Patel Engineering Limited (PATELENG) Q4 FY23 Earnings Concall Transcript

Patel Engineering Limited (NSE:PATELENG) Q4 FY23 Earnings Concall dated May. 15, 2023.

Corporate Participants:

Kavita Shirvaikar — Whole time Director & CFO

Rahul Agarwal — Head Strategic Finance

Analysts:

Supriya Madye — Kirin Advisors Private Limited — Analyst

Sagar Gandhi — Future Generali Life Insurance Company Limited — Analyst

Arushi Shah — Sushil Finance — Analyst

Manan Poladia — MKP Securities — Analyst

Deepak Poddar — Sapphire Capital — Analyst

Prashant Kshirsagar — Unived Corporate Research Private Limited — Analyst

Rikesh Parikh — Rockstud Capital LLP — Analyst

Samir Palod — AUM Fund Advisors LLP — Analyst

Vignesh Iyer — Sequent Investments — Analyst

Shikhar Mundra — Vivog Commercial Limited — Analyst

Dipendra Jain — Jain Doshi and Company — Analyst

Nikhil Chandak — JM Family Office — Analyst

Faisal Hawa — H.G Hawa and Company — Analyst

Riken Ramesh Gopani — Capri Global — Analyst

Aman — QUAD Investments — Analyst

Viraj Mahadevia — Individual Investor — Analyst

Tejas Shah — Individual Investor — Analyst

Priyam Kataria — IDBI Capital — Analyst

Maruti Nandan Sarda — Individual Investor — Analyst

Aksha Trivedi — Individual Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q4 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 Ms. Supriya from Kirin Advisors Private Limited. Thank you and over to you ma’am.

Supriya Madye — Kirin Advisors Private Limited — Analyst

Thank you. Good evening, everyone. Today on behalf of Kirin Advisors Private Limited, I welcome you all to the conference call of Patel Engineering to discuss Q4 FY ’23 and FY ’23 numbers. On the management side, today, we have Ms. Kavita Shirvaikar, Whole-time Director and CFO; Mr. Rahul Agarwal, Head Strategic Finance; and Mr. Aditya Bajaj, Investor Relations and Marketing.

Now I hand over the floor to Ms. Kavita Shirvaikar ma’am to give you the opening remarks. Over to you ma’am.

Kavita Shirvaikar — Whole time Director & CFO

Thank you, Supriya. Good evening, ladies and gentlemen. A very warm welcome to all of you, and thank you for attending this earnings call for Q4 and FY ’23 of Patel Engineering Limited. We have uploaded earnings presentation and the press release along with the results on the stock exchange, and I hope you all have had a chance to look at the numbers. We shall be giving a short brief of key highlights of the performance of the company in this Q4 and year ended FY ’23, and then we’ll be happy to answer any questions, which you all may have.

Let me start with the environment. The last quarter saw some significant challenges in the global environment with signs of some developed economies heading towards a recession. However, despite the fact, India’s growth continues to be resilient and spend as a spun of the fastest-growing economies in the world. The Government of India has strong infrastructure push under the Prime Minister’s Gati Shakti initiative, logistic development and industrial corridor development will contribute significantly to raising industrial competitiveness and boosting future growth of the Indian economy. In the recent weather, capital investment outlays for infrastructure has been increased by 33% to INR10 lakh crores, which would be approximately 3.3% of GDP, which is going to provide tremendous impetus to the infrastructure companies going public.

Speaking, about the hydropower sector in India, Patel Engineering has a dominating presence. India has classified hydropower as renewable energy and see it has a key transition away from coal. India having the advantage of [Indecipherable] resources with number of reverse flow into have huge potential to test in terms of hydropower, which is yet to be explored. Recently the Indian government has approved its largest-ever hydropower project, the Dibang multipurpose project in the mountains of north eastern region. It is a 2,880 megawatt project located in Arunachal Pradesh. I think to be developed by NHPC Limited. We have recently been declared L1 for a part of this project, which shall we rolled out in stages. There is a huge potential in hydropower and tunneling sector with more than INR80,000 crore of works coming up in next few years in this segment.

Further, we have also forayed into micro-irrigation and have had multiple orders in Q4 FY ’23 in this sector. This is the last leg of irrigation and water projects where water is carried to the fields to end consumers in the latest through pipeline and canals. There is a huge potential in this segment, as there is a very essential element for development of villages, which are far away from the rivers. Under the Pradhan Mantri Krishi Sinchayee Yojana for 2021 to ’26, there has been an outlay allocation for INR93,000 crore which would benefit about 22 lakh farmers. Hence, there is a huge potential of work expected in this segment also.

Although most of you may be aware, let me give you a brief background of our company. The company was established in the year 1949 and has a strong presence in the hydroelectric and tunneling and irrigation sector. The company has a consistent track record in execution of projects in both domestic and international arena. The company has successfully completed over 85 dams, 40 hydroelectric projects and more than 300 Kilometer of tunneling involved with generation of over 12,000 megawatt of power capacity. The company has irrigated over 5.5 lakh acres of land in India and constructed over 1,200 kilometer of road. In India, our clients are mostly central and state government PSUs and NHPC, SJVN, HPPCL, IRCON, CPPPL, Midco, TANGEDCO, etc.

I am happy to share the company has received some prestigious award in Q4 2023. One is ET Ascent award for Best Infrastructure Company of the Year Railway development. This award was received for our T2 project, which is located in Jammu and Kashmir. Number two, Best Infrastructure Company of the Year, Water Management. This award was for AMT-II project located in Mumbai, Maharashtra. Number three, Construction Times award for best tunnel project of the year. The award was received for Sela Pass tunnel project. We are also extremely pleased to inform that National Geography has took a keen interest in some of the prestigious projects, which are being executed by our company, and they have featured them on their channels. There, you get a better idea on the scale and magnitude of the projects undertaken by the company and also a glimpse of the difficult terrain and condition we operate in.

I’m happy to inform you that the right issue of INR325 crores has been fully subscribed and would like to thank all the stakeholders who have shown their trust in the company. As regards to monetization of non-core assets, we have managed to sell a few of our land parcel located in Telangana and has generated cash-flow around INR367 crores. The company has also realized INR157 crore during Q4 FY ’23 some arbitration awards again.

During the year as was committed. The company on a consolidated basis has reduced its debt by INR500 crores in FY ’23 through monetization of non-core assets, surplus from projects and partly from right issue projects. The Consolidated debt to equity ratio has improved from 0.9 to 2.59. The inflow of these funds has helped the company in reducing its debt and operating working capital requirement for the total. In future also, we will continue to work on monetizing non-core assets and reduce debt further.

I would like to make you notice that, out of total consolidated debt of INR1,752 crores as on March 31, 2023, working capital debt is around INR1,100 crores and term debt is around INRN 600 crores, which will be refinanced in next over 2 to 3 years. The finance cost for the FY ’23 is around INR418 crores. Let me give you breakup of interest costs. Interest to bank is around INR226 crores, interest on advances from clients is around INR114 crores, any around INR78 crores towards the ILC commission charges and other borrowing costs.

Now coming to order book. As you all are aware, the company mainly focuses on the hydropower, irrigation and tunnel segment, amongst others. And let me tell you, the last year has been very good for the company. We received new orders of around INR4,560 crores and declared L1 for new projects of around INR3,200 crores, thus taking our order book to an all-time high of around INR20,000 crores including L1 as on March 31, 2023, which has surpassed our expectations at the start of the year and gives us a book-bill ratio of around 4, 5 times. Projects received during the year are mainly in the micro-irrigation and hydropower segment. It is located in Maharashtra, Madhya Pradesh, Karnataka and Arunachal Pradesh. Some of these projects are being executed along with JV partners and our share in this 9 projects cumulatively is around INR4,117 crores. The major project among this is INR3,637 crores, Dibang multipurpose project, which will be executing along with our JV partner and our share in this project is around INR1,800 crores.

The composition and breakup of the order book of INR20,000 crores is based on this. 60% of our order book comprises of hydro sector and around 21% from irrigation sector, 12% from tunneling sector and rest from road and others. Out of the 54% is from central government PSU, which are AA, AAA rated, and balance 41% from the state government and other authority. With the recent influx of orders, revenues and profitability are expected to improve in the coming period.

The company is also considerably scaled up its operations. Currently, we have an employee base of more than 4,400 and our equipment base has also increased to around INR1,100 crores as on March 31, 2023. Another major achievement that the company has implemented SAP across all project sites, which will better monitoring of progress and cost of execution of the project.

Now let me brief you the key financial numbers for this quarter and full year period ended March 31, 2023. On a consolidated basis, revenue from operation for Q4 FY ’23 is INR1,298 crores, which is up by 15.77% from INR1,111 crores in the corresponding quarter in the previous year. Revenue from operation for FY ’23 is at INR4,201 crores, which is up by 24% from the INR3,380 crore in FY ’22. We are happy to say that we have growth, more than INR4,200 crores revenue in this year, which is all-time highs, surpassed the guidance of 15%. This is on account of strong order book and efficient execution of work across all project sites.

On a stand-alone basis, revenue from operation for Q4 FY ’23 is at INR1,192 crores, which is up by 14.3% from the INR1,042 crore in Q4 FY ’22. Revenue from operation for FY ’23 is at INR3,817 crores, which is up by 26% from INR3,029 crores in FY ’22. Operating EBITDA on a consolidated basis for Q4 FY ’23 is at INR180 crore, a margin of 14% and net profit at INR84 crores, which is up by 298% from INR21 crores in the corresponding period in previous year. Our full year operating EBITDA is at INR625 crores, a margin of 15% and net profit is at around INR154 crores, which is up by 181% from INR55 crores in corresponding period in previous year. On a stand-alone basis, operating EBITDA for Q4 FY ’23 is at INR176 crore, a margin of 14.8% and net profit at INR84 crores, up by 128% as compared to profit of INR36 crores in Q4 FY ’22, and full year profit is up by 176%, at INR155.8 crores from INR56.3 crore in corresponding period in previous year.

As regards the sector-wise revenue break-up on a stand-alone basis from hydro, it is 57%, from tunnel 15% and irrigation, 16% and 12% from road and other segments. Based on the improvements in the financial performance in last few quarters, along with the promising executional outlook of the company, the rating of the company has improved to BBB+ outlook. Going-forward, we expect it to improve further, which will help bring down our interest costs, adding to our bottom line is improving.

On a consolidated basis, our EPS has improved from INR1.51 to INR3.19, and debt-to-EBITDA has improved from INR4.29 to INR2.280. As you can see there is an overall improvement in financial position of the company.

Before the small brief from our side, now I will like Supriya to take over, and our team here shall be happy to answer any further questions, which you all may have. Thank you.

Supriya Madye — Kirin Advisors Private Limited — Analyst

Thank you, ma’am for the in-depth analysis. I request the operator to open the floor for the Q&A.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Sagar Gandhi from Future Generali Life Insurance Company Limited.

Sagar Gandhi — Future Generali Life Insurance Company Limited — Analyst

My first question is on the arbitration awards. So in the PPT. I could see a large number to the tune of INR4,000 crores. My first question is how much of it is likely to go through over the next four quarters? I mean, how much of money we are likely to receive from that overall pool? Then I’ll ask my second question.

Rahul Agarwal — Head Strategic Finance

So see, the INR4,000 crores number which you see in the PPT that includes arbitration awards and claims at various stages, and we expect as mentioned on the call earlier that we expect around INR200 crores from the total non-core asset realization the next year.

Sagar Gandhi — Future Generali Life Insurance Company Limited — Analyst

So receivables plus land assets, both together. Out-of-the total pool, you are expecting INR200 crores in the next two quarters?

Rahul Agarwal — Head Strategic Finance

Correct. Next full year.

Sagar Gandhi — Future Generali Life Insurance Company Limited — Analyst

Next full year?

Rahul Agarwal — Head Strategic Finance

Yeah.

Sagar Gandhi — Future Generali Life Insurance Company Limited — Analyst

Okay. And what would be your execution in FY ’24 an approximate margin guidance, if you can give any for FY ’24?

Rahul Agarwal — Head Strategic Finance

Yeah. So see, FY ’24 we would like to continue our execution, we have an outlook of around INR20,000 crores with a book-to-bill ratio of 4 to 5 times, but we expect around 15% revenue growth on a CAGR basis.

Sagar Gandhi — Future Generali Life Insurance Company Limited — Analyst

And the margin trajectory will be better than FY ’23 or will it be lower?

Rahul Agarwal — Head Strategic Finance

Similar lines on this line, 14%, 15%.

Sagar Gandhi — Future Generali Life Insurance Company Limited — Analyst

Okay, around 14%, 15%.

Operator

The next question is from the line of Arushi Shah from Sushil Finance.

Arushi Shah — Sushil Finance — Analyst

[Indecipherable] So one thing is what I wanted to know is [Indecipherable] focus on micro irrigation — hydropower, right. So with that delay of high-margin segment or from is it like that these are the drivers [Indecipherable] premium cash flow [Indecipherable]?

Rahul Agarwal — Head Strategic Finance

So we could hear you little bit only in-between, but we’ll will take the question, that yes, our main focus and our core sectors also hydropower, irrigation and underground tunnel and these are because of our niche in the business, we have tentatively getting margins a little higher margins 14% to 15%.

Arushi Shah — Sushil Finance — Analyst

Okay. [Indecipherable]

Operator

Sorry to interrupt, Arushi ma’am. Well, you audio is very low. Could you please move a little closer to the microphone?

Arushi Shah — Sushil Finance — Analyst

I’m so sorry for the glitch. So [Indecipherable] I saw the entire video for the National Geographic, how they covered it, it’s very beautifully done. So keeping in mind such that the real work for and such difficult situation. I’m sure the cost of my take, it might be a little more toxic we than what we expect. So should we have older pass-on clauses for the cost or and how is it?

Rahul Agarwal — Head Strategic Finance

Yes, so we have escalation clauses in the contracts, but contracts are mostly items weighted. And we have a pass-through for escalation more than 90%.

Kavita Shirvaikar — Whole time Director & CFO

Unlike our other difficulties, we have already projected while bidding, we take into consideration these are the difficult and other cost factor now.

Arushi Shah — Sushil Finance — Analyst

So they’re already taken into consideration most of the times?

Kavita Shirvaikar — Whole time Director & CFO

Yes.

Operator

The next question is from the line of Manan Poladia from MKP Securities.

Manan Poladia — MKP Securities — Analyst

So first of all, congratulations on a great set of numbers. My question is on the order inflow for next year, is there an internal target that you are envisioning for the next year or the next two years or so?

Rahul Agarwal — Head Strategic Finance

So we had our initial target to achieving INR20,000 crores which we surpass now. Makes, it is INR25,000, but next year, maybe around 12% to 15% growth in order book, we expect.

Manan Poladia — MKP Securities — Analyst

Okay. Also, you just mentioned that you are expecting 15% CAGR on the execution side. So that 15% CAGR, would you say is guidance just for FY ’23, ’24 or is that guidance for two or three years?

Rahul Agarwal — Head Strategic Finance

Yeah, 2 years at least.

Manan Poladia — MKP Securities — Analyst

And same for the margin as well. The EBITDA guidance?

Rahul Agarwal — Head Strategic Finance

Correct, same.

Operator

The next question is from the line of Deepak Poddar from Sapphire Capital.

Deepak Poddar — Sapphire Capital — Analyst

I wanted to understand on the debt side. I mean, you mentioned about the inflows that you are looking for from arbitration or a non-core assets. So what sort of repayment target we have for FY ’24? From currently INR1,750 crores of gross debt, what sort of debt outlook we would have by FY ’24 end?

Rahul Agarwal — Head Strategic Finance

Yeah, so we expect debt reduction by INR200 crores approximately.

Deepak Poddar — Sapphire Capital — Analyst

So around INR1,550 crores, right?

Rahul Agarwal — Head Strategic Finance

Yeah.

Deepak Poddar — Sapphire Capital — Analyst

And you also give a breakup of interest cost, right. So it’s also driven by bank interest, there are customer advance interest as well. So what sort of interest payment we are looking at for because of this repayment that we have seen, INR500 crores to this year. And so what any sort of interest cost reduction that we can expect on a quarterly basis?

Rahul Agarwal — Head Strategic Finance

Yeah, so, see most of this reduction of this INR500 crores in this year happened in Q4 and that saving in interest will reflected in next financial year.

Deepak Poddar — Sapphire Capital — Analyst

So what sort of savings we can we can build-in, if you can give us some indication?

Rahul Agarwal — Head Strategic Finance

See, I can just broadly give you that our average interest rate is around 11%, 11%, 11.5%, so accordingly. And in next year, that savings should be there. Maybe some new advances coming in for new projects, which we have taken.

Deepak Poddar — Sapphire Capital — Analyst

Okay, so this INR500 crores, 11% is around INR50 crores, INR55 crores, right, I mean, ideally?

Rahul Agarwal — Head Strategic Finance

Correct. Yeah, so I mean, plus some new advances coming in, so nearly net embedded is around INR25 crores, INR30 crores.

Deepak Poddar — Sapphire Capital — Analyst

INR25 crores net reduction. Okay, yeah, that’s it from my side, all the very best.

Operator

[Operator Instructions] The next question is from the line of Prashant Kshirsagar from Unived Corporate Research Private Limited.

Prashant Kshirsagar — Unived Corporate Research Private Limited — Analyst

Congratulations on an excellent presentation and the numbers. I just wanted to ask you few macro questions. One is about your Subansiri Lower Hydroelectric Project. Now, what is the status of that project? When you should be executing, see the first unit or the second unit? So can you give us the status on the Subansiri Lower Hydroelectric Project?

Kavita Shirvaikar — Whole time Director & CFO

See, there are two parts, one is our dam, which — so my sense is looking and manage the powerhouse and HRT which we are executing. From our side, we have a plan. Our work to complete first two, you need to be we should be able to hand over by September.

Prashant Kshirsagar — Unived Corporate Research Private Limited — Analyst

September. But the is it possible that the first unit maybe by commissioned by June?

Kavita Shirvaikar — Whole time Director & CFO

We are trying actually because there are other elements apart from our work, there are other elements also there which are NHPC is working with other contractors.

Prashant Kshirsagar — Unived Corporate Research Private Limited — Analyst

Okay, so that’s why I was asking you whether is it possible to and what is — what do you feel the likelihood the probability of it?

Kavita Shirvaikar — Whole time Director & CFO

We are trying, they are also trying.

Prashant Kshirsagar — Unived Corporate Research Private Limited — Analyst

Okay. Because the reason I’m asking is, the power minister in his interview has said that one unit will be commissioned by June. So I was [Speech Overlap]

Kavita Shirvaikar — Whole time Director & CFO

That is the target. We all are working towards it.

Prashant Kshirsagar — Unived Corporate Research Private Limited — Analyst

Yeah. And second question is about the Dibang hydroelectric project. You said you’re with the joint venture with the — who is your joint venture partner in this? And can you share some details about the project?

Kavita Shirvaikar — Whole time Director & CFO

GR Infra is our joint venture partner.

Prashant Kshirsagar — Unived Corporate Research Private Limited — Analyst

Can you repeat it, I just missed it. GR?

Kavita Shirvaikar — Whole time Director & CFO

GR Infra.

Prashant Kshirsagar — Unived Corporate Research Private Limited — Analyst

GR Infra, okay. And what is the this thing payment schedules and the terms for the project or is it too early to say that?

Kavita Shirvaikar — Whole time Director & CFO

Is it too early to say that because we are just L1, once we get there, you’ll get more details about it.

Prashant Kshirsagar — Unived Corporate Research Private Limited — Analyst

Okay. And for Subansiri, what is the distinct of payment schedules or have you received most of your advances or how that’s working?

Kavita Shirvaikar — Whole time Director & CFO

Subansiri is item rate contract, so get monthly payment based on our work.

Prashant Kshirsagar — Unived Corporate Research Private Limited — Analyst

And what is the retention money because your press release that is in 2020, you said it’s over INR1,584 crore project. So has there been any cost overrun, because of the COVID and recent flooding key had in Subansiri.

Rahul Agarwal — Head Strategic Finance

So cost escalation is always there and it is linked to WPI Index.

Kavita Shirvaikar — Whole time Director & CFO

Which we will get paid as and when the existence book.

Prashant Kshirsagar — Unived Corporate Research Private Limited — Analyst

Okay, and last question is, you talked about your execution profile for the FY ’24, which is on the — which is very optimistic and rightly so, but there are very various elections coming through in this year. So will it affect your execution profile by any chance?

Kavita Shirvaikar — Whole time Director & CFO

No, fair question. And then you see right now, if you see our order book is INR20,000 crores which is excluding L1. So we already have sufficient order to achieve next 2-year execution our guidance but our target.

Prashant Kshirsagar — Unived Corporate Research Private Limited — Analyst

No, what I’m asking you whether you’ll be able to execute in the sense of — because of the political scenarios. See, if the inter political scenario changes, sorry.

Kavita Shirvaikar — Whole time Director & CFO

On the execution, per se, once we get LOA, we don’t see any challenges.

Rahul Agarwal — Head Strategic Finance

Most of these projects are from central PSUs which are NHPC, SEVP, SJVNL. So we don’t see any challenge in our project execution.

Prashant Kshirsagar — Unived Corporate Research Private Limited — Analyst

So you don’t see any challenge in that process. So your guidance of that 15% increases the remains constant types for next 2 year?

Kavita Shirvaikar — Whole time Director & CFO

Yeah, more or less, yes.

Prashant Kshirsagar — Unived Corporate Research Private Limited — Analyst

Yeah, more or less. And the last part is on the outstanding part of it, which you expect to receive from the projects, so what percentage do you think it can go into say, bad debt so the provisions have to be made for that?

Rahul Agarwal — Head Strategic Finance

These are non-government receivable. We don’t expect any bad debts.

Prashant Kshirsagar — Unived Corporate Research Private Limited — Analyst

The penalty clause or any of that sort coming through by any chance?

Kavita Shirvaikar — Whole time Director & CFO

Till now, no run has been imposed or any of our projects. Our all execution are on time. On time means, within as per contract, if there is delay they get extended on time from the plant. There’s no — we are not envisaging any such LD or other things.

Prashant Kshirsagar — Unived Corporate Research Private Limited — Analyst

Yeah, last question is about the National Geographic videos which were excellent actually. And congratulations to the company for it. But was it a sponsored things, where the company paid the things all National Geographic on its own did the videos for you?

Kavita Shirvaikar — Whole time Director & CFO

They have identified these landmark project and they approach us for the details.

Prashant Kshirsagar — Unived Corporate Research Private Limited — Analyst

But did the company pay them anything or is it just free sort of?

Rahul Agarwal — Head Strategic Finance

We have to arrange for the all video, rain handling.

Prashant Kshirsagar — Unived Corporate Research Private Limited — Analyst

No, but the fees you then have to pay them or anything of that sort. It’s not of sponsored thing?

Kavita Shirvaikar — Whole time Director & CFO

Yeah, we have to reimburse them the cost this they incur to for arrangement.

Prashant Kshirsagar — Unived Corporate Research Private Limited — Analyst

For arrangement, okay. I hope the company does well.

Operator

The next question is from the line of Rikesh Parikh from Rockstud Capital LLP.

Rikesh Parikh — Rockstud Capital LLP — Analyst

Congratulation on a good set of numbers. Can we kindly means the run-down of the debt breakup for the ’23, means how the run-down has happened as such? I understand there was a right issue of INR225 crores. So what will be the other portion as such?

Rahul Agarwal — Head Strategic Finance

No. So we have run down around INR157 crores, plus around INR67 crores, almost INR225 crores from non-core assets, which is arbitration awards and real estate and rest some portion will have gone from right issue point and the rest is all from surplus operations because we had NCD deals plus other very installments of loans. So all that we have paid from operations.

Rikesh Parikh — Rockstud Capital LLP — Analyst

And what will be the repayment schedule on our debt for the next one year from the cash flow business?

Rahul Agarwal — Head Strategic Finance

So next year we estimate around INR200 crores of net debt.

Rikesh Parikh — Rockstud Capital LLP — Analyst

Well I mean contacted — that is the next one year, that is, which is for repayment?

Rahul Agarwal — Head Strategic Finance

So next one year, our scheduled repayments are around INR100 crores approximately.

Rikesh Parikh — Rockstud Capital LLP — Analyst

Okay. Second thing is on them but monetization. I look at the presentation, we have almost like INR1,000 crores of orders and blend bank valuable, while last year full year we looked at the INR67 odd crores of monetization. So can we see any improvement for those?

Rahul Agarwal — Head Strategic Finance

Sorry, your voice broke in between.

Kavita Shirvaikar — Whole time Director & CFO

Sorry, can you repeat your question. Last, we did not hear.

Rikesh Parikh — Rockstud Capital LLP — Analyst

Last year, we have realized, INR67 crores on line bank monetization. So can you…

Kavita Shirvaikar — Whole time Director & CFO

So FY ’24 also, we expect around INR80 crores to INR100 crores out of sale of land parcels.

Rikesh Parikh — Rockstud Capital LLP — Analyst

Okay. And my last question is on the promoter stake last year there was certain stated reduced from 43% to 38%, so any yields or further state value possible or we are weeks or whatever the reshuffling ratable?

Rahul Agarwal — Head Strategic Finance

No, we don’t expect any further sales.

Kavita Shirvaikar — Whole time Director & CFO

Yeah.

Operator

The next question is from the line of Samir Palod from AUM Fund Advisors LLP.

Samir Palod — AUM Fund Advisors LLP — Analyst

Congrats on a good set of numbers and a very informative presentation. Just one question on your overall guidance given that you’ve grown revenues from operations, 25%, the order book is very, very uncertain and gives you visibility for over four years, four to five years. What is — why is the guidance that only 15% for the next two years on a compounded basis? Is there — are you see challenges in how the order book execution pans out? Or is it you just want to be conservative?

Kavita Shirvaikar — Whole time Director & CFO

Overall if you see, our order book breakup, 60% is coming from hydro and 21% coming from irrigation. So hydro, normally, the cycle is four to five years and irrigation is 2 to 3, 3 to 4 years. So considering overall factor calculating, we are fairly confident to achieve 15% growth. We can actually, but we are confident considering overall 15% is achievable.

Samir Palod — AUM Fund Advisors LLP — Analyst

And my second question is with what are — are there any other sort of sectors in the order book that you are focusing on which could be and which you have bid for and which you can potentially bid which could be shorter duration executions, that will help to higher than 50% sales over the next two years, which is not idle or not irrigation, but roads and urban infra or other types of orders, is that — are you building that pipeline of orders as well?

Kavita Shirvaikar — Whole time Director & CFO

See, based on the opportunity available and considering our margin requirements, if you see that opportunities, we would consider that option, but right now our focus is in our core, which is hydro, irrigation and water sector also, we are exploring. The next question is from the line of Vignesh Iyer from Sequent Investments.

Vignesh Iyer — Sequent Investments — Analyst

Congratulation on good set of numbers. My question is on more on the accounting side of it. I just wanted to understand, we have seen some tax reversal happening in quarter four. So just wanted to understand are we shifting to any new facts rates from FY ’24?

Rahul Agarwal — Head Strategic Finance

No, it is on account of completion of assessments and reversal of excess provisions.

Vignesh Iyer — Sequent Investments — Analyst

Okay, so what would be our steady-state tax rate cut for the — I mean tax slab for our FY ’24?

Rahul Agarwal — Head Strategic Finance

It’s around 30% only.

Operator

[Operator Instructions] The next question is from the line of Shikhar Mundra from Vivog Commercial Limited.

Shikhar Mundra — Vivog Commercial Limited — Analyst

I want to understand how that interest cost INR418 crores when we see our interest cost 11%, how is the interest expense, INR418 crores?

Rahul Agarwal — Head Strategic Finance

So we explained that INR418 crores, there are 3 components, one is interest on our lenders bank, rate interest on that, which is around INR220 crores, then BC commission and other borrowing cost is around INR80 crores and the balances interest on client advances.

Shikhar Mundra — Vivog Commercial Limited — Analyst

Okay, and what’s the interest rate on client advances?

Rahul Agarwal — Head Strategic Finance

That is around similar around 19%.

Shikhar Mundra — Vivog Commercial Limited — Analyst

Okay. And what are the total client advances is standing as of now?

Rahul Agarwal — Head Strategic Finance

On a consolidated basis, we have around INR1,200 crores.

Shikhar Mundra — Vivog Commercial Limited — Analyst

And one thing I wanted to understand why is that guidance of only 15%, why is the guidance conservative of only 15%, when our order inflows are so high?

Rahul Agarwal — Head Strategic Finance

So we are conservative in that we may see more, but right now, we are confident at least 15% will happen.

Shikhar Mundra — Vivog Commercial Limited — Analyst

Okay, and what is the typically like INR20,000 crores is the order book, we say what is the typical time to execute an order, how many months, how many years?

Rahul Agarwal — Head Strategic Finance

So 4 to 5 years is the book-to-bill ratio.

Operator

The next question is from the line of Dipendra Jain from Jain Doshi and Company.

Dipendra Jain — Jain Doshi and Company — Analyst

My question has already been answered.

Operator

The next question is from the line of Nikhil Chandak from JM Family Office.

Nikhil Chandak — JM Family Office — Analyst

So a couple of questions. One is there is a slide in the PPT which gives the land-bank book-value at approx INR1,000 crores. So what I wanted to understand is what is the plan, exactly as in do you intend to monetize this entire 2,150 acres of land and the cost is INR1,000 crores, what would be the approximate market value of this?

Rahul Agarwal — Head Strategic Finance

So market value is also around INR1,000 crores only. And what we expect is, I mean slowly, we will be able to monetize these land parcels. If you see that there are huge land parcels and just bad find by us immediately for everything, but we have been trying and we’ll slowly monetize everything.

Nikhil Chandak — JM Family Office — Analyst

But the intent is to monetize and in all these 2000 acres.

Kavita Shirvaikar — Whole time Director & CFO

Yeah, intent is to monetize all this.

Nikhil Chandak — JM Family Office — Analyst

Understood. And sorry, how come, I mean, you think the market value today is the same as what the cost of this land bank is. So there has been no appreciation or depreciation.

Kavita Shirvaikar — Whole time Director & CFO

No, cost is not INR1,000 crores, market value is INR1,000 crores.

Nikhil Chandak — JM Family Office — Analyst

Okay. No, the way the PPT read is approx value in book. So I thought the accounting the cost.

Rahul Agarwal — Head Strategic Finance

No, it’s not like that. Approx value in books, means, it is not actually a book accounted book, it is total value of the land.

Nikhil Chandak — JM Family Office — Analyst

So value of the land is — and these are all free of encumbrances no litigation. I mean, are these clear titles, which is easily monetizable or how should one understand?

Rahul Agarwal — Head Strategic Finance

The title is clear, it is mortgage to lenders.

Nikhil Chandak — JM Family Office — Analyst

Okay, understood. And the other question was. So obviously, the EBITDA margins are healthy at 14%, 15% percent. But by the time we come to the net profit margin, there is so much of interest, depreciation, exceptional items that you are left with a PAT margin of 3.68% for fiscal ’23. So how should one understand the flow-through from EBITDA to PAT. Finally, will you still be having this element of interest, depreciation, so that 15% becomes say 3%, 4% over the next 2, 3 years, or should this PAT margin show some improving trend?

Rahul Agarwal — Head Strategic Finance

We expect interest costs to go down and then accordingly, the PAT margin should go up, that is what is our expectation.

Kavita Shirvaikar — Whole time Director & CFO

So you can see around INR4,000 crores claims which is in pipeline, which we can monetize eventually over the period of 3 to 4 years, plus we have land-bank of around INR1,000 crores, which we can — we are trying year end of this of monetizing. So eventually if you see, our debt is going to come down in 3, 4 years, as we mentioned it sits under, as I have mentioned the breakup of the debt. So around INR600 crore, which is a reasonable debt and which will be paid over 3 to 4 years. So eventually our interest costs will come down and our profit, correspondingly, our profitability will improve.

Nikhil Chandak — JM Family Office — Analyst

Understood. But you think it will take that long as in 3, 4 years, more for the land to these land parcels to be sold. And for the arbitration awards to come. Arbitration, I can imagine it takes longer, but even though the land parcel, it will take 4 years for example?

Kavita Shirvaikar — Whole time Director & CFO

Because some of the land parcel, like it is a large land parcel. If Tamil Nadu advantage, we have a 1,400 acre land parcel, which would be in today’s scenario, finding buyer and everything, we are not sure how much time it is going to take. But other land parcel, we will be able to monetize early. As we mentioned like around INR200 crores, we expect next year itself.

Nikhil Chandak — JM Family Office — Analyst

Understood. In a scenario today for real estate, land parcels is I’m seeing at the margin positive. I mean, if you see the way real estate companies are buying land parcels, till the time the land parcel makes sense is closer to the city and so on so forth. So there are buyers in the real estate market is fairly buoyant, which is why I was surprised when you said 3 to 4 years.

Rahul Agarwal — Head Strategic Finance

No, it is not that everything will take 4 years. It does happen slowly over 3 to 4 years. And we are looking at buyers who can give us upfront cash. So we are not looking at development agreement, where we get slowly, there are many people who are ready to do that, but we want upfront money.

Nikhil Chandak — JM Family Office — Analyst

Understood. Sorry, just to be sure the land parcels are closer to the city area or is it more — how should one understand like in terms of is it more industrial land, residential, it could be suitable for residential?

Rahul Agarwal — Head Strategic Finance

So the land parcel, which is in Tamil Nadu, around 1,400, 1,500 acres that is industrial land and the rest land parcels are closer to the city.

Operator

The next question is from the line of Sagar Gandhi from Future Generali Life Insurance Company Limited.

Sagar Gandhi — Future Generali Life Insurance Company Limited — Analyst

This is my follow-up question in addition to my first question. So this receivables or arbitration claims of INR4,300 crores, of which what is already earmarked as arbitration awards in your favor is INR1,200 crores. So when we say this entire thing is going to get realized over the next 3 to 4 years, I mean, is it really not very conservative in nature?

Rahul Agarwal — Head Strategic Finance

So see arbitration awards, one is in our favor. It is there in course at various levels. So it will take its time, plus the other arbitration awards is to get into arbitration or is in arbitration that much time will be required.

Sagar Gandhi — Future Generali Life Insurance Company Limited — Analyst

And of this INRN 4,300 crores, how much will be from the central government side or pending with the central government side?

Rahul Agarwal — Head Strategic Finance

The mix would be similar to what our order book is there, but right now exactly, we don’t have that split.

Operator

The next question is from the line of Arushi Shah from Sushil Finance.

Arushi Shah — Sushil Finance — Analyst

Thank you for the follow-up question. Just one thing, do we have any maintenance capex which we incurred recurrently? And if at all, what percentage of does it fall?

Rahul Agarwal — Head Strategic Finance

We don’t have because we have to hand over the project after completion. So there will be 1-year DLP period. I mean, we don’t have any operation maintenance what we have to do.

Arushi Shah — Sushil Finance — Analyst

Okay. So we not incur any capex from our side?

Rahul Agarwal — Head Strategic Finance

No, if this is there, it is a separate contract.

Arushi Shah — Sushil Finance — Analyst

Okay. So I mean, do we have any plans or anytime soon in the coming years there? It will be incurring substantial amount of capex?

Rahul Agarwal — Head Strategic Finance

So capex will come for new projects is developing, but that has mostly funded from client advances around one capex is there even in list.

Arushi Shah — Sushil Finance — Analyst

Okay. And most of it on the adviser are contracted once this is only.

Rahul Agarwal — Head Strategic Finance

Correct.

Arushi Shah — Sushil Finance — Analyst

Okay. And anything which we have to put in apart from that, like any maintenance or any machinery or something like that, we don’t take that into consideration, do we?

Rahul Agarwal — Head Strategic Finance

Not really, because we have lot of machinery from our existing projects will get towards. So we shifted to the new project.

Operator

The next question is from the line of Faisal Hawa from H.G Hawa and Company.

Faisal Hawa — H.G Hawa and Company — Analyst

So the last 4 or 5 years have been a very difficult years for us in terms of the various financing problems and project delays. So we have fortunately been able to revise the company to a very large extent. So where do you think we went wrong in the past? And can you just tell us three things, which we will now not repeat and which will correct the mistakes of the past?

Rahul Agarwal — Head Strategic Finance

Sure. So see we went into diversification. When we went into asset ownership, we went into real estate development. And now we are focusing on our core business only, which is EPC and construction business. So that is one major thing, because we do the CV afforded into power ownership assets, real estate development and all, it’s to get all on the company, which we have stopped. The second thing is projects, government side also allocation of projects now handover of land is happening before the project is being awarded. So that has less number of delays for projects during the execution time. So that is helping. And then again, we are also focusing on taking projects which are self-sustainable, so we have to — we can find it from client advances, and we don’t need to borrow more funds and get into the debt cycle again.

Faisal Hawa — H.G Hawa and Company — Analyst

And why are we not discounting these disputed receivables, which we have already won an arbitrage by agencies who get like 20% to 25% less, but then they fight the rest of the cases in high potence of pre-close?

Rahul Agarwal — Head Strategic Finance

So that would give us immediate funds.

Faisal Hawa — H.G Hawa and Company — Analyst

And one more thing is that, what is the kind of order inflow that we are targeting for FY ’24 and FY ’25?

Rahul Agarwal — Head Strategic Finance

So see, as far as discounting and all is concerned, we are very confident that the money will be recovered and if such agencies come up, we can — we are happy for this session. We are not close to that, that is what…

Faisal Hawa — H.G Hawa and Company — Analyst

Many infrastructure companies are doing this, so the funds are very much available if you have one at any of the lower costs, people are ready to give you the funds after discounting some profit that they want.

Kavita Shirvaikar — Whole time Director & CFO

No, fair point. So we are also in the process of discussing. NHAI has, as I understand, NHAI is doing largely these kind of settlement like we are in the hydro segment, our client is and NHPC, NTPC…

Faisal Hawa — H.G Hawa and Company — Analyst

These are private institutions, which are doing it, private NBFCs, private foreign institutions who are…

Kavita Shirvaikar — Whole time Director & CFO

Yeah, you rightly said, but then our client is, these are the central PSUs, namely central PSUs. So these are NHPC, SJVNL, Midco, NTPC and SBPDCL. So right now, they are not very aggressive in these kind of settlement.

Rahul Agarwal — Head Strategic Finance

No, he is talking about any settlement done by any third-party vendor. I don’t think there is any available [Indecipherable] coming.

Kavita Shirvaikar — Whole time Director & CFO

No, right now we have 13% interest, but we are open with these kind of settlement.

Faisal Hawa — H.G Hawa and Company — Analyst

And about the order book, if you could — what are the kind of orders that we’re targeting for FY ’24 and ’25.

Rahul Agarwal — Head Strategic Finance

For ’24, ’25, we expect our order book also to grow around 14%, 15% so after execution.

Faisal Hawa — H.G Hawa and Company — Analyst

Okay, and do we know the balance sheet now as they have to even take on HAM projects from NHAI, etc.

Rahul Agarwal — Head Strategic Finance

No we are not looking at taking HAM projects.

Faisal Hawa — H.G Hawa and Company — Analyst

Okay. But we will be taking on a lot of these subcontracting projects like how we have done with GR Infra etc.

Rahul Agarwal — Head Strategic Finance

So it is not a subcontract from GR Infra. We both are jointly bid with NHPC contract, and we don’t work on subcontract model. So we take projects directly from government.

Faisal Hawa — H.G Hawa and Company — Analyst

Okay. And one more question is that what is the scope of our EBITDA margins getting better with the larger revenues being executed? And so that our fixed cost will now be divided over a much bigger revenue.

Rahul Agarwal — Head Strategic Finance

So I’ll explain this. When we are taking more projects, we have to increase our employee base setups also. So tentatively, our EBITDA margin should remain in similar lines of 14%, 15%.

Faisal Hawa — H.G Hawa and Company — Analyst

So it’s not much scope in improvement over there?

Rahul Agarwal — Head Strategic Finance

In terms of margin, not much, but the overall value in terms of, if the revenue goes up the quantum of EBITDA will increase.

Faisal Hawa — H.G Hawa and Company — Analyst

And any chances of the promoters — their shares are mostly pledged, so any chances of the promoters really getting these shares unpledged or paying off the debt that they have incurred on the conditions?

Rahul Agarwal — Head Strategic Finance

That will happen over a period of time, not immediately.

Operator

The next question is from the line of Riken Ramesh Gopani from Capri Global.

Riken Ramesh Gopani — Capri Global — Analyst

Congratulations for the good result. I have few questions on the order book. So firstly in terms of inflows, you said that you would probably grow similar to what your top line growth will be. But if you could sort of outline that within key segments and hydro and irrigation, would the mix be very similar to the current order mix or based on what you have currently bid or the bid visibility that you have for FY ’24, what will be the inflow mix be like for FY ’24?

Rahul Agarwal — Head Strategic Finance

Very difficult to exactly estimate that, but we expect our hydro segment will remain above between 50% to 60%.

Kavita Shirvaikar — Whole time Director & CFO

And around 20%, 23% from irrigation and rest from other sectors.

Riken Ramesh Gopani — Capri Global — Analyst

Okay. So broadly very similar to the current colors that you have on the order book itself, not many difference than that, got it. And in terms of execution, I see you’ve given details in terms of completion stage of your order book as well. So if you could outline that is like you did mention that it’s 4 to 5-year execution period for the hydro projects, but is it a typically linear for execution cycle or based on how you have your current profile in terms of completion stage? If you could outline as to at what stage that there had been any acceleration for the overall execution?

Rahul Agarwal — Head Strategic Finance

So see, initial — for hydro projects, initial 10%, 20%, the execution is little on lower side and then once if the concreting stage and all those states had, then execution will be higher.

Kavita Shirvaikar — Whole time Director & CFO

So from second third, fourth year, it is the maximum, that time you can see linear, first year, it is a little bit on a slower side, because first year, 6 months goes for mobilization.

Riken Ramesh Gopani — Capri Global — Analyst

Understood. So if you could outline that in this INR20,000 crores of order book, today you have outlined about 50% is in the below 10% bucket. Over the last 2, 3 years, what percentage was there in the less than 10% bucket? How is it actually progressed?

Rahul Agarwal — Head Strategic Finance

So see, we have recently received lot of projects. That’s why that below 10% right now is higher. But over the last 2, 3 years, it was around maybe INR4,000 crores, INR5,000 crores range.

Riken Ramesh Gopani — Capri Global — Analyst

Okay, got it. So this below 10% is going — is slightly higher this year because of the new order wins and maybe in ’25, is when you could see a higher execution from these orders post the first phase, the slow phase going away?

Rahul Agarwal — Head Strategic Finance

Correct.

Riken Ramesh Gopani — Capri Global — Analyst

Got it. And lastly, in terms of the segment where you have actually pushed a lot of new order wins this year in the irrigation segment, is it because of terrain and the complex nature of the hydro projects, you do higher margin in those projects? In irrigation, if you could outline that what are the typical margin there and do they sort of have any inbuilt impact from commodities or any such things in the irrigation segment?

Rahul Agarwal — Head Strategic Finance

So see, hydro segment, if you say, our average margin, whatever is there, hydro segment will give us a 200 basis points may be higher and the irrigation segment may give 200 basis points lower.

Riken Ramesh Gopani — Capri Global — Analyst

Okay, got it. So as compared to the company average that would be the color on that. Okay, got it. That’s all from my side.

Kavita Shirvaikar — Whole time Director & CFO

Thank you.

Operator

The next question is from the line of Aman from QUAD Investments.

Aman — QUAD Investments — Analyst

I have just one question. What is your vision down the line 3 years for Patel Engineering in terms of hydro energy and the equity segment, what is your vision to become in terms of turnover, as well also in terms of taking more advanced projects? And how do you feel, Jammu Kashmir has turned out to be, is it a successful venture or are we facing any what do you say struggling or any challenges and how are we going to overcome those challenges?

Kavita Shirvaikar — Whole time Director & CFO

So as regard region, see, as we have mentioned, our reason is to be a best execution company in this sector, like we have strong manpower, we have strong group. If you say we have consistent track record of execution of the project. Now as regards to turnover over next 2 to 3 years, we are — our vision is to turnover to take it to around INR5,000 crore-plus company.

Aman — QUAD Investments — Analyst

Okay. And in terms of EBITDA, that will be ranging from 14% to 15% or are we expecting a turnover, the volume gets split?

Kavita Shirvaikar — Whole time Director & CFO

Considering current order book portfolio, which we have, we are fairly confident to maintain the EBITDA level at current level at 14% to 15%

Aman — QUAD Investments — Analyst

Towards Jammu Kashmir segment, how are we…

Kavita Shirvaikar — Whole time Director & CFO

Jammu Kashmir, we are comfortable. If you see, I think 5, 6 projects we are working with Jammu and Kashmir. So we don’t see any issue sector process, 80% is going on full stream.

Operator

The next question is from the line of Viraj Mahadevia, an Individual Investor.

Viraj Mahadevia — Individual Investor — Analyst

I had a question, out of your total debt of about INR750-odd crores, the critical is the term loans, which is INR650 crores. Can you give us a sense of how soon you think the term loans, you’ve obviously said you want to auction all this land etc., but how soon do you think the term loans can be repaid in the next two years, completely?

Kavita Shirvaikar — Whole time Director & CFO

2 to 3 years.

Viraj Mahadevia — Individual Investor — Analyst

2 to 3 years, completely repaid on the term loans.

Kavita Shirvaikar — Whole time Director & CFO

Yeah.

Viraj Mahadevia — Individual Investor — Analyst

Okay. And so the land parcels, have you considered auctioning it on portals, such as the MSTC portal, where you may have luck for particularly the larger industrial land parcels to accelerate the monetization of some of this land, which seems to be otherwise indicated it will take 3 to 4 years, you may be able to accelerate some of that sales? Hello?

Operator

Ladies and gentlemen, the management line has been disconnected. Please stay connected, while the management line gets connected back. Ladies and gentlemen, thank you for patiently holding. The management line has connected once again. Mr. Viraj, you can continue with your question now.

Kavita Shirvaikar — Whole time Director & CFO

I am sorry, the call got disconnected.

Viraj Mahadevia — Individual Investor — Analyst

Have you considered using the MSTC portal for auctioning your land, particularly the industrial large land parcel in Tamil Nadu? You may be able to accelerate your land sales in that manner?

Kavita Shirvaikar — Whole time Director & CFO

Fair point. We have noted a region, we’ve been trying to approach them for that.

Viraj Mahadevia — Individual Investor — Analyst

Great. They have a great portal for e-commerce auctions. A lot of the government PSUs, including also selling the land and buildings through that portal. And my last question is, your arbitration awards in your favor, about INR1,200 crores. Given that they’ve already come in your favor, how soon do you think that converts to cash, in the next one year or longer?

Kavita Shirvaikar — Whole time Director & CFO

Considering our past experience, we conservatively, it will take around 2 to 3 years.

Viraj Mahadevia — Individual Investor — Analyst

Okay. So technically, if arbitration takes 2 years, which is INR1,200 crores, and you can sell incremental land of INR200 crores minimum in the next 2 years, you should be close to debt free, actually.

Kavita Shirvaikar — Whole time Director & CFO

Our intention is the same, but let’s see how the other factor works because it is government plays the major role.

Operator

The next question is from the line of Tejas Shah, an Individual Investor.

Tejas Shah — Individual Investor — Analyst

On the arbitration, now what we are saying is INR1,200 crores is already awarded and balance, I think, you’ve got — what you are saying total INR4,000 crores, how many thousand crores are pending on the arbitration?

Rahul Agarwal — Head Strategic Finance

Yeah. So under the arbitration is around INR1,400 crores, rest is yet to go into arbitration.

Tejas Shah — Individual Investor — Analyst

So means we have — are in different lines in terms of getting it in our favor or we are going to submit for the arbitration?

Rahul Agarwal — Head Strategic Finance

No, INR1,400 crores is under arbitration and rest, we are going to submit for arbitration.

Tejas Shah — Individual Investor — Analyst

Okay. And normally, what is the time period for once you place it for arbitration? How much time does it take to get approved or rejected? And once approved, how much time it takes to realize on an average?

Kavita Shirvaikar — Whole time Director & CFO

Normally, it is 18 months to 24 months.

Tejas Shah — Individual Investor — Analyst

That is only for that approval or receipt of cash?

Kavita Shirvaikar — Whole time Director & CFO

From arbitration process phase to 18 to 24 months.

Tejas Shah — Individual Investor — Analyst

Okay. And once the award is given, then how much time does it take for the money to come to you?

Kavita Shirvaikar — Whole time Director & CFO

See, if client challenges, then it goes to district court, then district court to high court and high court to Supreme Court. This is a normal legal records available to the parties.

Rahul Agarwal — Head Strategic Finance

But in 2 cases, we’ve seen that client under [Indecipherable] against bank guarantee, they are giving money, that as we realize around INR150 crores in this year.

Kavita Shirvaikar — Whole time Director & CFO

Like if we choose central PSU, they normally adhere to the guideline, and they are open for release of around 75% of the arbitration process, again submission of bank guarantee. So current year also, we realized around INR150 crores to this total.

Tejas Shah — Individual Investor — Analyst

Agreed. Then what is the cost of bank guarantee over there?

Kavita Shirvaikar — Whole time Director & CFO

Around 1%.

Tejas Shah — Individual Investor — Analyst

Per annum?

Kavita Shirvaikar — Whole time Director & CFO

Yeah.

Tejas Shah — Individual Investor — Analyst

Okay, great. And about the land parcels, could it had been realized much faster?

Kavita Shirvaikar — Whole time Director & CFO

Yeah, we are trying. Our endeavor is to realize much faster.

Operator

The next question is from the line of Shikhar Mundra from Vivog Commercial Limited.

Shikhar Mundra — Vivog Commercial Limited — Analyst

Land, what you are having in Tamil Nadu, how far is it from the CP level because I can’t understand 1,400 acre land, why it should take 4 years to encash it, because you can go for industrial development like plotting of the plots or just because there is a big demand for land in Tamil Nadu for industrial purpose. Are you debarred from doing that or you have to sell it as it is?

Rahul Agarwal — Head Strategic Finance

It’s not about debarment. We don’t want to invest money in that. We are focusing on our core business and that is why as and when we get a good buyer who can take it…

Shikhar Mundra — Vivog Commercial Limited — Analyst

How long you’ve been holding that line?

Rahul Agarwal — Head Strategic Finance

We must be holding for last 4 to 5 years, maybe more than that.

Shikhar Mundra — Vivog Commercial Limited — Analyst

How many years?

Rahul Agarwal — Head Strategic Finance

Maybe 7, 8 years.

Shikhar Mundra — Vivog Commercial Limited — Analyst

It is more than 9 years. So why do you say for 9 years you could not dispose it of? How would you so sure that in the next 3 years, you will be able to dispose it of as it is?

Kavita Shirvaikar — Whole time Director & CFO

Our focus right now is core business, core business is our EPC business, executing…

Shikhar Mundra — Vivog Commercial Limited — Analyst

Where is the land located, madam?

Kavita Shirvaikar — Whole time Director & CFO

It is in Nagapattinam.

Shikhar Mundra — Vivog Commercial Limited — Analyst

How far from which side of Madras, Chennai?

Rahul Agarwal — Head Strategic Finance

So Nagapattinam is actually near a port, so maybe around 200 kilometers from Chennai.

Kavita Shirvaikar — Whole time Director & CFO

Yeah.

Shikhar Mundra — Vivog Commercial Limited — Analyst

So it’s far off from Chennai. So what is — who will buy that land? Eventually, who will buy that land?

Rahul Agarwal — Head Strategic Finance

See this land was purchased to develop our thermal power plant there, which we held of later. So now eventually, when other industries, which will be coming up there, they will buy the land.

Kavita Shirvaikar — Whole time Director & CFO

As you rightly mentioned, this can be used for industrial development. So there…

Shikhar Mundra — Vivog Commercial Limited — Analyst

200 kilometers from Chennai, 200 kilometers from Chennai, then you cannot get — you cannot go for that plotting of the land. So you have to look for a buyer only if somebody is wanting to put up a plant, because otherwise you cannot make 1 acre plot each and sell it off. If it is near Chennai, there will be many medium sized scale industries they could — there is a big demand for the land. So this land, I don’t think you will be able to sell it. You have not been able to sell it for max last 9 years. You can’t sell it in next 3 years because there is no concrete plans you have it in place.

Rahul Agarwal — Head Strategic Finance

Correct. I’ll explain you. We had initially when we had purchased and kept it for development of our thermal power plant on our own, that period after we went into this more where we have to conserve and reduce our debt, we sell that plant. So last 3, 4 years, we have been working on debt reduction plan. As and when this land parcel, we get a good buyer, we’ll sell it.

Shikhar Mundra — Vivog Commercial Limited — Analyst

Just tell me, anybody who — what is your cost of your land each acre? Well, how much you’re expecting from that land?

Rahul Agarwal — Head Strategic Finance

For 1,500 acres?

Shikhar Mundra — Vivog Commercial Limited — Analyst

Yeah.

Kavita Shirvaikar — Whole time Director & CFO

It all depends on the market condition.

Shikhar Mundra — Vivog Commercial Limited — Analyst

The condition is right in front of us, no, madam. Why do you say market condition means what? We know what is the market condition today in that area. Agricultural lands are available at these prices. So why do you say market condition, you have to be more specific, no?

Kavita Shirvaikar — Whole time Director & CFO

Right, that we can have a separate discussion.

Shikhar Mundra — Vivog Commercial Limited — Analyst

No, you should come prepared in con-call because this is a major investments you’ve made in land and your company’s EBITDA margin is so low, unless you structure your balance sheet well, you cannot make money. And as it is, you are saying that your growth plan is only 15%, your INR20,000 crores is your order book. This is you are finding it difficult to execute the job you’re like, I don’t understand, because I’ve seen road projects, they do much faster, okay. Hydro projects may take longer time, but they cannot be so long. 15% growth when it’s a big-time in the infra projects. At this time, if you cannot show growth maybe your lack of capital or something is wrong. It cannot be 15%. You have order book, and you have to mobilize it faster, is that you have team, you have infrastructure, you have a technology, you have — this company is very old. So your problems are — banking is all over, madam. Now your problem is something different.

Kavita Shirvaikar — Whole time Director & CFO

No, there is no problem as such. If you see last year also, current year also we achieved 25% growth, and we can achieve more growth as a conservative, we are giving this 15% guidance that is already…

Shikhar Mundra — Vivog Commercial Limited — Analyst

Okay. And number two, I just want to understand, when you do this turnover booking, when you show this sales turnover in your balance sheet, there will be so many orders, which are of the old orders which are doing exactly right now. So when you do the billing to your client, do you do it at your tender rate or you do it at escalation rate?

Rahul Agarwal — Head Strategic Finance

Escalated rates.

Shikhar Mundra — Vivog Commercial Limited — Analyst

Escalated rates. So when you said that you are arbitration money, which is due, is it a part of that money is because of the escalation rate or is there is something because the delay from the client side? Is it only that the arbitration amount is only pertaining to delay because of the unfortunate circumstances or is it because of the rate difference also they are holding your money?

Rahul Agarwal — Head Strategic Finance

See, normally rate difference we can’t hold, because that is clearly covered in the contract for escalation is a pass-through. Only when there is a variation thing, or any delay from the client side, that is the word.

Shikhar Mundra — Vivog Commercial Limited — Analyst

So there is — so we’re trying to understand now when you are having INR1,200 crores arbitration is already awarded. So now what is the stage? Are they challenged it in the district court or in a higher court? How many pending applications are pending in various courts?

Rahul Agarwal — Head Strategic Finance

Yes. So it is all challenged on the various forums.

Shikhar Mundra — Vivog Commercial Limited — Analyst

So now out of INR1,200 crores where is it challenged? Where is it lying? Can you just give a breakup, this is lying in high court, this is lying Supreme Court or in a district court, so we know and how much time you’re going to get that money?

Rahul Agarwal — Head Strategic Finance

Yeah. So INR1,200 crores we are saying INR1,200 crores is in various courts, district court, high court. This is not in Supreme Court. Obviously Supreme Court would have been there, then the money realization would be much faster. So that’s how we have given a guidance on this year…

Shikhar Mundra — Vivog Commercial Limited — Analyst

So out of INR1,200 crores, how many awards are there? Total awards consisting of INR1,200 crores, how many awards are there?

Rahul Agarwal — Head Strategic Finance

There are multiple awards around…

Shikhar Mundra — Vivog Commercial Limited — Analyst

May be 10, 20, 50, like any numbers? You must be having the list, not INR1,200 crores, this is the award in pending in district court, is happening in high court and this is not pending in any court. So can you give a breakup of that, so we know where you can get that money?

Rahul Agarwal — Head Strategic Finance

But we can send you an email. There is no…

Shikhar Mundra — Vivog Commercial Limited — Analyst

Because see, this in your balance sheet, what I look at it, unless the arbitration comes through, otherwise we’ll see a bigger profit of INR100 crores — INR50 crores, INR100 crore by doing a turnover of INR4,000 crores and the risk reward ratio to unfavorable because you do so much of a take rate and your EBITDA margin is so low. And on the top of your PAT margin becomes even lower, it is almost like 2%, 3%. So anything goes here and there, the whole project become unviable, no? Such a complicated project should be working on a higher level of margin, I don’t know why is it so low. We’ll have to understand why your company has 2%, 3% PAT margin.

Kavita Shirvaikar — Whole time Director & CFO

If you consider like EBITDA margin as compared to our sector, it is fairly good margin, 14%, 15% if you compare to other competitors and others. 14%, 15% is considered to be a fairly good margin.

Shikhar Mundra — Vivog Commercial Limited — Analyst

Capital. 15% EBITDA margin is good when you have a turnover faster turnover business. So much of risk is involved, no, because of your delay in projects and they are all huge projects. So your margin becomes very small for a turnover of doing INR4,000 crores, you can imagine, you just make INR100 crore profit. Don’t you think it is too low and such a big risk involved in that business?

Kavita Shirvaikar — Whole time Director & CFO

Once you complete, I would like to answer this thing. If you see, we could achieve turnover of INR4,000 crores this year. Going forward, our target is in next 2 years to reach to INR5,000 crores. If you see our execution rate is not slower, it is fast. EBITDA margin is also maybe at last 2 to 3 years, we have been consistently maintaining this margin, and we have consistently reduced the debt over last 5 years of the INR1,200 crores, we have reduced this year. Last year also it was reduced around INR500 crores. Eventually, next year, we have given the guidance of INR200 crores. And over the period, we believe it takes 2 to 3 years, we are planning to reduce of INR600 crores, INR700 crores. Eventually, you have seen our margin is consistently improving.

Rahul Agarwal — Head Strategic Finance

We have reduced our debt from INR5,000 crores level…

Operator

Mr. Shikhar Mundra, we request that you return to the question queue for follow-up questions.

The next question is from the line of Priyam Kataria from IDBI Capital.

Priyam Kataria — IDBI Capital — Analyst

I have one question on that Dibang [Indecipherable] JV with GR. How is the whole divided between you and GR? What is their role and what is our role?

Kavita Shirvaikar — Whole time Director & CFO

This is 50%, 50%.

Priyam Kataria — IDBI Capital — Analyst

Not in terms of share, but in terms of operational [Indecipherable].

Kavita Shirvaikar — Whole time Director & CFO

Your voice is breaking.

Operator

[Operator Instructions]

Kavita Shirvaikar — Whole time Director & CFO

So as to revoked position, can happen once it is advised. Right now the partnership is agreed 50%, 50%. I hope I have answered your question.

Operator

The next question is from the line of Maruti Nandan Sarda, an Individual Investor.

Maruti Nandan Sarda — Individual Investor — Analyst

My question is around the land parcel, which we are not able to sell. So as one of the questions which was asked before a couple of questions. So can we are appoint some agency or some institution who can do it for us at user fee because right now, if you sell that INR1,000 crore land that can change the portion of the company at a pretty fast pace. That should be like at the forefront of the management. And that is our — that should be our aim to get it done, like maybe in couple of quarters rather than 3, 4 four years.

Kavita Shirvaikar — Whole time Director & CFO

You have rightly said, we are in a process of continuously monetizing our land and our claims. Last — if you see last 5, 7 years before, our debt was INR5,500 crores, which we could bring it down to today, INR1,700 crores. And further also conservatively, we are saying in 3 to 4 years, we should be able to bring down to another INR600 crores, INR700 crores. And you rightly said, we are already in discussion with 2, 3 other large agencies since they can help us in monetizing this land parcels.

Maruti Nandan Sarda — Individual Investor — Analyst

In addition to that, are we in talks with the Tamil Nadu state government, if they can help us out in this, because it’s a very big parcel and it will lead to some kind of help from maybe government also to get it monetized.

Kavita Shirvaikar — Whole time Director & CFO

Fair point, we will evaluate that option also, we’ll explore that option also.

Maruti Nandan Sarda — Individual Investor — Analyst

And I have one more request, if it is doable. Maybe in 3, 4 weeks or in a month’s time, if we can have a separate call for the investors in respect of our preparation on how we are trying to monetize this land parcel because I think that is the biggest question which every alternate investor is asking the management. So can we do that maybe in a month’s time?

Kavita Shirvaikar — Whole time Director & CFO

Okay.

Maruti Nandan Sarda — Individual Investor — Analyst

I think that will be great.

Kavita Shirvaikar — Whole time Director & CFO

Okay. Thank you.

Maruti Nandan Sarda — Individual Investor — Analyst

That’s all from my side.

Kavita Shirvaikar — Whole time Director & CFO

Thank you.

Operator

[Operator Instructions] The next question is from the line of Aksha Trivedi, an Individual Investor.

Aksha Trivedi — Individual Investor — Analyst

Aksha, this side. So my question is on the sustainability of the current revenue which we’ve quoted in the quarter, like if we say the quarterly numbers of March ’22, we again had a good set of numbers in this quarter. Again, we have a good set of numbers, so it is only typically for the March or we forecast like we can see this number continuing in the next quarters?

Rahul Agarwal — Head Strategic Finance

So see, monsoon period, the revenue is little on the lower side. That’s how you see little fluctuation in terms of the revenues in quarter-on-quarter. It is not exactly comparable like that.

Aksha Trivedi — Individual Investor — Analyst

Okay. So can we regard this, like March quarter is usually like this?

Rahul Agarwal — Head Strategic Finance

Yeah, generally, the fourth quarter is always a bit.

Aksha Trivedi — Individual Investor — Analyst

Okay. So here we’ll not be able to surpass what we have posted in next 2 or 3 quarters, right like this is a benchmark quarter?

Rahul Agarwal — Head Strategic Finance

See, it depends upon how work will get executed on the new projects also, what we receive this year.

Kavita Shirvaikar — Whole time Director & CFO

And how will be the rainfall and everything, we cannot estimate right now.

Operator

The next question is from the line of Prashant Kshirsagar from Unived Corporate Research Private Limited.

Prashant Kshirsagar — Unived Corporate Research Private Limited — Analyst

I just wanted to ask you about the Dibang project, which you have got in joint venture. So what is the sharing ratio in the venture — the joint venture?

Kavita Shirvaikar — Whole time Director & CFO

It is 50-50.

Prashant Kshirsagar — Unived Corporate Research Private Limited — Analyst

It’s 50-50. Okay. And in Subansiri, just a specific question I wanted to ask you, at the time of the press release you had said that the order was for INR1,564.42 crores. So ultimately when are executing today, what should be the order size.

Kavita Shirvaikar — Whole time Director & CFO

Because it is item rate contract and quantity-based contract, so it is based on — normally it will be more or less on the similar line. So around INR1,500 crores plus escalation.

Prashant Kshirsagar — Unived Corporate Research Private Limited — Analyst

Plus escalation. But what should be the escalation around, 30%, 20%, 40% or what?

Kavita Shirvaikar — Whole time Director & CFO

Normally in the range of 15% to 20%, you can consider.

Prashant Kshirsagar — Unived Corporate Research Private Limited — Analyst

Okay, 15% to 20%, okay.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to Ms. Supriya for closing comments.

Supriya Madye — Kirin Advisors Private Limited — Analyst

I thank you on behalf of Kirin Advisors for joining the call. I thank the management for the detailed explanation and detailed analysis for the result. Now I request to conclude the call. Thank you.

Rahul Agarwal — Head Strategic Finance

Thank you.

Kavita Shirvaikar — Whole time Director & CFO

Thank you, everyone.

Supriya Madye — Kirin Advisors Private Limited — Analyst

Thank you.

Operator

[Operator Closing Remarks]