KEC International Ltd (KEC) Q2 FY23 Earnings Concall Transcript

KEC International Ltd (NSE:KEC) Q2 2023 Earnings Conference Call dated Nov. 07, 2022

Corporate Participants:

Vimal Kejriwal — Managing Director & Chief Executive Officer

Rajeev Agarwal — Chief Financial Officer

Analysts:

Bhoomika Nair — DAM Capital — Analyst

Parikshit Kandpal — HDFC Securities — Analyst

Ashish Shah — Centrum Broking — Analyst

Sandip Sabharwal — asksandipsabharwal.com — Analyst

Priyankar Biswas — Nomura — Analyst

Amish Kanani — JM Financial Services — Analyst

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

Jayesh Shah — Ohm Portfolio Equi Research — Analyst

Bharat Sheth — Quest Investment Advisors — Analyst

Vishal Biraia — Max Life — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the KEC International Limited Q2 FY ’23 Results Conference Call. We have with us today from the management, Mr. Vimal Kejriwal, Managing Director and CEO; and Mr. Rajeev Agarwal, CFO.

[Operator Instructions]

I now hand the conference over to Mr. Vimal Kejriwal. Thank you, and over to you, Mr. Kejriwal.

Vimal Kejriwal — Managing Director & Chief Executive Officer

Thank you, Rithuja. Good morning to everyone. I welcome you all to the Q2 earnings call of KEC. Let me start with an update on the overall performance for the quarter and thereafter talk about each of the respective businesses and key strategic initiatives. We have achieved revenues of INR4,064 crores for the quarter with a strong consolidated growth of 13% and standalone growth of 11% vis-a-vis Q2 last year. The growth was delivered by good performances across most of our businesses. The growth could have been higher, but for extended monsoon in Southern parts of India. We have delivered an EBITDA margin of 6.2% at the standalone level and 4.4% at the consolidated level for the quarter. The margins continue to be impacted primarily due to elevated logistics costs, which are now coming down, execution of legacy projects with adverse commodity prices and cost for completion of the last EPC projects in SAE Brazil. We have significantly reduced our commodity exposure in legacy projects to less than 5% of our order book.

In Brazil, I’m pleased to share that we have largely completed the last EPC project last month and expect it to be commissioned within this quarter. With this, our order book in SAE of almost INR1,100 crores does not have any EPC project and comprised of orders for supply of towers, hardwares and poles. We are confident of a revival in the performance of SAE from Q4 onwards. Furthermore, with a strong order book in North America, the Mexico factory is well-loaded for H2. Considering the performance of Brazil, we adopted a prudent approach and made a provision for impairment of INR76 crores during the quarter in the standalone financials. However, this has had no impact on the consolidated financials. Excluding the impact of exceptional item, we have delivered a PBT margin of 3.1% and PAT margin of 2.7% at the standalone level. Our consol PBT margins are at 0.7% and PAT margins at 1.4%.

We continue to have good traction in orders. Our YTD order intake stands at INR10,465 crores, with a strong growth of 25%. The largest contributors in the order intake have been our T&D, Civil and Railway businesses followed by Cables and Oil & Gas. Most of these orders had been secured at elevated [Indecipherable] current commodity costs. This gives us an — confidence of an improvement in the margin trajectory going ahead as these orders get into execution. The traction in order intake has expanded our order book to an all-time high of INR27,569 crores, including the orders secured in Q3 till date. Additionally, we have a large L1 position of over INR6,500 crores diversified across businesses. With this, our order book plus L1 stands at a record level of INR34,000 crores, our tenders under evaluation and in pipeline stand at over INR1,10,000 crores. Our debt level, including acceptances has started improving and has reached INR5,919 crores as on 30th September, a reduction of more than INR150 crores against Q1 FY ’23. We expect improvement in the working capital in the second half of the financial year and are committed to reduce the debt levels going forward. Our interest cost stands at 3.1% for the quarter as a percentage of sales. The interest cost is slightly higher owing to the steep increase in the interest rates globally, especially in SAE Brazil and the elevated debt levels.

Now coming to the specific businesses. Our core T&D business has delivered a growth for the quarter, despite the various headwinds. The growth has been delivered on the back of strong execution, especially in the international market. The T&D business has significantly expanded its order book with strong order inflows of INR3,775 crores across India, Middle East, Africa and the Americas.

In India, the business has secured its second prestigious order to construct our 400 KV digital substation for PGCIL in addition to the first 765 KV digital substation in India secured last quarter. Wherever the business has backed two more large transmission line orders from PGCIL, the business has also diversified its clientele with an order to construct a large GIS substation from a reputed power generating company in India. The business has also secured multiple orders in the international markets, especially in the Middle East. We have successfully leveraged our Dubai facilities to significantly enhance business in the Middle East. Our order book and L1 position in the Middle East has now expanded to over INR4,000 crores, a growth of approximately 2 times versus last year.

The overall tender pipeline in T&D continues to be strong, both in domestic and international markets. Additionally, the business has a large L1 pipeline of over INR3,000 crores contributed largely by international orders. Our railway business has achieved a revenue of over INR850 crores for the quarter. I am pleased to share that the business has secured YTD order inflows of approximately INR2,500 crores, a healthy growth of almost 2 times vis-a-vis others last year. These include orders in the conventional OHE and composite projects as well as orders in the new areas of speed upgradation and technologically unabled areas of metros. During the quarter, the business has also successfully expanded its presence with two prestigious orders in the emerging areas of TCAS, Train Collision Avoidance System under Kavach, which aims to enhance safety of the Indian railways with world-class technology. We are witnessing an improved visibility of tendering activity across segments and are confident of securing a larger share of orders in the coming months. The railways tender pipeline continues to remain healthy across conventional technologically-enabled emerging areas as well as international opportunities. With sustained focus on execution, strong tender pipeline and an order book plus L1 of over INR7,500 crores, we are certain that railways will contribute significantly to our growth going forward.

Our Civil business continues to be on a high growth trajectory as it dropped revenues of INR740 crores for the quarter with an impressive growth of 65% vis-a-vis Q2 last year. Our Honorable Prime Minister, Sri. Modi has inaugurated the prestigious Phase-1 extension of Kochi Metro, KEC’s first metro rail project, wherein the viaduct and stations were delivered by our Civil business and the ballastless tracks were laid by our railway business. This project is set to make local travel more convenient and ease lives of thousands of commuters. We are also working on Phase 2 of the Kochi metro, which shall be completed in the near future. The Civil business continues to deliver consistently on the order intake front and has secured YTD orders of over INR3,000 crores, a strong growth of 25% vis-a-vis last year. During the year, the business has strengthened its presence with significant orders in the water pipelines, public spaces, industrial and data center segments. The business is now executing eight prestigious projects in the water pipelines segment aggregating to over INR2,500 crores on the Jal Jeevan Mission of the government. The uptake in order intake has significantly enhanced the order book plus L1 to over INR9,500 crores comprising of turnkey EPC projects across segments from marquee clients. With an uptick in government spending across segments and a resurgence in the private capex in the industrial and the reality sector, we are confident that this business will continue to be the key growth driver for us going forward.

We are pleased that our foray into data center is doing well and we recently secured our third order in the segment. In Oil & Gas pipelines, the business has demonstrated very good performance post-acquisition of KEC Spur Infrastructure last year in October ’21. The business delivered revenue of INR81 crores and secured new orders of INR250 crores for composite works of an oil terminal station and laying of cross-country pipeline during the quarter. The business has a strong order book plus L1 of over INR900 crores comprising government and private players. We are confident of scaling up — significantly scaling up the business both in India as well as overseas. Our Cables business achieved revenues of INR390 crores and grew by 9% vis-a-vis Q2 last year. I’m happy to share that the business has achieved its highest-ever revenues and profitability in H1. The business is also progressing well with the development of five new products, of which three products have been successfully commercialized.

Coming on to strategic initiatives. We remain committed on delivering profitable growth through focused diversification, expanding international reach in our non-T&D business and strengthening the balance sheet through sustained cash flow generation. Additionally, we are making good progress in our two-fold transformational program on world-class engineering and civil execution excellence and collaboration with a global consultant. The objective of this program is to expand our business horizons, improve engineering-led wins and enhance profitability. The key deliverables of the program include institutionalizing new-age solutions for optimizing cost and resource consumption, reimagining processes to improve productivity and implementing digital solutions to crash the project cycle time. We have already started witnessing benefits of this program, wherein we have expanded our footprint into diverse technology-intensive and enduring that EPC projects in Railways and Civil.

We continue to deploy several mechanization, automation and digitalization initiatives across projects, which has significantly helped us to improve productivity and quality of execution. In ESG, we continue to take several measures to transform our operations in a sustainable manner. One of the key measures in the installation of induction furnaces and usage of natural and LPG gas at our transmission power plants in India and Dubai to lower carbon emissions, resulting in a saving of 24,000 liters of fossil fuel every month. I am also delighted to share that KEC has been recognized as one of India’s Best Managed Companies by Deloitte for the second time in a row, the unique distinction is a testament of our strong focus on sustainability and governance.

Overall, we are pleased with our consistent growth in revenues, traction in order intake and improving working capital scenario despite a challenging environment. We have significantly reduced our exposure to legacy projects and have commenced execution of projects, which are secured based on current commodity prices and logistic costs. This augurs well for us and gives us the confidence of a sequential improvement in the margins in the quarters to come. On a concluding note, I would like to convey that outlook remains robust across most of our businesses based on our traction in order intake, record order book plus L1 of over INR34,000 crores and a strong tender pipeline, we are now increasing our revenue growth targets from the earlier 15% to 20% for the whole year.

Thank you very much. I’m now open to questions.

Questions and Answers:

Operator

[Operator Instructions]

The first question is from the line of Bhoomika Nair from DAM Capital. Please go ahead.

Bhoomika Nair — DAM Capital — Analyst

Yes, sir. Sir, just if you can give an update on how the working capital is panning out, I think we were looking at some easing of the working capital and release of funds from Afghanistan and also other areas of Railways, if you can just give an update on what is the status of the same?

Vimal Kejriwal — Managing Director & Chief Executive Officer

So Bhoomika, we are broadly in line with what we were talking about saying that the improvement is starting from Q3 and we should hopefully see a bump up, significant improvement happening in Q4. So I think that’s in line. We have reduced from INR150 crores, we would have loved to reduce more, but I think that’s where we are. Afghanistan is somewhere where we have still not received cash but we are in active dialog with all the three multilaterals. We do expect that before the end of the year, I’ll say at least 30% to 40% of the outstanding’s should get realized either from multilaterals or from against our ECGC claims. So I think, Afghanistan, we will definitely see some light happening in the near future. There’s also a lot of pressure on restarting some of these projects because some of them are of strategic importance to World Bank as well as to some of the countries participating. So we’ll keep our fingers crossed, the embassy has recently opened and visas and all getting issued. So I think in Q4, we will definitely see a positive movement in Afghanistan.

Bhoomika Nair — DAM Capital — Analyst

Right. Okay. So the other aspect is on order intake, right? In the first half, we’ve seen a fairly strong order intake of INR10,000 crores, we probably touched close to INR20,000 crores in the current year. How is the outlook in terms of across segments looking at maintaining this momentum in the next few years, if you can just talk about the bid pipeline across T&D, Railways, Civil, the three key segments for us?

Vimal Kejriwal — Managing Director & Chief Executive Officer

So bid pipeline is driven in — obviously, very strong, okay, across both the residential and now we are seeing industrial and public spaces. Metros is slightly weak as we have not seen major announcements of new metro, so whatever is coming is from the existing projects of Chennai and Delhi and Mumbai, but not all new, but overall, there is a huge pipeline of tenders in Civil. As far as T&D is concerned, international pipeline is very strong, especially from the Middle East, and also I’ll say from far East, we are seeing some tenders coming out in Thailand, Indonesia — sorry, Malaysia, etc. So that is going on. Africa is also slightly coming up now. Last quarter, we had said we are very disappointed, but I think off late, we started seeing some tenders coming out, particularly in East Africa, I will say. India, I think T&D tenders are coming out consistently, especially from power field and also the TBCB tenders. There has been some slowdown in award because of the GIB issue is still not resolved. I think they were hearing on end of November. So once that gets resolved, so all the tenders which are stuck in Rajasthan should start coming out. Gujrat are already out and some tenders in Maharashtra and Karnataka should be awarded now. So I think India, I said, we have a decent tender pipeline, but we are lucky that we have already won four and maybe I think five or six projects already in this year, okay? And we are L1 in couple of them more. So I think for us, both India and international will do very well. And the last part is SAE where we have a strong order book, as well as large L1s in SAE, so I think we’ll also see a good traction on the SAE order intake in the next half.

Bhoomika Nair — DAM Capital — Analyst

Sir, is it possible to quantify the bid pipeline within T&D? What is it looking like both in India and international?

Vimal Kejriwal — Managing Director & Chief Executive Officer

I don’t have the numbers right now. Maybe you can talk to Abhishek later, but should be around INR25,000 crores, INR30,000 crores, okay?

Bhoomika Nair — DAM Capital — Analyst

Sure, sure. Sir, lastly on SAE, I know this quarter, we’ll complete the last project. So what will be the level of loss that it will come off to versus the INR60 crores, INR70 crores that we’ve been making on a quarterly basis at EBITDA?

Vimal Kejriwal — Managing Director & Chief Executive Officer

Unfortunately, I don’t have the numbers. If we knew what we are losing, we would have provided for that and closed the accounts. We will commission the project this quarter in November or December. So by that time, all our various claims and all that, commercial issues, which are going on with the client, that should also get completed. Brazil, advantage is that normally, they also complete all the commercial pieces. So this quarter, Bhoomika, we will complete the entire EPC, including the commercials and all that, so whatever is going to happen, I don’t know what will happen, that those will get accounted for in this quarter. But I do presume that they will be reasonably lower than what has come in Q1 and Q2. I don’t expect losses or anything of that order, there will be some numbers depending upon how the claims pan out, okay? But we do expect that, they will be reasonably lower than what has hit us in Q1 and Q2.

Operator

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

Parikshit Kandpal — HDFC Securities — Analyst

Hi, Vimal, sir. Congratulations on a decent quarter, sir. My question is if I see the business right now, so we are having the headwinds of high-interest rates, which is started getting reflected on higher debt levels, evaluated interest cost of almost INR127 crores this quarter. And then second thing is, while we see some improvement happening from the SAE and we expect to improve our margin, those standalone margins have actually — I mean at all-time lows now. So just wanted to understand from you what’s happening on the standalone business, why has the margins come off during this quarter. And do you feel some more pressure, the headwinds to standalone business given that we are out of the commodity cycle where the price has corrected, but our margins will now compress?

Vimal Kejriwal — Managing Director & Chief Executive Officer

So, Parikshit, standalone, I think there are a couple of reasons for standalone being where they are. So one is, while the prices have come off, even the impact of that will start coming in now. We have committed cost on raw materials, bookings have been done and we have legacy projects, so that is still continuing. What has also happened and why I’ll say this quarter, it got a little bit, I’ll say aggressive in terms of numbers and all that is because the price has started coming down. We also fast-tracked execution of some of our projects, which normally we would have kept, let’s say, do it [Foreign Speech]. What happened was that there are projects where we could have waited till Q4 and all that for execution and gradually spread over the losses, but since steel came down from INR72,000 to INR56,000 and INR55,000, we did size that, it’s better to cut our losses and execute those projects. Similarly, on international front also, when we were seeing that logistic costs, etc., were not coming down, steel is not coming down, or it had come down to a certain level, we did, I’ll say fast track some of our legacy and loss-making projects, which we had earlier thought that we will split over maybe H2 or maybe going over Q1, okay? So that’s one thing which has sort of put a little bit of extra pressure on the standalone. Secondly, I think in Q2, there was excessive rainfall which sort of, I’ll say pushed down our revenues for the quarter in India, especially. Had we — had that not happened, we would have probably done 11% growth in standalone is not enough. We could have done easily to 20%, okay? So because of that, there was some leverage, which has come and hit us both on interest and also on the opex cost. Third is that we have now got a large order intake at current and maybe sometimes at a better pricing also. So, all those orders are now on the design and execution, and we will start revenues accruing from then maybe at Q3 or maybe at least in Q4. The fourth piece, what I would like to add is that you have seen results of many of the cable and conductor companies and all that. Now with metal prices, they are coming down, all of them are under tremendous pressure to supply. So, we are also running in a supply-constrained in some of the places where the prices have come down, but we are not actually able to supply the material because the factories of all the conductor manufacturers are full. So I think these are a few reasons. And I think the last thing I would like to say is, you will also start seeing the numbers of standalone versus consol being different now because we now have our Dubai factory, we also have Dubai EPC LLC, where all our UAE and other jobs are now getting executed under that LLC, which will come under the consol rather the standalone. So you may going forward also see some changes in the consol versus standalone, especially on the T&D sector. I hope I’ve answered all your questions, Parikshit.

Parikshit Kandpal — HDFC Securities — Analyst

Yeah, yeah. Second question is on profitability. So between the SAE and the standalone, so how do you see the margins coming back to that high single-digit? When do you expect you’re all consuming the current order book and raise of commodity prices and the factors you mentioned just now? So how do we revert back to that high-single-digit margins by then, if you can give some sense and color on that?

Vimal Kejriwal — Managing Director & Chief Executive Officer

So to me, Parikshit, Q4, we should start seeing at least a breakeven in SAE. Okay. Q3, I’m not sure I don’t want to commit or stick my neck out but Q4, definitely we should start seeing breakeven in SAE and by Q4, I’ll say largely except maybe one order or maybe two orders where we have an issue where we are not able to commence execution, most of our legacy projects will get completed in terms of material supply. There could be closure issue and all that. So from I think Q1 onwards, we should start seeing margins heading towards high-single-digit.

Parikshit Kandpal — HDFC Securities — Analyst

What about standalone, sir?

Vimal Kejriwal — Managing Director & Chief Executive Officer

I think the problem will continue to be on standalone also because as I said, some of the orders, which we have on TBCB and all that are in standalone, so we’ll have to wait and see how it pans out. But maybe you may have Q1 could be against still single high-digit even for standalone, maybe Q2 onwards, we may see some changes.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. Okay, sir. Just lastly, sir, if you can give us the segmental breakup of debt between T&D and non-T&D, so how much would be the distribution there?

Vimal Kejriwal — Managing Director & Chief Executive Officer

The revenue was 49%. You’re looking at what distribution?

Parikshit Kandpal — HDFC Securities — Analyst

No, debt, sir. Debt numbers between the T&D and non-T&D.

Vimal Kejriwal — Managing Director & Chief Executive Officer

Debt, I don’t think we have, and I don’t think we give it in that fashion, but I don’t even have it right now. Maybe you can talk to Abhishek later on, maybe you’ll get a better idea.

Operator

Thank you. The next question is from the line of Ashish Shah from Centrum Broking. Please go ahead.

Ashish Shah — Centrum Broking — Analyst

Yeah. Thank you for the opportunity. Sir, first question is on the Afghanistan execution. So you did mention that there are some mitigations that you may start the work on some of the projects there, but now it’s been some time that you had got those projects, a lot of things are happened in between. So is there any talk of renegotiating the value of the order, so that your margins are protected? Because then we don’t want that SAE corner kind of a situation again. So I’m just getting your thoughts on that, sir.

Vimal Kejriwal — Managing Director & Chief Executive Officer

Ashish, there is a clear — I’ll not use the word renegotiation. But there are clear discussions happening on cost to complete happening and all the cost of materials. So, let me put it this way that we already have around, I don’t have the number, the 30, 40 local employees who are there at site, who are maintaining the stores and maintaining the work, which has been done. So hopefully, there is no deterioration in the work, which has been done. So all these costs, which we are incurring and also additional costs with a flux of time are under discussion with the clients. So definitely when we restart, we will definitely have better numbers available. And I think even if — let’s this go to the extreme, even if there’s nothing happening there in terms of cost negotiation and all that, most of these projects are on high double-digit numbers and all that, 15%, 20%, 25% and all that. So if we don’t see — in fact, as and when we start, in fact, I should’ve added that when I answered the previous question in [Indecipherable] annual numbers are lower as compared to last quarter, because last time, we had Afghanistan in the execution where the margins were higher. That was one of the reason. The other piece is that actually most of the — these projects material has been supplied, I think probably 90%, 95%. So all the costs which are now to be incurred are on the local execution cost, which in our view considering the local scenario of prevailing with the security having significantly improved vis-a-vis the earlier era, I’ll not say it is very good, but vis-a-vis, the earlier era. We do expect that the execution cost may actually turn out to be beneficial rather than adverse. But we are very clear that there will be a settlement arrived at on the cost incurred to be incurred and all that before the projects restart. And that should take care of all our concerns.

Ashish Shah — Centrum Broking — Analyst

Got it, sir. So, if I may ask, what is the outstanding backlog there in Afghanistan now at this point?

Vimal Kejriwal — Managing Director & Chief Executive Officer

I think it’s around INR600 crores or INR500 crores. Roughly around INR500 crores. I don’t know the exact number, but it’s in that ballpark, INR500 crores to INR600 crores.

Ashish Shah — Centrum Broking — Analyst

Sure. That’s fine. That’s fine, sir. Sir, second question, and I think the last one is on the interest cost. So, traditionally, we have been guiding interest as a certain percentage of the revenue, obviously, 2% in all seems a little difficult now, but for this year, what would be your guidance for the interest cost? Would we expect the run rate to increase even further because the rates are still increasing or this is the stable level that you may look at?

Vimal Kejriwal — Managing Director & Chief Executive Officer

Maybe, Ashish, I’ll probably stick my neck out here and say that we expect it to come down, okay, as a percentage of revenue, because what is also going to happen is that we just said that we will grow at 20%. If you look at our numbers for Q3 and Q4, so growing at 20%, our revenues will grow also significantly. So as a percentage of revenues, we expect them to come down by — maybe by 20 basis points or something, maybe 2.8% or 2.9% or something like that. We are targeting 2.75%, but I don’t know whether we’ll reach. But I think 2.8% or something should be a safe number to assume for the year as a whole.

Operator

Thank you. The next question is from the line of Sandip Sabharwal from asksandipsabharwal.com. Please go ahead.

Sandip Sabharwal — asksandipsabharwal.com — Analyst

Yeah. So I’ve been tracking the Company as you know for many, many years. So I think this is the second cycle, we are seeing that because of interest cost, the profit pool for the shareholders actually has come down sharply and — in a rising interest rate environment, given the kind of debt you have, although you are guiding for a lower interest cost to revenue that might become tougher and tougher to achieve. So are there any levers for you to actually be generating free cash flows and reducing this debt? Because one cycle when debt went up, then you guys worked very hard, debt came down and then again, now it’s getting up.

Vimal Kejriwal — Managing Director & Chief Executive Officer

Sandip, a very, very, very valid question, and thank you for your continued interest. So there are a few things, which are going to happen. One is Brazil, the interest rates went up significantly. We do expect that with a stable environment, which is coming in there and we have seen the commodity and other prices stabilizing in Brazil, other costs also. We think that the interest rates will start coming down there. We have also refinancing some of our debt in Brazil at a lower cost through some other development banks. So that’s one part of it. The second part of it is that with a lot of volatility in the supply chain. Our inventories have gone up by almost INR300 crores over March, okay? And we do expect that with all the supplies, especially of steel and other metals stabilizing, we will start getting back to our normal inventory, so maybe INR200 crores, INR300 crores of cash will get released from our inventories. Third piece is that last time, we had discussed about GST, where on all our Railway and Civil contracts, now we are able to charge 18% GST, which is also the import GST except for cement. So we have started seeing a release of our GST locked up in our refund, already I think around INR40 crores, INR50 crores has come back to us and we expect another INR200 crores or INR250 crores number to get released by the end of March. So overall, if you look at all these things, maybe INR600 crores, INR700 crores of numbers from the debt should come down even if we continue to be inefficient on our DSO okay? We are working on the debt on the receivables, etc. So I do presume that some numbers will come out. So when I said that interest costs will come down, there were, I’ll say, two or three different facets to it. One was that we expect the overall borrowings to come down. Second was that we expect our revenues to go up, so definitely will come down. And third is, we do expect that we should be able to collect a lot of money especially on the railways and some of the transmission projects, which are now nearing completion and which have a higher retention value. So we should become more efficient in our debtors.

Sandip Sabharwal — asksandipsabharwal.com — Analyst

Sure. That will be great. The second part was that although diversification of the revenue, like you have done it very well like important to Railways, Civil and other segments. So from a pure transmission company, you are a very diversified engineering company now, but has that impacted in some way the entire bidding process of projects, your ability to actually predict what kind of margins you’ll make out of them and that has actually hurt the near-term performance or do you think that you are able to manage that term?

Vimal Kejriwal — Managing Director & Chief Executive Officer

I don’t see any concern. In fact, to me, that has been actually on the other side, where it has made us much more predictable. So the problem what we have been having is what has happened on the commodity prices basically on COVID account, okay? You know the commodity has hit the roof and all that, and because of COVID and at that point of time, to protect revenues, we had taken few orders in — I’ll say, in the period of around August, September, August to December 2020 when tender pipelines were very poor and those orders got delayed. So that is what has hit the numbers and all that. I don’t see any structural change, in fact, the — right now, the margins on my non-T&D business are significantly higher than T&D because T&D has been hit by fixed-price contracts, which are now getting over.

Operator

Thank you. The next question is from the line of Priyankar Biswas from Nomura. Please go ahead.

Priyankar Biswas — Nomura — Analyst

My first question to you is like last time, if you can give us some color on the non-T&D margins. So, if I recall, last time, you had probably highlighted that in Railways and Civil, probably you are already closer to 10% levels. So what is the status now? And as far as collections are concerned, so this Railways, how much is owed to us right now? And when do we see those money starting flowing in like possibly some timelines?

Vimal Kejriwal — Managing Director & Chief Executive Officer

So Priyankar, our margins continue in the same manner, okay? We are still not exactly double-digit, but we are pretty close to that in both Railways and Civil, okay? As far as railways is concerned, I don’t have the exact number of AR and all that, but I can tell you one thing that we have collected either equal to or more than our revenue for the half year, okay? So the AR numbers in terms of overall has come down in Railways, okay, not to the extent we wanted it to come down, but it has come down, and some of the money which are stuck in, are in couple of projects which were on EPC mode and all that, and I think those projects will get over in this quarter. So, hopefully, by Q4, all the money on these two or three projects, which are large projects will get released. So Q4 could see a significant improvement in the railway, AR and DSO performance.

Priyankar Biswas — Nomura — Analyst

Okay, sir. And sir, since you have given increased revenue guidance, so similarly, your order inflows have been quite strong. So what is the expectation for order inflows now because it has been trending quite strong, so in FY ’23, what would you suggest would be the order inflow growth that you would expect?

Vimal Kejriwal — Managing Director & Chief Executive Officer

So, Priyankar, we have been around INR18,000 crores to INR20,000 crores. Let’s see where can we reach finally. We are already at INR10,000 crores and odd. We have INR6,500 crores of L1. Hopefully, this L1 gets converted, then we should be at INR17,000 crores in any case, plus we have bid for a lot more projects. So I’ll say on the band of INR18,000 crores to INR20,000 crores is what we are targeting for.

Priyankar Biswas — Nomura — Analyst

Okay, sir. I have one more thing that I observe here is that the rise in debt for both the consol and the standalone seems to be almost similar, almost like — almost to the net debt increase of almost INR1,000 crores each. So is it like that, we are essentially borrowing at the standalone level and funding the SAE losses to avoid interest payments out there or some sort of mechanism like that being done?

Vimal Kejriwal — Managing Director & Chief Executive Officer

I think I’ll ask Rajeev to touch base with you later on to understand it exactly. There will obviously be some borrowing at the standalone level into — and — somewhere by way of equity. We don’t give — we hardly given any loans to the subsidiaries, okay? Maybe, I don’t know, I don’t think [Indecipherable].

Rajeev Agarwal — Chief Financial Officer

No.

Vimal Kejriwal — Managing Director & Chief Executive Officer

We’ve not given any loans to our subsidiaries, whatever has been given has been by way of equity but we do expect that the loans in the subsidiary will now start going up because the balance sheets will now start improving. So then, they should be able to borrow on their own, and there will be no need for us to raise money in the standalone and fund them, but obviously, the standalone has got a better balance sheet. So the cost of raising funds in the standalone are obviously better. So if there is a mechanism, and since we are 100% loan, we will see how to best optimize the interest costs, but right now, we are not giving loans to them, no.

Priyankar Biswas — Nomura — Analyst

So, in equity infusion, so in that sense that the corresponding rise in debt in standalone could probably be due to equity infusions into the SAE would that be the right way to see?

Vimal Kejriwal — Managing Director & Chief Executive Officer

That is the right way I’m looking at it and that is also the reason why we had taken an impairment because we had given equities and our equity investments in the companies have gone up, okay?

Priyankar Biswas — Nomura — Analyst

And sir, the last question from my side. Like at your absolute borrowing level, let’s say, ex of SAE, so what is the rate of interest that you’re getting on the debt, I mean excluding SAE? And how would it compare, let’s say, similarly last year? So I just want to understand the rate of increase of interest from the core business.

Vimal Kejriwal — Managing Director & Chief Executive Officer

I think it’s around 7%, okay? And I think it’s gone up by, Rajeev, 50 basis points or…

Rajeev Agarwal — Chief Financial Officer

From last year, it is 200.

Vimal Kejriwal — Managing Director & Chief Executive Officer

From last year, 200 basis points, Rajeev is saying. From last year, okay?

Priyankar Biswas — Nomura — Analyst

Okay. Up 200 bps effectively.

Rajeev Agarwal — Chief Financial Officer

[Speech Overlap] in the interest cost this year, roughly about INR100 crore interest has increased besides the INR90 crores, 50% is on account of the interest rate rise and 50% is on account of the additional volume of borrowing debt has been increased during this period, okay? So that 200 basis point interest rates have risen and that is across the Board. If you look at the data, RBI has increased their repo rate and all that, so that is exactly reflecting into the borrowings because most of our borrowings are short-term in nature. They are for working capital purposes. So that — it translates immediately into the — your borrowing numbers.

Operator

Thank you. The next question is from the line of Amish Kanani from JM Financial Services. Please go ahead.

Amish Kanani — JM Financial Services — Analyst

Yeah. Hi, sir. Sir, I just wanted to understand with less than 5% of our order book slow moving and low margin, can we assume that the balance order book is more like high single-digit maybe EBITDA margin between 8% to 10%, sir? And is it possible to give us the average execution cycle across what it is, for the order book, which is outstanding [Indecipherable]?

Vimal Kejriwal — Managing Director & Chief Executive Officer

So, Amish, the — I’m not very clear in your first part. But, let me first answer the second part. Our average order book would range from 12 months to 18 months and some of them are 20. But, Civil would have longer, especially the water pipelines and the metro projects and all that, but average, T&D is now slowly coming down to between 12 to 18 months. Most of the T&D pace are actually on 15 months, okay? Civil, industrial would be — probably be less than 12 months. Residential would extend because it’s normally large townships, etc. So they will start from 12 to 24 months. I’ll say average, you can take 18 months, okay, on a ballpark. And what was the first part? Audio or your voice was not clear.

Amish Kanani — JM Financial Services — Analyst

Sir, barring the 5% order book, which you mentioned either slow moving and/or — and you also mentioned that Brazil, there is no EPC products in our tower business. Can we assume that now our outstanding order book as we execute will be more like 8% to 10% EBITDA margins, sir?

Vimal Kejriwal — Managing Director & Chief Executive Officer

100%, yeah, absolutely.

Amish Kanani — JM Financial Services — Analyst

Okay. And sir, we have recently seen the headline of Brazil changing the — there was the outcome of the election. The question is, sir, there is losses that we’ve made, are we taking it as a part of normal business? So, we are going to our client and saying that we have incurred a loss, which we may go and say that there are some claims that they need to give, given that power is very, very critical. You have seen always — power utilities are always given some special treatment if you stop order, there also the politicians also get affected. In the context, are we going back to them and saying that you need to compensate us, unless — or else, we’ll not work again, something like that, sir?

Vimal Kejriwal — Managing Director & Chief Executive Officer

So, Amish, what has happened is that as far as the government is concerned, we don’t deal with government directly. We are contractors to the developers there. We have gone back to our clients and wherever, whatever was possible, except for the last order, which we are right now completing, all the orders have been commercially negotiated and closed, part of the losses had been reimbursed, part of that not been reimbursed because unfortunately, Brazil did not declare COVID as the force majeure. So because of which your legal recourse was very, very poor because clients also did not get a legal recourse, okay?

Amish Kanani — JM Financial Services — Analyst

Okay.

Vimal Kejriwal — Managing Director & Chief Executive Officer

So, which is where you got caught into what the President said that it is a flu, and there is ease and all that. So we know we got caught very badly in that. I don’t think we have any way of recouping that. But what we have been discussing with the local government and the Brazilian authorities is how do we bring the business back on track and all that. And so I think there are some talks happening. And I think we expect that there will be some benefits, which will be passed on in terms of sales tax, etc., to the businesses, but that would be for the future business, it will not be on the past. Past, whatever has been accounted will be — has been now accounted and will be closed, okay? We do not see any recourse from the government or anyone on the past losses.

Operator

Thank you. The next question is from the line of Vivek Ramakrishnan from DSP Mutual Fund. Please go ahead.

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

Good morning sir, my question was just nuance a little bit on the working capital cycle, you’ve taken a lot of things to answer this question. So in terms of there have been — if I understand correct, there have been certain one-offs that have come because of supply chain constraints. So your estimated number of [Indecipherable] come down because of that.

Operator

I’m sorry to interrupt you, Mr. Ramakrishnan, but you are not clearly audible, sir.

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

Okay. Let me just go to another point, sorry. Better now?

Operator

Yes.

Vimal Kejriwal — Managing Director & Chief Executive Officer

Yeah, it’s better. Yeah.

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

Okay. Great. Thank you, sir. Sir, I’m just trying to understand to further nuance the working capital cycle, you said that there were certain one-offs, which were due to supply chain constraints and certain one-offs, which are because of the way, let me say, the railway order was tendered and that extended the working capital cycle. Now going forward, given that we are approaching some kind of normalcy in the world, do you expect these one-offs to come off and that’s the INR600 crores that you’re guiding towards in terms of reduction in debt? And secondly, a question is given the fact that you’ve seen this, how would you look at working capital cycle and the interest costs going forward in terms of the future contracts? Would they be more short tail in nature or would we still have any contracts which has long tail like we have right now? Thank you, sir.

Rajeev Agarwal — Chief Financial Officer

So, Vivek, this is Rajeev. Basically, there are many reasons for the increase in the working capital over the last one, 1.5 year. So obviously, if you look at the broader reasons, one is Railways, there is a change in the structure of some of the project, there’s a EPC project, which required us to complete the milestone. So, we are achieving the milestones before we go to that build, as it is the BOP order that we were only getting. So on the BOP order, generally, when we supply the material, you get paid immediately on that. But in case — as it is said in the EPC projects, these are design and build projects, so you achieve a certain milestone, for example, 50 kilometers of compete, let’s say overhead electrification you’ve have completed, only then you can build. So, those type of orders actually require certain additional working capital and that is where the working capital that capital business increases. And a few other reasons like GST, we — I mentioned in the previous call also the GST in Civil and Railways business, which are the large business and they have grown very well over the last two, three years. They were having a inverted duty structure, wherein our entire input was coming at 18% GST whereas the output GST was 12%. So that led to a huge accumulation of close to a INR400 crores, INR500 crores in the GST account. Luckily this has prevailed and the GST has been reversed, increased to 18% for these railway projects and railway and civil projects [Indecipherable]. So now our accumulation has stopped and now we are able to recoup some of the GST balances. So now the GST values have started going down. So already, let’s say last two to three months since the new rates have been implemented, we have reduced close to about INR50 crore and — at least our accumulation and our expectation is that by year-end, we should be able to, let’s say, reduce about INR200 crores to INR300 crores on the GST account. The third piece was as Vimal mentioned just a while ago that because of the — let’s say, a lot of supply chain bottlenecks, which we faced during the COVID period time and the price confusion, which was happening, so we accumulated some of the inventories at site because the — our working site should not get impacted with the non-availability of the materials. So that also led to some increase in the inventory levels, which is about INR200 crores, INR300 crores, that should normalize in the remaining H2 level. We expect another INR200 crores to INR300 crores should go down. Fourth item is Afghanistan, which again Vimal has guided, and we are in active dialog with the multilateral funding agencies and we do expect that there will be some reduction. My sense is about INR200-odd crore. We should be able to collect it by Q4. It could be, let’s say, depending on whatever discussions are going on and they have accepted our position and they are in the process of settling, so we are quite confident that some reduction will happen at least INR150 crores, INR200 crores should happen from Afghanistan also. So there are various actually items on which we are currently working and we are — on an overall basis, we are quite hopeful that we should be able to reduce the overall debt level from the current level by at least INR500 crores to INR700 crores. So that should happen, and then remaining normalization should happen in the next financial year. So my sense is that we should buy — next financial year, FY ’23-’24, we should come back to let’s say 100 days or 110 days of NWC which used to be there about two years back, so that is how we are working very, very in a focused manner to reduce our borrowings on that and that should be the normalized working capital, 100, 110 days of NWC.

Operator

Thank you. The next question is from the line of Jayesh Shah from Ohm Portfolio Equi Research. Please go ahead.

Jayesh Shah — Ohm Portfolio Equi Research — Analyst

Yeah. Kejriwal Ji, first of all, big congratulations for the big transition that we have seen in KEC from a T&D company to a powerhouse of execution and projects across civil, rail, adding other engines of growth in the domestic business. Whilst this is very impressive, and I think this alone leads the case for re-rating, my worry is more on the international business, and when you look at the big picture, how do you look at controlling the risks on the international business? For instance, we have seen the SAE example for the last two times. So based on this experience, write-offs, what are the lessons that we learn? How do we control the risks here and the amount of losses and working capital? And especially, given the geopolitical situation where we don’t know about country currency risks, are we better off focusing more in India? So my question is, is there any informal gap that you would put on the order book business? And over time, isn’t it possible to grow the domestic business much more than focus on international business? And lastly, I would say that if you listen to all the calls, the focus from all the analysts and investors is more on controlling working capital and debt rather than growth for growth sake. So I think these are the large big-picture questions I have concerning your strategy vision that I wanted to ask and get your view. Thank you.

Vimal Kejriwal — Managing Director & Chief Executive Officer

Jayesh bhai, first of all, thank you very much for your compliments. And secondly, it looks like you were sitting in my Board meeting because we have exact discussions, which we were having in our Board yesterday, saying [Foreign Speech], should we control this, should we do that and all that. We are seriously — we were looking at all that has happened, okay? SAE, to the — is like, is in a bit of an aggravation because we really got hit by like whatever has to go wrong, went wrong in that country for whatever reason. We don’t have any excuses and all that. I can only say that it just resolved in apology that we were not able to control the losses. But let me tell you another thing, Jayesh bhai, that we are running almost 290 projects, okay? And at any given point of time, five, six, seven, eight projects will always maybe more than that can always go wrong. Brazil, we learned our lesson, saying we have analyzing what all have gone wrong and what you need to do to take care of such things going forward, not just in Brazil, on an overall. Your point on international is something which keeps on cropping up again and again, okay. We have an international I think order book of close to maybe INR5,000 crores or something right now on the EPC side between basically — and T&D, okay? And generally, if you look at our history, except for the last two COVID years, okay, international has always made more money than India, always. I repeat that. Okay? And we do expect that if we put in our proper checks and balances, we will be able to go back to that point of time. On the other hand, if you look at India, basically Railway and Civil is right now only India, okay? T&D, if you look at it, it’s probably I think 30%, I mean 30%, 40% is India, rest of that is international. We always keep on sort of debating, weighing, looking at it saying that should we expand here, should we not expand? We have a lot of risk metrics, which we look at when we go to a new country and look at how the credit rating of that country, what is the, I’ll say exchange control there, what has been the performance, what is IMF rating for that country, what is the — ensure ECGC rating for that country done in past. So all that work is done. So typically, if you look at it, Brazil was more of an execution issue, I would say, wrong tendering, wrong cost taken somewhere but otherwise, we ensure that we have multilateral funding, even in Brazil, instead of all the losses we got paid all the money from the clients and all that. So the major issue is political stability, currency, so legal system. So all that is looked into account and the way execution can be done and, but your points are well taken and we are seriously debating on some of those points, which you have raised.

Jayesh Shah — Ohm Portfolio Equi Research — Analyst

Yeah, I think, whilst you guys understand the business very well, we take an outsider view and a very short-term view. We only thought I would leave with you is that international business for KEC is supposed to have at least 1.5 times the margins of the domestic business given the political and the currency risk. So I would actually look bad as a freighter, rather than just be happy about international business having higher margins than domestic. And of course, in any way, if we can control the working capital and receivables, then that’s a big, big luck from a risk management perspective, but I’m sure since you are debating, you would find appropriate solutions here.

Vimal Kejriwal — Managing Director & Chief Executive Officer

I’m happy you mentioned our 1.5 times. My International head is on the call and I hope [Indecipherable].

Jayesh Shah — Ohm Portfolio Equi Research — Analyst

Yeah. I’m happy to pester him more if you need.

Operator

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

Bharat Sheth — Quest Investment Advisors — Analyst

Sir, just to get some flavor from say two, three years perspective, so if you can bifurcate our T&D business, international and domestic as well as other business, railway and civil as well as cable, so how well all business we see the visibility for next three, four years timeline? In T&D, you gave INR25,000 crore of pipeline but between say domestic and international and last couple of year in domestic T&D were really going down. So now which — where the visibility looks to be a little better. So how do we see this thing playing on and then the overall project cycle of all these different verticals, how many months really like T&D you said is 16 — 12 to 18 months, so different and working capital environment in all these three, four verticals?

Vimal Kejriwal — Managing Director & Chief Executive Officer

Bharat Bhai, a lot of questions. Okay. So let me start with T&D. Sorry, cables is an easier one. Cables, our share is 4% to 5%. Okay. So cables market can go depending upon our capacity to manufacture, okay? Right now, we’re probably operating at 70 — 60%, 70%. We are trying to improve the capacity utilization and we also put in some money balancing the equipment. So cables will definitely grow by 10%, 15%, as I said constrained by our manufacturing capabilities, okay? And it will grow, it is doing well. We are happy with the performance, the ROCEs are pretty high there, okay? Although the EBITDA is not very great, but we are doing well. As far as T&D is concerned, I’ll tell you the joker in the pack in T&D is your green hydrogen. If you look at what our Honorable Prime Minister is talking about 5 million tonnes and all that, and even if you achieve 50%, 60% of that by 2030, we are talking about some 300 gigawatts of renewable capacity to be added in the next six, seven years. Now that’s the requirement for meeting the requirement of the target of the green hydrogen for India, okay? If that sort of numbers happen or like all the Big Daddys have jumped into win hydrogen, if they start putting in that sort of money, there will be a huge requirement for renewables and obviously, then to translate the power generated by these renewables, okay? So we have to keep our fingers crossed and wait and watch, seeing how does this piece develop going forward. So, one is the opportunity in doing a solar EPC or a wind EPC and all that, that is one part of it, okay? But the major part of it is that, how will the power generated by these renewables get transmitted, because it is easier probably to transmit power than move ammonia or green hydrogen and all that. So power transmission is easier than any other transmission that way, okay? So, I do expect that the T&D piece out of green hydrogen would be very, very large. If the government is really serious about achieving the targets, which have been laid out by the government, okay? So that’s one big joker in the whole pack. So if some part of that is happening, then T&D will really move to a next level. And second part here is that we have never seen shortages of power in India, except for the last one year, which means the power demand is somewhere going up, okay? So that is also leading to some incremental T&D orders, which are coming in but I’ll still not say that’s great. The major order will come in now from the green hydrogen and also if you look at the last few years, solar and all has not done very well. Now that we have capacities coming up in India for module manufacturing and other things, we do expect that solar generation will go up, apart from the green hydrogen piece of it, okay? And which once the issues in Rajasthan and other places get cleared, we do expect that there will be some more orders coming out on the green energy corridor, which is what orders will come to us, okay? So the T&D will depend upon how the renewables pan out both for normal requirement of power to meet our COP27 or whatever requirements, you want to say and also for the green hydrogen. So we are actually very bullish right now in the coming year, not today but maybe in a year or two on the India T&D piece and also probably on the solar EPC piece. Have I answered your question, Bharat bhai?

Bharat Sheth — Quest Investment Advisors — Analyst

Yeah, largely. Of course, I mean there are so many ifs and buts, so, but it’s fair I mean. And international?

Vimal Kejriwal — Managing Director & Chief Executive Officer

International, right now, if you look at, there is basically I can see three different markets which are there. One is clearly, Middle East, which is really growing very fast whether it is Abu Dhabi, whether it is Dubai, whether it is Oman or whether it is Saudi, okay? Very clean — or even Kuwait, sorry. So these are the four or five countries where we are seeing a lot of demand coming up and all the oil money seems to be getting invested in some good assets being built up in these countries. The other area where we are seeing a large demand is North America, especially, United States, okay? We know that our Mexico factory downwards a little bit so many orders. Mexico always used to operate at 50%, 60% in the last two or three years. Right now, we are looking at adding capacity there because that — because we have got so many orders coming from that what President Biden has talked about Build Back Better and all that. So, and also with the — I think a few cyclones and all, which hit them and many other large cities are without power. So America, especially United States is becoming a big market for us to supply of towers. We don’t do EPC there but the supply of towers is becoming a big market. And third, to a smaller extent, our markets like Thailand and Malaysia, and fourth will be Bangladesh. So to me, these are the four regions in International where we are seeing a lot of traction happening and we are generally familiar with these markets, so we don’t anticipate the problems, which we’ve had in other countries where we take projects here. In fact, let me also add one thing, Bharat bhai, is that this year, our international will grow by at least 30% to 48% as compared to the last year, okay? And we have an order book, so next year also, it will grow reasonably well.

Bharat Sheth — Quest Investment Advisors — Analyst

Relatively lower than the domestic side, margin is better?

Vimal Kejriwal — Managing Director & Chief Executive Officer

Margin will now pick up because now these orders are at newer prices. So last two years have been difficult for international because we had many fixed price orders, which were taken at lower metal prices. Now the order, which we’ll start executing now are at higher material prices. So we will start getting back to better margins in international now.

Bharat Sheth — Quest Investment Advisors — Analyst

Okay. And working cap — and remaining two — three piece, I mean Solar EPC also, this railway and civil?

Vimal Kejriwal — Managing Director & Chief Executive Officer

See, railways, off late, we are seeing a lot of tenders coming up for building of new lines, doubling, tripling probably an election impact of 2024, I do not know. But as we earlier not seen so many orders for new lines, okay, so that is doing very well, plus all the civil works for CM works, Chennai Metro and the Mumbai now is getting over, so the electrical part is now coming in, laying of tracks, power supply, OHE. So I think railways and also the speed upgradations, sorry. The Ministry is very keen to upgrade the speed on all the trunk routes and some of the major routes. So a lot of work is coming out in railways. We are also L1 in a couple of projects in railways in the international market. So I think railways will do well this year and also coming years, we do see a decent growth in the railway piece. Civil is doing very well, in any case. So I don’t think I need to talk much about it. We should cross INR4,000 crores of revenue this year and maybe at least 30%, 40% increase next year back — on the back of our INR9,000-plus crore order book in Civil.

Bharat Sheth — Quest Investment Advisors — Analyst

And competitive landscape, if you can briefly touch upon in…

Vimal Kejriwal — Managing Director & Chief Executive Officer

So Railways is becoming a little bit more competitive than before. I think I’ll say a few months back, the competition was lower, but now we are seeing a little bit improvement, increase in the competitive intensity. Transmission for the larger orders, we don’t see too much of competition. There are five, six players but for substations, the number of players are relatively lower. Civil, you can divide them, let’s say between INR500 crores below or INR500 crores plus. Below INR500 crores, you’ll have maybe five or six competitors in every tender, maybe even more sometimes. Above INR500 crores, you typically have three, four or maybe five players in competition. So competition, I think is okay. I don’t think it’s become very intensive — very intense, sorry. But it is generally okay.

Operator

Thank you. The next question is from the line of Vishal Biraia from Max Life. Please go ahead.

Vishal Biraia — Max Life — Analyst

Vimal Ji, what is the extent of subcontracting that we do?

Vimal Kejriwal — Managing Director & Chief Executive Officer

Extent of subcontracting, see, basically we hardly have people on our own, okay, except for the international market where visas and all are done by us, so sometimes some people work for us. Otherwise, largely most of our projects are subcontracted. But there are various models of subcontracting, which we follow. Sometimes it could be only a labor subcontract, and sometimes it could be with material, sometimes you could do a back-to-back subcontracting of a full unit and all that. So depending upon the type of project, the discussion with the client and the capability of subcontractors, okay, it would follow a different model in each project, but most of our projects are typically subcontracted out in various forms.

Vishal Biraia — Max Life — Analyst

Sure, sir. Sir, but if you consider a bit material and 20 [Phonetic] subcontracting, so that proportion would be lesser [Phonetic] of the total in India and in abroad — in international?

Vimal Kejriwal — Managing Director & Chief Executive Officer

In India, generally, It will not be with material. In India, it is generally a labor contract.

Vishal Biraia — Max Life — Analyst

Labor.

Vimal Kejriwal — Managing Director & Chief Executive Officer

Okay?

Vishal Biraia — Max Life — Analyst

Okay.

Vimal Kejriwal — Managing Director & Chief Executive Officer

I’ve hardly seen any contract where we have given in India with material, I don’t think so. Sometimes in international market, when you’re giving piling contract, you may give them with summit and all, saying, it’ll pay a per cubic liter of pile, etc. So the major subcontracting happens in regions like Thailand, Malaysia, etc., where you have got large subcontractors who are capable of doing it. So, to me, Vishal, it depends upon the capability of the subcontractor rather than our willingness. I am happy to give it back to back then I don’t get into issues of material has been delayed or some other things happened or price increases, etc. So depending upon the capability of the subcontractor, we decide to subcontract it. But I don’t think as material put together, material and all, hardly be more than — not more than 10% or something where you are giving it with material, etc.

Vishal Biraia — Max Life — Analyst

Okay. In Middle East, how would it be done, subcontracting?

Vimal Kejriwal — Managing Director & Chief Executive Officer

So, Middle East what happens is that, let’s say, you take a piling contractor. He will come and do the drilling and everything for you. You will supply him the concrete, okay? Erection, obviously, it’s our towers. So they only do this, stringing is generally done by our own people because that’s the most critical part for us, so we do it ourselves. There are countries where, let’s say, you look at places like Dubai, where only approved subcontractors are allowed to do Civil, so there you will upload the entire work to him, sometimes including the supply and all that also.

Vishal Biraia — Max Life — Analyst

Okay, okay. And among — the other question is if it is — I mean if you’re able to break it up as to — of the other INR27,000 crore, INR28,000 crores worth of order book that we have, what proportion is fixed price to where?

Vimal Kejriwal — Managing Director & Chief Executive Officer

I don’t have a right answer but a large part of, I’ll say International would be fixed price. So maybe around 20% or so, I’ll say, it’s a wild guess. Maybe Abhishek can give you later on but I think it should not be more than 20% or something, okay. Because why I’m saying that is most of our Civil and Railways are always with PV, so which is a large part of my order book. In T&D also, international also, we now have a lot of orders which are with PV, India some parts are with PV. So I think max would be 20% or maybe even lower than that.

Operator

Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Vimal Kejriwal for closing comments.

Vimal Kejriwal — Managing Director & Chief Executive Officer

Thank you, Rithuja. And thank you everyone for your interest, okay? We are very clear with the current order book and what we have. I think we will have a significant improvement in our revenue and performances, margins have been under pressure, but we do expect that from next quarter onwards, the margins will start showing an upward trend and should start normalizing towards Q1 side. Thank you very much. Thank you, everyone.

Operator

[Operator Closing Remarks]

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