Kalpataru Power Transmission Ltd. (KALPATPOWR) Q4 FY22 Earnings Concall Transcript

Kalpataru Power Transmission Ltd. (NSE: KALPATPOWR) Q4 FY22 Earnings Concall dated May 15, 2022

Corporate Participants:

Bhoomika Nair — DAM Capital Advisors — Analyst

Manish Mohnot — Managing Director and Chief Executive Officer

Ram Patodia — President, Finance and Chief Financial Officer

S.K Tripathi — Managing Director, Chief Executive Officer

Analysts:

Swarnim Maheshwari — Edelweiss Securities — Analyst

Narendra Mhalsekar — IIFL Securities — Analyst

Parikshit Kandpal — HDFC Securities — Analyst

Bharat Sheth — Quest Investment Advisors — Analyst

Prem Khurana — Anand Rathi Securities — Analyst

Jainam Shah — Equirus Securities — Analyst

Teena Virmani — Kotak Institutional Equities — Analyst

Thomas George — Individual Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q4 FY’22 Earnings Conference Call of Kalpataru Power Transmission Limited and JMC Projects Limited hosted by DAM Capital Advisors. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Ms. Bhoomika Nair from DAM Capital Advisors. Thank you, and over to you, ma’am.

Bhoomika Nair — DAM Capital Advisors — Analyst

Thank you. Good morning everyone and welcome to the Q4 FY’22 earnings call of Kalpataru Power Transmission and JMC Projects. We have the management today being represented by Mr. Manish Mohnot, Managing Director and CEO; Mr. Amit Uplenchwar, Director, Group Strategy and Subsidiary Operations; Mr. Ram Patodia, President, Finance and CFO; and Mr. S.K. Tripathi, Managing Director and CEO of JMC Projects.

I’ll now hand over the floor to Mr. Manish Mohnot for his initial remarks post which we’ll open up the floor for Q&A. Over to you, sir.

Manish Mohnot — Managing Director and Chief Executive Officer

Thank you. Bhoomika, and good morning, and a warm welcome to everyone for the KPTL and JMC Q4 and full year earnings conference call. Trust each one of you and your families are keeping safe and are in good health. The initial few minutes I will focus on my thoughts on the strategic aspects of the business and later I will share some notable highlights of our financial and operational performance.

The operating environment continues to remain challenging with recent geopolitical conflicts, high commodity prices and disruptions in supply chain. In the midst of these headwinds, we have made notable progress on many strategic foots [Phonetic]. In line with our efforts to prioritize growth in the core EPC business, we have significantly scaled up our T&D and civil businesses during the year. We have also enhanced our international reach and achieved significant breakthrough in securing large-sized EPC orders. By doing this, we are consistently improving our competitive position and business mix with emphasis on segments and markets that have higher growth outlook and better margin profile.

Our consol order book visibility including L1 is at an all-time high of over INR40,000 crores. In financial year ’22, we have entered 4 new countries taking our global footprint to 67 countries. We have improved our market standing by securing high value projects in the T&D, Water, B&F and Urban Infra space. In the T&D business, we secured single largest order till date in history of INR3,276 crores in the South America market, it’s not Brazil. Additionally, we secured our first international order for the B&F business in Maldives, and oil and gas pipeline project in the Middle East. JMC’s Water business has achieved record order inflows of INR3,286 crores in ’22, significantly expanding its geographical reach within India. In the road business, we have won 2 new projects in Africa valued over INR2,200 crores. In the urban infra business, we are L1 in a large-sized airport project in Asia and has emerged as a top bidder for metro rail project in India.

The average size of most of our recent order wins, including the ones which we are L1 is over INR900 crores. Moreover, around 75% of these orders have price variation clause on a long-term in nature which will very well safeguard us from the current volatility in the markets. Our subsidiary Linjemontage has reported good growth in revenue and profitability since acquisition in March ’19. We have almost doubled the size of the business. In Fasttel Brazil, we are strengthening the organization alongside integrating the systems and processes in line with KPTL and they have reported a loss for Q4.

In line with our vision and efforts to become a leading EPC company, the Board of KPTL approved the scheme of merger of JMC with KPTL in February ’22. This is a significant milestone for both the companies to unleash their growth potential and drive the next phase of growth. The merger has been help, integrate, develop EPC capability in the high-growth segments and markets. The merged entity will benefit from operational and cost synergies arising from scale and size of the combined business. The merger will also enable us to bid for large-sized complex projects along with improved management bandwidth. Moreover, the combined entity will have a strong balance sheet and financial flexibility to invest in core EPC business to create long-term value and achieve our vision of USD3 billion revenue organization by 2025. The process of getting necessary approvals for the merger are underway and progressing as per schedule. The merger is expected to be completed by Q4 of ’23.

In financial year ’22, we’ve also made considerable progress on our deleveraging journey, with improvement in working capital management, record number of project closures and completion of divestment of T&D BOOT assets. We have reduced the consol net debt by 45% from 20 levels. Our net debt is at INR1,902 crores with a net debt to equity ratio of 0.43x. We have been successful in reducing our debt alongside pursuing business growth, capex and M&As over the past few years.

We are working hard for resolution of our road BOOT assets and anticipate favorable results in the coming quarters. We expect to complete restructuring of Wainganga road project in the first half of this year as we have received majority of approvals from the lenders. Simultaneously, we have started refinancing process for Vindhyachal road project. We expect our cash outflows to come down with the completion of restructuring of WEPL. In regards to our Indore real estate project, we have achieved sales of around 60% of units and received cash flow of around INR160 crores from project till date. We plan to complete the balance sale in the current financial year.

Now let me provide you with key highlights of our financial and operational performance. At KPTL consol level, we have delivered robust performance with top line growth, stable margins and notable drop in debt levels. Our consol revenue grew by 1% in Q4 and 14% for full year to INR14,777 crores. Our revenue growth was back on strong execution in B&F, Water and international T&D subsidiaries. Revenue of LMG Sweden was INR1,191 crores and Fasttel Brazil was INR548 crores for full year ’22. LMG has achieved a revenue growth of 12% Y-o-Y with improved profitability.

Our consol EBITDA margins remain under pressure with the elevated level of commodity, freight and other input pressure. EBITDA margin was 7.3% in Q4 and 8.6% in financial year ’22. Our PBT was INR157 crores in Q4 and INR696 crores in financial year ’22. PBT margin for full-year ’22 was 4.7%. PAT was INR115 crores in Q4 and INR535 crores for full-year ’22. Consol net debt were INR1,902 crores, which is a decline of 17% compared to last year. Our net working capital has improved from 102 days in ’21 to 98 days in ’22. Our consol order inflows was INR18,161 crores in ’22 which is a growth of 11% compared to previous year. Our consol order book as on 31st March was INR32,761 crores, up 17% Y-o-Y. Till date in financial year ’22-’23, we have received new orders of INR3,819 crores. Additionally, we have L1 of around INR4,200 crores spread across Water, Urban Infra and T&D business.

The Board of Directors of KPTL have recommended a dividend of INR6.5 per share which is in line with our dividend policy of 15% to 20% of PAT as dividend.

At KPTL standalone level, revenue was INR2,010 crores in Q4 and INR7,062 crores for financial year ’22. Our revenue declined due to lower order inflows during the first half of the year, lower dispatches in the T&D business, and slow progress in few oil and gas pipeline projects. T&D revenues including Linjemontage and Fasttel grew by around 8% and railways revenue grew by 2% while oil and gas revenue declined by around 20%. We were able to maintain EBITDA margin of 8.5% in Q4 and 9.2% for financial year ’22. We have prudently made provision for CTC cost on account of high commodity cost on existing projects and we have provided for INR118 crores on CTC losses in Q4 for the next year. Our lower revenue growth and fallen EBITDA margin has led to fallen PBT and PAT.

Our net debt has declined by 47% Y-o-Y to INR414 crores, this is in line with the guidance to be significantly lower and negligible debt company. KPTL along with Linjemontage and Fasttel received orders of INR8,159 crores in ’22. Our closing order book as on 31st March ’22 at standalone is INR15,759 crores. We have received new orders of INR1,626 crores till date in the current financial year ’23. Additionally, we have L1 position of INR1,500 plus crores largely in our T&D business.

I would like to highlight a typo in our investors presentation on Slide number 14. T&D share in total KPTL stand order book is 71% instead of the typo of 61%. Please note that.

In JMC standalone, we reported strong revenue growth of 16% in Q4 and 45% for full year ’22 to INR5,353 crores. Our revenue growth was driven by robust execution in B&F and Water business. JMC’s EBITDA business were at 8.5% in Q4 and 7.9% for full year ’21. Our EBITDA margin was impacted given higher commodity and other input costs. We expect margin to improve going forward as most of the projects have price escalation provisions in JMC.

Our PBT before exceptions and ECL provision was INR66 crore in Q4 and INR166 crores for full year ’22. ECL provisions and exceptional items pertaining to road BOOT SPVs have impacted profitability for full year ’22. Our net debt at INR640 [Phonetic] crores at the end of March ’22 is much lower compared to the net debt of INR512 crores in the previous year. The increase in debt is on account of growth in working capital, capex and investments in road BOOT assets largely towards repayment.

JMC received record order inflows of INR10,199 crores in ’22 and order book at an all-time high of INR17,139 crores at the end of March ’22. JMC has also received new orders of INR2,193 crores financial year till date in ’23, there is an additional L1 position around INR2,700 crores.

Going forward, we’ll continue with a strategy to drive sustainable and profitable growth by one, accelerating growth in core business; second, building efficiencies to improve competitiveness. Third, sharpen capabilities by improving integration of JMC and KPTL, and strengthening balance sheet through debt reduction, exit of non-core business and efficient capital management.

Let me now conclude with the outlook and guidance for the next year. Despite the near-term headwinds due to fluctuations in commodity prices, geopolitical uncertainties and high input costs, we remain favorably placed to navigate these challenges given our established EPC capability, strong order book, robust balance sheet and well diversified business mix. We expect consol revenue to grow in excess of 15% for next year with PBT margin in the range of 5%. We will target consol order inflows of over INR21,000 crores for full-year ’23. We will continue with our deleveraging journey by actively looking to exit non-core business and improving our capital management. We further target debt reduction of around INR300 crores to INR400 crores in financial year ’23.

With this, I would request the moderator to open the lines for Q&A. Thank you.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Swarnim Maheshwari from Edelweiss Securities. Please go ahead.

Swarnim Maheshwari — Edelweiss Securities — Analyst

Yeah. Hello, sir. Good morning and congratulations for managing in such a tough environment. Sir, my first question is, I mean if you can just spell — if you can just give us some more color on this INR3,200 crores of single ticket order that we have taken, what is the nature of this order, this is an EPC contract and what’s the timeline. I mean just trying to understand from the risk perspective, to be honest, because it’s quite a big ticket size order.

Manish Mohnot — Managing Director and Chief Executive Officer

Sure. Morning Swarnim. So, Swarnim, this order of around 700 kilometers of T&D line end-to-end EPC to be delivered in Chile. This order has 3 components. First, our component is engineering design and necessary approvals, which will continue for the first 12 to 18 months. Then we start with the EPC project which has to be delivered over a period of 36 months to 42 months. The entire order whether it’s design, whether it’s procurement, whether it is construction is with that, the client has responsibility for environment and ROW, which will be done by the client in that part of the country. So the order has to be executed over a period of 5 years to 6 years, there’s 2 large developers in that country. And we have to do the end-to-end EPC.

Swarnim Maheshwari — Edelweiss Securities — Analyst

Okay, you mentioned the execution period is 5 years to 6 years.

Manish Mohnot — Managing Director and Chief Executive Officer

So as I said earlier, the first 18 months is primarily engineering and design; such large orders, engineering and design takes time, right, which is just significant component where we will have to put all the efforts and post that execution will start. So from a revenue perspective, just only less than 10% of the orders revenue which comes in the first 18 months and balance after that.

Swarnim Maheshwari — Edelweiss Securities — Analyst

All right. And safe to say, this would be funded by multilateral agencies?

Manish Mohnot — Managing Director and Chief Executive Officer

So this is business funded by 3 large developers in that part of the world. I wouldn’t be able to give you the exact names but they are developers whose net worth is in billions and billions of dollars, right. So they have won a concession project and we have the EPC project, they are very, very large developers, they’re much bigger than any organization we have in our country.

Swarnim Maheshwari — Edelweiss Securities — Analyst

All right. Okay, got it, sir, Sir, secondly, in one — in the last quarter, we had mentioned that the execution had got postponed to Q4 because of some delay and it was a strategic call on delay in dispatches. But I think the Q4 still continued to be seen in terms of execution challenges, we can understand on the margin pressures and all because of commodity, but just wanted to better understand on the execution front.

Manish Mohnot — Managing Director and Chief Executive Officer

No, you’re right, Swarnim. Q4 also, we had some challenges right primarily on supply chain logistic issue more than anything else. As an organization, we have not delayed anything because of commodity prices and that’s why we continue to take CTC losses, but supply chain continued to be a dampener, right, availability of — and the entire Ukraine thing happened and then the China thing happened where the vessels got blocked, all of that. So supply chain continued to be a challenge. We see that challenge continuing even in the current quarter. And that’s why I’m targeting more growth at a consol level of 15%. KPTL standalone could still have growth challenges in the current year. We’re definitely growing because it’s a degrowth compared to the previous year and we have visibility of order book, but yes, supply chain disruption continued to be a challenge while we speak now.

Swarnim Maheshwari — Edelweiss Securities — Analyst

All right. Got it, sir. Thank you so much and wish you all the best.

Manish Mohnot — Managing Director and Chief Executive Officer

Thank you, Swarnim.

Operator

Thank you. [Operator Instructions] The next question is from the line of Narendra Mhalsekar from IIFL Securities. Please go ahead.

Narendra Mhalsekar — IIFL Securities — Analyst

Hi. Good morning and thank you for the opportunity. Sir, with regards to your guidance for 15% plus sales growth at consol level, is it fair to assume that this growth will largely be driven by JMC portfolio as T&D continues to face execution headwinds. And if you exclude the HBDC order inflows for T&D have fairly been weak, so what would be your guidance for the standalone business in inflows and revenue for FY’23 and also what is the sort of fixed price contracts — share of fixed price contract in your order book and how do you see the standalone margins going from here with the lows of 8.5% seen in 4Q?

Manish Mohnot — Managing Director and Chief Executive Officer

Excellent. I think you’ve asked me all the questions in one, which is good. Okay. So we will go step by step. Yes, you are right, I think a significant question portion of the growth comes from JMC, so our internal target is KPTL will go in the range of 10% to 15%, JMC would grow at the range of 15% to 20%, why are we confident of the 10% to 15%? Because we have also received some orders in the last few weeks, which we have declared where delivery can start immediately. So confidence of 10% to 15% is visible because the visibility on that in the current order book is good, right.

Second, where do we expect margins to be? As we have declared at a consol level, we expect PBT without any exceptions to be in the range of 5%, right, which converts to increase in — if you look at on a standalone — or on a consol or a standalone basis, an improvement of closer to 15% to 20% compared to what we have reported today. At EBITDA level, we expect both the companies to be in the range of 9%. We are not projecting 10% what we have seen in the previous year as of now because although we’ve seen some softening in commodity prices last 2, 3 weeks, but we would still like to wait for a few more because steel is something which is very volatile, we would still like to wait for a few more months before we revise those targets.

On — 1-2-3. Then you had a question on saying that visibility on T&D. I think the visibility on T&D has improved significantly in the last 3 months to 4 months driven by a lot of factors. One, international funding agencies have started bidding for projects again, they started funding projects again and that’s a big thing in international market. Second, on domestic market, you’re seeing a lot of states coming out with projects and you know even PGCIL coming of with cost plus, which all of us are aware of, the entire Leh-Ladakh, which is a big thing for PGCIL where we should have a reasonable share. So with that, I think achieving that 10% to 15% growth for KPTL in the current year would not be a challenge.

The last question you had was on INR21,000 crores order book target. I think as of now it’s equally divided, both the companies have a target of being in the range of INR10,000 crores to INR11,000 crores of fresh order inflows. As of now today, we have visibility of around INR7,500 crores, including what we have declared today and our own view is that achieving that INR21,000 plus crores should not be a challenge given the current visibility. Hope I’ve answered everything. Is there anything I left, 1,2,3,4,5. Yeah, I think I have answered everything.

Narendra Mhalsekar — IIFL Securities — Analyst

Thank you sir for that.

Operator

Thank you. [Operator Instructions] The next question is from the line of Parikshit Kandpal from HDFC Securities. Please go ahead.

Parikshit Kandpal — HDFC Securities — Analyst

Hi sir. So my first question is on CTC provisions.

Operator

Sir, sorry to interrupt, if you can take the phone off speaker please.

Parikshit Kandpal — HDFC Securities — Analyst

My first question is on the CTC provisions. So how much of CTC provision has been taken in the fourth quarter of FY’22?

Manish Mohnot — Managing Director and Chief Executive Officer

Morning Parikshit. I think I’d just declared that number. We’ve taken a provisioning of INR118 crores primarily in KPTL on a lot of projects where based on the commodity price of 31st March, we have taken some provisioning. We follow this policy driven by our corporate governance norms, as well as driven by the requirements of auditors where we look at the pricing as of 31st March. We do believe that there could be some savings in this once looking at the current meltdown in commodity, which we have seen over the last 2 quarters. But our provision is at INR118 crores in Q4 on CTC.

Parikshit Kandpal — HDFC Securities — Analyst

So the 31st March prices sir, so what kind of margins if the prices remain at that level, so what kind of margins — so you said 9% is what you’re guiding but if the prices remain at that level, so is it right to assume that we have assumed almost double-digit margin if the prices remain at 31st March level?

Manish Mohnot — Managing Director and Chief Executive Officer

So Parikshit, as I said, I just don’t want to comment on that at this stage because the volatility is so high, we saw steel coming down by INR2,000 last week, we don’t know what’s going to happen tomorrow. What we are clearly guiding is that PBT margin at a consol in the range of 5%, right, and that’s something which we are guiding looking at everything what we have looked at today. We would come back with revised guidance on margins, if we see this volatility, meaning a reduction in prices, continuing, clearly, if it continues to go down, you will see margins going up, but I just don’t want to comment on it right now because it’s completely external driven not driven by any one of us either on the call or in the room today.

Parikshit Kandpal — HDFC Securities — Analyst

Sure sir. Sir, my second question is on the Kohima transmission monetization. So if you can reconcile in the cash flows, how it is getting reflected because part of it is funded through debt and then through loans and advances structured debt and then as equity, so how is it reflecting in the cash flows if you can just reconcile that?

Manish Mohnot — Managing Director and Chief Executive Officer

Amazing question, I’ll have to come back to you on this Parikshit whether it comes from cash from operations or cash from investment, my own understanding would be — and I’m going to take help of Ram on that — Ram? Ram, the entire thing comes — so what our CFO has confirmed is the entire thing comes from cash flow from investing activities.

Parikshit Kandpal — HDFC Securities — Analyst

Because I just see that about INR157 crores has come in from the — like proceeds from the sale of subsidiary and joint ventures. So I understand it was about INR500 crores which has just come to us if we can — Ram can help us. If he doesn’t have it handy, maybe later in the call he can just clarify how it is.

Manish Mohnot — Managing Director and Chief Executive Officer

Equity, to the extent we have an equity that wouldn’t come in cash flow from investing activities. Ram, maybe you could answer this.

Ram Patodia — President, Finance and Chief Financial OfficerFO

And then there is a loan amount also which is the forming part of — [indecipherable] which is also forming part of my investment activities, so if we divided that entire cash flow into two or three lines, based on the requirement as per accounting standards.

Manish Mohnot — Managing Director and Chief Executive Officer

So maybe, Parikshit, on smaller books, we might be able to give you these details.

Parikshit Kandpal — HDFC Securities — Analyst

Sure sir. And sir, just my last question from the Linjemontage and Fasttel, so you did mention about the revenues, the revenues have fallen in the fourth quarter, you mentioned there’s a growth in Linjemontage of 12%. So if you can just comment on why the revenues are falling in the fourth quarter for both the entities and what is the total annual profitability of these two entities at EBITDA level, just give us some sense there.

Manish Mohnot — Managing Director and Chief Executive Officer

I think it’s just the mix of orders, more than anything else. Q4 for Linjemontage continues to be a quarter where weather impact is also there, but it’s just the mix of order book more than anything else for both of them, right. As far as next year is concerned, we expect both the businesses to grow only at a single digit level, okay, because Linjemontage has grown significantly over the last 3 years, they’ve doubled themselves in 3 years. And normally after 3, 4 years, it’s time to revisit growth, get the team in, build system and processes. For Linjemontage, we expect a growth of only 5% to 10% in the current year. As far as Fasttel is concerned, we have taken a loss provisioning of around INR27 crores in the current year in financial year ’22 with the number, which is closer to INR35 crores in Q4. With this, we do not believe that Fasttel would have any loss going forward. This is all as far as losses are concerned because the whole order book is delivered. They’re today sitting on orders which they have won in the last 6 months only. So going forward, Fasttel also, in fact, we expect EBITDA to be positive, more in the range of 8% to 9% only. As far as both the business together are concerned, we do not expect them to grow beyond 5% to 7% in the current year.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. And what was the EBITDA margin for Linjemontage for FY’22?

Manish Mohnot — Managing Director and Chief Executive Officer

It was in the range of — so if you look at gross and net and I’m saying net because there were some put call options for which we have to do a provisioning, so at a net level, it continues to be in the range of 6% to 7%.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. Okay. And both these entities remain debt free, right. There is no debt on —

Manish Mohnot — Managing Director and Chief Executive Officer

No, Linjemontage remains debt free. It has surplus cash. They’ve also declared some good dividends, which you should see in our books coming into Q1. As far as Fasttel is concerned, they have a small debt which has come up in Q4.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. Sure sir. Those were my questions, I’ll join the queue for more questions. Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Bharat Sheth from Quest Investment Advisors. Please go ahead.

Bharat Sheth — Quest Investment Advisors — Analyst

Hi, good morning, Manishji and SKT on excellent performance in challenging times.

S.K Tripathi — Managing Director, Chief Executive Officer

Good morning.

Manish Mohnot — Managing Director and Chief Executive Officer

Good morning.

Bharat Sheth — Quest Investment Advisors — Analyst

Sir, now on the merger. I mean, a large part of the FY’23 have been I mean asked by the people, but so if we look at 3 years perspective post merger we have stated that we expect INR100 crore benefit in operational side, is that fair understanding?

Manish Mohnot — Managing Director and Chief Executive Officer

Yes.

Bharat Sheth — Quest Investment Advisors — Analyst

And this will be more of front-loaded or back-loaded saving and how much could be the saving in finance cost, I mean overall finance if we look at I mean only core business?

Manish Mohnot — Managing Director and Chief Executive Officer

So, a significant portion of the savings will be in the finance cost, it’s not — so if I divide this saving into 3 areas, one is finance costs. Second is operational efficiencies, right, so a significant portion will be in finance cost because today the rating of the 2 divisions are different, the profile of debt is different, all of that. As far as operational efficiencies are concerned, we do not see significant reduction happening in people costs because with the growth I think we’ll be absorbing all the people we have, we will actually have to recruit more people. But we expect operational efficiencies to come in making sure that we have the best of the processes, making sure that there’s focus on delivering before time and that’s going to be a big advantage also. That’s why we’re saying INR100 crores to INR150 crores saving, which is what we projected looks visible and that’s also there in our margin guidance. We look at it, we are at around 8.6% consol EBITDA in the current year and we are saying, we’ll be in the range of 9%. That’s visible there also.

Bharat Sheth — Quest Investment Advisors — Analyst

Okay, fair. And this 8.6% is despite I mean writing off and 9% we may further — if commodity prices sustain at this level, then there could be some benefit. Is that fair understanding?

Manish Mohnot — Managing Director and Chief Executive Officer

Write-off at EBITDA level is minimal.

S.K Tripathi — Managing Director, Chief Executive Officer

I think the write-off is more beyond EBITDA. At EBITDA level, we have hardly had any write-offs. right.

Bharat Sheth — Quest Investment Advisors — Analyst

Okay. Sir, and coming to now on this, where we have say — in your initial opening remarks, we have received one L1 in airport side in Asia also, which has been given on the Slide number 4 and we were also in tunneling projects. So what are the status of this new area of verticals that we are entering?

S.K Tripathi — Managing Director, Chief Executive Officer

Yes, so, Bharat bhai, good morning, SKT here. So airport, yes, we are L1 in large airport in Asia. I will not give the specific details, but this is a sector which we have been trying to get in for a long time in India as well as the international and we see a good visibility of this business building up in Africa going forward and that is why we have built on a single large EPC project which bring us PQ.

Coming to your second part of the question, tunneling, yes, it’s strategically we are trying to enter this business, but currently what Manishji has said in the opening remarks, we are L1 in large metro project, which is basically a elevated corridor, which we have executed in the past also.

Bharat Sheth — Quest Investment Advisors — Analyst

Okay. We were L1 in one tunneling project —

Manish Mohnot — Managing Director and Chief Executive Officer

Just to add to that — yeah — just to add —

S.K Tripathi — Managing Director, Chief Executive Officer

Yeah, Bharat bhai —

Bharat Sheth — Quest Investment Advisors — Analyst

See, we were, I mean, L1 at the end of Q3 in [indecipherable] tunnel project. So what is the status of that project?

S.K Tripathi — Managing Director, Chief Executive Officer

Bharat Bhai, that project is still in question with government where the some security clearances are — have been raised by the government because we had the Turkish partner, we are trying to resolve that problem. So it’s still matter is in the court, is under subjudice.

Bharat Sheth — Quest Investment Advisors — Analyst

Okay. And Manishji —

S.K Tripathi — Managing Director, Chief Executive Officer

And Bharat bhai, this road, we have not taken in our L1 numbers, right, this tunneling project.

Manish Mohnot — Managing Director and Chief Executive Officer

— this tunneling project.

Bharat Sheth — Quest Investment Advisors — Analyst

Okay, fair. Manishji, you said that is this gross borrowing. I mean net borrowing is at consol level is INR1,900 crores. So how much is at core level. And if we really reduce. I mean or divest I mean some of the road projects. So this INR300 crores, INR400 crores savings what you are talking is over and above if we divest some of the borrowing may go out.

Manish Mohnot — Managing Director and Chief Executive Officer

So our core level debt, if you look at KPT and EPC together, KPTL and JMC together is around INR1,100 crores net debt, right.

Bharat Sheth — Quest Investment Advisors — Analyst

Yeah.

Manish Mohnot — Managing Director and Chief Executive Officer

We have not taken any proceeds from divestment into our target INR300 plus crores reduction in net debt. If that happens, it will be over and above that. This INR300 crores to INR400 crores comes only out of internal efficiencies, working capital, project closures and the focus on being lowly leveraged from a long-term perspective. So we have not taken — yes, we have taken Indore in this because we expect a lot of cash flows to come — we have targeted around INR125 crores of cash flows to come out of Indore in the current year. And that is included in this INR300 crores to INR400 crores number.

Bharat Sheth — Quest Investment Advisors — Analyst

Okay. And any update on — see, with this restructuring and divestment plan of the road as well as our logistic business?

Manish Mohnot — Managing Director and Chief Executive Officer

So I think what I mentioned earlier also, we are in advanced stage of discussions with bankers on both of them, we’ve got all the approvals except one bank, post which we will apply to NHAI. We’re expecting we are pushing to get that approval in the next few weeks, post that NHAI whatever time it takes. As far as refinancing is concerned on one of the projects we’ve got, a couple of proposals from large banks and NBFCs, we’re working on that also and hopefully Q2 we should be able to give you clarity on that. As far as Shubham Logistics is concerned, I think that’s something, which could take some more time because that business has headwinds, which are very different today, with the increasing wheat prices and commodity prices, you are seeing warehousing revenue come down by closer to 25% in Q4, right, because people are just exporting, but yes, last Friday, the government has banned export of wheat and that would have an impact, but as of now, we kept that on a backburner. I don’t see that happening in ’22-’23 for sure and we have not budgeted for anything out of that in our targeted debt reduction. But yes, we have declared that as non-core, and it’s only a matter of time that we started looking at it either a strategic investor or any other options for that business.

Bharat Sheth — Quest Investment Advisors — Analyst

Okay. And last question. Post merger with the strong net worth, so how much incremental I mean say on the project bidding side will we say currently we are bidding only for hypothetically INR500 crore or INR1,000 crore from JMC, so post that, how much of that we can increase?

Manish Mohnot — Managing Director and Chief Executive Officer

So today, we don’t have a challenge from a bandwidth perspective of bidding for any size projects, but yes, but strategically we are saying that we would be bidding for high value projects only merging the strengths of engineering and civil across the 2 companies will be one company and we should be declaring the name soon. Strategically, our focus is, we will continue to bid for large projects only unless strategically we need to — it’s a new entry strategy, new country strategy, any of that, but the focus will be shifting to bidding for large projects only.

Bharat Sheth — Quest Investment Advisors — Analyst

Last question, Manishji, we said that in 74% is with the price escalation. I mean whatever order we have won, so I — my belief is that in international, it’s a fixed price contract. So, these things are changing from here on?

Manish Mohnot — Managing Director and Chief Executive Officer

Yes. We’ve seen — we have also recently we have signed an international contract where the client has in principle at least for a variable price, so slowly and steadily, we are pushing clients. I’m not saying that we’ve been successful a lot and saying that this kind of volatility is something we as contractors can’t absorb. And we are pushing this domestic and international. Have we succeeded? My view is, out of the last 5 contracts bid, we have succeeded in 2, right, which is not bad, but we would have loved to succeed in all 5. So it’s a mindset change, which will happen over a period of time and for all these commodities meltdown happens and we come back to reasonable levels, the push could be different, but yes, we are pushing for, you know, at least the volatility being absorbed by the developers instead of the EPC contractors.

Bharat Sheth — Quest Investment Advisors — Analyst

Okay, thank you and all the best, sir.

Operator

Thank you. The next question is from the line of Prem Khurana from Anand Rathi. Please go ahead.

Prem Khurana — Anand Rathi Securities — Analyst

Yeah, thank you for taking my questions, sir. My questions are with respect to JMC. So just, I mean to begin with, I mean when I look at our order backlog and look at the composition, infra is almost around 53-odd percent now, I think when we embarked on this journey to kind of diversify our order backlog, when we used to be around 10-odd percent on infra side, idea was going to go to 30 and we have come to almost now 53. Given the fact that might become a large part of the order backlog now so and at the same time your private sector F&B seems to be making a come back now with residential real estate cycle going good. So do you see this mix to sustain at these numbers or do you get to thought process where I mean the private F&B could again become larger than infra going forward and also if you could share your thoughts on how the international and domestic mix be — become. I think as of now, it’s around 22% international, which used to be negligible for us and given the fact that we are looking at some more international geographies, fair to assume I mean international would also go up even further?

S.K Tripathi — Managing Director, Chief Executive Officer

Yeah. So going forward, the B&F is getting lot of traction domestically, but we are also expanding B&F also now on the integration foray and few successes have been there. And going forward — so to answer your question, this ratio of the B&F private driven will get keep reducing because our focus today domestic side, we have huge opportunities on the government side and the international also our 100% projects are multilateral funded or so-called the government-funded. There’s nothing private funding. Now with the increased size in the order booking, which is now being driven by the International and Water, this ratio will further get skewed but B&F also will grow along with the other government opportunity. So to answer your question, the non-B&F, non-private business will keep on increasing proportionately going forward the next 2 years to 3 years horizon.

Prem Khurana — Anand Rathi Securities — Analyst

Sure. And it is unlikely to have any change in the working capital cycle that we get to have and if it is, let’s say, comparison between private and public or does the working capital cycle, I mean you assume and will be the same, right, with both the segments?

S.K Tripathi — Managing Director, Chief Executive Officer

It will remain same and it keeps changing based on the market conditions and we keep moderating it depending on the market conditions, right. So we moderate the order inflow if we find that cash flow inflows are tight, then we go and focus somewhere else. I think it is more of a moderation seeing the overall situation of the sectors.

Prem Khurana — Anand Rathi Securities — Analyst

Sure. And sir, I mean in this order backlog almost now INR17,000-odd crore, how much would be Water orders and possible to share. I mean, how much would be bought out component in these waters. I mean because there the margin ideally should be lower than, I mean, what we make with pure EPC projects on the bought out components, possible to share, I mean, how much is the order backlog in there and how much is bought out portion in these water orders?

S.K Tripathi — Managing Director, Chief Executive Officer

Water will be — out of the INR17,000 crores, water will be about INR7,000 crores, out of this, the bought out will be almost 70% of the — this will be bought out, most of the water contracts, they are the escalation, but recently, due to the very sharp [indecipherable] in the commodity prices, the indices, they never move so quickly as the commodity prices and that is why we have seen some erosion in the profitability, but as the market stabilizes, I think the water contracts, the margin — overall margin profile is better than the average what we are showing for the company as a whole. And we see this kind of visibility to continue at least for next 1 to 2 years.

Prem Khurana — Anand Rathi Securities — Analyst

And just 2 more if I may. One was, I mean essentially on — if you could share the status on the asset sale, I mean, the road BOT that we were planning to sell. Where are we in terms of our efforts now?

S.K Tripathi — Managing Director, Chief Executive Officer

So, asset sale at the moment, seeing the current situation, we are not seeing any traction in the market realistically but we have reworked on the strategy now, one asset is already terminated, there, we are working with NHAI and the bankers to settle the termination payment, so that cash outflow — yearly cash outflow is stopped. The WEPL, there we are already — we briefed in the — Manishji has briefed that we are working on the restructuring, something should happen in the Q1. The VEPL, it’s sort of self-sustaining and we are going for the refinance there. Hopefully that should happen, say in next 2 quarters, and Agra-Aligarh anyway VVEPL is a small asset. So it is self-sustaining. So these 2 assets now with the current revenue spectrum, which has now touched to about INR58 lakh per day, right, yeah, so there is — so if you look at these assets including repayments, they are — we need a revenue of about INR66 lakh. Last year, they were earning INR47 lakh and now they are at about INR58 lakh per day. If this trend continues, it significantly improves the health of BOOT portfolio and our obligations to fund more and more reduces. So this is our overall strategy here. One asset, we will refinance. One asset, we will restructure, and one asset, we are trying to settle with the NHAI on the termination payment.

Prem Khurana — Anand Rathi Securities — Analyst

Sure. And just one last, I mean, so I think in your earlier remarks, I mean, you spoke about kind of getting into newer segments. So would that needed to kind of incur some more incremental capex. I mean over and above what we generally get to have in terms of run rate, so you spoke about I think underground metro and you’re getting into airports as well and the idea is to kind of take up some more orders on airports side in Africa, so that need going to incur capex, which is in excess of, I mean, the run rate generally that we get to have with us?

Manish Mohnot — Managing Director and Chief Executive Officer

We are trying to balance the overall portfolio. If I look at water, they don’t require any capex and that is what we are leveraging to build other businesses, right. So if the water business requires only 3% capex, maybe underground and the airports they require 10% to 15% level of capex, we are balancing both so that the overall capex investment remains in [indecipherable] and anyway with the merged entity going forward, we will have the better ability to fund the capex which are particularly in the underground project which are very capital intensive. And that is what currently our strategy to fund the capital intensive projects and we balance the portfolio on the capex side.

Prem Khurana — Anand Rathi Securities — Analyst

Sure. Sir, [indecipherable] if we would share absolute number for FY’23 in terms of capex. That will be my last question. Thank you.

Manish Mohnot — Managing Director and Chief Executive Officer

Capex number for FY’23.

S.K Tripathi — Managing Director, Chief Executive Officer

So on a consol basis, we expect capex to be in the range of INR300 crores for FY’23.

Prem Khurana — Anand Rathi Securities — Analyst

Sure sir, thank you. Thank you very much for taking my questions.

Operator

Thank you. The next question is from the line of Jainam Shah from Equirus Securities. Please go ahead.

Jainam Shah — Equirus Securities — Analyst

Yeah. Good morning sir, thank you for the opportunity. Sir, my question is related to the road assets of the JMC. So, sir, if you see that Kurukshetra that we have given the termination notice to the NHAI and we have also provided for some of the provisions in our books. So, sir, I wanted to know how much investment is still there in our books for the KEPL in terms of equity plus loans plus some quasi equities we have?

S.K Tripathi — Managing Director, Chief Executive Officer

So, KEPL, everything is provided, there is nothing left to be provided in KEPL.

Manish Mohnot — Managing Director and Chief Executive Officer

And our investments today stand at number closer to zero.

Jainam Shah — Equirus Securities — Analyst

Okay. And sir, any amount to be received from NHAI would be directly going to the lenders for the repayment of the loan. So, there will not be any incremental payment from our side in the coming 1 year like in the formality of this combination?

S.K Tripathi — Managing Director, Chief Executive Officer

So that is our best endeavor. As per the concession provisions, NHAI is supposed to pay to the lenders what is due to them, but knowing NHAI, it is a journey we have to travel with them. I’m sure you understand the way the NHAI conducts on these issues. So we have received the engineer recommendation which says that with the full debt obligation of the bankers can be paid off, NHAI is evaluating it, we are working with them and we’ll come to know by the end of this quarter how NHAI is going to handle this issue.

Jainam Shah — Equirus Securities — Analyst

Okay. Okay. And sir, any adjusted equity kind of thing that we are expecting to get back, like, although we have provided everything, but any kind of positive cash flow we can expect from this asset?

Manish Mohnot — Managing Director and Chief Executive Officer

No.

Jainam Shah — Equirus Securities — Analyst

And sir, you have said that we were requiring INR66 lakhs for this 3 road assets for the overall repayment of the 3-road assets, so are we factoring into any major maintenance into that INR66 lakhs or any major maintenance would be over and above it. So what I believe is that there might be some major maintenance cycle in upcoming 1 to 2 years for one of our project, so —

Manish Mohnot — Managing Director and Chief Executive Officer

So let me rephrase what I have said, INR66 lakh is the subsistence revenue including the debt obligations, right. And currently we are at INR58 lakh, compared to the INR47 lakh of last year. So there is a lesser pain now to manage these assets. That is the point number one. As far as the major maintenance is concerned, this is to be funded separately, which is not part of this number, right. And we don’t have major repair obligations, which are there maybe in ’24, ’25, but there also, we have taken a strategy where we are spreading the major maintenances because if there was no traffic last 7, 8 years and there was no revenue, there is no immediate need to do the major repairs and those repairs we are spreading over a period of 2 years to 3 years strategically in order to contain the funding requirements.

Jainam Shah — Equirus Securities — Analyst

Okay. Okay, got it, sir. And sir, if we just take a scenario that this refinancing of WEPL and VEPL takes some more time, then any — how much funding is expected for FY’23, as we have done INR81 crore for this FY’22, so any ballpark number for upcoming 2 years for this funding like, is it like INR8 lakhs into 360 days, something like that?

Manish Mohnot — Managing Director and Chief Executive Officer

So last year, our total funding in these SPVs was to the extent of INR140 crores, this year it is to be expected to be in the range of about INR80 crores, INR70 crores to INR80 crores depending on how the revenue comes on the full-year cycle.

Jainam Shah — Equirus Securities — Analyst

Okay. Okay. The INR140 crores that you have told versus INR81 crores reported into the presentation. So this balance INR60 crores is for Kurukshetra if I’m not wrong?

Manish Mohnot — Managing Director and Chief Executive Officer

Yeah.

Jainam Shah — Equirus Securities — Analyst

Okay. Okay. Okay, sir. Okay. Yeah, sir. Thank you so much.

S.K Tripathi — Managing Director, Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Teena Virmani from Kotak Institutional Equities. Please go ahead.

Teena Virmani — Kotak Institutional Equities — Analyst

Hi sir, my question is related to KPTL standalone. We have seen a sharp increase in working capital requirement for KPTL standalone. So what exactly contributed to that sharp increase? And going ahead, how do we see that panning out for the company? So as the [indecipherable] provisions, which are taken for around 118 crores, are they part of the working capital or is it part of the overall expenditure which the company has reported?

Manish Mohnot — Managing Director and Chief Executive Officer

So, good morning, Teena. I think you’ve answered a few questions yourself which is good. So let me first answer the last one. Yes. Provisions, continue to be part of working capital, first. Second, why has the working capital in days gone up? There are 2 specific reasons. One, we have focused on not increasing our customer advances, given the interest rates, given our low debt levels, right, that’s a conscious call of not in focus, not increasing customer advances where the interest rates are much, much higher and second consciously last 2 quarters, we’ve also made sure that creditors payment is much higher. It would typically be, creditor days have come down significantly at the KPTL standalone level, both are conscious efforts right given the low interest rates and given that we have a low debt. As I said earlier, on a consol basis, we are targeting to be in the range of 90 to 100 days as far as net working capital is concerned and we’re pretty confident we’ll be there.

Teena Virmani — Kotak Institutional Equities — Analyst

So sir, even if I adjust this creditor days and then another adjustment related to CTC provisioning, then also the working capital cycle is much higher, so going down to almost around 90 to 100 days would require a correction of somewhere in the range of 35 to 40 day of correction from the current levels of FY’22. So do you think it is possible in the next 1 to 2 years when we know that the environment is little volatile.

Manish Mohnot — Managing Director and Chief Executive Officer

I’ll just be very clear on what I’ve said, on a consol basis, we expect 90 days to 100 days. As far as KPTL is concerned, we will continue to be at slightly higher level and the current environment, because we are still with that low debt and all of that, we are still not taking too many customer advances, so from 134 days, we definitely plan to bring it down to levels of 120-odd days in the next year or so. But it’s not going to be significantly lower. At JMC, it will be lower and consol we should be in the range of 92. So from 134, our target would be getting it down closer to 120 levels by the end of next year.

Teena Virmani — Kotak Institutional Equities — Analyst

Okay, got it, sir. And then my second question is on overall consol revenues like if I see overall consol revenues are around 148 billion [Phonetic] for ’22 and the standalone number, if I add up the standalone numbers and JMC numbers, there is still a shortfall. So where is the shortfall coming through because again standalone is around INR70.6 billion and JMC is around INR55 billion. So where is the gap coming in from because Shubam you mentioned that there are challenges on the group side, so what exactly is contributing to this gap between [indecipherable] and these 2 entities?

Manish Mohnot — Managing Director and Chief Executive Officer

I think the biggest gap is KPTL Sweden, Linjemontage, which is closer to INR1,100 crores, then there’s Kalpataru Brazil, which is closer to INR500 plus crores and then there is Shubham Logistics. So if you add all of that because stand-alone Linjemontage and Brazil are not reported in the revenue, so if you add all of that —

Teena Virmani — Kotak Institutional Equities — Analyst

Okay. So this is not part of your revenues on the standalone basis.

Manish Mohnot — Managing Director and Chief Executive Officer

Perfect.

Teena Virmani — Kotak Institutional Equities — Analyst

Got it.

Manish Mohnot — Managing Director and Chief Executive Officer

Whereas both put together, there are around INR1,700 crores plus Sweden and Brazil and then you have Shubham also around INR120 crores.

Teena Virmani — Kotak Institutional Equities — Analyst

Okay. My next question — my last question is regarding the guidance for JMC. Given the fact that the order inflow for the company was quite good and order book is also very good. So why such a conservative guidance of around 15% to 20% for JMC? Is there anything of believe that you see from the customer side to go slow or in terms of payment otherwise like when you normally see the order book, it’s fairly strong. So I believe the growth should ideally be much more than 15% to 20% for JMC.

S.K Tripathi — Managing Director, Chief Executive Officer

No, so I think you’re right, looking at the order book. But the numbers could be much better. We just want to be slightly conservative at this stage, right, because there are the global issues happening all of that, but you’re right, last year also we had guided JMC to be in the range of 20 and we have done 40, right, so current year also, we believe that this could come up but you just like to wait for one more quarter to be sure that what numbers would come up. But, yes, you’re right. 20 minimum is visible, it will go up beyond that only.

Teena Virmani — Kotak Institutional Equities — Analyst

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

Operator

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

Parikshit Kandpal — HDFC Securities — Analyst

Just on the loss funding, so last call, we had said that about INR15 crores to INR20 crores will be the recurring cost funding. So now it’s again INR70 crores to INR80 crores number which you have mentioned this quarter, so just if you can breakup this number, Is there any major maintenance included in this because we were expecting some INR40 crores to INR50 crores of major maintenance in FY’23. So does that include that?

Manish Mohnot — Managing Director and Chief Executive Officer

Kandpal, can you repeat your question once again?

Parikshit Kandpal — HDFC Securities — Analyst

Just on the loss funding, you said that in FY 23 about INR70 crores to INR80 crores of loss funding will happen, just wanted to understand from the last quarter call you went and about INR15 crores to INR20 crores will be loss funding on a recurring basis. And it could be something, which will come up on major maintenance at FY23 for this INR70 crores to INR80 crores, does it include any major maintenance?

Manish Mohnot — Managing Director and Chief Executive Officer

Yes. So, out of INR70 crores to INR80 crores, about INR20 crores to INR25 crores will be towards the maintenance obligation, right. And the balance will be towards the loss.

Parikshit Kandpal — HDFC Securities — Analyst

The number seems to be on a higher side, sir, because we were looking at settling down is the loss funding on a recurring basis about INR20 crores, INR30 crores. So does it have an impact of delaying the restructuring of the WEPL that is why this number is high, I just wanted to understand what would be the normal recurring loss funding from here on after the WEPL restructuring?

Manish Mohnot — Managing Director and Chief Executive Officer

So you are right. Currently the numbers — because the restructuring thing if it gets delayed by another quarter or so, that is why these numbers, we have still kept little on higher side, depending on the outcome with NHAI.

Parikshit Kandpal — HDFC Securities — Analyst

But on a recurring basis, what could be the loss funding sir including major maintenance and delay — and assuming that the restructuring of WEPL happens, so from thereon how much we can spend recurring?

Manish Mohnot — Managing Director and Chief Executive Officer

That’s right. So if it happens, there could be a reduction of another INR10 crores to INR15 crores.

Parikshit Kandpal — HDFC Securities — Analyst

And then on FY’24, how much would be the loss funding after the restructuring, sir?

S.K Tripathi — Managing Director, Chief Executive Officer

’24, we can come back to you Kandpal with the revised working because all will depend on the traffic scenario, right, so it will be a wild guess putting any number now. But if the number goes as I said the subsistence revenue is at the level of INR66 lakh, if it crosses that, then we have lot of problems solved on these projects.

Manish Mohnot — Managing Director and Chief Executive Officer

So I’ll just give you different perspective to it based on what SKT said, 66 versus 57, we have a shortfall of closer to that 10, right, and if I put that number assuming things won’t improve that then we’re looking at INR35 crores to INR40 crores funding only for debt management and interest. if the number 58 goes up to 62, great. If it comes down significantly, is something, but as of now. If you look at the numbers given by SKT, there’s half mix of MMR and balances INR35 crores to INR40 crores what will go out for maintaining the cash flows on these 3 assets.

Parikshit Kandpal — HDFC Securities — Analyst

But sir, what will be the impact of restructuring on this number [indecipherable]?

S.K Tripathi — Managing Director, Chief Executive Officer

So, ideally, if it happens, the way we wanted this number of particular could come down to closer to a single-digit growth getting into the next year. But as I said ideally right. Because there’s the final negotiations happening with the bankers, a few things up and down can happen. And that’s why I just want to restrict that for maybe a few more quarters because the moment it’s done, we’ll come back to you at the first instance to tell you exactly what the number would be.

Parikshit Kandpal — HDFC Securities — Analyst

My second question is on the elevated cash levels in the balance sheet close to about INR900 crores, so why such high cash levels and what do you intend to do with that cash?

S.K Tripathi — Managing Director, Chief Executive Officer

So I think it’s — these cash levels only stay at quarter end and the year end, primarily for various reasons, which I just don’t want to discuss on the call, you know, because we have banking limits which we need to utilize and all of that because we have used limits, so typically at quarter end and year-end, you will always see that we have high cash levels for a few days in our balance sheet.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. Last bit on [indecipherable] data — net cash data, which you have mentioned. And also if you can mention about the pledges. So earlier the promoters have guided a pathway towards reducing the pledge. So where are we on the journey of reducing pledge and when can concrete action happening there.

S.K Tripathi — Managing Director, Chief Executive Officer

So we continue to be on that date, which we had given in the December quarter. We believe that starting Q2 the pledge will start coming down. That’s what the promoter have told us given the increase in sales and the kind of traction which real estate has, so we don’t see pledge coming down in Q1, but what we have been given to inform by the promoters is that starting Q2 the pledge will start coming down.

Parikshit Kandpal — HDFC Securities — Analyst

And the net cash status at the KPTL level if you can give some comment sir.

S.K Tripathi — Managing Director, Chief Executive Officer

Net cash —

Parikshit Kandpal — HDFC Securities — Analyst

At the KPTL level, we were trying to reduce the debt to near 0, so if you can just give some color on that.

S.K Tripathi — Managing Director, Chief Executive Officer

Again, it would be difficult to give you exact number of KPTL. As I said earlier on a consol basis and that’s a better way to, we expect debt to come down by INR300 plus crores and significant amount of this would be at KPTL because Indore itself, we are expecting INR125 plus crores, so — but it’s good to look at it on a consol basis because hopefully by the year end when we declare this will be one entity.

Parikshit Kandpal — HDFC Securities — Analyst

But Indore, how much is the residual cash flows, including what is unsold which we can realize from that project now?

S.K Tripathi — Managing Director, Chief Executive Officer

250 plus crores.

Parikshit Kandpal — HDFC Securities — Analyst

250?

S.K Tripathi — Managing Director, Chief Executive Officer

Yeah.

Parikshit Kandpal — HDFC Securities — Analyst

Okay, thank you.

Operator

Thank you. The next question is from the line of Thomas George, an individual investor. Please go ahead.

Thomas George — Individual Investor — Analyst

Good morning, Mr Mohnot and congratulations for a very successful quarter results. I have just a small question in terms of looking prospectively after the merger, what will be the employee size of our company, both the companies put together?

Manish Mohnot — Managing Director and Chief Executive Officer

Good morning, Mr. George. So we are currently at levels of around 7.500 people on the merged entity. Given the growth prospects, we believe this could slightly go up. But our own projections is we should be in the range of 7,500 level as far as employees are concerned.

Thomas George — Individual Investor — Analyst

Right, sir. Thank you, sir. Good day, sir.

Manish Mohnot — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. As there are no further questions, I now hand the conference over to Ms. Bhoomika Nair for closing comments. Over to you, ma’am.

Bhoomika Nair — DAM Capital Advisors — Analyst

Yeah, I would just like to thank everyone for their participation and particularly the management for giving us the opportunity to host the call, sir. Thank you very much and wish you all the very best. Thank you very much Bhoomika and thank you everybody. [Operator Closing Comments]