X

Capacit’e Infraprojects Limited (CAPACITE) Q1 FY23 Earnings Concall Transcript

Capacit’e Infraprojects Limited (NSE:CAPACITE) Q1 FY23 Earnings Concall dated Aug. 10, 2022

Corporate Participants:

Rohit KatyalExecutive Director and Chief Financial Officer

Analysts:

Mohit KumarDAM Capital — Analyst

Rishikesh OzaRoboCapital — Analyst

Deepak PoddarSapphire Capital — Analyst

Nukul Varma — Analyst

Dhananjay MishraSunidhi Securities — Analyst

Arun — Analyst

Jiten RushiAxis Capital Limited — Analyst

Parvez QaziEdelweiss Securities — Analyst

Ankit BabelSubhkam Ventures — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Capacit’e Infraprojects Limited Q1 FY ’23 Results Conference Call. As a reminder, all participant lines will be in listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. I’ll now hand the conference over to Mr. Rohit Katyal, Director and CFO of Capacit’e Infraprojects. Thank you and over to you, sir.

Rohit KatyalExecutive Director and Chief Financial Officer

Good afternoon everyone. On behalf of Capacit’e, I welcome everyone to the Q1 F ’23 earnings conference call of the company. Joining me on this call is Mr. Alok Mehrotra; Mr. Nishith Pujary, and our IR team. I hope everyone has had an opportunity to look at our results. The presentation and press release have been uploaded on the stock exchanges and our company’s website.

Before I begin the review, a brief disclaimer. The presentation, which we have uploaded on the stock exchange and our website, including the discussions during this call may contain certain forward-looking statements concerning the company, its prospects and profitability, which are subject to several risks and uncertainties and the actual results could differ from those in such forward-looking statements.

We are very excited to start the financial year on a positive note with robust overall performance. Our strong execution capabilities coupled with repository of asset base enabling efficient execution were reflected in healthy revenue growth and profitability. We are witnessing strong execution momentum across our projects and are focused to create value for all our stakeholders. With a healthy order book and sustained order inflow and our expertise in executing and delivering projects on time, we are optimistic that we will witness a healthy and sustainable growth here on.

Other key updates, the company was awarded a project from MCGM for a multi-specialty hospital project in Bhandup Mumbai valuing INR670 crores in Q1 FY ’23. Similarly, a residential project in Navi Mumbai from a prestigious private sector client for INR227.45 crores was awarded. Allotment of INR31 lakh fully convertible warrants to promoter and promoter group at a price of INR1.60 per warrant. Promoters have already brought in 25% of the upfront amount in the company.

Let me now turn to the performance highlights of Q1 FY ’23. Revenue from operations for the period grew by 70% to INR477 crores as compared to INR280 crores in Q1 FY ’22. EBITDA for Q1 FY ’23 stood at INR101 crores as compared to INR42 crores for corresponding period last year. EBITDA margin for Q1 FY ’23 stood at 21% as compared to 14.9% in Q1 FY ’22. PBT for Q1 FY ’23 grew to INR38 crores as compared to INR6 crores in corresponding period previous year.

PBT margin for Q1 FY ’23 stood at 8% as compared to 2.1% in Q1 FY ’22. PAT for Q1 FY ’23 grew by 538% [Phoentic] to INR29 crores as against INR4 crores in Q1 FY ’22. PAT margin for Q1 FY ’23 stood at 6% as compared to 1.6% in Q1 FY ’22. Cash PAT for Q1 FY ’23 grew by 197% [Phoentic] to INR76 crores as compared to INR26 crores in Q1 FY ’22. Cash margin for Q1 FY ’23 stood at 15.9% as compared to 9.1% in Q1 FY ’22.

The company continues to focus on working capital management and quality of order book. The working capital cycle, excluding retention has improved marginally from 91 days to March ’22 to 89 days in June ’22. Order book on a stand-alone basis stood at INR8,229 crores as of June 30th, 2022. Public sector accounts for 68% while the balance comes from private sector. Residential accounts for 28% of the order book, followed by commercial and institutional at 21% and mixed-use construction at 52%. We remain optimistic on India’s recovery amidst the continuing geopolitical uncertainty.

Before taking the question-and-answer session, I would like to reiterate the vision of the company. The company stands committed to improving the net working capital cycle and bring it down to 60 days, excluding retention by Q1 FY ’24. The company endeavors to reduce leverage levels in medium-term by release of retention money. Objective is to continue to improve shareholders value by investing in people, technology, and processes. I now leave the floor open for questions, please.

Questions and Answers:

Operator

[Operator Instructions] Our first question is from Mohit Kumar of 10 Capital. Please go ahead.

Mohit KumarDAM Capital — Analyst

Yeah, good afternoon, sir. And congratulations on a very, very good set of numbers. Sir my first question on the margin, margin is pretty high. Is there any one-off in this margin, is this something which got booked this quarter compare — related to some project which got completed in this particular quarter, that’s why the margin is higher, is that a fair understanding?

Rohit KatyalExecutive Director and Chief Financial Officer

Yes, that’s a fair understanding. There is an impact positively of INR8 crores on certain accounting changes, which, therefore, has resulted in a onetime benefit of INR8 crores. Our guidance for the full year continues to be 18% to 18.5% as was guided earlier during the last conference call.

Mohit KumarDAM Capital — Analyst

There’s nothing else, right, apart from accounting change?

Rohit KatyalExecutive Director and Chief Financial Officer

Nothing. There is no change. So that has been corrected. And that positive impact on the sales has been INR8-odd crores. Net of tax, that’s about INR6.5 crores.

Mohit KumarDAM Capital — Analyst

Second one is the MHADA project. I think we are expecting the book of INR5 billion, if I’m not wrong in this particular fiscal year. Of course, that would be get consolidated in the JV accounting, but I think the order book is almost in the like Q4. When do you expect the booking to happen in this fiscal?

Rohit KatyalExecutive Director and Chief Financial Officer

The overall revenue will be booked at the LLP level and being 35% shareholders and as per accounting standard 116, yes, we will not be in a position to book revenue on that. However, the LLP has contracted proportion of capacities lower to the company. And it shall be booking the proposal revenue executed through such subcontract for the LLP in its books of accounts. So it will be booking its share of 35% in its books, which could be close to INR135 crores-odd in the current financial year.

Mohit KumarDAM Capital — Analyst

INR135 crores. Is that our share?

Rohit KatyalExecutive Director and Chief Financial Officer

Yes. That’s our share.

Mohit KumarDAM Capital — Analyst

Yes, understood, sir. And lastly, on the other earning opportunity. Of course, we are getting more private orders now. How do you see this evolving over the next two, three quarters? Are we expecting more residential orders in this fiscal and the balance sheet in public on private to change materially over the next few years?

Rohit KatyalExecutive Director and Chief Financial Officer

I believe that the auto mix at the moment is approximately 70% in favor of public sector and 30% in private sector. That primarily should continue over the next two years. However, order booking is dynamic. A bigger inflow of order from a private sector could change that by 5% here and there, but on a sustainable and more logical basis, I believe that 17% towards public sector and 30% towards our recreated client in private sector is a good assessment to make.

Mohit KumarDAM Capital — Analyst

Are there a large order opportunity from the government side in Mumbai especially?

Rohit KatyalExecutive Director and Chief Financial Officer

That continues in all the geographies where we have operated earlier. However, we have in the current last quarter just concluded booked substantially a sizable order from MCGM and in the health care segment. And such opportunities continue to be present. More elaborate details were provided in the last conference call. So company is very optimistic of booking the orders, and that has been reflected over the last six, seven years of operations of the company. So yes, we are very confident of booking and surpassing the current year targets of order book as well.

Mohit KumarDAM Capital — Analyst

Understood. Thank you and all the best. Thank you.

Operator

The next question is from Rishikesh Oza of RoboCapital. Please go ahead.

Rishikesh OzaRoboCapital — Analyst

Hi, sir. Good afternoon. Sir, my first question is that quarter-on-quarter, our depreciation has gone up from INR20 crores to INR42 crores. So can you please provide some reason on that? And will it remain on this similar level?

Rohit KatyalExecutive Director and Chief Financial Officer

You have rightly pointed out. However, the reason for that increase is that, as informed in last quarter, that Oberoi projects were changed from with material to without material. So when the value of the raw material that is steel and concrete was removed, that resulted in accelerated provisioning of site establishment, which comes under the depreciation header. This is a one-time exercise and therefore, from next quarter, it will be the normal INR18 crores to INR20 crores what you see towards the site establishment and INR30 crores on an overall basis. So the excess depreciation, which has been booked this year is because of the change in the order from with material to without material in case of one big client.

Rishikesh OzaRoboCapital — Analyst

Okay. Sir, my second question is, if you could provide revenue guidance for FY ’23?

Rohit KatyalExecutive Director and Chief Financial Officer

That’s too early to say. Let’s complete quarter two and in the next conference call, I’ll definitely give you our guidance.

Rishikesh OzaRoboCapital — Analyst

Okay, sir. And sir, also, if you could elaborate on the accounting change?

Rohit KatyalExecutive Director and Chief Financial Officer

As I told you, the accounting change is in line with the industry standards, IND AS 115 on input method. There is hardly any difference in that because now in both the cases it’s taken at cost plus profit. So the impact of that, as I just answered, was in totality INR8 crores, which has been recognized and has been taken into the limited review accounts.

Rishikesh OzaRoboCapital — Analyst

Okay, sir. And my last question is if you could provide an order inflow guidance for this year, sir?

Rohit KatyalExecutive Director and Chief Financial Officer

I have always maintained that the company shall book minimum order of what it executes and this means we should be upward of INR2,000 crores in our order inflow, fresh order inflow, of which nearly INR800 crores have been achieved. So in nine months, we have to go towards INR1,400 crores or thereabouts, which is a very doable task given the track record of the company.

Rishikesh OzaRoboCapital — Analyst

Okay, sir. Thank you very much.

Rohit KatyalExecutive Director and Chief Financial Officer

Welcome.

Operator

[Operator Instructions] The next question is from Deepak Poddar of Sapphire Capital. Please go ahead.

Deepak PoddarSapphire Capital — Analyst

Yeah, thank you very much sir for the opportunity. Sir, I just first off, I wanted to understand on the retention money by when we are expected to get that? And what’s the quantum?

Rohit KatyalExecutive Director and Chief Financial Officer

So the retention money closing balance stands at INR175 crore, out of which we have realized about INR10 crores in the current quarter. We expect to issue bank guarantees in view of cash retention to our clients starting September end and in October. So our target is to connect close to INR120 crores of retention money in the quarter three and quarter four of the current fiscal. This obviously will come into the cash flows of the company other than the normal data recovery, which happened.

Deepak PoddarSapphire Capital — Analyst

Okay and what about this quarter, second quarter, what are the amounts that are expected to collect?

Rohit KatyalExecutive Director and Chief Financial Officer

We are expected to collect INR20 crores, of which INR10 crores has already been collected.

Deepak PoddarSapphire Capital — Analyst

Okay, so ideally by fourth quarter, you do expect some deleveraging to happen, right, as you mentioned in the…

Rohit KatyalExecutive Director and Chief Financial Officer

I just told you that this is a temporary blip in the gross and the net debt of the company. It is directly related to the accumulation of retention money, which is now due and payable against bank guarantee and on submission of bank guarantees, this monies will get released.

Deepak PoddarSapphire Capital — Analyst

Understood. And what’s the status on the rating upgrade that we were looking for?

Rohit KatyalExecutive Director and Chief Financial Officer

The rating exercise has already started. I am hopeful that before the next time we meet for a conference quarterly call, we should have some good news for you.

Deepak PoddarSapphire Capital — Analyst

Oh, that’s great. And lastly, on the margin front, I mean, if you adjust this INR8 crores, I think our adjusted margin stands at about 19%, excluding other income?

Rohit KatyalExecutive Director and Chief Financial Officer

Yes.

Deepak PoddarSapphire Capital — Analyst

Now this the minimum margin level at least we can expect going forward?

Rohit KatyalExecutive Director and Chief Financial Officer

It would be too optimistic that we don’t expect or factor in any unforeseen. So the margin guidance continues at 17.5% to 18%, anything more should be taken as a bonus.

Deepak PoddarSapphire Capital — Analyst

Okay, the reason I ask is because I assume that the commodity prices is also going down.

Rohit KatyalExecutive Director and Chief Financial Officer

Our order book is non-speculative when it went up, when we did not make loss. So when it comes down, we don’t make any profit. It’s a pass-through mechanism, which means that if the price is INR100, the client has to pay the difference and if it will go to INR20, the client takes away all the money. So except for increase in percentage of PAT margin due to such price increase or reduction, nothing else is an absolute loss for the company or profit.

Deepak PoddarSapphire Capital — Analyst

Fair enough, fair enough. Yeah, yeah. I got it. Yep, that’s it from my side. All the very best. Thank you.

Operator

The next question is from Nukul Varma [Phonetic] who is an individual.

Nukul Varma — Analyst

Congratulations on a very good set of numbers. My question is the provision what we have made of INR84 crores, as you mentioned in the last quarter, will there be any realization on that account?

Rohit KatyalExecutive Director and Chief Financial Officer

Yes, we are in discussion on settlement agreement with the Radius Group — not Radius Group, the Neelkamal Realtor, which was earlier a part of Radius Group, but now we believe Godrej coming in is finalized. We expect the documents to be signed over the remainder of the current month and monies to be realized in quarter three. This amount is close to INR15 crores.

Similarly, we are expecting the resolution to another project where the bankers, as per the latest guidelines and GR of the Slub [Phonetic] SRA, Slum Rehabilitation Authority, have taken up a project which was earlier belonging to Radius in Chembur and the new promoter and the banks supporting them are coming in.

So we expect that resolution to happen also in quarter three and some payment towards that being realized in quarter four. So these are the two big resolutions, which we expect. And therefore, you should expect some write-back. On the provisions which have been made, but all our projections are given without considering any write-back.

Nukul Varma — Analyst

So this INR15 crores, as you mentioned about Neelkamal realtors and what would be the quantum for this SRA project cost limbo?

Rohit KatyalExecutive Director and Chief Financial Officer

INR24 crores.

Nukul Varma — Analyst

Okay. All right, thank you so much. All the very best.

Operator

The next question is from the Dhananjay Mishra from Sunidhi Securities. Please go ahead.

Dhananjay MishraSunidhi Securities — Analyst

Yeah, good afternoon Sir, could you provide a breakup in terms of which all projects contributed majorly in this quarter revenue?

Rohit KatyalExecutive Director and Chief Financial Officer

I do not have project-wise detail in front of me. However, we shall advise our IR team to make it to you very promptly.

Dhananjay MishraSunidhi Securities — Analyst

Not a specific number, just majorly which all project would have contributed?

Rohit KatyalExecutive Director and Chief Financial Officer

95% of these revenues have come from the ’21 operational projects of the company. With Raymond, Oberoi, CIDCO and Piramal leading the pack, setting led by BSNL data centers. And obviously, the other projects like JJ and BMC. As I told you that I don’t have the exact figures project-wise. However, that can be provided to you by our IR team very promptly.

Dhananjay MishraSunidhi Securities — Analyst

Looking at current pace of execution, I assume that coming quarters will not have much deviation in terms of revenue, like dealerships INR470 crores. So these numbers here and there, we can have…

Rohit KatyalExecutive Director and Chief Financial Officer

Remember that Q2, these days, June is not a very powerful season for monsoons. Monsoon’s more so from July to September. September last year, October also was impacted. However, considering that and the average loss over the last five years being close to 21 days, we do believe that we will be closer to your target what you have mentioned. However, our overall year’s target of INR1,800 crores is given.

Dhananjay MishraSunidhi Securities — Analyst

Okay. And lastly, what is your non-fund based limit and utilize limit?

Rohit KatyalExecutive Director and Chief Financial Officer

The non paying [Phonetic] fund-based limit is INR940 crores, out of which further allocation is INR190 crores for LC and balance for bank guarantee. The bank guarantee outstanding is currently at INR400 crores. And the LC outstanding is currently at INR175 crores.

Dhananjay MishraSunidhi Securities — Analyst

Okay, thank you. All the best for upcoming quarters.

Operator

Thank you very much. The next question is from Arun [Phonetic] of Meta [Phonetic] Stocks. Please go ahead.

Arun — Analyst

Thank you for the opportunity. Sir, my question is, in the long term, what are the emerging trends that you see will drive the growth for Capacit’e? I understand Capacit’e’s focus from government of India and plus covering oppose to coworking has been driving Capacit’e’s order book. Any other trends that you foresee that will drive Capacit’e’s order book for the future?

Rohit KatyalExecutive Director and Chief Financial Officer

Good question. You see that there is an overall optimism around the real estate industry starting Q3 of ’21. That continues. That is relevant from the financials of our clients. So that announcement of new projects and award of construction contracts will continue. We have a new player in form of Adani taking over many projects that has been added to our clientele. So I believe that it is quite — we are quite optimistic on the opportunities which the private sector will present, whether it is residential in super high rise, commercial, retail, on these three aspects.

Secondly, from the public sector side, it is not only hospitals. The growth plans, as far as Housing For All, continues to be in focus. And all of our existing clients are planning for projects in current year leading into next financial year. And Capacit’e, with the qualification processes, it presents a good opportunity across all segments.

Thirdly, the Railway Land Development Authority is coming up with a renovation — major renovations of its existing railway stations to modernize them. They go to 172 stations. The tenders have already gone live, and we believe that the Capacit’e will have a good opportunity in that as well.

So apart from hospitals or what we call the health care, institutional, hospitality, retail, commercial and residential, railway station redevelopment, airport modernization or modular expansion will present an opportunity to Capacit’e in the years to come. So since Capacit’e is present across the government of all the sub-segments of building construction and has the specialization and the equipment base, we are optimistic about capitalizing on these opportunities.

Arun — Analyst

Awesome. Very nice to reason of cost saving in response to that question. My second question, sir, given the have been Mumbai and Mumbai has a huge redevelopment opportunity. Is Capacit’e looking…

Rohit KatyalExecutive Director and Chief Financial Officer

I can’t hear you clearly.

Arun — Analyst

Sir, am I audible now?

Rohit KatyalExecutive Director and Chief Financial Officer

Yes, better.

Arun — Analyst

Sir, given Mumbai has a huge redevelopment opportunity, will Capacit’e looking at this opportunity in the near future?

Rohit KatyalExecutive Director and Chief Financial Officer

As a construction company, yes. As a developer, no. MHADA is the largest redevelopment project on cash contract basis in Asia. However, you know very well that redevelopment projects start to take some time to kick off. So while we will be present for some decent-sized projects, we may not look at every and all the opportunities that may arise out of this. Secondly, we will be skeptical of doing private sector projects as far as redevelopment is concerned because of the size and obviously the risks attached post the IL&FS debacle, which we have faced and all of you are aware. On the government side, as I just mentioned, some opportunities will come up in MHADA, it will come up in Mumbai Municipal Corporation, Thane Municipal Corporation, [Indecipherable] and so on, and we shall look at them on a case-to-case basis.

Arun — Analyst

Thank you. Thank you so much, sir. Wishing you all the best for the next quarters. Thank you.

Rohit KatyalExecutive Director and Chief Financial Officer

Thank you.

Operator

[Operator Instructions] The next question is from Jiten Rushi. Please go ahead.

Jiten RushiAxis Capital Limited — Analyst

Yeah, good afternoon, sir. And if you go back in my question and consciously looks at the numbers, sir, my first question is on the updates on Selco projects. So just one thing what revenue we have booked in Q1? And what is the run rate you’re expecting from the Selco and has it received any clients in market?

Rohit KatyalExecutive Director and Chief Financial Officer

So the Q1 revenue booked in Selco is INR75 crores on [Indecipherable], all right. And we believe that we shall book close to INR200 crores in the monsoon season. Thereafter, we shall be booking INR50 crores in quarter three of the current fiscal. That means INR50 crores per month. So INR150 crores in quarter three and close to INR180 crores in quarter four. So you can add up the total, and that shall be giving you the revenue for Selco for the current fiscal.

Jiten RushiAxis Capital Limited — Analyst

And on the seventh land parcel, then, can you explain your impact with Devon land parcel?

Rohit KatyalExecutive Director and Chief Financial Officer

Seventh land parcel in writing has been received. However, being monsoons, the excavation activity cannot start at the moment. So we shall be only taking possession once the monsoons are over.

Jiten RushiAxis Capital Limited — Analyst

As then we will have full exit automation [Technical Issues]

Rohit KatyalExecutive Director and Chief Financial Officer

Absolutely, but the current order backlog from CIDCO continues at INR2,380 crore with the interim extension in place and second expansion going on by the client, we already have our hands full for the next three years, even if you consider INR600 crores per year.

Jiten RushiAxis Capital Limited — Analyst

So then next year, what kind of execution we can see from CIDCO probably how once you have the second?

Rohit KatyalExecutive Director and Chief Financial Officer

On conservative basis, INR600 crores to INR700 crores minimum.

Jiten RushiAxis Capital Limited — Analyst

That is yearly run rate you are talking about right sir?

Rohit KatyalExecutive Director and Chief Financial Officer

A yearly run rate — you can see a better figure, but since you are asking for a project-wise specific number, I’m giving me an approximate number.

Jiten RushiAxis Capital Limited — Analyst

So sir, in this project, also we will be using mould only rate. So sir, in CIDCO project we are using mould for formwork for during the construction. So sir, is the capex still pending for the formwork because we are still to receive seventh land parcel. So obviously, the building will start, which is a larger and order backlog of CIDCO project. So what kind of capex you can see?

Rohit KatyalExecutive Director and Chief Financial Officer

Yes, so as explained last time, we already have purchased total 18 set [Technical Issues] at project site, 18 sets translates in fulfilling of 54 slabs or 54 floors per month, which therefore target to INR50 crores of billing, right? Of course, in monsoons, you will have obstruction. This is apart from the six sets are under manufacturing. We have given a projection of INR42 crores for the current year as far as balance it corporate procurement is concerned and it will remain at that level, give or take INR2 crores here and there.

Jiten RushiAxis Capital Limited — Analyst

So for the six form work pictures the cost is INR42 crore?

Rohit KatyalExecutive Director and Chief Financial Officer

No, including what has been received this year, plus whatever has to be received, the cost is INR42 crores. This cost is subject to the aluminum price, which was at peak. Fortunately, it has come down, but the budget approved at the moment for aluminum form work in the current financial year for the remainder is INR42 crores in totality.

Jiten RushiAxis Capital Limited — Analyst

So we have received how many this year so far?

Rohit KatyalExecutive Director and Chief Financial Officer

Saying out of 24 sets, 18 sets are arrived. Six sets are balance to be received.

Jiten RushiAxis Capital Limited — Analyst

So you said that INR42 crores including the [Indecipherable] like you were supposed to book some revenue from the Manav project.

Rohit KatyalExecutive Director and Chief Financial Officer

INR0.77 crores of revenue has been booked. The project is in filing and we have come out of the business, which is now not as the structure around filing the superstructure will be constructed. So [Indecipherable] sets of aluminum formwork are at site. And given the intensity of the monsoons, we should be starting the superstructure construction by this month and early next month. So as I told that our share of close to INR135 crores is what we are looking in the remainder of the year to do.

Jiten RushiAxis Capital Limited — Analyst

And sir, what is the executable portion of share in the order backlog right now, which we are considering [Technical Issues].

Rohit KatyalExecutive Director and Chief Financial Officer

The LLP has given an order of INR1,400 crores to Capacit’e Infraprojects for the rehab portion, which is 35% of the INR5,000 crores of rehab portion.

Jiten RushiAxis Capital Limited — Analyst

In next two, three years, three years, right?

Rohit KatyalExecutive Director and Chief Financial Officer

The completion period is 27 months from handover of individual building. So this includes design charges have all put together, 11 to 12 towers. At the moment, work on two towers at Capacit’e have started. We expect to start other six towers in the current year. So you can safely presume INR1,400 crores divided by 11 towers were the value four towers. So if we have started two towers, we have started work on INR280 crores. As soon as we started our on next two towers, the value will go to INR480 crores. Since it’s monitoring. We do believe that the construction speed will be quite good. And therefore, we are anticipating a revenue of INR135 crores in the current financial year.

Jiten RushiAxis Capital Limited — Analyst

Probably we can see good kind of next year onwards.

Rohit KatyalExecutive Director and Chief Financial Officer

Absolutely.

Jiten RushiAxis Capital Limited — Analyst

Sorry, I’m asking on the depreciation part. So probably from the coming quarters, we will not see such high lease in this is just one of [Technical Issues].

Rohit KatyalExecutive Director and Chief Financial Officer

As explained, you have to take a depreciation of INR30 crores. As the revenue increases, your write-off of temporary sectors and site establishment will also increase. And therefore, it will be close to INR30 crores in absolute terms, but if the revenue goes beyond INR500 crores, it could increase also.

Jiten RushiAxis Capital Limited — Analyst

Sir, any capex other than the CIDCO capex which you are planning for this year or odd INR40 crores to INR42 crores, any other capex we’re looking on?

Rohit KatyalExecutive Director and Chief Financial Officer

At the moment, no order has been taken, which will require additional capex. However, it is directly proportional to inflow of orders. The company is looking to book orders, which do not involve further capex because we would like to increase our asset turn. However, there is any such order could be promptly intimated to you during the next conference call.

Jiten RushiAxis Capital Limited — Analyst

Sir, one last question in terms of bidding strategy. So are we looking to bid for what we have seen recently that diesels are supplied from customer and we would do [Indecipherable]. Are we looking for such type of this. We are looking for…

Rohit KatyalExecutive Director and Chief Financial Officer

We are not ever to such type of bids because we have our margins covered, and we are not investing from working capital as far as steel and concrete is concerned. So there is no harm. So you are definitely sacrificing. So let’s say, if you’re doing a revenue of INR250 crores for Oberoi in a year. So obviously, you are sacrificing 40% of that because of having three issue material, but similarly, the returns on revenue go up so the past margins will be higher.

So if you see our revenue for the current year, in spite of having two major orders, one from Oberoi and second from CID creators, which involve steel and concrete free issue, there has been substantial increase in the revenue. So that will continue for the remainder of the current financial year. And yes, we are not averse to the client getting steel and concrete on free issue or issue basis. Whatever reduces our working capital cycle, we will definitely look into that.

Operator

Our next question is from part of Parvez Qazi from Edelweiss Securities. Please go ahead.

Parvez QaziEdelweiss Securities — Analyst

A couple of questions from my side. First, sorry, I missed the revenue contribution from the MHADA project this quarter?

Rohit KatyalExecutive Director and Chief Financial Officer

INR10.77 crores.

Parvez QaziEdelweiss Securities — Analyst

Sure. Second is, what would be your bid pipeline currently? And what is the competitive intensity that we are facing nowadays?

Rohit KatyalExecutive Director and Chief Financial Officer

See, the company is well poised and placed to pick and choose at this moment in time. And therefore, we are not bidding for government projects, which are below INR350 crores or so. Simply because the competitive intensity increase in lower-value projects as far as public sector is concerned. And when the projects are above INR400 crores, INR500 crores, the competitive intensity is lesser. And you have more mature players competing with each other, therefore, the pricing comes that’s fair. That’s number one.

Number two, in private sector, it was never a competitive intensity. It’s more of you will be closing on our technical competency and capability by the client. And subsequently, it’s an open book policy. So we continue to work accordingly. As far as the big pipeline is concerned, if you talk in general, all India basis is very, very strong, but if you talk from Capacit’e’s perspective, we are looking at geographies that we have already worked.

And we do believe that there will be an opportunity of more than INR45,000 crores for the remainder of the year to before, of which we will choose the projects to our lighting, which can be accredited or PAT accredited. So that is the philosophy which we have followed. As far as the total order book is concerned, we’re looking at upward of INR2,000 crores to be added up to INR8,000 crores. INR800 crores has already been added.

Parvez QaziEdelweiss Securities — Analyst

Sure. And you did mention that we are witnessing an improvement in working capital, and this trend will continue going — so where do we see our debt level by lets say this fiscal?

Rohit KatyalExecutive Director and Chief Financial Officer

You will have a more clearer picture by the end of quarter two, but I do believe that release of retention on gross basis should lead to a reduction of INR60 crores to INR70 crores in the debt level.

Operator

[Operator Instructions] The next question is from Ankit Babel from Subhkam Ventures. Please go ahead.

Ankit BabelSubhkam Ventures — Analyst

My question was again on the debt part, which you just answered, like also what was the gross debt at the end of Q1?

Rohit KatyalExecutive Director and Chief Financial Officer

INR356 crores. And then…

Ankit BabelSubhkam Ventures — Analyst

INR356 crores. Okay.

Rohit KatyalExecutive Director and Chief Financial Officer

That is including the promoter debt. Excluding the promoter, it continues at INR314 crores.

Ankit BabelSubhkam Ventures — Analyst

INR314 crores. And on this base of now assuming that promoted debt will be converted into equity, — so not this INR314 crores debt you expect, a INR50 crores to INR60 crores of reduction by the end of this year, right?

Rohit KatyalExecutive Director and Chief Financial Officer

Absolutely, that is directly proportional I believe of retention, I’ve explained in my earlier answers.

Ankit BabelSubhkam Ventures — Analyst

Okay and this takes care of the fact that your working capital will also reduce from current 90 days to around 70 days by the end of this year excluding retention money.

Rohit KatyalExecutive Director and Chief Financial Officer

Net of retention, yes. And that’s the reason for guiding for reduction in the capital, that is reduction in debt. If your working capital cycle increases, the debt cannot reduce.

Ankit BabelSubhkam Ventures — Analyst

Okay and sir, lastly, what will lead to this reduction in working capital from 90 to 70 days?

Rohit KatyalExecutive Director and Chief Financial Officer

The collection efficiencies. We are talking about retention that is long-term receivables coming into its system. And as I have explained, that INR120 crores are already due and receivable awaiting submission of bank guarantees, expected to be realized at INR20 crores in the current quarter and balance in the quarter three and quarter four of current fiscal. So this is, one, such money comes into the system.

It acted two manners. A, it could reduce your overall debt position. B, it will reduce your total trade level, capital utilization, but most importantly, it reduces your debtor level on a consolidated basis. Therefore, the net working capital will reduce on account of t things: number one, release of retention and the money coming into the system for utilization by the company or reduction of debt. And number two, and more importantly, the clients now paying on time. That will be the second big positive. If you see over the last five quarters, it has come down from 117 days to 89 days now.

Ankit BabelSubhkam Ventures — Analyst

So sir, if this receivables comes down, can there be any benefit in your ECL provisioning. Any write-backs or future ECL provisions would be lower as compared to the previous one. Any benefit from that angle?

Rohit KatyalExecutive Director and Chief Financial Officer

You see that ECL provisioning is a policy which is separate from debtor collection. Right, yes, reversals will happen as and when the collection happens. And I’ll explain that we are expecting collections against the provisions which we have made. We have received all our moneys from Kalpataru in quarter one and some part in quarter two of the current fiscal. So whatever provisioning was made obviously has been reversed. Against that, we are quite optimistic of two major collections in the current financial year. And if that happens, that will positively add to your profitability and the cash flow.

Ankit BabelSubhkam Ventures — Analyst

Okay. And sir, lastly, a lot of your retention money requirement and receivables you are planning to replace it with bank guarantee. So that could be a huge jump in your bank guarantee charges. So which would be forming part of your interest cost. So just for our understanding. So this quarter, your interest cost was INR20 crores. Now considering the fact that going forward, your gross debt will reduce, and at the same time, your bank guarantee commissions will increase. So net-to-net, I mean, this INR20 crores is the peak number on a quarterly basis? And did expect a reduction in December? Or you believe that this number will go up in the near term and going forward also?

Rohit KatyalExecutive Director and Chief Financial Officer

So firstly, the bank guarantee commissions are at between 1.6% to 1.7% for the year, while the interest costs are our upward trend, assuming 9% per year. So there’s a barrier differential of nearly 7%, which will have a positive impact on the finance charges, which are levied. Although as one point we have to remember that bank guarantees on an absolute debt. It’s a nonfund-based limit where the bank charges commission and not interest, okay.

Number two, with the estate total with further utilization of INR250 crores in the current fiscal, our bank guarantee charges for the remaining period. There is — on an annualized basis, it may be close to INR4.5 crores. And four or six months, it may be INR2.25 crores, but if the money which is coming in quarter trhree and quarter four will nullify this increase, and more or less, your assessment that the finance charges will be between INR21 crores and INR22 crores is fair enough.

Ankit BabelSubhkam Ventures — Analyst

So overall interest cost, what you are expecting? I mean, this year, I understand that it will take time for it to come down because the money would be realized in the second half, but next year, considering the growth also in your revenue and everything. So what kind of interest cost we should build in, in our model?

Rohit KatyalExecutive Director and Chief Financial Officer

As a percentage, it’s already come down on absolute is INR21 crores. So we are expecting finance charges of INR83 crores to INR84 crores in the current financial year. In the next financial year, with the reduction of debt, it obviously will come down.

Ankit BabelSubhkam Ventures — Analyst

Okay. So you’ll peak this year at around INR80 crores, INR83 crores.

Rohit KatyalExecutive Director and Chief Financial Officer

Absolutely.

Ankit BabelSubhkam Ventures — Analyst

Okay, sir. That’s it from my side. Thank you.

Operator

Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Mr. Katyal for closing comments.

Rohit KatyalExecutive Director and Chief Financial Officer

I would like to thank once again all of you for joining us on this call. We hope we have been able to answer your queries. Please feel free to reach out to our IR team for any clarification or feedback. Thank you and see you next time. Bye-bye.

Operator

[Operator Closing Remarks]

Related Post