Vascon Engineers Limited (NSE: VASCONEQ) Q2 2025 Earnings Call dated Nov. 05, 2024
Corporate Participants:
Vishal Mehta — Investor Relations
Santosh Sundararajan — Group Chief Executive Officer
Somnath Biswas — Chief Financial Officer
Analysts:
Himanshu Upadhyay — Analyst
Aadesh Gosalia — Analyst
Rajendra Kulkarni — Analyst
Ayush Kataria — Analyst
Balasubramanian — Analyst
Praveen J — Analyst
Madhur Rathi — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Vascon Engineers Limited Q2 & H1 FY25 Earnings Conference Call. [Operator Instructions]
I now hand the conference over to Mr. Vishal Mehta. Thank you, and over to you, sir.
Vishal Mehta — Investor Relations
Thank you, Shlok. Good morning, everyone. I, Vishal Mehta, on behalf of Stellar Investor Relations, welcome you all to Vascon Engineers Limited Q2 & H1 FY25 Earnings Conference Call. We shall be sharing the key operating and financial highlights for the second quarter and half year ended September 30, 2024.
We have with us today the senior management team of Vascon Engineers Limited, Dr. Santosh Sundararajan, Group CEO; and Mr. Somnath Biswas, Chief Financial Officer.
Before we begin, I would like to state that this call may contain some of the forward-looking statements which are completely based upon the company’s beliefs, opinion and expectations as of today. The statements made in today’s call are not a guarantee of future performance and also involve unforeseen risks and uncertainties. The company also undertakes no obligation to update any forward-looking statements to reflect development that occur after the statement is made. Document relating to the company’s financial performance, including the investor presentation have already been uploaded on the stock exchange and the company’s website.
I now invite Dr. Santosh Sundararajan to state his opening remarks on the company’s performance for the second quarter and half year ended September 30, 2024. Then we will open the floor for Q&A session. Thank you, and over to you, sir.
Santosh Sundararajan — Group Chief Executive Officer
Good morning, everyone. Season greeting, and I wish everyone a Prosperous New Year. We are happy to report a significant growth in our overall revenue, driven primarily by our EPC segment. Despite a slowdown in the overall sector and severe monsoon for these few months in several parts of the country, the timely execution of projects and the smooth operation has led to significant improvement in our overall performance.
We have achieved a remarkable 22% year-on-year revenue growth in H1 FY25. This focused approach not only boosts our efficiency but also fosters the culture of accountability and excellence within the team, ultimately contributing to our sustained success.
Let me reiterate that the Ind AS accounting treatment in real estate can result in timing differences between the recognition of expenses and revenue which has resulted into decline in profit as compared to previous year’s quarter. Going forward, the outlook for EPC segment continues to stay robust, backed by a healthy and strong order backlog of INR3,267 crore, which is four times the FY2024 EPC revenue. This demonstrates a solid foundation for growth and for successful execution going forward.
Out of the total order book, INR2,781 crores comprise of external EPC and INR486 crores comprises of internal projects. Approximately 82% of these orders come from government projects providing reliable cash flow and ensuring swift execution timelines. We anticipate this momentum will continue in the coming quarters, backed by strong and healthy order book.
In terms of winning new orders during H1 FY25, the company has received new orders from PWD Sindhudurg for the construction of a medical college worth INR332 crores and has also received letter of acceptance from Mumbai Metro Rail Corporation at Kalbadevi for INR57 crores.
Our balance sheet has remained robust over the past six months, resulting in significant increase in our bank guarantee limits. This enhanced financial strength provides us with the capacity to support further growth in our EPC division, ensuring continued expansion and success in this sector.
Coming to the real estate segment. The market looks promising for us and we intend to launch two, three new projects in FY25. Our first redevelopment project Om Sainath located in Santacruz, Mumbai is expected to be launched in the month of December. The Powai residential and commercial project is also expected to be launched in early 2025 and other projects are expected to be launched in FY2026. This will contribute towards revenue in coming quarters and we remain positive about our business prospects in the coming year.
In H1 FY25 we achieved new sales booking totaling to 22,152 square feet, generating a sale value of INR14 crore and a total collection of INR25 crores. We are optimistic about our real estate sector’s trajectory, strong pipeline of upcoming projects to strengthen our confidence in sustaining and enhancing positive momentum. We are committed to leveraging these opportunities to drive growth and performance.
Lastly, coming to GMP business. We would like to inform you with all the divestment of its 100% equity stake in GMP Technical Solutions was announced by the Board meeting held on July 17, 2024. The company has received the sale consideration of INR157 crores against the transfer of 12,689 equity shares on October 2024 and on 10th October 2024 the money has been received. GMP Technical Solutions that is to be a material subsidy of the company.
As against the company’s share of INR157 crore post tax and other allied expenses, we are expected to have a net cash flow in the range of INR100 crores to INR110 crores. This fund will be majorly utilized as growth and opportunity capital for both real estate and to create some assets for the EPC division which in turn will be used as collateral for augmenting the EPC working capital limits.
We are happy to inform you that CRISIL has upgraded our credit rating for term loan of INR725 crores and the rating has been upgraded to CRISIL A minus stable for long-term facilities and CRISIL A2 plus stable for short-term facilities. This was from CRISIL BBB plus and CRISIL A2. The ratings upgrade reflects a sustained operational and financial risk profile driven by a healthy execution of the EPC segment. The upgrades also takes comfort from the enhancement and working capital limit and also factors in the extensive experience of the promotes.
Our healthy execution track record in the civil construction business and reputed clientele, comprising primary public sector and government entities. This upgrades will play a crucial role in negotiating favorable interest rates in the company’s favor.
Coming to the financial performance of the Company in Q2 FY25. Let me start with the standalone numbers during Q2 FY25, the company reported a total income of INR202 crores as against INR176 crores in the corresponding quarter last year with the growth of 15% year-on-year. In Q2 FY25 the EBITDA stood at INR17 crore as against INR25 crore in the corresponding quarter last year. The EBITDA margin was at 8% and a net profit of INR8 crores in Q2 FY25 as against INR20 crores in Q2 FY24.
At a consolidated level, Q2 FY25 the company reported a total income of INR202 crores as against INR174 crores for last year with a growth of 25% year-on-year. The EBITDA stood at INR17 crores as against INR25 crores in the corresponding quarter and the EBITDA margin is at 8% and a net of INR9 crores in Q2 ’25 as against INR20 crores in Q2 FY24.
In summary, our various initiatives are successfully driving growth of the company with a healthy order book in the EPC segment, an upcoming new project in the real estate segment, and a strong balance sheet mainly focusing on solidifying our financial as well as market position. With all the above-mentioned points, we are very much confident to grow ahead and achieve our goals.
Furthermore, by the sale of GMP business, this divestment will allow us to focus on the core business operations which is now well-positioned. We are excited for the future and committed to using our innovative solutions and dedicated team to drive value and excellence for our stakeholders.
With this, we can open up the floor for question-and-answer. Thank you.
Questions and Answers:
Operator
Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from the line of Himanshu Upadhyay from BugleRock PMS. Please go ahead.
Himanshu Upadhyay
Yeah. Hi. Good morning. The first question was, you stated that Om Sainath redevelopment will be launching in December. So have we got the RERA number and commencement certificate for construction in that project?
Somnath Biswas
See, commencement certificate we are expecting within next seven-10 days. It is — and then we’ll — it will take another month to get the RERA. So, that’s why we are expecting to get it launched by end of December.
Himanshu Upadhyay
And the other project you stated which you want to launch in FY25 is?
Somnath Biswas
The Powai is very much on the road. We are just expecting the EC very shortly. So, once EC is being done. This falls under the parameter of EC since it is more than 2 lakh square feet, so anytime in November, we are expecting that EC and then the commencement certificate and RERA will follow subsequently. So, already FY — already calendar year ’25 the Powai is expected to be launched, so probably in the Q4 of the financial year.
Himanshu Upadhyay
Okay. Yeah. And any thoughts on how is the EPC business coming up and what is the new orders you are expecting or how are you expecting FY25 to grow in the — generally second half is more orders, or get more orders. Any thoughts on that?
Santosh Sundararajan
Yes, actually we have a target of INR1,500 crore order booking for the year which we have been maintaining. And we have only achieved about INR400 crore so far. So we do have a backlog on that front partially also was because of the impending elections in the state. And so, we kept our order booking plans on hold for a bit. We would wait for the elections and then from December onwards try to bag a few more orders in Maharashtra.
Also, we were waiting for certain BG limits to come through, new assessment from our lead banker SBI, which is also almost at the final stage will happen anytime and with certain revision of terms, our ability to bid will be better. But yes, we still have about INR1,000 crore — INR1,100 crore target for the year, which we have taken and we hope to achieve before April.
In terms of execution also the quarter three and quarter four are historically always much better than quarter one and quarter two for us. We have crossed INR400 crores almost in quarter one and quarter two as EPC. Our target for the year was INR1,000 crores and we are well poised to touch that target for this year. The fingers crossed, we should be achieving that.
Himanshu Upadhyay
And one thing on the current estate projects, okay, in GoodLife, what is the progress because the collection this quarter versus last quarter remains the same, and again the sales are constant, so what progress are we seeing in that project?
Santosh Sundararajan
You are right. The reason that we, in general, have constant of sluggish sales is primarily because we have not put up much new inventory for us to focus on sales. We have a few units left in Coimbatore, the first building phase one, and then we have a few units in Talegaon and few commercial units in the tower of Ascend project. These are the three projects where we have inventory, which we are focusing.
But the amount of unsold inventory is not so big for us to continuously be scaling up sales quarter-on-quarter yet. Only after launching two or three new projects, will we be having unsold inventory to focus on sales velocities.
Himanshu Upadhyay
And by when do we expect the completion of GoodLife project and Tulip?
Santosh Sundararajan
So GoodLife, we have been completing in phases. We completed one phase last year. We will be completing one more phase this year.
Tulip’s, again two phases, one phase will be completed before March this year, and one phase before March of next year.
Himanshu Upadhyay
Phase one and two what you are saying is Tulip, in the Tulip phase three also there are two parts?
Santosh Sundararajan
Yeah, there are two towers. I mean, there are — the phase 3 is the biggest of the three phases in Tulips. So, phase 3 has two big towers, tower 6 and tower 7. So, tower six, we will be finishing in this financial year, and tower 7 in next financial year.
Himanshu Upadhyay
Okay. Thanks from my side.
Operator
Thank you. [Operator Instructions] The next question comes along the line of Aadesh Gosalia from Spark Capital. Please go ahead.
Aadesh Gosalia
Hello. Am I audible?
Santosh Sundararajan
Yes.
Aadesh Gosalia
Yeah. So thank you for the opportunity. So, I had a couple of questions. The first one is with regards to the — this gross margins. We have seen a reduction in gross margin, so even I think quarter-on-quarter and even on a year-on-year basis. So, any views on that?
Somnath Biswas
I don’t think there is a, if you talk about — if you go on the segment analysis, the EPC gross margin remain unaltered. Maybe 0.25 basis plus and minus it keeps on happening, what kind of project contributing more revenue in the particular quarter. But EPC margin if you look at it, range anything between 14.5% to 15% gross margin it is happening throughout the year.
Real estate, yes, it is happening as because this is the effect of Ind AS 115, depending upon what kind of completion you are recognizing. So, if you look at the standard on profit and loss, yes, obviously they are due to the impact of real estate in certain quarter. If you look at this quarter, real estate contribution 00 in topline, real estate contribution is zero — almost zero.
But whereas there is some bottom-line expenses contribution coming from real estate. So that will impact in the bottom line in overall basis. But if you look at segment-wise, EPC remains stable and steady throughout the couple of at least last eight, 10 quarters or more. It is quite consistent at the range of 14.5% to 15%. Real estate, it keeps on moving depending upon what kind of revenue you are recognizing in that particular quarter.
Aadesh Gosalia
Okay. And, sir, any view on the order book like since we have elections that have already been going first half of the year and now there are certain state elections that have happened, and one like Maharashtra elections that are coming up. So, any view on the order book and about like how you are seeing this overall picture with regards in the second half, and also how has the month of October went by for us?
Somnath Biswas
Just — prior to this, I think Mr. Himanshu also raised the same question which Mr. Santosh answered. This year we have targeted for the order book of INR1,500 crore, so as to maintain that run rate and all these things. Out of that, almost close to INR350 crore we have already bagged in the H1.
Yes, you are right, that impending election or central and state impacted to some extent, but we are well confident that in H2 we will be able to bag another INR1,000 crore so that bidding process and everything is on and we are also with some margin realignment of working capital limit, we are expecting from the lead banker by November, so we will be able to leverage more BG level. So, we are well poised to back almost INR1000 crore plus order.
So, our target, we are quite confident to achieve the target.
Aadesh Gosalia
Okay. And how about this Q3 has been right now, like if you can share some light, the previous month, how has it gone by and any short term like view about this quarter.
Somnath Biswas
No, Q3 is going as per plan, couple of projects Moshi and Police Housing in Pune and now Capgemini, all three have taken off. And so, the billing trajectory on these projects now is climbing. So, month-on-month, value of the bill is increasing on these projects, is same as the case with Suphal Bihar. So, Q3 definitely will be, in terms of top line much better than Q2.
Aadesh Gosalia
Okay, okay, sir, got it. Thank you so much. That’s it from my side.
Operator
Thank you. The next question is from the line of Rajendra Kulkarni, an Individual Investor. Please go ahead.
Rajendra Kulkarni
Hello. Am I audible?
Operator
Yes, sir. You are.
Santosh Sundararajan
Yes.
Rajendra Kulkarni
First of all, sir, I appreciate your results for your previous commitments and promises like disinvestment of GMP, et cetera. I just wanted to know company’s view on the so called the third Mumbai which is coming up, that is developed towards Panvel region and other extended Mumbai area? How do you see the real estate market coming up in that area and do you foresee any solid, durable business coming out from that area?
So you can already — you are already in the Mumbai business, though I feel redevelopment projects have their own limitations. To grow in a meaningful way, you need to start new green field projects in Mumbai. So, please throw some light on the extended Mumbai region and some company’s thought on it.
Santosh Sundararajan
So, we have maintained over the last few quarters that, we do not want to digress on our short-term strategies to do with real estate, which has been one growth in Pune through strategic joint ventures in developed locations, not on the outskirts where we are still doing 50-acre or 100-acre projects, but closer to where development from the government has already reached. So, whether it is two acres, five acres, we are looking for parcels which are ready to sell in Pune. Similarly, in Coimbatore where we have a brand.
And in Mumbai, this has been our new entry into Mumbai. As far as real estate is concerned, we haven’t done much in Mumbai in our past and considering our company size and our — size of our balance sheet, our ability to raise finance, we do not want to be aggressively jumping into a bigger game in Mumbai. There are enough players in Mumbai with bigger pockets who have done much bigger projects.
We are therefore happy at this point of time, taking niche projects in prime locations like Santacruz, where we can showcase our quality of construction, quality of design, which we feel is superior to a lot of the competition that is offering in Mumbai. And once we are in a position to execute these three that we have in hand, two in Santacruz, one in Powai, then, we will see how we want to take our next steps in Mumbai.
So, at this point of time, we do not have any aggressive plans to look for big greenfield projects in extended Mumbai. But having said that, we have our own land in Thane and so that we are working on, and that is also prime location as far as extended Mumbai is concerned. So, by the time that land — we had mentioned last call also we are working on acquiring — ring-fencing about 20 acres-25 acres road touch in that location. And once we reach that stage, we will deliberate at the Board level what we want to exactly do with the 25 acres whether we want to sell some or develop some.
Rajendra Kulkarni
Okay. And one more question, in the same real estate division, are you planning to launch any new projects in Pune right now?
Santosh Sundararajan
In Pune, we have one project in Kharadi which is yet to be launched. We hope to launch it in the next financial year. And we are in the process of tying up at least a couple more joint venture projects in niche locations, as I said. So, with tie-ups happen, then within six, eight months again, next financial year, we may be able to launch one or two more. One is confirmed.
Somnath Biswas
Two is confirmed. Eventually one is Baner-Pashan Link Road.
Santosh Sundararajan
Correct, correct.
Somnath Biswas
That is coming up with almost 1 million square feet, and another one is the Kharadi which is 0.5 million square feet. So, next financial year ’25, ’26, you will see two launches of 1.5 million square feet in Pune.
Rajendra Kulkarni
The Kharadi project is besides the tower of Ascend project?
Santosh Sundararajan
Not besides the tower of Ascend. It is [Speech Overlap]
Rajendra Kulkarni
No, no, I mean despite other, that is separate project.
Santosh Sundararajan
Yes. Yes. Yes.
Rajendra Kulkarni
Okay. Okay. Thank you, sir. Thank you.
Operator
Thank you. And the next question comes from the line of Ayush Kataria an Individual Investor. Please go ahead.
Ayush Kataria
Hello. Thank you for the opportunity, sir. So I wanted to understand, as we have told our GMP business, roughly it was 30% of our business previously. So, how much will it be replaced by real estate business going ahead? As you have said, you will be focusing on real estate business as well.
Santosh Sundararajan
So, if you see our last year’s consolidated revenue was in the range of INR1,000 crores, INR1,050 crores.
Ayush Kataria
Okay.
Santosh Sundararajan
And this year we are targeting to cross last year’s revenue in spite of not having GMP in hand. So, GMP had contributed about less than INR300 crores, almost INR300 crores last year, INR270 crores odd, I guess, towards that top line. So, this year, that INR270 crores would disappear from our consolidation, but still we have a plan to not dip our top line, achieve the same amount of top line although if not a little bit more.
Primarily, that is driven by additional INR200 odd crores that will come from the EPC segment this year. So, what we are losing in GMP this year will be augmented by what EPC has scaled up, not yet real estate, but real estate project, the top line will start appearing in our books a couple of years from now. And so, by the time we reach INR1,500 crores, there will be good contribution from real estate as well.
Ayush Kataria
Okay. Okay. Also, I wanted to understand as we have EBITDA margin. So, from 14% like last quarter it was 9%, now 8%. So, as you are saying we will be buckling upon EPC projects and real estate. So where we can see those margins going ahead. Because in EPC generally, we have 14%, 15%, in real estate we have 25% at EBITDA level. So, how will be the blended margin?
Santosh Sundararajan
So — again, so what happens unfortunately when quarter-on-quarter when we compare, just because of the real estate recognition not happening in a linear fashion, the consolidate — or the standalone EBITDA margins keep going up and down a little bit. So, that’s why we provide the segmental accounts or segmental analysis of our two divisions.
EPC has been quite stable. With the growth in scale of EPC, we hope to achieve EBITDA of — in the range of 11% and 12%. Hope to get a PBT closer to, our target is to reach, step-by-step reach close to 10% in terms of PBT. We are currently closer to 8%. We would like to — with scale hopefully this year we can touch 8.5%, maybe 9%. And next year we can inch towards 10% at PBT levels for EPC. That is an internal target which we definitely focused on maintaining extreme discipline and monitoring our project and controlling our margins.
On the real estate side, the EBITDA as well as the PBTs could be exactly double, again as a blended what is the contribution of top line from each division that is what would give you your blended result.
Ayush Kataria
Right. Right.
Santosh Sundararajan
So, next — even this year when we are saying we will do INR1,100 crores, INR1,000-odd crores would come — we are targeting about INR1,000 crores coming from EPC only, and only about INR100 crores coming from real estate. So, again, the blended margins would not go up much from EPC levels of 8%. It might come towards 9%.
But next year, as the execution of these new projects that we are launching, the revenue will only start coming in two years, 2.5 years’ time into our books. But as I said, when we touch INR1,500 crores, top line in two years from now, hopefully, INR250 crores, INR300 crores, comes from real estate. And so the percentage contribution of top line from real estate will continue to increase step-by-step from here. And so the blended margins also would go up.
But I can just say that, in general, you can take the numbers, segment-wise whatever numbers we are saying is what we are targeting to achieve.
Ayush Kataria
Okay. Understood, understood. And also sir, currently we have INR3,200 crores, INR3,300 crores of order book and execution timeline would be around two years, because generally contracts are for two years so — and you are saying INR1,000 crores will be achieved this year, so like INR2,000 crores remains for the next year. So, I am not able to understand that.
Santosh Sundararajan
So, we are at INR3,300 crores currently, let’s say and only INR600 crores more will be achieved this year. INR400 crores is already gone.
Ayush Kataria
Right.
Santosh Sundararajan
So, INR3,300 crores minus INR600 crores we will come down to INR2,700 crores, if we do not book any more orders. Right?
Ayush Kataria
Okay.
Santosh Sundararajan
Now, next year we want to do, say we want to achieve INR1,200 crores and not INR1,000 crores, which means we should start the year with INR3,600 crores in hand.
Ayush Kataria
Right. Right. Right.
Santosh Sundararajan
So, that is why I keep saying that we definitely have a target of about INR1,000 crores more of order booking by April, to keep this growth to realize.
Ayush Kataria
So, roughly 25%, 30% growth in order book each year we can expect, right?
Santosh Sundararajan
Yes.
Ayush Kataria
Okay. Okay. And also sir, on our bank guarantee and performance guarantee fund so how much is required, like for funds INR3,200 crores order book. So like bank guarantee and performance guarantee should be given. So, for that [Speech Overlap] will still be required?
Santosh Sundararajan
No. No. So, the order book that we already have in hand, the guarantees are already upfront it. So, we do not require any more funds for providing guarantees for this order book. Where we would need, as I said we have another additional INR1,000 crores target for the year of order booking. And to achieve INR1,000 crores order booking, you need 5% EBG, and conservatively speaking another at least 5%, 7% of advance that we would like to draw down to start those projects. So, about 10% so INR100 crores of BG limit would have to be fronted over the next six months to achieve our order booking targets.
Ayush Kataria
Okay, understood. And one more question sir, as currently we are more, like more businesses coming from government projects, roughly 82%. So any plans for reducing that?
Santosh Sundararajan
See, at a very strategic level, we would like to be at least 60-40 or 65-35 government to private. Now, one good thing is that as a composition of our total order book of INR3,300 crore, INR3,400 crore order is our internal order which can be classified as private. So, if you consider that, then the government order composition, the overall kitty is only about 70%.
Still at a theoretical level, we would like to have this towards 60%, at least 60-40 and not be skewed towards one direction. But having said that, we — at this point of time, over the next six months whatever best orders come, we will take, if it’s government orders that is what we are getting we will go for it. We will not be rejecting a good government order just to maintain a ratio that we want to maintain.
Ayush Kataria
Okay. Okay. And so, as we mentioned internal and external, so, have you thought of any blended ratio for that as well, like 10%, 20% on internal order book, 80% from external order book? Any target?
Santosh Sundararajan
So, ideally see, as I said, we would want — let’s say we want a 60-40 government to private. Now, in the 40 private, maximum that comes from my internal order I am happy. It is better to be working for Vascon Real Estate as our client than any other private builder because obviously, Vascon Real Estate is the best private client the EPC division can have. Our risks of money coming in, BG risks and all the other risks are much better controlled if we are working for our own self.
So, ideal ratio would be 40% coming from our own real estate and 60% coming from EPC outside. But that would take three, four more years to achieve but we are working towards that.
Ayush Kataria
Okay. Okay. And one last question sir, sorry for asking so many questions. So, we have already entered Pune, Mumbai and Coimbatore in real estate business. So, any plans for any additional city?
Santosh Sundararajan
No. In the short term — short to medium term, no.
Ayush Kataria
Okay. Okay. That’s all from my side. Thank you for answering all the questions.
Santosh Sundararajan
Sure.
Operator
Thank you. The next question is from the line of Balasubramanian from Arihant Capital. Please go ahead.
Balasubramanian
Good afternoon, sir. Thank you so much for taking my questions. Sir, my first question regarding we have received INR157 crores for divestments. So, like what are the plan for the fund allocations — for deploying those funds?
My second question is regarding margin improvement from 8% to 10% on the EPC business. What kind of initiatives we are taking to achieve those kind of margins?
Santosh Sundararajan
So, from the GMP sale, we have received the net cash flow in the range of INR110 crores post tax and post certain expenses, cost of sales, all of that being funded. Vascon [Technical Issues]
In a very general broad level, [Technical Issues] some real estate projects, those QIP hasn’t gone through. So, we have some temporary borrowing which we will try and pay off towards the real estate and use the little bit of the funding [Technical Issues] and balance 29%-25% towards EPC. We will try and create some collateral for EPC, which we can then pledge with the banks because we are expecting augmentation in BG limits with our rating improvement and, the continuous process with the bank.
But once the BG limit augmentation happens, we would need collateral to avail the limits. So, that is the focus as far as the fund usage is concerned.
And sorry, what was the second question?
Balasubramanian
[Technical Issues]
Santosh Sundararajan
Yeah, 8% to 10%, yes, it’s a challenge. The answer is in two fronts. One is that, if we can hopefully keep a healthy mix of order booking that we have queued towards design and build projects because that is where we are able to add efficiencies on the drawing board by doing efficient design, by being optimal in our consumption and increase our margins 1 basis points or 2 basis points, that is one strategy. Higher the design build projects we have in hand, higher our chance that we can pull this margin up from 8% to 10%.
And the second aspect is that scale is improving. We were doing INR700 crores last year. We are doing INR1,000 crores this year. We are doing INR1,200 crores next year. So, our overhead will get spread out on higher denominator, So that will also help us improve our margin from 8% to 10%.
Somnath Biswas
There is another aspect also that is why we are confident on [Technical Issues] If you look at pre-COVID or during the COVID kind of, whatever the order book was having some kind of little bit competitive margin as compared to what you are getting today. So, most of those orders has been almost [Technical Issues]. So now whatever we are executing, having a quite a good range of healthy margin. So we are confident to [Technical Issues] it will remain constant, so the absorption will be much greater. So that’s the way we will move from 8% to 10%, the way we will keep on increasing the volume.
Balasubramanian
Got it, sir. Sir, you have mentioned about fundraising through QIP. So, what is the plan? How much we are planning to rise and when it is expected to complete?
Somnath Biswas
As of now, we put QIP in the back seat as because, if you look at that market and all these things, we are not very hopeful to go with the QIP as because dilution of the existing stakeholder will be quite substantial with this price. So, we are not interested to go for that. We are looking some other option. But in worst case scenario, the plan B, what we thought of earlier days we will raise capital through debt and all these things.
Santosh Sundararajan
Or through equity. See the original plan was to fund real estate projects by project level equity. When the prices of — share price went up to INR75, INR80, we thought it was probably an opportune moment to do a QIP and raise INR100 crores rather than raise private equity at project level. But now with the market again having fallen and we don’t know when we will get back to those levels, we — if we have to launch couple of projects, we will go ahead with the private equity path or short-term debt path and carry on our growth story rather than diluting equity compulsory.
Balasubramanian
Got it, sir. Thank you.
Operator
Thank you. The next question is from the line of Praveen J from Sincere Syndication. Please go ahead.
Praveen J
Hi, sir, am I audible.
Operator
Yes, sir, you are.
Santosh Sundararajan
Yes.
Praveen J
Yeah. Yeah. Thanks for the opportunity. My question is also for the line of QIP which was being answered — which is asked by the previous participants. So my doubt was even when our share price is in INR73 range, how viable would this QIP be? As our credit rating is now being increased, why are we not going for debt and I am not saying that getting books also high — in a high range. So, why are we not expecting debt as an option, sir?
Santosh Sundararajan
Which option?
Praveen J
Debt, pricing debt as an option instead of going for QIP?
Santosh Sundararajan
No, no, no. So we have been very clear on our strategy for EPC. We do have a certain amount of debt to do with working capital, about INR60 odd crores which gets utilized and we have then advances available to us from clients through BGs. And sometimes we do take short-term, six months, eight months, short-term debt if that is a more viable option than using the advances available from clients because many of these advances are anyway interest bearing plus you have to put up your BG margins. So, it’s a call project to project, how we fund, but yes, mostly these are short-term debt funded only.
On the real estate, there are two aspects to funding. One is the construction finance, which we are very happy to avail at low interest rates, which is when the project has been launched, the approvals are in place again, it’s a short-term funding which may be extinguished by the project receivables within a period of a year or so.
However, we are vary towards using NBFC, high cost debt at an early stage of real estate where we are — at a stage of joint venture where we need to upfront the money to maybe pay the deposit to the partner or to get approvals in place. Because there is always a huge delta in terms of timelines to approval in our country, and the interest meter keeps running and these are high-cost debts. So, that is the only debt.
We are very about — sometimes in real estate, we would rather part with higher IRR towards an equity partner at a project level who will probably take some stock from the project at a discounted rate upfront, rather than go for debt at a very early stage.
Somnath Biswas
But keeping in view of that also, what you are talking, we are also exploring some kind of opportunity where the site is a, if it is a structured debt where the content is very low kind of rate of interest, and it is back-ended to some extent. So, then probably, since all these three projects, what we are looking for Bombay is QIP aim for this key project, since it is at the per day advance level of launching, so we are also not ruling out that debt option.
But if we get that kind of structured debt, that content is very low margin, low rate of interest and it is little bit back-ended, we are open to do so and we are exporting that also.
Praveen J
Right sir. Sir, one more question is similar line, like we initially planned for QIP of around INR100 crores to INR150 crores and with the situation as we explained we are not going ahead. So, whether our growth is getting hampered on this aspect, like the purpose in which we have initially planned for the QIP, whether we are going for the same targets or we are revising the targets based on the QIP, sir?
Somnath Biswas
No, no, there is no change of target. Nothing is there. The growth will not be hampered. So, we had the Plan B on the place, because if you look at our current gross debt also increase as because of the delay we took some kind of debt from Arka Capital and infuse that in the project. So that approval process should not get delayed or stopped.
So that, our timeline and schedule whatever the launch is, it is very much on the card. So there is no delay and subsequent to that, the part of the GMP sale proceed which we received to some extent, it will be utilized to mitigate that requirement also. So our growth process will not be delayed.
Praveen J
Thank you, sir. This answers my questions.
Operator
Thank you. The next question is from the line of Madhur Rathi from Counter Cyclical Investments. Please go ahead.
Madhur Rathi
Thank you for the opportunity. Sir, when I look at our FY24 annual report, out of us, we have given — we have around INR266 crores of receivables. Iut of that sir, INR84 crores are pending for more than two years. So how much of that would be retention money.
And sir, I guess the INR103 crore receivables from the GMP would have gone [Indecipherable] right now.
Somnath Biswas
[Speech Overlap] Close to INR65 crores to INR70 crores is retention.
Madhur Rathi
Okay. And sir, there is another line item of INR97.7 crores that is retention money that is pertaining to EPC. So, I am not trying to understand why this you are saying NR65 crores to INR70 is the retention. But also, there is a line item where it says INR97.67 crores is the retention money pertaining to EPC.
Somnath Biswas
I do believe, what I — my — follows that if you are talking about aging wise, which is [Technical Issues] but there [Technical Issues] which has been in every invoice [Technical Issues] 5% retention has been involved. So, almost INR20 crores to INR25 crores is less than one year retention.
Madhur Rathi
Sir, like as on date, how much would be the retention money, and what would be the long-term and short-term bifurcation over that?
Operator
Mr. Madhur, does that answers all your questions?
Madhur Rathi
No, I just was asking that. Sir, how much of retention money have we given as of date and what would be the bifurcation of the short-term and the current as well as the non-current portion of it?
Santosh Sundararajan
If I look at the number, total receivable is INR91 crores but out of that INR76 crores is the retention.
Madhur Rathi
Okay.
Santosh Sundararajan
Note 10, I can look at.
Madhur Rathi
Okay. Okay. Sir, and second question was. sir, we have drawn INR62 crore loans and receivables to related parties where KMP have key influence. Sir, so, what is this regarding, and what kind of interest do we earn on this?
Somnath Biswas
So, that includes some project advance, that Powai project whatever you include So, that includes that — our inclusion in the Powai project. [Technical Issues] So that is rising as a project [Technical Issues]
Madhur Rathi
Okay. Sir, there is a — like — I think last few quarters you have mentioned that you would do a QIP. So, are there any plans to go forward with that QIP going forward or are we planning to keep it on hold currently?
Santosh Sundararajan
Already, we answered. We have kept it on hold. In the current market situation — market condition, all those things, there is no point of making a dilution of the existing stakeholder status. So we are not — as of now it is on hold.
Madhur Rathi
Okay. Sir, my apologies. I joined late. Sir, just a final question, sir, I think, we have — I think you are guided for INR1,000 crore EPC revenue in FY25 as well as INR125 crore revenue from Real Estate, but sir, in our credit report it has been mentioned that INR850 crore under revenue own on the EPC segment for FY25. Sir, so why is this — like why the INR150 crore difference between what we have said and what we have said to the credit rating agencies?
Somnath Biswas
So, we are always little bit conservative in terms of our CMA and rating agencies are concerned. So, there is no point of underperforming in any chance with the rating agency rather than overperforming what you are doing. So, that is the policy even in all the CMA for the banks and all these things, we are little bit conservative while projecting that number with the banks and rating agency.
Madhur Rathi
Okay. Sir, so can we expect to be closer to the INR1000 crore that we have guided for on the investor presentation and like concall?
Somnath Biswas
Yeah, we have bid well for that, if you look at H1, we already did INR400 crores. So we are quite confident to at least close to INR600 crores in H2.
Madhur Rathi
Okay. Sir, I wanted to understand, like we have guided I think around 15% to 18% kind of PBT margin on the real estate segment and sir, we also do our EPCs. So, is this including the EPC margins, or is this pure play the marketing and — as a developer kind of margins and the EPC margins are different, so that’s why it looks lower than other players, like Sunteck who have similar EPC as well as the marketing in-house.
Santosh Sundararajan
I think –I know it’s very difficult to — as I said, see, we are in two divisions. We are in EPC and real estate, and reiterate that in EPC, we are currently at around 8% PBT level. We want to move towards 10% from year on. And that’s a conscious attempt or strategy that we have with scale, as well as with certain other ways of improving efficiencies.
On the real estate, our gross — our PBT would come about double of our EPC PBT between the range of 17 — 16% to 17%. How much is our blended standalone margin quarter-on-quarter or year-on-year would entirely depend on the proportion of real estate and proportion of EPC. At this point of time, it’s 90% contribution is coming from EPC, and so our margins would remain skewed towards EPC margin.
Only when our proportion of revenue contribution coming from real estate increases, we will have blended margins go up. It’s very difficult to compare with peers who are in both these businesses because it all depends whether it’s a joint venture, whether it is land owned by them in the books traditionally, and what proportion of real estate, what proportion of EPC.
So, I think the best way would be to separate the two segments and compare EPC to EPC peers. And real estate, at this point of time is contributing very little, but as it grows, then we will start comparing it to real estate peers.
Madhur Rathi
Sir, my question was more regarding, does the EPC margin that we have guided, is it excluding — so I think, on the EPC segment we bifurcate what is the captive EPC project and what is the outside EPC project. So, including the captive EPC project as well as the marketing that you did for the real estate segment, our margins would be combined of these two. So, at times 15% to 16% so it would be around 25% PBT level. Is that understanding correct?
Santosh Sundararajan
No, in our segmental reporting, if you split the two, then we do not then consider our in-house EPC revenue.
Madhur Rathi
Sir, so overall [Speech Overlap]
Somnath Biswas
In EPC, that is the funding cost, cost on one part, but in financial that has been eliminated.
Santosh Sundararajan
So, your marketing cost and all go ahead cost of real estate, nothing to do with EPC.
Madhur Rathi
No sir, I am not talking about cost, but I understand that the 15% to 18% margin is the margin for that and we don’t take any kind of margin from the EPC that we do for the in-house real estate. Is that understanding, correct?
Somnath Biswas
Yes. Yes.
Santosh Sundararajan
Correct.
Madhur Rathi
Okay. Sir, just a final few questions. Sir, why — sir, what is the contingent of performance guarantee that we have given to banks on behalf of our group that is around INR228 crores versus INR160 crores on a Y-o-Y basis?
Santosh Sundararajan
I couldn’t get it. Can you just repeat the question?
Madhur Rathi
Sir, we have given around INR228 crore of performance guarantee for our group companies to bank. So what is in regarding under contingent liabilities?
Santosh Sundararajan
There is only one — as of now, there is only one guarantee which was towards GMP. That will also be now released. It’s released with the sale of GMP. So we do not have any guarantees henceforth that will be towards any of our group companies.
Madhur Rathi
Okay. Sir so, like, when I look at our balance sheet around, I guess, out of sir, how much of these INR228 crores would go away?
Operator
Does that answer your question?
Santosh Sundararajan
I will get back to you. See, there will — we have a bank guarantee of more than INR200 crores in the market to third-party clients. As far as GMP was concerned, how much of the value of our guarantee,
Somnath Biswas
INR100 crore.
Santosh Sundararajan
INR100 crore was the value of our guarantee towards GMP which is now gone. But even then, we will be having more than INR200 crores of bank guarantee in the market to do with our EPC clients. The exact number, we have to verify and get back to you.
Madhur Rathi
Okay sir, got it. Sir, just a final question from myself. Sir, why is our cost of borrowing so high at around, I guess, 12.5% to 15% rate of interest, and what — when can we expect this to reduce going forward?
Santosh Sundararajan
See, there are two aspects to our cost of borrowing. One is our CC limit, which is I think, around 9% from SBI or the consortium of bankers. But the other borrowing for us, we only borrow most of our borrowing is partially collateral free, short-term borrowing to fund the launch of a real estate project or to fund interim funding of an EPC project for a few months.
So, consciously, I mean, these borrowings, even if they come at 12%, they are generally collateral free. And — so that sort of benefits us, and that’s why I think the overall skew is going towards 11% to 12%.
Madhur Rathi
So, can we expect some kind of improvement in our cost of borrowing moving forward, or with the GMP coming in, as well as the I think Thane land monetization post elections we can expect?
Santosh Sundararajan
The cost of borrowing, I think, although we would like to attempt to bring it down. But at this point of time, as I said, for the kind of loans that we look for which are short-term loans in both real estate and EPC, collateral free, they would come in that range of 12% only. So, at this point of time, we do not have any real plans to drastically bring down the cost of borrowing going forward.
Madhur Rathi
Okay, sir. Sir, thank you so much and all the best.
Operator
Hello, does that answers your question?
Madhur Rathi
Yes. Thank you so much.
Operator
Thank you. As there are no further questions from the participants, I will now hand the conference over to Dr. Santosh Sundararajan for closing comments. Over to you, sir.
Santosh Sundararajan
I would thank all of you for actively participating in our call and tracking us. And wish you all a Happy New Year, and I will see you again next quarter. Thank you.
Operator
[Operator Closing Remarks]