Vascon Engineers Limited (NSE:VASCONEQ) Q1 2023 Earnings Conference Call dated Aug. 03, 2022
Corporate Participants:
Santosh Sundararajan — Group Chief Executive Officer
Somnath Biswas — Chief Financial Office
Analysts:
Vinita Kapoor — Individual Investor — Analyst
Renuka Jadhav — Individual investor — Analyst
Shrey Gandhi — Arihant Capital Markets Ltd. — Analyst
Milan Shah — Urmil Research Consultant team — Analyst
Deepesh Sancheti — Manya Finance — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Q1 FY ’23 Earnings Conference Call of Vascon Engineers Limited. [Operator Instructions]
I now hand the conference over to Dr. Sundararajan, Group CEO, Vascon Engineers Limited. Thank you and over to you sir.
Santosh Sundararajan — Group Chief Executive Officer
Thank you. Good morning, everyone. I welcome you all to the Earnings Conference Call of Vascon Engineers for the quarter ended June 30, 2022. Today joining with me on this call is Mr. Somnath Biswas, our CFO, and our investor relations team Stellar Investor Relations. I believe you would have gone through the Q1 FY ’23 financial results and the results presentation uploaded on the stock exchanges and on the company’s website.
The key development in Q1 FY ’23. We have been highlighting over the past few quarters that we are focused to improve our debt position, and in continuation to that we are happy to report that over the past 15 months we have been able to reduce our debt by INR59 crores to INR155 crores as on June 30, 2022, as against INR214 crores as on March 31, 2021. This, along with improved cash flow generation, has led to net debt of only INR48 crores as on June 30, 2022, as against INR134 crores as on March 31, 2021.
More importantly, a significant part of the debt reduction has been on the high-cost debt, which helps in bringing down our finance cost. During the aforementioned period, the total debt-equity ratio has improved to 0.19 times from 0.30 times. Further, our credit rating profile has also improved. As mentioned in the last con call, too, our credit rating for long-term bank facility has been upgraded from Acuite BBB minus to Acuite BBB stable, and for short-term bank facilities has been upgraded from Acuite A3 stable to A3 plus stable. With improving business performance and cash flow generation, we are hopeful of further upgradation in our credit rating going forward. We continue to focus on liquidity management by monetizing the noncore assets.
The second key highlight is the improving run rate of the EPC execution. During the quarter, EPC revenue increased 78% on year-on-year basis and 4% on quarter-on-quarter basis to INR137 crores, while, of course, on year-on-year basis it may look high growth centric due to the base effect of the partial lockdown last year, but when compared on quarter-on-quarter basis, too, the growth in EPC execution run rate is quite encouraging. Given that typically, in construction industry, Q1 of any fiscal year is lower than Q4 due to seasonal effects. We attribute this growth to rigorous efforts by our team to resolve the challenges that we have been facing in the past.
Thirdly, our EPC order book have been robust. As on June 30, 2022, the total order book stands at INR1,777 crores of which external EPC orders are INR1,638 crores and the balance INR139 crores is from internal orders. Further, almost 76% of the order book is towards government projects, which provides visibility or faster execution and uninterrupted cash flows, helping us improve our execution run rate.
With that, we believe we are well placed across improved performance in the next couple of years, as our order book forms 4.2 times FY ’22 EPC revenue, providing strong visibility of EPC revenue growth for the next two, three years. The company is witnessing increased demand in real estate EPC segments as we are tying up with realtors based in Pune, Mumbai, and Coimbatore.
Lastly on the real estate and GMP business, we are happy to report there is meaningful progress in both the business segments. During the quarter, we launched new residential project Tulip Phase III in Coimbatore, the first Tower 6. And out of the 49 units which is in Vascon share, 44 units were sold within one month of launch. We are planning to launch Tower 7 of the same project in August ’22. On the other project, Vascon Springs, we have fully sold the building consisting of an area of 33,387 square feet, out of which 70% is Vascon’s share.
GMP business is also looking turnaround. Company has generated a profit of INR1.3 crores in the current quarter. With that, Vascon Engineers embarks to move towards growth trajectory. The company’s proficient team and rigorous hard work has begun to show meaningful outcome in the performance. In the recent past, the company faced various headwinds, which have progressively resolved, thus heading towards achieving new highs, our emphasis towards debt repayment and building a robust order book with reliable clientele.
Coming to the industry sector, the rating companies have revised the construction sector outlook to neutral in FY ’23 from an improving FY ’22. A stable sector outlook reflects the expectation of a continued uptick in business activities for EPC players. Order inflows have increased significantly in majority of the segments and tendering activity is gaining momentum owing to the financial assistance by the central government granted back in FY ’22. Order inflows for FY ’22 were also aided by resurgence in state government capex expenditure on economic activity, which had been limited in FY ’20 and FY ’21 due to the downturn in economy and the effects of the pandemic.
According to the industry reports, order book visibility is likely to be strong in the medium-term given the overall number of tenders declared increased by over 11% year-on-year in FY ’22, and that significant central government budget expenditures are expected to continue in FY ’23. At Vascon, too, the company is witnessing a robust ordering activity and continued strong execution across EPC projects. In Q1 FY ’23, all the projects were operating at optimum levels, enabling faster project execution and resulted in better returns. We believe that the execution will continue to gather momentum going forward. Going forward. I would like to reiterate that the company is relentlessly focusing towards deleveraging its balance sheet by repayment of high-cost debt. Deleveraging will aid efficient working capital management. We are continuously working towards liquidating the assets to generate additional cash flow. The EPC segment during the quarter witnessed a fast-track execution of the projects. EPC segment’s revenue stood at INR140.7 crores, including those of internal orders for Q1 FY ’23, with an EBITDA at INR13.2 crores. Major projects, namely the Maharashtra State Police Housing, PWD Raipur Hospitals at Kaushambi and Bijnor are running smoothly. With the order book of close to INR1,777 crores, we envisage that EPC segment will deliver a strong performance going forward. We are witnessing orders from segments like Mumbai Police, Raj Bhavan, Vedanta in Barmer, Samyama Project, etc., in our EPC segment. Real estate segment, after various headwinds in the recent past, is gaining momentum. There is a gradual recovery in the demand as economy moves towards normalcy. Our new sales booking in Q1 FY ’23 stood at around 123,716 square feet for a total sale value of INR71 crores. During Q1 FY ’23, our real estate revenue stood at INR7 crores for Q1 FY ’23 and EBITDA of INR1.73 crores. The gross margin came in at 66% while EBITDA margin at 25% in Q1 FY ’23. Due to the nature of accounting treatment given to revenue [Indecipherable] business as per Ind AS, recording of revenue happens on project completion basis making it lumpy in nature whereas administrative and other expenses are recorded as incurred. Due to this timing difference of revenue and expense recognition, in certain quarters where revenue is not booked, the real estate business will show a loss, as opposed to those quarters where revenue is booked. Currently, we are executing almost six to seven projects. It is expected to generate a potential revenue of INR352 crores on completion basis, which is estimated to be within the next 6 to about 24 months. The projects in near pipeline include residential and commercial projects at Coimbatore, Madurai, Pune, Mumbai with aggregate sales value of INR1,760 crores with Vascon share being INR1,304 crores. The GMP business continues to deliver a sustainable performance with the revenue of INR60.3 crores for Q1 FY ’23 and a healthy gross margin of 28%. EBITDA stood at INR4 crores with the margin of 7% in Q1 FY ’23. On the overall financial performance, let me start with the standalone numbers. During Q1 FY ’23, the company reported a total income of INR143 crores as against INR78 crores in Q1 FY ’22, the growth of 83% year-on-year. In Q1 FY ’23, EBITDA stood at INR14.53 crores as against a loss of INR0.17 crores in the corresponding period last year. EBITDA margin was at 10%. Reported net profit of INR10 crores in Q1 FY ’23 as against a loss of INR7.2 crores in Q1 FY ’22. On a consolidated basis in Q1 FY ’23, the company reported a total income of INR203 crores as against INR114 crores in Q1 FY ’22, a growth of 78%. The EBITDA stood at INR18 crores and a margin of 9% as against INR2 crores in Q1 FY ’22, and the net profit at INR10.8 crores as against a loss of INR7 crores in Q1 FY ’22. On the strategy, the company is focused towards building a strong order book enabling the execution to continue at current levels. The EPC business will be the prime focus of the company going forward. However, we are also having emphasis on growing our real estate exposure in chosen markets. With this we can now open the floor for question and answers. Thank you.
Questions and Answers:
Operator
[Operator Instructions] The first question is from the line of Vinita Kapoor [Phonetic] an individual investor. Please go ahead.
Vinita Kapoor — Individual Investor — Analyst
Hi. Thank you for the opportunity. I just wanted to know how much real estate sales the company is expecting by the end of FY ’23?
Somnath Biswas — Chief Financial Office
INR130 Crores. So, we will be finishing about four projects, which will get their OCs this there are mostly this year so we will be able to recognize them progressively in Q2 and Q3 and Q4 and the total sales would be about INR130 Crores.
Vinita Kapoor — Individual Investor — Analyst
Yes. Okay. And can you throw some light on new order coming quarter in the EPC segment and are there any L1 order for the company?
Santosh Sundararajan — Group Chief Executive Officer
Just give me a second.
Vinita Kapoor — Individual Investor — Analyst
Yeah, no issues.
Santosh Sundararajan — Group Chief Executive Officer
INR130 crores. So we will be finishing about four projects, which will get their OCs this year, so we will be able to recognize them progressively in Q2, Q3, and Q4 and the total sales will be about INR130 crores.
Vinita Kapoor — Individual Investor — Analyst
INR1-3-0 crores?
Santosh Sundararajan — Group Chief Executive Officer
Yes.
Vinita Kapoor — Individual Investor — Analyst
Okay. And can you throw some light on new order in coming quarter in the EPC segment and are there any L1 orders for the company?
Santosh Sundararajan — Group Chief Executive Officer
No, as it stands, we are not aware of any order where we have been declared as L1. Normally when they open a tender and we are L1 in government sector, then we would receive the LOI immediately. But we are working on — now as I said there are quite a few orders that are coming up being posted on the portals of various departments, so we are having a keen eye on it, and we are targeting a few. So hopefully we were waiting for a little bit of BG limit augmentation, but that is also happening parallelly. We are in talks with the banks. It looks very promising that in another three months we should have lot more BG limits than we have today. But even with the current available limits, we are hoping to take at least a couple of orders in the next quarter or two.
Vinita Kapoor — Individual Investor — Analyst
Okay, fine. I will come back in the queue. Thank you and congratulations.
Santosh Sundararajan — Group Chief Executive Officer
Thank you.
Operator
[Operator Instructions] The next question is from the line of Shrey Gandhi from Arihant Capital Markets. Please go ahead. Shrey Gandhi, your line has been unmuted. Please go ahead with your question. We request you to unmute yourself from your handset and proceed with your question. Due to no response, we will move to the next question which is from the line of Renuka Jadhav, an individual investor. Please go ahead.
Renuka Jadhav — Individual investor — Analyst
Yeah. Thanks for the opportunity. So my first question is what is the interest rate of the Aditya Birla Capital loan? And can you also help me when the company will be debt free or by what time the company will fully pay off its high-cost debt?
Somnath Biswas — Chief Financial Office
Aditya Birla interest rate in the range of 12.5%. And if you would talk about the debt optimization, more or less, we are very close to debt optimization, some plus/minus — if you look at high-cost debt, only a miniscule high-cost debt of Kotak is left out, which is to the tune of INR10 crores. Rest all the high-cost debt has been extinguished. So current debt pool is significant part is a cash credit limit of SBI and UBI, which is a part of EPC business, and one, two projects construction finance, which will in some cases will be extinguished and in some cases new fresh book on CF will be raised. So more or less we are very close to optimization, maybe under INR10 crores, INR15 crores plus/minus will be there, not too much.
Santosh Sundararajan — Group Chief Executive Officer
We are not — when we say debt free, I think, see, we had a target plan over the last two years to bring down our high-cost debts to — currently we are at a net debt of INR48 crores and for an EPC segment that is growing, or it is expecting to grow, [Indecipherable] year on year for the next two to three years. But there will be a credit requirement of CC limits. So that’s the only debt we will be living with. That we do not intend to extinguish down to zero or any such thing in the short term, but all other high-cost debts that were bothering us, that were not getting relevant cash flows to service them on time in easy fashion, all that we have parked [Phonetic] and so now we are very comfortable with our cash flow situation.
Renuka Jadhav — Individual investor — Analyst
Okay, that was helpful. So my second question is on the other income side. There is a drop in the other income. So if you look historically, it has always been in the range — in INR3 crores range. So is there any specific reason for that?
Santosh Sundararajan — Group Chief Executive Officer
See, there is always — I think there are two aspects to other income. One is a steady interest that we gain on our FDs that are parked with the bank by way of margin money that we have to put up with the bank. That has gone up a little bit because the margin money Margin money has only continued to increase a little bit over the last few quarters, but the other aspects of other income is one-off sales which we hold as inventory in our books. So sometimes a old house in a project [Phonetic] which has not been sold gets sold or a old real estate asset being held as inventory gets sold then we get a spike. So I think normally we do get one or two sales. This quarter we have not had any such small apartment or something getting sold.
Renuka Jadhav — Individual investor — Analyst
Okay. So I have another question like what is the status of the non-core asset, like any sales happened in the non-core segment during this quarter?
Santosh Sundararajan — Group Chief Executive Officer
Specifically in this quarter noting much. See, as of now we’ve step by step extinguished most of our non-core assets. Now we have the big-ticket ones like the office in Kaledonia, then we have Thane land, of course, we have land in Aurangabad which is not yet sold, and then, of course, GMP the strategic investment, which at some point we could look at divesting. But these are the bigger ticket ones which will take their own time to exit from. But all the other ones, low- and medium-hanging fruits we have worked hard on, including inventory in Windermere project, which was a year ago was staring at us because the interest was very high over there, all of that we have extinguished over the last 12 to 15 months.
Renuka Jadhav — Individual investor — Analyst
Okay, sir. That’s it from my side and all the best.
Operator
Thank you. The next question is from the line of Shrey Gandhi from Arihant Capital Market. Please go ahead.
Shrey Gandhi — Arihant Capital Markets Ltd. — Analyst
Yeah, good morning. Sir, my question was like with regard to Thane land, when you expect the monetization to happen? And second question would be on the margin outlook, like what do you think on the margin outlook?
Santosh Sundararajan — Group Chief Executive Officer
On the Thane land, there is no answer that I would be able to provide as to when we will see monetization happening. It’s still a little bit ahead of us, but day by day what is indeed happening is the boundary of the city is stretching, Thane land has coming to developable zone, and the prices are only going up, development is only expanding. So at an appropriate time, down the road, if we want to do it today, we need a lot of capital which we do not have, and we are not focusing on raising that sort of capital on our balance sheet to solve the Thane puzzle. So we’ll wait for a while, and we’ll find a partner who will then come in and we’ll solve this together. So it is a goldmine. It is only gaining in value as we sit on it. When we will be able to monetize it, I do not really have an answer. Definitely not in the next couple of years.
Having said that, there is also a corridor that is being proposed by the government, a highway or something that is going to be constructed, which does cover a good portion of our Thane land, about 20%, 25% of our Thane land comes under that corridor that is being proposed. It is not yet officially declared by the government, but preliminary plan show that. And if that acquisition does happen from the government side, then a portion of Thane would have to be liquidated by sale to the government. And the rates are normally good. They are — if that does happen, that will be also good for us.
And to do with expected margins, I think the EPC division is stabilizing at about — it used to about 17%, 18% gross profit. Now its stabilizing round to about 15%. We hope this remains — we should be in line to remain at 14%, 15% level. This year we do have a little bit of effect of the steel and all escalations that have happened in the last six, eight months, while some are covered — most of them are covered for us, some are not. So those aspects have also brought down the gross profits a little bit. But I think going forward, we hope to stabilize EPC gross profits in this range of 14%, 15%. Real estate will be spike quarter-on-quarter. It is very difficult to put a number to it, but on a general basis the real estate margin — gross profit margins would be above 20%.
Shrey Gandhi — Arihant Capital Markets Ltd. — Analyst
Okay. Thank you, sir.
Operator
[Operator Instructions] The next question is from the line of Milan Shah from Urmil Research Consultancy. Please go ahead.
Milan Shah — Urmil Research Consultant team — Analyst
Hello, can you hear me, sir?
Operator
Yes, we can hear you.
Milan Shah — Urmil Research Consultant team — Analyst
Okay. First of all, congratulations for good set of numbers. I want to understand the employee benefits expense it is decreasing every quarter. Is it replacement of employees or is it efficiency of productivity?
Santosh Sundararajan — Group Chief Executive Officer
So it is a combination of both, dip in our employee costs a little bit last year. We did have certain decisions that we did take to bring down our overheads a little bit, but also there is an effect of the ESOPs that get loaded quarter-on-quarter. So in the initial quarters when we had an ESOP scheme that was declared last year, so the way it hits your balance sheet as cost is a lopsided. In the initial quarters, there is a higher loading that comes to our P&L and as the date pass by, every quarter-on-quarter the loading decreases. So that is also a reason why the employee cost looks lower.
Milan Shah — Urmil Research Consultant team — Analyst
Okay. So it may be also going to increase in next time when we are going to allot ESOP, right?
Santosh Sundararajan — Group Chief Executive Officer
No. So ESOPs for the next four years so what has happened is we have already taken an approval from AGM and board and allotted ESOPs to all staff all the way up to 2026.
Milan Shah — Urmil Research Consultant team — Analyst
Okay. So up to 2026 it is not going to be increased, right?
Santosh Sundararajan — Group Chief Executive Officer
Yes, so up to 2026 we will not be coming up — we do not expect to be coming up with any new ESOP schemes. There is no such plan in the short term. So the new ESOP cost won’t be hitting our balance sheet for at least three to four years. What is there existing will continue.
Milan Shah — Urmil Research Consultant team — Analyst
Okay. Then this is why the excellent move by the company for productivity. And wish you best of luck for growth.
Santosh Sundararajan — Group Chief Executive Officer
Sure, thank you.
Milan Shah — Urmil Research Consultant team — Analyst
Thank you.
Operator
[Operator Instructions] The next question is from the line of Deepesh Sancheti [Phonetic] from Manya Finance [Phonetic]. Please go ahead.
Deepesh Sancheti — Manya Finance — Analyst
Hi, sir. I joined in a bit late, but just want — so if there any repeat questions, just apologize for that. I want to know what is the percentage of sales in terms of self-development and developing for others, as in contractual development?
Santosh Sundararajan — Group Chief Executive Officer
So in contracting I think it will not even be 5% or 7% — less than 10% accrues currently from our self-development projects, more than 90% is from third party.
Deepesh Sancheti — Manya Finance — Analyst
And going ahead it’s going to be this way only? We are going to develop our projects?
Santosh Sundararajan — Group Chief Executive Officer
I hope not. I’ll tell you, honestly speaking, my best client is, obviously, our own real estate division. As an EPC player, our preferred client, our best client is obviously our own real estate division where we do not have to worry about collections, we do not have to worry about risk of payments, we do not have to have man-to-man marking monthly basis by client requirements on various. So our overheads come down. We can focus on engineering. We can focus on quality delivery. So I would be very happy as an EPC player if this percentage comes below 90% to 80% and 75%, but for that the real estate division should see opportunities and should be able to launch and sell enough projects to bring us there. Real estate division is also working very hard now to sign up new projects in both Pune and possibly in Coimbatore [Phonetic], so two places where we’re a established brand name. So as we go down, if there is path, I hope that this percentage can come down to at least 80:20 over the next year or so.
Deepesh Sancheti — Manya Finance — Analyst
So, 20% should be our own development, right?
Santosh Sundararajan — Group Chief Executive Officer
I hope so, yes, to reduce my percent [Indecipherable] which would mean — again see that will be putting extra pressure on the real estate side because EPC from third-party will continue to grow. There is no intention to not take projects from third-party. As we take more projects on third party, the growth of our own development would have to be even higher than that, so that this ratio comes down to 80:20.
Deepesh Sancheti — Manya Finance — Analyst
And because of the prices, the price increase in steel and cement, is there any pressure on our gross margins or it doesn’t matter?
Santosh Sundararajan — Group Chief Executive Officer
There is as I said — I would be wrong to say that nothing matters because although in most of our contracts a good amount of these escalations are passed through to the client and that is a saving grace. But still everything has gone up and everything is not a pass through. So if diesel goes up what happens is transportation of small things to site, small things that we purchase, including up to sand and metal in some contracts are not covered. So there is a price increase in every aspect, not only steel and cement. So it is definitely affecting our margins in a small way. That’s why I said, our gross profit which used to be at 17%, 18%, now we’re looking at a 14%, 15% level. So the percentage growth is definitely being seen as an effect of these escalations.
Deepesh Sancheti — Manya Finance — Analyst
Okay. So going ahead what is the margin estimate you can give us?
Santosh Sundararajan — Group Chief Executive Officer
So I would like to stick to 14% to 15%. We do try to target projects where on a design-and-build basis we can make higher gross profits. But as we are looking for growth, we cannot continue to remain extremely sparing when it comes to take projects. So far we’ve been very choosy. We’ve given up a lot of projects where we feel the margin is 1 or 2 percent basis points lower than what we want. But if we want now do an order booking and grow from these levels of EPC to 30%, 35% year-on-year, then we might not have the luxury of being choosy. So might have to take up, on an average, bring down our gross profit levels by 1 or 2 percentage. So that 17%, 18% coming down to 15% [Technical Issues] cost escalation. But going forward I would [Technical Issues].
Deepesh Sancheti — Manya Finance — Analyst
There is slight disturbance in the line.
Santosh Sundararajan — Group Chief Executive Officer
Can you hear me now?
Operator
Your voice was breaking up for a bit, sir. If you can just repeat your answer, it would be great.
Santosh Sundararajan — Group Chief Executive Officer
Yeah, as I said, we were operating at 17% to 18% level, which has come down to about 15% currently because of escalations. But going forward, we will expect to make in the same region of 14% to 15% gross profit. This is because as we want to grow, we will not have this luxury of being choosy to that level on the profits we expect from projects. So if you want to compete and grab a few more projects, we might have to take them at 1 or 2 basis points lower in terms of margins. So 14% to 15% is a prediction we would make and hope to recoup it [Phonetic].
Deepesh Sancheti — Manya Finance — Analyst
And what is the status of payment from customers? Are the builders — are these real estate players paying properly right now? No longer situation which used to be happening two, three years back? Are things better?
Santosh Sundararajan — Group Chief Executive Officer
So we have 80% of our exposure to government sector. We have only one or two projects going on in the private sector and that too two clients whom we know, reputed clients. So to answer your question, yes, we are not facing that a problem in the last few quarters. But whether in general real estate sector has revived at the same time, it’s tough for us to say. But I do think there is an improvement because of RERA coming in and because of answerability and escrow accounts which RERA mandates, and some financial tie-ups happen with financial partners, so automatically discipline comes in on real estate side where we it do open escrow accounts. So I think it is improving, and we are hoping to increase our exposure to private sector also going forward.
Deepesh Sancheti — Manya Finance — Analyst
Okay. And sir, last question. I heard somebody talking about your Thane land, and you said that it is a goldmine which you are sitting on. Can you quantify as of now what is the size or what is the price which — what is the value of the land? And is there any other goldmine that you are sitting on?
Santosh Sundararajan — Group Chief Executive Officer
See, we are sitting on GMP which is also a goldmine. GMP has now started doing — is going to do more than INR200 crores this year. They will give decent gross profits, EBITDA this year. And if that continues for a year or two, which it will, then you will be able to plot price times earning times multiple and accordingly look for a decent valuation. And so that is also a goldmine we are sitting on. But Thane land the reason I call it a goldmine is because, even as it stands, we are having — in that company there’s about 150 acres of land. 45% of that company belongs to Vascon, so you can say about 70 acres of land belongs to Vascon. It is not contiguous, and it is not entirely saleable at that price today. But the ready reckoner value or the going rate in Thane around our parcel is always upwards of INR4 crores to INR5 crores an acre. So even by doing nothing — and this is being held in our books at INR50 crores, INR60 crores kind of valuation, whereas this is already just at market value of sale, this is worth then INR350 crores. And if you look at the FSI that is committed there and the buildability that is possible in that location because it is next to a main road, it’s crazy. So those Excel Sheet number looks extremely crazy. I wouldn’t want to quote them here and…
Deepesh Sancheti — Manya Finance — Analyst
No, no. Right. I understand. This is good enough to build our confidence. Just one more question about GMP. That land, for how many years can we project the sales, as in what is the project lifecycle?
Santosh Sundararajan — Group Chief Executive Officer
The project lifecycle likely in GMP is not more than six months to eight months generally. They have currently — they are sitting on about INR250 crores of order backlog, which is very healthy from their perspective because they do extinguish it very fast.
Deepesh Sancheti — Manya Finance — Analyst
So that kind of sales will be seen in the next two quarters that is what you are trying to say.
Santosh Sundararajan — Group Chief Executive Officer
You are already seeing it. See, this quarter they have done INR60 crores of sale. So even if that goes times four, you are looking at INR240 crores, INR250 crores of top line from GMP this year. I am just linearly projecting. It might even do better.
Deepesh Sancheti — Manya Finance — Analyst
Okay. And what will be the reasonable expectation of margins over there?
Santosh Sundararajan — Group Chief Executive Officer
So we’re looking at — currently we’re still looking at single digit PBT, maybe 7%, 8% is what we are looking at over this year and next year, and then if some operational efficiencies of scale catch up, then hopefully that would reach towards 10%.
Deepesh Sancheti — Manya Finance — Analyst
Okay. And on bad debtor side, is there any payments which have been received or is there any fresh new addition?
Santosh Sundararajan — Group Chief Executive Officer
No, there is no such new addition. Payment is also not received in this prior quarter, but we keep on pursing and we’re expecting something to happen in the next quarter.
Deepesh Sancheti — Manya Finance — Analyst
Okay. And what is the payment cycle from the government, since we work basically with the government only in the EPC, what is the payment cycle?
Santosh Sundararajan — Group Chief Executive Officer
They are paying us every month. So we raise a bill every month, and we do receive payments every month.
Deepesh Sancheti — Manya Finance — Analyst
Oh, that’s really fast for government…
Santosh Sundararajan — Group Chief Executive Officer
No, these departments are paying. After we raise a bill, not more than 40, 45 days we do receive the payments so far.
Deepesh Sancheti — Manya Finance — Analyst
That’s nice. And you are able to pass on all the increase in raw material cost, especially steel and cement and everything, you are easily able to pass it on?
Santosh Sundararajan — Group Chief Executive Officer
So in most of the projects, steel, cement, and tiles and the base rated items, so bulk — 90% of our escalation costs are passed on. In a couple of projects, we do have a clause in the contract, which doesn’t help us pass on in entirety these costs, but we are in talks and negotiations with the government because in both these projects what has happened is, that is Goa Airport as well as in Bangalore, there were delays from the government side in terms of obtaining their environmental certificate or tree-cutting permission, and then the project got delayed by more than a year. And when the project started, COVID happened. And post-COVID, we’re seeing is escalations.
So these projects we basically should have been out of it had the government given us the clearances on time. So there is a very strong case for us to put it back to them that these delays have been initiated from your side, and currently we are facing the wrath of the escalated prices. So they are amenable to listening to these arguments. They have a committee which is listening some places, so they are giving us benefits. And otherwise, all said and done, if it doesn’t work out through negotiations, then we will be doing through arbitration to recover more than the escalations that we are facing on these couple of projects. But in all other projects 90% is covered and the small 8% to 10% which is not covered we are facing that on our [Technical Issues].
Deepesh Sancheti — Manya Finance — Analyst
Okay. And just one more question about the Thane land. Who is the 55% landowner, if you can mention his name?
Santosh Sundararajan — Group Chief Executive Officer
So, there are couple of HNIs, I don’t think I want to mention their names.
Deepesh Sancheti — Manya Finance — Analyst
No, no, not the HNI’s names. I just want to know if there was a single entity.
Santosh Sundararajan — Group Chief Executive Officer
So, the company — there’s a single entity that will be entire 150 acres, and the shares of the company are held in 45:10:45, so 45% is another HNI from Mumbai, 10% is another HNI, and 45% is with Vascon.
Deepesh Sancheti — Manya Finance — Analyst
So fine, there are not the too many players?
Santosh Sundararajan — Group Chief Executive Officer
No.
Deepesh Sancheti — Manya Finance — Analyst
Okay. Great. Thanks a lot, sir. This really builds a lot of confidence in the company. Thank you so much.
Santosh Sundararajan — Group Chief Executive Officer
Thank you.
Operator
[Operator Instructions] The next question is from the line of Shrey Gandhi from Arihant Capital Markets. Please go ahead. Shrey Gandhi, your line has been unmuted. Please go ahead with your question.
Shrey Gandhi — Arihant Capital Markets Ltd. — Analyst
Hello.
Operator
Yes, sir, we can hear you now, but your voice is breaking up.
Shrey Gandhi — Arihant Capital Markets Ltd. — Analyst
[Technical Issues]
Operator
Sir, your voice is breaking. We cannot hear you clearly. Can you please move to a better reception area?
Shrey Gandhi — Arihant Capital Markets Ltd. — Analyst
[Technical Issues]
Operator
No, sir, we cannot hear you clearly at all. I would request you to please check your phone line and rejoin the queue. In the meanwhile, we’ll move to the next question, which is from the line of Vinita Kapoor [Phonetic], an individual investor. Please go ahead.
Vinita Kapoor — Individual Investor — Analyst
Follow up question. Since all the segments are doing well, any EPC guidance can you give us on the EPC segment? And how is the real estate panning out to be?
Santosh Sundararajan — Group Chief Executive Officer
For the year, we are looking — the EPC has done INR137 crores in the first quarter. So we had set ourselves a target of INR600 crores. I think we are very much in line to achieve that. I think only a COVID phase four, if it all, can pull us back. Otherwise, everything looks promising. Q2 will always be lesser than Q1 or — Q2 is the worst quarter because of rains. We are already seeing that. There were 15 days continuous rains in July and Bombay could not do the projects or do the targets for the month. But that is known and expected, but Q3 and Q4 are our best quarters. So I would still project that achieving INR600 crores as we projected for the year looks well on track for EPC. Real estate, we’ve just said we will get about four projects we’ll be getting their OCs this year, and those sales will total up to about INR130 crores. So unless we have one-off sales other than this, otherwise we should stabilize at about INR130 crores from real estate for the year.
Vinita Kapoor — Individual Investor — Analyst
And they all are in Pune and — these OCs, four — the four projects which you mentioned?
Santosh Sundararajan — Group Chief Executive Officer
One is in Coimbatore and three are in Pune.
Vinita Kapoor — Individual Investor — Analyst
Okay. And what is your overall guidance for this year and next year?
Santosh Sundararajan — Group Chief Executive Officer
So as I said, on a consolidated basis, if you add up the EPC INR600 crores plus INR130 crores from the real estate that takes you to INR750 crores, plus GMP is looking to do around INR200 crores, INR250 crores. We have internal [Phonetic] target that we touch the four-figure mark. Hopefully, we will or we might just land up a few short; hopefully we will. And on the profit side, as I said, the percentage [Technical Issues] it will translate to about single-digit PBTs at the end of the day because real estate does much more than INR130 crores, if we have one-off sales coming from there, then we could look at higher PBTs, but otherwise the PBT would be single digit 6%, 7%, 8% is what we might end up with.
Vinita Kapoor — Individual Investor — Analyst
Okay. That is great. One last question, what is the interest rate of Aditya Birla Capital loan? And if you can just help me when the company will be debt free or by what time the company will be able to pay off its high-cost debt?
Santosh Sundararajan — Group Chief Executive Officer
So the Aditya Birla loan is at 12.5%. It’s also a short-term project-related loan. So as the project gets executed, this will get extinguish in the next 18 months or so. The only high-cost debt that remains is the last amount of the Kotak debt that we had taken for our Windermere Project. The Kotak debt was INR110 crores. We have brought it down all the way to only Rs.10 crores at this time, and this Rs.10 crores we are waiting for one sale to occur in Windermere, which is verbally tied, so we will be extinguished in next couple of months. If that doesn’t happen, then we will extinguish it from other sources. So this way or that way, in the next quarter or two, this INR10 crores will disappear. That is the only high-cost debt that remains with us.
The third debt, which we do not intend to extinguish is a little bit of CC limit that we have with SBI. You would appreciate that EPC is growing in a significant way. We did only INR300 crores the year before, then we have done INR400 crores last year, and we are looking to do INR600 crores this year, and hopefully carry on for a year or two at least with the same percentage of year-on-year growth. So at these levels about INR50 crores, INR60 crores of CC from a bank is not serviced [Phonetic] and it is in a way needed to keep pushing the business. So we do not intend to extinguish. And that’s a low-cost debt. That’s only 9% or so. So we do not intend to extinguish that last piece of debt that would remain with us.
Vinita Kapoor — Individual Investor — Analyst
Okay, that was very helpful. Thanks. That is it for me. Thank you.
Operator
[Operator Instructions] The next question is from the line of Shrey Gandhi from Arihant Capital Market. Please go ahead.
Shrey Gandhi — Arihant Capital Markets Ltd. — Analyst
Hello, is my voice clear now?
Operator
No, sir, your audio is still not clear.
Shrey Gandhi — Arihant Capital Markets Ltd. — Analyst
Hello?
Operator
Yes, I think this is better.
Shrey Gandhi — Arihant Capital Markets Ltd. — Analyst
So thank you for taking my question again. Just wanted to have an outlook on the Goa land, when will it get monetized, that Goa land. And with regards to the real estate, I wanted to know when is handover for the real estate and if you can give some guidance on the overall margin going ahead. Segment wise you have already given. Overall consolidated margin how it will be. Thank you. That’s it.
Santosh Sundararajan — Group Chief Executive Officer
So we do not have any land in Goa. We had a share in a hotel in Goa, which we already sold couple of quarters ago. So as of now, we do not hold any asset in Goa that is up for liquidation. We are only executing as an EPC player the Goa airport project. Other than that, we do not have anything in Goa. Your second question was real estate, sorry?
Shrey Gandhi — Arihant Capital Markets Ltd. — Analyst
When will be the handover in the real estate?
Santosh Sundararajan — Group Chief Executive Officer
Handover of what exactly?
Shrey Gandhi — Arihant Capital Markets Ltd. — Analyst
Real estate projects.
Santosh Sundararajan — Group Chief Executive Officer
That is an ongoing process. We have Windermere which is 98% completed, so that is almost handed over. We’ve got OCs for both the buildings in that project. Then we have a project going on in Talegaon, Katvi, which the Phase 1 we expect to get the OC and handover in this financial year. We have a project going on in Kharadi, Forest Edge, which again the Phase 1 is handed over to people. We’re currently in the process of handing over the last stage of handover to customers. We’ve already got the OC and recognized that last year. This year the Phase 2, the second building, we are expecting to get the OC and start the handover process in the third quarter and fourth quarter. And again one project in Coimbatore, which we have sold fully, and we intend to handover in the fourth quarter of this year. Other than these will be new projects which we will be launching. Coimbatore we’ve just launched a residential project. As we said, we’ve sold a good percentage in the first building. This handover will now happen 1.5 years from now.
Shrey Gandhi — Arihant Capital Markets Ltd. — Analyst
And some view on overall consolidated margins going ahead?
Santosh Sundararajan — Group Chief Executive Officer
So if everything goes to plan, as I said GMP will also stabilize at high-single digit 7%, 8%, 9% margins. Our EPC will also stabilize closer to 10% of PBT. And the real estate will give a little bit higher. So on an average, because the weightage of real estate in our total top line even for this year is going to be only 10%, 12%, 15%, so I think on an average we will still put our head out and say we will be in the high-single digit as a consolidated PBT.
Shrey Gandhi — Arihant Capital Markets Ltd. — Analyst
Okay. So high-single digit.
Santosh Sundararajan — Group Chief Executive Officer
Yeah.
Shrey Gandhi — Arihant Capital Markets Ltd. — Analyst
Thank you so much. Thank you.
Santosh Sundararajan — Group Chief Executive Officer
Thanks.
Operator
[Operator Instructions] As there are no further questions in the participants, I now hand the conference over to Dr. Sundararajan for closing comments.
Santosh Sundararajan — Group Chief Executive Officer
Thank you, everyone, for the participation and interest. I missed pointing out that — I am sure you would have observed, but for the first time we’ve had INR10 crores of profit in this quarter, which is entirely completely operational, no one-off. In fact, even the other income did not even get INR1 crores or INR2 crores from sales of old inventory. So we are back on track to getting operational profits, and this will only continue to improve going forward. Thanks for your interest and I’ll see you all again next quarter. Thank you.
Operator
[Operator Closing Remarks]