Mazagon Dock Shipbuilders Ltd (NSE: MAZDOCK) Q3 2025 Earnings Call dated Feb. 07, 2025
Corporate Participants:
Sanjeev Singhal — Chairman & Managing Director
Analysts:
Jyoti Gupta — Analyst
Atul Tiwari — Analyst
Gagan Thareja — Analyst
Rohit Natarajan — Analyst
Bhavish — Analyst
Anirudh Murarka — Analyst
Jyoti Gupta — Analyst
Prerak Gandhi — Analyst
Alok Shah — Analyst
Presentation:
Operator
Thank you ladies and gentlemen, good day and welcome to the Masgown Docs Shipping Shipbuilders Limited Q3 FY ’25 Earnings Conference Call hosted by Nirmal Bang Institutional Equities Private Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone.Please note that this conference is being recorded. I now hand the conference over to Ms Joti Gupta from Nirmal Bang Institutional Equities. Thank you, and over to you, ma’am.
Jyoti Gupta — Analyst
Thank you, you, sir. Good evening, everyone. On behalf of Nirmal Bang Institutional Equities, I welcome you to the 3rd-quarter three FY ’25 earnings conference call with the management of Doc Shipbuilders Limited. We have with us Shri Sanjeev Singhal, Chairman and Managing Director; Charge and Director of Finance; George, Director Shipbuilding; Commander, Vasudesh Puranik, Retired Director, Corporate Planning and Personnel and Director of Submarine and Heavy Engineering additional charge.
Without further ado, I request Mr Shi Sandeep Singhal to start with his opening comments, after which we can open the floor for questions-and-answers.
Thank you, and over to you, sir.
Sanjeev Singhal — Chairman & Managing Director
Thank you yeah, good afternoon, everybody. Happy to welcome you all to this investors to this conference call. We have posted a good set of numbers. The company is consistently doing well as you must-have gone through the numbers. Whatever queries would be there, we would be happy to address those queries. We can start — start with the conference, please. Sir, should we start with the Q&A? Yeah. Thank you very much. We will now begin the question-and-answer session.
Questions and Answers:
Operator
Anyone who wishes to ask a question may press star and one on the touchstone telephone. If you wish to withdraw yourself from the question queue, you may press star N2 participants are requested to use handset while asking a question. Ladies and gentlemen we’ll wait for a moment while the question queue assembles first question is from the line of Atul Tiwari from JPMorgan. Please go-ahead.
Atul Tiwari
Yes, thanks a lot, sir, and congratulations on good set of numbers. Sir, my first question is on the medium-term margin profile that the company can have. And so the context is that over past three to four years, your margins have expanded quite a bit. So are the current margins sustainable at about 20% 21%? So could you share your thoughts on that?
Sanjeev Singhal
No, this is — we have earlier also indicated this is based on the orders, which were legacy orders continuing for quite some time. The order profile is changing and a normal margin for this kind of industry would be in the range of 12% to 15%. So we have always given this kind of a projection that a sustainable margin would be something around 12% to 15%. And sir, this 12% to 15% will be at PBT level or at EBITDA level. Yeah, this is at PBT level. PBT level.
So including other income and everything, the year 12% to 15% of revenue. Yes.
Atul Tiwari
Okay, sir. And sir, if you could comment on the media reports regarding P75i order, where we are in the process and how long these negotiations could go on and when we could expect some kind of conclusion of these negotiations and award of the order?
Sanjeev Singhal
No, the price bids have been opened, so a decision has already been taken that only one bid is technically suitable, that is the one submitted by Masgon Builders Limited. Price bids have been opened. We expect that anytime soon the negotiations or the discussions should start. I would not say negotiations because there would be discussions with respect to commercial also. We are quite hopeful that if the process goes as per the normal pace, next financial year, we should — the order should be in-place.
Atul Tiwari
Okay, sir. And sir, my last question is on any other large orders that are in the pipeline over next one to two years, if you could highlight. Additional submarines, we are quite hopeful that there is a — we are confident that it can be done before 31st March this year. Oh, so these are the three additional P75 submarines, yes. Okay. And
Sanjeev Singhal
Within this financial year, you are hopeful that it should fructify. We are quite confident about it because from our side, everything has been done. So now it is only the final approvals which is pending with the MOD and government. So there is sufficient time is there. So we are quite hopeful that before 31st March the order should be in-place.
Atul Tiwari
Okay, sir. Thank you. Thanks a lot.
Operator
Thank you. Next question is from the line of Gagan from ASK Investment Managers. Please go-ahead.
Gagan Thareja
Yeah, good evening. I hope I’m audible clearly.
Sanjeev Singhal
Yes, yes, sir. Yes.
Gagan Thareja
Sir, the first question is on the other expenses for the quarter. I mean, mean there is a host of expense items or line items which cumulatively add-up to that and that has gone up substantially. So provisions, project-related expenses, so on and so forth. I think if I accumulate all of this into other expenses, it’s up just from your segment.
Sanjeev Singhal
Your voice is there, but simultaneously something is there in the background also. Okay, clearly your question is not understood clearly.
Gagan Thareja
Yes. Better now?
Sanjeev Singhal
Hello. Yeah. Can you repeat? Yeah.
Gagan Thareja
Okay, I’ll repeat my question. My question is the other expenditure for the quarter — Q3 results reported, which includes provisions and project-related expenses has gone up substantially. Can you elaborate on that?
Sanjeev Singhal
Yes, certain provisions have been created with respect to the inventories which are lying with us and where the warranty period of the ship is complete. So considering that there is no clear visibility with respect to their utilization, although the items are good and we expect that going ahead in future, these items may be required on the ships which have already been commissioned or on other projects. As and when they are — they are utilized, the provision would be reversed, but for the time-being provisions have been created with regard to the excess inventory.
Gagan Thareja
Okay.
Sanjeev Singhal
Here is this. And with regard to the offshore project of ONGC, the first one which we had received the order in the month of December. Although the timeline has been extended by up to 31st of March, the quarter timing, the timelines have been extended without waving the LD. The LDE issue remains open.
So we have provided the listed damages for the project. As and when the time is time extension is received with the of liquid damages, this provision may be written back right. And sir, you also indicated that if you are able to deliver the orders ahead of schedule, there will be a reversal of liabilities and you will be able to save on costs. Has that manifested itself in this quarter and to — is it possible to give some idea of what benefit could have come from that in the quarter?
Yeah, we have completed the project 15 Bravo, all the derivies are done. Default for liabilities for or second ship will be converted very shortly. The port liability for the first one is done. Portfoll rate of the second ship is expected soon. So as far as this quarter profit is concerned, substantial contribution is from INR15 right.
Gagan Thareja
So if I understood it correctly, the subsequent quarter, which is Q4 will possibly also have some element of reversal of for it liabilities, depending upon what exactly is the expenditure on liquidation of depot deposed liability.
Sanjeev Singhal
Okay. The exposure is less than the gene created for that. There will be a reversal.
Gagan Thareja
Right. And also you have some provisions created for these coffeine deliveries, which you have done in the past during the COVID period and you indicated that once, I think INR140 crores to INR150 crores, two such reversals are possibly there to be done was in.
Sanjeev Singhal
— was only INR142 crores for somewhere in INR5 already in this quarter, which is — which has also contributed to the profit. Okay. That is somewhere in one is still under discussion. There the provision is in the range of INR100 crores because the LD applicability for the first submarine was at the rate of 2.5%.
On others, it was applicable at the rate of 5%. So this is still under. We are pursuing that. And with regard to the sixth submarine, again, we have now delivered it in the month of January. So this again will be taking up for of LD. So this will take some time, but as and when the received, these decision will also be able.
Gagan Thareja
Sorry, just to get the number, this was INR42 crores or INR142 crores, I — you are not very clearly audible to me.
Sanjeev Singhal
SL5, we have reversed INR142 crores.
Gagan Thareja
Okay. All right, sir. And what are the deliveries due in the 4th-quarter? You indicated scorping you delivered one in January, so that will come into the 4th-quarter. Any other delivery spending for large platforms in Q4?
Sanjeev Singhal
In this financial year, no deliveries are planned. We are not expecting any further delivery in this financial. Next financial year, one is definite could be two.
Gagan Thareja
All right, sir. And next-generation COVID also the order finalization I think is due and fairly close to completion. Any updates there that you can provide and when do you see this being materializing?
Sanjeev Singhal
We have participated in the build the bid is not open the hello yeah. Okay. Right. MR. Miyu has replied that price bids have not yet been opened.
Gagan Thareja
Okay. All right, sir. And in — you mentioned a fairly comprehensive capex program. Can you give us how you’ll be spending it? I think you indicated INR5,000 crore over the next four, five years. How will be the capex budgeted on an annual basis starting next financial year?
Sanjeev Singhal
We have — we have two capex programs. One for the adjacent land which we need to be developed with a graving drydoff and also near in the Navai we Call-IT as the Nava that also has to be developed as a full-fledged shipyard with a graving drydock. Per the, their reports would be ready by — the DPR should be ready by mid of this year and then we will be tendering out the EPC contract. There is the uncertainty of environmental clearance which are there.
So it will — it’s a slightly lower just are coming to. So from a financial standpoint, in terms of magnitude, what we — what will the capex budget be for ’26, as far as these projects are concerned, there may not be a major capex, but yes, our floating drydock would be ready. Floating by May, it is around INR500 crores capex is there approximately. So that will get realized in the — completely in the current — next financial year or quarter.
And apart from INR100 crores, INR350 crores will get realized by apart from P75, P75i and NGC, what all orders are there in the pipeline for which you might have bid off, which you — which you see coming up for bidding in the next 12 to 18 months. So large order — large order is not there, but discussion is there with regard to 17 follow-on of 17 alpha, that is 17.
And with respect to next-generation destroyers. So a firming up at the level end has not taken place, but we expect between two to three years from now, these two projects should be 75. Right, sir. And these 75 and 75i, is it possible to understand from the — from the point where you receive the order, how will deliveries be scheduled?
Gagan Thareja
I mean first delivery will be how far away from having the — received the order for 75 and 75i and thereafter how will the submarines be delivered here the date of placement of receipt of order and then subsequent submarines each one year, additional one year for each submarine. Okay. And for the existing scorpion culvary class, I think you also indicated on the midlife upgrade, there will also be an AIP which will be installed. When is — when is the order disbursal For that due and thereafter for the midlife upgrades, further orders are placed over what time schedule. AIP order for approximately INR1768 crores we have already received in the month of December.
Sanjeev Singhal
As the order is concerned, it is still with maybe to decide. So we expect next financial year there should be a.
Gagan Thareja
Yeah. Thanks, sir. Thanks for taking my questions. I’ll get back-in the queue. Thank you.
Operator
Thank you. Before we move to the next question, a reminder to the participants to ask a question, you may press star and one. Next question is from the line of Rohit Natrajan from Aditya Birla Sun Life Insurance. Please go-ahead.
Rohit Natarajan
Hi, thank you for this opportunity. Congratulations on a strong set of numbers. My first question is more to do with the normalization of margin for FY ’26 any color on what will be that number look like?
Sanjeev Singhal
MR. Rohit, your audio is not clear. There is not a lot of background disturbance.
Rohit Natarajan
I was asking what is the normalized EBITDA margin assumption for FY ’26.
Sanjeev Singhal
I said PBT level, it will be around 20% to 15% just on the first question, we have indicated that normalized — normalized PBT for this industry, anything between 12% to 15% is quite okay. My second question is more to do with, say, let’s say, you hypothetically if we conclude this year with INR12,000 crore execution, will it be fair to say because we haven’t concluded the order, the next year could possibly see some sort of a decline in execution and then probably we will see a jump.
No, we are not envisaging a decline next year. That means from the existing order backlog, you should be in a position to grow at least 10%. Is that the fair assumption to be made? Right now, we have not taken assessment with respect to the growth, but yes, there will not be a decline.
Rohit Natarajan
Got it, sir. Thank you. That’s it from my side.
Operator
Thank you. The next question is from the line of Sagar Gandhi from Invesco Mutual Fund. Please proceed. MR. Sagar, your line is unmuted. Please go-ahead with your question. Mister Gandhi, may please request you to unmute yourself from your site thank you.As there is no response from the current question, we will move to the next question from the line of Bhavish, an individual investor. Please go-ahead.
Bhavish
Good evening, sir. Congratulations on a great set of numbers. My first question is with respect to your order book. So as I can see in the investor presentation, the order book as on 31st December ’24 stands at INR34,787 crore. So if I had to discard the three deliveries are done in the month of Jan 2025, what will be the current order book stand at? Like will it be between INR26,000 crore INR27,000 crores?
Sanjeev Singhal
First of all, are you correct you, the three deliveries were not in January. Two deliveries were in December. So these have been taken into consideration while working out the order book. And with regard to the third delivery also, this was in the first week of January, so it doesn’t have any material impact on my order book.
Whatever numbers are there as on 31st December. They by and large consider all the three deliveries. Okay thank you for that. And secondly, sir, mister Prime Minister Modi is traveling to France next week. So there are rumors that there might be a contract signed for the Rafael and the three submarines. So can we see this getting materialized by next week or it will happen by 31st March? No comments from my side.
Bhavish
Okay, sir. That’s it from my side. Thank you. Thank you and all the best.
Operator
Thank you. Next question is from the line of Sagar Gandhi from Invesco Mutual Fund. Please go-ahead. MR. Gandhi, please go-ahead with your question you are not audible. Please unmute yourself from your end. As there is no response from the current question, we’ll move to the next question from the line of Anirud Murarka from Continental. Please go-ahead.
Anirudh Murarka
Good evening, everybody. Am I audible?
Sanjeev Singhal
Yeah. Good evening. Please continue.
Anirudh Murarka
Congratulations, sir on for a great set of numbers. My question is regarding your subsidiary, Goat Ship yard and plans to list the same in the future and how much take do we hold in this company? Goah Ship yard is not our subsidiary. They are our associate company. We are holding 47.21%.
Sanjeev Singhal
Currently, there is no management control, it is just an investment in Goa Ship yard we don’t participate in their provision programs or any kind of a decision-making. They are an independent company.
Anirudh Murarka
Okay, sir. Thank you.
Operator
Thank you. Our next question is from the line of Atul Tiwari from JPMorgan. Please proceed.
Atul Tiwari
Yeah, sir. Thanks a lot for taking my question again. Sir, if I could ask, I mean, you did mention a PBT margin of 12% to 15% for this industry. For next year FY ’26, will this margin emerge or will we continue to operate at much higher-margin given the kind of work we have right now going on.
Sanjeev Singhal
Next financial year is primarily the existing orders where the margins are comparatively higher, better. So next financial year would be not 12% to 15%, but at the same time, difficult to assign any kind of a number, but we expect healthy margins next financial year. Okay. And sir, at the end-of-the nine months, our order book is down year-on-year and I understand that we will likely get very large orders very soon. But will it take some time to ramp-up the execution of those orders?
Anirudh Murarka
And hence consequently say for one year, our revenue growth could be slow like say 5% or 10% only. Is that a possibility or will we continue to grow at like 20% even next year.
Sanjeev Singhal
So we are not saying that next year growth is not projected at 20%. We are saying that there would not be a decline in next year revenues. Growth numbers have not been worked out. There could be a marginal growth?
Anirudh Murarka
Okay. Okay, okay. Thank you, sir. Thanks a lot for taking my questions.
Operator
Thank you. Next question is from the line of Ms Gupta from Nirmal Bang Institutional Equities. Please go-ahead.
Jyoti Gupta
Good evening, sir. If we close this year with a INR12,000 crore execution, do we see with the current you know, the projects upcoming, which you’ll have by March, do you mean order book intake of something like a INR17,000 crores and then INR19,000 crores in the next two years?
And when you say that your PBIT margins are going to decline to 12% to 15%, will that be after FY ’26 because you’re saying FY ’26 would be better than FY ’25, then your margins should actually start seeing a decline after FY ’27 or we should start seeing it after FY ’26?
Sanjeev Singhal
I — none of these statements which you have made or can we ascribed to me. I have never said INR12,000 crores we are expecting this year. We have never said with respect to next year margins or there would be a margin decline. I have only replied that a normalized margin for our industry could be in the range of 12% to 15%. Balance us?
Jyoti Gupta
I see that kind of normalized margin from which year can we start expecting those kinds of normalized margins?
Sanjeev Singhal
So we are executing the existing orders. So where the margin should be somewhat similar levels what we are experiencing today, except for the exceptional items like reversal of LDs etc and depending upon the execution so we don’t see much change for the existing orders okay and this existing order that we have, these are executable over the period of two years or three years, approximately two of you, 2.5 years. So which means — and these are all nomination.
Jyoti Gupta
Obviously, after 2.5 years, you may see — I mean, we could see some sort of changes in the margins, right?
Sanjeev Singhal
This industry, it all depends on when these orders — large-value orders are metalizing on us. Sitting today, I will not be able to predict what is going to happen after 2.5 years. If we are — if the material — if the orders with respect to additional submarines with respect to 75 are materializing, the normal repet of scorpion submarines is coming to us, then I don’t see a reason for decline in the revenues or profits. Sir, how much are we progressed in terms of indigenization And how much would that impact have on the overall margins if Indianization is not likely to have an impact on the overall margins because initially there is an investment required. Some of the business would be there. So we expect to counter both the factors with each other. So we don’t see any significant impact neither on the negative side nor on the positive side with regard to indigenization because these would be the first projects where the indigenization would be taking shape and depending upon at what value or what cost we are able to get these equipments, the future trajectory would be decided for future projects.
Jyoti Gupta
Okay. Thank you.
Operator
Thank you. Participants to ask a question, you may press star and one. Next question is from the line of Prerag Gandhi, an individual investor. Please go-ahead.
Prerak Gandhi
Yes. Hello, sir, and congratulations on a good result. So sir, a couple of questions. First was that in the last con-call, you mentioned about your current — expanding your current yard capacity. So where do we stand with respect to that? And secondly, how much do we stand to gain in case of fresh orders from the Government of India with respect to submarines and the big ships P75? We have reply — just replied to both these queries.
Okay, sir, sure. I’ll take a look at that. And secondly, sir, the thing is that with respect to defense allocation this budget, it has seen a flattish or probably a flattish approach. So do we see a more push towards Indian Navy considering a long gestation period in the shipbuilding industry.
Sanjeev Singhal
As far as the budgetary allocation is concerned, for the capex there is an increase of around 5% on an overall basis considering all the three wings. But our experience states that whatever is the requirement, whatever proposals are formed up, there is no for funding or now the proposals have been stalled by the government.
So as and when the proposals get formed up, we are quite confident that they will be converted into orders. We don’t see lightly constraints as such.
Prerak Gandhi
Okay, perfect. Thank you so much and all the best. Thank you.
Operator
Thank you. Next follow-up question is from the line of Gagan Thareja from ASK Investment Managers. Please proceed.
Gagan Thareja
Yeah, thanks for taking the follow-up. Sir, two questions on P75 and P75i. Are there three P75 submarines that you will be getting the order for? Will they be inclusive of AIPs or without AIP?
Sanjeev Singhal
Or without AI without AI. Without AI. Without AIP and 75 is with AIP? Yeah. I’m just wondering if you are upgrading your T75 existing submarines, the five or six that you’ve delivered with you know DID or AIP, what would it not be a natural progression to build the next three with an AIT inclusive in it? I’m just curious to understand why are they not with an AIP?
Yeah, because the first one is yet to be approved — see, see after making the AIP, it has to be integrated with a submarine and then tested. Eventually all line will have this AIP but as of now since the AIP is not it integrated, they are not considered it for the moment. It is kept as an additional item, add-on item.
No, but I mean the delivery for the first one would be far-out, right, three, four, five years out. So by that — yeah, I mean that’s also. They didn’t want to tell everybody let the first one get proven and then they will. It’s a matter of only time. If it is available, it will be integrated.
Prerak Gandhi
All right. Hi. And on I, you know, there were questions raised that while you know Tyson submarine has demonstrated the sea-proven AIP, the submarine on which the AIP was installed and demonstrated was a relatively smaller one compared to the specifications of the Navy.
Does that mean that Tyson Group will have to go back to the drawing board for, you know, a complete redesign for the Navy’s requirements and therefore, you know, the design and delivery phase could be a reasonably lengthy one.
Sanjeev Singhal
So see this eye — P75 eye summaries are of larger dimension and both in terms of diameter and the lens. So the AIT that is required on-board will be off the higher capacity and it’s a matter of only upscaling what has already been developed and available with the journs. No, when you upscale it, obviously, you have to test it for balance also, right, isn’t it? Because the center of gravity and center of hydrostatic pressure will shift around, right?
And all that gets catered in the design. I’m asking this because you know the Spanish company had a terribly difficult time managing weight around design extensions like what does not have our AIP as of now. So that is why they are — yeah, no, but even if you look at the Greek, the Greeks purchased Tyson groups to one, two submarines and I think even they had these issues — keeping issues with the first one and some redesign.
Already the submarine design has already been made and it is available there is no problem at all for eye program. All right. And the deliveries for these are 10 years receive the order could be how far-out for the 75 seven years on signing of the contract for the first one-and-one year subsequent for the remaining summary.
But 25 should be done at a quicker pace because you’ve already done it can efficiencies will improve the speed but kind of time because this is a general timeline for constructing companies worldwide.
Prerak Gandhi
All right. Thank you. I’ll get back-in the queue. Thanks for taking my questions.
Operator
Thank you. Thank you. Our next question is from the line of Anirud from Continental. Please go-ahead.
Anirudh Murarka
Thank you for giving an opportunity once again. Sir, my question is that from your official handle, we have seen many pictures of foreign delegations visiting your shipyard. So there’s any progress or potential for exports of submarines or our products to these delegations like from Brazil, from Indonesia?
Sanjeev Singhal
Okay. See, these visits by the foreign nationals are steps towards converting them into exports. They don’t happen overnight because there are a lot of issues involved when it comes to export so at the moment we have already started some amount of export to Malaysia but that’s at a very small-scale, we are supporting their submarines.
So as and when things get crystallized, they will convert into some export orders. But it doesn’t happen in a hurry. I mean, you need some time, all these there are a lot of things involved in it but we are consistently at it. See important thing is once you get a lead you need to pursue it.
Prerak Gandhi
Thank you sir. Thanks a lot.
Operator
Thank you. Participants to ask a question, you may press star and one. Next question is from the line of Alok Shah from CPMS. Please go-ahead.
Alok Shah
Hello, sir. Thanks for taking my question. Just I just want to understand the next-gen Corvet 36 — approx 36,000 order when the tender will going to open, we don’t we don’t open forward. But right now, Navy has not indicated. So the — we don’t see anything happening this financial year.
Sanjeev Singhal
They will take time first, it has to be technically evaluated, then all the deficiency document has to be collected and then later on the price it has to be opened, then the negotiation is I think when it will be open. But most expecting next financial — next financial only it will.
Alok Shah
Okay, sir. Thank you. Thanks a lot.
Operator
Thank you. Next follow-up question is from the line of Gagan Thadeja from ASK Investment Managers. Please go-ahead.
Gagan Thareja
Yeah. Can you also give some update on the status of the P76 project? And is it still in a very preliminary design phase or do
Alok Shah
You see this also you know, sort of reaching some sort of proportion in terms of ordering perhaps couple of years down the line? We don’t have anything to share right now. Okay. Thank you.
Operator
Thank you. Participants to ask a question you may press star and 1. Participant, if you wish to ask a question, you may press star N1 on your touchstone telephone. As there are no further questions from the participants, I would now like to hand the conference over to the management for the closing comments.
Sanjeev Singhal
Yeah, thank you for giving us this opportunity to interact with the investors and we our primary focus is to execute the orders, which is already in-hand, both for the Indian Navy and ICG. At the same time, we will be looking for board orders, also exports as CMD mentioned. And we look-forward for fairly good growth both at off revenue as well as the bottom-lines in the future as well. Thank you very much.
Operator
Thank you. On behalf of Nirmal Bang Institutional Equities, that concludes this conference. Thank you all for joining us and you may now disconnect your lines. Thank you