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ITD Cementation India Limited (ITDCEM) Q1 FY23 Earnings ConCall Transcript

ITD Cementation India Limited (NSE:ITDCEM) Q1 FY23 Earnings Concall dated Aug. 17, 2022

Corporate Participants:

Prasad Patwardhan — Chief Financial Officer

Jayanta Basu — Managing Director

Analysts:

Anshuman Ashit — ICICI Securities — Analyst

Mohit Kumar — DAM Capital — Analyst

Vibhor Singhal — PhillipCapital — Analyst

Parikshit Kandpal — HDFC Securities — Analyst

Abhay Lodha — Sanmati Consultants — Analyst

Vijay Sadla — VL finance — Analyst

Dakshal Shah — Invexa Capital — Analyst

Saket Kapoor — Kapoor Company — Analyst

Venkat Subramanian — Organic Capital — Analyst

Presentation:

Operator

Good morning, ladies and gentlemen. Welcome to Q1 FY ’23 Post Results Conference Call of ITD Cementation India, hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Anshuman Ashit from ICICI Securities. Thank you and over to you, sir.

Anshuman Ashit — ICICI Securities — Analyst

Thank you, Lazan. Good morning, everyone, and welcome to the Q1 FY ’23 post-results conference call of ITD Cementation India Limited. Today, we are pleased to host the management of ITD Cementation, which is represented by Mr. Jayanta Basu, Managing Director and Mr. Prasad Patwardhan, CFO.

I would now like to hand over the call to Mr. Jayanta Basu for his initial remarks, after which, we will open the session for the Q&A. Thank you, sir, and over to you.

Prasad Patwardhan — Chief Financial Officer

Thank you, Anshuman. Good morning, everyone, and welcome to our Q1 FY ’23 results con call. This is Prasad Patwardhan, CFO. I will take you through the financial performance, the highlights of our financial performance in this quarter, and then hand over to Mr. Basu for his initial comments.

We are pleased to have shared with you that we are starting this financial year on a very positive note and have reported strong financial performance in this quarter. Our total operating income has crossed INR1,000 crores once again. We are at nearly INR1,100 crores as compared to INR826 crores. So this gives us an increase of 33% on a Y-on-Y basis. EBITDA is at INR101 crores in this quarter as compared to INR85 crores a year back, which gives us a growth over 19%. PAT of INR30 crores in this quarter as compared to INR18 crores a year back, a rise of about 68%.

Our balance sheet continues to be deleveraged and the equity ratio is at a very comfortable 0.3 times. The good part is we have secured good orders in this quarter. Our order inflow in this quarter has exceeded INR6,000 crores. This includes one large greenfield road order of about INR4,850 crores and a few other orders as well. Our order book as of June end has crossed INR20,000 crores, which is again an all-time high for the company. And subsequent to the quarter end, we have received another order worth about INR450 crores plus. So the order pipeline and the orders received are at a pretty good level.

That is all from my side to start with. I’ll hand over now to Mr. Basu for his initial comments, and then we’ll take your questions.

Jayanta Basu — Managing Director

Well, thank you, Prasad, and thank you all for joining this con call. Good morning to all of you. Prasad has just briefed about our Q1 performance for first quarter, that is FY ’22, ’23. As we have seen that consistently, our top line is growing, and it is close to INR1,100 crores in this last quarter, where we are sitting on huge order book of around INR21,000 crores. And I hope, we wish that we’ll be able to maintain the same run rate in terms of top line and order book and bottom line as well.

Coming to the operational performance. I’d like to share with you the major project, what we are now doing at various segments. For MRTS, as we know that we are executing three underground contracts, actually four, but three underground contract is ongoing. Chennai Metro, two; Bangalore, one; and of course, Kolkata Metro is on verge of completion. At Chennai Metro, we have started. We have briefed last quarter, but now that development that we have mobilized the trade [Phonetic] cutter machine, which is very sophisticated machine for the [Indecipherable] work. So already, we have mobilized around four numbers. And the good thing is that successfully, we could execute initial [Indecipherable] panels to the new machines and the progress is as per our expectation.

Underground Metro at Bangalore, almost 35% progress has been achieved. I have visited it last week, and the performance is well within our control compared to other contractors also who are doing better. Customer is happy, and things are all ok there. Then coming to Mumbai Metro, it is almost on verge of completion, currently at completed a long time back. And another important aspect of Mumbai Metro, if you remember that we have been talking about a critical activity, that is drilling and blasting tunnel to connect to the two shaft, which is very critical for underground work, and that has been completed now. So the risk what we have now before, which is now overcome.

Metro job there currently we have marine jobs, Udangudi, Sea Bird project, Vizhinjam Breakwater and Indian Oil Corporation at [Indecipherable]. All the jobs are going very well. And I must say that in Udangudi, we are doing breakwater, which is almost nine kilometers inside the sea, probably first time in Asia. And it was a very difficult job. But today, we can say we’re confident that we have almost achieved the required progress and the performance what we desired before. Similarly, at Vizhinjam also, the deep seaport where the breakwater construction was very difficult. And as you know that the customer Adani was standing for last several years to do the job. But we have started it last year, and we have done successfully. And now the job is now all because of monsoon, but after monsoon, we’ll be able to start, hopefully by end of next monsoon. I mean before next monsoon, we’ll be able to complete a job. These are the significant technical achievement, I must say.

Similarly, a few jobs in the building sectors. We have just secured one in Sikkim University, then Gohati, one reverse-type development, Surat metro job, all has started and going on well. And the good thing is that the Bangalore Metro elevated contract. The client has already taken over two contracts out of four. [Indecipherable] is also on verge of taking over from the client. [Indecipherable] of course will go up to end of this year.

So I think that things are quite going okay. And we have also secured a big job in UP that is Ganga expressway, as you all know. So with that, recently, we have secured around INR6,000 crores of order in last quarter, which is also a significant achievement.

So that is what from my side and I’ll be happy to answer any questions from your side. Thank you.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Mohit Kumar from DAM Capital.

Mohit Kumar — DAM Capital — Analyst

Hi. Good morning, sir, and thanks for the opportunity. Sir, my first question is on the margins. I think you guided for a double-digit margin for FY ’24. Given that the inflation pressure is easing now, how do you see the margin for FY ’23? Can we expect improvement in the margin compared to Q1? Q1, I think, is around 8.1%.

Jayanta Basu — Managing Director

Yes. Okay. So there are a few aspects, which is bothering this margin. One is the inflation, as you rightly said. We have to also consider that, as I mentioned last time that the Bangalore Elevated Metro is still continuing. And the revenue of INR1,100 crores out of the around INR70 crores to INR80 crores has come from Bangalore elevated metro for which we never draw any margin. If we eliminate that, the margin goes up to close to 9% or a little more than 9%. Going forward, once the Bangalore metro is over, I think the margins should improve. And definitely, next year, it should be double digit probably by FY ’23, ’24. Another one aspect also that some revenue we have done some big jobs, which are here to be — I mean 10% progress, for that we don’t need margins. That also contribute a little bit. So with that, I don’t see much issue on that coming next quarter going forward from there.

Mohit Kumar — DAM Capital — Analyst

When do you expect the Bangalore elevated to be completely out of our books?

Jayanta Basu — Managing Director

By end of this year, I mean, December, January, sometime, it should be over.

Mohit Kumar — DAM Capital — Analyst

Second is a very, very good order booking in the quarter. My question is on the Adani and the BMCT, both the orders are they fixed price contract? Or they are variable contracts? And when do we expect the work to start in these two projects?

Jayanta Basu — Managing Director

Adani road is not fixed price contract. It is star price contract. Star price means we have agreed for certain basic price of material based on which our contract value has been finalized. If those basic price changes either upward or downward, [Indecipherable] will be compensated or you have to give them back. So the risk of escalation is not there as far as road is concerned. And BMCT, that is JNPT gives a fixed price contract. And the estimate we have considered the escalation — probably escalation costs in our price.

Mohit Kumar — DAM Capital — Analyst

So when you say star price contract, what exactly do you mean which are indices your track in general? Or is it something to do with the actuals?

Jayanta Basu — Managing Director

It is based on actual. If you see the escalation clauses by the government tenders, they have a formula, which is based on RBI indexes and on the material, on the fuel, on the labor, et cetera, et cetera. That is one concept. When it is star price, it is basically, you have built this job with the INR5,000 per ton of cement, fixed. When the cement price goes up by INR500, we’ll be compensating — they will compensate you INR500 per ton. That is one of the concepts of star price.

Mohit Kumar — DAM Capital — Analyst

Understood, sir. Thanks you, sir and best of luck. Thank you.

Jayanta Basu — Managing Director

Thank you.

Operator

The next question is from the line of Vibhor Singhal from Philip Capital. Please go ahead.

Vibhor Singhal — PhillipCapital — Analyst

Yeah. Hi. Good morning, sir. Thanks for taking my question. And congrats on great order inflow in this quarter and a strong revision as well. Sir, my question, again, I come back to the order inflow. So I think this is the second consecutive quarter in which we have more than INR5,000 crores of order inflow. Last quarter also, I think we had very strong inflow. And this time, it was invested by the Ganga Expressway project. So now, sir, that we are at more than INR20,000 crores of order book, which kind of gives us a more than a 5-year kind of revenue visibility, so going forward, what is going to be our bidding strategy? I know it is not possible to take a break and not bid for any orders and all. But is it like, let’s say, I mean, growth suddenly has become now 24% for order book, which was less than 1% in last quarter. So are we still going to bid for maybe some other growth projects if we can get somewhere else? Or — and similarly in metro and your marine works will our bidding continue vis-a-vis as whatever opportunity comes? Or are we going to go slow and first, maybe execute or complete this order book and then probably take a few more orders?

Jayanta Basu — Managing Director

Yeah, our strategy will be a little different now. But you cannot stop the growth. Growth has to be there. And today, whatever order — I mean if you bid today the work will start after several months, maybe seven, eight months or even a year. If you remember the BMCT JNPT job, we have started bidding two years back, the order has just come. So it is like that. But definitely, our strategy will be a little different. I don’t think we’ll be interested to do further road work, unless we complete this big job at Ganga Expressway. That is number one.

Number two, certain sectors like elevated metro and difficult jobs also we will be now very selective going forward. But underground metro and the marine jobs, which is our bread and butter and we do well, we’ll definitely keep on pursuing for further order book. At the same time, also you have to see that our resources are available in terms of not only plant, we have to have our human capital as well as the firm-based non-firm-based. So based on all those aspects. Now we have got the opportunity, I mean, the privilege to select the job, which is a very good situation for us. So accordingly, we’ll have our strategy now.

Vibhor Singhal — PhillipCapital — Analyst

Sure, sir, definitely. I think it’s a very good situation to be in, in which we can pick and choose which projects we want to build. Sir, this Ganga Expressway project, what is the status on that? When do — has work started — when do you expect it to start?

Jayanta Basu — Managing Director

Actually, there is a zero date, which is basically when the financial closure of the — I mean, Adani, they will take financial closure and the environmental clearance, both the things are the trigger point. So they are working on that. And the idea is to have it after the monsoon is over, that is from the October. So the zero date for us will start from, say, around October, end of September or October.

Vibhor Singhal — PhillipCapital — Analyst

And we have to complete this in three years.

Jayanta Basu — Managing Director

It is not three years. It is around 27 months as per the contract.

Vibhor Singhal — PhillipCapital — Analyst

27. Okay, 27 months. So 27 months from October is when we have to complete it.

Jayanta Basu — Managing Director

Yes.

Vibhor Singhal — PhillipCapital — Analyst

Okay. Perfect. Also, sir, now that we’ve got 1 very good acquisition in this quarter and the order book as well, any changes to our guidance? We have earlier guided to basically 20% to 25% revenue growth in this year. Are we going to maintain that? Or is there any change to that, that you foresee?

Jayanta Basu — Managing Director

Actually, if you see the Ganga Expressway contribution in this year, it is very nominal. If we start the work from October, it has got some design involved. So design is — I mean design and the approval of that. So exactly this year contribution will be not much. Of course, for the marine work, BMCT will get some contribution, which already we have factored in our guideline what we have given last. I don’t think there will be much changes. It will be around whatever we have told last time.

Vibhor Singhal — PhillipCapital — Analyst

Got it. Got it. sure. So just one last book keeping question, if I may. Sir if I could get the gross debt number and the cash on the balance sheet at the end of the quarter.

Prasad Patwardhan — Chief Financial Officer

Gross debt is about INR500 crores. It is more or less at the same level as it was in the previous quarter. It’s the cash on the book, which has gone down. So the cash was at nearly INR380 crores in March. It’s down to about INR180 crores. So the net debt that is why it has gone up a bit. But at the gross level, the debt continues to be at the same level as the previous quarter.

Vibhor Singhal — PhillipCapital — Analyst

And so the cash would be lower because seasonally, Q1, some clients tend to pay a little bit delayed payment. So it would be a seasonal thing? Nothing to fall out in that type of projects?

Prasad Patwardhan — Chief Financial Officer

In fact, we got a lot of payments from our clients in the previous quarter, which resulted in a higher cash balance as of March. And that surely has got deployed in our projects, all these new orders that we have secured. The money has been deployed on these projects. So that is why the cash flow balances have gone down.

Vibhor Singhal — PhillipCapital — Analyst

Okay. As at year-end, we expect the debt to remain the same, INR500 crores?

Prasad Patwardhan — Chief Financial Officer

Yes, it may go up marginally because of all these new orders, there will be some funding that we’ll go into these new orders as well, but we don’t expect it to be significantly different.

Vibhor Singhal — PhillipCapital — Analyst

Got it, sir. Got it. Thank you, sir. Thank you so much for taking my questions and wish you all the best.

Jayanta Basu — Managing Director

Thank you.

Operator

The next question is from the line of Parikshit Kandpal from HDFC Securities. Please go ahead.

Parikshit Kandpal — HDFC Securities — Analyst

Hi. Hi, Jayata. Congratulations on a decent set of numbers and strong order inflows. So my first question is that for the last two quarters, last three quarters, we have been ballpark range of INR900 crores to INR1,050 crores kind of turnover. So order book has almost jumped 50%. So by when do we see this run rate hitting INR1,500 crores. So is it like third quarter or fourth quarter, we’ll start seeing that happening?

Jayanta Basu — Managing Director

Well, this quarter, that is second quarter also will be almost close to first quarter because there is some effect of monsoon, which is obvious. But in third and fourth quarter, if not INR1,500 crores, it will be close to that.

Parikshit Kandpal — HDFC Securities — Analyst

Great. So next year, we are definitely well placed to cross that INR6,000 crores of turnover mark if that run rate sustains for the next year, which should, I believe be, because at the INR20,000 crores order book, typically company report INR6,000 to INR7,000 crores of turnover, taking the three years’ time to completion of the order book. And largely, you have EPC project, there is no hand, there’s no BOP. So the work time to start like really quick after you get the LOAs. So is it the right assumption?

Jayanta Basu — Managing Director

Yes. So we have the question and answer together. So I think it’s okay.

Parikshit Kandpal — HDFC Securities — Analyst

Great, sir. So now the only puzzle here is that whether these orders — now we have seen inflation now cooling off the last couple of quarters, we have recently maintained our margin to higher single digit. Now we have all these complex jobs very limited elevated component and all are like right of way is not a constraint. So do we expect that margins to maybe ballpark crossing the double-digit and maybe that closer to 12% than to 12%, so maybe little closer to 12% in that range from next year, given that commodities have been cooling off?

Jayanta Basu — Managing Director

Yes. I’ll maintain the same whatever I have told last time and today morning also. This year, it will be close to double digits, if not double digit, but next year differently, it will be 10% plus.

Parikshit Kandpal — HDFC Securities — Analyst

No closer to 12%. So between — like somewhere between that band of 10% to 12%.

Jayanta Basu — Managing Director

Okay.

Prasad Patwardhan — Chief Financial Officer

So that is our explanation Parikshit. And we hope we’ll be there in FY ’24. And you will see that improvement in the margin from Q3 or Q4 onwards.

Parikshit Kandpal — HDFC Securities — Analyst

Sir, I mean, you have done a very excellent job in containing your balance sheet, especially on the debt side. We have seen companies with a similar quantum of debt — sorry, similar size of order book of INR20,000 crores, having debt of more than INR1,500 crores to INR2,000 crores, even in some cases, INR4,000 crores. But you have very well contained yourselves in that debt. So the only thing is as the growth picks up, whether that will translate into profitability and flow to the part is a question which we as an analyst look at. And we have had multiple accidents in the past wherein we had faced these issues on elevated metro where we have made losses.

One project, two projects have really impacted our performance. And now we don’t — I hope that you have been giving comfort many quarters that we don’t have any more projects like that, which will continue to bleed us on the profitability. I hope you will maintain that — are you still maintaining that? I mean, given the visibility on the project on the execution which is happening? Do you see any more pain points coming off from any write-off, further write-offs in the order book?

Jayanta Basu — Managing Director

No. I think we all know that we had Bangalore Metro, which is — which should be behind us totally by end of this year. And prior to that, we had Delhi. Apart from these 2 jobs, we don’t see any issues on any other jobs. Yes, margin will be a little more, a little less, but there is no major hit coming from any job.

Parikshit Kandpal — HDFC Securities — Analyst

Sir, beyond this, any other elevated projects in the order books? Beyond the Bangalore Elevated Metro?

Jayanta Basu — Managing Director

No, no, no. No, Bangalore is over. Bangalore is hardly maybe another INR100 crores net flow on that.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. So we have totally stopped bidding on elevated side? Or we are bidding very, very conservatively?

Jayanta Basu — Managing Director

No, we have not totally stopped. We are open in this, but definitely we will be very conservative in this segment going forward.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. And this INR4,850 crores of the Ganga Expressway project, this is including GST, excluding GST?

Jayanta Basu — Managing Director

Excluding GST.

Prasad Patwardhan — Chief Financial Officer

Excludes GST.

Parikshit Kandpal — HDFC Securities — Analyst

I mean this GST will be how much, sir? 12% or 18%?

Prasad Patwardhan — Chief Financial Officer

Now it is because of the change in regulation to last month, it is now 18%.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. So you have adjusted this order book for 18% of GST.

Prasad Patwardhan — Chief Financial Officer

So this INR4,850 crores is excluding GST. So GST will be over and above this INR4,850 crores.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. Okay. Great, sir. I think they’ve done a phenomenal job, especially on the balance sheet side. I hope this momentum now gets translated — order book momentum gets translated into margin is what we are looking at.

Jayanta Basu — Managing Director

Thank you, Parikshit.

Operator

The next question is from the line of Abhay Lodha from Sanmati Consultants. Please go ahead.

Abhay Lodha — Sanmati Consultants — Analyst

Good morning, sir.

Jayanta Basu — Managing Director

Good morning.

Abhay Lodha — Sanmati Consultants — Analyst

Congratulations for a good set of numbers. Sir, I have got two questions. And we have got the total order backlog of INR21,000 crores approximately as on 30 June ’22. Now just I wanted to know how much value of the tender we’ve already participated and which is pending. And how much amount of the contracts were L1?

Jayanta Basu — Managing Director

Okay. First, this participation, I think it is around close to INR8,000 crores, which consists of overseas job, two overseas job, one in Bangladesh, one in Sri Lanka and a few jobs in Adani in private sector and some jobs in Tamil. So around INR8,000 crores job we have participated. None of the results is yet out, is out. So there is no job, which is we are at L1. But definitely, a few jobs, which we are discussing with the private client like Adani, where we are expecting the order very soon, which will be around INR500 crores to INR600 crores. So to summarize INR8,000 crore job we have tendered for and around INR500 cores to INR600 crores we are expecting from the job what have tendered for.

Abhay Lodha — Sanmati Consultants — Analyst

Okay, sir. The second question is regarding the earlier participant has asked. Again, I’m asking, but in a different way. Regarding margins, we are the — this current quarter saw 9% margin approximately on the sales book buyers, whereas our competitor like Patel Engineering, they are generating margins of 14% to 15% consistently since last three, four quarters. So why there is so low margins and there is something in tendering process or some specialized job, which they are doing which we are not doing? Can you put some — throw some light on it, sir?

Jayanta Basu — Managing Director

Yeah. I think to answer this question, it will take a long time. They are company of our standard and their margin, if you see also close to our — around 9% to 10%, even less than that. They are a company, those who are small and the business model is different. I don’t want to comment on that. But definitely, on our side, I can comment that our margin has affected because of two reasons. One is the commodity price, which is common for everybody. And second, which is not common for everybody, we had some bad jobs, which is still going on. But as I said that by end of this year, those jobs will be completed, and they will find that our margin is improving.

Operator

The next question is from the line of Vijay Sadla [Phonetic] from VL Finance.

Vijay Sadla — VL finance — Analyst

Yeah. Congratulations on good set of number, sir. I have two questions. One is regarding the interest cost that we are paying. It seems pretty high given the kind of debt or basically debt and cash we are holding on the books. So can you explain in detail what are other elements in the interest cost apart from the core interest cost? So if I can understand, there is a bank where in other costs also involved.

So if you can just split the interest cost, that will be great. And secondly, just coming to Bangalore Metro. How much is the residual now to be booked in this year? How much is the residual turnover that is to be booked in the current year? And have we raised basically the portion of — with the government on — regarding the losses in the Bangalore Metro? And when we can expect those money to come back to us?

Jayanta Basu — Managing Director

Okay. Regarding bank interest, I think, Prasad will address it. But before that, let me address the Bangalore Metro. I think Bangalore Metro, we are still around INR80 crores to INR90 crores of job we have to do, which should be over by this year, December, January. And regarding claims, yes, as we have maintained on the con call that we have got several claims, which we are pursuing with the client, and those things are under discussion. And some will be settled amicably. And if not amicably, it will go for arbitrations and proceeding as per the contract. So regarding interest, Prasad, if you can.

Prasad Patwardhan — Chief Financial Officer

Yeah. Thank you, Mr. Basu. The breakup of our interest cost is roughly — it includes interest on the borrowings that we have on the banks and financial institutions, which is about a third of the figures that we have reported. Nearly one-third is interest on customer advances. Most of the advances that we get from our clients are interest bearing. And our customers are charging interest generally at market rates. It is linked to the MCLR of the banks. So about one-third of the interest cost that we are reporting is interest on customer advances. And the remaining one-third is roughly the cost that we incur for getting bank guarantees and letters of credit. So largely, that is the split of the finance cost that we reported in our financials.

Vijay Sadla — VL finance — Analyst

Okay. Okay. So these costs will remain more or less the same? Or it will be a function of kind of turnover.

Prasad Patwardhan — Chief Financial Officer

It’s not a function of turnover. If we take more advances, then if the advances are interest-bearing, then we’ll end up paying some cost on it. If our debt increases or decreases, correspondingly the interest cost will also vary. So there’s not a function of our turnover, but it is a function of the debt and customer advances and LCs and guarantee limits that we utilize from the valuing system.

Vijay Sadla — VL finance — Analyst

Okay. So basically, out of this one-third, one-third is only a pure interest portion?

Prasad Patwardhan — Chief Financial Officer

Yes.

Vijay Sadla — VL finance — Analyst

The rest is all — okay. Got it, sir. Thank you very much, sir.

Operator

We’ll move on to the next question. That is from the line of Parikshit Kandpal from HDFC Securities. Please go ahead.

Parikshit Kandpal — HDFC Securities — Analyst

Just some quick book keeping questions for Prasad. Prasad, you just highlighted this interest breakout. If you can also quantify the amount. So that you have already told INR500 crores. So now what is customer advances? And what is the total acceptances?

Prasad Patwardhan — Chief Financial Officer

No, no, LCs and guarantees are varying. It will not be possible for me to quantify the increase and guarantees that we have. But as of — out of about INR33 crores, INR34 crores of interest cost, nearly INR11 crores is interest on the bank debt and the term loans that we have. About INR11 crores is the interest from customer advances. Our advances outstanding as of 30 June are about INR600-plus crores. And the rest is the cost of LCs and bank guarantees that we have issued for our customers and to our vendors for supply of material.

Parikshit Kandpal — HDFC Securities — Analyst

What is the total acceptances outstanding as of the June quarter?

Prasad Patwardhan — Chief Financial Officer

Total acceptances, I don’t have the exact number, but it should be in the range of about INR3,500 crores.

Parikshit Kandpal — HDFC Securities — Analyst

INR3,500 crores?

Prasad Patwardhan — Chief Financial Officer

INR3,500 crores, acceptances and bank guarantees both together.

Parikshit Kandpal — HDFC Securities — Analyst

No, no, I’m just talking about acceptances against the credit.

Prasad Patwardhan — Chief Financial Officer

I don’t have that number with me right now, Parikshit. Maybe we can touch base offline and share these figures.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. And just one more thing on the recognition of profits from the associates. So we have seen — done the tunneling job in Mumbai Metro, even if you can update us on the Kolkata Metro, how’s the status there. I understood that, that tunneling is also over. So why is still not — the momentum is not catching up on the recognition of profit from associates. Any comment there will be helpful.

Jayanta Basu — Managing Director

Yes. Mumbai Metro, definitely, as I just mentioned, that the NATM is over, so we definitely have some effect from next quarter onwards. So, so far, we went a little conservative on this Mumbai Metro. I wish — I hope that from this quarter, it will reflect on our result. And Kolkata Metro also, the tunneling is over. But unless and until we retrieve the TBM portion, which was stuck up, we want to still maintain our existing run rate. Once it is retrieved, we’ll see what can be done.

Parikshit Kandpal — HDFC Securities — Analyst

Sir, are we booking any losses and succeed from Kolkata Metro? Or is just — we’re not booking anything on like 0 profit or losses from there in associates.

Jayanta Basu — Managing Director

No. Kolkata Metro, I think the profit is — I mean we are declaring profit. There is no loss. And we don’t see that there will be any losses for it. Profit may increase whatever we are declaring today.

Prasad Patwardhan — Chief Financial Officer

We are regularly booking profit on the Kolkata Metro, even when the incident happened three years back. Even after that, we have never recognized a loss from the Kolkata Metro project.

Parikshit Kandpal — HDFC Securities — Analyst

Sir, what will be the residual profit right now on the percentage completion basis on both these projects? Our share, if we can.

Prasad Patwardhan — Chief Financial Officer

We are not able to give out that number right now. We can reconnect offline for that.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. And any settlement we have reached with the insurance company? Anything if you want to talk on how much amount we would have received, any reversals on account of that.

Prasad Patwardhan — Chief Financial Officer

There are no reversals. Whatever claim is realized, it will only be an upside to the numbers that we are reporting. The insurance company has, in principle, settled about INR10 crores, INR15 crores of claim. So there is an acceptance of liabilities. But the balance amount is yet to be received from them. The good thing is the acceptance of claim by the insurance company and whatever we receive will only be an upside to the margins that we are reporting because we have not considered any realization from the insurance claim for reporting the numbers.

Parikshit Kandpal — HDFC Securities — Analyst

And what is the total hit we have taken on account of this incident as of — till now in the books?

Prasad Patwardhan — Chief Financial Officer

Well, till now, we have spent about INR50 crores, INR60 crores because of that incident in terms of compensation and other costs that we have incurred.

Parikshit Kandpal — HDFC Securities — Analyst

And against that, we have got a claim acceptance of about —

Prasad Patwardhan — Chief Financial Officer

About INR10 crores.

Parikshit Kandpal — HDFC Securities — Analyst

So is there any more — I mean, is it bank on sales one of the claim acceptances still working on? There’s a final settlement, like INR60 crores —

Prasad Patwardhan — Chief Financial Officer

No, it’s not a final settlement. We will get something more from the insurance companies, but that is being discussed and processed by the insurance companies, we will get it.

Parikshit Kandpal — HDFC Securities — Analyst

And the INR50 crores to INR60 crores have been provided already in the books —

Prasad Patwardhan — Chief Financial Officer

Yes, that is already considered in the results that we have declared. So that is why I mentioned whatever insurance claim is realized, it will be only an upside to the numbers that we reported.

Parikshit Kandpal — HDFC Securities — Analyst

Okay, Prasad. Great. Thanks for answering my questions.

Prasad Patwardhan — Chief Financial Officer

Thank you, Parikshit.

Operator

The next question is from the line of Dakshal Shah from Invexa Capital. Please go ahead. Dakshal, your line is in the talk mode. Please go ahead.

Dakshal Shah — Invexa Capital — Analyst

Hello?

Jayanta Basu — Managing Director

Dakshal, please go ahead.

Dakshal Shah — Invexa Capital — Analyst

Yeah. Dakshal Shah here. First of all congratulation on a good set of numbers.

Operator

Sorry to interrupt. Sir, your audio is breaking up. We are not able to hear you clearly.

Dakshal Shah — Invexa Capital — Analyst

[Technical Issues]

Operator

I am so sorry, sir. But we are not able to hear your question because the audio is breaking up.

Dakshal Shah — Invexa Capital — Analyst

Yeah. [Indecipherable]

Jayanta Basu — Managing Director

No, I am sorry. We are not able to hear you.

Operator

Sir, may we request that you rejoin the queue. Your audio is not clear.

Dakshal Shah — Invexa Capital — Analyst

Sure.

Operator

Thank you. We’ll move to the next question that is from the line of Vibhor Singhal from Philip Capital. Please go ahead.

Vibhor Singhal — PhillipCapital — Analyst

Hello, sir. Thanks for taking my question again. Just one small question. Sir we have historically also taken projects on fees. And right now, also, we are working — as you mentioned, in the pipeline, we have two projects in Bangladesh and Sri Lanka. So generally, we, of course, whenever, I mean Adani Group has always been a very important client for us, and we’ve also been all across. So recently, Adani Group has acquired a port in Israel. Now that’s, of course, an operational port already. But if there is any marine job that comes up on that part of the world, will you be comfortable? Or will you be able to take — I mean, foster that also? Or is there a specific set of geographies or countries that we believe that we are more comfortable working in?

Jayanta Basu — Managing Director

Well, it depends upon a few factors. First and foremost, we’ll be only interested if it is the marine job. That is number one. Number two, we want to concentrate on the neighboring countries like Bangladesh, Sri Lanka, we have been in Myanmar, Maldives, maximum up to Mauritius. And then we don’t want to have too many jobs overseas at a time. So maximum two at a time. And then we’ll see, maybe another two, three years’ time, what we do. So based on this strategy, whatever comes, we’ll decide our bidding strategy on that.

Vibhor Singhal — PhillipCapital — Analyst

Got it, sir. Thank you so much, sir. Thanks for answering that and wish you all the best again.

Jayanta Basu — Managing Director

Thank you.

Operator

The next question is from the line of Saket Kapoor [Phonetic] from Kapoor Company [Phonetic].

Saket Kapoor — Kapoor Company — Analyst

Yeah. Thank you for this opportunity. Sir, firstly, if you could give us the figure of what is our currently the work in progress? How much amount has been — is there as on 30th, June?

Jayanta Basu — Managing Director

Our work in progress is about INR950 crores.

Saket Kapoor — Kapoor Company — Analyst

And sir, regarding this customer advance, what was the figures that you have provided?

Prasad Patwardhan — Chief Financial Officer

Sorry. Come again?

Saket Kapoor — Kapoor Company — Analyst

How much is the customer advance from — for the various projects?

Prasad Patwardhan — Chief Financial Officer

The outstanding balance is about INR650 crores as of June.

Saket Kapoor — Kapoor Company — Analyst

Okay. And the claims partner, what have we claimed? What is the claim figure?

Prasad Patwardhan — Chief Financial Officer

No offense, we’ll not be able to share with you the claim figure because these are under various stages of discussion with the client. So it will not be possible for us to share the claim figure with you.

Saket Kapoor — Kapoor Company — Analyst

Correct. Correct, sir. Sir, about the execution cycle, if you could give us some more [Indecipherable] now, this would be the monsoon-affected quarter. And I think to what I heard from our MD, sir, that we would be scaling up to INR1,200 crores to INR1,500 crores would be our either target for H2. This should be a fair understanding?

Jayanta Basu — Managing Director

Yes. I think the second quarter also will be like first quarter as because of monsoon effect and the jobs which have secured like Ganga Expressway and the JNPT job, they will take time to pick up. So third and fourth quarter, definitely, it will be as you mentioned, INR1,200 crores to INR1,400 crores, in that range, you can expect.

Saket Kapoor — Kapoor Company — Analyst

Sir, you did mention, Mr. Jayanta, that you have been visiting the site and taking note of the progress. So who are the key competitors in the major projects which we are currently doing. We are competing with the likes of or we are doing candidly with the likes of which competitor?

Jayanta Basu — Managing Director

Yes. If you see the segment where we are in marine L&T, Afcons and Ajuga and for the Legrand Metro apart from L&T, Afcons, so we have got J Kumar and Tata projects, Villamar from Turkey. So these are the kind of competition we have now.

Saket Kapoor — Kapoor Company — Analyst

And then taking this irrigation and the tunnel project, so in the — with the irrigation do — are we doing some river-linking projects also currently? And this Nal se Jal scheme, are we playing a part in this strictly for the Uttar Pradesh government or we are only up to the MRTS part of the story for Uttar Pradesh?

Jayanta Basu — Managing Director

So Uttar Pradesh, I don’t know. We are not in the irrigation job, and we have — I don’t read for anything we have set for. So connecting the river and all, I also have no idea is there any prospect. That is different. Of course, we are doing Ganga expressway in Uttar Pradesh. We have done one job for inland water transport at Haldia, but that job is already completed, and we are in the verge of getting the final certificate.

Operator

Ladies and gentlemen, we’ll be taking the last question. That is on the line of Venkat Subramanian [Phonetic] from Organic Capital.

Venkat Subramanian — Organic Capital — Analyst

Hi. Thanks for taking my question. On Bangalore and Delhi, will we have any claims? Or will those projects have any claims on us? And what is the current discussions there?

Jayanta Basu — Managing Director

Yeah. I think we are mentioning every con call that both the project, Bangalore and Delhi, we have our claim. We are discussing the client and some claims are in discussion stage, some are in arbitration stage, but it will take time, but definitely have got claims both the job.

Venkat Subramanian — Organic Capital — Analyst

You would expect this to be coming to light, what, in about 12 to 18 months? What kind of time frame do you have in mind to get to know which way it goes?

Jayanta Basu — Managing Director

Pretty standard in Indian context because if you have arbitration, it goes to 1, 1.5 years. And thereafter, the customer can challenge it to the court. So cycle would be something around two to three years’ time, not before that.

Venkat Subramanian — Organic Capital — Analyst

Okay. There is a lengthy discussion today about margins and margins improving beginning next year, et cetera. We added something like about 2.75-odd percent of PAT margin. So given both levers, one margin improving and higher execution, what kind of PAT margins do you think will be realistic?

Jayanta Basu — Managing Director

I cannot comment about next year, but this year, it will be the same margin, worked around close to 3%. Next year, definitely, it will be a little bit more, but maybe we need 3% to 4%.

Prasad Patwardhan — Chief Financial Officer

Yes, as we see improvement in our operating margin, the PAT margin will also move up. We have already given some indication of the expected EBITDA margins for next year. So in line with that, we should see an improvement in the PAT margins as well. As Mr. Basu said, this year, at least we are expecting around 3% PAT margins. Next year, we’ll have to see as the operating margins improve, we’ll see an improvement in the PAT margins as well.

Venkat Subramanian — Organic Capital — Analyst

That was my question. So operating leverage should play a fairly meaningful role in that improvement, right?

Prasad Patwardhan — Chief Financial Officer

Right.

Jayanta Basu — Managing Director

Yes. Yes.

Venkat Subramanian — Organic Capital — Analyst

Okay. Thanks. Thanks a lot. I am done. Yeah.

Operator

Thank you. Ladies and gentlemen, that is the last question. I now hand the conference over to Mr. Anshuman Ashit for his closing comments.

Anshuman Ashit — ICICI Securities — Analyst

Thank you, Jayanta Basu, sir; and Prasad, sir, for giving us this opportunity to host the call. And I thank all the participants as well for making this call very interactive. Sir, any closing comments that you would like to make?

Jayanta Basu — Managing Director

Well, I would like to thank everyone for taking time out and joining us on this call, and we value your continued support and interest in the company, and we look forward to interacting with you again next quarter. Thank you.

Prasad Patwardhan — Chief Financial Officer

Thank you. Thank you.

Operator

[Operator Closing Remarks]

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