Garden Reach Shipbuilders & Engineers Limited (GRSE) Q4 FY23 Earnings Concall Transcript

Garden Reach Shipbuilders & Engineers Limited (NSE:GRSE) Q4 FY23 Earnings Concall dated May. 30, 2023

Corporate Participants:

Cmde PR Hari — Chairman and Managing Director

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

Analysts:

Amit Dixit — ICICI Securities — Analyst

Dixit Doshi — Whitestone Financial Advisors — Analyst

Harshit Kapadia — Elara Capital — Analyst

Shalini Gupta — East India Securities — Analyst

Umesh Raut — PhillipCapital India — Analyst

Vivek Namashivayam — Shanti Financial Services — Analyst

Presentation:

Operator

Good afternoon, ladies and gentlemen. I’m Vikram, the moderator for this conference. Welcome to the Conference Call of Garden Reach Shipbuilders & Engineers Limited arranged by Concept Investor Relations to discuss its Fourth Quarter and Year Ended 31 March, 2023.

We have with us today, Commodore P.R. Hari, Indian Navy Retired, Chairman and Managing Director; and Shri R.K. Dash, Director, Finance and Director, Personnel Additional Charge. [Operator Instructions] Please note this conference call is being recorded.

I would now like to hand the floor over to Commodore P.R. Hari, Chairman and Managing Director. Thank you. And over to you, sir.

P.R. Hari — Chairman and Managing Director

Thank you, Vikram. Ladies and gentlemen, on behalf of the management of team GRSE, I wish you all a very good afternoon.

I’m Commodore P.R. Hari, the Chairman and Managing Director of the company. And I have with me here, Shri Ramesh Kumar Dash, Director, Finance and Chief Financial Officer; and Mr. Sandeep Mahapatra, the Company Secretary.

Let me, at the outset, welcome you all to this con call to discuss the financial performance of the company for the quarter ending and financial year ending 31 March, ’23. I’m sure that you’re all familiar with the operations and the functioning of the company since we have interacted through con calls and in physical mode over the last one year.

I believe that it is the physical performance, coupled with effective treasury management that translates into a strong financial performance. And so let me take you through the highlights of our physical performance during the year gone by; the order book position, the execution plan for the current orders and also give you a glimpse of the future outlook of the company.

We started the last financial year that is FY ’23 with an order book of INR24,147 crores. That comprised of seven projects, including 24 marine platforms. Three for the Indian Navy, that is the P17 Alpha projects for three warships, four Survey Vessel Large ships and eight antisubmarine shallow water crafts. There is total 15 ships from these three projects for the Indian Navy, one project for the Indian Coast Guard of Fast Patrol Vessel project comprising of one ship, because we had already delivered four ships earlier, so one ship was remaining.

A project for the Government of West Bengal, an electric ferry, we call it the next-generation electric ferry. One project comprising of six Patrol Boats for the Government of Bangladesh and another export project for the Cooperative Republic of Guyana, a passenger cum cargo vessel. So total seven projects, 24 marine platforms. Of these, we have completed two projects, the Fast Patrol Vessel project for the Indian Coast Guard. We delivered the ship on 31st of December last year, 31 December, 2022 as against a contractual date of 31 January, 2023. That means a month ahead of schedule. We also delivered the passenger cum cargo vessel for the Government of Guyana on 12th of December 2022, well ahead of schedule.

In addition, we have completed seven launches. Now launch is a very main production milestone in the construction cycle of a warship, so we completed seven launches during the year gone by, that is FY ’23, 1 Fast Patrol Vessel, one Ocean Going Vessel, two anti-submarine shallow water crafts, two survey vessels and of course, the prestigious P17 Alpha, the second ship of the P17 Alpha project. In addition, we also laid keel for six ships, that is five antisubmarine shallow water crafts and one vessel for the Government of West Bengal, the next-generation ferry.

As mentioned, of the seven, we have completed two projects during the year. And I shall now brief you — I shall brief you regarding the status of the ongoing projects. The P17 Alpha project is now at a phase where the physical construction is reaching its mid-project phase. The first ship, we already completed 50% of construction, the second ship following closely with around 45% of construction, and the third ship chugging along fast at 30% of construction. We intend delivering these ships commencing mid-2025, and shall complete the delivery of these ships during mid-2026.

Coming to the Survey Vessel Large project, the first ship has already achieved plus 80% physical construction, the second ship following very, very closely with over 70% construction, the third and fourth ship with 55% and 40% of physical construction. Of these, the first ship is now at the trial phase and we intend delivering this ship this year. The last of these ships, which I had mentioned has now touched a physical progress of around 40%, shall be launched during mid-June this year. If you look at this project as a whole, as I had mentioned, the first ship delivery will commence this year and we should complete this project during the next year, that is 2024-2025.

Now coming onto the antisubmarine shallow water craft project. We have already launched two of these ships, and both these ships have touched plus 50% of physical progress. The third ship is planned to be launched during mid of June, and the delivery of these ships are planned between 2024 and 2026. The next-generation ferry that we are presently building for the Government of West Bengal, we intend delivering this ship during the Q3 of the current financial year, targeting November for delivery. And the last project, that is the Bangladesh Boats, the Patrol Boats for the Government of Bangladesh, we intend delivering this ship during the current financial year.

The last financial year ended with an order book of INR25,111.29 crores. How the figure has gone up is through a contract conclusion that we achieved with the Indian Navy for four number next-generation Ocean Going Patrol Vessels. We concluded the contract with Navy on 30th of March 2023 with an order book — order value of approximately INR3,500 crores.

Product diversity has been our USP, unique selling point. And with our project — products ranging from warships to Bailey Type Portable Steel Bridges to marine diesel engines, we have taken this level of diversity to another level, having concluded a contract with the Indian Navy for provisioning supply of 10 Naval-standard gun, 30 mm Naval-standard guns with an order value of around INR250 crores. This contract has been concluded very recently.

Coming to the Bailey Bridges segment. As I had stated during our earlier interactions also, we own around 60% to 65% of the Indian market. And last year, we had concluded an MOU with the Border Roads Organization, one of our major customers for 30 modular bridges. And this year, on 7th of May this year, we have signed an MoU for another 30 bridges.

In addition, during the last financial year, we have been accorded the Green Channel certification, the only Indian organization manufacturing Bailey Bridges to be certified by the Quality Assurance organization of the government. In this segment, we’re also executing an order for the Government of Bangladesh, again, for modular bridges.

On the marine diesel engine segment, hitherto, we have been only assembling, testing and carrying out trials of diesel engines. These engines come in semi-knocked down, or fully knocked-down condition from our partners, and we used to assemble these engines, accept [Phonetic] and hand over to the customer.

In the last year, we have moved a step ahead and concluded an MoU with the Rolls Royce for localization of high-speed engine. We expect good dividend once this MoU is translated into a license agreement, as these engines are in high demand for our major customers that is the Navy and the Coast Guard.

Another vertical that we have been providing impetus over the last year and a half to two is on ship repairs. We have taken over three dry docks from the Kolkata Port Trust during end ’21. And these three docks that we have taken over from KoPT, that is the Kolkata Port Trust, have been almost having 100% occupancy. And we have been carrying out refits of Coast Guard ships and commercial vessels in this facility.

Going forward, our aim is to consolidate the strength that we have from a very healthy order book and conclude and execute the existing orders, with the last order, that is the next-generation Ocean Going Patrol Vessel by FY ’27 — ’29, and while we execute these orders also bid aggressively to get new orders that have unbundled [Phonetic].

Having covered our physical performance, I shall now share the highlights of our financial performance. We had recently declared our audited financial results, and I’m really happy to inform you that in terms of financial performance, FY ’23 has been the best ever in the history of our company.

The revenue from operations have gone up by over 45%, that is 45.7% from INR1,754 crores during FY ’22 to INR2,561 crores during FY ’23, and so has the total income gone up from INR1,918 crores, INR1,918 crores to INR2,763 crores, with the EBITDA going up from INR294.88 crores to INR351 crores, registering a growth of 19%. The PAT going up from INR189.53 crores to INR228 crores, that is a growth of 20%.

Our earnings per share has gone up from INR16.55 to INR19.91, registering a growth of 20%. The PE ratio, moving up from 13.68 to 22.88. Our net worth going up by 12.5% from INR1,257 crores to INR1,413 crores. And return on net worth correspondingly has seen a growth of 20% from 15.07 to 16.14.

With this, I conclude my introductory remarks. And the moderator could take on and steer the questions, please?

Questions and Answers:

Operator

Thank you very much, sir. [Operator Instructions] We take our first question from the line of Amit Dixit from ICICI Securities. Please go ahead.

Amit Dixit — ICICI Securities — Analyst

Yeah. Hi. Good afternoon, everyone, and thanks for taking my question, sir. I have couple of questions. The first one is essentially on the revenue booking that we are expected to do in this year. Looking at your platforms, the Patrol Boat would be delivered sometime this year. The frigates are in advanced stage of where you have peak revenue bookings. So just wanted to get an idea of how much revenue booking we are looking for this year and possibly if you can mention for FY ’25 as well.

P.R. Hari — Chairman and Managing Director

Thank you, Mr. Amit. See, we have had interactions earlier on the revenue generation from the 2022 to financial year ’28, that is when the current order book excluding the next-generation OPVs are going to be completed. Now during the last year, when the projects had — with the delivery of two ships that is the vessel for the Government of Guyana and the Fast Patrol Vessel, and with the other projects reaching a level of production maturity, wherein the equipment go in, we have registered a growth of around 45.7% and recorded a revenue of INR2,561 crores.

Now coming to the current year and the next year, that is the FY ’24, ’25, and ’26, as I had mentioned, majority portion of the current order book is from the — is the P17 Alpha project. And within this project, the first ship has touched, as I had stated 50%, the second ship following close by with 45% and the third ship at around 30%. And if you’re taking a shipbuilding cycle, this is the phase, when a ship is moving from 40% to 60% is that equipment go in. And when the equipment go in and definitely, high-value equipment, it is where the equipment go in and the cost of equipment is directly proportional to the revenue generation.

So, we are very confident and as per our build strategy and the production schedule, we expect to maintain an upward trajectory during ’24, ’25, and ’26. That’s all I can — I’m not giving you figures. But you know the current order book position is INR25,000 crores at the commencement of the financial year. We have also stated that the projects are in a stage where equipment will go. And I also mentioned that we are on an upward trajectory. So, we expect to touch the peak revenue generation during the coming three years, that is ’24, ’25 and ’26. The process has already started. Actually in FY ’22, we were just hovering around 1,500, 1,600, 1,700 up to 2022. Now the lead has started and again, I’m reiterating that we will be able to maintain this upward trajectory.

Amit Dixit — ICICI Securities — Analyst

Okay. Thanks, sir. That’s helpful. The second question is essentially on the next-generation corvette. Now, this particular project has figured in the standing committee of different report also that till FY ’25, the orders that we have mentioned that they are likely to complete, this particular project fits in over there. So just wanted to get the current status of this thing and where we are in the — I mean, if there are any approvals pending or something, I mean, just wanted to get an idea of that.

P.R. Hari — Chairman and Managing Director

Thank you. Thank you, Amit, again. I’ll give you and other investors and analysts who are online a broad overview of this particular project. Why we are very interested in this project is, this is one project that we’re eagerly looking forward to. The AoN, the Approval of Necessity was accorded by the Defense Acquisition Council for this particular project during May-June 2022. Now the process thereafter is that, once an AoN and the AoN value is approximately INR36,000 crores, is the high value project. And this project is for eight ships and as per the thought process of the customer that is the Navy, this project is going to be split between two shipyards, with the L1 shipyard getting five ships and the L2 shipyard getting three ships.

The project — the requirements, that is the specifications and the customer requirements are being finalized. And as per the Defense Acquisition procedure norms, we expect the RFP for this project to come out sometime during the second half of 2024. Once the RFP comes out, then the process of bid submission and toll [Phonetic] collection, all those things will go on. And as you rightly said, the contract is expected to be signed with both the L1 and L2 shipyards sometime during 2025. We expect it to be mid-2025.

Now, again, I would like to expand on this particular project, that as I had mentioned, it’s a very, very high-value project, that is INR1,000 crores for a single project with L1 shipyard getting rather 5/8, so that comes to around INR23,000 crores to INR24000 crores. And our strategy would be to go aggressive on getting this five ship order purely because of the captive expertise and experience that we have at GRSE for building corvettes for information. And I’ve stated this before and some of you know that we are the only Indian shipyard to have built and delivered nine corvettes, both missile and anti-submarine warfare corvettes to the Indian Navy, and all nine of them are with Navy and doing active service for the nation. So in a nutshell, high-value project, AoN accorded, the requirements being finalized by Navy, RFP likely to be out during end — second half of ’24, that is calendar year ’24, and order likely to be during mid calendar year ’25.

Amit Dixit — ICICI Securities — Analyst

Okay, sir. That’s very helpful. Thanks so much. And all the best.

P.R. Hari — Chairman and Managing Director

Thanks.

Operator

Thank you. We will take the next question from the line of Dixit Doshi from Whitestone Financial Advisors. Please go ahead.

Dixit Doshi — Whitestone Financial Advisors — Analyst

Yeah. Thanks for the opportunity. You mentioned an order book of around INR25,100 crores. Can you give a breakup of the order book in terms of P17 Alpha, ASW, and Survey Vessel Large?

P.R. Hari — Chairman and Managing Director

Sure, sure. Yes, let me just go through the figures. Yes, the order book value is INR25,111 crores and this comprises of four Survey Vessel Large, three P17 Alpha, and eight antisubmarine shallow water crafts, and, of course, four next-generation OPVs. So for the P17 Alpha, we have around INR14,000 crores, that is 47% of the order is from the P17 Alpha project and the other three projects put together and, of course, the miscellaneous orders come to balance 53%.

The Survey Vessel Large project, we have INR1,470 crores and antisubmarine shallow water craft project, we have around INR5,500 crores. And the NGOPV project, recently concluded contract, we have around INR3,500 crores. This is the breakup, if you’re speaking about the high-value items, P17 Alpha around INR14,200 crores, the Survey Vessel around INR1,470 crores, the antisubmarine shallow water craft around INR5,500 crores and the next-generation ocean going patrol vessels INR3,400 crores.

Dixit Doshi — Whitestone Financial Advisors — Analyst

Okay. [Speech Overlap]. Yeah. Sure. Now second question is, obviously, you touched upon that over next three years, we will see the upward trajectory of the revenue. But just to — so basically P17 Alpha and ASW are up for delivery over the next two and a half years. So is it fair to assume that at some point of time, we can do almost like INR5,000 crores, INR6,000 crores of top line over the next three years in any particular year?

P.R. Hari — Chairman and Managing Director

So see, first point I would like to clarify is that the survey vessel deliveries will start coming out — start coming from this year. But as you can see, survey vessel, we are just left with around INR1,400 crores, all four ships put together. And yes, P17 Alpha, we have around INR14,000 crores left remaining in the order book and the antisubmarine shallow water craft around INR5,000 crores.

Now coming to the deliveries. The survey vessel project will finish between — that is FY ’24 and ’25. The antisubmarine shallow water craft deliveries would commence from FY ’24 and move on till FY ’27. And the P17 Alpha, the delivery will commence — because there are only three ships, of course, high value, very, very high-value ships. The P17 Alpha delivery will commence from FY ’26 and end in FY ’27. I hope you got it. So mid of calendar year 2025 and end at the middle of calendar year 2027 [Phonetic]. It moves over to FY ’27. So, yes, there is a definite possibility of the order book touching the figure that you mentioned. If you see a portion of the order book value that is remaining, and this could be in — that is the FY ’25 or FY ’26.

Dixit Doshi — Whitestone Financial Advisors — Analyst

Okay. And my last question from my side. On the recently received order of 30 mm Naval Surface Gun, so I think this is the new area where we are entering this year. So if you can broadly touch upon that? Do we have those kind of expertise or the capacity? I mean the — we will require the plant or capex? And any partnership we will be required to execute this order, and if you can just touch upon the execution timeline and margins in such business?

P.R. Hari — Chairman and Managing Director

Okay. Thank you. Thank you, again, Mr. Doshi. Yes, we are very excited about this project because this is the first time that an Indian public sector undertaking rather than a core weapon manufacturer venturing into gun manufacturing. And we have made a tagline, From Warships to Weapons, that is our tagline now. Here, this is a part of the government’s trust on indigenization. So far in the shipbuilding scenario, we have been able to attain almost 100% indigenization on the float part, that is the HAL, that is the steel and associated fittings. They’re all 100% indigenized.

Coming to the move part. Move part means propulsion systems. Maybe we are at around 60% to 65%, and the fight part. Fight is where the weapons and sensors come, where we as a nation was lagging behind. And the trust of the government has been over the last few years to provide an impetus to indigenization in this front also. These are some of the initiatives that the government has cleared, and we have definitely moved ahead in this direction and we have concluded a contract, as you mentioned for 30 mm gun. 30 mm Naval-standard guns for the Navy. The first order is for 10 mm gun. And yes, we are collaborating with reputed OEMs for this project.

And since you asked about the execution timeline, it is between 12 months to 18 months. We intend to complete this project between 12 months to 18 months. And here, again, business opportunities are huge because once we indigenize this product and considering that the government’s trust is on the indigenization of weapon systems, after this project is executed, we expect future orders in this line. Project execution time, 12 months to 18 months.

Dixit Doshi — Whitestone Financial Advisors — Analyst

So any more [Speech Overlap]

P.R. Hari — Chairman and Managing Director

Sorry. Did I miss the finance — you asked about the margin. Margins are between 7% to 8%.

Dixit Doshi — Whitestone Financial Advisors — Analyst

Okay. And any other defense manufacturing we are targeting? Anything on the ammunition or any more defense equipments?

P.R. Hari — Chairman and Managing Director

I think we have our plate full. We are one of the biggest defense manufacturers building warships for the Navy and Coast Guard, with 106 warships only to Navy and Coast Guard. So, I think our hands are full. And of course, we are also providing this Portable Steel Bridges to army and the Border Roads organization, now these guns. And also, we have already diversified into Deck Machinery that is fitted onboard for warships. And definitely, I had mentioned earlier during my introductory remarks on the marine diesel engines, the high-speed diesel engines, which are, again used on those warships. So, I feel — we’ll limit it to it at this moment and unless some new technology comes in, we will definitely explore such opportunities also.

Dixit Doshi — Whitestone Financial Advisors — Analyst

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

P.R. Hari — Chairman and Managing Director

Thank you.

Operator

Thank you. [Operator Instructions] We take our next question from the line of Harshit Kapadia from Elara Capital. Please go ahead.

Harshit Kapadia — Elara Capital — Analyst

Thanks for the opportunity, sir. Just few questions from my side. I just missed your initial part. Can you highlight what is the order inflow decline for GRSE? And secondly, any update on the next-generation corvette order, which you got the AoN approved in the month of May 2022, when it is likely to be tendered out and what is your expectation there, sir?

P.R. Hari — Chairman and Managing Director

Thank you, Mr. Harshit. I had mentioned this earlier. I’ll first come to the next-generation corvette. I had addressed this question during an earlier query from one of our other investors. Next-generation corvette, as you rightly said, the AoN has been accorded during May, June last year. Right now, the technical requirements are being finalized by the Navy. And the project is for around INR36,000 crores for eight warships of the corvette class. And we expect the RFP to come out during the end of calendar year 2024 and the contract with L1 and L2 bidders would be — and this project of eight ships is going to be split between two shipyards, with the L1 shipyard getting five ships and the L2 shipyard getting three ships. And the contract is expected to be signed during 2025 calendar year.

Well, coming to the order book, you must have already listened that the order book stands at INR25,111.29 crores at the end of the last financial year. And now since you asked about the orders out of pipeline, what we expect or what is on the anvil? One 14 Fast Patrol Vessel project for the Indian Coast Guard, the RFP is already out and soon we would definitely be submitting our bid for that. This could be in the tune of plus INR1,000 crores. And six Ocean Going Patrol Vessels for the Indian Coast Guard, again, the RFP is out and we’ll again be submitting the bid for this. And two more projects, one one-off project for Coast Guard for a cadet training ship and a project for the NCPOR, that’s the Polar and Oceanographic Research Center, which comes under the DRDO. They also come out with a one-off ship, a research ship, polar research ship, which the order value could be between INR750 crores to INR1,000 crores. So these are the four RFPs which are live as of now.

And, of course, the next-generation corvette, which I just discussed, which is in the offing maybe end ’24 — second half of ’24, the RFP will come out. Navy has already come out with an RFI for 21 water jet FACs. The response has been given by all of us, all of us that’s in the four defense shipyards and the other private players. And we expect the RFP to come out in 2024. Two multipurpose vessels from Navy, RFP likely to come out in 2024. Order value could be in the range of around INR1,500 crores. 120 Fast Interceptor Crafts, again, for the Indian Navy. RFP expected 2024-’25. Five next-generation survey vessels.

This is similar to the survey vessels that we are currently building. These ships could be with some more advanced features. That’s why they’re called next-generation survey vessels. RFP likely to come out in 2025, a hospital ship for the Indian Navy. RFP expected 2025. 18 next-generation Fast Patrol Vessels for the Indian Coast Guard. ’25-’26, the RFP could come out. And 22 interceptor boats for the Indian Coast Guard. RFP expected in 2025. So, this in a nutshell are the orders that are on the anvil, or this could be between any of the capable and qualified shipyards among the names that I mentioned.

Harshit Kapadia — Elara Capital — Analyst

And sir, what about the Landing Platform Dock, sir?

P.R. Hari — Chairman and Managing Director

Yeah. There are four Landing Platform Docks. This again is the high-value order, could be in the range of between INR25,000 crores to INR30,000 crores. The RFP is expected 2025-’26. Yes, I had missed that. So, these are the RFPs, which are in the pipeline over the next two years to three years.

Harshit Kapadia — Elara Capital — Analyst

And sir, what has been the key reason why we are not able to clean up our EBITDA margins, sir, despite our revenue rising to an all-time high in FY ’23? So if you can share something, it would be really helpful, sir.

P.R. Hari — Chairman and Managing Director

See, if the EBITDA margin is directly proportional to revenue from operations, I should have had a 44% EBITDA margin. So, I mean, even I would love that. But please understand that shipbuilding — I’ve explained this before, shipbuilding is a process where the margins are relatively in the range of 7% to 10%. Now in case of shipbuilding any — I’m not speaking about EBITDA margin, I’m speaking about the PAT margin. If the PAT margin is between rather anything plus 7% to 7.5%, which is considered good.

Now coming to GRSE. GRSE currently has got — I’m not speaking about small orders, which will not have a consequential effect on the overall order book or the revenue. Let me take the four projects that we’re executing, major projects, that is the P17 Alpha, the survey vessel, the antisubmarine shallow water craft, and NGOPV. In case of P17 Alpha, that was a fixed price contract which was awarded to GRSE and the profit margins, it came on a nomination basis which you’re familiar with. The profit margins are around 7.5%.

Now in case of the other three projects, we have won them on competitive bidding, competitive bidding against competitors including private shipyards where the margins are visible [Phonetic]. And still, we have been able to maintain PAT margin above 7.5% last year. Our revenue from operations is — rather in total is INR2,763 crores. The PAT was INR228 crores, that comes to 8.26%. So as we have discussed earlier, GRSE has been able to maintain and will maintain profit margins as well PAT margins above the level that we have mentioned, that is around 7% to 7.5%.

Operator

Sir, I’m sorry to interrupt, you may please come back to the question queue. Thank you. [Operator Instructions] We take the next question from the line of Shalini Gupta from East India Securities. Please go ahead.

Shalini Gupta — East India Securities — Analyst

Yes. Good afternoon, sir. Sir, just two, three questions at my end. Sir, you have said that the nomination contracts guarantee you a 7.5% EBITDA margin and a 5% PAT margin. Sir, in financial year — sorry?

P.R. Hari — Chairman and Managing Director

Yeah. Please go ahead. I’ll answer the question together.

Shalini Gupta — East India Securities — Analyst

Yeah. And then in financial year — sorry?

P.R. Hari — Chairman and Managing Director

Please go ahead, ma’am.

Shalini Gupta — East India Securities — Analyst

In financial year ’23 itself, our EBITDA margin was around 5.8%, so lesser than the figure guaranteed for you from your nomination contracts. So sir, my question here is this. My question here is this that earlier you have said that you won several projects where the price — where the bidding was very competitive. So now going forward, should we expect EBITDA margins less than what we saw in financial year ’23? I’m not talking about PAT margins because they have a huge element of other income, but operationally, that is the EBITDA margin. Should we expect lesser than what we saw in financial year ’23, which is 5.8%?

P.R. Hari — Chairman and Managing Director

From the investor perspective, now GRSE has been giving an EPS of INR9 [Phonetic], that is 20% rise in our EPS. The market price have gone up almost 100%. PE ratio has gone up. PAT, finally, what translates into the dividend and the market appreciation is the PAT. We had mentioned the EBITDA margin. I will answer your question, direct question, EBITDA margin for 2023 — financial year 2023. GRSE’s total income, INR2,763 crores, EBITDA INR350 crores, INR2,763 crores by INR350 crores translates to 12.7%. So the EBITDA margin is not 5.5%. It is [Speech Overlap]

Shalini Gupta — East India Securities — Analyst

Sir, it does not include other income.

P.R. Hari — Chairman and Managing Director

One second. I’ll answer. One second, ma’am. Now, we will say other income. What is other income? I had mentioned at the beginning how does the company function successfully, is through effective treasury management. Other income is the operational capital. That is what we use for running our projects. If we do effective treasury management of that amount, how can it be taken out of our EBITDA, how can it be take note of our operational income?

Shalini Gupta — East India Securities — Analyst

Sir, there is a special reason for this. The reason is that the other income comes from a body of revenues, which will go out of your book once your large projects like the P17 Alpha is completed. Because the P17 Alpha projects will peak somewhere in 2025-’26. And thereafter, the large portion of other income will come down. That is the way the contracts are structured. That’s what I have understood. So, that is why we are always focused on EBITDA without the other income.

P.R. Hari — Chairman and Managing Director

What should the — I mean, I would not contest that, but it’s the cycle. When P17 Alpha is completed, GRSE is not going to end. When P17 Alpha gets completed, some other project will come in, high-value projects will come in. That’s all we all exist for. And the second part is the PAT, which again translates into the dividend is increasing. We have registered over 20% growth from the last year.

So I mean, I can only say that these are the values that are available. And other income, I reiterate that other income — suppose if we do not do effective treasury management, would we be able to generate so and so amount from our working capital? We would not be. Yes, when this gets into production and when it is replaced for the projects, our operating income automatically will increase, and more projects will come. So, I do not agree that the EBITDA margin is 5.8%. We’re very, very confident. And I reiterate the fact that the EBITDA margin is 12.7%, and the PAT margin, of course, it is 8.26% as I mentioned.

Thank you, ma’am.

Operator

Thank you. We take our next question from the line of Umesh Raut from PhillipCapital. Please go ahead.

Umesh Raut — PhillipCapital India — Analyst

Good afternoon, sir. Thank you so much for the opportunity. My first question is more structural in nature. So if I look at medium to long-term pipeline, I observe about five to six large marquee projects coming in from the Indian Navy. So whether it is next-generation destroyers, next-generation frigate, next-generation corvette, submarine, LPDs. So basically, in your view, how Indian Navy will prioritize in terms of acquisition pipeline within all these projects, considering that they will certainly have a funding constraint as well?

P.R. Hari — Chairman and Managing Director

Thank you, Mr. Umesh. Yes, there are high-value projects that are coming in. Some of them that is the NGs, next-generation corvettes. Maybe it’s already got an AoN. And as I mentioned, that is for about INR36,000 crores. I deliberately not touched upon the next-generation destroyer project because it is still in liquid form. We expect it to get crystallized — the projects could get crystallized in the coming year and thereafter, the RFP will come out. And also coming to the other major projects, high value, I’m only speaking about the high-value projects that are going to come from the Navy.

One would be the Landing Platform Dock, LPDs. So, these are the three high-value projects that are going to come out from the Navy. And if you’re looking at medium-value projects, we have a project of five next-generation survey vessels, which could be in range around INR3,500 crores to INR4,000 crores. And on a similar line, even Coast Guard has got high-value projects in next-generation patrol vessels, Fast Patrol Vessels coming up.

Now the government allots budgets financial year wise depending upon the progress of the projects, which are already been sanctioned, and the fund flow that is expected through award of new contracts. So, I don’t see budget constraints as an issue at all with respect to project approval or orders in the coming years. And because these are required for the Navy, because this has already been approved in the long-term perspective plan of both the Navy and the Coast Guard.

Now coming to the our, that is GRSE has taken that, especially the next-generation corvettes, the Fast Patrol Vessel, which is one of our niche products, the survey vessels and the Ocean Going Patrol Vessels that are going to come for the Coast Guard, where the RFP is already out, it’s got a very good chance of becoming L1 or L2 wherever it is a split order.

Coming to your specific question of high-value projects, that I already answered, and as far as the budget constraints or limitations that comes in, I don’t see any issue. Just to give you an example, there are — and of course, the government’s focus is on maximum indigenous production.

Now of the 43 platforms that are being constructed for the Navy today, 41 are being constructed at the Indian shipyards, and the Coast Guard 100%. Nine platforms are currently included, all nine by Indian shipyards. Now between Coast Guard and the Indian Navy, I’m keeping F8, that is keeping F8, plus smaller vessels like fast interceptor crafts or fast interceptor boats, which are going to come out in large numbers, I’m just keeping them out of the current calculation. The numbers of medium and large-sized platforms range between 45 to 46 for Navy, and similar number for the Coast Guard. So this in a nutshell is the orders in the pipeline in the coming year.

Umesh Raut — PhillipCapital India — Analyst

Got it, sir. Sir, my second question is pertaining to antisubmarine warfare shallow water craft. So, we are hearing from the media news that there are some supply issues around engine set, which required to come from the European countries. And basically because of that, delivery can get stretched beyond the expected timeline. So what is your view on this?

P.R. Hari — Chairman and Managing Director

Thank you, again, Mr. Umesh. We do not have any issue with respect to propulsion engines, main engines which are coming from abroad. As a matter of fact, since you asked the question, we have already launched two ships. Two ships means in the next financial year, the engine set have been already lowered. We have already launched two ships of the project as per the production timelines. One more ship, we are launching during mid of June, where the engines are already being lowered. The next two ships, we plan to launch in September, engines already lowered. As far as GRSE is concerned, there are no issues with respect to propulsion engine or the main engine coming in from abroad. Thank you.

Umesh Raut — PhillipCapital India — Analyst

Got it, sir. Thank you.

Operator

Thank you. We take our next question from the line of Vivek Namashivayam [Phonetic] from Shanti Financial Services. Please go ahead.

Vivek Namashivayam — Shanti Financial Services — Analyst

Yeah. Thank you. My question is regarding [Speech Overlap]

Operator

Sir, please use the handset, and come a little close to your mic. Your audio is not very clear, sir.

Vivek Namashivayam — Shanti Financial Services — Analyst

Yeah. Is this audible?

Operator

No, sir. Please use the handset.

Vivek Namashivayam — Shanti Financial Services — Analyst

I’m on a handset now. Is it better?

Operator

Yes. Please go ahead.

Vivek Namashivayam — Shanti Financial Services — Analyst

Yeah. So yeah, thank you. Congratulations again for sustaining and improving performance. If I see the overall record of GRSE as a firm over the last 10 years, 11 years, sales has been more or less flat for nine years, and then in the last one or two years, it’s shown exponential growth. And if I see the operating profit in 2012 and 2021 or 2022, they are more or less the same, which is INR144 crores in 10 years. So what has really changed?

I know it’s been — there have been ups and downs, but I’m just talking, when I look across a broad timeframe. But in the last one, two years, there has been exponential growth, which as was already discussed is not contributing to the same amount of our PAT growth except for in this year. My question is understanding that the next two years, three years is going to be very good revenues, will there be a significant impact or reflection on the PAT growth in the next two years? Because except for this year, PAT has not really grown much over so many years. And in the next two years, will there be a reflection on PAT growth significantly, given that the top line is expected to grow very high till ’25, ’26 as was stated? Thank you.

P.R. Hari — Chairman and Managing Director

Thank you, Mr. Vivek. As you rightly said, our sales revenue has been more or less flat for a substantial period of time. And it started picking up — actually from ’18-’19 onwards. In ’18-’19, we were touching around INR1,386 crores [Phonetic]. ’19-’20, we [Technical Issues] INR1,400 crores [Phonetic]. Then we had a dip during the COVID years. So, I’ll just take the COVID year off. Till last year ’21- ’22, this then touched our highest revenue of INR1,354 crores [Phonetic].

And this year, as you rightly said, there has been exponential spike. Versus today, this year, the revenue from operations is around INR2,561 crores. And if you are just taking the PAT as well as revenue from operations, PAT then ’18-’19 was INR109 crores, then INR163 crores, the INR189 crores and INR228 crores now. Now why the spike has occurred? I’ll first answer the question, then come on to your specific question on maintainability of PAT. Why has the order — sales gone up? Why has the PAT correspondingly increased?

We have an order book — we had an order book of plus INR20,000 crores from 2000, that is FY ’16 itself. But in shipbuilding, translation of an order book into revenue recognition happens at a certain phase. After FY ’16, then we got two more projects during FY ’19 that is the antisubmarine shallow water craft and Survey Vessel Large projects. Now if you look at revenue recognition, it peaked and then touches between 40% to 60% where the equipment going — high-value equipment going and then buttoned-up onboard and so on. So considering the project maturity at this stage, with the first of the P17 Alpha ships, I’m in the middle of that phase, that is 50%. The second ship is just creeping into that phase and the third [Phonetic] is following.

We are actually in a phase where — and of course, followed by the other smaller projects that is antisubmarine shallow water craft and survey vessel. One of the ships has crossed that phase. I was answering to a previous query, I had stated that we just got about INR1,400 crores left in the order book for the survey vessel project and around INR14,000 crores in the P17 Alpha project.

Yes, the revenue will peak during the next three years that is by ’24, ’25, and ’26. Now coming to your question. The PAT will definitely increase. We expect to maintain a CAGR — similar CAGR over the next three years with respect to PAT. I’m not assuring any exponential price, but we can assure a CAGR of what has been maintained so far between ’18-’19 and ’22-’23, We’ll maintain that for the next three years to four years. Thank you.

Vivek Namashivayam — Shanti Financial Services — Analyst

Thank you, sir. Thank you. Sir, if I’m allowed, just one more question. Now you are one — you are the leading shipbuilding organization in the country. Let’s suppose — and business is divided across the various shipyards. Is it possible that if there are very, very bulky orders, which need to be delivered in a short timeframe, the organization has sufficient scale to be able to manufacture as per the needs of the Navy, is it possible? Or you can only do as much as capacity that you have? Thank you.

P.R. Hari — Chairman and Managing Director

Thank you, Mr. Vivek. Very interesting question. GRSE has — some of you are aware, some of you may not be aware, GRSE perhaps has a very unique shipyard where we have three independent — fully independent shipbuilding facilities, all based at Kolkata. And all of them have captive shipbuilding infrastructure. With two of these facilities fully capable of end-to-end production, when I say end-to-end production it means from extracting [Phonetic] to delivery with adequate number of dry docks because in shipbuilding, the major requirement are dry docks and building berth, adequate number with enough length and breadth and displacement capacity is available with us here.

In addition to that, the moment we decided that we will be venturing into shipbuilding, we did not want to dilute our shipbuilding captive in project. So, we immediately went in for a long-term strategic lease with the Kolkata Port Trust for additional three docks. What I’m trying to convey is that we did not want to dilute our shipbuilding process. So as far as the capability, one, capacity and the infrastructure and facilities are concerned, there is no shortage. We’ll be able to meet the Navy’s or the Coast Guard’s requirements.

Now the capacity of the shipyard is assessed regularly by customer. They have a structured system for assessing the capacity of the various shipyards, not by us, every shipyard. And whenever they place an order, that is always placed after assessing this capacity and that’s how we have been getting these orders. Now coming to the point and answering your question, yes, we will be able to meet the needs and requirements of the customers.

And strategy, now adding on to this particular answer that I gave, as a strategy to facilitate concurrent construction, now we are executing a project, eight ships projects for antisubmarine shallow water crafts for Indian Navy. We as a strategy, have gone into a PPP model with one of our private friends, private partners and we have made a partnership model with them, wherein part construction is being done at this particular shipyard. So that will enhance the production. So as far as captive capacity, absolutely, no issues. To enhance the pace, we will be going in for partnerships also. Thank you.

Operator

Thank you, sir.

P.R. Hari — Chairman and Managing Director

Thank you. Thank you. We take next question from the line of Harshit Kapadia from Elara Capital. Please go ahead.

Harshit Kapadia — Elara Capital — Analyst

Yeah. Thanks for the question again, sir. Just wanted to check, what is the cash on balance for GRSE, your own cash on balance?

P.R. Hari — Chairman and Managing Director

One second, please. It is written on somewhere.

R.K. Dash — Director of Finance and Chief Financial Officer

Yes, own cash, INR140 crores, the project cash INR4,421 crores. Total INR4,561 crores.

Harshit Kapadia — Elara Capital — Analyst

Understood, sir. Thanks for that. And also just want to check with you, sir, when we look at other shipyards which are listed, there they are enjoying upwards of 10% kind of a margin even at PAT level, whereas you’re at 7.5%. So where is the difference? Is it the scale which is the difference? Or is there some efficiency, which the other shipyard has and probably, which is not available with GRSE? What is the reason why other shipyards are able to do what GRSE is not able to do?

P.R. Hari — Chairman and Managing Director

Okay. First point, I would like to say that the EBITDA margin — if you’re talking about EBITDA margin, EBITDA margin for the financial year ended 31st March is 12.7%. I do not agree with this figure of 5.8%. Keeping that apart, we can have our own calculation methodology and perception. And now if you are — there are only two more shipyards in India that are listed, the Cochin Shipyard and the Mazagon Dock Limited.

If you’re comparing, I would just state that the projects, which are being executed by these shipyards are on a nomination basis. the major projects. Whereas GRSE currently has one nominated project that is the P17 Alpha and the balance three projects — major projects have been won on competitive bidding. So it’s the same. If you analyze this over a period of time starting from now, you may like to do the comparison after a couple of years where each entity stands.

Operator

Thank you very much, sir. Ladies and gentlemen, due to time constraints, that was the last question. I now hand the conference over to the management for closing comments. Over to you, sir.

P.R. Hari — Chairman and Managing Director

Thank you, Vikram.

Ladies and gentlemen, we had a very fruitful interaction over the last one hour. And I’m sorry, I would have loved to answer more queries, but we are short on time. And I’m hopeful that, if not all, most of your queries have been adequately addressed.

We intend to live on the strength of our healthy order book and focus on timely execution of the ongoing projects. We are very confident that we have very clear execution strategy. We shall also be focusing on product diversification. We already started the process and we’ll further consolidate on this along with the new technology adoption. Exports shall be another focus area where we have made some inroads and of course, ship repair and the portable Bailey Bridges.

I would like to close by again bringing up the issue of margins, which we have been battling this margin perception over the last few interactions. And my sincere request to the analysts especially is that the profit after tax is increasing steadily. Second, what you talk about other income has been generated through effective treasury management from our own working capital. Once we both are on the same page, perhaps we’ll have a clearer understanding about each other.

Thank you. And thank you once again for sparing your valuable time to attend this con call. Thank you.

Operator

[Operator Closing Remarks]