VA Tech Wabag Limited (NSE:WABAG) Q3 FY23 Earnings Concall dated Feb. 13, 2023.
Corporate Participants:
Rajiv Mittal — Chairman and Managing Director
Pankaj Malhan — Deputy Managing Director and Group Chief Executive Officer
Skandaprasad Seetharaman — VA Tech Wabag Limited
Analysts:
Mohit Kumar — DAM Capital Advisors — Analyst
Bharat — Moneybee Investment Advisors — Analyst
Kaushik Poddar — KB Capital Markets — Analyst
Darshika Khemka — AV Fincorp — Analyst
Nikhil Abhyankar — DAM Capital Advisors — Analyst
Hemant Soni — Individual Investor — Analyst
Omkar — Individual Investor — Analyst
Sheen George — Geojit Financial Services — Analyst
Arun Chakravarthi — Individual Investor — Analyst
Manish Shah — Individual Investor — Analyst
Shri Harsha — Individual Investor — Analyst
Presentation:
Operator
Good evening, and welcome everyone to this earnings call post announcement of Nine Months and Q3 FY’23 Results of VA Tech Wabag Limited. On the call today from the management team, we have Mr. Rajiv Mittal, Chairman and Managing Director; Mr. Pankaj Malhan, Deputy Managing Director and Group CEO; and Mr. Skandaprasad Seetharaman, Chief Financial Officer.
Kindly note that during this call, the company may make certain forward-looking statements concerning the business prospects and profitability, which may be subject to risk and uncertainties and the actual results could materially differ from those in such forward-looking statements. The conference call will be archived and a transcript will be made available on the company’s website. The company’s results of this presentation has been uploaded on the website and stock exchanges, which provides an overview about our core offerings and the analysis of the results for the period. We trust that you had an opportunity to look through the same. We will start with the opening remarks from the management, post which we will open for the interactive Q&A.
I now hand over to Mr. Mittal to take you all through the key business highlights. Over to you, sir.
Rajiv Mittal — Chairman and Managing Director
Thank you. Ladies and gentlemen, welcome to this earnings call for Q3 and nine months FY’23. Along with me on this call is Mr. Skandaprasad Seetharaman, our Chief Financial Officer. I’m also joined today on this call by Mr. Pankaj Malhan, Deputy Managing Director and Group CEO who has joined our leadership team at WABAG as part of our ongoing succession planning exercise. Pankaj comes with a rich experience in power and steel sector leading diverse roles in engineering, greenfield projects, and also leading profit centers. He was earlier associated with JSW and Vedanta as part of their steel business and was a long-timer in the Tata Group in their power and steel businesses. Pankaj will closely work with the leadership team of WABAG in the next month and will take over the Group CEO responsibilities from me. I wish Pankaj all the best and I’m confident that he will lead the WABAG Group to great success.
Our momentum of delivering profitable growth continues through the nine months period as well. As a Group, our strategy has been to focus on international geographies, industrial projects, advanced technology plants, and EP, which is engineering and procurement business, and also continued focus on long-term O&M business. This is reflected in our improved margin profile and cash position, which we have consistently demonstrated over the last many quarters.
As a multinational plant, about half of our revenues consistently flow from projects in international geographies. As an advanced technology business major, our order intake majorly comprises plants in desalination, recycle, reuse and ethylene treatment segment. This mix of international presence in emerging geographies, it’s focused orders, and increased mix in EP projects directly reflects on the consistent growth of our operating margin and enables us to maintain a net positive cash flow.
As a Group, we have also stated our objective to increase the quantum of our O&M [Phonetic[ business, which now stands approximately around 35% of the order book and with more DBO and HAM projects in the pipeline, long-term O&M business are the future and we are well-placed here. I am proud to inform you that WABAG has once again improved its global GWI ranking from fourth place to third position for ensuring safe and clean drinking water and healthy environment for over 88 million people. Also, it is a matter of great pride for us to be recognized among the top 10 global desalination players by GWI. Both these recognitions are further testament to our position globally as a water technology leader, global manufactured water leaders and our consistent contribution to the cause of global water security.
As a Group, we have aligned our business and focused areas towards sustainable development goals of the UN in specific SDG 6, we are already a water positive organization and with our focus on green energy production from biogas in our wastewater treatment plant, we are also contributing to Panchamrit goals set by India at COP ’26 of achieving 50% energy requirement of India from renewable energy by 2030 and achieving Net 0 by 2070.
Again, circular economy is really important for WABAG. We have been advocating that waste to wealth is our theme in promoting a total water resource recovery model through tertiary treatment plants, where we manufacture clean water from used water, which is deployed for non-potable purpose, thereby releasing water for potable use. Our plants across the world produce over 2,500 MLD of tertiary treated water, also accompanied in such plant is the generation of green energy from biogas, which powers the treatment plant, making energy neutral. Our biogas plants produce over 40 MW of green energy. The sludge that gets produced from the treatment plant is converted into manure, thereby ensuring the sewage is resource and not a liability.
Circular economy in water is thus a revenue model and not a liability model. Recently, WABAG conducted a conference on manufactured water in India in Chennai with eminent panelists from municipal and industrial segment participating in the panel discussion and also it was graced by a large audience. We also showcased our marquee plants in desalination and tertiary treatment plants in Chennai. Conference enabled creating higher awareness and acceptance of recycled and reuse for industrial, agricultural and indirect potable reuse purpose. WABAG has always been in the forefront of using technology in the water sector and with our R&D centers in Vienna, Austria, Winterthur, Switzerland and Chennai, India, we today have to our account more than 125 IP rights, internally-developed and internally used.
With our business strategy to focus more on technology projects both to drive better margin and be in the cream of water treatment business, we have been over the past few years, securing orders mainly focused in desalination, tertiary treatment and industrial segments. Even this year, you would have seen that our three major projects have been either in desalination, or industrial water treatment. Also as informed in the last conference call, few key projects where we are already a preferred bidder are also advanced technology projects.
We’ve always emphasized on being a global leader. And you have seen that our business has been consistently 50% or more from international geographies. It is important for me to mention here about our focused regions in the International space. Europe will continue to remain our hub for incubating new technologies, which gives us a early mover advantage in other geographies, as we move more international, we have the opportunity to increase our EP share — engineering and procurement share of the business, which is in line with our business strategy of improving the bottom line and cash flow and thereby better valuation for all stakeholders. EP orders always helps to reduce the construction risk, thereby exercising better control over execution as compared to EPC projects. EP orders deliver better margin profile since the path through — sorry, construction portion of the revenue is reduced and this trend of better margin is already reflecting in our performance.
Let me now mention briefly a few key business updates. Before I proceed into the business updates, as we have mentioned in our previous calls as well, the ordering activities are moving swiftly and we have already placed a few large bids, both in India and in EMEA cluster. We are already a preferential bidder in few of our key orders we are targeting and expect that the awards will happen within this fiscal year. On the other tenders, we have placed our bids and we are confident of converting a good part of them. In all, our order book, which has been consistently remained over INR10,000 crores will further grow by the end of this year. Starting with India cluster, which comprises of India subcontinent and Southeast Asia, India cluster has been a backbone of the Group with Indian government’s various initiatives in the water sector like Namami Gange, Jal Jeevan Mission, Swachh Bharat, AMRUT, India is poised to keep growing and contributing to WABAG Group significantly.
Our AGCC project, we also call it SIBUR project, has been progressing swiftly, despite the restriction imposed by the geopolitical situation, we have been able to make steady progress here. The 48 MLD Reliance desalination project in Jamnagar is also in the construction and procurement stage. Orders of long lead items are completed, while the site activities have picked up been up in [indecipherable. All other projects have generally been on track. Our current project in cluster’s pack across waste water treatment recycle, reuse and desalination. Projects in the cluster have been generally progressing well.
Let’s move on to the Middle-East and Africa cluster. EMEA cluster has a tremendous potential and we expect to deploy our efforts to convert a good amount of these opportunities going forward. MARAFIQ sewage treatment plant project in the Kingdom of Saudi Arabia and ASHGHAL Doha project in Qatar are currently in final stages of completion. MARAFIQ is under performance guarantee trial runs stage and we expect to complete the project within this fiscal year. A 50 MLD [indecipherable] desalination plant Tunisia, North Africa being built for SONEDE, funded by KfW Germany is also progressing well and heading swiftly towards mechanical completion. At our 300 MLD Independent sewage treatment plant at New Jeddah Airport in [Technical Issue], which is being built with the state-of-art NEREDA technology, all supplies have been completed and testing and commissioning is in progress. The 50 MLD desalination plant in Senegal funded by JICA Japan which we received this year has started moving well on the engineering part and also the procurement activities are moving at a swift pace.
Let’s move on to Europe cluster. Europe cluster continues to remain our technology hub incubating new patents and proprietary technologies, which help us to have a early mover advantage in the developing economies, which is our focus market. The significant business of Europe will continue to come from Middle-East and North Africa.
Lastly, on our Namami Gange, for Clean Mission HAM projects. Our 187 MLD KMDA STP project being built in Arupara, Bally and Baranagar is substantially complete. We are on track to start testing and commissioning in this fiscal year and complete this plant by H1 of next fiscal year. Our STP HAM built for BUIDCO at Kankarbagh and Digha where we announced the effective date in Q1 this year has been moving well with the engineering and procurement activities substantially complete and construction activities have commenced.
On the 40 MLD Ghaziabad Nagar Nigam tertiary treatment plant [Technical Issue] we have progressed over 25% on the project activities. Lastly, on our service [Technical Issue], our strategy to grow the O&M business and this is evident from the order book of INR3,200 crores coming from several service business as of nine months this year, which constitutes 37% of our order book. Large DBO, HAM and one city one operator projects are enabling this growth in the backlog and we expect to witness growth in the revenues of the service business in the next few years as the EPC portion of the DBO and HAM projects gets complete and long-term O&M revenues start flowing.
With a consistent high-quality order book over INR10,000 crores and a strong order pipeline, we are confident of continuing to generate value for our stakeholders in this growth story in the years to come. I would like to express my sincere thanks to our direct [Technical Issue] for their continued support. Before I move on to Skanda for him to take you through the financials and other business highlights, I would now request Mr. Pankaj Malhan to say a few words. Over to you, Pankaj.
Pankaj Malhan — Deputy Managing Director and Group Chief Executive Officer
Thank you, Mr. Mittal, for this opportunity to speak to our stakeholders. Good evening, ladies and gentlemen. It is indeed a pleasure to welcome you all and to introduce myself as member of WABAG’s senior leadership team. First of all, let me take this opportunity to thank Group management and the entire Board of Directors of WABAG for placing their trust in me to do this very important duty. I think I had a wonderful couple of months and had an opportunity to get to know few of our fellow-WAGAGites over the past couple of [Technical Issues] and I have been impressed by their dedication to pursue the mission of the organization, which is sustainable solutions for a better life. I’m glad to be a member of a remarkable community of individuals that are committed to improve the quality of life in this world [Technical Issues] but very recent DWI report which says we are touching the large base of 88 million residents across the globe.
Let me speak something about myself. I have experience in working with diverse leadership teams where I have been largely involved in terms of business growths and turnarounds in a variety of industries, which include power, steel, polymer and process automation. [Technical Issues] remarked I was part of JSW. And have been blessed to work with companies like Vedanta Resources Limited and Tata Group. I think the management of water and waste water is a promising area for the entire humankind and is the necessity of humankind along with the environmental concerns.
Globally, if were to say, climate change presses itself through water only, nine of the 10 natural disasters are water related today. If we were to achieve climate and developmental goals, water must be at the core of adaptation. Not to say and mentioned over here, Government of India is focusing on this happening sector strongly, which is evident from number of policies and schemes introduced like AMRUT, National Water Mission, Namami Gange to name a few. I’m extremely delighted again to be part of this pure-play water technology company, which is amongst the leaders in manufactured water with presence in 25 countries across four continents and blends [Technical Issues] over years, WABAG guys have demonstrated a strong zeal towards technology and an excellent dedication towards making a sustainable contribution to environmental protection and improving quality of life.
My top responsibilities going forward would be to further strengthen the EHSS aspects and inculcate digitalization and world-class processes with cutting-edge technologies into the business, thereby setting the highest standards of corporate governance and creating value maximization for the stakeholders. Looking forward to more successes and celebrations and robust. Thank you very much. Over to you, Mr. Mittal.
Rajiv Mittal — Chairman and Managing Director
Thank you, Pankaj. I’m sure you along with the entire WABAG team will take the Group to a greater height and successes. I wish you all the best once again. Now we can move into the financial highlights. I would request Skanda to take you through the same. Over to you, Skanda.
Skandaprasad Seetharaman — VA Tech Wabag Limited
Thank you, Mr. Mittal. Good evening, friends. Trust you’ve had an opportunity to look at the results update presentation as circulated and uploaded on our website and stock exchanges.
Let me take you through the key financial highlights for the quarter and nine months ended 31st December 2022. Before I jump into the numbers and the highlights, a few words about the recent Indian central government budget. The budget has kept up the scope investments with higher allocation of INR70,000 crores to the Jal Jeevan Mission. The last mile connected to be achieved through the Jal Jeevan Mission will ovide the demand augmentation, which will in turn increase the need for treated water in the future. The allocation to green hydrogen [Technical Issue] INR20,000 crores is also encouraging, as this will indirectly increase the business landscape for the water sector. Effective infrastructure budget allocations of over INR13 lakh crores is encouraging and we expect this to gallop the economy forward, especially in these challenging times.
In summary, the budget continues to keep the momentum generated in the water sector, ongoing. Also, we are confident that the general vision and direction of this first budget in the Amrit Kaal [Phonetic] is expected to keep the Indian economy growing much faster than all other major economies of the world.
Before I move into the financial updates, a key event that happened during the quarter was the strategic funding tie-up we established with Asian Development Bank, one of the world’s top multilateral institutions, ADB will invest INR200 crores over a one year period in WABAG in this March, ADB’s first private sector water investment in India. This is indeed a wonderful testament and validation to WABAG’s global leadership in the water sector.
I’m also very happy to share with you all that WABAG short-term credit rating has been upgraded one notch to a A1 plus, which is the highest level of short-term rating signifying our strong business and credit credentials. As a management team, we have been putting in our best efforts and you have been seeing that the credit rating indicators have been consistently improving at least over the past eight quarters, specifically.
Now moving on to the financial updates. Our consolidated revenues for the nine months financial year ’23 stood at INR2,034 crores, and on standalone basis stood at INR1,577 crores. Our consolidated revenues for Q3 stood at INR652 crores and on standalone basis stood at INR519 crores. The consolidated EBITDA for the nine months stood at INR201 crores, up 14% year-over-year, and the standalone EBITDA for nine months stood at INR172 crores, up 33% year-over-year. The consolidated EBITDA for the quarter stood at INR75 crores and standalone stood at INR64 crores.
The profit after tax attributable to owners stood at INR124 crores on consolidated basis for the nine-month period, up by about 45% year-over-year. On a standalone basis, the profit after tax stood at INR97 crores, up by about 61% year-over-year. For the quarter, the profit after tax on consolidated basis stood at INR47 crores and on standalone basis stood at INR37 crore.
A look at our key business metrics for the quarter. Core EBITDA stood at 13.5%, double-digit EBITDA margins as we retained our focus on technology, international, industrial and EP projects. Core PAT at 8.8% driven by operating margin improvements and control over finance cost through efficient banking lines management both volume and cost front.
Core return on capital employed, that is ROCE, stood at 21.4%, in line with our asset-light model and technology focused approach. Working capital on absolute basis has continued the trend of reduction year-over-year and the core working capital days stood at 90 days, driven by focus on working capital and cash management, being the priority of the management.
Gross debt stood at INR297 crores, reduction of 41% year-over-year for Q3. Improved performance on cash flows year-over-year with net debt at INR30 crores and we are on track to continue remaining net cash positive by the end of the year. In line with our strategy to remain an international group, 48% of our revenues were delivered from rest of the world and 52% was from India. Our order backlog stands at over INR10,000 crores with more than half of it coming from overseas geographies and projects.
The quality of order book is enhanced with the majority mix of multilateral and federal government-funded projects, industrial jobs backed by adequate payment securities largely in desalination and wastewater treatment, including recycle, reuse and industrial water treatment space. The consistent level of order book over INR10,000 crores in the past few quarters and the confidence from orders where we are preferentially placed already gives us a good confidence about revenue visibility and growth.
We express our heartfelt thanks to our bankers, investors, fellow WABAGites and all other stakeholders for the continued support extended to us.
With this, we now open the floor for Q&A.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] We have a first question from the line of Mohit Kumar from DAM Capital Advisors. Please go ahead.
Mohit Kumar — DAM Capital Advisors — Analyst
Before I start. I would like to congratulate Pankaj and wish you best of luck. Thanks for the opportunity to ask questions. I’ll ask two questions. Primarily, first is on the revenue. Our revenues have been kind of stagnant compared to nine-month FY’22, while numbers are similar. While order book has improved materially over last three, four years. Can we expect some more momentum in the revenues going going forward?
Rajiv Mittal — Chairman and Managing Director
Yes, Mohit, I think we have been communicating in each of our interaction that couple of years back we have — we had strategy documents which is going to be implemented over the next four, five years. And we have clearly mentioned that we want to remain as a technology player and focusing on what we are good at in EP, engineering and procurement. And implementing projects using our proprietary technology, advanced technology in the emerging markets. While here we used to focus also on EPC projects where we have mentioned many times to you that the C part is almost like a pass-through, because we don’t do the construction we always outsource and which, yes, it gives us the top line but also reduces our bottom line. So that directional change we had done about six to seven quarters back. And you can see the results very clearly that today our bottom-line is substantially growing which is — was planned. Also our debt levels have come down. Our cash flows have gone up. And you can see the interest costs and the bank charges have come down. So this is what we believe we are creating value for all our stakeholders. And this is what the direction we want to grow in addition to also focusing on our service business, which is again a annuity business with more and more DBO contracts coming and the HAM contracts which gives us a long-term operation and maintenance, our focus will remain on margin improvement and cash improvement.
Mohit Kumar — DAM Capital Advisors — Analyst
How should we think about growth in the next, let’s say, FY’24 given the order book?
Rajiv Mittal — Chairman and Managing Director
See, here, we will have no choice but to grow, because we had mentioned to you in the last con-call, and today also, that our order pipeline looks really solid. And already, there are a few very large projects where we are already a preferential bidder. So we expect in next six to seven weeks we should be having all these contracts signed and coming into an execution phase. And this will definitely give us the improvement in other business. But again. I want to just remind our focus will remain on margin improvement and cash improvement.
Mohit Kumar — DAM Capital Advisors — Analyst
Good to hear that. My second question is on the order opportunity, how does the domestic order opportunity is looking like at this point of time? And when you say that your large orders that you are the preferred bidders, can you just let us know the quantum of those orders?
Rajiv Mittal — Chairman and Managing Director
As these orders are not in public domain, but we know there are three extremely large orders. We had also mentioned this in our con-call speech last time and also during the interaction in the Q&A. But we see at least about INR5,000 crores where we are like a preferential bidder and we should be able to close this in next six to seven weeks. And this is what we are hoping will give us a good momentum to start the next fiscal year, which you said FY24. And also these orders all funded by multilaterals like JICA, World Bank of the kind, and hence, our cash-flow should also substantially improve. This, we have said before, this is going to be in the space of desalination, waste water and recycle, reuse, which are all technology-based orders, so it should also have better margins.
Mohit Kumar — DAM Capital Advisors — Analyst
Understood, sir. Thank you and all the best sir. Thank you.
Operator
Thank you. We have a next question from the line of Bharat from Moneybee Investment Advisors. Please go ahead. Mr. Bharat, kindly acknowlege.
Bharat — Moneybee Investment Advisors — Analyst
Hi, am I audible?
Operator
Yes.
Bharat — Moneybee Investment Advisors — Analyst
We just had a question regarding the INR5,000 order intake that you just said that you are the preferential bidder. So when do you expect the results for that particular order that you just said?
Rajiv Mittal — Chairman and Managing Director
As I said, we should be closing in this fiscal year. So you can say in next six to seven weeks.
Bharat — Moneybee Investment Advisors — Analyst
Okay. So you won’t be able to give any details regarding the order, right, the —
Rajiv Mittal — Chairman and Managing Director
We should not because it’s this information is not in the public domain, more than that, we cannot give you. But let’s all keep our fingers crossed and very soon we’ll be able to make a public announcement.
Bharat — Moneybee Investment Advisors — Analyst
Yeah sir. Sir, and my second question as I know that now you only take EP contracts, construction contracts we have not been taking, so I just wanted to know, looking at the margin, so what would be the sustainable EBITDA margin going forward, so would you be able to give me guidance on that?
Rajiv Mittal — Chairman and Managing Director
Bharat, you’re right, but just want to make a small correction. It’s not that we are not taking EPC orders. EPC orders are not our our preference. EP is what there will be always clients who would like to see a single-point responsibility, so we will be taking some EPC orders, but our focus will be on EP, the margins will depend on the percentage of EP orders orders in the total order book. So this will be fluctuating, but our aim would be to move more and more towards EP and technology orders is what we want to move and also international and industrial segment is where we want to move.
Bharat — Moneybee Investment Advisors — Analyst
Okay. And would you be able to just guide me sustainable margin that we would be able to achieve?
Rajiv Mittal — Chairman and Managing Director
See, as I said, that this margin will depend upon the mix between the EPC, EP and our service business, but definitely going forward as you have already seen in the last few quarters there will be a margin expansion.
Bharat — Moneybee Investment Advisors — Analyst
Okay, okay, that’s it, I’ll get back in the queue.
Operator
Thank you. We have our next question from the line of Kaushik Poddar from KB Capital Markets. Please go ahead.
Kaushik Poddar — KB Capital Markets — Analyst
Yeah. A new Managing Director or a potential new Managing Director is here. I mean, what is the rationale for bringing in some new person at such senior level, who is going to take over as the Managing Director and what is the mandate given to him?
Rajiv Mittal — Chairman and Managing Director
Very simple my friend. Every organization has to have succession planning in place. The simple rationale is we need to bring in people who can take over over a period of time from existing management. So that is the succession planning and Pankaj is a result of that, we are really happy to have him with lot of his experience and working in large organizations with system, processes and governance. We are very happy to have Pankaj as a part of the management team and the mandate given to him is very clear from the title he holds, Deputy Managing Director and Group CEO, which clearly shows that to start with he’s straight into the operations and trying to see how to improve WABAG’s position and also meet the strategy goals, which we have taken on ourselves two years back.
Kaushik Poddar — KB Capital Markets — Analyst
And secondly. I mean, you emphasized the role of the European operation for the technology part. Now when in India, the technical manpower is much cheaper, is there any reason — rationale for keeping the technology part in Austria?
Rajiv Mittal — Chairman and Managing Director
Yeah, absolutely, Kaushik. It is because we are talking about technology. Technology is appreciated and in demand in the developed world, like today, Switzerland is the capital of environment and water, the technologies which are demanded by the clients in that country, they are not even spoken in the emerging world. So when we develop some technologies based on the market needs and perfected in the advanced world or the developed world, when we need this technology in the emerging world, we already have it ready, we have reference plants, we have an experience, and that is the reason we have the technology center in Vienna and in Switzerland and also we are doing adaptation of these technologies for the emerging world and we are doing lot of work in Chennai, with the help of some research scholars and universities in Chennai.
Kaushik Poddar — KB Capital Markets — Analyst
And what is your annual R&D spend and how many people are there purely focused on technology?
Rajiv Mittal — Chairman and Managing Director
See, our all R&D work is slide work, some of the work we do, along with the client, but if you say, exclusively for this, maybe about 25, 30 types are only working on this kind of thing. And our spend is close to 1% of our top line.
Kaushik Poddar — KB Capital Markets — Analyst
I mean is, is this a standard thing over the past years. I mean, is it increasing?
Rajiv Mittal — Chairman and Managing Director
No, no, it’s standard over this and all the group companies are contributing to R&D budget and this technology is what we develop at the group level, is available to all the entities across the group.
Kaushik Poddar — KB Capital Markets — Analyst
Okay, and as I see. I mean your EC part — EP part of your business is growing much, much more. And also you’re emphasizing on service. So does it mean that the turnover may not be going up and that you will be more focused on service part of the business and this is the way to go. So top line is not the one we should be looking at more in line is the way forward?
Rajiv Mittal — Chairman and Managing Director
I think you are right. Just a small correction. As we are talking about our order book swelling by end of this fiscal year, we will have no choice but to have increase in top linke, but you’re right in terms of top line is not the way to look at this company, bottom line, and more specifically, cash flow.
Kaushik Poddar — KB Capital Markets — Analyst
Okay. And my last question with the kind of increased cash-flow you’re having, I mean throwing up more free cash. Can we see your coming back to the dividend list for this financial year?
Rajiv Mittal — Chairman and Managing Director
I do not know about the dividend list. I think together with all of you we will have to make a call, because as you know, we are investing in a small way, keeping our asset-light model intact into our HAM projects, which are also giving us annuity revenue and good margins. So it’s a question of how much you pay dividend and how much you work on increasing the valuation of the company by investing a small amount into these HAM projects. So this is a judgment call we will all have to make together what is more beneficial to our stakeholders.
Kaushik Poddar — KB Capital Markets — Analyst
Okay, okay. I think I have taken a lot of time. Thank you. Thank you. Let others get in. Okay. Thank you.
Operator
Thank you. Ladies and gentlemen, in order to ensure that the management is able to answer queries from all participants, kindly restrict your questions to two at a time. We have a next question from the line of Darshika Khemka from AV Fincorp. Please go ahead.
Darshika Khemka — AV Fincorp — Analyst
Hello sir. Thank you and firstly congratulations on a good set of numbers. I had a question — am I audible, firstly?
Operator
Yes.
Rajiv Mittal — Chairman and Managing Director
Yeah, a little bit louder will be better.
Darshika Khemka — AV Fincorp — Analyst
All right. So am I audible now? Any better?
Rajiv Mittal — Chairman and Managing Director
Please carry on. We’ll manage. Don’t worry.
Darshika Khemka — AV Fincorp — Analyst
All right. So I see that the receivables that the company had stood at around INR2,000 crore number, it would be great — I think — it was around INR1,400 crores. Could you help me with the breakdown into PPGENCO — TSGENCO and APGENCO, it’d be extremely helpful. And also, if the company has provided for any number in the last nine months. I ask this question because in Q1 con-call you had mentioned that you usually provide for INR60 crores to INR65 crores on an annual basis.
Rajiv Mittal — Chairman and Managing Director
So, Darshika, this is one point which we mentioned as part of our notes to the results. You can see, note four to our results, which gives the receivables from TSGENCO and APGENCO and also from [indecipherable]. So we basically divide it into the three brackets in which we view this, number one. Number two, yes, we said in our Q4, as well as earlier calls that we consistently provide, there is a Board-mandated ECL policy which we use for the purpose of assessing provisions and providing. And here we are also providing on the same lines this year as well consistently, and you can see in notes for the total of these three numbers is INR350 crores in total, and this is net of all the provisions that we have made till 31st December.
Darshika Khemka — AV Fincorp — Analyst
Could you quantify the number that you provided in the last —
Rajiv Mittal — Chairman and Managing Director
Maybe INR20 crores, INR25 crores.
Darshika Khemka — AV Fincorp — Analyst
Okay.
Operator
Thank you. We have a next question from the line of Nikhil Abhyankar from DAM Capital. Please go ahead.
Nikhil Abhyankar — DAM Capital Advisors — Analyst
Thanks for the opportunity, sir. Sir, can you give an update as to what has happened with Chennai plant, we were one of the four bidders.
Rajiv Mittal — Chairman and Managing Director
Yeah, we had mentioned this earlier, maybe you missed out. Even in the last con-call, we have given. Out of the four bidders, only three bidders had submitted the bid, technically was evaluated and it was approved for price bid opening and that’s the reason we mentioned this is one of the projects where we are preferred bidder and we expect in the next six to seven weeks award.
Nikhil Abhyankar — DAM Capital Advisors — Analyst
Understood sir and any other specific desal plant — desal orders that are coming up?
Rajiv Mittal — Chairman and Managing Director
Yeah, a number of them, I think as we mentioned, going forward, we see manufactured water and for the sake of clarity to all of you, we call manufactured, be water cause this is manufactured by us. It’s not god given water as it is in the question of rain water or surface water, which gets from the lakes or river, this is manufactured water because in its original form this water is not usable. So as a company we manufactured this water from a non-usable form to a usable form, whether it is recycle, reuse, we do offer used water, already it is used, we’re not throwing it away. We are treating it and recycling it for non-potable purpose, agriculture and also indirect potable purpose. Second, it’s again seawater, in its normal form it’s not usable, and desalinating it and making it as potable water, hence there’s a great market for manufactured water going forward and you will see a lot of our orders coming going forward will be from these two segments.
Nikhil Abhyankar — DAM Capital Advisors — Analyst
Understood. And just a final question regarding bread and B. So one of the OMCs have come out with a INR4 billion project. So are there any more projects coming up, and are we participating in them?
Rajiv Mittal — Chairman and Managing Director
Sorry, what you mentioned about 4 million —
Nikhil Abhyankar — DAM Capital Advisors — Analyst
4 billion, INR400 crores of project had come up for ZLD, zero liquid discharge from one of the OMCs. So are there any such projects in line?
Rajiv Mittal — Chairman and Managing Director
I think, see, today, Pollution Control Boards are tightening their norms. You cannot discharge affluent or wastewater, which is not meeting the discharge standard. So there’s more and more demand going forward is going towards ZLD, we have just completed one project in India and we are executing one more project in abroad. So this ZLD is going to be a way forward going forward and also they are going to become more and more affordable as we have expansion of capacities. So, yes, it is going to be also a technology of future.
Nikhil Abhyankar — DAM Capital Advisors — Analyst
Sure, sir, and just a final bookkeeping question, Can you give us the number for inventories, trade receivables, trade payables and advances to and from the customers?
Rajiv Mittal — Chairman and Managing Director
Nikhil. I’d suggest we take this offline. I mean, you can contact the Investor Relations people and they will give you this number, otherwise, it’ll just be a number reading session. Is it fine?
Nikhil Abhyankar — DAM Capital Advisors — Analyst
Sure sir. Thank you.
Rajiv Mittal — Chairman and Managing Director
Thank you.
Operator
Thank you. We have our next question from the line of Hemant Soni, an Individual Investor. Please go ahead.
Hemant Soni — Individual Investor — Analyst
Thank you for providing me the opportunity. Sir. I have one question, so I understand that we are focusing on the EP part and not on the construction part and the margins — and we are choosing more on margins basically, but as per your earlier calls, you had guided H2 revenues will be better than H1. Now currently, we are seeing that Q3 revenue Is down as compared to Q2. Can you throw some light on that, sir?
Rajiv Mittal — Chairman and Managing Director
Yeah. I think you know project business is very lumpy business. If we would have got a few projects what we planned In Q3, we would have got that. And some of the projects for decision-making, it gets postponed by a month or two and it happens, but generally, what you’re saying is always a trend always H2 will be always better than H1. And I still believe that going forward, we still have a chance in this Q4 to be good and already we have done quite a bit in H1, and we definitely going-forward some of the projects will get converted, will show some revenues at least in the engineering front in the next two-three months, we will see in Q4 a good result, but overall. This kind of EP projects, large technology projects, will continue to give us good margin and good cash flow. So even if some revenue may be slightly lower than we all would have expected, but margins are intact, cash flows are intact. You can see, even our margins have expanded almost 40%, 50% compared to the last year nine months. So, there has been very decent growth in terms of margin and cash flow.
Hemant Soni — Individual Investor — Analyst
Yeah, I understand sir. Can we expect some of the revenue will be spilled over in Q4?
Rajiv Mittal — Chairman and Managing Director
Yeah. As I said, it all depends, whether we get these some of the orders in next one or two weeks or six, seven weeks. If we get it in one or two weeks, obviously, there will be revenue flowing from those orders. But if we get towards the second half of March, then there will not be much revenue flowing in this Q4.
Hemant Soni — Individual Investor — Analyst
Okay sir, and sir, can we expect to close this year, it is FY’23, INR15,000 crores of order book based on, frankly, we have INR10,000 crores and we are the preferential bidder for INR5,000 crores of order. So can we expect the order book to be INR15,000 crores by end of FY’23?
Rajiv Mittal — Chairman and Managing Director
As they say in Arabic, Insha Allah, why not? I think we all are praying and wishing for it. So let’s hope that next time when we meet, we can celebrate INR15,000 crores.
Hemant Soni — Individual Investor — Analyst
And sir, this order book, if it will be INR15,000 crores, it is executable over a period of how many years?
Rajiv Mittal — Chairman and Managing Director
Generally, it is about three years, but you can take it about maybe 3.5 years because there’s always some reason of delay, you could add six months, let’s say, about 3.5 years.
Hemant Soni — Individual Investor — Analyst
Okay, sir. Okay, thanks a lot.
Operator
Thank you. We have our next question from the line of Omkar, an Individual Investor. Please go ahead.
Omkar — Individual Investor — Analyst
Sir, very good evening. First of all, congratulation for your good set of numbers, in respect of net profit and very good operating profit margin at 11.5%. And I’m very much audible, right, sir?
Rajiv Mittal — Chairman and Managing Director
Yeah.
Omkar — Individual Investor — Analyst
Okay, great, sir. So up to Q2 results of the WABAG, I have gone through the interview of Rajneesh Chopra who is a global head for WABAG. He is saying we are having more opportunities in Russia to do more projects. He further said that as western world sanctions are there in Russia, global competitors of WABAG are not active in Russia. Therefore, WABAG is actively and strategically targeting Russian market. And active bidding is happening from WABAG and before March 2023, three, four bids will get submitted in Russia and he further said, WABAG is confident not only they will get the order but also they will get good margins. So my first question is, do you think is it a fair bet to get orders from Russia where geopolitical risk still involved in Russia and why are we taking risk to win the orders in Russia as Russia-Ukraine war is still going on. We learned already a lot of things from the APGENCO project, where our money got stuck, but as we are getting a good margin, so that is only reason we are our bidding more in Russia or some specific reason for that? Over to you sir.
Rajiv Mittal — Chairman and Managing Director
Thank you. I think all your questions are in answer what you said Rajneesh has mentioned in his interview.
Omkar — Individual Investor — Analyst
Right.
Rajiv Mittal — Chairman and Managing Director
Russia was always a spot market for us. And we are considering whether it should be a target market. And you said that as some of our technology-led competitors have moving out or have moved out already, lot of their projects remain incomplete and clients have no option, but to choose somebody who has a technology know-how to complete these projects. So we consider this as a great opportunity for WABAG again to demonstrate that technological superiority.
Regarding your risk and very valid question, see today, you know, the Indian government is opening up doors for Russia and even talking about rupee being a credible currency because there’s so much of money which India has to pay to Russia. So you would have read in the news that the rupee is going to be a tradable currency between the two countries.
Second, we don’t take any international orders, especially in countries like Russia, where we do not have a confirmed irrevocable letter of credit before we start our reputation and that’s the reason we call some of these orders like the framework orders till we get a letter of credit. Like in SIBUR, which we are executing, we have a $100 million of executable LC and that’s how we restarted the project. So as far as the risk is concerned, we do not see as a risk as soon as we dispatch our goods, we have our letter of credit to draw the money from the banks where we have got the LC assigned to them. So we do not see the risk, and you can be rest assured we will not be — we know how to manage risk, we have worked in the Arabic word, we have worked in the African world and all this, we work either with each ECGC cover from Government of India, all with letters of credit. We will not take any financial risk and that is the reason, most of our orders are again multilaterally funded or central government guaranty backup. So you can be rest assured, no financial risk will be taken by this company.
Omkar — Individual Investor — Analyst
Oh, great, sir. Thanks for the update. And a quick question regard to Russia project only, the management says, in Russia project will contribute substantially in H2 in WABAG revenue as INR1,000 crores order still to be executed of this order, how much Russia Amur project contributed in Q3 and how much it will contribute in Q4? I’m not expecting exact figure for quarter four, but how much it has contributed in quarter three, that AGCC project?
Rajiv Mittal — Chairman and Managing Director
See, AGCC project, you know, it will only got revived in Q2. So Q3 was more on engineering and some of the change of vendors from the sanction countries to the non-sanction countries. So the contribution was not that great, maybe 10% of the total revenue, right. But going forward in Q4, we are expecting this to go up to 15%, 20% of the Q4 revenues, and next year is where we will supply the goods and it will contribute substantially in FY’24.
Omkar — Individual Investor — Analyst
Okay, got it, sir. And quick question on that 400 MLD JICA project, as we are talking about this project since February ’21, in last conference call also, you said pre-qualifications were over, technicals were submitted, the revaluation are completed, and now you were waiting for the price bids to be open. So, whether the price bid has already opened or not?
Rajiv Mittal — Chairman and Managing Director
Yes, yes.
Omkar — Individual Investor — Analyst
It is already opened. And when the government will announce the preferred bidder, I understood, through your answer next four to six weeks the final outcome should come. But any specific timeline or deadline is there for these projects? Or is it still can get postponed for three months also?
Rajiv Mittal — Chairman and Managing Director
Normally it will not. As I’ve said, we cannot hold government but the planned timeline is within this fiscal year, because this is again financial bids bids are opened, the evaluations are almost going to be completed, the state government because of the size of project will have to approve it, then we have to send it to JICA for their approval. And after the approval, they can give us a letter of award.
Omkar — Individual Investor — Analyst
Great sir, thanks for answering my question. And again, congratulations for good set of numbers. Thank you very much.
Rajiv Mittal — Chairman and Managing Director
Thank you.
Operator
Thank you. We have our next question from the line of Sheen George from Geojit Financial Services. Please go ahead.
Sheen George — Geojit Financial Services — Analyst
Hello. Hello.
Rajiv Mittal — Chairman and Managing Director
Yeah, yeah.
Sheen George — Geojit Financial Services — Analyst
Good evening, sir. Can you give us the order intake —
Rajiv Mittal — Chairman and Managing Director
Can you be little louder or take your handset?
Sheen George — Geojit Financial Services — Analyst
Yeah, am I audible now?
Rajiv Mittal — Chairman and Managing Director
Yeah better.
Sheen George — Geojit Financial Services — Analyst
Can you please give us the order intake estimates for like FY’24 and FY’25?
Rajiv Mittal — Chairman and Managing Director
I can only tell you, as you have seen, water is a preferred sector in India, lot of money is getting allocated in the water sector, same is the thing in Middle East with the oil prices at its all-time high. with lot of affordability for the Middle East clients to invest in water projects and in general infrastructure. So I would say the complete environment is very positive and we are bullish about it. And with WABAG’s global position and standing, we would have definitely our share of orders. So you can always be feeling good that we will have a good year next few years also. But with our order backlog being at all-time high by end of this fiscal year, there’s nothing to worry about the growth or the execution what we will have to do in the next few years, we have enough to queue in the next few years.
Sheen George — Geojit Financial Services — Analyst
Okay sir. Order book expectation percentage which you are expecting?
Rajiv Mittal — Chairman and Managing Director
Sorry, we can’t hear you.
Operator
George, please use your handset?
Sheen George — Geojit Financial Services — Analyst
What is the expectation percentage you are expecting for the next two years approximate?
Rajiv Mittal — Chairman and Managing Director
I don’t think I should guess certain things, but I think the market we have seen, we have seen our position over the last few years, you can only feel that we will not be desperate in going for orders, we will select the orders based on the merit and the defined guidelines we have internally and we would still have enough orders to give a good growth in top and bottom-line, more focused on bottom line and cash flows.
Sheen George — Geojit Financial Services — Analyst
Thanks.
Rajiv Mittal — Chairman and Managing Director
Thank you.
Operator
Thank you. We have our next question from the line of Arun Chakravarthi, an Individual Investor. Please go ahead.
Arun Chakravarthi — Individual Investor — Analyst
Good afternoon.
Rajiv Mittal — Chairman and Managing Director
Good afternoon. How are you?
Arun Chakravarthi — Individual Investor — Analyst
Congratulations, this is really — more of the beautiful results.
Rajiv Mittal — Chairman and Managing Director
We have been waiting for few quarters already.
Arun Chakravarthi — Individual Investor — Analyst
Yeah, let me tell you — this is very good results. I was very much pleased. But all of my questions have been answered.
Rajiv Mittal — Chairman and Managing Director
But still we are happy to hear your voice.
Operator
His line got disconnected. We’ll take the next question from the line of Manish Shah, an Individual Investor. Please go ahead.
Manish Shah — Individual Investor — Analyst
Thanks for the opportunity and congratulations on a very good set of numbers. Sir, out of this INR5,000 crores of orders which you are expecting till the end of March, how much is this Chennai order sir?
Rajiv Mittal — Chairman and Managing Director
See, at the moment, it will not be fair for us to disclose these numbers as of now, but as a ballpark number we have given you some three orders which will at least contribute INR5,000 crores or more. That’s all. I would like to say at this stage, because the information is not public, and I don’t want to jump the gun and give numbers, which are not in the public domain.
Manish Shah — Individual Investor — Analyst
But it should not be more than 40%?
Rajiv Mittal — Chairman and Managing Director
No, no, it will be far more than that.
Manish Shah — Individual Investor — Analyst
So that means we are very much dependent on that single order, sir?
Rajiv Mittal — Chairman and Managing Director
No, no, no, when we say INR5,000 crores, that doesn’t mean these three orders is equal to INR5,000 crores. It will be equal to much more than that.
Manish Shah — Individual Investor — Analyst
Okay, okay, okay. Sir, and out of these orders, which we are expecting end of March, how much is the contribution from rest of the world and how much is contribution from India, sir, approximately?
Rajiv Mittal — Chairman and Managing Director
See. It will be because of this large order in Chennai, predominantly, it will be from India in Q4. But there will be a substantial portion also coming from rest of the world.
Manish Shah — Individual Investor — Analyst
At least 60-40, India — 60 India, and 40 out-of-the world — rest of the world?
Rajiv Mittal — Chairman and Managing Director
India will be much more in this case.
Manish Shah — Individual Investor — Analyst
In this case. Thank you for the opportunity, sir.
Operator
Thank you. [Operator Instructions] We have our next question from the line of Shri Harsha, an Individual Investor. Please go ahead.
Shri Harsha — Individual Investor — Analyst
Afternoon, everybody. And congratulations for good set of numbers. Can you tell me is there — the other prospects for order like the Chennai desalination order which is as big as this order which is available in India?
Rajiv Mittal — Chairman and Managing Director
See, generally, over the years, we have seen that the ticket size of orders are going up year-on year. But to have something comparable to Chennai, it will take some time, but there are orders may not be they are comparable to Chennai, but they are not getting much smaller compared to Chennai. Today, average size is going around INR1,000 crores. So that’s the kind of orders which are in the pipeline, plenty of them. So I think nothing to worry today, your company WABAG is focused on large complex advanced technology orders. So we will continue to focus on large and complex orders.
Shri Harsha — Individual Investor — Analyst
Okay, another question, like I want to know the opportunities in the zero liquid discharge front, as more and more companies are actually concerned about the environmental issues.
Rajiv Mittal — Chairman and Managing Director
Yeah, absolutely. As the regulators and authorities are tightening the implementation, so I think a lot of industries are getting notices and ensuring that they meet the discharge standard, including the municipal authorities also. Well. I think there have to be a way of balancing between the economics and the environment and that’s what government is trying to do is trying to see how to balance between this because zero liquid discharge is not one of the cheapest technology and they are ensured that the industry can afford and still they will be able to meet the discharge standard. So I think this is what most of the work is going on, lot of brainstorming is happening between the water managers to see how to meet both the ends. But one thing is very clear, going forward, it’s only a matter of time, zero liquid discharge will become a state-of-art technology.
Shri Harsha — Individual Investor — Analyst
Do we have any patent or trademark registered in the zero discharge liquid front in the name of company?
Rajiv Mittal — Chairman and Managing Director
I don’t think it’s a technology which needs any trademark or a patent, it’s more about your engineering skills, how do you use your experience and know-how and put the scheme together and tailor make it for the customer’s use, there is no standard technology, which can be just used, it can membrane-based technologies, it can be thermal-based technologies who have a combination of both to ensure that we meet the required — so it’s not the technology, it’s about your engineering and experience capability to put a scheme together, which will meet the required demand and also be economical.
Shri Harsha — Individual Investor — Analyst
Thanks.
Operator
Thank you. [Operator Instructions] We have our next question from the line of Manish Shah, an Individual Investor. Please go ahead.
Manish Shah — Individual Investor — Analyst
Thank you, sir. Sir, what is the probability of our getting these orders, which is INR5,000 crores which you told till March?
Rajiv Mittal — Chairman and Managing Director
See, our probability of getting these orders, as I told you, we are preferred bidder, is very high. Now, March is the target of the government and the funding agency to give this order in this fiscal year. So I would say that generally the probability is very high.
Manish Shah — Individual Investor — Analyst
And sir, another question about this other income, which is less in this quarter because the contribution from rest of the world is less, right?
Rajiv Mittal — Chairman and Managing Director
Sorry, which other income you’re talking about?
Manish Shah — Individual Investor — Analyst
Sir, other income in this current quarter is down compared to the second quarter because the contribution from the rest of the world is down, so we are not able to get any incentive or dollar income. So in the fourth quarter, it will correct itself?
Rajiv Mittal — Chairman and Managing Director
I think you have to see. I think this was the question even in the first quarter. See, there is — company’s business is international. We’re doing some business in the geographies where the U.S. dollar is a currency, we also do business where euros is the currency. So in the third quarter, U.S. dollar has appreciated but also euro has appreciated. So it has a negative cross effect, where there will be some ForEx loss on euro and some. U.S. dollar gain and hence you see this number to be very low compared to the earlier quarters.
Manish Shah — Individual Investor — Analyst
Sir, another last question, sir, at least we should get INR3,000 crores of orders till March, at least?
Rajiv Mittal — Chairman and Managing Director
Why are you reducing our target? You should be increasing our target.
Manish Shah — Individual Investor — Analyst
No, no sir, I will be the happiest person if you get INR5,000 crores —
Rajiv Mittal — Chairman and Managing Director
Let’s be optimist, let’s pray for us, let’s pray for your company that we do what we commit.
Manish Shah — Individual Investor — Analyst
Best of luck, sir. Best of luck. Thank you so much.
Rajiv Mittal — Chairman and Managing Director
Thank you.
Operator
Thank you. Ladies and gentlemen, that was the last question for today. I now hand over the call to management for closing comments. Over to you, sir.
Rajiv Mittal — Chairman and Managing Director
Thank you. A few words before we close in summary. I think it has been again a profitable growth. Our order book is more than INR10,000 crores, order pipeline looks strong, with lot of orders where we are preferred bidder. We will continue to focus on international geographies, EP orders technology-based orders which will help us to not only improve the margin, but also remain cash-positive by the end of the year. We will remain on track to continue to be a net positive company by the end of this fiscal year. Our business is all about clean and green ensuring water security and sustainability. Future looks bright for water sector and WABAG is well placed to be the key global player in contributing to world’s water sustainability and security. Once again, thank you everyone for your participation in our nine-month and Q3 FY’23 earnings call. We have uploaded the analyst presentation in our website. In case you have any further queries, you may get-in touch with Stellar IR Advisors, our Investor Relation Advisor based in Mumbai or feel free-to get-in touch with us directly. Thank you.
Operator
[Operator Closing Remarks]