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Va Tech Wabag Ltd
NSE:WABAG
Va Tech Wabag Ltd
NSE:WABAG
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Thank you all for making it convenient to attend this investors meet, which we are doing almost after 4 years plus. Of course, COVID has kept us away. But otherwise, this used to be a yearly event. Though we have been doing such calls over a telephone con calls, but there's nothing like coming, looking into your faces, getting the feedback from you on first-hand basis, shaking hand with you. We were missing that. So it's really fortunate to see you all in strength, and I understand some are on the way.
And this is what we are here for, to meet you, get your guidance, get your expectations from the company because we are here to serve our shareholders, and that is a single purpose we do our business to make sure that we add value to create wealth for all our shareholders.
Let me introduce my team on the dais. Extreme left to me is Mr. Pankaj Malhan. He's our Group CEO and Deputy Managing Director, who joined us recently about 6 months back. Next to him is Mr. Skandaprasad Seetharaman. He is our CFO, and he's been with the company for a long time, and he's taken the CFO's position about a couple of years back. To my immediate left is Mr. Shailesh Kumar. He has also joined us about 1.5 years back.
He is heading our India cluster. India cluster is the biggest cluster for WABAG and is 1 of the 3 clusters we have, which Shailesh is heading is India cluster, which is India and all the neighboring countries, including the Southeast Asia. And other clusters are Middle East and Africa, and our legacy cluster is Europe, which we had acquired from Siemens in 2007 from a reverse acquisition.
This is a meeting where we are going to share with you our results, and before we go to that, I think you will be happy to know that your company where you have put in your hard-earned money, we are in 25 countries. We are truly Indian multinational. You can see our presence in Southeast Asia, in Middle East, in Africa and in Europe. That's what your company is. And you will be even happier to note that next year, we will be completing 100 years of WABAG.
So next year, we'll be celebrating our centenary year because WABAG, as a brand, came to existence in 1924. And this is our 100 years we'll be completing. We have a huge legacy, which gives us huge technical advantage, brand value and references more than 6,500 plants we have built in this period, so which is helping the business to prequalify for any projects, anywhere in the world, any size, any complexity.
We'll be covering a bit on WABAG for all the new investors who have not so much in-depth understanding of WABAG. Then a little bit about the sector, especially the sustainability, the green, the circular economy, the climate change, which are all the buzzwords, and your company's business is right in the center of all these concepts, which are very, very popular and is the right thing. People are taking interest in it to protect our Earth -- Mother Earth. And this is where your company is playing a big role in managing this.
Long-term strategy, about 2 years back, we had a very renowned professional to support us in drawing our strategy, which we did, was approved by the Board, and we have started implementing it, and you have started seeing the result of this strategy. And briefly, we'll discuss about it.
Then finally, of course, the numbers, which matters the most, we'll talk about business metrics, the numbers which are very, very important, and we'll share with you and try to take your views on that.
I think that these 4 quadrants is what WABAG stands for. As you know, we are one of the very few companies which are into pure-play water. You will not find anybody like us who only focuses in water. Our business is only water. We have no other business. Neither we have an aspiration to diversify into anything. We are happy with what we are doing. We are knowledgeable of what we are doing. We have a brand which is very solid in the sector, and we want to continue. And this is something which we are also focusing on the technology part of it. We are not a general contractor like many other companies who are trying to enter this sector. We are a specialized contractor, and we call ourselves as a technology company.
We have more than 125 IP rights in terms of patents and trademarks. And these IP rights, we use it in our own business. We don't subcontract it. We don't license it. It is used only for proprietary projects. I think we have continued to invest money in R&D centers where we are producing both technology in terms of process and products. And this is something a part of our top line is always invested in new technologies and new products.
Most of our research and development is today happening in sustainability, green and climate change and renewable energy. This is where the focus is, and we believe this is where the future is. The market is going to support that. So we are investing money and time into that.
Now if you look at our going global in terms of deliveries, we are already present in 25 countries. And with 99 years of experience, 25 countries and just from 1995 year onwards, we have built more than 1,400 plants. You will not find companies who have this kind of a track record and not only in one country, multiple geographies. These are technologies which is second to none. These are global technologies. We compete with global companies, not only with Indian companies, and we compete with best in the class, and we are second to none.
We have a tremendous price advantage because of our sheer presence in India compared to our competitors who predominantly comes from Europe. So this is giving us a cost arbitrage much though our expectation of margins are far higher than our European company's expectation of margin [indiscernible] enough money to give a competitive edge over our European competitors.
I think it's very important to see that WABAG is not only an Indian company. It's recognized globally. You would be happy to know if you don't know already that WABAG started about 25 years back as a start-up company. And today, it's #3 globally. There's no company globally who have achieved so much in so little time. I'm proud to be not only WABAGite but also be a proud Indian to say that the India flag is in the water sector at #3. So this is a real proud moment that we could achieve what so many other companies could not achieve.
Desalination, which is also something of future technology. You see a lot of interest is coming there to build up water security globally. We are, again, in top 10 globally in providing desalination technology.
We realized when we did our strategy that we should not do something what we are not good at. And something what we are not good at is sheer construction, civil works. That's not something good for us. And at most of the time, it's like pass-through in our P&L, and we don't make a lot of margin. That portion subdues our margin. So it was decided to focus on EP jobs. What is EP? Engineering, what we are good at, and procurement of the technology components, which are required to build an advanced technology plant. This is something we should supply. This is where we should make decent margins and not get subdued by civil works, which is just like a pass-through for us. Plus also, when you take this kind of civil works, it's always delayed for reasons which are out of your control. And most of them are ROW issues. But when you're not doing the civil works, you are not plagued by these delays. So that is the reason we said we'll focus on EP projects going forward. And you will see all this is having an effect on our bottom line as well as cash flow.
We also said we will not get into plain vanilla, run-of-the-mill technologies because that has become a commodity. We'll focus on advanced technologies, where we can limit the competition because in our business, still business is L1 business. So if we have to be L1, then we have to put barriers for other companies so that they don't pull the price down. And one of the best way to put barriers is to use technology as your barrier because what you have done, what references you have, these other companies will not be able to do, and even if they try to bring joint ventures and all that, they will not be able to compete with you. So that was other strategy we had.
But at the same time, we said we want to remain asset light. It has worked for us. Over the years, we have seen the companies who have gone for asset-heavy model, we have seen what has happened to them. We are very proud that last 25 years, we have followed very religiously to remain asset-light. Even presently, we are handling some HAM projects, but we have found a way that it is not heavy on our balance sheet. We remain asset-light. We are a service provider. We want to remain service provider. We don't want to invest in assets nor in manufacturing facility. We are a design company. We will get it outsourced. We'll get it manufactured our technology components, but we don't want to invest in manufacturing also.
A new concept has come, and we'll talk more about it later in my discussion. See, today, we call -- there are 2 types of water. One is a God-given water. Other we call it today, a manufactured water. God-given is all what is glaciers, Yamunotri, Gangotri flowing down, rainwater, which is filling our lakes for you in Mumbai, Tansa, Tulsi, Vaitarna, and that is the lakes are used to supply water throughout the year. So that's a river -- rain water. But with all the climate change happening and drought situation happening, we have seen what has happened to cities and countries. So we wanted to come up with a solution which is drought-proof.
Irrespective of drought, we can manufacture water. So we can help to supplement this water by our technologies. First, we said, let's go to sea and use seawater. This is a perennial source of water. It's drought-proof. Any season, any condition, you'll always have seawater. So why don't we use seawater and convert that into potable water, which can be used for both domestic and industrial customers? This technology is working well. You know we had built a plant almost 11 years back in Chennai. Last 10 years, we have been operating this plant. It is giving water to south of Chennai, very reliable, economical and viable technology.
Since 10 years further, inflation has happened. It has brought the cost down and reliability up and more and more plants are coming. So we are going to focus the next decades on desalination and try to build our order book and execution on that because the competition is limited. People don't have references in this, neither they have the scale at which the new plants are coming. So we will be easily able to put qualification barriers and make decent margins for the company.
The other manufactured water, we talk about used water. Whether it's used water from industry or from domestic users, from our houses, these hotels, commercial establishments, they go down the drain most of the time. Even your own Mumbai doesn't have treatment plant, it goes into the sea. We are polluting the environment. So the government has come very strictly. They have put even NGT on it. If you do that, you can be slapped with fines. So we said, why make this liability cost us? Convert the liability into a resource. And resource will give you a business compulsion to treat this water, not only the compliance you have to do to the discharge standard. So from [ sewage ] today, we are recovering all 3 forms of resources. The first one is gas, which we convert all the organics to biogas, methane, and it is used to produce energy to run the plant, or it is used for CNG production. Both are economically valuable resource.
Second, we use the solid waste from this waste water, and it is very rich in fertilizer manure, nitrogen, phosphorus, potash. All this even government of India gives us subsidy for that. If I sell it to the farmers every tonne, we get direct money from government of India. So they are encouraging us to use this rather than try to only dispose it. So we have to treat it, use it, and it has an economic value. The biggest economic value comes in recycling this water.
We have plants all over the globe not only in India. Our first plant was 25 years back in Africa, which people are drinking this water. That's the only resource they have to survive. Nothing has happened to them. They're all healthy, and they are putting up a new plant now. So it shows that it's a mental barrier that you cannot drink this water, but if you go to Singapore, we will use the same water coming out of the taps, coming out of the wash basins, brushing our teeth, there's no problem. When we say it is in our country, we said, "No, no, no, no. We don't want to use this treated water." Biologically, chemically, it is much safer than this bottled water. If any one of you come to Chennai, we'll take you to the plant, and we'll show you that we can drink this water. We can give you a bottle, go to and send it to any lab and see that whether it meets all the WHO parameters. So this day is not too far when this recycled water will be used for a potable purpose, but it's well accepted today to use it for nonpotable purpose.
So all the industry is only going to get this water. Those days are gone when they tap into groundwater and take the water. Central Ground Water commission is going to disconnect all this and slap heavy fines if we do something, which is not licensed for them to take groundwater. We have not only a project done in Chennai. Today, we are executing a project in Ghaziabad, where same thing has happened that disconnecting all the groundwater tappings which the industry has done and they have to buy this water. In Chennai, we are selling it for INR 80 a kiloliter, and in Ghaziabad, it's close to INR 50.
Now you see how a liability is converted into resource. So it is a business compulsion that you have to treat. It's not compliance to the discharge standard you have to [ deal ]. And this is what is making a big difference in the mindset of treating this water.
I think this is -- all of you who know this. We are a complete solution provider. And we do design, engineering, procurement, construction, installation, commissioning and operation and maintenance for all sectors, whether it's water, wastewater, municipal, industrial, desalination, reuse, sludge management, we do all of it. And the model we use to execute projects can be EP model; can be EPC model; can be DBO, design, build, operate model; or it can be also HAM model. These are the models which we use to execute our projects.
This is what I was telling you: proud to be not only a WABAGite but also an Indian to see globally, we are today at #3. And you see we have not gone overnight. We've gone from 10 to 6 to 4 and today to 3. This shows that your company is moving in the right direction, moving in with a lot of momentum and belief, and I'm sure it's a matter of time, we will further improve our ratings.
On the right side, you see on desalination, we are at #6 globally. And I'm sure with this new project in Chennai, our rating will move more leftwards. I don't know whether it will be 3, 4. Next year, we have to see where our rating will move.
Just to talk about our leadership team. This is our Board. I'm joined by Mr. Varadarajan, who is a Co-Promoter with me; Milin Mehta, Independent Director; Vijaya Sampath, Independent Director; Ranjit Singh, as an Independent Director; and Amit Goela, Nonindependent, Nonexecutive Director. These are the people on the Board.
And I have a management team. I've already introduced Mr. Pankaj Malhan; Skandaprasad Seetharaman; Shailesh Kumar; Mr. Mahmut Gedek, who is not here, he leads our European cluster; and Rajneesh Chopra, who heads our Global Business Development. This is a top management team.
Let's talk a little bit about the sector. You can see there's a huge outlay of these technologies, which are happening in southern part and also in North America, a lot of technologies, which are used. Recycle is very vastly promoted. And this all discharge handlers have a very strong regulatory framework even in India, NGT has been given powers to slap heavy fine, including imprisonment if you won't meet the discharge standard.
There's huge investment globally happening in desalination, led by, of course, Saudi Arabia, which they are going to invest a lot of money over the next 3 years. Egypt has announced huge desalination schemes where we are also qualified. So we'll be looking, having our chances to win some projects where we have been already in Egypt for last over 40 years, and we are doing a lot of projects in Egypt.
Somebody was talking to me over a cup of tea, semiconductor, yes, it's a big business. It needs ultrapure water. Semiconductor doesn't need only water. It needs ultrapure water. It needs technology, and we have done a few plants. We know what to do, and that's where we are.
Green hydrogen, everybody is talking about it. Maybe it's not economical today. But in a matter of time, like solar, it took some time to become viable. So I'm very sure green hydrogen is also a technology. It's a matter of time. We're all talking about it, how it is helping businesses to grow and also manage the climate change and reduce the greenhouse gases. Water will play a very important role in hydrogen production.
Oil and gas, we remain very bullish on it. We are one of the best references globally, and we will continue to be focusing on oil and gas.
You must have seen in the last many years, there's suddenly a lot of interest in investment in water sector. Water sector is seen as -- because SDG goal, and number 6 is all talking about water and environment, and we are right there. You talk about ESG. It's all talks about environment, social and governance. So again, we are very much there as a water sector. You talk about green, clean, all this water is right in the focus. So we would believe that going forward, there are going to be huge investments coming into this sector. Plus all the multilaterals are seeing this sector being a social sector with renewed interest, a lot of money is flowing into this sector whether it's from JICA, Japan, World Bank, Asian Development Bank, KfW from Germany, all this money is coming into with very attractive interest rate and a long tenure to Government of India.
I think the numbers are huge. We don't want to talk about it even lets assume they invest half of it, 1/4 of it, huge numbers. So water sector is going to see huge attraction of funds in years to come.
As I told you, we have 3 clusters: India cluster, MEA cluster and Europe cluster. India is going to be driven by all government funds, which are all sovereign funds, which are coming, whether it's AMRUT, Jal Jeevan Mission. Namami Gange Jal Jeevan Mission is also some say 'Har Nal Se Jal'. This is an initiative of Prime Minister to see that every house has a tap and pipe connection. So that's a huge investment going into Jal Jeevan Mission, Swachh Bharat Mission, too. I think also 5 states have already signed into reuse of used water. And I'm sure, as time passes, success stories will reveal, and we see more and more buyers for reuse of water. There's also a huge demand for water in Southeast Asia, which is a India cluster business, and we're focusing on it.
MEA, as I told you, Saudi Arabia alone have a plan of investing $28 billion to treat wastewater. They don't want only treat but also, the treated water like I told you they want to reuse it. So that's what they say. Their target is 35% of wasterwater they want to recycle by the year 2030. Egypt, I told you, huge desalination plants where prequalification is over, and we are qualified for that. A lot of work is happening in Africa. A lot of multilateral money is going. A lot of G2G money is flowing into Africa to support them to manage this climate change.
In Europe, there's -- we talk about nutrient removal. They go 2 steps up and talk about micronutrient removal. So there are the technologies at a different level. And we are right there. We are one of the companies who have maximum references in micronutrient removal. So they are into a different lead, which probably will reach in the next 20 years. But to say we are a company also having all these advanced technologies and we will have references by the time this part of the world will need it, we would have built maybe 50 plants by them. So we will always have a head start when this technology will become relevant in our part of geographies. Again, a lot of EU funds are moving into former Eastern block of Europe, and that will also open up new opportunities for the company.
We talked about biogas market. You can see how big is this market. A lot of plants are not tapping this biogas, it is wasted. And if you were wasting biogas, you are really taking up oxygen from atmosphere because it needs 4 oxygens to kill 1 methane. So it is having a very drastic effect on greenhouse gases. And that is the reason you should tap this biogas, not let it out into air, convert into CNG or energy, and this is a huge potential, huge potential. You can see almost 80 billion potential is there in biogas, which is not tapped today. Somebody has to apply even a business sense to say, "Why don't we tap into this potential and convert this into an economic resource."
Again, we are doing a lot of work on hydrogen to partner with people who have the electrodes to produce hydrogen and we can be their water partner to give them clean water. So the electrodes will not have scaling on it. So we have remove a lot of [indiscernible] so that scaling doesn't happen.
So you can see when we talk about SDG goals, we don't only talk. We have numbers to support what we have done to support these SDG goals. This is what our path is to net zero. So all the greenhouse gases, we want to reduce it. And that's what we are working on. If you see water neutral, we are making industries to be water neutral. And how we are doing it, as we said, used water, we are recycling up to 85% to 90%. The 10% which is remaining goes for zero-liquid discharge. So that goes for the infiltration route where, again, that water is recovered. So net discharge from any industry will become 0. We have already references, and I think more plants will follow this route that they don't deal with regulators, pollution control boards because if they're discharging water, they have to meet the compliance. When they don't discharge anything, one, it gives them water security. Under any condition, they have their own recycled water. Like our Prime Minister said, [indiscernible] were self-reliant. They are producing their own water. Plus, they are not discharging anything out. So that headache is also gone.
Waste to energy we talked about. We can convert waste into energy, which is today a liability. We can convert into resource. Resource recovery, we talked about it, gas, solid water, circular economy. By doing all this, we are helping to converge towards circular economy because everything we are recycling, reuse, and this is going back into the economy. So nothing is going to waste. And you can see the bottom part of the presentation, so much of this [indiscernible]. Water, we are producing. Recycled water, we are producing so much. Green energy, we are producing. Wastewater treatment, we are doing. Clean water per day, what we are producing, saving power cost by producing power from biogas, we are saving so much of thermal energy and, hence, reducing the greenhouse effect. And also, we are saving so much of greenhouse gases, enormous quantity. So we are making a small contribution to the global SDG goals.
This is our group strategy. And this is what we have come up in the last 2 years. And you can see why we have come up with it. We've always wanted to grow and grow profitably. We are never a company who was only thinking of growth in terms of revenue, top line, no. Our bottom line should grow faster than bottom line, and that is what we call profitable growth.
Market leadership, we've shown you we have done enough to achieve the market relationship -- leadership, and people respect us. They look us with regard, and brand has tremendous value.
Today, third year consecutive, we are generating free cash. You have seen our presentation, we are uploaded into our Investor Relations page of our website. Third year, consecutively, we have generated free cash. Our growth or quantum. You have seen our profitability in terms of EBITDA or PBT or PAT, and this is the trend we want to continue and grow, not a step-wise growth. We want to grow quantum leaps we want to do. And today, the order book we have will enable us to achieve this.
Last but not least, the biggest concern has been the valuation. We don't deserve to be valued so low, 10 multiple. And we have to do everything to change the valuation because companies in the right business, companies doing the right things, why we should not be valued for what we are worth.
These are the strategies which we had. We said to improve this, whatever I told you, we need to have a very strong marketing team. We call that go-to-market teams. They are the people who are going to sell technologies. They are the people who are going to penetrate the market. They are going to open up new markets. They are going to sell new advanced technologies, which create barrier for our competitors, and we need smart team who can open new doors and convert existing clients to what we want.
O&M focus, service business has always been our focus. As we say, we are not top line-driven. People who are top-line driven, for them, O&M business is not important. For us, it's extremely important. It's annuity business. It gives us visibility. Today, we have a huge 10 to 12 years visibility of O&M with the backlog we have. So we are going to focus on stand-alone business. We are going to focus on one city, one operator. We'll talk later a little bit more about it, like we are doing in Agra and also in Ghaziabad, only one operator for the whole city to maintain the complete wastewater infrastructure. That's the model we want to follow for many cities to -- in the future. And this, we brought in from Istanbul, Turkey, where we did management of Istanbul City for 3 years.
We want to -- in near future or medium term, we want our O&M revenues to be at least 20% of the total revenue of the company. This will bring in stability, then will bring in better margins, better cash flows and better predictability of our numbers.
As I told you, we are focusing on EP. We are taking EP out. That's not focus. If it comes, we'll do it, but that's not the way we want to go. We want to focus on industrial business, which we have always done. In fact, this company was born when we took the first Reliance job in Jamnagar. They were setting up a greenfield refinery. So even today, we are focusing on industries we want to focus more because they give us opportunity to really use some of our innovative technologies, which we have done very successfully.
Today, we are one of the leaders in oil and gas. So we want to continue that journey. We also want to be more international. If you've seen our presentations over the last couple of years, our split of order book being more 50-50. Our revenues are more 50-50, so we want to continue that there because it's a lumpy business, some years because of some large orders like Chennai order can shift this. But on long term, we want to be in international market. At least 50% of our revenue should flow from international market.
Partnership. As we said, we did partnership both in technology, construction and finance. Construction because we don't want to do civil. We need partners who can do civil. So it is off our balance sheet. We also don't want to invest. We want to remain an asset-light company. We want financial partners who have deep pockets who are interested in investing to -- on their IRR. So we are already partnered with some of them like IFCs, ADBs and Tata Cleantech, they are investing and also some other fronts like Green Growth Fund, they are also investing in equity. So these are the partnerships we want to do so that all the investment is off our balance sheet, and we remain asset-light.
Technology. We believe we are second to none in technology, but technology is always evolving. If somebody has a better technology than us, we don't mind going and getting these technologies from them. And that's something we are willing to take care.
Again, we are doing so much business globally. We want to develop a few centers across the globe where projects can be executed completely from engineering to commissioning from one center. So we are developing a few centers across the globe, which can service any geography from their center. So it will be a dedicated teams. They need not be -- they have to sit in one place, but the teams will be one. They can even work remotely because it's all possible. COVID has taught us that remotely things can work, and we did it very successfully. In fact, our successful years have been the COVID years. So why not continue what we've done well.
Now I will give the business metrics presentation to my colleague, our CFO, Mr. Skandaprasad Seetharaman.
Thank you, Mr. Mittal. Good evening, everybody. I'll take a few minutes to go through the key metrics. I'm sure you have seen the investor presentation.
So these are the highlights for the year. We continue our profitable growth journey, which has been our focus and commitment to all stakeholders. Our EBITDA has grown by 43% for exceptional items, and PAT has grown by 74% to about INR 230 crores in the last year. Our order book is at a historic high of INR 13,200 crores, which is again 30% year-over-year. This provides us a very robust revenue visibility over the next few years, both on EPC and on O&M front.
From a cash and working capital, our focus remains intact. You would have seen us giving you commitment on cash in the last conference calls. We have generated operational cash like in the last couple of years of INR 85 crores, INR 850 million on a consolidated basis and free cash of INR 86 crores in this year. We continue our turnaround from being a net debt to a net cash company this year as well, with a net cash balance at the end of the year of about INR 100 crores. There has been a significant reduction in our gross debt by 50%.
We moved from INR 428 crores, which was the last year's gross debt, to about INR 213 crores in this year. Working capital again, has been a key focus for us to keep it under 90 days. We are well below 90 days at 78 days, with a 10% gross reduction in absolute values. Credit rating, obviously, is a reflection of how we perform. And today, we are at the highest short-term rating of A1+. This again reaffirms the strong business credentials that we exhibit.
As I said, this has been the highlight. This has been us delivering on the commitments of cash. If you see the first 4 bars is when we did have a net debt scenario. And as we moved more on implementation of the strategy, it started also reflecting on both the metrics as well as most importantly, cash. Like we said, when we started about, say, 10, 12 years back, the focus was on order book. Then it moved to top line. Now the focus is on profitable growth and generating cash because valuation doesn't come from top line or from order book. It comes from how profitable we are and how much we are able to generate cash for our shareholders.
A historic desalination order, highest ever for WABAG, historic high, JICA-funded and the largest desalination plant, both in India and Southeast Asia. We are very proud to have won this against tough international competition. And if you see the prequalified parties, we were the only Indian party -- Indian leader JV in the 4 parties, which got prequalified. This will make Chennai the desalination capital, and we are very proud that we will be managing 70% of the water production through desalination in the city of Chennai. We've already done the 100 MLD. This is another 400 MLD that we are doing.
Second, this is under historic order in terms of our breakthrough into this geography, Bangladesh, again, a World Bank- and AIIB-funded project. This is, again, won against tough international competition. And like Mr. Mittal mentioned, this is one place where we are generating green energy from biogas, which will be captively used for the plant, which will make it power-neutral.
On key performance metrics, I'm sure you would have noted that in the last few years, we have been representing core and noncore with the large exceptional items that came through. The overhang is completely out. Now our numbers are actually reflecting what is our business performance. And these are the numbers, which are directly from the results: a ROCE of about 18.5%; an EBITDA, double digit, as we have said always, 12%; a PAT of close to 8%; and working capital at 78 days.
And this is our order book composition at INR 13,200 crores, with a very healthy O&M mix of about 40%, which gives us visibility over the next 10, 12 years in terms of O&M turnovers. And as Mr. Mittal said, the business is lumpy, so it will move between years, but our endeavor will be to keep the international and Indian business at 50-50. This is -- the moment is largely because of the large project that we got in Chennai.
So our focus has been on manufactured water -- will be on manufactured water. So by manufactured water, we first focus on protecting the environment, and this also powers the economy. As was mentioned, one is recycled. The other is desalination, and third is industrial water treatment. All these 3 product lines, as you can see, are not any more liabilities. These are all money generators, and it ends up protecting the environment because it promotes eventually a circular economy.
So we'd like to take couple of minutes to play a video on manufactured water.
[Presentation]
I'm sure you have seen that we don't just talk manufactured water. We also walk the talk.
With this, thank you very much for your attention, and we are open for Q&As.
I think just everybody who wants to ask the question, they can put their hands, talk about the name and the organization they present. The mic will come to you. .
[indiscernible]
Too many questions to retain it. I will take your first question and let me get up. NCLTs and some are in arbitration. Now we have been patiently waiting for it. Even NCLT case, the so-called fast track, 4, 5 years, no decision. And that is the reason we have taken this case and whether it belongs to both the projects or no? No. Predominantly, this write-off is because of APGENCO, which are -- one is at NCLT, other is in arbitration. You can see still, we have not taken the TSGENCO because that is already at the highest level of Supreme Court arbitration. We're expecting the decision by -- soon. And client has already accepted that they owe us this money. Just because of arbitration conclusion, the payment is not made. I'm hoping that arbitration will be concluded favorably to us and that money will be recovered.
So other than TSGENCO, everything is written off. We'll continue to pursue the legal things on this [indiscernible] reasons we have in our books. And if things come through, we'll add back to our income. But today, the [indiscernible] that is the reason we've to be done. Regarding your second question was on [indiscernible] simple answer is no. We want to remain what we are doing. As I told you right at the start, what we do, we continue to do. What we do good, we want to do better. But we don't want to get into a business which we don't know. We have no expertise. It is completely a different FMCG business. We are not experts there, so we will not do that.
And the last one was about margins. I think as you have seen that the margins have been good and which has also enabled us to write off because this year, the margins have been fantastic. The businesses have done well. The EP part has worked for us. The international part has worked for us. Currency gain has worked for us for the international projects. So all parameters have worked for us, which has enabled us to get a decent good bottom line, which enabled us to write off and still in green. Now going forward, maybe 1 or 2 things, maybe we'll not be so lucky. But double-digit EBITDA margins are very sustainable at the consolidated rate. That's something we want to confirm that. Thank you.
[indiscernible]
Yes. Okay. I think first thing you should know that there are a lot of new projects, Reliance, Senegal, [indiscernible] , Russia, which towards the second half and towards the last quarter and last month, there were a lot of dispatches, material dispatches, EP project. So we have taken the revenues up, but also they are not due to be collected. Some of these materials will have to reach Russia before they will start persisting ourselves. And it's a good 2-month cycle from the day you dispatch and the day receiving cash, okay?
The others are having some payment cycles, anything between 3 months to more than that on international projects and Indian projects 52 days to 70 days. So these as the last quarter or last 4, 5 months revenues are not even due. And that is the reason there's a bulkiness in the second half of this, which always in the first half of this year, even first quarter, we should be able to collect a lot of that. This happens every year, but this year, it has been special because of a lot of new projects where we have encouraged, and we ended up in merging almost in the last month and last quarter.
[indiscernible]
Yes, I think something which we can't control. We can only direct our sales and marketing team to go after projects which are more EP than EPC. But there are still customers who want us to take a single point responsibility. And that's why we enter into partnerships with companies who will do the C part. So our endeavor going forward will be to reduce fee, which we have been able to do over the last couple of years. And going forward, we'll continue to do that. But also -- this is also comes from our business strategy where we want to do EP, and your question on EP has a better margin, yes, EP has a better margin, better timing, better cash flow, all this is the reason we want to focus on EP, and these last 2 years, our margins have improved, our cash flows have improved and this is a combined effect of a few things we are doing right based on our strategy.
[indiscernible]
I will not be able to tell you an exact number, but maybe excluding this recent payroll jobs, maybe 20-odd percent, 25%.
Anybody? Also, we want to see people who have joined us on the phone, if they have any questions.
Little bit louder.
[indiscernible]
Already told one of our friends here that this year, you have 12%, okay? Yes, we are still lucky on two fronts, which we have told you. But anything on double digit, you can take it in your model, okay? I'll not be able to give you an exact number. I think that's the best guidance I can give you. But you can definitely consider double digit, which we have been giving for many, many years in the past, but now you can confidently take that because of the strategy shift we have done, you can raise that double-digit numbers.
Revenue growth, as I told you, we are not focused on revenue growth, but this is going to be an outcome of our order backlog. We are not going to book orders just to grow on revenue. We are going to book orders to grow on bottom line and cash, okay? But if the kind of order book we have, all-time high, historical high, you are going to get us revenue growth irrespective because we have to execute the project in a given time. So that will definitely see a good revenue growth in the years to come and we also are endeavoring to further improve our order backlog in the years to come.
[indiscernible]
See, these large projects have certain time to complete all the formalities. We have completed all the formalities. The contract has been signed. It goes to the funding agency to set up LC limits because we have a dollar component in it, which only JICA from Japan, Tokyo can pay us. So these LC limit will be signed. These are all conditions precedent before the effective bid.
Our work has started. But contractually, effective date will not be announced until all this condition precedent is met, including giving us a site. You know that in India political foundation stone laying for this kind of massive project, which we expect in the coming months, all that they will do. They will hand over the site. I assume that in this next 30 days, we'll do all that and get going and start invoicing at least the engineering portion of it. And then going forward, we start invoicing the construction portion because we start with construction within this year. So you will see some revenues coming in the first half, mainly engineering, and a little bit of construction, but there will be some good revenues will come in the second half and it will peak next year.
There are quite a few hands here, yes. Maybe give the lady the mic, okay?
[indiscernible]
[Indiscernible] Anything below 90 days. The company that they will continue to [indiscernible] So we'd like to intend to put this larger projects, obviously, there has been some expansion, but on the other side, [indiscernible]
[indiscernible]
See the market is very bullish. I've shown you there are huge opportunities in India and abroad. So we would like to target order intake at a similar level at what we've given this year. This pipeline is very strong, very strong, a lot of bids are in the pipeline as we are even a preferred bidder. So god willing, keeping the fingers crossed, we will be able to announce some orders in this quarter.
[indiscernible]
See, this is something, if I could answer this question to you, we would have [indiscernible] But the only thing I can say is we continue to fight, continue to invest our legal expenses to ensure that we recover this money. So we are not giving up. This is only the [indiscernible] to clean the baggage, which we have been doing for so long. We want to see a little light of this and the true business performance you can measure than what the company is doing rather than getting this provisions every year as per seasonal -- we don't know. And any write-off is also going to be cash and corrected by the way.
[indiscernible]
Sorry? Three areas of to focus is to implement the strategy orders. I think that is what will give us profitable growth, that it what will give us valuation improvement, what all we have bought from this very low valuation, if next year, we stand in front of you and improve the valuation from this 10 multiple to 15. We are all smiling, so we are working on it.
[indiscernible]
I think you should know. As I said, we are a start-up company. 25 years we started. In 25 years, we have grown this company leaps and bounds. Today, we are the only company who is proud to say we're globally number -- Without any fundraise. Without any fundraise, we have done through our business goal and that is what we have invested in. Even the IPO we did in 2010, you know we gave equity to all the private equity inventors to make this company truly a public. Small projects came to us, we have to do because of SEBI, INR 125 crores invested in our office and in IT infrastructure because we were going global. Today, in Chennai, we are controlling all the IT of our.[indiscernible] So we have invested there. So that thing we have put it to our business. So only and only fundraise we got was few years back when we raised INR 125 crores. So in this 26 years, the only fundraise we have -- God willing, even with all these projects, we may not need a fundraise to fuel our working capital for contributing the projects. That's our belief. We have done it successfully in the past. We want to continue to do that and try not to do fundraise and still be able to deliver the project.
[indiscernible]
Why we should not do that? The aim would be, like I said, to the young lady that even order what we did last year, we intend to do this year. If we do that and even if we have a growth on our sales still we'll add at least 2,000 to our order book even in this year. So from 32 [indiscernible] the 1 or 2 years, why we should not reach 70.
[indiscernible]
Russia is stabilizing, okay? We had sanctions issues. We had a lot of vendors staying because a lot of European companies did not want to do business with Russia. So we had to change the vendors to India, Chinese and other vendors who can do business. We lost a lot of time in this. And also deliveries from certain locations were not possible. We had to transfer it to various places. I think it's all in place. This year is going to be a bumper year for Russia to do projects. You will see a huge sales number because a lot of or most of the supplies will move in this year up to March. And that's what we are expecting.
And your second for, yes, Russia remains our key markets. Russia, we will be focused. We have a special team focusing on it because India is preferred there. We like to do business and they open LC, we will complete special project, we have opened a $100 million LC, single LC from Kazakhstan, not from Russia, from Kazakhstan Bank, to State Bank of India. So there's no payment risk, why we should we not do business?
And you rightly said, our competition is less, European companies have gone out. So we should take advantage and do our business and improve our margin.
[indiscernible]
It will take some time for this hydrogen. Economically, still is not viable because it will be slow in investment, till it reach a critical mass then it will take off. We are there. We are into ultrapure water, like Pankaj said, in semiconductor. If we are at that level, hydrogen doesn't need that quality, need one bit lower, but other than desal but lower than semiconductor. We are there. We even produce water for semiconductor. We have plants for that. Yes.
[indiscernible] So we already produced water [indiscernible] so we're next [indiscernible] we can hedge for this.
[indiscernible]
We have already constructed a couple of plants, one in Qatar, where we have supplied our plant to produce water quality, for production of semiconductor.
[indiscernible]
The dividend policy is very much there. Go to our website, policy is very much there.
[indiscernible]
It depends on what is good for the investors. We are investing in the business. We are not raising funds, and growing the business, improving the valuation. So investors can decide whether dividend is important or the improvement in valuation is important. We can go into the market and raise funds. So it is a combined decision of all of us. So we tend to make a decision on your behalf, which we believe is good for the shareholders. But we are open for suggestions.
[indiscernible]
We are turning big. Yes, yes we are turning big. We'll definitely consider your suggestion. Thank you.
Okay. Somebody is on the con call. We'll give the team also a chance to ask their questions.
Our question comes from the line of Shreyas Mehta with SRI Capital.
Thanks for sharing all the details. I just had two quick questions. Number one is being the professionally run company, why don't we have ESOP scheme for our executives and all the employees. That's question number one. Second, you always...
Slowly, slowly, I think everybody is here. The question from this gentleman is, we are professionally run company. Why do we not have an executive program for ESOP? I think the answer we have done twice the ESOP scheme when it was really making a lot of sense. One we had done in 2006, another we've done in 2010. We are in discussion with various experts what is good for motivation and rewarding our executives. And we don't only limit to top executives, we give it across the company. We have demonstrated that. It has been a great motivator. We will have to consider because ESOP is no longer a very attractive thing from the tax, which have come in. So we will have to consider what is most attractive for our people, which we can give more money in their hands. We will consider that, Shreyas.
Yes. I appreciate that. So if you do not approve ESOP after you consideration, you will possibly will have something else which you consider it to be more appropriate for employee motivation. So as and when you come to some decision on that, it will be helpful if you share the details.
No, no, we always share, but for your information, we have a very decent performance-related bonus program which we have it for the last 15 years in this organization. We were probably the first one in the engineering industry to have this variable pay. So there's a fixed pay, and there's always variable pay, which is depending on the performance of individual and also of the company.
On the same line then, if we also have some understanding about retention of talent because as you continue to talk about being an asset-light company, not having -- our main strength is technology as you have repeatedly mentioned, technology possibly backed by passion and talent or the manpower which we are employing. So how is the retention of our human resources?
So, I think the retention has to be meaningfully employing people, giving them challenging and exciting assignments, having a great career path and creating a great environment to work in. It was also good to see that we have been also selected and nominated as best places to work recently. So there are some right things we are doing, but this is a continuous process, and we will definitely keep on focusing on it. As you rightly said, talent management and talent retention is the biggest job for our HR today because there is -- market is opening up, and we want our talent to remain with us because they are the people who are going to contribute to our future growth.
I appreciate that. Just last question from my side.
Too many questions. Can you come back, Shreyas, because you've already taken 3 questions. We have a rule of 2 questions per participant.
Sure. No issues, yes.
[indiscernible]
We lot of learnings from our past decades. So everything before today, we have [indiscernible]
[indiscernible]
[indiscernible] It is roughly around 24%, 25% because large amount of our order book is in India. And you see already our European geography has exposure has come down to 5%, which is, again, largely based in North Africa and in the Middle East. So our effective tax rate would be about 24%, 25%. That's the range we have been you see us between 23% and 25%, that's the range.
[indiscernible]
We've been focusing on debt reduction, and that's how we've made cash over the last 2, 3 years. Obviously, there will be some amount of debt we will use to balance the [indiscernible] And with a lot of export projects, we are also able to raise debt from the plant at a much lower rate than what let's say what we would do just in INR. So we are up 9% in terms of our overall cost of capital. You'll see how we have been on the interest charges, just to your calculation on an average, it will be plus 9%.
Against the competitors.
[indiscernible]
Our question comes from the line of Kothari with HDFC Securities Limited.
So I just wanted to get some insights on our upcoming order pipeline. So we are currently having all-time high order book. So what are the prospects you are looking forward as the L1 order coming in the coming years and the order pipeline that we are looking at?
Our focus is going to be on manufactured water. So our main focus is going to be on desalination and reuse, which the team will continue to focus. Yes, once a while, we'll continue to take industrial projects, some projects in sewage and water treatment also, but we'll have to see that we are competitive in it and we can create some differential with our technologies, but our focus will continue to be in manufactured water going forward.
And may I have a number for the bid pipeline?
See bid pipeline is going to billions and thousands of crores, but what I was telling some of our friends here that there is a good pipeline, a concrete pipeline, of which some projects we are already declared as a preferred bidder. This we expect in next 6 to 8 weeks we should be able to declare the orders.
Our next question comes from Niraj with AM Securities.
Since there is no response, we move on to our next question. It's from the line of Tushar [indiscernible] Wealth Management Private Limited.
I could see that company is booking more on the EP projects. So I just want to understand the EP project contribution to the total pie, considering the EPC order, we have near to 60% of the EPC order. I just want to understand the EP contribution to that INR 7,920 crores odd number?
So I think this was answered earlier also. Our EP portion would be roughly 30%, 35% of our order book today, especially because of this large lumpy order that we have received from Chennai Metro for the 400 MLD desalination. So we would have about 30%, 35% of our EPC order book at EP.
Okay. Sir, the next question would be this O&M project, what would be the annual run rate for the O&M projects, which you can be sure of?
See, these projects, if the order book will start at different timelines as the EPC part of these orders get over, then the O&M starts. But we are -- we have at least a visibility of about 10 years of revenue coming out of this order book.
Okay. Sir, if my calculation is correct that considering the execution period of 2 to -- even if you consider it 3 years, so considering that 7,000 odd EPC contract, the number is coming out to INR 2,640 crores. If you add the O&M part to that, so the number should -- the topline should grow to a good extent from here on. What's your thought on that, sir?
So talking about them. So the question is there is an order book which will pan out over 3 years the EPC. And O&M, if we add even the current 400 kind of number, we are seeing growth with this number, and he's asking what is your thought on that?
There's nothing to be very intelligent about it. As you rightly have said, with the order book we have, definitely, we are looking at growth, and we have to see how much we can execute from EPC. O&M will be anyway a steady business and that will give us a topline number in the years to come. But definitely, with the kind of order book we have, we are looking at the topline growth also.
[indiscernible]
[indiscernible]
On behalf of VA Tech Wabag Limited, that concludes the conference call. Thank you for joining us, and you may now disconnect your lines.