Patel Engineering Limited (PATELENG) Q2 FY23 Earnings Concall Transcript

Patel Engineering Limited (NSE:PATELENG)Q2 FY23 Earnings Concall dated Aug. 08, 2022

Corporate Participants:

Vastupal Shah — Associate Partner at Kirin Advisors Private Limited

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

Rahul Agarwal — Head Strategic Finance

Analysts:

Rushabh Shah — RS Capital — Analyst

Nilesh Karani — Magnum Equity Broking Limited — Analyst

Yashwanti Khedkar — Individual Investor — Analyst

Sandeep Mane — Individual Investor — Analyst

Avinash Gupta — Individual Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q1 FY ’23 Results Conference Call of Patel Engineering Limited hosted by Kirin Advisors Private Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Vastupal Shah from Kirin Advisors Private Limited. Thank you and over to you sir.

Vastupal Shah — Associate Partner at Kirin Advisors Private Limited

Thank you. Good evening everyone. I would like to welcome Ms. Kavita Shirvaikar, Whole-Time Director and CFO of Patel Engineering Limited; Mr. Rahul Agarwal, Strategy and Finance Head. Ms. Kavita will give you the brief about the quarter and development during the quarter and result.

Ms. Kavita over to you ma’am.

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

Thank you Vastupal ji. Good evening everybody. I would like to thank and welcome you all to this forum where we have the opportunity to discuss about the performance of our company for QI FY23. Although most of you may be aware, but for those who are here for the first time, I would like to give you all a brief background of our company.

The company was established in the year 1949 and has a strong presence in the hydroelectric and tunneling sector. The company has a consistent track record in execution of projects in both domestic and internal arenas. Patel Engineering Limited has successfully completed over 85 dams, 40 hydroelectric projects and more than 300 kilometer of tunneling with a current presence in 17 states in India and also in Nepal.

Since inception of the company, it has been involved with generation of over 12,000 megawatt of power capacity. The company has irrigated over 5.5 lakh acres of lands in India and constructed over 1,200 kilometers of road. In India, our clients are mostly central and state government PSU namely NHPC, SJVNL, HPPCL, IRCON, CVPPL, NEEPCO, TANGEDCO etc.

Now, let me walk you through the key financial highlights of this quarter. I hope that you all had a chance to have a quick look at the numbers which we can see it in the line with our estimates. On a consolidated basis, revenue from operation for QI FY23 is INR973.91 crore, which is up by 46.18% from INR666.25 crore in the corresponding quarter in the previous year.

On a standalone basis, revenue from operation for Q1 FY23 is at INR881.09 crore, which is up by 53.1% from INR575.35 crore in Q1 FY22. On a consolidated basis operating EBITDA for Q1 FY23 is at INR149.83 crore, a margin of 15.38% and net profit at INR31.25 crore as compared to a profit of INR1.74 crore in Q1 FY22. On a standalone basis operating EBITDA for QI FY23 is at INR122.97 crore, a margin of 14%, and net profit at INR33.04 crore as compared to a profit of INR3.5 crore in QI FY22.

The increase is attributed to overall growth of the company in terms of order book and execution of the existing projects. We continue to retain our focus on bidding for new projects which are self-sustaining. Our order book now stands at INR17,824 crore as on 30th June, 2022. During this quarter the company received three new orders, approximately INR3,300 crore.

The Kwar hydroelectric project in Jammu and Kashmir with a value of INR2461 crore, PVPG tunnel in Mumbai of INR420 crore, Kohima tunnel project in Manipur value of INR823 crore, it is in joint venture and our share is 51%. That is INR420 crore.

The company’s focus continues to be on its core competency areas of hydropower projects, underground tunneling apart from other segments like irrigation, urban infrastructure and roads.

Let me brief you about our order book composition. Around 64.6% of our order book comprises of hydropower projects, 14.3% irrigation projects and 13.4% from tunneling sector and 5.2% from road projects and rest from urban infrastructure and others. The sector-wise revenue break up on a standalone basis for Q1 FY23 from hydro it is 49%, from tunneling 22%, irrigation 15%, roads 8% and others 6%.

See I would like to highlight some of our key achievements at our project sites in this quarter. Our AMT-II project which is in Mumbai was featured in a documentary by India Science on water, augmenting infrastructure, improving distribution, a report on improvement of water distribution in the city of Mumbai, Maharashtra. This year we have completed a 3.6 kilometer long excavation for the first phase of the water there.

At our Luhri hydroelectric project, which is Himachal, we have successfully completed the work of diversion tunnel including the gates. At our Arun-III which is in Nepal, we achieved breakthrough at surge shaft, vertical shaft, pressure shaft one and vertical pressure shaft two. At our Kundah pump storage project which is in Tamil Nadu, we successfully achieved breakthrough of a unit draft tube tunnel 02 in Powerhouse 7.

So now, speaking about the future prospectus of the company, we expect to continue to build our order books by selectively taking self-sustaining projects with healthy margin. We expect our order book to increase beyond INR20,000 crore at the end of this financial year.

The company is also looking to further reduce the debt burden. We are planning to reduce around INR600 crore to INR700 crore over the next two to three years by monetizing our real estate and other non-core assets. The process of merging our subsidiaries with Patel Engineering has reached an advanced stage and formalities should be concluded in this quarter. This will help reduce costs and ensure that the company gets synergies of operations throughout the Group.

That was a small brief from my side. Now, I would like Vastupal to take over and our team here shall be happy to give replies to any questions which you all may have. Thank you.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, we will now begin with the question and answer session. [Operator Instructions] The first question is from the line of Rushabh from RS Capital. Please go ahead.

Rushabh Shah — RS Capital — Analyst

Yeah, hi. Congratulations on decent numbers to the whole team.

Rahul Agarwal — Head Strategic Finance

Thank you.

Rushabh Shah — RS Capital — Analyst

Yeah. So actually, I just want to understand on strategic perspective there was a notification in that you guys are planning a QAP and also your preferential allotment has been made to an FTA. So, if you can please elaborate what is the capital, how are you going to allocate and where do you see growth coming and that requires so much capital? Could you please elaborate here?

Rahul Agarwal — Head Strategic Finance

Yes, so see, we have a lot of order inflows coming in and — so at the moment our working capital requirements, we are taking shareholder’s approval for raising funds up to INR500 crore, out of which INR40 crore one investor has already committed. So, we are going ahead with the preferential allotment for them.

Rushabh Shah — RS Capital — Analyst

So but the balance by when can you — when will we be done or at what price or something?

Rahul Agarwal — Head Strategic Finance

No nothing has been decided yet. It’s just because we are going to AGM we are also taking this approval right now.

Rushabh Shah — RS Capital — Analyst

Okay. Okay, and second thing, there has been a change in government in Maharashtra. So, are you seeing more of infrastructure projects getting, you know — the order book as well is getting expanded or you’re seeing faster execution. Is there any change there, in Maharashtra side?

Rahul Agarwal — Head Strategic Finance

No, I mean for us we have a couple of projects in Maharashtra and things are going the same way. I mean it is going at a good pace.

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

But yes, we are positive. That going forward things also look positive.

Rushabh Shah — RS Capital — Analyst

Okay. Okay, and — so on the debt levels, you mentioned that INR600 crore, INR700 crore you will be reducing over two, three years. So that will be mainly through you said from real estate and divestment of non-core assets. So, this is only from these two or little bit also from internal cash flow that you will be generating or is only from this real estate and non-core assets you’ll be reducing the debt?

Rahul Agarwal — Head Strategic Finance

No, it is all combined.

Rushabh Shah — RS Capital — Analyst

Okay, even internal cash accruals.

Rahul Agarwal — Head Strategic Finance

Yeah. Yeah.

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

Yeah, yeah. Correct.

Rushabh Shah — RS Capital — Analyst

And there has been increased focus on renewables by government. And most of our customers have central — as state PSU units, are you seeing interest traction, are they getting more aggressive in giving orders or and also payments are coming on time?

Rahul Agarwal — Head Strategic Finance

Yeah. So the payments are coming on time and the government is coming up with lots of projects under renewable segment and the large renewable segments like hydro, where we are focusing.

Rushabh Shah — RS Capital — Analyst

Okay. Okay, so the interest cost, for the balance year, is it standard or sustained this interest cost for the FY’23. How much interest cost we will be paying? Because I believe there was — last time we mentioned that some credit rating up-gradation was supposed to be taken place where we’re seeing some benefit. So that crediting has still not happened, right, as updated?

Rahul Agarwal — Head Strategic Finance

No. So we have got credit rating done from ICRA for part of our debt. We have got a BBB stable rating there, which is up than our BBB minus currently. Now for the full-fledged rating, that is also in process that should also happen in some time.

Rushabh Shah — RS Capital — Analyst

Okay, so this current run rate of interest costs that will sustain for a full year?

Rahul Agarwal — Head Strategic Finance

Yeah, yeah, yeah. So basically, we don’t expect — if your question is about interest costs, we don’t expect any increase in interest costs in terms of the increase in interest rates happening in RBI.

Rushabh Shah — RS Capital — Analyst

Okay. So despite our sales may go up, might be 10% — 12% to 15% this year, interest costs will remain at the same level?

Rahul Agarwal — Head Strategic Finance

Yes, the portion of debt we reduce, that interest will come down.

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

That interest will come down. Correct.

Rushabh Shah — RS Capital — Analyst

Okay. So, I think you are expecting 14%, 15% increase on top line on consol level? Is that — because the order book is increasing proportionately, so?

Rahul Agarwal — Head Strategic Finance

Yeah. So we expect 10% to 15% growth year-on-year.

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

Yeah. On top line.

Rushabh Shah — RS Capital — Analyst

Okay. Got it. Okay, thank you.

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

Thank you.

Operator

Thank you. The next question, this is the line of Nilesh Karani from Magnum Equity Broking Limited. Please go ahead.

Nilesh Karani — Magnum Equity Broking Limited — Analyst

Yes ma’am, just to understand this thing. Basically, your trail of non-core assets and other things, like how much — like what is the timeframe like you’re looking at to get this credit to our company?

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

Within next two, three years.

Nilesh Karani — Magnum Equity Broking Limited — Analyst

Two, three years?

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

Yeah, two to three years. Yeah.

Nilesh Karani — Magnum Equity Broking Limited — Analyst

Okay. And one more question…

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

Gradually it will reduce.

Nilesh Karani — Magnum Equity Broking Limited — Analyst

Yeah. I got that and you’re — roughly your order book is around INR18,000 crore, correct?

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

Yeah, INR17,800 crore. Yeah.

Nilesh Karani — Magnum Equity Broking Limited — Analyst

Yeah. Yeah, INR17,800 crore, correct. So roughly around that ballpark figure, if you talk about. Like [Indecipherable] down the line four years, five years, correct?

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

Sir, your voice is breaking.

Rahul Agarwal — Head Strategic Finance

Sir, if you can speak a little louder, yeah.

Nilesh Karani — Magnum Equity Broking Limited — Analyst

Now am I audible? Hello?

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

Yeah. Now it’s better.

Nilesh Karani — Magnum Equity Broking Limited — Analyst

Yeah. So see, that is for four years, five years down the line, correct? The INR17,800 crore, is the — the whole order book is, it will take around four to five years for exhibition.

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

Yes, four to five years correct. Correct.

Nilesh Karani — Magnum Equity Broking Limited — Analyst

Right. So here basically ma’am, if we understand, so how are we — actually how fast it is growing. I meant, if I assume around INR4,000 crore every year, so how will we basically grow some — to 20% or 30%, like?

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

So as I mentioned, we expect by this year-end order book to grow to beyond INR20,000 crore. So, we are expecting another two, three large projects. So then it will continuously — if it is INR20,000 crore in four years, five years, so it will be sufficient for the next four to five years and every year we expect that kind of churning.

Nilesh Karani — Magnum Equity Broking Limited — Analyst

Okay. So we will be comfortable achieving INR4000 crore and then INR5000 crore and then INR6000 crore a year like for example, just a rough estimates?

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

See this growth estimate we are giving for next two years, we are saying.

Nilesh Karani — Magnum Equity Broking Limited — Analyst

Okay, ma’am, okay. And ma’am our hydro basically, total how much is our market share this total — means India I’m talking about, if you talk about India?

Rahul Agarwal — Head Strategic Finance

So the market share in terms of, you’re talking about current execution or past…

Nilesh Karani — Magnum Equity Broking Limited — Analyst

[Technical Issues] If I talked about INR20,000 crore over our current valuation, the altogether how much it would be like?

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

60%, 70%, we expect our order book breakup is from hydro sector.

Nilesh Karani — Magnum Equity Broking Limited — Analyst

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

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

Thank you sir. Thank you.

Operator

Thank you. The next question is on the line of the Yashwanti Khedkar [Phonetic], an individual investor. Please go ahead.

Yashwanti Khedkar — Individual Investor — Analyst

Yeah, good evening ma’am and congratulations on a good set of numbers. I just wanted to understand like we were discussing about the order and order book going forward and as the government focus on the infrastructure is highly on, there are a lot of the chances of getting good orders across the segments. So, just wanted to understand like we have around 50% to 70% of the orders coming from the — coming from the hydro and tunneling, and among all, like how is the margin spread over across these segments.

Rahul Agarwal — Head Strategic Finance

So blended wise, we have a margin of 14% to 15%, hydro and tunneling segment has margin little upper side, like 1% or 2% upper side. And the other segments are little lower side. So on an average, that is why we get around 14% to 15% margin.

Yashwanti Khedkar — Individual Investor — Analyst

14% to 15% on an FY [Phonetic] and that will continue.

Rahul Agarwal — Head Strategic Finance

Yeah, we expect to continue to do that. Yeah.

Yashwanti Khedkar — Individual Investor — Analyst

On a yearly basis we expect on the net level, right?

Rahul Agarwal — Head Strategic Finance

Yes.

Yashwanti Khedkar — Individual Investor — Analyst

So I wanted to understand like how in terms of the segregation across the years, generally our first two quarters are subdued or they start — how are the things, like how the order into other business expense across over the period of the year.

Rahul Agarwal — Head Strategic Finance

Yes. So generally first two quarters are subdued because of rains and all, the last two quarters are better. In fact, last quarter is considered for us to be the best than first two quarters because of rain, some revenue may be lower in that.

Yashwanti Khedkar — Individual Investor — Analyst

Yes. So then we’re projected 40% plus growth in the top line in the first quarter, it means the outlook is very promising going forward for the coming quarter and for the year.

Rahul Agarwal — Head Strategic Finance

Hopefully.

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

Yes.

Yashwanti Khedkar — Individual Investor — Analyst

Sir, and ma’am, you gave me the order info details, like before this, Kwar coming from the Jammu Kashmir and I missed on the second order. I also have the figure of around INR840 crores of order of which 50% we are the partners. So that is INR420 crore, can you just give me the third order which is from — from whom we have received?

Rahul Agarwal — Head Strategic Finance

That is from MCGM PVPG tunnel.

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

PVPG tunnel which is in Mumbai with a value of around INR420 crore.

Yashwanti Khedkar — Individual Investor — Analyst

Okay. Okay, that’s it from my side. Thank you so much and all the best for the future.

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

Thank you ma’am. Thank you. Thank you ma’am.

Operator

Thank you. The next question is from the line of Sandeep Mane [Phonetic], an individual investor. Please go ahead.

Sandeep Mane — Individual Investor — Analyst

Hello, good evening.

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

Good evening.

Rahul Agarwal — Head Strategic Finance

Good evening.

Sandeep Mane — Individual Investor — Analyst

Hello, I want to just know, the hydroelectric project contribution, with order book is comparatively big. So how much impact does it hold on this EBITDA margin?

Rahul Agarwal — Head Strategic Finance

Sorry, we could not get your question. Can you please repeat?

Sandeep Mane — Individual Investor — Analyst

Yes, the hydroelectric project contribution with order books is comparatively big. So how much impact does it hold on the EBITDA margin?

Rahul Agarwal — Head Strategic Finance

So see EBITDA margins, on average, 14%, 15% is there for last one or — one year or more than one year. So I don’t see there is any major change in the EBITDA margins because of that.

Sandeep Mane — Individual Investor — Analyst

Okay, one more question sir. Since this is the first quarter. How are you expecting margin to be played out? Are these level of margin sustainable?

Rahul Agarwal — Head Strategic Finance

Yes, we expect this level of margin to be sustainable.

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

Yeah.

Sandeep Mane — Individual Investor — Analyst

Yeah? Okay, thank you sir.

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

Thank you.

Operator

Thank you. [Operator Instructions] Next question that’s on the line of Rushabh from RS Capital. Please go ahead.

Rahul Agarwal — Head Strategic Finance

Hello?

Rushabh Shah — RS Capital — Analyst

Yeah, thank you.

Rahul Agarwal — Head Strategic Finance

How are you?

Rushabh Shah — RS Capital — Analyst

Yeah, I’m fine sir. Thank you. Actually I just want to confirm you mentioned about the reduction in debt, so I just want to understand real estate, I believe we have an asset in Hyderabad. So, and we just mentioned, what are the non-core assets do we have which you intend to monetize? And why — is it possible that we may monetize them faster than two to three years.

Rahul Agarwal — Head Strategic Finance

So, Mr. Rushabh we are trying, but monetization will take time. So that’s why we are given a period of two to three years. And in terms of non-core assets, we have real estate plus we have arbitration awards also. So all combined, we expect to reduce debt by INR600 crore, INR700 crore over the next two to three years.

Rushabh Shah — RS Capital — Analyst

Okay. And how has our gross debt moved from March to June? What’s the gross debt figure now?

Rahul Agarwal — Head Strategic Finance

It’s almost similar, not much difference.

Rushabh Shah — RS Capital — Analyst

And has there been an execution delay due to monsoon or we were as per planned in 1Q, something got spill over into Q2 or…?

Rahul Agarwal — Head Strategic Finance

No, so Q1, Q2 generally the monsoon is little lower only, everything is as per expectation only.

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

So we already factor it when we submit the plan.

Rushabh Shah — RS Capital — Analyst

Sir because this time, monsoons are little bit harsh in some regions. So I’m just asking, that’s why.

Rahul Agarwal — Head Strategic Finance

We have not been, luckily not been impacted that much because of all that.

Rushabh Shah — RS Capital — Analyst

And that this QAP, can we expect something to get finalized by FY23 or later also?

Rahul Agarwal — Head Strategic Finance

See it will all depend on the market situation also, we are just keeping in principle approval taken from shareholders, based on market situation we will go ahead.

Rushabh Shah — RS Capital — Analyst

Okay. Okay, fine. Thank you.

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

Thank you.

Operator

Thank you. [Operator Instructions] The next question is on the line of Avinash Gupta [Phonetic], an investor. Please go ahead.

Avinash Gupta — Individual Investor — Analyst

Hello? The numbers were good, actually, after a long time, right? My question is more in terms of a broader strategy, which is the areas we are looking at because tunneling — surely tunneling and hydropower is something which is a core business where we have potential, but are we looking at other segments as well, because I’m not too sure about the hydro, how the market looks going forward for next two, three years? What is the kind of capacities which are coming in? And surely we’ll be — technically we’re much better qualified, but how’s the market looking and what is the kind of capacities which are coming in these particular verticals, one is the hydro, second is tunneling. If you can throw some light on that?

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

No, you are right sir. We are looking to other segments like irrigation, road. We are looking for other segments also.

Avinash Gupta — Individual Investor — Analyst

But in terms of visibility, what is the kind of visibility on hydro and tunneling in terms of the kinds of capacities which we expect to come, that’s probably certainly one of the ways [Speech Overlap]?

Rahul Agarwal — Head Strategic Finance

There is a huge pipeline of work coming up in this segment, the government is focusing on renewable energy and power is a requirement which — India is short in power and to achieve that through renewable energy, large renewable energy sources is hydropower. So, government is focusing and lot of projects are coming up because India has a lot of water, running water, river everything. So, a lot of projects are expected to come up.

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

See, I’ll tell you, in Arunachal, I have shared in one of the meeting where Power minister, gave the speech, he said Arunachal itself has a potential of 50,000 megawatt, if 25,000 at least target, that’s a huge. Even this central PSU like SJVNL, NHPC they are coming up with large value projects.

Avinash Gupta — Individual Investor — Analyst

No, my feeling is because hydro ultimately is a very long gestation project, right? From the start till even the commissioning of — construction it will take at least minimum three to four years, kind of time, right. So the revenue potential — the potential which we are looking in next two, three years probably will be stage one or two right, in terms of expression of interest has already been called for them and kind of stuff or — because my thinking is the visibility has to be, I guess for hydro and for — tunneling to a lesser extent, but for hydro to a larger extent the visibility has to be very clear, right, the kind of…?

Rahul Agarwal — Head Strategic Finance

The visibility is very clear sir. So, we expect orders whatever we have got that will take four to five years to execute, plus we expect to add more orders. And yes, the power project construction period is four to five years, but that is fine, the order book we have enough order book to get to our revenues, whatever we need.

Avinash Gupta — Individual Investor — Analyst

No, I was more — obviously, this is one particular area, which is practically bread and butter for us, right, which is a base where we have a substantial amount of credential, right. But in terms of the growth areas, I’m saying, more something like, even because something I guess is going on the bullet train projects as well right or even the Metro ones right, the tunneling, lot of tunneling happens in that as well. So, are we kind of looking at that kind of area as well because tunneling is our expertise?

Rahul Agarwal — Head Strategic Finance

Yes. So, see, we may look into it in future. Right now, because we were getting so many orders from our core segment of hydro, so, that is why we are not required to look into other areas as of now. But yes, going forward when more projects will come up in other areas also we look into it [Speech Overlap] margins and self-sustainability everything comes from the project.

Avinash Gupta — Individual Investor — Analyst

True. Thanks a lot. Thanks.

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Yashwanti Khedkar, an individual investor. Please go ahead.

Yashwanti Khedkar — Individual Investor — Analyst

Yes, thank you once again for the opportunity. Sir, as we are the leading player in hydropower segment, how much the market share does Patel have in India, out of the total hydropower capacity?

Rahul Agarwal — Head Strategic Finance

See we are an EPC contractor. So, that way we don’t have a particular market share as such in terms of capacity, but around 20%, 25% of the hydropower projects in India, we have been associated some way or the other.

Yashwanti Khedkar — Individual Investor — Analyst

Okay. And sir, I just wanted to understand about the scheme of arrangement which were recently announced, like what is the timeframe you expect it to complete an expected amount the company will get by selling this?

Rahul Agarwal — Head Strategic Finance

No, there is no scheme of arrangement.

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

Merger.

Rahul Agarwal — Head Strategic Finance

Merger? Okay, see merger scheme that is NCLT has already approved it. So that, next quarter the merger shall be in place in the books also and it is a merger of wholly owned subsidiary. So, there is no money or any kind of exchange happening there. It is just to reduce costs overall of — statutory costs and other costs associated with the subsidiary will get reduced.

Yashwanti Khedkar — Individual Investor — Analyst

Just wanted to check whether any of the asset you are planning to monetize from this company.

Rahul Agarwal — Head Strategic Finance

So that is on, that is where we are saying, all non-core assets when we are talking we are talking about the group.

Yashwanti Khedkar — Individual Investor — Analyst

Across the group, okay. Okay, sir. Got it sir. Yeah, thank you so much sir.

Operator

Thank you. [Operator Instructions] As there are no further questions. I now have the conference over to Mr. Vastupal Shah for his closing comments.

Vastupal Shah — Associate Partner at Kirin Advisors Private Limited

Thank you, everyone, for joining the conference call of Patel Engineering Limited. If you have any queries you can write vastupal@kirinadvisors.com. Once again, many thanks to management team, and all the participants for joining the conference. Thank you.

Kavita Shirvaikar — Whole Time Director & Chief Financial Officer

Thank you. Thank you.

Rahul Agarwal — Head Strategic Finance

Thank you all.

Operator

[Operator Closing Remarks]