Garden Reach Shipbuilders & Engineers Limited (GRSE) Q2 FY23 Earnings Concall Transcript

Garden Reach Shipbuilders & Engineers Limited (NSE:GRSE) Q2 FY23 Earnings Concall dated Nov. 15, 2022

Corporate Participants:

Cmde PR Hari — Chairman and Managing Director

R.K. Dash — Director (Finance) and Chief Financial Officer

Analysts:

Venkatesh Subramanian — LogicTree Capital Advisors — Analyst

Rohit Natarajan — Antique Stock Broking — Analyst

Bharat Mani — Moneybee Investment Advisors — Analyst

Abhineet Anand — Emkay Global Financial Services Ltd — Analyst

Shalini Gupta — East India Securities — Analyst

Vignesh Iyer — Sequent Investments — Analyst

Sumit Chandwani — Arth Equity Advisors LLP — Analyst

Prabir Adhikary — Ratnabali Investments — Analyst

Presentation:

Operator

Good afternoon, ladies and gentlemen. I am Yashashree, the moderator for this conference. Welcome to the Conference Call of Garden Reach Shipbuilders & Engineers Limited arranged by Concept Investor Relations to discuss its Second Quarter and Half-Year ended 30th September 2022 Results.

We have with us today, Commodore PR Hari, Indian Navy – Retired, Chairman and Managing Director; and Shri R.K. Dash, Director – Finance and CFO. At this moment, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Please note, this conference is recorded.

I would now like to hand over the floor to Commodore PR Hari, Chairman and Managing Director. Thank you, and over to you.

Cmde PR Hari — Chairman and Managing Director

Thank you, Yashashree. Ladies and gentlemen, a very good afternoon to each one of you. I am Commodore PR Hari, the Chairman and Managing Director of Garden Reach Shipbuilders & Engineers and I have here with me, Shri Ramesh Kumar Dash, the Director – Finance and CFO; and Mrs. Aparajita Ghosh, Finance Head; and Shri Sandeep Mahapatra, the Company’s Secretary. Let me welcome you all to this conference call to discuss the financial performance of the Company for the second quarter and half-year ended 30th September 2022. I intend covering my talk under the following heads, that is the financials, the order book position, the execution plan for the current order book and a brief glimpse on the future outlook.

The half-year ending 30th September, the financial performance have been very encouraging, with the revenue from operations moving up from INR726 crores to INR1,262 crores, that is an increase by 74%, if one is comparing the half yearly performance of FY ’22 to FY ’23. When we compare the performance, revenue from operations of Q1 ’23 to Q2 ’23, there has been an increase of 18%. The figures have gone up from INR580 crores to INR682 crores. Similarly, the total income half-year to half-year has gone up by 67% from INR802 crores to INR1,344 crores.

EBITDA has gone up half-year to half-year from INR125 crores to INR163 crores, that is an increase of 31%. From Q1 of ’23 to Q2 of financial year ’23, in EBITDA, there has been an increase of 20%, that is from INR74 crores to INR89 crores. But PAT, profit after tax half-year to half-year comparison, gone up by 37% from INR79 crores to INR109 crores. Q1 of FY ’23, the PAT was INR50 crores, gone up by 17% to INR59 crores. Earnings per share has gone from INR6.93 to INR9.51, that is 37% increase half-year to half-year. So, on the whole, the financial performance has been satisfactory and we are very confident of maintaining the tempo that we have generated during the first-half of the financial year and carry it forward to the second-half, and thereby give good financial performance during the current financial year.

Coming to our order book position. As of 30th of September 2022, our order book stands at INR22,930 crores. This comprises of seven shipbuilding projects, totaling to 24 platforms, marine platforms. These include three projects for the Indian Navy, the P17 Alpha project comprising of three ships, the Anti-Submarine Shallow Water Craft project comprising of eight ships and of four ships Survey Vessel Large project. So, these three projects for the Indian Navy total to 15 war ships. In addition, we are executing a project for the Government of Guyana for Passenger cum Ocean Going Ferry Vessel and an order of the Indian Coast Guard for a Fast Patrol Vessel. We are also executing a project for the Government of Bangladesh for construction of six Patrol Boats and another for the Government of West Bengal for a next-generation electric ferry.

Shipbuilding comprises of a major chunk of our order book, that is nearly 97% to 97.5%, with the balance coming from the diversified segments of bailey bridges, deck machinery, diesel engines and ship repairs. As far as the execution plan for the current projects, of the seven projects, shipbuilding projects that we are executing currently, two of these projects we intend completing during the current financial year. That is the project being executed for the Government of Guyana, that is the Ocean Going Passenger cum Ferry Vessel. The Vessel as of now has raised around 75% of physical construction and this project is planned to be completed during the last quarter of this financial year. Similarly, the Fast Patrol Vessel being constructed for the Indian Coast Guard, we are almost past 81% of physical progress and the ship is now in the trial please. This ship is planned to be delivered again during the last quarter of the current financial year.

As far as the other shipbuilding projects are concerned, if we first start with the P17 Alpha project. As I stated earlier, we are presently constructing three P17 Alpha frigates for the Indian Navy. The first ship has already clocked around 43% of physical construction, the second ship around 35% and the third ship around 16%. The progress of these ships is satisfactory and as per the — the build plan. The first of these ships is scheduled to be delivered during mid-2025 and the last ship during mid-2026.

Now coming to the Survey Vessel Large project, where we are presently constructing four ships under this project and the first ship which was launched during end-2021 has already touched 65% of typical construction. The ship will be now moving into the trials phase and this ship we plan to deliver during the first quarter of the next financial year. The second ship of the project has now achieved around 58% of physical construction and that ship is likely to be delivered during the end of the next calendar year, that’s the third quarter of FY ’24. The construction progress of the last two ships of this project is also satisfactory, with both the ships having achieved 38% and 14% respectively.

Coming to the Anti-Submarine Shallow Water Craft project, there are eight ships in this project and we have already started production of five of these ships. The first ship has achieved around 38% of construction and this ship is scheduled to be launched. A launch in shipbuilding is a milestone even where the ship is put to water for the first take after the hull takes is complete. So, this particular ship of the ASW Shallow Water Craft project is scheduled to be launched during the next month.

Similarly, the second ship of the project has achieved around 23% progress and the other ships are following their build schedule. As per the existing plans and our build strategy, these ships will be delivered by FY ’27. What I have just mentioned gives you an overview about the progress and the status of the ongoing shipbuilding projects. As you can see, the current order book of INR22,930 crores will keep us steady with respect to workload up to FY ’27.

Coming now to the orders on the anvil and the future outlook. As I mentioned during some of the earlier con-call, GRSE has been declared L2 in an RFP floated by the Indian Navy for construction of eleven next-generation Ocean Going Patrol Vessels. As per the tender conditions, the L1 bidder gets to build seven vessels and the L2 bidder, that is GRSE, gets to construct four vessels. The way things are moving, this contract is likely to be completed during the current financial year and the order that is likely to the tune of around INR3,000 crores to INR3,200 crores. What I’m trying to convey is that, while on one-side we are executing the current order book, on the other side, there is a steady filling up of the gap generated in the order book to execution. So this INR3,200 crores plus what we are going to execute during the current year, it is likely to ensure that we maintain an order book position of around INR23,524 crores at the end of the current financial year also.

As far as the other orders that are on the anvil, one major order that GRSE is eagerly looking-forward to is that of the Next Generation Corvette. The Defence Acquisition Council has already given an approval of necessity for this project of Indian Navy and this is a high-value project costing almost INR36,000 crores and as per our current estimate, the RFP for this particular project is likely to be released by the Indian Navy by end of calendar year ’23 or early 2024. In addition, as per the — again, as per our understanding and appreciation, this is an eight ship project with two shipyards, five and three. One ship — one shipyard, we get to build five ships, so second shipyard will get to build three ships. So, with GRSE’s experience in building and delivering Corvettes, this is the Next Generation Corvette. So, with GRSE’s experience in building and delivering corvettes, our — with our experience, expertise and resources available, our bidding strategy I’m sure will be appropriate to ensure that we stand a very good chance in winning this bid.

In addition to the Next Generation Corvette, Indian Navy has also got a project, a high-value project of landing platform docks. Here, the RFP again is likely to be released in 2024. In addition, the Navy is also looking-forward to constructing twenty Follow-on Water Jet FACs. In case of Water Jet FACs, as some of you may be aware, GRSE has got a history of delivering the maximum number of FTV stroke, Water Jet — Water Jet FAC, both belong to the same class, 30-plus of these Vessels to both Indian Navy and Indian Coast Guard. So similar to the Next Generation Corvettes. When we did pitching in for this bid also, our strategy would be appropriate to give adequate competition to our contemporary shipyards.

In addition to these three projects for the Indian Navy, the Indian Coast Guard has got a couple of projects that are likely to come up in the near future. But there is a project for which the RFP is likely to be issued by the end of this calendar year, that means either this month-end or the next month for 14 Fast Patrol Vessels. The order value is likely to be in the tune of around INR1500 crores to INR1000 crores, and also the Indian Coast Guard is likely to come out with an RFP next year for 18 Next Generation Fast Patrol Vessel. So this in a nutshell gives you an overview as to what is on the anvil. This covers the shipbuilding segment.

As far as the ship repairs are concerned, again I said stated during an earlier investor con-call, we have taken over three dry docks in long-term lease basis from the Kolkata Port Trust and as of now, all the three dry docks are being extensively used for ship repair-related activities. So, our intent of taking over these dry docks was to give an impetus to ship repairs, another vertical now GRSE is looking very seriously. While we have taken over this facility just about 11 months back, the results so far have been encouraging and we have almost had 100% occupancy of these docks and we have one DPS of Indian Coast Guard for conductor of [Indecipherable] of their ships and also a few commercial vessels, where we are undertaking the dry docking and repair. So, this is an area which our shipyard will be focusing on in the coming years.

In addition to ship repairs, our diversified segments include the Bailey Bridges division. As you may be aware that GRSE today has around 65% to 70% of the Indian market in bailey bridges, that’s portable steel bridges. We have concluded an MoU with the Border Roads Organization for delivery of a particular type of modular bridges for which we have proprietary rights, as an IPR of the shipyard and this will give us an edge in getting more orders from the potential customers, that is the Indian Army and the Border Roads Organization.

Coming to the diesel engine plant, we have a diesel engine plant at Ranchi, where we have a license agreement with MTU, Germany, and based on this license agreement, we are — as in we have the facility and the capability to assemble the MTU make diesel engine and conduct the trials in that facility. On this segment, we expect orders from the Indian Navy for their projects where medium and small-sized diesel engines are involved. In addition, this particular unit for the diesel engine plant has got an order for delivery of 28 diesel alternators for the P17 Alpha projects being executed by both Mazagon Dock and our shipyard, that is GRSE. And we also have another unit that manufacturers and supplies Deck Machinery for the ships being built by GRSE and also by the other shipyard.

So, on all these trends, that is on the shipbuilding segment which is definitely our major revenue earner, along with the Bailey Bridges, the ship repair, the Deck Machinery and the diesel engine verticals, we are very confident of having a growth trajectory in the coming years that will be very, very encouraging for you the investors.

I have finished and open for questions and the moderator can take over.

Questions and Answers:

 

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] We have our first question from the line of Venkatesh Subramanian from LogicTree Investment Advisors. Please go ahead.

Venkatesh Subramanian — LogicTree Capital Advisors — Analyst

Hi, sir. Good afternoon. Thank you for the opportunity. I have two questions, sir. One is on the last item that you mentioned on various other stuff like ship repair and steel bridges, etc. All these units put together, say, over a period of three years from now, sir, what can be the approximate top line that you would envision on these projects? That’s my first question.

And the second question is on the INR36,000 crore RFP on Next-Gen — Next Generation Corvettes, as L2 bidder, we’ll get — my sense is, we’ll get three — orders for three vessels and what could be the value of that, sir?

Cmde PR Hari — Chairman and Managing Director

Thank you, Mr. Venkatesh. I’ll answer your second question first, while my mind calculating what is INR36,000 x 3/8. That comes to, one second, around INR13,500 crores. But let me tell you, we are not looking at being L2, finally it’s on how we bid and how our other more, as to how our competitors are going to bid. But on a very serious note, we are not looking at L2 for this project at all. But to answer your question, if we become L1, the value that is going to be accrued from this project is around INR22,500 crores and if it is L2, around INR13,500 crores.

Venkatesh Subramanian — LogicTree Capital Advisors — Analyst

L2 to L1. Okay, sir. Great. And the second one was on the INR3,000 crore order, sir.

Cmde PR Hari — Chairman and Managing Director

So the INR3,000 crore order, INR3,000 crore to INR3,200 crore order, this was a project where the bid was opened by end of February this year, where this is of course between the tender was there, the participants were all the shipyards, all the five of us, that is before, obviously, HDPEL, L & T, Cochin Shipyard and so on. So, we have become L2 and as per the tender condition, seven of the ships go to the L1, that is the Goa Shipyard and the four ships come to us. So, right now the project is at the negotiation stage between the bidders — the winning bidders and Indian Navy and as per the indications go, the contract is likely to be signed by during this financial year itself. So, that will give us an order book value of around INR3,000 crores to INR3,200 crores.

Venkatesh Subramanian — LogicTree Capital Advisors — Analyst

So, you’re saying INR3,200 crore for approximately four vessels, sir? Yes?

Cmde PR Hari — Chairman and Managing Director

That’s correct. The four vessels, approximately INR3,200 crores.

Venkatesh Subramanian — LogicTree Capital Advisors — Analyst

Okay. So, that’s INR800 crores. Last quick one sir, the 18 Next Generation Patrol Vessels, RFP is going to be out next year, you said, what would be the value of that, sir?

Cmde PR Hari — Chairman and Managing Director

The 18 Next Generation Vessels which is the Coast Guard RFP is likely to come out next year. At this moment, I can only give you an indicative figure, which in my appreciation. It could be around INR3,000 crores, that’s all.

Venkatesh Subramanian — LogicTree Capital Advisors — Analyst

INR8,000 crores, sir?

Cmde PR Hari — Chairman and Managing Director

INR3,000 crores. So, these Vessels are actually small Vessels.

Venkatesh Subramanian — LogicTree Capital Advisors — Analyst

Okay. Yes. And so on these small Vessels, the execution timeframe is usually shorter?

Cmde PR Hari — Chairman and Managing Director

Yes. Definitely the execution time of any warship depends upon one, the price and second, the complexity. When we are speaking about complexity, complexity depends upon the kind of weapon systems that sit on the ship. These Fast Patrol Vessels are — are compact Vessels with, let us say heavily dense population of equipment and systems. So, while the price is small, the complexity is definitely not that more or less small, so it’s called a FPV and so on. Since you asked the question, now for a conventional Fast Patrol Vessel, we’re presently executing an order for a Fast Patrol Vessel for the Indian Coast Guard. That we’ll pin it as 20 to 24 months. So, from the time the design is frozen, it takes around two years for a ship, for the first ship of a class to be delivered and from then on, we can deliver a ship of this particular type from — a ship for the three months thereafter.

Venkatesh Subramanian — LogicTree Capital Advisors — Analyst

Alright, sir. Got it. Great. Thank you, sir. The question on the other four business divisions or ship repair, steel bridges, etc., broadly if you can give us over a three-year period if we — some sort of guidance where we could be, sir?

Cmde PR Hari — Chairman and Managing Director

Okay. As I mentioned when I started that, our primary job is — and the focus is on shipbuilding and when we say shipbuilding, it’s on warship building and as I think we are different to the public sector shipyard. Our focus and aim would be to provide the quality warships to the Indian Navy and the Indian Coast Guard as per their expectations. Now keeping that as primary role, we also have ventured into, as you are aware, this kind of diversification in India at this juncture only we have. So with this kind of diversification as I had stated earlier, there are four verticals which we have foreseen. One is the Bailey Bridges segment. While on one side I stated that we have around 65% to 70% of the market share of bailey bridges, what you must appreciate is that the overall market in India itself is limited.

Venkatesh Subramanian — LogicTree Capital Advisors — Analyst

Okay. Right.

Cmde PR Hari — Chairman and Managing Director

Now with our new products, that is the modular type of bridges and with a certain amount of aggressive marketing strategy that we have taken, there is an improvement. Actually, our turnover in the Bailey Bridges division is very, very miniscule. It has doubled in the last three years. So, this is an — this is an area where I expect the maximum or two-fold increase in the next three years.

Coming to ship repairs, ship repairs there are shipyards who has got an edge over us in terms of experience in ship repairs. They have been focusing on ship repairs for the last 10 to 15 to 20 years. We have taken this as a serious vertical from the last year onwards and I had mentioned that we have taken over three dry docks to specifically give an impetus to ship repairs. Again in this field in an area where opportunities are there, because the Navy and the Coast Guard have definite needs to carry-out repairs of the ship on a periodic basis. So, at this juncture, I will not be able to put a figure to what the expectation is. But I assure you, may be what I would suggest is, an year down the line, let us see where we stand. We started in a very modest fashion. Let us stabilize and this is a focus, where the management’s complete focus is there and I expect a steep growth in this segment in the coming three years.

Venkatesh Subramanian — LogicTree Capital Advisors — Analyst

Okay, sir. Thank you very much. I’ll join the queue, sir.

Operator

Thank you.

Cmde PR Hari — Chairman and Managing Director

Thank you. Thank you, Mr. Venkatesh.

Operator

We have our next question from the line of Rohit Natarajan from Antique Stock Broking. Please go ahead.

Rohit Natarajan — Antique Stock Broking — Analyst

Thank you for this opportunity. Sir, one of your competitors was talking about some landing platform dock orders in the near-term plus there is a possibility that P17A can — repeat of P17A can also be thought about in — in near-to-medium term. Any color on these aspects, sir?

Cmde PR Hari — Chairman and Managing Director

Thank you, Mr. Rohit. The color as of now is great. Since if both these projects — see maybe you had come out with an RFI for the landing platform dock sometime earlier. After that, it has not really taken off. But the fact is that Navy has requirement for landing platform dock and as per our appreciation, the RFP for two landing platform docks is expected to come out by 2024, that is the appreciation. And this definitely is going to be a high-value order and yes — yes, there are competitors in this field, our sister shipyards only and as far as the P17 project, now the P17 Alpha project that we are currently executing is for seven ship frigates, both MDL and GRSE. MDL is constructing four of the ships and GRSE is building three ships. As per the current execution plan, these ships are likely to be delivered by FY ’27, that is mid the third quarter of 2026. So, that is the time in which project will reach a closure. So, Navy definitely has plans to go in for a follow-on of the ship, but that is still in discussion stage. So if Navy decides to go for a follow-on or more members of this, the clarity on this will emerge sometime in my appreciation only during 2024.

Rohit Natarajan — Antique Stock Broking — Analyst

Okay. Okay. Sir, my second question is more to do with the margins front. On one side, we know that 1.5% is the physical execution progress that is done at each ship units level, but the margin, how does that get translated? As in, is there any lumpiness when there are more brought out items, say let’s something goes into outfitting or advanced outfitting stage, how does that really shape up? Can you give some color on it?

Cmde PR Hari — Chairman and Managing Director

Okay. I’ll give you a brief intro on the shipbuilding process. So, that is to put things in the right perspective. Now, shipbuilding starts with the preparatory activities. That is the designs stays where once the proprietary activities are, before the actual construction of a ship start. That is the stage when the design of the ship is finalized, the equipment are finalized and based on the equipment finalization, orders are placed on prospective OEMs for the equipment. Once this project process is completed, along with procurement of steel, then starts, based on the design, the construction.

And the construction starts with the plate cutting and the block fabrication, then the block erection and at this stage, the equipment which have already been ordered start coming in. These are lowered and the outfitting starts. Once the ship reaches a completeness in terms of hull sum, that particular ship is launched on to the water where the floor foot worthiness of the ship is set and thereafter the outfitting goes in full flow and once the outfitting gets completed, the trials progress, leading to acceptance of the ship after the concerned field trials at the harbor and field trial.

Just in a nutshell, you see an overview of the first stages of ship construction. Now, steel formed, if you are looking at the overall profilage in terms of cost from 5% of a ship cost. If you are — if you are looking at the ship construction in it’s entirety, the hull along with the basic fittings, carry around 18% of a ships overhead, if you’re taking a ship as 100%, carries around 18%. Now, in the initial stages of ship construction, the progress will be around 1% to 1.5%. After that, then the equipments start getting lowered, the progress increases. Then a stage will come when the equipment get integrated to the ship and the systems get buttoned up. So there will be a stage in every ships’ construction, where the progress lead from 1% to 1.5%, to 2% to 2.5%, depending upon the size of the ship.

I’ll give you an example. In case of a Fast Patrol Vessel, it’s a small ship. Initially the progress is to the tune, so if the ship is small, 1% to 1.5%, then it moves up to around 3%. There are stages when the ship per month gives around 7% of physical progress. In case of a big ship, we may not be able to touch 7%, but at times it touches 3%. So, translating it into VOP, that is a revenue from operations or the value of production is VOP, the value of production is when the equipment and the systems, along with the labor gets pumped into a ship’s construction, where you cannot compare this with the profit. That’s completely different. Profit is dependent on a variety of factors, ranging from the equipment procurement process, the revenue expenditure, the internal efficiencies and so on. So, the physical progress as since you asked the question about the physical progress where there is a lump of 1% to 1.5%, yes, that is at some stage of the construction. But there will be a state where it will pickup and this will happen when the ship touches around 60% to 65%.

Rohit Natarajan — Antique Stock Broking — Analyst

I appreciate it, sir. Quite — quite — that was quite detailed. Just a follow-up on this part. But when we — when we, say, win a particular project at say 7.5% EBIT margins, we may have some sort of capacity utilization factor in mind. So, at that time, do you say we have booked our estimates on the 75% of the ship capacity that we have or 100% of capacity and if there are margin surprises, it is purely based on that incremental capacity utilization. Is that the way — right way to understand how the margin surprises come from?

Cmde PR Hari — Chairman and Managing Director

See, capacity utilization is based on the resources and infrastructure that we have. So as I remember that it has been brought out earlier, I am not going to again clarify. Our capacity for ship construction at this juncture is around essentially around 20 warships at the time. Well again, this in reality translates to much more, because in a project that’s executed, let us say a four ship project, all four ships will not be at the same phase of construction at every point in time, which means that the first ship is at outfitting stage, the second ship will be at the pre-launch stage and the third and fourth should be at some other stages of construction.

So, in our case, let us specifically talk about GRSE at this juncture. If I’m speaking about the P17 Alpha project, the first and second ships are already in the outfitting stage. Only the third ship is at the pre-launch stage. So, as far as capacity is concerned, it has got no constrain — we have got no constrained at all. And another aspect what you may like to notice is that, we have gone in for as I mentioned three dry docks were hired on a long-term basis on KOPT and in addition to that, we have gone in for a PPT model with two of the shipyards, one based in Kolkata and one in the Eastern front, where part construction of some of our ships are integral. So the resources which are captive within our campus, is certainly not a constraint for executing concurrent projects. What I’m trying to convey is, capacity is not a constraint.

Rohit Natarajan — Antique Stock Broking — Analyst

Absolutely. I appreciate your answer, sir. That was quite helpful. I look-forward for more questions. I’ll get back into queue. Thank you.

Cmde PR Hari — Chairman and Managing Director

Sure. Thank you. Thank you, Mr. Rohit.

Operator

Thank you. Ladies and gentlemen, in order to ensure Management is able to answer queries from all participants, kindly restrict your questions to two at a time. We have our next question from the line of Bharat Mani from Moneybee Investment Advisors. Please go ahead.

Bharat Mani — Moneybee Investment Advisors — Analyst

Hi, sir. Congratulations on a great set of numbers. So, I just wanted to know the physical execution progress monthly for P17 Alpha and progresses on the ASW. So — so I just wanted to know is it different from 0% to 40% and 40% to 65%, where the revenue booking is the most and then from 65% to the next level?

Cmde PR Hari — Chairman and Managing Director

Thank you, Mr. Bharat. If I just take the P17 Alpha project, the first ship has achieved 43%, the second ship is around 35% and the third ship is around 16%. Now, the physical progress from let us say 0% to 20% on a conventional, we get to around 1% to 1.5% per month. Then it starts getting a bit — I mean it gets bit the speed picks up and we get around 2%. The rate at which the growth is accelerated is, during a phase when the ship has touched around 60% of construction, where majority of the expense would have been already lowered and integration and the fitting work of the systems start. Which means, the percentage progress — monthly percentage progress increases when the ship is at a phase where it is between 60% and 80%. If you bring — if just bring it down to a smaller ship, size ship, then if you’re taking let us say a Fast Patrol Vessel, a Fast Patrol Vessel in the first 0% to 15% starts with around 2% per month and then it picks up maybe around 2.5% between 15% to 40% and, 3% to 3.5% and there’ll be one season the equipment trials are actually in progress, it touches around 6.5% to 7%.

But from a serious note, the monthly progress is definitely good to monitor, it is required to be monitored, but what we actually look at is the milestone. The major milestones in the ship construction are, one, the plate cutting, where we start the production, next is the keel laying off, which get manufactured at various locations, get lowered onto the building berth or building dry docks and once they get consumated, the next milestone that we look at is the launch of the ship. The next milestone is a basin trial. So, on a serious note, we should not be really looking at monthly progress, 0.5% or 0.7%, it is good to understand, but it doesn’t matter. What we must look at is launch, then the launch to trials ended.

Rohit Natarajan — Antique Stock Broking — Analyst

So, sir, the second P17 Alpha, so what is the expected delivery of that one?

Cmde PR Hari — Chairman and Managing Director

The second P17 Alpha is — as of now, it is expected to be delivered during the last quarter of financial year FY ’26. Let’s say between Jan and March 2026.

Rohit Natarajan — Antique Stock Broking — Analyst

Right. And the – and the Survey Vessel number three and four, the — can those — the delivery of those two ships?

Cmde PR Hari — Chairman and Managing Director

See, Survey Vessel, the first two ships are planned to be delivered during 2023 and the last two ships are planned to be delivered during calendar year 2024.

Rohit Natarajan — Antique Stock Broking — Analyst

Okay. So in a shipbuilding cases there are, I guess, 15 milestone payments. So can you share — the duration of the payments?

Cmde PR Hari — Chairman and Managing Director

See. It is more for — it is more to do with stages than the duration. It starts with — there is a payment which is signing of contract for the 10% for the preparatory activities and the same related aspects. And then there is a 10% payment for placement of orders for various equipment and provision of the plan for construction of the ship and so on — then at various milestones. You would have paid — one would be for so many 40%. I’m just giving one pay. 40% of physical construction, you get a stage payment, for launch you get a stage payment, contractor basin trial, you get a stage payment, 85% of construction, you get a stage payment leading to stage 14 will be a stage when the ship is finally delivered to the customer. And the stage 15 is when the ship completes the guarantee period. There is one year guarantee period. That is you know 5% payment actually. So this comprises, in a nutshell, the 100% payment staggered over 15 levels, 1 to 15.

Operator

Thank you. We have our next question from the line of Abhineet Anand from Emkay Global Financial Service. Please go ahead.

Abhineet Anand — Emkay Global Financial Services Ltd — Analyst

Sir, I just wanted to understand that you indicated that by FY’27 all these 23,000 odd crore order book will be completed. Is it right, sir?

Cmde PR Hari — Chairman and Managing Director

Yes, the existing order book. I have not included the order, which is likely to come for the — what I have mentioned also about an order, which is likely to come for the next generation Ocean Going Patrol Vessels excluding that. Current order book, as for our execution plan, the execution period is FY’27, correct, you are right.

Abhineet Anand — Emkay Global Financial Services Ltd — Analyst

Sir, very broadly, can you just make us understand that because from now till ’27 is like five years, right? So the next three years, what could be the broader execution? In terms of broader revenue, I’m not saying in guidance, but just a ballpark?

Cmde PR Hari — Chairman and Managing Director

I will rather talk in terms of the history of ships in this right here.

Abhineet Anand — Emkay Global Financial Services Ltd — Analyst

I understand. But our understanding on ships will be far lower.

Cmde PR Hari — Chairman and Managing Director

I’ll give you a reasonable input for you to extrapolate my calculation. See, in this ship, we have already completed the first half. We are at 1,262 crores, as I mentioned, the progress of production of the various ships is satisfactory and two of these projects, of course, there are small projects. We intend completing this year. So I’ll put it in a different fashion. So you get a better confidence. See, our current order book remaining is 22,930 crores. And I have also stated that as per the current execution plan, the order book will be exhausted by 2027. If I keep the next generation completely out of the figure, in the next five year, that is 22,930 divided by five comes to around 4,586 crores. So this is for you to extrapolate or. There could be financial years where the revenue could be more than that. There will be financial year, there will be less than that depending upon the stage of construction of the ships. But it will definitely not be uniform. Just to give reassurance, which I have been stating repeatedly in the last two investors con call also is that as per our appreciation and considering the physical progress of construction of the ships, because that is what is directly linked to payments, I mean revenue recognition, considering both this aspect, the current year, see last year our turnover was 1,758. So when I finished the last financial year, when we were discussing the results, we have stated that the next three years that is FY’23, ’24 and ’25 will be the best in terms of revenue recognition for the shipyard. So I have given you both the perspective. I’ve mentioned what is the total order book. Also stated what is our plan for execution. So I have even gone to the extent of dividing and telling you what and also given you an assurance that this year, next year and next, next year will be — the growth will be steady with perhaps FY’24, ’25 or ’26 being peak years.

Operator

Thank you. We have our next question from the line of Shalini Gupta from East India Securities. Please go ahead.

Shalini Gupta — East India Securities — Analyst

Good evening, sir. Sir, I had two very basic questions. Sir, if I understood correct. The revenue per ship that you make is about 700 crores. Am I right?

Cmde PR Hari — Chairman and Managing Director

Ma’am. Good afternoon, Shalini. It varies from project to project. I’m not sure which project you are talking about?

Shalini Gupta — East India Securities — Analyst

I’m just trying to get a ballpark figure because just from my projections. So is it correct between say 500 to 700? Would that be correct?

Cmde PR Hari — Chairman and Managing Director

No, ma’am. I’ll put you in the right perspective. See, our current order book is 22,930 crores. One second. Of this, around 14,997 crores pertain to the P-17 Alpha project for three ships. So that comes to balance around 5,000 crores per that ship. If i’m taking the Antisubmarine Warfare Shallow Water Crafts, 5,821 crores are still remaining for execution. Divided by eight that comes to almost around 725 crores per ship remaining because Survey Vessel, four ships, 1,600 crores remaining that means around 400 crores are remaining. In case of the FP, Fast Patrol vessel, 23 crores are remaining, one ship. So it depends upon the size of the ship and the order value. Are you on the same page? Could you make out?

Shalini Gupta — East India Securities — Analyst

Sir, I’ll listen to the conference call again. If I have another more questions, I’ll probably send you a mail or something because sir I’m just trying to for — I’m just trying to understand how I should build my projections. Sir, my second question is that what kind of EBITDA margin should we take. Because you were explaining how you arrive at your EBITDA margin, but I mean, it will be very difficult for me to calculate the kind of EBITDA margin you may arrive at. So would it be correct to say your EBITDA margins will be somewhere around 17% to 18%? Will I be correct?

Cmde PR Hari — Chairman and Managing Director

See, right now, EBITDA margins are around 12.7% to 13%. So we are considering our current order book, the margins that which we have made and won the project, the EBITDA margins what we anticipate is in the coming years is steady more or less steady around this rates that means 12% to 13%.

Operator

Thank you. We have our next question from the line of Vignesh Iyer from Sequent Investments. Please go ahead.

Vignesh Iyer — Sequent Investments — Analyst

Congratulations, sir, on good set of numbers. On the Alpha frigate part of the orders. I just wanted to know what is the original order value of these three frigates that we are making.

Cmde PR Hari — Chairman and Managing Director

Okay. The three frigates that we are making the order value. The total order value is 19,296 crores and the remaining order value is 14,997 crores.

Vignesh Iyer — Sequent Investments — Analyst

So roughly around 15,000, right.

Cmde PR Hari — Chairman and Managing Director

Yes, roughly around 15,000 crores.

Vignesh Iyer — Sequent Investments — Analyst

Okay. And the original value is around 19,296 crores, right?

Cmde PR Hari — Chairman and Managing Director

Correct. Correct.

Vignesh Iyer — Sequent Investments — Analyst

Okay. This confirmation I had. Second is sir if things there have been news that there are a lot of ships which are actually due for maintenance. And we are also into the maintenance contract part of it. So can you give us some idea about on that part of the business as in — the ship has to be gone for maintenance for maybe once every two years or such? So if you?

Cmde PR Hari — Chairman and Managing Director

Okay. I’ll answer this question. Both the Navy and the Coast Guard have ships which get periodically repaired. It’s called refit and repairs. So based on the — when the ship is built an operation comes or if it cycles from where the maintenance routines of the ships are decided and periodically the ship goes let us say every two years for a short refit and dry docking to check the underwater package and so on. And every five years that the ship goes for major refit. Now for undertaking these refit and repairs, the Indian Navy has got the naval repair organizations. But considering the range and scale of the ships that the Navy possesses, the yards, the repair yards, naval repair organizations are boosting at their speed. This means that they have capacity constraints. When they have capacity constraints, they outsource these refits to capable shipyard. Now Coast Guards, on the other front, they do not have the similar repair or setup like the Indian Navy. What I’m trying to convey is that every Indian Coast Guard ship goes for refit and repairs to outside shipyards and private firms. So and akin to Navy these refits and repairs comes for a short duration every two years and for a longer duration every five to six years. So the opportunities available on this front both with the Navy having capacity constraint and with the Coast Guard currently not having any captive where organizations is huge. It is specifically with this intent that we have ventured into this ship repair segment in a reasonably aggressive fashion. And towards this side, as I have mentioned, we have taken over three dry docks in the [Indecipherable] port trust. And we have already executed five projects for the Indian Coast Guard, including two major refits and three minor refits over the last one to one and a half years. We are currently also as on date also we are executing a project for the Indian Coast Guard refit and we have one more ship coming in for refit in the next year. So to answer your question, yes, both the Indian Navy and the Indian Coast Guard have a methodology wherein the maintenance is carried out in a periodic manner and as a business entity, we have huge opportunity in this segment.

Operator

Thank you. We have our next question from the line of Venkatesh Subramanian from LogicTree Investment Advisors. Please go ahead.

Venkatesh Subramanian — LogicTree Capital Advisors — Analyst

Yeah. Sir, actually, my questions have broadly been answered. But just a quick reconfirmation, sir. FY’23, ’24, ’25 are the peak years for the execution. So is that right, sir, just reconfirming my question?

Cmde PR Hari — Chairman and Managing Director

FY’23, ’24, ’25. No, I will add on FY’26 also. The peak could touch during FY’25 or ’26. Considering our delivery schedule and with the order book plan to be executed by FY’27. So if you’re looking at ’23, ’24, ’25. What I can assure you is that the revenue growth will be on an upward steady upward trajectory with either ’25 or ’26 being a peak year.

Venkatesh Subramanian — LogicTree Capital Advisors — Analyst

Okay. Got it, sir. Thank you.

Cmde PR Hari — Chairman and Managing Director

Thank you.

Operator

Thank you. We have our next question from the line of Swechha from ANS Wealth. Please go ahead. Swechha, can you please unmute your line? Since there is no response from her line, we’ll take the next question from Sumit Chandwani from Arth Equity Advisors LLP. Please go ahead.

Sumit Chandwani — Arth Equity Advisors LLP — Analyst

Hello? Can you hear me?

Cmde PR Hari — Chairman and Managing Director

Sure. I can hear you.

Sumit Chandwani — Arth Equity Advisors LLP — Analyst

Yeah, sir, how do you protect your margins? Since most of these are fixed contracts. Fixed price contract. Can you give us some idea on how do you protect your margins? And these are three, four year projects.

Cmde PR Hari — Chairman and Managing Director

Okay. Thank you so much, Sumit. Very interesting question. Now there was an era much before we have listed and well maybe 10 years back when the shipyards were having contracts that were cost plus contracts. Then came an era of nomination contracts. And now we are at a very, very interesting phase where we have all the contracts on competitive bidding phase. And let me give you confidence and assurance that the transformation of the shipyard from first the cost plus era to nomination, of course, it is tough. And from nomination to fixed cost and competitive has been [Indecipherable]. Now how do we since we are going for a competitive bidding along with our counterparts, the other shipyard, naturally the bids are absolutely competitive. The margins of it. How do we maintain the margins. See, over a period of time, all our production processes have been revamped. We have brought in automation. See, shipbuilding, you may appreciate that unlike any other manufacturing industry is labor intensive, but even in this segment, we have brought in measures to automize areas that are practically feasible to be automize. We have cut down our revenue expenditure by rationalization of a large amount of cycle steps and our focus as a business strategy our non-core activities are outsourced. So we keep our captive manpower only for core activities, core production shipbuilding activities. With all these measures, we have been able to maintain the margins, the level, what we are taking.

Sumit Chandwani — Arth Equity Advisors LLP — Analyst

Sir my question more around the shipment and material costs. So, you know, we’ve seen steel prices fluctuate a lot this year. So how do you — see the component of?

Cmde PR Hari — Chairman and Managing Director

I will answer. Understood. I will answer this question.

Sumit Chandwani — Arth Equity Advisors LLP — Analyst

And similarly foreign currency risk? You have a lot of imported equipment. How do you hedge that? If you can give us some color on your procurement policy hedging policies that will be great?

Cmde PR Hari — Chairman and Managing Director

Okay. Both the questions I will answer. Both of them are related to equipment and systems procurement. Now, in a shipbuilding project, as you may now be aware, that equipment and systems cost almost 60% to 65% of the project cost. And all these projects are fixed price contract projects and these projects both the P-17 Alpha, the Survey Vessel. I’m only speaking about the major key projects, which contribute majority of our major chunks of our order book. All these contracts have been concluded before the financial year 2019. These are fixed price contract. And since these contracts have been concluded before FY’19, all our equipment orders have been pleased well in advance. That means well before the market fluctuations started first because of the COVID and because of the current situation. So like we have fixed price contracts from our customers, all our contracts with our equipment manufacturers and the major contractors are on a fixed term fixed cost base. So what I’m trying to convey there is no impact with respect to the price fluctuations. Now, a small component that is not the equipment, not the major systems, but yard material. We call that as yard material, which mostly comprised of steel and certain fasteners and insulation and so on. That comprises only a very minuscule scale of the overall project. Even within the steel, we have an understanding, memorandum of understanding, with another PSU that is [Indecipherable] where a reasonable amount of protection is there against the variation. Coming to the balance material, which comes to, if you are looking at the overall project cost comes to around 5% that is the yard material less steel. Yes, there have been fluctuations, there have been impact because many of these are supplied by the MSME vendors. But and there have been escalations. But if you’re looking at in the overall perspective, the impact is minimal. Coming to the ERV. The projects. The key projects that is P-17 Alpha and the Survey Vessel project. They are protected against the ERV because the ERV variation clause is existing in the contract with the customer. So there’s no impact with respect to that with both this project.

Operator

Thank you. We have our next question from the line of Prabir Adhikary from Ratnabali Investments. Please go ahead.

Prabir Adhikary — Ratnabali Investments — Analyst

Yes, thank you. Thank you for the opportunity. Sir, I have a couple of questions. The first question is, sir, I want to understand something about this shipbuilding phases. Like you said that it starts from plate cutting to the delivery stages. As most of the equipments have bought out components. So can you please give us a sense at different phases, what should be the gross margin?

Cmde PR Hari — Chairman and Managing Director

Could you just repeat the question once again?

Prabir Adhikary — Ratnabali Investments — Analyst

Yeah, I’m saying that shipbuilding happens normally in phases like from plate cutting to the delivery each stage. And most of the equipments that you — install there in the ship bought out components. So this must be that your gross margin also fluctuates. So can you please explain like what should what could be the gross margin that happens in every phases?

Cmde PR Hari — Chairman and Managing Director

See, if you are — we are looking at — we are currently executing multiple projects, multiple projects. Like I just in my noted remarks I mentioned that we are building 15 ships for the Indian Navy itself. And all these ships are in various stages of construction. If you look at holistically in shipbuilding the conservative optimal profit margin is hovering around 7% to 7.5%. To give you, again, further understanding on the shipbuilding cycle. As you rightly said, plate cutting, of course, I’ll add another phase where the preparatory activities are in progress in the plate cutting. Then the block. The panel fabrication, block fabrication, and the block assembly, which happens in the dry dock. Equipment, what have been ordered start coming in during this phases, which is lower on board, then starts the integration, then the launch, then the outfitting final outfitting and the prior selected. Now if you’re taking a shipyard, now when we’re looking at the gross margins, you should look at from a holistic perspective at the shipyard. I have got seven projects currently being executed, shipbuilding projects. All of them are at various stages of production. Some ships at the final stage, some ship at the preparatory phase. So again, as I mentioned, the margin, the overall margin for shipbuilding projects over from 7% to 7.5%. Now what — how do we take it beyond this 7% to 7.5% is where the channels do. That is where to answering to a previous question, I have mentioned that we have gone through a slew of measures starting from automation to the extent feasible manpower, rationalization, resources, utilization, adapting to PPP outsourcing. And that is how we have been able to maintain margin above. Thank you.

Prabir Adhikary — Ratnabali Investments — Analyst

So is that my understanding is right that this 7% of EBITDA margin for the current quarter can go up to around 12% to 13%?

Cmde PR Hari — Chairman and Managing Director

I’ll put it. The current EBITDA margin for the current quarter is 12.16%. It is not 7%. And our PAT margin is still 8.11% for the half year. So I’m talking about the PAT margin. The PAT margin itself is plus 8%. The EBITDA margin. And again answering to your previous question, I have mentioned that our EBITDA margins have been hovering between 12.5 to — 12% to 13% and we’ll be able to maintain this in the coming days and years.

Operator

Thank you. We have our next question from the line of Vignesh Iyer from Sequent Investments. Please go ahead.

Vignesh Iyer — Sequent Investments — Analyst

Sir, thank you for the opportunity. I just wanted to ask you about. So in our balance sheet, right, so we had a good amount of money as an advance for the project execution, right. So it would be a request from my side that if you could show the amount received as advance separately from the cash and cash equivalents that we are actually generating from our internal approval. Because it’s kind of misleading because we cannot use that entire cash, because it’s kind of an advance from customers, as in your clients, right. So we want — in order to calculate the free cash flow in a better way, right, and to find out the closing free cash flow item, cash and cash equivalents, it would be better if the advance from customer and the amount you hold in your account which you are free to use is shown separately?

R.K. Dash — Director (Finance) and Chief Financial Officer

I’m Director of Finance, R K Dash. First of all I want to tell this the money what we are showing which is not urban. Because in shipbuilding project whenever we have submitted our port, we have not taken financial cost.

Operator

Sorry to interrupt, sir. You’re not clearly audible, sir.

R.K. Dash — Director (Finance) and Chief Financial Officer

Yes. Am I audible now?

Operator

Yes, sir.

Cmde PR Hari — Chairman and Managing Director

Yes.

R.K. Dash — Director (Finance) and Chief Financial Officer

So we don’t have any financial cost because our contract is met such an [Indecipherable]. Our working capital is financed by the customer. So that means whenever we are attending a particular stage of completion or we are attending a particular milestone at that time we are getting one. So first I want to clear it is not an advance. Second thing I want to tell that you show — you said that whatever our balance sheet we are showing our items it is not in our partnership. You know that it is already as per our whatever prescribed in the company as per that we are showing our items. So in this case whatever money we are getting, it is coming to our account. That cash what I’m showing it is my cash as well as customer cash. I don’t have a separate bank account to show separately my accrual and customer. It can be calculated from the balance sheet itself. A financial analysts can make out how much is own cash and how much is also customer cash. Because everything in the liability side we are also showing that from the customer we are showing from what we have got money. In the asset side also which is utilization in form of receivable, which is in form of also inventory. That is also a trade. So there is no scope to show that our own money and also customer money separately.

Cmde PR Hari — Chairman and Managing Director

Okay. Once again I would like to reiterate that this question we have been hearing often in the shipbuilding projects as per the existing contract where the contractor advance is not there. There is also various stage payments to meet the various project requirements.

Vignesh Iyer — Sequent Investments — Analyst

Okay. Thank you.

Operator

Thank you. We have our next question from the line of Abhineet Anand from Emkay Global Financial Services. Please go ahead.

Abhineet Anand — Emkay Global Financial Services Ltd — Analyst

Yeah, thanks for the opportunity. So, sir, on the orders on the anvil you had, first, you had mentioned is 11 Next-Generation Ocean Going Patrol Vessels. So who is the L1 here, sir?

Cmde PR Hari — Chairman and Managing Director

L1 is total number provided. So L1 is Goa Shipyard.

Abhineet Anand — Emkay Global Financial Services Ltd — Analyst

Okay. And the three Navy orders that you mentioned, one obviously, Corvette one, you said that RFP will be likely in FY’23 or early ’24. So when can we expect this contract to come up?

Cmde PR Hari — Chairman and Managing Director

See, this contract as per the current progress or what we have seen, what is our experience based on the earlier RFPs and the contract conclusion. If the RFPs coming out, let us say — let us take a conservative period of 2024 beginning then the contract will be concluded is likely to be concluded in the first quarter of FY’23.

Operator

Thank you. We have our last question from the line of Prabir Adhikary from Ratnabali Investment. Please go ahead.

Prabir Adhikary — Ratnabali Investments — Analyst

Yeah, thank you for taking my question once again. Sir, I want to understand this execution cycle of ASWC as these ships are smaller and roughly around 700 crores to 800 crores. And also the launch date was around ’22 to ’23 something like that. So is it my understanding, correct, that you can execute as this already started and launch date is there, so you can execute that or the five ships by 2024 or 2025?

Cmde PR Hari — Chairman and Managing Director

Okay. These — as you rightly said these ships are smaller in size, but they’re complex ships because these are pure weapon platform. When — despite the size of the ship being more, if the weapon intensity is high, the complexity of shipbuilding is equally high. Now, coming to this eight ships, we intend launching the first ship. The first ship has already reached launch stage. The first set is intended to be launched the next month. I mean we have closed this for one month away from launch of the first ship. As per the execution plan, this project is planned to be completed the eight ships, the delivery is planned to be completed by end of 2026.

Prabir Adhikary — Ratnabali Investments — Analyst

Okay, sir. Thank you.

Cmde PR Hari — Chairman and Managing Director

Thank you.

Operator

Thank you. I now hand the conference over to Commodore P R Hari for closing comments. Over to you, sir.

Cmde PR Hari — Chairman and Managing Director

Thank you, Yashashree. Before I do my closing remarks, I would like to highlight one aspect to the investors. Very interesting questions we have today with a few of them hovering around the margins. While we have endeavour plan for all these questions, what I would like to highlight and reiterate that our revenues have gone up, our net debt has gone up. As a matter of fact, our net worth has gone up to 1,360 crores from 1,257 crores at the end of last year. Our earnings per share has gone up. Return on investment has gone up. Market capitalization. Another interesting aspect, it has gone up by 400%. While this replace the confidence of investors in the shipyard. What I would like to reiterate is that we are fully conscious about your expectations and all of us will be putting to match your expectations. With that let me once again thank Yashashree and thank you Gaurav from Concept IR for organizing this conference call. I would like to pay my sincere gratitude to all my analysts and investor friends who have taken time out of their busy schedule to listen to us today. If you have any further questions, I would request all of you to please get in touch with us and we’ll be happy to address them all. Thank you once again. Jai Hind.

Operator

[Operator Closing Remarks]