Patel Engineering Limited (PATELENG) Q3 FY23 Earnings Concall Transcript

Patel Engineering Limited (NSE:PATELENG) Q3 FY23 Earnings Concall dated Feb. 08, 2023.

Corporate Participants:

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

Rahul Agarwal — Head Strategy and Finance

Analysts:

Rishabh Shah — Ares Capital — Analyst

S. Lodha — Sanmati Consultants — Analyst

Priyas Avanti Ketkar — Individual Investor — Analyst

Rahul Shah — Strategic Partners — Analyst

Raj — Arja Partners — Analyst

Vastupal Shah — Kirin Advisors Private Limited

Sanjeev Kumar Damani — SKD Consulting. — Analyst

CK Bhartiya — Individual Investor — Analyst

Varun Mehta — Wealth Link Investments — Analyst

Sandeep Mane — FM Research — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q3 FY 2023 Results Conference Call of Patel Engineering Limited hosted by Kirin Advisors Private Limited. As a reminder, all participants’ lines will be in the listen-only mode. And there will be an opportunity for you to ask questions after the presentation concludes. [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.

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

Yeah. Thank you, Vastupal. Good evening, ladies and gentlemen. A very warm welcome to all of you for attending this Q3 FY 2023 earning call of Patel Engineering Limited. We have uploaded the investor presentation on the stock exchange, and I hope you all would have got a chance to look at the numbers. Without getting into all details of the presentation, let me brief you on the key highlights of Q3 FY 2023, forth which we can take your questions.

Let me take you through the key financial numbers of the quarter and nine months period. On a consolidated basis, revenue from operations for Q3 FY 2023 is at INR10,369.77 million, which is up by 18.11% from INR8,779.43 million in the corresponding quarter in the previous year.

Revenue from operations for nine months FY 2023 is at INR29,039.37 million, which is up by 28% from INR22,686.43 million in nine months FY 2022. On a standalone basis, revenue from operations for Q3 FY 2023 is at INR9,293.89 million, up 20.17%, INR7,734.16 million in Q3 FY 2022. Revenue from operations for nine-month FY 2023 is at INR26,249.43, up 31.2% from INR9,998.06 million in nine months FY 2022.

Operating EBITDA on a consolidated basis for Q3 FY 2023 is INR1,637.48 million, a margin of 15.79% and net profit at INR194.83 million. Our nine months net profit has more than doubled to INR704.4 million as compared to INR335.62 million as corresponding period in previous year.

On a standalone basis, operating EBITDA for Q3 FY 2023 is at INR1,307.12 million, a margin of 14.06% and net profit at INR213.97 million, up by 32.2% as compared to profit of INR161.74 million in the Q3 FY 2022. A nine-month profit is up 178% at INR717.70 million from INR257.98 million.

The revenue for the quarter is higher as compared to previous year, given the increase in order inflow in the last few years, the sector-wise revenue breakup. Let me give you the sector-wise revenue breakup. Revenue from hydro is 52%, tunnel sector is 21%, — irrigation sector is 13%, from road and other sector is 14%.

Now, coming to order book of the company. Our order book as on 31st December 2022 is INR16,8094 million, which is INR16,809 crores. Coming to the composition, 66.7% is coming from hyper sector, 14.11% from irrigation sector, 12.56% tunneling sector, and rest is 7%.

Out of this, 75% of our order book is from the central PSU, which is AA, AAA rated and have a healthy balance sheet. Current year — current nine months, we have received order book of IND36,085 million. Revenue for these new projects and corresponding profitability shall commence in Q4 and next year revenue. So, going forward, you will see there will be an improvement in margin.

So, given the focus on infrastructure, we expect a huge pipeline of work going forward. We expect our order book to cross two million in the coming quarters. As you are aware, our order book mainly 66% comprises of hydro sector, we have a very positive outlook inside the sector.

Speaking about hydropower, hydropower centration is highly capital mode of electricity generation, renewable source of energy with no consumables involved. Very little recurring cost, hence no high long-term expenditure.

Hydropower supplies at least 50% of electricity production in 66 countries and at least 90% in 24 countries. With a large part of rivers and water bodies, India has enormous potential for hydropower generation. Around 26% of hydropower potential has been exported in India. So, there is a huge opportunity available.

Now, as regards to budget for the infrastructure sector, increase in the proposed expenditure for infrastructure to INR10 lakh crores for FY 2024. Out of the same, railways will receive a capital outlay of INR2.4 lakh crore, the highest allocation ever since 2013-2014. Investments totaling INR75,000 crores will be made in 100 vital transportation infrastructure projects.

The creation of the new infrastructure finance secretariat will increase opportunities for private infrastructure investment. Due to strong pedigree, Patel Engineering Limited is well-poised to take advantage of this growing industry.

Now, I would like to mention some key highlights, our execution key highlights of this quarter. The company was awarded with a Top Challenger 2022 Company at the 28 Construction World Global Awards 2022.

Our Chairman and Managing Director; Mr. Rupen Patel was featured in the CEO Magazine, sharing his views on transforming India’s infrastructure. At our AMD two project site located in Mumbai, Maharashtra, we completed entire tunnel of 5.5 kilometers by customized PBM ahead of schedule.

Our one of the projects in T2 tunnel was substantially completed in the last quarter, which is also — we completed ahead of schedule. The company has filed its letter of offer for a rights issue to raise INR3250 million, which will help the company to reduce the borrowing and meet its working capital requirements.

The promoters have already share of INR1,300 million in the company. The bad debt of the company on a consolidated basis is INR19,718.08 million. The same is expected to further come down with the help of right issue and monetization of non-core assets.

Q3 FY ’23 has been overall good for the company and in line with our expectations. The Indian economy is exhibiting promising signals with lending institutions balance sheet getting stronger, robust tax collection, growth in GDP and decline in interest rate with sturdy investment intentions, various new projects are expected to be introduced by the government and infrastructure and trend is likely to continue.

We expect continued growth in terms of revenue and profitability going forward. Searches generated from projects and from monetization of non-core assets shall be utilized to reduce the debt and improve the profitability further and unlock shareholder value.

That was a small brief from our side. And now I will like Vastupal to take over. And our team here shall be happy to answer any further questions that you all may have. Thank you very much.

Questions and Answers:

Operator

The first question is from the line of Rishabh Shah from Ares Capital. Please go ahead.

Rishabh Shah — Ares Capital — Analyst

Hello.

Rahul Agarwal — Head Strategy and Finance

Hi, Mr. Rishabh. How are you?

Rishabh Shah — Ares Capital — Analyst

Yeah, I’m fine. How are you?

Rahul Agarwal — Head Strategy and Finance

Good, good.

Rishabh Shah — Ares Capital — Analyst

Yeah. I just want to clarify, again, we have seen some sort of selling from the promoter entity in the December quarter as per disclosures, and now again, we are raising funds for right issue. So I’m trying to understand — promoter will be participating in this? What is

Rahul Agarwal — Head Strategy and Finance

Yeah promoters are participating.

Rishabh Shah — Ares Capital — Analyst

Okay. How much more capital raise do you think you require apart from this INR300 crore you’re raising now for growth or whatever, how much further capital you require after this?

Rahul Agarwal — Head Strategy and Finance

So INR325 crores rights issue, which we have proposed is based on whatever order book we have received and we expect to receive it next year or so. Going forward, when we get more orders then we’ll decide capital requirement.

Rishabh Shah — Ares Capital — Analyst

But going forward, will the promoter be selling more shares or what, because there has been some selling in the last six months, around INR140 crores of approximately value has been sold by the promote entity. So that is not giving some sort of confidence?

Rahul Agarwal — Head Strategy and Finance

So Mr. Rishabh, promoter has sold shares and put money in the company itself, which for the working capital requirements of the company. And that INR130 crores, which they have put is going to get converted into equity share, the right issue and of their share allotment.

Rishabh Shah — Ares Capital — Analyst

At what price will that be converted?

Rahul Agarwal — Head Strategy and Finance

Right issue price. It is done at right issue price.

Rishabh Shah — Ares Capital — Analyst

So I’m just clarifying, does the promoter need to sell further stake to bring more capital, I just want some clarification on that?

Rahul Agarwal — Head Strategy and Finance

So I’ll tell you, the promoter sold shares, because the company requested promoters to put in money in the company. We didn’t want to borrow it from lenders and incur more interest costs. So promoters sold some shares and put in the money and then now in right issue, all shareholders are getting the right to subscribe. They would have also got and now what they have already put in the money, so that — theirs portion will all will be converted.

Rishabh Shah — Ares Capital — Analyst

Okay. Okay. And is there any update on the land bank sales with any or anywhere else or any of the non-core assets that we have, any update, any significant development?

Rahul Agarwal — Head Strategy and Finance

So we are in discussions with various land sales, some portions we have done also. And now we are looking to sell more land parcels, but that depends upon how the transaction goes forward.

Rishabh Shah — Ares Capital — Analyst

So the last six months, has that been development because the last six months, we’ve been talking so is there significant development, maybe next one or two quarters, anything can happen now.

Rahul Agarwal — Head Strategy and Finance

Yes. So we have been discussion around INR60-odd crores funds we have received from sale of land parcels.

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

No Rahul, we have already sold around INR47 crores worth of — around INR50 crores value of land parcel and reduce the debt actually.

Rahul Agarwal — Head Strategy and Finance

Right, right. That’s what I’m saying. Already sold so much land parcel. And now we expect to go forward further as and when the turn actions will happen.

Rishabh Shah — Ares Capital — Analyst

Okay. That will be much higher than INR50 crores, INR60 crores, what you are saying?

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

Yes, correct. Correct.

Rishabh Shah — Ares Capital — Analyst

Okay. Okay. And sir, JV, there was some loss in the console. What is that exactly in one of the JV, there is some loss that have booked exception or something?

Rahul Agarwal — Head Strategy and Finance

No, I’ll tell you. Exceptional items, we had sold one project, Raichur Sholapur Transmission Company, where we have one — 33.33% stake. So upon sale of that asset, whatever balance, because there were some foreign currency ECB loan out there. So although that transaction took one year to complete, so during that period, based on the agreed pricing another, we had to incur a loss of around INR six-odd crores. So that has been taken as exceptional item.

Rishabh Shah — Ares Capital — Analyst

So going forward, further — the all other — associate or JV companies, any transaction are we expecting or to get rid of something or.

Rahul Agarwal — Head Strategy and Finance

Nothing as of now.

Rishabh Shah — Ares Capital — Analyst

Okay. And then just other expenses, we have seen an increase now, if you just compare year-on-year and sequentially, so what is the reason for that?

Rahul Agarwal — Head Strategy and Finance

Not any specific reason. The overall revenue size, everything is increasing. So we have to expand in terms of employee base, in terms of administrative overheads. So that is only there.

Rishabh Shah — Ares Capital — Analyst

Okay. And just last question, the demand, what is the outlook because since last — I think this Q3, Q4 are good for intra companies normally?

Rahul Agarwal — Head Strategy and Finance

Right. So we had given an outlook of around 15% year-on-year in terms of revenue. I think we are in line with that.

Rishabh Shah — Ares Capital — Analyst

Okay, okay. Thank you.

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of S. Lodha from Sanmati Consultants. Please go ahead.

S. Lodha — Sanmati Consultants — Analyst

Thank you, madam for opportunity. Hello, am I audible?

Rahul Agarwal — Head Strategy and Finance

Yes. Yes, sir.

S. Lodha — Sanmati Consultants — Analyst

Can you tell us, sir, what is the position of the order bid by the company, which is pending and where — how much companies L1 in the orders. How much orders — company has further bid for the — this Heidel and Infra?

Rahul Agarwal — Head Strategy and Finance

Sir, so at any point of time, we keep on bidding and more than 10,000, 20,000 works are always there in pipeline. And so hopefully, let’s see what orders when we can receive?

S. Lodha — Sanmati Consultants — Analyst

Anything out of that orders bid? Anything out of that order bid there? Anything in the L1 in any amount L1?

Rahul Agarwal — Head Strategy and Finance

Sir, L1, we can’t comment right now unless LI is received.

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

No, but there is an — we expect to receive well L1 shortly, yes.

S. Lodha — Sanmati Consultants — Analyst

No amount — cannot be set right

Rahul Agarwal — Head Strategy and Finance

Sir, right now, we cannot give the amount because that we can give only after L1 is received.

S. Lodha — Sanmati Consultants — Analyst

So whatever you are running, you are saying INR100 crores will be the interest and you are taking too long in the monetizing that your fixed asset, you’re talking since last four years to monetize the asset, management is sleeping on the assets and paying INR100 crore interest in the quarter. What is the sense, sir.

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

Sir, sir, May I — Sir, this last three five years we have paid INR1,200 crores debt repaid by monetizing initially — now another one more asset and one more claim monetization is in process. The current quarter, which is from last quarter, December no — that Q4, you will see some more monetization, which is in pipeline and which will materialize and you will see further debt coming down.

S. Lodha — Sanmati Consultants — Analyst

Interest — as it has not come down. You are saying that it is already INR100 crores. Whatever year you are paying in interest. What you will — will give that — to the shareholders.

Rahul Agarwal — Head Strategy and Finance

Sir, our business is such that we need funds for working capital. So we need to take advances from clients plus we have borrowing, so — both combined, we have to pay interest, plus we also have to pay bank guarantee commissions for bank guarantees taken for project. But if you see considerably, we have reduced debt, and that is what our focus is to keep on reducing that. And as and when revenues are increasing and the debt is reducing, our profitability will improve.

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

Sir, because of that, we are coming right to which will further reduce the debt

S. Lodha — Sanmati Consultants — Analyst

Maybe the rate is — has been — cleverly planned. Why you are not being the rate of INR28, why you are bringing at INR16.

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

It is based on the market, sir.

S. Lodha — Sanmati Consultants — Analyst

Not based on the market. It based on the unethical means of intention of the management

Rahul Agarwal — Head Strategy and Finance

But it is also shareholders, right?

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

Yes

S. Lodha — Sanmati Consultants — Analyst

No, no. The question does not arise — you sold the same in the open market open market. Then you will lend that money from your private company to the company, then same money being utilized in the acquiring the share is INR12. This is the history. Don’t you agree with me?

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

No, sir. We don’t agree with you.

S. Lodha — Sanmati Consultants — Analyst

Okay. Thank you. Thanks. That’s all

Operator

Thank you. The next question is from the line of as Priyas Avanti Ketkar and Individual Investor. Please go ahead.

Priyas Avanti Ketkar — Individual Investor — Analyst

Yes. I wanted to continue with the big part of this company. What is the current cost of the debt which you are free

Rahul Agarwal — Head Strategy and Finance

Cost of debt is around 11%, 11.5%.

Priyas Avanti Ketkar — Individual Investor — Analyst

Are talking about financial investment — to have the reduced rate we are betting on a lead?

Rahul Agarwal — Head Strategy and Finance

So we are constantly working with rating agencies to improve our rating — our rating was at the start of the year was around BBB minus and now we are at BBB stable. After results, we expect to go for a re-review and then hopefully things will improve further. If you see in the market, the rates — interest rates have been increasing, but because our rating has been improving, our interest rates have not gone up.

Priyas Avanti Ketkar — Individual Investor — Analyst

Okay. And can we explore further reviews

Rahul Agarwal — Head Strategy and Finance

Yes. I mean post March results when our rating is reviewed then we’ll touch base again little little.

Priyas Avanti Ketkar — Individual Investor — Analyst

Coming down from the financial performance we have seen there was a 100 basis point decrease in operating margin, which is around some 16 — an odd percent to 15 and odd percent. So is that because of any change in the project mix or that is due to may because of the cost? Because I see there is any cost improvement or cost increase in the employee costs, so how is it?

Rahul Agarwal — Head Strategy and Finance

So I’ll explain you. It is two-fold. One is if you see, we always say that our margins will range between 14% to 15%. It’s only quarter-on-quarter basis, it’s not exactly comparable because in mid quarter, what kind of portion of work is executed based on that, it will determined. Plus this year, we have got a lot of new orders. So for the new orders in the initial mobilization phase, there is no profit book, maybe up to 8%, 10% of the work executed. So, unless — now Q4 onwards, maybe that threshold will cross and the profitability booking will start.

Priyas Avanti Ketkar — Individual Investor — Analyst

So what kind of guidance and what kind of margin you foresee even for closing for FY ’23 and going forward, because we are getting any content — margin for this coming another portfolio?

Rahul Agarwal — Head Strategy and Finance

So we expect margins to be between 14% to 15%.

Priyas Avanti Ketkar — Individual Investor — Analyst

Okay. And that is sustainable?

Rahul Agarwal — Head Strategy and Finance

Yes.

Priyas Avanti Ketkar — Individual Investor — Analyst

And how do this right issue of around INR325 crores, what portion you are planning to repay as a debt?

Rahul Agarwal — Head Strategy and Finance

So I’ll tell you, the mix is such that out of the total right issue size, around 25% is kept for general corporate purpose and the rest amount is for payment of debt, interest, everything.

Priyas Avanti Ketkar — Individual Investor — Analyst

Okay. Sir, yes, the budget has been positive with the INR10,000 crores of capital outlay for the whole infrastructure. But as we are basically into the hydroelectric and any specific positive can we see from the business budget perspective going forward?

Rahul Agarwal — Head Strategy and Finance

So I’ll tell you the budget says INR10 lakh crores of capex expenditure for infrastructure. Obviously, I mean, a large share will have to go for renewable energy. Hydropower being a large renewable energy sector, so we expect a lot of works coming in hydropower, and we get a lot of work. Apart from hydropower, we also have other sectors where we are working, other water works, irrigation, roads, railways. So I mean, we expect a good chunk of orders coming in from all these sectors as well.

Priyas Avanti Ketkar — Individual Investor — Analyst

Okay. Thank you for all information and all the best for the future. We experience in base to come down going forward. Thank you, Sir.

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of Rahul Shah from Strategic Partners. Please go ahead.

Rahul Shah — Strategic Partners — Analyst

Hello. Hi. Congratulations on the good set of numbers. I would like to ask you on the margin front. With the increase in the order book — I guess the order book is at the peak? And how we are expecting net profit margin to pan out in the coming years? Rightly there’s a huge growth in margins in the current quarter. So can you put some light on that?

Rahul Agarwal — Head Strategy and Finance

So see, I mean, our main cost — our EBITDA margin is around 14%, 15%. So as and when the revenues will grow, the EBITDA in absolute terms will grow. Now the interest cost, because we are taking so much measures to not increase the debt, so we are trying to manage the interest cost at current levels or reduce it from there. So then delta will always be there and then profitability will improve.

Rahul Shah — Strategic Partners — Analyst

Okay, Sir. That’s it. I guess, other questions have been asked already. Thank you for the results and all the best.

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of Raj from Arja Partners. Please go ahead.

Raj — Arja Partners — Analyst

How your FY ’24 is going to look like? Regarding sales and pattern etc?

Vastupal Shah — Kirin Advisors Private Limited

So we expect around — we had given a guidance of 15% year-on-year growth for revenue. So we should maintain that.

Raj — Arja Partners — Analyst

15% sales growth. Okay.

Vastupal Shah — Kirin Advisors Private Limited

Right.

Raj — Arja Partners — Analyst

And also on an earlier analyst, he alleged you about fraud and everything. So sir, about that. So it gives a very strong interest in the community?

Vastupal Shah — Kirin Advisors Private Limited

So I’ll tell you, we answered already that the promoter hold a share and put the money in the company. Then that is — I mean, there is no — nothing wrong in that because the company needed money. They sold the shares and put the money in the company. Now then we came out with the right issue, which is open to all shareholders right issue when we come out, it has to come out based on the market, what is there currently. And accordingly, and the price, whatever is offered on the right, it is offered to all. So it’s not that promoters take is going to go up or anything like that and promoter is trying to do. I mean anybody can blame anything, but that is not a fact. The fact is that promoter has not come out with the preferential allotment — it is very clear. The date when we announced the right, the pricing was around INR17 order. So some considerable discount from there we’ve done market past right issue sizes we have seen accordingly, we have gone ahead.

Raj — Arja Partners — Analyst

Okay. Thanks. Have a good day. Bye.

Operator

Thank you. The next question is from the line of Sanjeev Kumar Damani from SKD Consulting. Please go ahead.

Sanjeev Kumar Damani — SKD Consulting. — Analyst

Good afternoon. Am I audible?

Vastupal Shah — Kirin Advisors Private Limited

Yes.

Sanjeev Kumar Damani — SKD Consulting. — Analyst

Yes. Thank you, sir. Sir, congratulations on very fine set of numbers. And I know that through the difficult periods, we are coming out of such a math of situation. So I really appreciate the patience of the management, and their efforts in taking out the company, sailing it out from all the difficult times. So now coming to my question, I’ll be very happy to gauge the proper strength of the company, if I can know an approximate amount of real estate or land buildings and properties that company owned, which is having a reasonable market value as at today, which we can either realize or may or may not realize, but we hold these many assets which are company’s assets not related to the current business of the company. Can I get any such approximate amount for my better understanding of the company?

Vastupal Shah — Kirin Advisors Private Limited

Yes. So in the last quarter conference call also, we said that we have a land bank of approximately INR1,000 crores value.

Sanjeev Kumar Damani — SKD Consulting. — Analyst

Okay. Okay.

Vastupal Shah — Kirin Advisors Private Limited

So these land banks, these are non-core assets, which we are slowly trying to monetize. And then everything can’t be monetized immediately.

Sanjeev Kumar Damani — SKD Consulting. — Analyst

We understand this. Yes, sir. Please continue, sir.

Vastupal Shah — Kirin Advisors Private Limited

Yes. Correct. So these are the assets which we have, which will help to monetize apart from normal business.

Sanjeev Kumar Damani — SKD Consulting. — Analyst

Right.

Vastupal Shah — Kirin Advisors Private Limited

However, we can get from past claims and arbitration awards because we have done a lot of projects of the government in the past and we have arbitration awards and claims. So whatever money gets realized from that, all combined, we are trying to reduce debt as much as possible.

Sanjeev Kumar Damani — SKD Consulting. — Analyst

Agree, sir. So I was coming to the second question also that — I mean if this can be classified very clearly that the arbitration awards already received then how much we have got against those awards? How much real cash has come into the company? How much amount as claimed by us, is still under arbitration or dispute? So if all these things can be very clearly classified, one can understand the inner strength of the company much better. And my last question is about the same first question, that only 1,000 worth of land parcel we have got or we have got many other assets, which can be — which are not part of the operations of the business, like various sites are there where we are working, but suppose we have offices, we have godowns, we have some clear land meant for real estate development. So the sum total will come to only INR1,000 or will it go up? Now I expect your reply sir. Thank you.

Rahul Agarwal — Head Strategy and Finance

So this I’m talking to you about major land parcels, which we have. Now if you are talking about site offices and all that sort of working, we have not done. So obviously, each site will have a site office, some portion of land, some queries. All those land parcel will be there. Some are rented out. So I mean it is that another.

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

No, no, Rahul sir, over and above that land parcel, we have another claims like arbitration award and all.

Rahul Agarwal — Head Strategy and Finance

Okay.

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

There also we expect going forward around INR1,000 crores realizations. So INR1,000 crores from claim and INR1,000 crores from a large sales.

Sanjeev Kumar Damani — SKD Consulting. — Analyst

Okay. So can I take it this way, that awards already given in our favor are INR1,000 crore worth or they are much more and our rest of the better, which are still disputed, you know.

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

See I will tell you sir, around INR1000 — around INR700, INR800 is award is in our favor and around INR1,000 crores, which is claim under pipeline.

Sanjeev Kumar Damani — SKD Consulting. — Analyst

Okay. That’s the total thing that we have made a claim of and what maximum we can realize is the INR1,800 crores in due course of time. Because

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

No, 800 — INR2,000 crores from claims and INR1,000 crores from land parcel

Sanjeev Kumar Damani — SKD Consulting. — Analyst

Land parcel. This much what we can realize in due course of time. And you hinted just now that in this quarter only, you are trying to realize something. So will that be around

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

Around INR100 crores — we expect to realize in this quarter, sir.

Sanjeev Kumar Damani — SKD Consulting. — Analyst

So INR100 crores might come out of all that. Right.

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

INR100 crore land around 50 70. So around INR200 crores we expect in this quarter, sikr. INR150 crores to INR200 crores in this quarter.

Sanjeev Kumar Damani — SKD Consulting. — Analyst

Very nice. Thank you very much and all the best for the future of our company. Thank you.

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

Thank you, sir. Thank you.

Operator

Thank you. The next question is from the line of CK Bhartiya, an Individual Investor. Please go ahead.

CK Bhartiya — Individual Investor — Analyst

Hello. Am I audible?

Operator

Yes, sir. You are audible.

CK Bhartiya — Individual Investor — Analyst

Yes. My question is regarding right issue. Out of INR325 crores, what I understand, INR130 crores has already been infused by the promoter. Is it correct?

Rahul Agarwal — Head Strategy and Finance

Correct, correct. Only

CK Bhartiya — Individual Investor — Analyst

It means only INR195 crores is to be received in this right issue?

Rahul Agarwal — Head Strategy and Finance

So I’ll tell you, 325 is the size, promoter is holding around 40%. So their share comes to around INR130 crores that they have already infused. Balance, we are expecting to receive from other shareholders.

CK Bhartiya — Individual Investor — Analyst

Yes, INR195 more INR200 crores. And now you have just said the 25% will be used for corporate purposes, 75% will be used for the repayment of interest and loan.

Rahul Agarwal — Head Strategy and Finance

Correct.

CK Bhartiya — Individual Investor — Analyst

Can I assume that out of the right issue proceeds of net INR200 crores the entire amount will be repaid towards debt?

Rahul Agarwal — Head Strategy and Finance

No, say, INR130 crores promoter fund, which is received is already received as debt. So that will be repaid from this balance amount, total issue size 25% is general corporate purpose and rest will be used for repayment of debt and interest. The general corporate purpose also will help in way of reduction of debt, because then we don’t need to avail working capital facilities to that extent.

CK Bhartiya — Individual Investor — Analyst

Net-to-net cash inflow to the company will be INR200 crores.

Rahul Agarwal — Head Strategy and Finance

Correct, correct.

CK Bhartiya — Individual Investor — Analyst

Because INR130 crores, you have already received.

Rahul Agarwal — Head Strategy and Finance

Right.

CK Bhartiya — Individual Investor — Analyst

Now tell me the next question, considering the price difference between the present price and your right price is about INR three, INR four only. In case public does not take their part, will be promoters — we — are ready to take up more share?

Rahul Agarwal — Head Strategy and Finance

We don’t know, sir. We’ll have to check with them. Right now, we have got also INR130 crores.

CK Bhartiya — Individual Investor — Analyst

Have you got any commitment from the promoters increase right issue is not taken up by the public, will they be subscribing or there is no commitment from the promoters?

Rahul Agarwal — Head Strategy and Finance

They have given commitment up to their share of the issue.

CK Bhartiya — Individual Investor — Analyst

Okay. In case as public does not take in that case, you will let that be unsubscribed. Isn’t it?

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

Sir, with the positivity in the current infrastructure sector and our company performance, we are positive to achieve that.

CK Bhartiya — Individual Investor — Analyst

No. Madam, you are already — this is there, but we have seen your prices coming down from 28, 29 level to 15 even this environment, when there is a positivity in infrastructure and your performance continues to be good. But prices are falling because of the promoter said in this year, isn’t it? So I believe that because in the comments, there is a possibility that promoter — public may not take up this year. That is what I just was wondering.

Another question, let it be, if you want to. Another question that I have seen in the consolidated performance, your margins in this business has come down from INR40 crores to INR30 crores in this quarter. What is the reason? Translated into that, because most of the EBITDA is from the real estate, and if you see that your — if you see the segmental. Segmental your civil construction is from down by — from INR51 crores to INR30 crores

Rahul Agarwal — Head Strategy and Finance

So you can’t compare quarter-on-quarter. If you see last year comparable this quarter was around INR31 crores only. So we are in line with that.

CK Bhartiya — Individual Investor — Analyst

But your prices — your this top line has also gone up from 8,500 to 10,000 from 853 to 1,019, it means your margins are down?

Rahul Agarwal — Head Strategy and Finance

Correct. Correct. So margins are — that’s what I’m saying. So our current margin is around 1%, 2% down from that quarter. But on an overall basis, we maintained 14%, 15%. And it depends upon what portion of work is getting executed in this current quarter.

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

It all depends on the which we executed during the quarter.

CK Bhartiya — Individual Investor — Analyst

Okay. Thank you, madam. That is from my side. Thank you very much.

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

Thank you.

Operator

Thank you. Next question is from the line of Varun Mehta from Wealth Link Investments. Please go ahead.

Varun Mehta — Wealth Link Investments — Analyst

Hi, sir. I just want to understand that you said there is the cost of borrowing is 11% for us.

Rahul Agarwal — Head Strategy and Finance

Correct.

Varun Mehta — Wealth Link Investments — Analyst

And total debt is INR2,000 crores, INR, INR1,900-something, you just mentioned?

Rahul Agarwal — Head Strategy and Finance

Right

Varun Mehta — Wealth Link Investments — Analyst

So why we are paying INR100 crores a quarter, which makes it INR400 crores per year. So if you could just —

Rahul Agarwal — Head Strategy and Finance

We have — I’ll tell you, we have — the finance cost consists of three main components. One is the interest which is payable on the lend to the lenders, which is around 11%, 11.5% on this INR2,000-odd crores. Then they have advances from clients for projects. So on the advances also, we have to pay interest. So we have advances of approximately INR1,000 crores, INR1,100 crores. On that, also, we have to pay interest.

Some are interest free; some are at a lower interest cost. But still, there is a interest cost of around 9%, 10% on that. And apart from that, we have to give performance BGs, advanced BGs, so we have to pay BG commission. BG, LC commissions on the non-fund-based component. So that is also around INR60 crores to INR80 crores per annum. So, all combined, you will see a INR400 crores interest, our finance cost.

Varun Mehta — Wealth Link Investments — Analyst

Understood. And how much is our accumulated losses so that, like, for income tax and total losses, what we have, and others?

Rahul Agarwal — Head Strategy and Finance

Accumulated losses. No, we don’t have accumulated losses as such, because we have been earnings profits every year.

Varun Mehta — Wealth Link Investments — Analyst

Okay, okay. Understood. Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Sandeep Mane from FM Research. Please, go ahead.

Sandeep Mane — FM Research — Analyst

Hi. Hello.

Rahul Agarwal — Head Strategy and Finance

Yes.

Sandeep Mane — FM Research — Analyst

Good afternoon. Hello. Am I audible?

Rahul Agarwal — Head Strategy and Finance

Yes, yes, you are audible, sir.

Sandeep Mane — FM Research — Analyst

Yes. Sir, my first question is, can you give me one point about your future plans for business growth?

Rahul Agarwal — Head Strategy and Finance

So, future plans for business growth, we — there are a lot of projects in pipeline. And we expect the order book to go up. And — so currently, we are around INR16,000 crores, INR17,000 crores — INR16,800 crores. And subject to go up to post execution around INR20,000 crores in coming quarters. So then, from there — so we expect at least 14% to 15% growth top line basis.

Sandeep Mane — FM Research — Analyst

Makes sense, basically. Sir, can you tell me which sector will be the focus area?

Rahul Agarwal — Head Strategy and Finance

So we are focusing on all segments, but our majority order book comes from the hydropower and underground tunneling. So, hydropower, underground tunneling, railways, waterworks, these are the sectors which we are focusing on.

Sandeep Mane — FM Research — Analyst

Yes. Sir, total order book stood at INR168,094 million, right?

Rahul Agarwal — Head Strategy and Finance

Right.

Sandeep Mane — FM Research — Analyst

Sir, can you tell me sector-wise contribution for the same?

Rahul Agarwal — Head Strategy and Finance

Yes. So, around 66% in hydro, around 14% is irrigation, 12.5% is tunneling, underground tunneling, and rest is roads, urban infrastructure and others.

Sandeep Mane — FM Research — Analyst

It’s roads and other.

Rahul Agarwal — Head Strategy and Finance

Roads and urban infrastructure.

Sandeep Mane — FM Research — Analyst

Urban Infrastructure?

Rahul Agarwal — Head Strategy and Finance

Yeah.

Sandeep Mane — FM Research — Analyst

Yeah. Yeah. How many contribution?

Rahul Agarwal — Head Strategy and Finance

Sorry?

Sandeep Mane — FM Research — Analyst

How many contributions in roads and others?

Rahul Agarwal — Head Strategy and Finance

26% balance whatever is there.

Sandeep Mane — FM Research — Analyst

Roughly okay, okay. Got it. Sir, in Hydro Pressure and Tunnelling

Operator

Sir, Mr. Mane, sir you are audio is not clear.

Sandeep Mane — FM Research — Analyst

Hello?

Operator

Yes sir. Can you use a handset mode while speaking? Your audio is not clear.

Sandeep Mane — FM Research — Analyst

Yeah. Now? May I audible?

Rahul Agarwal — Head Strategy and Finance

Yes, yes.

Sandeep Mane — FM Research — Analyst

Yes. In Hydro Pressure and Tunnelling what is the opportunity size in India?

Rahul Agarwal — Head Strategy and Finance

So I’ll tell you in hydro segment, the opportunity side, there’s a huge potential around, you can say, more than INR50,000-odd crores of work is expected to come in hydro segment itself.

Now, railways have been allocated INR Two lakh crores this year, INR2.4 lakh crores. So railways, if you see our railway line in India, a lot of think scope is there to expand in the Northeast and J&K where they have to construct through making tunnels. We are already making two, three tunnels for J&K and water road organization in Arunachal and J&K. So there is a lot of scope coming up, sir.

Sandeep Mane — FM Research — Analyst

Are we not in the West?

Rahul Agarwal — Head Strategy and Finance

Sorry?

Sandeep Mane — FM Research — Analyst

Are you planning what to do in railway?

Rahul Agarwal — Head Strategy and Finance

Railways I mean we do work for railways, but mostly for tunneling works.

Sandeep Mane — FM Research — Analyst

Okay, got it. Sir and my last question is what about the debt reduction, any progress on that?

Rahul Agarwal — Head Strategy and Finance

So we are focusing on reduction of debt. We are looking for a sale of certain non-core assets, realization of certain arbitration awards. As Kavita ma’am was saying some time back.

Sandeep Mane — FM Research — Analyst

Yeah.

Rahul Agarwal — Head Strategy and Finance

Yeah. We will be using these funds to reduce the debt. Plus, I mean wire rights issue also some funds is expected. So that will also help in reduction of debt.

Sandeep Mane — FM Research — Analyst

So in this quarter, can we have received any fresh order right now?

Rahul Agarwal — Head Strategy and Finance

This quarter, not nothing yet.

Sandeep Mane — FM Research — Analyst

Okay sir. Thank you.

Rahul Agarwal — Head Strategy and Finance

Thank you.

Operator

As there are no further questions, I now hand the conference over to Mr. Vasta Palca for his closing comments.

Vastupal Shah — Kirin Advisors Private Limited

Thank you, everyone, for joining the conference call of Patel Engineering Limited. If you have any query, you can write up at info@ kirinadvisors.com. Once more many thanks to management team and participant for joining the conference call.

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

Thank you.

Rahul Agarwal — Head Strategy and Finance

Thank you all. Thank you.

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

Thank you, Operator.

Operator

Thank you.

Kavita Shirvaikar — Whole-Time Director and Chief Financial Officer

Thank you.

Operator

[Operator Closing Remarks]