. We did the first one.
Today, 100 MLD plant will cost about INR 700 crores to INR 800 crores. So this project of 400 should be more in the region of INR 3,500-odd crores.
Oh, my god. Okay. Okay. Yes, I'm not aware of this.
That is an advantage. You become aware when you start investing in a water company.
Yes. And I'm likely that -- I just asked it from April onwards.
All the best.
But I -- my request. For last 2 years shares we didn't get anything. What about the 1 is to -- 1 out of 5 shares bonus, at least a small one. So no grudges for Mr. Jhunjhunwala stake also for the existing shareholders.
No. This is available to everybody. It's your company. We should all work to improve the valuation and wealth is here to be shared with all the stakeholders.
The next question is from Kirthi Jain from Sundaram Mutual Fund.
Sir, my question is with regard to our opening remarks. You had highlighted that our O&M business, high-margin business, will go to 25% in the near future. And second thing you told is that we are also working on the cost optimization, and that will also improve the margins. So given these 2 aspects and also the operating leverage will start to come in, as we worked in a very adverse condition in the first quarter, that is the third factor. So given these 3 factors, how we should see our core margins moving, sir? Can we expect to touch 15 percentage in, say, 1, 1.5 years?
This is over ambitious Kirthi.
But I think you can do, sir, the way...
If you all believe as investors, then we will have to at least endeavor to do that. But it's also our duty not to set your expectation, which at the moment, we believe it's very much on the higher side. I think we have just demonstrated that even last year, which was a tough year for the company, we have achieved a core EBITDA of 11.5%. Going forward, as you expect, we also expect, and we are working on it, and my core team is also working on it to see how we can improve the margins and optimize the costs. So our endeavor will always to improve the margins. But at the moment, the core margins are very much intact and growing strongly. We hope that in future also, it will grow strongly.
But it should directionally improve from that 11.5% right, sir, to say something higher, given that the first 2 factors...
Definitely. Only time will tell how the COVID situation is going to come in because our fixed costs, a lot of it will remain. So we will have to see the COVID goes away and our revenues have to pick up so that our margins will improve.
Okay. Sir, with regard to our European cost structure [ asset realization ], are we completed the process or is it still a work in progress, sir?
It is still in work in progress because any such thing, because we are a technology company, we don't want to lose core strength of technology experts. So we will do it slowly.
The next question is from the line of Renjith Sivaram from ICICI Securities.
Sir, just wanted to ask with the Digha, Kankarbagh and Howrah. These projects are yet pending in terms of commencing, right?
True.
Because it's not there in your revenue recognized.
Yes. Because as we just said, just a few minutes back, the KMDA project is going to get closed most probably in next 2, 3 weeks because there's only one condition precedent which is pending, which we expect in next 2, 3 weeks we should be able to close and achieve a financial closure. Once the financial closure is done, the execution will start.
And the other one, Digha and...
It's just a few months away because this is a lot more is pending. So we would expect by year-end, we should see the financial closure. And sir, in...
And Renjith, for your information, in Digha, Kankarbagh, there are 2 portions. One is DBO and another is HAM. So DBO portion work will start early than the HAM portion, because HAM portion is only INR 200 crores. We have a DBO portion of close to INR 1,000 crore. So there, we have started the work already. And in the coming quarters, you will see a lot of revenue from this.
Okay. And regarding the order pipeline, you mentioned the Chennai desal one big opportunity. Apart from that what are the big buckets of -- because [Audio Gap] or is there is something happening in BMC, you were expecting a large...
You know all this, and probably we have discussed for last 3, 4 years. And BMC is a great example, how things can be postponed and postponed and postponed. Last 10 years, we have been following this project. This is a mega project. We hope at least in this government, they will finalize and get the projects executed. These are, again, mega projects. Not large projects, but mega projects. And we hope this happens. See, again, as we said before, we are full with order book. So we have enough orders for next 3 years execution. We will be very selective in what we go for. And I also believe that government will be very selective which projects they will approve for investments. So we are very, very cautious in what we are going to select in India and abroad. And accordingly, we will go for order booking. But we will definitely pick up our market share even during this year.
The next question is from Dhananjay Mishra from Sunidhi Securities.
Sir, just a repeat, you just mentioned that this INR 450 crore outstanding is outside of the provision we have made. So are we going to only claim the INR 450 crore or we are going to claim the provision we have built till date?
See, our endeavor is to claim more. But because some of this is doubtful, hence, we are making a provision. But INR 450 crores is a clear receivable, which is our -- for the management judgment, we should be able to claim.
Okay. So this is only for the presentation purpose, in PPT or annual report. This is not the actual -- we may be claiming to GENCO little more than that, right?
Correct.
The next question is from the line of [ Vijit Kochar ], who is an individual investor.
Yes. I have -- I just have one question. In your last call, you had mentioned that you would be looking to raise INR 400 crores both through mix of debt and equity. Now that INR 120 crores is lined up through marquee investors, is there still a plan to raise that remaining INR 280 crores or has that changed?
See, we have always told you that we just don't want to raise capital and put it in the balance sheet, okay? We will only raise if there's a need of a working capital for enhanced execution speed. Now we have raised the first tranche. We will have to watch. If this is more or less what we want, we'll stop there. But if we see that we need to do a second or a third tranche, we will take a decision at an appropriate time. And of course, we will come to each of you as a shareholder to take your approval. But as of now, whatever was planned, we have raised it.
Okay. So no need for additional equity issue to maybe pay down debt?
No, I would not say that. That is the reason we are asking you to give us an enabling resolution for the balance INR 280 crores. This is one of the areas which we want an approval from the shareholders. But we are not saying that we are going to go tomorrow and raise this capital. We just want a facility-enabling approval that in case after 6 months we see a need, we don't have to come again and ask for a approval. That's all we are asking.
[Operator Instructions] The next question is from Mohit Kumar from IDFC Securities.
Sir, my -- sir, one question, especially on the international order pipeline. This -- the -- how is the order pipeline looking outside of India, especially in Middle East market?
See, it's going to be slow, no doubt about it because all the governments are going to force on this pandemic first. That's where their investments will go, their focus will go to protect the human life. And some of these projects will get delayed, some of them will become smaller. But we have enough pipeline to meet our appetite because our appetite is not a very large one. So we have no concern in getting our projects which we have targeted during this financial year.
Is there any financial number you have in your mind when you say that the number which you are targeting for this fiscal, this financial year? And are you budgeting for something from Mumbai desal -- Mumbai project and Chennai project?
See, Mumbai and Chennai project is kind of once-in-a-lifetime projects. So they cannot be our normal bread-and-butter projects. So obviously, if we get Mumbai and Chennai, they will be over and above our forecast or budget numbers. But our budget numbers, what we want to make sure that our backlog or the order book remains intact. At least what we execute, we would like to get new orders to that extent. That is our aim. During this pandemic year, we don't want to go very aggressive, but we also don't want to reduce our order book.
And sir, size of the Mumbai project will be around INR 15,000 crore, am I right? If you take half...
If you take all the projects put together, maybe.
Yes, yes. All the projects put together. All of them.
Individual projects will be something around INR 3,000 crores, INR 4,000 crores.
Okay. I'm putting all 7 projects put together.
Yes, yes, it will be more than INR 15,000 crores. Anything between INR 15,000 crores to INR 20,000 crores.
It's a very high number. Okay, sir.
That was the last question in queue. As there are no further questions, I'd like to hand the conference back to Mr. Rajiv Mittal for closing comments.
Thank you, everyone, for your participation in our Q1 FY '21 earnings call. We have uploaded the analyst presentation in our website. In case you have further queries, you may get in touch with Stellar IR Advisors, our Investor Relations adviser based in Mumbai, or you can get in touch with us directly. Thank you so much.
Thank you very much. On behalf of VA TECH WABAG Limited, that concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.