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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 '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rajiv Mittal, MD and Group CEO. Thank you, and over to you, sir.
Thank you. Dear friends, good evening. Let me welcome you all to this earnings call post announcement of Q1 FY '22 results of VA Tech Wabag Limited. Joining me today for this earnings call is Mr. Skandaprasad Seetharaman, our Group CFO. Let me take a moment to introduce Skandaprasad to all of you. Skandaprasad has varied experience in Wabag in multiple roles and capacity, and he was our Group Finance Controller for the last 4 years. Skanda was identified as a high-potential resource under the Wabag's [High-Squad Leadership Program]. I'm pleased to note that he has been groomed well to assume this higher responsibility of Group CFO. I wish him good luck for this new role.We hope you all had a chance to go through the results update. Despite the second wave of COVID-19, the business activity has continued to progress well into the first quarter of this fiscal. Construction and supply chain has now reached almost near the pre-COVID levels. We are also extremely happy to have recently won an engineering and a procurement order worth USD 165 million, which is about INR 1,230 crores from Amur Gas Complex LLC in Russia. Amur Gas Chemical Complex is a joint venture of Sibur Holding Russia and China Petroleum & Chemical Corporation, which is also known as Sinopec China. AGCC is set to become one of the largest basic polymer production facility. This order further consolidates Wabag's position in oil and gas sector, wherein we will deploy advanced technologies to treat the wastewater streams. The facility will remain -- sorry, the facility will maintain a zero liquid discharge, ZLD, and will be designed to recycle and reuse the water released from the petrochemical unit substituting about 25% of the raw water intake requirement. Deployment of zero liquid discharge and recycle and reuse makes this facility environmentally friendly and meets stringent environmental regulations. Wabag has a strong track record of successfully executing many such technologically advanced large projects globally, which are one of the key reasons for us to secure this prestigious award against the international competition. We are confident that this order will be a game changer for Wabag.Our order pipeline continues to be robust for the year ahead. Coming to some of our key projects update. Our MARAFIQ project in the Kingdom of Saudi Arabia to design and build a large sewage treatment plant with the capacity of 120 million liters per day for Jubail Industrial City is nearing final stages. All engineering and equipment deliveries are complete and installation is underway. Pre-commissioning activities are expected to commence within this fiscal year. At our 300 MLD independent sewage treatment plant at New Jeddah Airport in Kingdom of Saudi Arabia, which is built with the state-of-art Nereda Technology, the project continues to progress well, detail engineering and ordering is nearly complete. Construction activities from customer side is currently underway.In our effluent treatment plant being executed for Purolite in Romania, which includes 15 years of operation and maintenance, the project has been commissioned ahead of schedule despite the COVID-19 challenges. Currently, we are awaiting clearances for start-up and commencement of operations. Thereafter, Wabag will run the operation and maintenance of the plant starting H2 FY '22.At our Doha South project in Qatar, which is being executed for Public Works Authority towards rehabilitation of South Doha sewerage treatment facility using advanced technology to treat additional sewerage, which will be generated from the football stadium constructed for FIFA World Cup 2022. Detailed engineering and deliveries at site are completed, and we expect to complete the project by this year-end.In our Zarat seawater reverse osmosis plant of 50 MLD capacity, expandable to 100 MLD being executed for SONEDE in Tunisia, the project is progressing well with engineering and ordering almost complete, civil work at sites are at peak progress, equipment deliveries and installations are underway.Close on the heels of Wabag's being ramped as fourth globally amongst private water operators, I'm honored to have been recognized by Global Water Intelligence among the world's top 20 10 leaders in the water sector. It is a matter of pride that only 3 out of the 20 are from the EPC companies, and this has come in at a time when Wabag would be celebrating 25 years of service to the society, particularly to the Indian water industry. It is certainly a moment of pride for all of us, and I fully owe this global recognition to all the Wabag family and all our other stakeholders. I would like to express my sincere thanks to our direct and indirect employees and all the stakeholders, including our customers, suppliers, investors, bankers, and thank them for their continued support along the journey.I now request Skanda to take you through the financial highlights of the quarter.
Thank you, Mr. Mittal. Good evening, friends. It is indeed an immense honor for me to be entrusted with the role of Group CFO of Wabag. My sincere thanks to the group management and the Board of Directors for having report strength in me to deliver this important responsibility.As a leader in the water sector, Wabag is well poised for a profitable growth with an order book of over INR 10,000 crores and a robust order pipeline. With the continued support of all our stakeholders and my fellow [indiscernible] (00:08:18), I look forward to be part of the leadership team as we expand our horizons and strengthen our global leadership position.I trust you had an opportunity to look at the results update presentation as circulated and uploaded on our website. Let me take you through the key financial highlights for the quarter ended 30th June, 2021. Our consolidated revenue from operations stood at INR 658 crores, up by 53% compared to the same quarter of the previous year. On a stand-alone basis, the revenue from operations was INR 469 crores, up by 66% as compared to the same quarter of the previous year. EBITDA for the year stood at INR 40 crores on consolidated basis and INR 26 crores on stand-alone basis.Continuing our endeavor for profitable growth, profit after tax attributable to owners for the period stood at INR 15.2 crores on consolidated basis, almost 3x of our profit for the same quarter of the previous year. The profit attributable to tax stood at INR 10.4 crores on stand-alone basis. We once again thank our bankers, vendors, investors and all other stakeholders for the continued support extended to us during the quarter and going forward.With this, we now open the floor for question and answer.
[Operator Instructions] The first question is from the line of Dhananjay Mishra from Sunidhi Securities & Finance.
Congratulations to Mr. Skandaprasad for the new role, and all the best to him. And Mr. Mittal you mentioned about you have a robust order pipeline. So if you can talk about this all order we can get this year or maybe next year, which is under Wabag?
I think you have seen, generally, there has been a lot of interest and a government push along with the government funding in this water sector, be it drinking water under the Jal Jeevan Mission, be it wastewater, which is under the Amrut and the Namami Gange mission and also there was this Niti Aayog initiative, which is also promoting desalination plants in the coastal towns and cities. So there is a huge buzz in the country to have this water availability to the people and improve the water security at the same time to improve the sanitation and reduce the pollution of our water bodies. There's also a big initiative to reuse the water as an alternate source and conserve portable water. On this initiative, there are lot of initiatives which government has taken, there are a lot of tenders which are in the market, maybe they are a little bit slow because of COVID, but these inquiries are certain. There can be a bit of delay of 1 or 2 quarters, but they definitely will happen. You know there are some very large projects which are coming up in major metro cities, including desalination in Chennai. And plus, we have a very high focus for last few years on the international market. As you have seen Russia, like this, we have a few other good order prospects in our Middle East market and few in the Africa market. So from one order intake, as I said, we have a very solid concrete order pipeline for the coming quarters, and we hope to announce some more orders in the coming quarters.
Okay, sir. And just last question.
Can you speak a bit louder?
You used to provide revenue guidance. So can we have revenue guidance for this year? This order...
You know this is very uncertain period we are going through. So any guidance will be qualified with what is happening in pandemic, what kind of restrictions are coming, lockdowns are coming, globally things are very uncertain. So I think we keep our heads low. We continue to work and produce results as we have been demonstrating during the last 15 to 18 months. So my aim would be to keep delivering and keep improving our performance year-on-year, that will be our endeavor rather than giving guidance, which will be qualified.
The next question is from the line of Priyankar Biswas from Nomura.
Congratulations on some good showing despite the second wave of COVID. So on the COVID part, my first question is, I understand that there has been some impact due to the second wave leading to extended stay at sites as is mentioned in the presentation. So if you can broadly say, if there were, let's say, no second wave, for instance, how much would our revenues have been potentially higher? And how much should, let's say, the -- what was the extended stay impact on the margins? Like how much could our margins have been? If you can give some color on it. I mean approximate figures will also work.
So I think we do not have a very firm figures, as you rightly said. We can give some approximate figures. This first thing is the second wave definitely had a impact on slowing the things down for about 3 to 4 months. And also, this has an impact on extending our stay at site. Though as per the government of India directive, most of the clients have given us the extension of time. But being a forced measure, the cost, both the parties will have to absorb their cost. And that cost has been in the range of maybe about 1.5% to 2% of our EBITDA.
Okay. So if this was not the case, then probably the EBITDA could have been, let's say, 150 basis points higher. I mean that would be a correct assessment?
Correct, correct, correct. Absolutely correct.
And sir, again, can you -- if possible, can you give the net debt position as at the end of 1Q?
I think this is about -- net debt is about just over INR 100 crores.
Okay. So net debt of INR 100 crores. So it was like net cash at the FY '21? So...
Yes. So INR 40 crores was on net cash, so this is about INR 140 crores, INR 150 crores movement.
So it is largely a working capital movement, I guess?
Yes, yes. It's all because of the first quarter, especially because of COVID, some of these clients were also closed, and you know all over the country, there was a havoc. Most of the offices -- government offices were closed, so the collections were a little bit slow. But we still have to continue our progress. So we had to pump in little bit of cash. And you can see from our payable also about the same amount would have come down that we have paid faster to the people to get the project executed.
Sir, if I can squeeze just one more in. So you have said that the Romania project is commissioned and there will be 15 years O&M from the second half. So how much can the -- what could be the contribution for this project for the O&M, let's say, for the second half, I mean, additional on whatever you are doing?
This is already in the order book. So this would not add to the revenues. This is already in the base of revenues for the year. This is about INR 9 million to INR 10 million of total orders -- total order value over a 15-year period that it would combine.
The next question is from the line of Kaushik Poddar from KB Capital Markets.
On this APGENCO and TDGENCO, if you can update?
I think there's nothing to update. Because of COVID, it's is still in [indiscernible] (00:18:48). So we are just waiting from all these courts to resume the physical hearing, and then we will have something to update.
Okay. And on the order book front, right now, your turnover sale will be around INR 3,000 crores out of this thing. So your order book is around 3 years of your turnover. So are you happy with this position? Or you would like it to be around 4 years? Or how does it work? I mean what is the comfortable order book position you want to have?
Yes. I think everything -- more the merrier, as they say, [Foreign Language] more. So definitely, we would like to take more, but we are also responsible to see under the present circumstances, COVID situation, the speed of execution has to be seen. We don't want to take orders in the order book and then incur delays, overruns and potential delay penalties. So we have to assess the situation, assess the speed of execution and then say whether we can go to 3.5x, 4x. But today, we have sufficient to keep all our [indiscernible] busy. We may go up to 3.5x. But I think for this year, our aim would be to go towards 3.5x and push execution speed.
Okay, okay. And you just talked about the fact that you have lost around 1.5% margin because of this COVID and all these things. So what is the turnover you would have lost? I mean had it been a typical normal quarter, what is the ideal turnover you would have got for the first quarter?
Maybe 10%, 15% more.
Okay. So with your resources, both human as well as physical, one can expect a normal growth of around -- what is the kind of turnover one can expect, say, in a normal year? As things stand, as your resources in the form of staff as well as for materials, can you reach a turnout of INR 3,500 crores in a normal year?
Yes, I think we can reach -- the potential is always there. And there is also, we keep on hiring people, especially in various geographies when we grow, like when we go to Russia, not only we'll have our colleagues from our other units, including India and Romania, Czech and other units, but we will also have this -- our Russia team will have to grow because we'll have to hire some local people to execute this large project. So hiring is not a problem, but this condition of pandemic is really a showstopper. We don't know what we'll plan out in the coming quarters. We hope things don't go that bad and we continue to grow. And we have always endeavored to grow year-on-year. So this is a journey we are very bullish that we will grow this year also.
So grow year-on-year is fine. I mean what is the normative growth you would like to have? In a normal year, I'm not talking of the pandemic or anything on that. So had it been a normal year.
Normal year, we had definitely aimed for 15% plus.
[Operator Instructions] The next question is from the line of Harsh Shah from Dimensional Securities.
So my question is on the raw material side. I mean what kind of escalation....
Can you be little louder?
Yes, sure. Sir, my question is on the commodity side. What kind of inflation are you seeing in your existing order book? And if you expect it to impact your margins going ahead?
Normally, as we have said before also, most of our orders, especially in India, we have an escalation formula, which covers about 60% to 70% of any inflation which is happening in various prices, whether it is metals, plastics, oil, business, everything, including labor. But a part of it is always a fixed cost and the government of India indices do not cover 100%. There was a time at 2008 and 2009, there was a government order passed which linked directly the sale prices, they called it star prices, to our contract price, which gave us almost 90% coverage. This year, government has not passed this order. And this year, it has been absolutely an abnormal increase in all the metals, especially steel, iron, nickel, copper, nickel, all this. In addition to that, there has been an increase in the plastics enormously, plus the freight charges because of the lack of containers and the shipping industry, there has been a tremendous rise in the shipping. So now all these factors, all our new projects, which we have booked in the last year, we have taken into account all this. We have provided some -- still in case some inflation happens, we have the provisions in our costs. But these are some of the old orders which we have booked 2 years back. So we are seeing some impact because of that.
Okay. Understood. And my question was also on the overall EBITDA margin. I mean we have been struggling to reach that double-digit mark. Because on the other hand, when I see certain simple EPC projects like, say, road or civil constructions, those guys make 11%, 12% kind of EBITDA margin very easily. Now when we talk about this industry, which has its own complexities and has its own importance, then why is it that our margins are so low in the range of 8% to 9%. As well as we have a very stretched working capital cycle as well. If you can explain that a bit?
I think if you see our past record, if we -- also on EBITDA, we have also been in double digit, okay? And if you see that this is where on consol, we have been closer to the 10%, 11%. And on stand-alone, we have been more closer to 12%. So we have never struggled on the EBITDA margin. We have always -- below the EBITDA, we are an asset-light company. So there's hardly any depreciation for us, where you talked about road and other contracting companies, they have a lot of equipment they own. So they will have a depreciation below the EBITDA line, plus only in recent years, you would have seen some interest costs. Otherwise, we are -- always on interest, cost was not there. The only cost was of the bank charges for LCs and BGs. So below the EBITDA also, our cost normally has been very low. So this is also a differentiator between us and the other companies which we are talking about.
Understood. And last question is on the balance sheet side, more of a bookkeeping question. If I look at the last -- if I look at the balance sheet, the average cash balance that you have been keeping is around INR 300 crores, INR 300 crores to INR 320 crore. But when I look at the other income, the interest received from other income, it is only around INR 5 crores to INR 7 crores. So why are we not getting, say, even 5%, 6% kind of yield on the cash which we have on our book?
See, Harsh, much of this cash is from projects, and it gets redeployed into the projects. So it's not like we hold the cash balance in our banks and yield money out of it. All this money gets redeployed into business and gives us progress and EBITDAs. So the cash balance at the point in time is not representative of what will stay throughout.
And then shouldn't be -- shouldn't it be reclassified as inventory or maybe something as other current assets? Because it's misgetting when I see cash of INR 370 crores on the book, but there is no corresponding income in the P&L.
Because this cash remains in the current account, as Skanda said, we are not putting it in any mutual funds or fixed deposits because this is a revolving cash. Because we bill, we collect cash, then during the month, we spend. Again, the next tranche comes, it remains. Again, we use it during the month. So it is a cash which always is there and is there for executing projects. So it will be natural to classify this as cash, but it's not -- which we can invest for a long term. It's not a free cash.
Okay, okay, understood. So maybe you need to say is that as of 31st March, this is the balance you have, but that might be used very immediately for a new project or for expenses?
Same project for the next couple of months, we would use this cash. And if we don't use this cash, obviously, we will invest.
Understood. Understood. And sir, any update on losses that we are making on the subsidiaries?
Losses we are making on?
In our subsidiaries? So maybe the margins are lesser in our subsidiaries compared to what we do in our stand-alone business?
[indiscernible] projects which various subsidiaries are using and how this gets broken down and what we book the income in India, what we book in subsidiaries. So I think generally, we -- you have seen that if we find that subsidiaries are not going to be something which is self-sustaining, we have been closing. Over the last 2, 3 years, you would have seen some 2, 3 subsidiaries we have closed. Again, you will see in the coming years, we will close another 2, 3. And we'll open new which we see are having potential to be #1, #2 in the respective countries because we want to have companies which are in their respective regions in top 3. So that has been our philosophy. So any point of time if some subsidiary is making less profit doesn't mean that they don't have a potential for future.
[Operator Instructions] The next question is from the line of Jonas Bhutta from Phillip Capital.
A couple of questions. I missed the early part of your comment.
A little bit louder, Jonas.
Okay. Better now, sir?
Yes.
Okay. So I missed out on the earlier remarks -- your opening remarks. So I just wanted to know there was a very sharp uptick expected in the execution of both the KMDA and the BUIDCO project on the EPC side. I don't see them figuring out in the top 10 list in the presentation. So if you can just update on where they are? And do you expect these -- both projects to ramp up now in the remainder of the year given the disruption that we've seen in the first quarter?
Absolutely. I think you know that KMDA, we got the financial closure, and the effective date was towards the end of last fiscal year. And from April, the activity started. Unfortunately, as soon as we started, the COVID caught us. So there has been a slowdown because of COVID coming in, and that's the reason. But the project is in full progress. There's no stopping. All our 3 sites are under execution. You can visit sites, you can see construction work is going on. And you are right that during this year, you will see a substantial progress on KMDA. On the HAM, towards the end of last year, we did the financial closure. Some of the condition precedents were pending which got closed over the last 2, 3 weeks. So we expect any moment we will get the effective date from our client, and then we will start execution. So this month, we could kickstart the HAM Digha and Kankarbagh project.But the DBO project is going on. Especially in monsoon, the pipeline laying work will be stopped. They will stop digging the roads. But in a month of September, this will pick up again.
Any target that you can share with us? Because last year, both these project did somewhere about INR 40 crores, INR 50-odd crores kind of revenue. This year, what is the kind of ramp up? Because they all -- both of these, I think, have a pretty stringent execution time line maybe of 2 to 2.5 years. So -- and then this is why it's my interest in just trying to understand whether this can be achieved before time or not.
We expect, as per our plan, about 35% to 40% we should be able to do the KMDA project and about 20%, 25% we should be able to do the HAM project.
Understood. That's helpful, sir. Sir, my question second question was on the other income in the quarter. There's a very sharp increase there. Is there something that is embedded in terms of some one-off gains or something because it's almost 60% of your PBT [indiscernible] level? So I wanted to know if there's something sitting in it.
Jonas, one is the dividend income from our associate entity, which anyway, we will have to see along with share of profit. So it's by nature, we classify under other income, but it is operational income. The second, this is about INR 5.5 crores. And about INR 7 crores is on account of forex gains, which is, again, operational because these are translation of receivables and payables. And we are doing a lot of international projects, and we have receivables and payables in USD and euros. The translation of this comes to about INR 7 crores. That's the main part. Other than that is a regular interest.
Understood. The third question was on the provision. So does 1Q have any of these ECL provisions that we also used to make for the APGENCO project? Because your other income is controlled. So my assumption was that we'd not need any major provision in that. Is that understanding correct?
No, I think ECL is an ongoing thing as per Ind AS. Every quarter, every time we close the books, we make an assessment for both delays and defaults. And there's always, we make a provision whatever is required. So even this year, we have about INR 10 crores, INR 12 crores of provisions.
In Q1, sir?
Yes. It's about I think INR 17 crores, INR 18 crores -- sorry?
Out of the INR 30 crores of other expenses, INR 10 crores is ECL provisions?
About INR 12 crores, INR 13 crores is there, plus there is a provision net of about INR 1.5 crores, so about INR 14 crores, INR 15 crores total, including some others at the group level.
Okay. Understood. That's helpful. And my last question was, sir, last year, we saw this OCOD project in Agra data upgrade in terms of the project costs due to inflation. And that was going to lead to an increase in our O&M revenue in FY '22 by almost INR 30 crores, INR 40 crores full year basis. I don't see that in one number. So if you can just help us, is that going to happen 2Q onwards? Or why is it not showing up because that was resulted in a defect and poor uptick in our O&M revenue. We are still at about INR 70 crores at the group level, sir.
Yes, Jonas, see, the escalation is there, which is about 4%, 5% a year. And that would come through whenever we file our invoices for escalation. It doesn't happen immediately. So it will gradually come over the year.
No, because I saw the total project cost in the order book sort of got knocked up higher last quarter by almost INR 100-odd crores. And at that time, the explanation was that this will all translate to additional revenue of almost INR 30 crores, INR 40 crores on an annual basis for the next couple of years. And that question was from that perspective.
So Jonas, that was true, and that is still true, because there is a provision in the contract to have an escalation, I think, 5% every year. That's a -- this is a contract where we also do some additional renovation work, additional replacement work. This is also the additional order, which the government gives us on need basis and we execute that. And that is where we had shown in order book that this because of the variation or escalation in our income, which is 5% every year, so we have given that. And every year, we'll build that. What Skanda said, we will only recognize the revenue when we will bill and it will get approved by the client, then we'll recognize the revenue. Maybe this quarter, we have not submitted that invoice of that escalation and hence, it is not got recognized as a revenue. Maybe -- but throughout the year, it will get recognized and you will see in our revenue.
Understood, understood. And if I can squeeze in one more. What is the execution time frame for the -- this recent order from Russia, sir, the INR 1,200 crore order?
It's 2 years, because it's an EP order, Jonas. It's the engineering, technology supply and plant and machinery supply. We are not doing the construction, we are not doing installation. We are providing our special services to them as supervising them. So our job will get over when we supply the goods.
The next question is from the line of [Arunava Chakraborty], an individual investor.
Sir, congratulations. Even after COVID second wave, we could achieve at least 50% revenue again.
Thank you.
But my question is the EBITDA percentage is not improving.
I don't know if you were on the line, we had explained to some of the participants before. There are 2 reasons we gave. One was because of this COVID about 3, 4 months...
Some other expenses, yes.
Yes. This goes up, plus the general inflation, especially on the metal and plastic...
Metal, yes, yes, input costs. But we couldn't transfer the cost, I mean the -- we couldn't...
2/3 of it, we have transferred to the client, but still we have to take a little bit of a hit. And this is a onetime issue. All our new projects are posted with new commodity prices we have today in the market.
Yes. And now my second question is, for the last 1.5 years, what I have observed that the growth in our turnover, like execution, how far we can go in the year? Like how can it be -- how can we grow 30%, 40%? Is there any possibility of growing 30% in a year or 20%?
I think 30% probably is a little bit on a higher side, but there's a good possibility of growing 15%, 20%.
20%. Okay. That is fine. Like because we are having so much of orders in hand, so I was just wondering whether we can have 20% growth at least in the business.
This is what will be our endeavor if we don't have road blocks like COVID.
Yes. No, no. Yes, yes, yes. Of course, like if normalcy is there. I mean COVID is not in our hands. So in normal circumstances, we expect a ballpark figure of 20% growth in...
We aim always for 15% to 20%. That is what we budget, and that's how we deploy the resources. But once a while we get a little bit of a bumpy ride, where we have to slow down...
Yes. No, this year, at least you have started well as compared to last year. Like this year, also, we had lockdowns and all. Last year, we had a turnover of INR 400 crores. So we have already achieved 50% higher as compared to last year.
I think we were well prepared this year.
Yes, yes, yes. That's very efficient if we have learned from the -- this thing. But otherwise, order-wise no problem at all, fantastic orders because of your intellect and [indiscernible] the technology -- excellent technology of about -- but...
That's exactly what you have said as a technology company, that gives even the Russia order...
Russia order, EBITDA will be much higher.
Yes, yes. It should be.
That is because of your brain. That merely comes out of the -- for the brain, not for the...
It is all the experience. Any such project for Petronas we did, Reliance we did, Dangote we are doing, Aramco in Saudi Arabia. We have done lots of projects of this type and that was the main reason under a very strict international competition, clients selected us.
Yes. That's why [indiscernible]. That's very well. But what happened to the Chennai one, the JICA? Is it...
Any moment now the new government has settled in. So you can expect the request for quotation will come in any moment now.
From municipality?
Yes. Of course, this is laterally funded by Japanese government.
Yes, yes, the JICA.
Yes, JICA.
JICA, JICA, yes. So that is -- I think we should be the able one.
Your blessings.
Because we are based in Chennai, and the COVID is in Chennai and we have already done one job for JICA. So we stand a good chance. And that's a huge order.
Yes, it is, it is. Big milestone order.
Yes, yes. And we'll make it. We will make it. I'm sure.
Thank you for your encouragement.
The next question is from the line of [indiscernible], an individual investor.
Sir, my question is on that O&M. As our O&M is keep on increasing, so when you look forward 3 to 4 years, what kind of revenue we can expect from the O&M.? As of now, our O&M stands at 20%, I guess so. So what kind of revenue we can expect? Can we expect it to go to 20% to 40% in the 3 to 4 years' time frame?
Yes. I think if you see, our this year is about 15% is O&M revenue coming in the first quarter of the total revenue. Our endeavor in next year or 2 to take it to around 20% is what we are working towards. And ultimately, if it can be anywhere between 20%, 25% in a few years, I think this is where we want to increase our service income to around at least 20% plus.
Yes. And this is a higher-margin business, right? So we can expect the EBITDA margins to keep increasing from here after 2 years, at least.
Absolutely. You are very correct.
[Operator Instructions] The next question is from the line of [Mahesh Gupta] from [indiscernible] Consultancy Services.
Sir, I just wanted to know that, right now, since COVID is there, we cannot predict anything. And if there's a COVID third wave, then all bets are off. It all depends on how severe it is. But assuming that there's no COVID third wave in India and in other countries also, COVID will now receded from here on. Assuming that scenario, over the medium term, sir, what type of growth are we looking, sir? 15%, 20% or more than that in top line?
Yes. No, no. Let's, for your modeling or calculation, please assume in that range, please, because let's take a step at a time. Let's watch what's happening in the country and elsewhere in the world. And I think slowly we will take as things develop. So I think for the moment, in that range is a good number to with.
Okay, sir. And margins would definitely improve from here on?
Yes, that is our endeavor. That's why we all exist here to continuously improve the margins.
The next question is from the line of Pranav Tendulkar from Rare Enterprises.
Sir, about the order book of around INR 10,000 crores, can you just give us some color about the order book? How much of it is Indian, non-Indian? how much of it is the industry? How much of it is foreign governments? And if possible, in that, how much of it is petrochemical or [indiscernible]?
Pranav, did you get a chance to see our investors presentation?
Yes, yes. So there is a mention of industry and non-industry, but can you give us a little bit more color? So I went through that presentation.
I think we can take it also off-line, but basically I think you have seen that we are slowly increasing our O&M backlog. Today, our O&M backlog is 35% of the total order book. And our industrial is also increasing, which is more than 20% of the total order book. And that is where I think we would aim even in future to increase O&M and also increase industrial. And you will also see, going forward, we will also pick up more international orders because this market is getting very good. Especially Middle East, Africa, this is a region which is coming back. We expect to pick up good orders in the coming quarters.
[Operator Instructions] As there are no further questions from the participants, I would now like to hand over the conference to Mr. Rajiv Mittal for his closing comments. Over to you, sir.
Thank you, everyone, for your active participation in our Q1 FY '22 earnings call. We have uploaded the analyst presentation in our website. In case you have any further queries, you may get in touch with Stellar IR Advisors, our investor relation adviser based in Mumbai, or also you can feel free to get in touch with us directly. Thank you again. All the best.
Thank you very much, members of the management. Ladies and gentlemen, on behalf of VA Tech Wabag Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.