Power Mech Projects Limited (POWERMECH) Q3 FY23 Earnings Concall Transcript

Power Mech Projects Limited (NSE:POWERMECH) Q3 FY23 Earnings Concall dated Feb. 08, 2023.

Corporate Participants:

Mr. Prasheel Gandhi — Investor Relation

Mr. J Satish — Chief Financial Officer

Mr. S.K. Ramaiah — Director, Business Development

Mr. Sajja Kishore Babu — Chairman and Managing Director

Analysts:

Mohit Kumar — DAM Capital — Analyst

Dixit Doshi — Whitestone Financial Advisors — Analyst

Satish Heyda — Lucky Investment Managers — Analyst

Jay Sinha — Jay Tours and Travels — Analyst

Anupam Gupta — IIFL Securities — Analyst

Nikhil Abhyankar — DAM Capital — Analyst

Riken Gopani — Capri Global — Analyst

Sheen George — Geojit Financial Services — Analyst

Anish Jobalia — Girik Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q3 FY 2023 Earnings Conference Call of Power Mech Projects, hosted by Nirmal Bang Institutional Equities. [Operator Instructions]

I now hand the conference over to Mr. Prasheel Gandhi from Nirmal Bang Institutional Equities. Thank you and over to you Sir.

Mr. Prasheel Gandhi — Investor Relation

Thanks Tanvi, and good afternoon everyone. Nirmal Bang Institutional Equities welcomes you all to 3Q FY 2023 earnings conference call for Power Mech Projects. On the onset of call, I would like to thank the management team for giving us the opportunity to host the call. Today from the management team, we have Mr. S.K. Ramaiah, Director, Business Development and Mr. Jami Satish, CFO.

I would now like to hand over the call to management for opening remarks, post which we can take questions from the participants. Thank you, and over to sir.

Mr. J Satish — Chief Financial Officer

Yeah, yeah. Thank you. Good afternoon, friends. This is Satish here, and I have with me Mr. S.K. Ramaiah, Director, Business Development. I welcome you all to the earnings call quarter three and nine months FY ’22 and ’23. The performance for quarter three and nine months for this financial year continued as per target for the entire year. The reported total income for quarter three is around INR912 crores. Again, this is all-time high in terms of execution for Power Mech in its journey during quarter three of any financial year.

The EBITDA is around INR106 crores, and PAT is INR51 crores. During quarter three of previous financial year, the reported total income was INR650 crores. EBITDA was INR72 crores and PAT was INR33 crores. On a year-on-year basis, total income has shown a growth of almost 40%. With the growth of revenue, the growth in EBITDA is around 47% and growth in PAT is almost 54%.

The revenue mix for quarter three is as follows; Erection business contributed almost INR144 crores, civil business, including railway, water projects, it’s around INR492 crores, operation and maintenance, both the domestic and international put together is INR260 crores, electrical business is around INR12 crores and other income close to INR3 crores.

During quarter three of last financial year, the same numbers were like erection business contributed INR127 crores, civil business around INR268 crores, operational maintenance, INR226 crores; electrical business, INR25 crores; and other income, it was around INR4 crores.

During quarter three of FY ’23, domestic business has contributed almost like 89% and the balanced has come from the international market. Similarly, power sector has contributed 55% and non-power sector, it’s almost like 45%. That is a mix for FY — quarter three FY ’23.

We have seen growth across all the segments, except to Electrical business. In Electrical business, the company is very much selective in its approach and not intending to expand its space in electrical business. O&M business has grown by almost 15%, and it has contributed 29% of the total revenue for this quarter.

Similarly, the total reported income for nine months FY 2023 stands at INR2,435 crores. And for nine months, the EBITDA is close to INR281 crores and PAT is INR134 crores. Whereas during nine months of last financial year, the reported total income was INR1,822 crores, EBITDA was INR206 crores, PAT was INR21 crores.

On a year-on-year basis, for the nine months, we have seen a growth of almost 34% in revenue. And with the growth of revenue, the growth in EBITDA is almost 36% and 47%.

And the revenue for nine months is as follows. Erection business contributed INR458 crores, civil business, including railway and water projects, it’s around INR1,235 crores, operational and maintenance INR682 crores, electrical business INR52 crores and other income, it’s around INR8 crores.

Whereas during nine months of last financial year, Erection business has contributed INR370 crores, Civil business is around INR775 crores, operational maintenance INR587 crores, electrical business, it was around INR76 crores, and other income, it was around INR15 crores.

And the mix between international and domestic, the domestic business has contributed 86% during nine months FY 2023, and the rest has come overseas business its aroubd 14%. And the mix between power and non-power business stands at 59% and 41% during nine months of this financial year.

The company always been conservative in its approach since it inception and therefore, while building its business plan takes all suitable steps to retain the plan under control. In addition to the plan for sustained growth, the company’s focus will also continue on cash flow and margin improvement.

We are seeing the profile — margin profile improving gradually. Maybe by FY 2025, we are expecting to reach to our earlier reported margin profile and move thereafter with some gradual improvement. This is mainly on account of various initiatives, what we have taken since past few years.

Moreover, we are very happy to see our execution cycle improving each quarter-on-quarter. The company has set a strong bid in terms of resources, equipment, strong manpower-based leadership skill both at senior level and middle and junior level, engineering skill ATC to execute projects in the range of INR400 crores to INR450 crores per month, which is encouraging.

If you see like a few years back, our education range used to be around INR400 crores to INR450 crores plus in a quarter. Now the same level of education is going to be done in a month. This was the transformation of the company that has been done to for sustained growth. All the existing projects are on track and moving as per the schedule. The execution plan for the year and for the next financial year, remains on track, and we do not see or anticipate any changes in our business plan. Similarly seeing the present opportunity side, the order book target for the current and next financial year looks to be comfortable. Each month, the business development team review is done based upon changes to see that the overall target of the company is intact.

The company is also expecting good amount of order booking and execution cycle at international market. The team is strengthened even at international market, especially, we are expecting good amount of addition in the operational maintenance for the Nigeria market.

Moreover, the company has set a strong risk management policy and team to review each project progress and identify associated risks, which is helping us to proactively mitigate at early stage for any associated risk if any. The initiative that the company has taken few years back is helping now for a sustainable growth across vertical.

Coming to the next line item. Depreciation as a percentage remained on lower side. As we have said — even stated in the last call, because of controlled capex, this line item is kept more or less flat. Cumulative finance cost as an absolute number remain controlled. There has been some increase in the non-fund utilization because of the order book increase and execution cycle improvement.

Now this as a percentage, we are expecting it to come down further. The overall working capital cycle is improving for the period due to change in the customer as well as the business mix. The net current debt, excluding cash and cash equivalents, it’s ranging in the range of 145 to 146 days during the period. And as stated earlier, this is expected to improve further.

As you all know, like this used to be 153 days, 31st March, 2022 and 205 days, 31st March, 2021. So there has been significant improvement in the working capital cycle.

Moreover, the operating cash flow, we have seen positive, it’s around INR45 crores plus during the period.

And more importantly, we are seeing that the average monthly collection improving each month, which used to be INR300 to — which used to be INR250 crores to INR300 crores. Now it has gone almost like INR300 crores to INR350 crores plus. And we are expecting this to go up again to INR400 crores to INR450 crores per month with the growth of the business. And coming to the debt line item, the gross debt, it stands around INR535 crores, and the net debt is almost like INR336 crores, whereas FY ’22, it was INR527 crores and the net debt was INR320 crores.

So in spite of the growth in business execution cycle and all, this number, we have kept flat. And we are working to bring it down. So this shows the improvement in the working capital and the cash flow. Coming to the order book. The backlog as of 31st December 2022, it stands around INR24,200 crores. And the plan we have set close to INR10,000 crores for this year. We are trying to move towards that line item. We have done so far INR8,500 crores. Apart from that, we have projects which are L1, close to INR970 crores. So we are comfortable to reach to the closer number, the target what we have set for this year.

Now I request Mr. S.K. Ramaiah to say few more developments, before we get into question-and-answer session. Thank you.

Mr. S.K. Ramaiah — Director, Business Development

Yeah, Ramaiah here. Good afternoon to everybody. Thanks, Satish, for your update on the various numbers. I think we continue to be bullish on our approach in the new opportunities and the various development activities and marketing from the variety of customers’ base and the investments, which are taking place in all the sectors of the economy.

Basically, there is a substantial growth in the order backlog compared to March 2022, INR8,854 crores. Now it has reached almost INR50,000 crores as Satish has told. That is almost 90% — more than 90% growth in order backlog that has been propelled by substantial opportunities in FGD business in various infrastructure projects and then other key opportunities.

And for the quarter three, the total order booking has been INR1,531 crores compared to INR1,628 crores compared to last quarter. And of course, in the second quarter, there was bulk orders on FGD particularly. And our expectation is that in the balance of things, over INR8,500 crores is there, INR9,500 crores to INR10,000 crores should be a reasonable possibility at the end of the year. That should help us to build up a backlog of nearly INR10,000 crores by end of the year, which stands as on today also near that figure.

Now, the key segments as I already told you that mechanical, the backlog has gone up from INR1,650 crores to INR8,260 crores. Civil, INR5,842 crores to INR5,663 crores. This is from March ’22 to as on December ’22. And O&M, INR1,240 crores to INR850 crores and electrical INR118 crores to INR130 crores. And then the domestic, there is a substantial growth because of more of the opportunities. And we have –obviously, we are focusing on the domestic market because of all this market available.

And then the powersector continues to give a fillip to the backlog based on the FGD opportunities and a few of the other installation opportunities coming up. That comes to INR9,638 crores versus non-power of INR5,268 crores. Apart from the MDO, this is a backlog.

Now, coming to the key orders backlog, apart from what we have had in the first two quarters. BMRC, Challaghatta, Bangalore workshop depot around INR427 crores. And then on the wagon repair shows railways INR250 crores until other FGD jobs are there. And then the L1 status is there more than INR70 crores. Therefore, with these opportunities, obviously what we are targeting for nearly INR9,500 crores to INR10,000 crores would be a possibility.

And then next coming to the next year, 2013, 2014 we are already mapping some of the opportunities and as we have seen, the investment in the current budget of infrastructure and capital investment of INR10 lakh crores and the major investment is coming in the railways, about INR2.4 crores and roads INR2.7 crores and then in energy sector and other miscellaneous, various other areas also.

And therefore, we are in line with these opportunities brought up by the government investments and then particularly in drinking water schemes then energy sector, oil and gas sector, mining and minerals apart from the roads. Therefore, these opportunities will be continue to be aggressively pursued by us and our estimation is that we can target nearly opportunities wise over INR30,000 crores to INR35,000crores.

And then, international also, because of our domestic bullish market, we were not focusing much in the last one or two years. But Middle East, it will be opening up in the Middle East market, plus 300 gigawatts of opportunities and then West Africa is there; Nigeria, we are already working there. And we are also undertaking O&M job for the job which is just now completed. And then other countries in the Western Africa. And then domestic, obviously, there is going to be continued scope potential for the FGD about 80,000 megawatts.

Then some of the new plants are also expected to come in Neyveli Lignite operation in Orissa, about 2,400 megawatt. Then NTPC is to add additional capacity Singrauli, Lara and other projects also. Therefore, there is going to be some additional opportunities, which is expected in the thermal sector also.

And then infrastructure, particularly mining, minerals and then coal mining, then material handling, railways. Railways is going to be a substantial opportunity. In fact, already, we are doing about six, seven projects. And there are a lot of opportunities in maintenance of repair shops and then these Metro projects, Metro projects, they — this one we have made in Bangalore for the Challaghatta project, similar projects we can take up for the new Metro projects, because wherever metro projects are coming, there are maintenance shops are required, and that is our focus on the new opportunities.

Therefore, all these things, combined together, it is not a challenge to target opportunities to INR30,000 crores to INR40,000 crores. And with a hit rate of 20% to 30% — 25% to 30%, I think our next year targets of about INR7,500 crores to INR8,500 crores, that should be a reality. And this growth story should be continued to be maintained in the coming two to three years.

Apart from the new opportunities, which will come up. And one more, I think what I can say is that, there is going to be a huge investment, which will come up in the private sector,particularly in the minerals and metals, steel, etc.

The total investments like ArcelorMittal is going to make major expansion then JSPL is coming with expansion. JSW is coming with expansion. Apart from that, minerals and coal mining, a lot of expansions are expected. And these opportunities will grow both for EPC jobs, then erection testing, commissioning jobs and many of the other civil works, etc. For that also, we have — if we factor it, these opportunities will further go up.

That is what I would like to say, and then we can now wait for your questions. Thanks.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Mohit Kumar from DAM Capital. Please go ahead.

Mohit Kumar — DAM Capital — Analyst

Good afternoon sir and congratulations on a very good set of numbers. The first question is on the revenue guidance for FY 2023, I think you’ve given a guidance of INR36 billion, are you maintaining that number? And how do you see FY 2024 on this base?

Mr. J Satish — Chief Financial Officer

See, FY 2023 is — we are on track. Normally, like if you take nine months, first half and the second half, second half which is significantly high compared to first half, okay, so the targets and execution cycle more or less on control. So, we are confident that number will continue. 2024, even like — we have kept — water will play a significant role and of course, O&M will continue to be around INR150 crores to INR200 crores. And water business, because — the order backlog, what we have taken is close to INR2,800 crores to INR3,000 crores. And the calculation is per village, it’s working around INR1 crore. Now, post detailed project report DPR, the value is going up almost like 20% to 25%.

So, now the order book, we have taken the original contract value. Once the — few villages, it’s been divided and almost like 20%, 25% is yet to revise, okay? So, maybe FY 2023 31st, during quarter four, we’ll divide it complete number. So, this will throw a huge backlog for us even in terms of the execution. The water itself now on average, it’s working almost like January — post-December. January, it’s almost like INR120 crores to INR150 crores. So, this cycle is expected to improve to INR150 crores to INR160 crores. So maybe INR1,400 crores, INR1,500 crores, our execution cycle we can expect next year. So, the single order backlog now, okay, on average 42% to 43% is quite comfortable to take it next year.

Mohit Kumar — DAM Capital — Analyst

Sir, you’re talking about number of 43 billion, is that number — is the number –?

Mr. J Satish — Chief Financial Officer

No, conversion is 40% plus — 42% plus conversion to the opening order book, okay? It’s quite comfortable. On top of that, the temporary shutdowns and any new orders come to the next year, that will also add to the kitty. So, if all goes well, debate looks like FY 2024, we should cross almost like INR5,500 crores plus.

Mohit Kumar — DAM Capital — Analyst

Understood. And sir, have you started executing Adani FGD project? And has it started contributing or do you think it will take some time to takeoff?

Mr. S.K. Ramaiah — Director, Business Development

I think we have had a thorough review on all these projects of Adani, 15 plots of 6,000 — 8,460 megawatts. And reasonably, the — first is the ordering status is back around 1,100 crores have been ordered. Another INR100 crores is expected by end of March. And next year, by second quarter, and maybe beginning of the third quarter, most of the orders should be completed, except for the lost segment, electrical T&D.

Of course, that should give a good track in terms of execution of this, because there are commitments of this one. All these projects are committed projects. And with local regulator in place to sanction there and then approve this project for the PP and other things. Therefore, we are on track on all these projects have done to-date.

Mohit Kumar — DAM Capital — Analyst

Lastly, sir, on the Talabira, Singrauli, Lara, what are the kind of opportunities we can cater to? And are you seeing the tenders from these — the companies for where we will be eligible?

Mr. S.K. Ramaiah — Director, Business Development

Yes, you mean to say for the power plants?

Mohit Kumar — DAM Capital — Analyst

Yes.

Mr. S.K. Ramaiah — Director, Business Development

Yes. See, Talabira that 300 to 800 megawatt, NRK [Phonetic] has already submitted bids, BHEL and L&T are there. And they are ready to take decision maybe by end of this year — end of this year, perhaps they will take a decision. That opportunity will be there. And of course, NTPC, I told, they have to — they are inviting bids for the Lara project also, 200 to 800 megawatts. Then Singrauli also, that is an additional opportunity.

Therefore, next — all these projects will come up possibly for the next year in terms of the power sector business. And there I told you about the FGD business. And then, the FGD, substantially what we are doing is that, now [Indecipherable] we have already provided an offer. And then JSPL is coming with the FTD conversion for all their plants around Tamnar then in Odisha, that is in Chhattisgarh, Odisha.

That will be a substantial opportunities in terms of roughly around 4,000 megawatts. And we have got a good relationship with JSPL, [Indecipherable], Tamnar and various other projects like that. And that should drop opportunities at least over INR2,500 crores to INR3,000 crores, apart from the other government tenders and utility tenders which are expected to be completed.

Mohit Kumar — DAM Capital — Analyst

I understood, sir. Best of luck, sir. Thank you and best of luck, sir.

Operator

Thank you. [Operator Instructions] the next question is from the line of Dixit Doshi from Whitestone Financial Advisors. Please, go ahead.

Dixit Doshi — Whitestone Financial Advisors — Analyst

Yes. Thanks for the opportunity. My first question is on the status of MDO project. So is it on line? Is it on stream? Like earlier, you were guiding that by Q4 FY 2024, it should start generating revenue?

Mr. S.K. Ramaiah — Director, Business Development

Yes, yes. Yes, I wish to update — one good update, one good development. See, for — starting with MDO project, the critical milestone is Stage-one forest clearance, and we have got it, sir. So it’s — in terms of approvals, now in place, next two months, the environmental clearance will follow because Stage-one FC is important for environmental clearance.

So by June, we’ll start ground activity. So this project is completely under control and is as per the plan. So we had planned close to INR50 crores plus FY 2024, and that is in control. It’s possible.

Maybe slight improvement because of the escalation. We have taken the price as we quoted. So probably maybe second half or quarter three of next year, we’ll review numbers and will come up with the revised number. So the number is going to INR50 crores plus.

Dixit Doshi — Whitestone Financial Advisors — Analyst

Okay. Thanks. Now my second question is just to understand. So whenever we execute any particular work after completion of the work at every month, we must be generating the invoice to the client. Let’s see if some clients don’t pay, then until what level we work or we stop the work

Mr. J Satish — Chief Financial Officer

So normally, our being a cash contract, recalled cash contract, the payment cycle is normally 30 to 60 days. But as a practice, it’s going almost 70, 75 days. So existing customers, wherever we understand we go up to 60, 65, 70 days also. But new customers, we don’t look beyond 40, 40, 28. So we see that the payment is well protected otherwise. So we will end up incurring additional costs.

Dixit Doshi — Whitestone Financial Advisors — Analyst

Okay. Okay. But — there are — so in the past, have you done like let’s say, some payment is not coming beyond 70 days also. We stopped the work typically?

Mr. J Satish — Chief Financial Officer

Sir, this case has been in multiple instances. We have to build that pressure okay. Because our like 50%, 55% logics, even 65% is manpower, okay? So we have to build that payment — my payments are linked to our collection. So we have done in across in multiple cases.

Dixit Doshi — Whitestone Financial Advisors — Analyst

Okay. Okay. And my last question is on this Adani FGD order. So earlier you have mentioned that we are going to receive the advance and we will not require to deploy our own funds in this project, is that right?

Mr. J Satish — Chief Financial Officer

Yes. Even today the stance remains the same, sir. It’s a complete. The plan is to have a cash-neutral project. So we will not invest anything in terms of working capital except the equipment of INR25 crores to INR30 crores, which we have already done that. So we have taken almost INR100 crores of advances for this project. We have already aware of this and we’re expecting the last two days, we got some amount and maybe next one week, we’ll be getting another INR25 crores to INR30 crores. So net bids we’re drawing because interest free. And our progress is is again aligned to the receives. So it’s on track, sir, yes, you are right. It is going to be a cash-neutral project.

Dixit Doshi — Whitestone Financial Advisors — Analyst

Okay. Okay. That’s it. And just one last question. So in terms of margins across the segments, we generally have a similar margins or it varies like erection, civil work, O&M?

Mr. J Satish — Chief Financial Officer

The margin profile changes, sir actually O&M that, sir, we comment more, okay, that sir we comment more. And compared to domestic and international its slightly higher side.

Dixit Doshi — Whitestone Financial Advisors — Analyst

Okay?

Mr. J Satish — Chief Financial Officer

And mechanically, it works around 11.5% to 12.5%. Civil, it’s working now 9% to 10.5%. The reason being, we have spent in terms of royalty to build the credit since four to five years now and we are getting that fruit now. So what will happen is the projects which we have ported paying the royalty now that’s getting over maybe next a few quarters, we’ll see that margin profile improving. So we are targeting that FY ’25, at least we should reach to our normal reported higher margins, which used to be 13%, 13% flat. So that’s where we are working towards.

Dixit Doshi — Whitestone Financial Advisors — Analyst

Okay. Okay, fine. That’s it from my side.

Operator

Thank you. [Operator Instructions] The next question is from the line of Satish Heyda [Phonetic] from Lucky Investment Managers. Please go ahead.

Satish Heyda — Lucky Investment Managers — Analyst

Yes. Hello, sir, I joined the call a bit late. Maybe it could be a repetitive question, I’m sorry for that. I just wanted to test what upgrade would you give on the INR6,000 crores of the order which has come from Adani Power on the FGD side in terms of execution, in terms of the time line and will it, by any chance, change the initial expectation of revenue that we had for the ’24 and ’25, which I think in the last quarter, we mentioned that we’ll do about INR3,800 crores to INR4,000 crores revenue this year and about 5.5 next year. So, does it change anything? Does it change in terms of the order inflow advances? If you could comment on that, Sir? And I’m sorry if this question was answered earlier.

Mr. J Satish — Chief Financial Officer

Yes. As Satish has I think told recently, the advances are on track, INR100 cores and another INR50 crores are also on the pipeline. And as far as the conversion is concerned, — these projects are expected to be completed by ’25 of the projects. Therefore, the most important for all these projects execution is the ordering cycle. Now ordering cycle will be completed in the next six to nine months. Therefore, the conversion should be on track. This year, we may get about INR50 crores to INR100 crores of turnover. The coming year, about INR1,500 crore minimum, we are expecting it and balance will be completed in the next 12 to 18 months.

Therefore, these projects are fully committed, and we are clearly following it up on all the aspects of that execution. And then major works will be on the civil, mechanical, supply, structural and equipment supply. And as I told you, INR1,100 crores ordering has already been done, and the balance offering will be completed by second to third quarter. And that should pave the way for a timely — reasonable timely execution bearing the local issues, whatever is there, that is access availability, customer acceptance of certain things, all those things and normal project issues can be there. Otherwise, we are very confident on continued tracking this project in reasonably.

Mr. S.K. Ramaiah — Director, Business Development

And Sir, this INR3,500 crores, INR3,600 crores, it’s more or less in total because quarter nine months, so we have seen the execution cycle improving, and it’s going as per our plan. So this year, the guided numbers remains under control. And next year, even INR5,500 crores plus, okay? And any improvement in the additions of next year, that may add up more, but we’ll come with that number, maybe first quarter of next year. As of now, the number what you have given that remains exactly the same.

Satish Heyda — Lucky Investment Managers — Analyst

You have got INR1,100 crores of orders already issued on that INR6,000 crores of order backlog that you have from Adani, that’s now you’re mentioning, right? INR1100 crores worth orders has been issued.

Mr. J Satish — Chief Financial Officer

Yes.

Satish Heyda — Lucky Investment Managers — Analyst

And what is your revenue assumption from that order for next year that is ’24 in your total INR5,500 crores revenue that you were thinking?

Mr. J Satish — Chief Financial Officer

Our assessment is that around INR1,500 crores.

Mr. S.K. Ramaiah — Director, Business Development

It will range to…

Satish Heyda — Lucky Investment Managers — Analyst

INR2,000 crores? Okay. And sir, this being a more regulatory nature orders. So it was a compulsion to put up these FGDs. Is there a time line issue for implementation of it by any regulatory authorities or anything?

Mr. J Satish — Chief Financial Officer

I will tell you that, you see the entire FGD retrofitting is guided by the [Indecipherable] between ’24 to ’26, that is the three categories of plants are there: Class A, Class B and Class C and most of these plants come under Class C, therefore, ’25 and ’26. Therefore, there is a reasonable time available to implement this project to meet the regulatory debt balance fixed by the government. And accordingly, the ordering is being done, and that is how the EPC also has been placed by the Adani.

Satish Heyda — Lucky Investment Managers — Analyst

Okay. Okay. So in any situation, can this be canceled or postponed? Or it is a compulsion to implement?

Mr. S.K. Ramaiah — Director, Business Development

No, no. It is part of the — one thing is part of the national commitment. And second thing, all these FGD implementation of 1,69,000 megawatts is the total plant identified out of something like 2,10,000 megawatt. This is part of the mandatory incorporation committed to the COP2026, whatever was the international commitments are there. And it is very important for this country to meet the sulfurized emission control, and there is no going back on this. And in fact, order is expected. In fact, a lot of inquiries are coming already more than 55% ordering has been done, another 40%, 45% has to be done perhaps in the next one year, all this ordering should be completed.

Satish Heyda — Lucky Investment Managers — Analyst

And sir, what is the progress on the balance, 80,000 megawatt of projects where the FGD order is yet to be placed and you were hoping for some order wins there?

Mr. S.K. Ramaiah — Director, Business Development

Yes, yes. We are targeting nearly about 7,000 to 8,000 megawatts in that. I told JSPL is there. Vedanta Group is there. They are our favorite customers. And then private and public sector utilities also. In Tamil Nadu we are targeting, already we have submitted the offer and other selected places wherever we are there, we can do that. Our plan is to at least see the opportunities for about 7,000 to 8,000 megawatts in this.

Satish Heyda — Lucky Investment Managers — Analyst

Okay. And my last question is, our MDO order execution will start in ’25, right? That’s how it is? Or is it inFY’24?

Mr. Sajja Kishore Babu — Chairman and Managing Director

See, MDO, just before your question, we had that update. So MDO, we have cracked the first milestone, which is important to start the project. That’s the forest clearance Stage one. Now that Stage one clearance comes, then Stage two and environmental will fall in two months. So we have got that approval, sir. Now the approval part is in control. So the execution ground will start June onwards. So the INR40 crores to INR50crores or maybe slightly this number may go up because of the escalation and what we have projected as per the time line.

Satish Heyda — Lucky Investment Managers — Analyst

So the execution of some business will be there in ’25, right — ’24, sorry ’24?

Mr. Sajja Kishore Babu — Chairman and Managing Director

2024, we are expecting close to INR50 crores and may slightly drop because of escalation figure [Indecipherable] ramping up.

Satish Heyda — Lucky Investment Managers — Analyst

And on the margin side, do we expect any expansion in margin next year?

Mr. Sajja Kishore Babu — Chairman and Managing Director

Sir, there is a gradual improvement because see last four, five years, we are losing in terms of royalty in spite of our core business doing a good amount of execution margins. There is high probability that it will go up. But we are confident that now because of all these new initiatives, ’25 at least we’ll try to reach to a normal margin, that’s in plan.

Satish Heyda — Lucky Investment Managers — Analyst

This is that 2.5% of order that you have to pay for…

Mr. Sajja Kishore Babu — Chairman and Managing Director

That percentage is coming down, okay? Now slowly, the margin profile is improving. So we are seeing that by’25, we should go back to our normal reported margins of 13% at least.

Satish Heyda — Lucky Investment Managers — Analyst

Thank you. Thank you very much, sir. Thank you.

Operator

The next question is from Jay Sinha [Phonetic] from Jay Tours and Travels. Please go ahead.

Jay Sinha — Jay Tours and Travels — Analyst

Hello. Hello, good afternoon.

Mr. Sajja Kishore Babu — Chairman and Managing Director

Yes, sir.

Jay Sinha — Jay Tours and Travels — Analyst

Sorry, this is a repetitive question, I think. This is regarding the Adani order only because of the Adani things order, I think our share got beating. Now how’s the — regarding the payment of Adani orders of INR6,000crores, how safe new place we are regarding the payments and the execution?

Mr. Sajja Kishore Babu — Chairman and Managing Director

Sir, as we said, okay, even we had the similar portions, okay. As we said, this is a cash-neutral project. We have [Indecipherable] we will draw and utilize heat-based. So we have drawn INR100 crores plus. We’ll be trying some more amount and almost INR1,100 crores to INR1,200 crores order being done.

Now it’s a global mandate and for them also there’s a time pressure. So in terms of execution, it’s on track. We are planning maybe INR50 crores to INR100 crores of turn over this year and maybe next year, we have planned INR1,200 crores to INR1,500 crores.

And this number may further go up, because of time pressure, but that will come in maybe quarter one or quarter two of next year.

Jay Sinha — Jay Tours and Travels — Analyst

That’s on the project.

Mr. J Satish — Chief Financial Officer

It’s more or less absolute under control, sir. There is no slowdown.

Mr. S.K. Ramaiah — Director, Business Development

And to add to what Satish said whatever projects we are doings are excellent so far. We haven’t really checked on that. The road project and then the infra projects and even mining projects, what we are doing in FGD jobs are also and no where our bills are pending for more than a month. 30 days to what else?

Mr. J Satish — Chief Financial Officer

16 years, our journey where we understand the customer. So my actual payment cycle is 30 days, okay. So if you see today — as of today, no due actually pending. And being large contract mitigation we’ve ensured that it has to be cash-neutral project, extra capex INR42.40 Crores actually improve. Those are in house equipment. Apart from that, there will not be any working capital investment from on a side.

Mr. S.K. Ramaiah — Director, Business Development

In fact, we had a review with the organic names, and we are giving the unpredicted support as far as these investments are concerned. Because they are very specific for meeting the regulatory requirements, and they are already committed on these projects.

Jay Sinha — Jay Tours and Travels — Analyst

Okay.

Mr. S.K. Ramaiah — Director, Business Development

And then there are PPAs also in place. INR67 Crores orders from all the PPAs are inclusive also the projects.

Jay Sinha — Jay Tours and Travels — Analyst

So according to my understanding, this after completion of this project, maximum payment cycle will be 30 to 45 days.

Mr. S.K. Ramaiah — Director, Business Development

No, no. This project — yeah. 30, 40 days are maximum beyond that, we cannot effort to wait.

Mr. J Satish — Chief Financial Officer

In the case of Adani, FGD job, our commitment for investment is working cap based on what we receive from them.

Jay Sinha — Jay Tours and Travels — Analyst

Okay.

Mr. S.K. Ramaiah — Director, Business Development

So we have structured.

Mr. J Satish — Chief Financial Officer

So we have structured the entire contract. Our vendors will pay only once we get from them.

Mr. S.K. Ramaiah — Director, Business Development

Yeah.

Jay Sinha — Jay Tours and Travels — Analyst

Okay. So once they pay you the advance, then only you will execute the order.

Mr. J Satish — Chief Financial Officer

But today if I have surplus sir, it is almost like more than INR100 crores plus. Okay. What I really is a INR60 crores, INR65 crores as surplus cash.

Jay Sinha — Jay Tours and Travels — Analyst

Okay. Okay.

Mr. J Satish — Chief Financial Officer

Yeah. Can you we go to next question sir?

Jay Sinha — Jay Tours and Travels — Analyst

Yeah. Thank you. Thank you very much.

Operator

Thank you. [Operator Instructions] The next question is from the line of Anupam Gupta from IIFL Securities. Please go ahead.

Anupam Gupta — IIFL Securities — Analyst

Sir, just one question. The mining MDO revenue for FY 2024 is at INR50 crore or INR250 crores?

Mr. J Satish — Chief Financial Officer

INR50 crore. 50.

Anupam Gupta — IIFL Securities — Analyst

INR50 crore. Okay. And in FY 2025, this number should ramp up to what level?

Mr. J Satish — Chief Financial Officer

MDO this 25, let’s take this base number without escalation, it will be in the range of 155 to 175.

Anupam Gupta — IIFL Securities — Analyst

Okay. And escalation is approximately 40%.

Mr. J Satish — Chief Financial Officer

Sorry, can you repeat again?

Anupam Gupta — IIFL Securities — Analyst

Escalation versus the base price is approximately 40% on current cost?

Mr. J Satish — Chief Financial Officer

Yes, today, see the quoted price is 886. As for today’s escalation, it’s working almost like INR1,450. Yes as you rightly pointed, it’s slightly higher side, because diesel has been given in price escalation index have more weight because of that, this price as significantly has gone up. So the cost is not proposed at. So the margin profile should also improve.

Anupam Gupta — IIFL Securities — Analyst

Okay. And in terms of when you consolidate it in your balance sheet, what sort of capex should we build in for FY ’24 — sorry, FY ’23 and ’24

Mr. J Satish — Chief Financial Officer

FY ’23 for now the — max of INR15 crores because not much investment will happen. FY ’24 — see, we have planned an equity infusion of close to INR100 crores plus 75% will come from outgo. So maybe INR150 crores, INR160 crores, both the equipment put together equity and maybe and all. So it may range INR150 crores to INR180 crores, and that is [Indecipherable] 45…

Anupam Gupta — IIFL Securities — Analyst

INR150 basically includes INR75 crores of equity and balance of capex.

Mr. J Satish — Chief Financial Officer

Yes, the INR75 will increase INR24 crores, maybe INR30 crores to INR40 crores and INR25 the rest.

Anupam Gupta — IIFL Securities — Analyst

Okay. understand. That’s all from side. Thank you.

Mr. J Satish — Chief Financial Officer

Yes. Thank you, sir.

Operator

Thank you. The next question is from the line of Nikhil Abhyankar from DAM Capital. Please go ahead.

Nikhil Abhyankar — DAM Capital — Analyst

I just have a bookkeeping question. So can I just…

Operator

We have lost the connection for Nikhil. We’ll move to the next question from the line of Riken Gopani from Capri Global. Please go ahead.

Riken Gopani — Capri Global — Analyst

Hi, sir. Am I audible?

Mr. S.K. Ramaiah — Director, Business Development

Yes, please start.

Riken Gopani — Capri Global — Analyst

Yes. Thank you for the opportunity, sir. I have three questions. The first one on the order book. So you’ve mentioned for next year yet that you might bid for about INR30,000 crore, INR35,000 crores of orders in the domestic market. And at the 30% that could give you about INR8,000 crores to INR9,000 crores of orders here. But you’re also saying that you would increase the focus on the international markets next year as well. So overall, what kind of order inflow do you expect in international and in aggregate what kind of accretion do you see to the order book for…

Mr. J Satish — Chief Financial Officer

The plan that we have kept INR7,500 crores, INR8,500 crores, okay. That includes close to INR700 crores of international order book. That is a target. So that will be a combination of maybe 50% O&M and 50% in the mechanical space.

Mr. S.K. Ramaiah — Director, Business Development

So our opportunity in domestic is substantial. Now whatever we get better opportunities there, there we’ll target in international because India, there’s a lot of domestic opportunities, [Indecipherable] last year also the same thing.

Riken Gopani — Capri Global — Analyst

Got it. So INR7,500 crores is roughly what you’re expecting is the domestic inflow. And in that, are you booking in any FGD orders as well? Or this is outside of that

Mr. J Satish — Chief Financial Officer

No, FGD total opportunities, we are — we may be bidding for about INR5,000 crores. Maybe we’ll expect about 30% in that.

Riken Gopani — Capri Global — Analyst

Got it. Okay. Got it. Got it. The next question is with regards to the cash flow that you’ve been able to improve the overall working capital cycle, as you mentioned, compared to last year as we what is driving this improvement? And in terms of next year, what’s the direction that you would want to guide?

Mr. J Satish — Chief Financial Officer

It’s very simple. Like if you see, we have been working for 23 years with BHEL,okay. The experience with BHEL used to be slightly different five years back. But now since five years, we are seeing the receivable cycle going up to 80 to 95 days okay. And — so that was one of the reasons. And some of the projects, BHEL — when the project is about to complete the final bid certifications, they are taking slightly longer time. Now since four, five, years we have been working in various directions, various initiatives like railway, water, international and all. So now we are selecting projects where we see that the project is well-funded and the working capital cycle is good and our comfort in terms of the execution. So that is helping us to — and bringing down the BHEL Pipe.

If you — if we go back seven year back, the BHEL Pipe to be almost like 65% to 70%. And if we go back to two years back, BHEL Pipe used to be almost 35% to 40%, but now it has come down to 14% to 15%. So that is helping us to — helping us in a lot to rotate the working capital and the retention money, which we had INR250 crore to INR280 plus, okay. Now in spite of growth we’re keeping it constant there is on being like some of the projects or shifting and such in the private customers that the retention money comes in support of the BG. So that will help us to support in terms of the working capital.

Riken Gopani — Capri Global — Analyst

Got it. So you’re expecting this 138 days to also further come down in the next year?

Mr. J Satish — Chief Financial Officer

The idea is to bring it down to at least 135 days, first, at least next 12 months, okay, that’s the plan. And with the new initiatives and all the new projects, there is a high probability that, that should further come down. So we have seen that gradual improvement.

Riken Gopani — Capri Global — Analyst

Got it. Got it. And just in terms of one clarity on the FGD bit, you mentioned that there is a regulatory time line that needs to be followed. But just to understand this better, are there any requests that can be taken to postpone this? Or there is under no situation? Can there be any postponement to the time lines that are being currently outlined for FGD?

Mr. S.K. Ramaiah — Director, Business Development

Yes. I think this are — data are continuously monitored by the central government and central authority also. There they had fixed 24, and now they had made it 26. And looking at the — because it’s not only the main ordering is important, but the way it is implemented with the availability of the plant also for the shutdown and there are availability of some of the access there because they’re all — be retrofitted. Those factors will be taken and the availability of the equipment also from the where they sourced, how it is sourced and all for all these aspects.

And then, of course, all the FGD investment is part of the tariff pass-through. And all these things also have to be firmed up with the tariff commitments from the DISCOMS [phonetic] and LC Boards. Therefore, it is a combination of all these factors, but the commitment to implement FGD is very clear, and that is what we’ve seen in the ordering also. A lot of ordering is continuously happening.

Riken Gopani — Capri Global — Analyst

So it’s at least fair to assume that the projects which you have on hand currently, there may be reasonable visibility that they are not being pushed any further, and it will be done by FY ’25.

Mr. S.K. Ramaiah — Director, Business Development

Yes, that is our optimism.

Mr. J Satish — Chief Financial Officer

We think that on the ground.

Mr. S.K. Ramaiah — Director, Business Development

And also watching the way the ordering is being done because ordering is the most important thing for all these projects. And apart from that we are executing two other projects for BHEL also. That is on the civil side, they are also on track. Therefore, we don’t anticipate huge delays or any delays on this because government itself is pushing for this completion. And there is a commitment from the developers also.

Riken Gopani — Capri Global — Analyst

Got it. Got it. That is very helpful. Thank you so much, sir and all the best for the future. Yes. Thank you.

Operator

Thank you. The next question is from the line of Sheen George from Geojit Financial Services. Please go ahead.

Sheen George — Geojit Financial Services — Analyst

Hello.

Mr. S.K. Ramaiah — Director, Business Development

Yes.

Sheen George — Geojit Financial Services — Analyst

Hello?

Mr. S.K. Ramaiah — Director, Business Development

Yes, you are audible, sir.

Operator

Yes. Please go ahead.

Sheen George — Geojit Financial Services — Analyst

Good evening, sir. Sir, can you give us the revenue forecast for like what is the estimate for 2024 and 2025 — by 2024 and 2025?

Mr. J Satish — Chief Financial Officer

Yes. See, ’24 like as we discussed, okay, as we also stated, like see the conversion, 40% to 42% is very much likely. So INR5,500 crores plus any upside on the FGD that will help us, okay, that’s the plan. So we — and for 2025 because the MDO is going to start, and we have even closed the water projects and all, okay? So there could be even some upside in FY ’25 also, okay. So that should range maybe in the range of around taking MDO together, it should range close to INR6,000 crores plus because we have to complete water projects also.

Sheen George — Geojit Financial Services — Analyst

Understood. And can you give…

Mr. J Satish — Chief Financial Officer

We have kept a target of INR7,000 crores to INR7,500 crores, okay. And ’25, we have kept the order book target of INR8,000 crores, okay? So FY ’25 order book, we are not taking any conversion percentage. I’m just taking the backlog.

Sheen George — Geojit Financial Services — Analyst

Sir, can you come back again on the order book? You’re voice was very feeble.

Mr. J Satish — Chief Financial Officer

No. See, what I’m trying to say, sir, FY ’24, we have kept a target of INR7,500 crores plus of order booking. And FY ’25, we have kept a target of INR8,000 crores plus order booking. So taking 40% conversion to the opening order book, I’m not taking the addition for that year. So we should be able to cross INR6,000 crores plus in ’25.

Sheen George — Geojit Financial Services — Analyst

Okay. And what about your order intake estimates are there?

Mr. S.K. Ramaiah — Director, Business Development

In fact, for this year, we kept INR10,000 crores, so we’ll be close to that number. FY ’24, INR7,500 crores plus and FY ’25, INR8,000 crores plus.

Sheen George — Geojit Financial Services — Analyst

Fine. Thank you, sir.

Operator

Thank you. The next question is from the line of Anish Jobalia from Girik Capital [Phonetic]. Please go ahead.

Anish Jobalia — Girik Capital — Analyst

Hi sir, good evening. Sir, you actually gave some numbers around the cash flow from operations in your initial comments. So if you could just — I lost your voice during that time. But if you can give your — the number for the nine months? And what are your targets for the full year as well as for the next year? I mean, given the scenario of the improvement in the growth in the revenues and margins and also working capital that we are expecting. So, if you can share some numbers, that would be great, sir.

Mr. J Satish — Chief Financial Officer

Yes. See, sir, for nine months, it’s close to INR45 crores to INR50 crores plus because that is a number. And this number is expected to go up because whatever is required to mobilize the projects, we have spent the money for all the new orders, including this recent Kazipet and Bangalore Metro. So whatever mobilization is required, initial mobilization, we have done that. So FY ’24 year-end, it may be in the range of maybe close to INR100 crores that is what our expectation. And ’24 is the number should go up, maybe close to INR180 crores to INR190crores.

Anish Jobalia — Girik Capital — Analyst

Okay. So I mean, like if I see the half year, so in the half year, I think, like we were — we did already like INR62crores. So, if you have done like INR45 crores, it means like there was a negative cash flow from operations in this quarter. Is that correct?

Mr. J Satish — Chief Financial Officer

Maybe INR10 crores to INR15 crores with the difference. Yes, you’re right.

Anish Jobalia — Girik Capital — Analyst

Okay. So — but then we are still expecting to achieve the INR100 crores CFO for FY ’23? That’s the target. Is that correct, sir?

Mr. J Satish — Chief Financial Officer

That is the target, sir. So the reason being like the new projects at Kazipet and Bangalore Metro whatever mobilization required, okay, we have done internally. So the building starts so maybe 30 or 45 days thereafter. Normally, it takes 30 to 60 days. So what are the projects we have on hand, it’s all been spent now.

So — and quarter four normally, it’s a good quarter for collections and in terms of execution there is as pressure from. There always used to be pressure from the customer during the quarter four. And if you see in terms of quantum also, quarter four will be almost — will be the high comparatively quarter one, quarter two and quarter three. So we are expecting good amount of collections.

Anish Jobalia — Girik Capital — Analyst

Okay. Got it, sir. All the very best for the next question and the coming year. Thank you.

Mr. J Satish — Chief Financial Officer

Yes, yes. Thank you.

Operator

Thank you. The next question is from the line of Riken Gopani from Capri Global. Please go ahead.

Riken Gopani — Capri Global — Analyst

Sir, just one follow-up question with regards to FGD. So the current order win that we have, that is for about 6,000 megawatts. And the total order book reflects about INR6,000 crores. Is it about INR1 crore or so for megawatt that it works out to — is that how it works? And in that context, when you said that you are targeting to make about 8,000 megawatts of additional ordering here then just help me understand why you’re building in INR1,500 crores in new order win expectations for next year?

Mr. S.K. Ramaiah — Director, Business Development

So what is the — there are two types of packaging there. One is if you complete EPC package is there, what we got from Adani around INR73 lakhs per megawatt. And there are contracts which are awarded on a package basis, like severe mechanical supply and then a service job. That can vary between INR20 lakhs to INR30 lakhs per megawatt. It is a customer choice. Therefore, and then the orders which are in the pipeline from the CESC, Goenka Group is based on that type of philosophy only, not on the EPC.

Therefore it is a combination of EPC, then packaging-wise and all. But what I said on a ballpark basis, if we take the 7,000 to 8,000 megawatts, the opportunity, what we are going to target is around INR5,000 cores, INR6,000 crores. And then based on our past experience and the competitiveness in the market, that is what the figure I told about INR1,500 crores.

Riken Gopani — Capri Global — Analyst

Okay. But the total remainder of the power capacity, which needs to get the FGD retrofitting done, that is about 80,000 megawatts, is that correct?

Mr. S.K. Ramaiah — Director, Business Development

Yes, it is around 80,000 megawatts. Now the rest of the private players, like Adani they have taken an advanced action. Now JSPL is there, JSW is there. Vedanta Group is there. And then various other private developers also have to do it, and apart from that, the state utilities also there.

For example, Tamil Nadu is coming with a lot of inquiries, and then Maharashtra, then Gujarat state, then the other — most of the states, they will have some residual orders — a bulk of the order has to put in, only NTPC has done bulk of the ordering, and then some of the private players. Therefore, all these things, they have to complete in the next one year, because the deadline is 2026. On that basis, these figures will be INR1 crore.

Riken Gopani — Capri Global — Analyst

Okay. So you’ll still be participating in that 80,000 as well. This is just based on what you have current visibility of?

Mr. S.K. Ramaiah — Director, Business Development

Yeah. What I would like to say, these are all industrial packages, individual plants are there. Therefore, about 10% of the available opportunity will participate. That is on conservative basis. Maybe we will exceed that also. But we are taking this one, our present this one, we can do that much easy.

Riken Gopani — Capri Global — Analyst

Understood, sir. Understood. That is very helpful, and thank you so much for the answers.

Mr. S.K. Ramaiah — Director, Business Development

Yeah. Thank you sir.

Operator

Thank you. As there are no further questions, I would now like to hand the conference over to management for closing comments.

Mr. S.K. Ramaiah — Director, Business Development

Yeah. Ramaiah here again. Thanks a lot for your presence and all. I think Satish has given the numbers and the marketing and the opportunities available in the budget of INR10 crores. There is a 30% increase in the capital investment as a whole by the government, and now private capital will come in a big way in infrastructure, then capital equipment, steel plants, infrastructure projects, mining, minerals, etc.

I think the opportunities of INR30,000 to INR40,000 crores is not a challenge, and therefore, the targets what has been fixed for INR7,500 crores next year and then continue to be maintained that is reasonably possible.

And our ordering — the execution cycle also is improving it. It’s a better understanding of the business in various projects, what we have done, wherever we entered new business also in non-power. The execution cycles are improving it and the projects are getting controlled and with better execution and also cash collection.

Therefore, we remain to be optimistic and the numbers have seen that in terms of the ordering, execution and then other PAT and EBITDA margins. That is what I would like to say.

Mr. Prasheel Gandhi — Investor Relation

Thank you all. Thank you very much.

Operator

[Operator Closing Remarks]