Vascon Engineers Limited (VASCONEQ) Q4 FY23 Earnings Concall Transcript

Vascon Engineers Limited (NSE:VASCONEQ) Q4 FY23 Earnings Concall dated May. 16, 2023.

Corporate Participants:

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Somnath Biswas — Chief Financial Officer

Analysts:

Manish Ostwal — Nirmal Bang Securities — Analyst

Dhananjay Kumar Mishra — Sunidhi Securities — Analyst

Himanshu Upadhyay — O3 Wealth & Asset Management — Analyst

Rishith Shah — Nuvama Wealth — Analyst

Kunal Jain — JM Securities — Analyst

Hiten Boricha — Sequent Investments — Analyst

Rishikesh Oza — RoboCapital.in — Analyst

Rikesh Parikh — Rockstud Capital LLP — Analyst

Manish Shah — — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Vascon Engineers Limited Q4 and FY ’23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Dr. Santosh Sundararajan, Group CEO, Vascon Engineers Limited. Thank you, and over to you, sir.

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Thank you. Good morning, everyone. I welcome you all to the earnings conference call of Vascon Engineers for the fourth quarter and full-year ended March 31, 2023. Today, joining 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 Q4 FY ’23 financial results and results presentation uploaded on the stock exchanges and on the Company’s website.

Fiscal 2023 was an excellent year for the Company and perhaps the continuation of a virtuous cycle that we have managed to create, with all elements of our business is performing that. We had been in our past calls indicating that the management has been focusing on the basics of each of our segments and this has yielded phenomenal results. Improved cash flow profile backed by sale of some of our non-core assets, better operational efficiencies in the EPC segment, picking up in real estate and GMP segment has helped us in lowering our debt. The reduction of this high-cost debt has allowed us to get decent credit rating from credible rating agencies like CRISIL and Acuite. And it opens up avenues for the Company to carry-forward the growth cycle that has started in the year gone back.

Over the last eight to 10 quarters you would have seen that we have been guiding for improving quarterly run rate and this trend continued in Q4 FY ’23. From FY ’21, our total revenue has almost doubled from INR518 crores towards typical high of INR1,030 crores in FY ’23. Our profitability has improved significantly from a loss of INR40 crores in FY ’21 to highest-ever INR100 crore profit in FY ’23. On the balance sheet side, cash conversion cycle has also improved, and net debt brought down towards near INR12 crores as on March 31, 2023. With an order book at over 3 times of FY ’23 revenue, strong balance sheet, high-efficiency of all business segments and our overall improved financial position, we believe we are well-positioned to continue this growth trajectory in the coming quarters.

Let me take you through the developments in a bit of detail. Improved funding position. As you would recollect, we have been informing you that our credit rating has been improving and with Acuite’s rating of BBB Stable for long-term and A3 Stable for short-term facility and CRISIL rating of BBB Stable for long-term and A3+ short-term rating. We had commenced applying for enhanced BG limits. We are happy to report that we are in the final stages of getting those limits enhanced and this will allow us to significantly increase our order book position and continue with the EPC execution run rate. Currently, the Company has a working capital of INR243 crores as on FY 2023 and expects to increase the working capital limit by INR50 crores by end of this year. The ratings have also helped us negotiate better interest rate.

EPC execution and order book. During the quarter, as well as for the full-year, EPC revenue increased by 53% year-on year and 22% quarter-on-quarter to INR203 crores in Q4 FY ’23. And for FY 2023, revenue increased 58% year-on year to INR662 crores. Our EPC order book has been robust throughout the year. We started the year with an order book of INR1,832 crores and won orders worth approximately INR600 crores in the last three months. We had some large order book wins in the year gone by, with some marquee projects such as the tender for Maharashtra State Police Department for construction of residential and Jila Karagar At Amethi works worth about INR450 crores in total. And our first-ever redevelopment project of INR225 crores in Bandra, Mumbai. We executed orders worth INR700 crores and closed the year with a total order book that stands at INR2,172 crores, which forms almost 3 times of our FY ’23 EPC revenue, providing strong visibility of EPC revenue growth for the next two, three years. Of the total orders, external EPC orders are INR1,739 crores and the balance INR388 crore are from internal orders. Further, almost 78% of the order book is towards government projects, which provides visibility of faster execution and uninterrupted cash flows.

Real estate continues towards growth momentum. Coming to our real estate business, as we have been explaining for some time now, the nature of the bookkeeping treatments in terms of Ind AS requirement means there can be some timing differences between booking of expenses and booking of revenues. Now that a large part of our real estate projects portfolio has completed, we will still — we will start seeing positive reflection on the results of our real estate business segment. Our new sales bookings in FY ’23 stood at 1,74,000 square feet for a total sales value of INR118 crore. During FY ’23, our real estate revenue stood at INR115 crore and EBITDA at INR39 crore. Gross margin came in at 49%, while EBITDA margin at 34%. We are hopeful of maintaining the momentum in the real estate segment as we complete projects and have a good pipeline ahead. We are also tying up with realtors based in Pune, Mumbai and Coimbatore.

Lastly, the GMP business has started showing better performance now, and it has continued to deliver sustainable performance in the past quarter, as well as the full year. Revenue of INR256 crore for FY ’23 and healthy gross margins of 32%. EBITDA stood at INR25 crore with an EBITDA margin of 10% in FY ’23.

Debt repayment continues. The Company has been repaying a significant amount of high-cost debt over the last two years, and this has helped the Company bring down its finance costs substantially during the year. We are happy to report that over the past 24 months we have reduced our gross debt by INR79 crores to INR135 crore as on March 31, 2023, as against INR214 crore as on March 31, 2021. This, along with the improved cash flow generation, has led to a net debt of only INR12 crores as on March 31, 2023, as against INR134 crores as on March 31, 2021. We will continue to pay our debt as our cash flows keep improving.

Before going to our financial performance, a little update on the overall industry scenario. The Indian budget for FY ’23-’24 has been showing positive signs for economic outlook and is expected to grow at 7%, which is a robust growth rate as compared to the other major economies that are actually seeing a slowdown. With an increase in capital expenditure on infrastructure investment by 33% to INR10 lakh crore for FY ’23-’24 to significantly boost the economy. Along with that, the real estate growth is predicted to coincide with the improvement of the domestic economy. This expansion is backed by the increased activities in the Company’s stronger job market and higher income levels, all of which will undoubtedly lead to an increase in real estate demand. Affordable housing is still under focus for the Indian government through various schemes as housing for all under the PM Awas Yojana by increasing the outlay by 66% to INR79,000 crores. Apart from these initiatives, the government has been building and constructing infrastructure mega projects, including roadways, airports, metros and so on under the PM Awas Yojana. These components will encourage both qualitative and quantitative growth in real estate investments.

Coming to the financial performance of the Company in Q4 FY ’23. On the overall financial performance [Technical Issues], during Q4 FY ’23, the Company reported a total income of INR251 crores as against INR153 crores in Q4 FY ’22, a growth of 64% year-on-year. In Q4 FY ’23, the EBITDA stood at INR46 crores as against INR13 crore in the corresponding period last year. EBITDA margin was at 18%. The reported net profit of INR41 crore in Q4 FY ’23 is against INR6 crore in Q4 FY ’22. On a consolidated basis, in Q4 FY ’23, the Company reported a total income of INR336 crore as against INR222 crore in Q4 FY ’22, a growth of 51% year-on-year. The EBITDA stood at INR58 crore with an EBITDA margin of 17% against INR24 crore in Q4 FY ’22 and a net profit of INR50 crore as against INR11 crores in Q4 FY ’22.

To conclude, we would like to reiterate that the Company continues to be focused towards building a strong business with focus on execution of our projects, efficiently deploying our capital, increasing our order book while maintaining financial prudence, which will enhance profitability.

With this, we can now open the floor for questions and answers. Thank you.

Questions and Answers:

Operator

Thank you very much, sir. [Operator Instructions] The first question is from the line of Manish Ostwal from Nirmal Bang Securities. Please go ahead.

Manish Ostwal — Nirmal Bang Securities — Analyst

Yes, sir. Thank you for the opportunity. My question on Slide #7 of our presentation. Sir, we have seen the growth in the revenue is around 55% on a consolidated basis, whereas the employee cost and other expenses were flat on a Y-o-Y basis. Can you explain why the employee, other expenses flat despite the increase in the business volume — business growth?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

This is — you’re checking quarter-to-quarter, one second.

Manish Ostwal — Nirmal Bang Securities — Analyst

FY ’23 versus FY ’22, yearly numbers, not quarter-to-quarter.

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Right. So yes, as I’ve been saying for some time, like our employee capital costs, including both our employee costs, as well as asset costs are capable of performing much more than they have been performing. So we really — we will be now having a little bit of increased employee cost in the coming year. But in the previous year, we maintained our employee costs at those levels. And the growth in top line has happened because the project finally got executed at the pace that they were to be executed.

Manish Ostwal — Nirmal Bang Securities — Analyst

The second question on the, sir, tax expense side, we have a tax expense in the P&L is at INR3.88 crores. And in the cash flow statement, this tax paid is INR10.51 crores. So the tax paid is very low. So what should be the normalized tax rate for the FY ’24 for — at a consolidated level, sir?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Still this year, we had carry-forward losses. That’s why our tax rate is very low and our PAT is almost the same as our PBT. Going forward, we will then now — our carry-forward losses are all extinguished. So from next year onwards, we will be paying taxes at normal corporate rates.

Manish Ostwal — Nirmal Bang Securities — Analyst

Okay. Sir, on one of the slides you mentioned that selling of the non-core assets and asset monetization. So can you help us to understand what is the potential value we can generate form that corporate action?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

So we’ve been discussing these non-core assets over the last two years in all our calls, and we are happy to report we have sort of made progress in most of them. We’ve even struck a deal for Aurangabad land, which is at an advanced stage. So that will also get executed. That only leaves us with Kaledonia, and at a bigger level it leaves us with what we can do with GMP and Thane land, part of Thane land if you view it that way [0:13:32]. So going forward, we’ll be focusing on trying to get — exit from these if we get the right valuations.

Manish Ostwal — Nirmal Bang Securities — Analyst

So based on the current market valuation, what is the potential of those assets, which for balance sheet of Vascon basically?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

So I wouldn’t want to speculate on the valuation. See, I mean, you would know better than me, you can study the balance sheet of GMP. They’ve been doing well. They have turned around. This year, they’ve done very well and they looked at growing from year-on-year-on-year. So when and at what valuation, we would exit, I wouldn’t want to speculate on a call, but if we feel it’s good for the Company and we’re getting the right price, then we’ll take a call.

Manish Ostwal — Nirmal Bang Securities — Analyst

Sure, sir. And lastly, in terms of growth outlook for the core EPC business for the next year, what kind of — what is your growth guidance for the business of EPC?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

So EPC will continue to grow. See, this year, of course, we had much higher growth percentage from last year because there was a lag due to COVID and the projects had to get executed. We do not expect the same percentage of growth next year, but we will definitely grow somewhere between 15% to 20% from this year’s numbers in top line and bottom line.

Manish Ostwal — Nirmal Bang Securities — Analyst

Right, sir. And one last question on the slightly longer term, in our real estate business, so from a three- to five-year perspective, real estate business contribution into the P&L and our strategy to grow that business, how do you see that business to contribute at a consolidated level?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

So real estate business will — in proportion — in the proportion that it brings to our balance sheet year-on-year from here, you will see the real estate business will grow. So far, for example, this year, it has contributed about INR100-odd crores. The thing with real estate, though, is that, revenue recognition on balance sheet only comes in project completion. So it’s very difficult to predict on an annual basis. But over the next three, four years, we have a lot of projects lined up in real estate. We are lining up even more projects. We have a robust team that is now fully charged up and geared up. And so, our focus is definitely there to grow the real estate division parallelly and hopefully, a little bit faster than even the EPC division.

Manish Ostwal — Nirmal Bang Securities — Analyst

So can we see a similar growth rate in terms of volume in real estate business also vis-a-vis the EPC business in terms [Speech Overlap] area?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Yes, yes. Definitely, you can see that growth rate impact probably better. But as I keep saying, in real estate, we’ll have to average these things over a three-year period, not year-on-year because we do not have enough projects to be completing projects every year. So basically, on the balance sheet, you’ll see those dips and rises. But if you average out for the next three, four years, yes, you will see much more growth than what even EPC is seeing. Thanks a lot for answering all the questions, sir. And all the best for FY ’24. Thank you.

Operator

Thank you. The next question is from the line of Dhananjay Kumar Mishra from Sunidhi Securities. Please go ahead.

Dhananjay Kumar Mishra — Sunidhi Securities — Analyst

Hello. Thanks for the opportunity and congrats on very strong operating performance. I just wanted to know, I mean, if you could give some color on in terms of big pipeline in EPC segment and which area you are looking in terms of big pipeline? And you said that INR60 crore limit will increase, so what kind of project you can bid, I mean, get in FY ’24?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Yeah. See, we are looking to continue our emphasis on the government sector. But at the same time, we are also now actively looking for projects in AAA rated private sector as well. So going forward, we have — we will be looking at both directions. We already bagged about INR600 crore in the last three months, primarily a good portion of it was a INR300-odd crore order from the Pune Police housing and also an order from the UP government. Going forward, we will, hopefully, next year, our target is to increase our private sector exposure because as of now, it’s extremely low.

Dhananjay Kumar Mishra — Sunidhi Securities — Analyst

Okay. Okay. So, I mean, and which area are you looking? I mean, you are also looking in railway segment or this redevelopment railway station project, which is coming up at very big from the government push. So are you looking at those areas as well?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Yes, yes. We will look at any kind of building. So even railway stations do qualify as buildings for us. So we will be participating — there are many tenders, there are many departments and there are a huge number of tenders that get floated. So we need to pick and choose at any point of time given our limitations of disposals, our limitations of guarantees and bandwidth. But yes, railway stations are definitely on our radar [Phonetic].

Dhananjay Kumar Mishra — Sunidhi Securities — Analyst

Okay. And the INR60 crore limit when do you expect to be commissioned [Phonetic]?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Hopefully, within the next — hopefully before our next call.

Dhananjay Kumar Mishra — Sunidhi Securities — Analyst

Okay, okay. And the second question with respect to real estate. So if you could give some number in terms of what was the total delivery in this financial year for which we have booked about INR140 crore revenue — I mean, recognized INR140 crore revenue? And what is the delivery schedule for the FY ’24 because you said that going — this year also delivery will be very good and the P&L number will look good. So what is the delivery schedule in FY ’24?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

No. So in FY ’23, we had completions from about three or four real estate projects. And that is why those revenues have reflected on the balance sheet and the bottom lines are also reflected. Going forward in FY ’24, we do not foresee us completing any bigger projects because most of them have just started, including Coimbatore and Kharadi and — so these projects will not be completed in the coming year. They will get completed in the year after that. Again, a good chunk of revenue recognition we foresee to be happening in FY ’25 and not in FY ’24 for real estate.

Dhananjay Kumar Mishra — Sunidhi Securities — Analyst

Okay. So FY ’25 will be good in terms of the P&L, right?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

And FY ’24 for real estate would be a little bit…

Dhananjay Kumar Mishra — Sunidhi Securities — Analyst

’25.

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Yeah, ’25 will be good, yes.

Dhananjay Kumar Mishra — Sunidhi Securities — Analyst

Okay. So FY ’24 will be slightly softer or maybe some decline in terms of [Speech Overlap].

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Yeah. That’s what we foresee, yes.

Dhananjay Kumar Mishra — Sunidhi Securities — Analyst

And in terms of this five projects we have in terms of launch pipeline. So do you expect to launch at least two or three of them in FY ’24?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Yes, we expect to launch at least three projects in FY ’24.

Dhananjay Kumar Mishra — Sunidhi Securities — Analyst

Which one, this Powai, Kharadi and [Speech Overlap]?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Powai, Kharadi and Santacruz will also be launched. And in fact, we are hopeful we might even launch Baner before the end of the year.

Dhananjay Kumar Mishra — Sunidhi Securities — Analyst

Okay. Okay. Thanks and all the best for upcoming quarters and next year [Phonetic].

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Himanshu Upadhyay from O3 PMS. Please go ahead.

Himanshu Upadhyay — O3 Wealth & Asset Management — Analyst

Yeah, hi. Congrats on good set of results.

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Thank you.

Himanshu Upadhyay — O3 Wealth & Asset Management — Analyst

I was going to your historical calls also. This question is like this. Last time the big issue was when the inflation came cost of capital increased and projects started getting delayed, and higher input and labor costs made a lot of projects unprofitable for us and some got even stuck, okay? How do you see this type of risk this time? And how do you minimize such a risk in orders which you may be taking now or your order book what you have? This was a big issue in FY ’12, ’13 and ’14. Yeah.

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Yeah, that’s right. So, I mean, see, from FY ’12, ’13, ’14, we have learned quite a few lessons. So we have a lot of smaller things that we do within the Company’s discipline that we follow to minimize our risks or our exposure or to ensure that the amount of money that is lying outside with our client is minimized. This is to do with the kind of clients we pick, the kind of projects we take, the terms at which we take for different clients. For government sector, of course, you don’t get negotiate terms. We can at best choose which department we want to work with. In the private sector, we have strongly been negotiating terms in our favor and ensuring that we do not have our risk flying on the other side of the table.

Also, having said that to do with inflation, there will be so much we can do in costing, if it can be cost for a project, we do provide for a little bit of inflation over the two-, three-year project period. You must note, however, that most of our key materials are generally covered by the contract either as a pass-through base rate or through PWD indexation. So therefore, we get the inflation on those items are covered for us. It’s only very few items that do not get covered. We take a little bit of a buffer for those when we cost and back the project. But yeah, if something really unprecedented happens, like it happened three, four years ago in COVID, for example, the prices shot through the roof within a six- to eight-month period. That is when we feel the heat. But otherwise, generally, the way our contracts are structured, we should not be feeling the burden of these inflations.

Himanshu Upadhyay — O3 Wealth & Asset Management — Analyst

Okay. So if I should understand that the cash — the critical difference between us today and in FY ’13-’14 would be the cash lying in the — or uncollected for the work we have done is much smaller than what used to be at that period of time. And we would have slightly higher building inflation in most of the projects.

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Yeah. And more importantly, the terms we are having with each of the clients we choose. For example, private clients, bank guarantees or the assets that have to be funded for their project, we get them to fund it. We do not put up performance guarantees. Also, for example, earlier, I mean, the small things, since you brought up the topic, there were — we used to have our advanced guarantee line with the client. While we recovered the advance, there was still a guarantee line with him for even portions of the recovered advance. So now we give these guarantees in much smaller portions and keep taking back our guarantees for the amount recovered. So these are small housekeeping issues, which the lessons have been learned and we are very careful on all these accounts.

Himanshu Upadhyay — O3 Wealth & Asset Management — Analyst

And secondly, on the GMP, the subsidiary, though, even we want to sell. But what will be the priorities? And what is the business looking like in FY ’24-’25 because generally valuation will depend on future prospects of the business, okay?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Yeah, if you see in GMP over the last two, three years, they’ve also, just like our EPC division, the growth has stabilized, they have come out of whatever issues we had and the bottom line this time is also the percentage EBITDA has stabilized. We look — going forward now, it is a matter of growing and I think they are also predicting, the division is also predicting to grow at same like our EPC division to grow at about 15%, 20% year-on-year for the next two, three years. And the bottom line percentage would only slightly improve with scale.

Himanshu Upadhyay — O3 Wealth & Asset Management — Analyst

Okay. Okay. And the orders, what they are taking, will it be significantly higher? What would be at same time last year? Or anything you can give on the business traction on that company?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

So if they have to grow at 15%, 20% year-on-year, obviously, their order intake would also have to increase. See, for GMP, their orders are normally extinguished in a much shorter period than, say, for EPC. So in EPC, while we say we start the year with X and then we expect to do X by 3. For GMP, it’s totally different because their orders are — they do not last such a long period. So it’s seeing their order book at a particular point of time would not help, seeing what exactly they bagged over a year would help us assess. And yes, definitely, they’ll be bagging more orders going forward to keep the growth.

Somnath Biswas — Chief Financial Officer

And eventually GMP is currently having order book is more than INR200 crore lying with them. So this is the current condition. So as CEO [Phonetic] said, the order addition coming every month, every quarter. So GMP’s growth is — significant growth is expected next year also, is continue to.

Himanshu Upadhyay — O3 Wealth & Asset Management — Analyst

Okay. Thanks for that detail, Biswas. And lastly, as a Company, in the top management, the debt has been reduced to minimum, okay? So one of the priority targets has been achieved, okay? But let us say, for next three years, okay, what would be the top three priorities or targets you want to achieve? One is done. But now if you take a clean slate, how do you model the Company and the targets you will be — are setting for the next three years, sir?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

So for the EPC business, see, we do not want — so there is three different businesses. So each target and each criteria would be different. On the EPC side, we want to increase our working capital limits primarily for the non-fund base. So our non-fund exposure will increase because there is no choice — there’s no way you can have growth without increasing your non-fund risk. So those will continue to increase. However, we will keep a cap on our CC limits and use it very prudently. Again, it’s a business call that sometimes we have advances available from clients at reasonable rates, which help us tied along, at sometimes it is better to use a little bit of your CC limits to keep the projects running. So we expect the CC limit to go up but not too much very marginally.

On the real estate side, we will be funding our projects on a case-to-case, project-to-project basis. So definitely, we will be taking the construction finance or some nominal debt in the beginning of the project, if needed, case-to-case basis at the project level.

Himanshu Upadhyay — O3 Wealth & Asset Management — Analyst

Okay, okay. Thank you from my side.

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

See, going forward, this year, we want to focus on our — improving our rating also by a notch or two and then renegotiating our terms with the banking consortium so that our terms are much more efficient. As of now, we still feel we are not getting the best of terms. We hadn’t backed performance for a while. Now that we have performance on our side, we would want to negotiate our terms with the bank this year.

Himanshu Upadhyay — O3 Wealth & Asset Management — Analyst

Okay, okay. Thanks for your detailed reply.

Operator

Thank you. [Operator Instructions] The next question is from the line of Rishith Shah from Nuvama Wealth. Please go ahead.

Rishith Shah — Nuvama Wealth — Analyst

Yeah. Thank you, sir, and congrats for a great set of numbers. So firstly, continuing from what the previous participants already asked. So on the EPV side, when we say we have some filters while bidding for an order or similar. So can you just kind of quantify what are the filters, some other set limit or a target margin that we see while bidding for an order?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Yeah. So, see, the first thing is, we continuously look for a design and build EPC mode projects. So even the governments are coming up with this mode of contracting. The private sector can be receptive to it if we give them a competitive offer. Now, what this mode of contracting does is, it gives us a competitive advantage. We have a huge amount of in-house strength in architecture, engineering, and we are very confident to use the strength and add design efficiencies, which creates a win-win situation for us and the client. And that sort of covers a couple of basis points of risk for other things that an item rate contract doesn’t cover. So that is one thing which we keep doing as a focus point to increase our margins a little bit.

The second thing is, as I said, depends on the client. If we are now dealing with a non — I mean, non-AAA private client, if I may say so, then we are very careful with the terms which we negotiate with them. So we do not put up our performance guarantees. Even if it means at the end, we don’t back the order for that purpose. We are very careful. So we do not put up our performance guarantees. We do not fund the capital acquisition in terms of aluminum shuttering or huge amount of equipment that needs to be funded for the project from our pocket. So we ensure that it is funded by the client. It could be recovered from us over the project period. But the initial funding, we put it on the client side. So we — as I said, in terms of retention bank guarantees or other bank guarantees, we give them in smaller pieces so that we can keep pulling out bank guarantees as and when they are due to us rather than leaving a big chunk with the client.

And yes, on — we ensure that our — see, there’s only so much you can do in terms of the rate because there is competition in the market. If I say I want a 20% margin, I may not be in the game at all. So we do — but at the same time, on the private sector, we do not cut rates to a point that is below 15% gross profits or anything because we would rather than work on the government sector. There’s enough projects. So we are not extremely aggressive or desperate, if I may say so, to back projects from the private sector, if our terms are not met.

Rishith Shah — Nuvama Wealth — Analyst

Got it. Got it. Makes sense. And secondly, so do we kind of — I know the concentration right now is on the building side or the civil side. So any plans to, I mean, kind of diversify into other segments?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

As of now, in the immediate short term, no, I think there’s enough work out there in the building. There are so many departments, so many kinds of buildings and the private sector is again opening up. There is — so there’s a lot of work in the building sector across the country. So as of now, no active plan to deliberately diversify into non-building.

Rishith Shah — Nuvama Wealth — Analyst

Right. Great. And thirdly, on the real estate side. So basically, we have a good enough pipeline on our hands right now. But I just wanted to understand the thought process in selecting a particular project or entering a particular area. I mean, how do you go about that? So what is the strategy behind selecting a particular project or a particular target audience or target city or the location that you select?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

So as of now, our cities that we are working in are only Pune, Mumbai and Coimbatore. So in the immediate term, we do not have any intention to expand geographically in going to other cities. We’ll be focusing on these three cities where we’ve already established a brand name and we’ve delivered projects and we have recognition and strength.

In Bombay, given the size of our Company, we feel what’s best suited for us is niche redevelopment projects, like the one in Santacruz that we’ve bagged. So we will be looking for similar projects going forward. Those projects might be small in terms of square footage, but they’ll be visible, they will be reasonable in terms of top line, bottom line for us.

In Pune, we look for joint — Pune and Coimbatore, we look for joint ventures. Again, we are not now looking for huge parcels like we used to 10, 12 years ago, 50-acre township projects. We are now looking for not more than four, five acres of land, not more than 1 million square feet in a project that we can deliver over a three-, four-year period and move on. So that is our strategy as of now to do with. And as I said, we are not looking at land banking. We’ll be looking at joint ventures. So yeah, that is the strategy for real estate.

Rishith Shah — Nuvama Wealth — Analyst

Great. Makes sense. Thank you so much, sir.

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Yeah.

Operator

Thank you. The next question is from the line of Kunal Jain from JM Securities [Phonetic]. Please go ahead.

Kunal Jain — JM Securities — Analyst

Congratulations on a good set of numbers, sir. I just had a couple of questions. Firstly, sir, I just wanted to understand in the presentation we had mentioned for Forest County, that collections have been INR56 crores but no revenue has been recognized. If you could explain, sir? I mean, how does this work, the revenue recognition for Forest County?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

So this Forest County project comes through a Company called Ajanta, where we are a 50% stakeholder. So that is the AOP. And so, what happens is they are not able to — we only get profit share that is recognized on our balance sheet, we do not get to recognize the revenue from their on to our balance sheet.

Kunal Jain — JM Securities — Analyst

Okay, okay, okay, okay. And sir, second question was regarding Ajanta Enterprises, sir. And you’ve mentioned that we’ve got a JV partner — yeah, we’ve got a JV partner and hence, there has been some agreement for sale of asset side. So if you can just talk about that, sir?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Which Company you’re talk about?

Kunal Jain — JM Securities — Analyst

Ajanta, Ajanta Enterprises, sir. I think you had mentioned one of the JV — some ventures has entered in for sale of asset side through some party?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

No. Sale — so we sold last year, we did sell a portion of the land that was there in Ajanta. That was last year. And we did sell some TDR this year. It’s not a joint venture. It is actually a profit sharing partnership that we have in Ajanta, where we have 50%, and there are two other partners in that company who hold the balance 50%. And — yeah, but no other sale of assets in that — I mean, no other sale of land in that entity. There’s a little bit more parcel that is available there, which we intend to develop going forward.

Kunal Jain — JM Securities — Analyst

Okay. Okay. Sir, one last question on Vascon Developers Private Limited. I think we have changed that to LLC, and I think our stake has also come down. So any idea if you can speak about who is the new partner and why has our stake come down? I think we’ve lost some stake and we’ve reduced to 35%, I think.

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Yeah. So there — that is — see, the land in — we had a land in Powai and now we’ve taken in — so we want to intend to develop that land rather than try and sell it off. So we’ve taken in an equity partner on that project so that we have the funds available to launch — there is huge amount of equity share involved in launching the project being in Mumbai, there is premium FSI cost, TDR costs and launch costs which are quite high. Now, considering our strategy, we do not want to be investing our cash flows either — so we look at — up to approval, we look at it as land cost, so we do not want to be investing our cash flows on land acquisition in that sense further, nor do we want to be borrowing heavily to fund the — rather than an initial amount of construction finance in our real estate projects, which we will liquidate — we’ll pay off quickly within a year or two, we do not want to be taking long-term borrowings or medium-term borrowings in real estate project. So we thought the best strategy is to get in an equity partner, dilute our stake and so that’s why you see our shareholding has come down.

Kunal Jain — JM Securities — Analyst

Sir, what was the kind of amount that the equity partner will be pouring in, sir?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

I am not — so I think we’d like to give you offline the details of this deal because all the valuation done and then according to the valuation of the land plus the premium, we got an equity partner come in. The exact numbers, I think, we’ll touch base offline after the call, we’ll be able to share this to you on e-mail.

Kunal Jain — JM Securities — Analyst

Got it. Got it, sir. And sir, last question is, what kind of realization approximately you’ll be looking at for the Aurangabad land? Just to understand how does our balance sheet change?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Yeah. So that is about INR26 crores, INR28 crores we expect from the sale of Aurangabad land. But that is Aurangabad land is pledged with SBI for our consortium banking limits. So we’ve got NOC from them to sell the land and then the proceeds will be kept as an FD with the bank at least in the short-term until we find alternate collateral.

Kunal Jain — JM Securities — Analyst

Understood, understood, sir. Okay, sir. Thank you so much. I’ll come back in the queue.

Operator

Thank you. The next question is from the line of Hiten Boricha from Sequent Investments. Please go ahead.

Hiten Boricha — Sequent Investments — Analyst

Hello? Hello?

Operator

Please proceed, sir.

Hiten Boricha — Sequent Investments — Analyst

Yeah. Hi, sir. Good morning. Sir, my first question is on the real estate side. So you mentioned majority of our revenue from the real estate will come in FY ’25. So you mentioned something about degrowth in this segment.

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

No. So it is not really a degrowth. So I would like you to understand that our real estate segment is only growing. We are launching more and more projects now. Going forward — but the thing with real estate is, it’s an accounting issue to do with revenue recognition Ind AS. So we’ve launched — for example, we’ve launched two projects already which we expect to finish, but it will not finish before March ’24, and it will not get the completion. And therefore, while there will be significant expenditure, there will be significant sales, there will be significant collections in all of these projects, we will not get to recognize those revenues, they will lie as inventory as of March 2024. And then in — before March 2025, we expect to finish these projects and get the completions. And then they will be recognized as revenue. So what is going to happen for us in real estate over the next four, five years is that, we will see a little bit of ups and downs year-on-year. But on an average, I can tell you that the real estate is expect to grow much more than what — over the next four-year period, I can predict on an average, you can expect much, much more than what we have delivered this year on real estate.

Hiten Boricha — Sequent Investments — Analyst

Okay. So, sir, when you say we recognize the revenue at the time of completion of projects, but we recognize the sales — sorry, expenses at the time of expenses is incurred? That’s the reason our margins are so — sorry?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Yeah. So two kinds of expenses. See, certain expenses are inventorized so they do not hit the books as expenses, they remain as inventory — direct expenses remain as inventory. Indirect expenses, however, salaries, marketing, overhead, all of those come as expenses.

Hiten Boricha — Sequent Investments — Analyst

So now, sir, when we are looking only for JV and not the land buying and anything we are looking for JV and some small projects in the real estate, so do we have any kind of IRR or the margin expectation for — I’m talking about the medium-term, at least if you can guide what will be a medium-term IRR or ROC in the real estate sector or the margins? Because when I — when we have a look at the margins in this particular segment, the margins is so like volatile. I just want to understand how this is going to work in medium-term, let’s say?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

So, again, — yeah. So, see, on the EPC side, we hope to be getting gross profits in the range of 15%, 16%, which will eventually translate — I mean, our target, which I dream to achieve a 10% PBT on the EPC business, we are at 8% currently. We hope we can bring that up. But even 8% is reasonably healthy given how the market performs. So in EPC, our gross profit margin from a project would be in the range of 15%, in general.

On the same calculation methods, on the real estate side, our gross profit expectations are normally in the range of 25% to 30%. I keep mentioning that we call it glorified EPC because it is still finally execution and design that is in our side of the story, the land and finance or the share of land and finance could be taken by other partners. So what is left in the whole game would be the premium that a developer in terms of bringing his brand sales, marketing, design and execution. That is what we would command. And so, that will be definitely more than EPC, so we expect — generally, our calculations show that we maybe [Phonetic] in the range of 25% to 30%.

Hiten Boricha — Sequent Investments — Analyst

Correct. Okay. Okay. And sir, my last question is on the BMS segment. So we have seen a very good growth, Y-o-Y growth of INR200 crores to INR250 crores. So can you shed some light on that, what kind of growth we are looking in this segment? And any color on margins?

Somnath Biswas — Chief Financial Officer

Yeah. So I had mentioned just now, so GMP is now clear of all its legacy troubles and issues, and it is now looking robust ready to grow at the same pace. So we are expecting another 15%, 20% growth in top line in the coming year. And the bottom line has now stabilized, the impact with scale, we expect the bottom line would also, in fact, increase by a percentage point or 2 at the EBITDA level.

Hiten Boricha — Sequent Investments — Analyst

Okay, sir. Okay. That’s all from my side. Thank you.

Operator

Thank you. The next question is from the line of Rishikesh Oza from RoboCapital. Please go ahead.

Rishikesh Oza — RoboCapital.in — Analyst

Hi, sir. Thank you for the opportunity. Sir, my first question is regarding the ongoing and the completed projects. What is the pending sales value in the ongoing and completed projects?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

For EPC?

Rishikesh Oza — RoboCapital.in — Analyst

No, no. For real estate?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

INR170 crores on the real estate projects.

Rishikesh Oza — RoboCapital.in — Analyst

Okay. And also for the sales that we have done, what is the pending collection on that?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

So that would — I mean, generally, in real estate — there would be no pending — see, I mean, INR100-odd crores is to be collected from units already sold. However, they’re not due — the collection is not due at this point of time. Generally, our real estate division collections are online. So when it’s due, generally, there’s not much of a lag in terms of collection.

Rishikesh Oza — RoboCapital.in — Analyst

Okay. Okay. Okay. And sir, regarding — you have said you will be launching like three to four projects in FY ’24. So what kind of average sales velocity do you look for?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

So our intention is to finish selling off at least 50% of the project when we launch these sort of — in principle, achieve that number with our Kharadi project, as well as our Coimbatore project at this point of time. That sort of gives us the confidence that construction is not going to be an issue and the construction finance or that we borrow is not going to be the only source of funding. In fact, that gives visibility that we’ll be able to pay back that construction finance debt ASAP. And then after that, again, the second plan is that, by the time we finish the project, before that, we definitely want to be finished with the balance sales. So we do not want to be pending up with a completed project and inventory in hand. So based on this, we gave the pricing at this point of time, which will give us the desired flow of sales.

Rishikesh Oza — RoboCapital.in — Analyst

Okay. But the silent [Phonetic] period would be like what, till you complete the project? Would it be like three, four years?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Two years, typically. Two and a half — once we have launched and started — real estate takes more than a year to launch because plan, design, approval, all of that. But sales only happen through RERA, sales can only happen once you’ve done all of that and broken ground. So from the time of breaking ground to finishing a building typically two to two and a half months.

Rishikesh Oza — RoboCapital.in — Analyst

Okay. Okay. And also, sir, regarding the projects that we have launched and that we have in our inventory, what kind of EBITDA margins do we look to achieve there?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

So as I said, the gross profit in real estate, we expect to get all these projects are in the range of 25% to 30%. In EPC, it’s in the range of 15%. I think EBITDA would then depend on the top line that we achieve for the year. Our EBITDA this year is, what? No, no, overall EBITDA. Company level. 10%, 12% at the Company level, I think, hopefully, we could improve on that a little bit.

Rishikesh Oza — RoboCapital.in — Analyst

Okay. But what would be that EBITDA margins for real estate division? Like not on the reported basis.

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

As of now, it’s 34%.

Rishikesh Oza — RoboCapital.in — Analyst

Okay. But actually, I’m not talking about the reported basis, but basically on the projects that we are going to launch, what kind of EBITDA margins like we look to achieve there on a cash flow basis?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

About 30%.

Rishikesh Oza — RoboCapital.in — Analyst

About 30%, right?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Yeah.

Rishikesh Oza — RoboCapital.in — Analyst

Okay. Okay. That’s all helpful, sir. Thank you.

Operator

Thank you. The next question is from the line of Rikesh Parikh from Rockstud Capital LLP. Please go ahead.

Rikesh Parikh — Rockstud Capital LLP — Analyst

Yeah. Thanks for the opportunity and congratulations on maintaining — getting this debt level to the INR12 crores. Sir, my first question is around the debt level, means, we have reduced debt from around 134 — net debt around from INR134 crores to INR12 crores, so can you help me with the bridge mix from where this — it has been reducing, means, equity raise, monetization and cash flow?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Yeah, it’s a combination of all three. We did a preferential in this period. So that helped us reduce about INR40-odd crores of debt. And then the balance has primarily been through cash from operations. We hardly had any one-off sales, nothing much, INR7 crore, INR8 crore of one sale that we did. The balance has been cash inflow from operations.

Rikesh Parikh — Rockstud Capital LLP — Analyst

No monetization in the last two years if…

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

The last two years, only that one [Indecipherable] land which was — nothing much. Not more than INR10 crores.

Rikesh Parikh — Rockstud Capital LLP — Analyst

Okay. Yeah. Thanks. That’s helpful. Second, what is your current rate of interest for that?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Current rate is 10% — 11%. Cost to Company as of now is 11%.

Rikesh Parikh — Rockstud Capital LLP — Analyst

11%. Yeah. Secondly, on our monetization front, we have registered Aurangabad land and the GMP Technical. So Aurangabad, what is the timeline and the value we are negotiating as such?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Aurangabad land, we’ll purchase about INR26 crores to INR28 crores. It is scheduled to happen in the next month or two itself. We’ve got the NOC from the bank as well. And as I said, that land is pledged with SBI for the consortium limits. So those proceeds of the sale will also go to SBI in the form of an FD as a pledge for the consortium limits till we find any alternative collateral.

Rikesh Parikh — Rockstud Capital LLP — Analyst

Sure. And for GMP Technical, have you got any bid or anything as such?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

No. We — I mean, GMP, we have not yet started actively looking. I mean, we — there are mandates — we will — we’re not desperate or looking very actively with a target in mind to sell it. We will look at valuation as and when we get offers, and if we feel something is good, then we will take it forward.

Rikesh Parikh — Rockstud Capital LLP — Analyst

And operationally, has the GMP turnaround on top line EBITDA margins or something like that?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Yeah, GMP is now very healthy. It passed all its troubled times, and last two years, it’s done very well. This year, in fact, it has grown by 20%, 25% in top line and the bottom line is about INR16 crores this year. And next year, they expect to grow on both top line and bottom line from here on. So I think we took a target last three, four years to stabilize the business to handhold it and ride it out of its troubled waters and ensure that it is looking forward towards growth. We have achieved that. It is now definitely growing well, it is performing well, and it is giving the expected margins in the sector. So from here, we can look at suitors [Phonetic], as I said, if we get the right valuation or what we feel is a good price for Vascon to exit, we will take a call.

Rikesh Parikh — Rockstud Capital LLP — Analyst

And my last question now for going forward, what will be the focus area, EPC, real estate or — and how we should be looking like the growth in both the segment as such?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Yes. So we have only EPC and real estate. Everything else for the last five, six years, we’ve classified as non-core, including GMP. So we view ourselves only experts in two field, that too one field, especially I keep saying glorified contracting. So we are people who know to design, build and execute. And we have a brand recognition that helps us sell and market our projects. So we will be focusing only on these two wings. The EPC will continue to look for order booking year-on-year augmentation of their banking facilities as we grow. And — so it’s a cyclical thing, we grow our banking limits, then we take more orders. We grow further. We keep going back to the bank. So that process will continue. And hopefully, from here, EPC story is to keep delivering similar or slightly better PBTs, while they continue to grow at 15%, 20%, 25% year-on-year in terms of their top lines.

For real estate, in the initial — we’ve been low for a while in the initial phase, we expect a higher growth more than 15%, 20% because we want to catch up for a bit and then it will also stabilize. But in the interim — so in real estate, our strategy is always to do joint ventures not to put capital on land and look at it as a glorified EPC, where our margins will be higher than third-party EPC. So these are the two engines with these simple focuses in mind, we will continue to grow. Real estate geographically, we’ll not go beyond Pune, Mumbai and Coimbatore as of now. And within Mumbai, it will not be big projects which are beyond the capacity of the Company. It will be niche redevelopment projects. And in Pune and Coimbatore, there would be joint ventures in prime — in good locations not really big projects on the outskirts. These are the guidelines under which we intend to grow.

Rikesh Parikh — Rockstud Capital LLP — Analyst

Okay. Thanks.

Operator

Thank you. [Operator Instructions] The next question is from the line of Manish Shah [Phonetic], an individual investor. Please go ahead.

Manish Shah — — Analyst

Sir, what should be the benchmark for this GMP Technical valuation, sir? At present, suppose, we take the turnover, so what should be — it should be 2x, 3x?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

No, I don’t know actually. I mean, see, I think these companies generally would get multiple — valued as multiple of EBITDAs. We are yet to get an understanding of how exactly could get valued in terms of either multiple of top line or EBITDA. So yeah, I wouldn’t want to speculate on…

Manish Shah — — Analyst

Suppose, if you take the EBITDA, what should be the approximate?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Maybe 10%, 12%, I don’t know actually. We expect EPC generally get valued like that. So considering it’s similar to EPC maybe in that range.

Manish Shah — — Analyst

8 times to 10 times?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Yeah. 10%, 12%, I don’t know. Actually, very honestly, I wouldn’t want to stick my neck out and give a number because we haven’t got offers from the market to gauge what — there might be other premium, there might be other — since it’s a niche company, there could be other reasons why foreign companies coming in would want to take a stake in it. So these multiples could go up. So we will know as we now approach the market going forward.

Manish Shah — — Analyst

Thank you, sir. And another question is about, sir, considering our size and negligible or no debt, I think we should double our Company in the next three and half years?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

See, we do expect 15%, 20% growth is what I would give as a guideline over the next three, four years. That is definitely visible. We do not see any impediments to stop that kind of a trajectory, if not more. Also the bottom line, on an average, since we have revenues in our bottom line from real estate, which will be a bit bravery [Phonetic] year-on-year due to Ind AS. So, again — but on an average over the next four years, we should be doing more than INR100 crores as a bottom line and growing INR1,000 crores into 15%, 20% year-on-year. That’s the target we can take. We might not exactly double, but yeah, hopefully, if we can, that will be even better.

Manish Shah — — Analyst

And sir, another thing is that, seeing all the financial thing, I think the margin should go up from here a little bit.

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Yeah, that’s definitely the intention with the scale, with size, we do hope that the margin goes up a little bit. Having said that, in EPC, the margin for even big companies are generally tight and single-digit. As you grow in EPC, what also happens is your stickiness of projects, you might — when we are small, we can be very choosy and pick high-margin projects only as we have a target of top line, sometimes you have to let go of a percentage point or two in your margins to bag a project. So that sort of levels you down. But having said that, yes, with scale, with the increase in top line, we definitely — our endeavor is to keep a focus on the bottom line and increase the top line [Phonetic].

Manish Shah — — Analyst

Sir, any new development on the Thane land, sir?

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

No. No update on the Thane land. Yeah, nothing to share.

Manish Shah — — Analyst

Thank you for answering all the questions, sir. And best of luck.

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] As there are no further questions from the participants, I now hand the conference over to Dr. Santosh Sundararajan for closing comments. Over to you, sir.

Santosh Sundararajan — Whole Time Director and Group Chief Executive Officer

Yeah, thank you, everyone, for the enthusiastic participation. And if there are any further queries, feel free to write to us through Stellar and we will get back to you. And I’ll see you again next quarter. Thank you.

Operator

[Operator Closing Remarks]