Capacit'e Infraprojects Limited (CAPACITE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Capacit'e Infraprojects Limited Q2 FY '22 Earnings Conference Call hosted by IIFL Securities Limited. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anupam Gupta from IIFL Securities. Thank you, and over to you, sir.

Thanks, and welcome, everyone, on the 2Q results conference call for Capacit'e Infra. From the management, we have with us Mr. Rohit Katyal, Executive Director and CFO. And from his team, we have Mr. Alok Mehrotra, President, Corporate Finance; and Mr. Nishith Pujary, Head Accounts and Taxation also on the call. I'll hand over to Rohit for the initial comments, and post that we can take the Q&A. Over to you, Rohit.

Thank you, Anupam. Good afternoon, everyone. We would like to extend a warm welcome to our Q2 FY '22 earnings call. I hope and your loved ones are doing well and safe. Along with me, I have Alok and Nishith and our Investor Relations team, SGA. I hope everyone has had an opportunity to review our results. On the stock exchanges and our company website, the presentation and press release has been posted. Before I take you through the operational and financial performance, I would like to highlight a few points. Following F1 -- following Q1 FY '22, the economy is showing signs of improvement. And many states have relaxed travel restrictions as vaccination programs have grown. Home registration surged throughout the festive season without the stamp duty incentive. This means that buyers are rushing to take advantage of current market conditions such as fair prices and to get low home loan interest rates as well as the urge to take advantage of some seasonal offers. In Q2 2021, the outlook for leasing and rentals in the commercial office sector was positive. Due to excessive rents, we lost additional 10 to 12 days of work, which has hurt our revenue for the quarter. After Q1 FY '22, labor availability has increased, allowing the projects to be executed more efficiently at all. As a result of the additional labor and travel convenience, our execution on the larger projects is picking up momentum and showing signs of improvement in both public and private sector. We are optimistic about H2 FY '22, hoping that there would be no further surprises related to COVID. We derive our strength from the strength of our clients' balance sheets, and all the sites are fully equipped with all resources. Our focus for expansion will be accelerating the completion of all our projects, ensure that our working capital cycle as well as our cost rationalizing strategies are effectively managed. Let me also take this opportunity to give you confidence that there is absolutely no challenge of debt servicing at Capacit'e. We have enough liquidity to run our projects, repay financial institutions and bid for newer projects. India ratings today have also published an update on the credit rating, and we are hopeful that the rating they decide will be concluded before the month end. Further, I'm happy to share that we have commenced BDD Chawl project at Worli with revised plans. We are confident of significant movement upswing in BDD Chawl project. Work front worth INR 3,800 crores has opened up for execution. This project is an integrated SPV with data and revenue recognition will start from Q3 of the current fiscal. Now allow me to give you an overview of our operational performance during the quarter. Order book. As on September 30, 2021 -- '22 -- '21, the total order book private plus public, excluding BARDA, was INR 8 776 crores. Our order book from the public sector accounts for 60% of the overall order book, while the order book from the private sector for the remaining 40%. The company saw cash collections of INR 587 crores in H1 of the current fiscal and INR 305 crores in quarter 2 of the current fiscal, indicating strong collection efficiency. The execution momentum is expected to increase. Our constant focus on client service and cash flow management has undoubtedly supported our business model. Our stand-alone financial performance for Q1 FY '22 is as follows: total income for Q2 FY '22 is INR 347.4 crores as compared to INR 382.4 crores in Q1 FY '22 and INR 187.5 crores in Q2 FY '21. EBITDA for Q2 FY '22 is INR 65.2 crores as compared to INR 41.8 crores in Q1 FY '22, up by 60% quarter-on-quarter. EBITDA margins in Q2 FY '22 were at 18.8%. Margins have improved due to adoption of cost rationalization measures. PAT for Q2 FY '22 stood at INR 17.2 crores. Cash PAT for the period was INR 42.6 crores. Debt level stood at comfortable levels of INR 288 crores at gross level and excluding [indiscernible] loans, stood at INR 235 crores. Our net debt remained stable at INR 89.3 crores in compared to INR 77.9 crores in Q1 FY '22, while the net debt-to-equity ratio for the same period, 30 September '21, stood at 0.09x. With this, I now leave the floor open for questions.

[Operator Instructions] The first question is from the line of [ Pritesh Chheda from Makinson Managers ].

Post the half year now versus the INR 1,600 -- sorry, the INR 1,900 crore revenue that we were thinking about for FY '22, where are we on the execution side? And this also meant a lot of improvement on the CIDCO project execution. Where are we on that particular part of the execution cycle?

So shorter question first, CIDCO project, the labor has been totally mobilized in last quarter itself, and the execution pace has picked up to approximately INR 20 crores a month. We expect the pace to go up from December onwards to INR 35 crores and approximately INR 40 crores thereon for the last quarter. Now the total workfront availability of -- for CIDCO, out of 7 locations, all locations have been handed over. Work on 6 locations has already commenced as was the case in the last quarter. We expect the work at the seventh location to start from this quarter. Coming to the overall revenue projections, we have given an upward revenue of INR 2,000 crores before the second wave had hit. And the revised projections will be communicated very soon by our Investor Relations team. However, we have remained confident of crossing INR 200 plus crores in Q3 and INR 550 crores plus in Q4. But these figures are still being tabulated given that the entire projects across are totally manned and operational with all resources, and therefore, the exact number will be communicated by our Investor Relations team to you maybe by day after tomorrow or by Monday latest.

Okay. So my second question is on this rating review. So what does this mean? This technically means we go back to where we were or we go back midway somewhere between A and B?

That's a big guess. We believe that our balance sheet strength doesn't change over the last 7 years. It's only improved. Whatever procedural matters they had to look forward, that comes to an end on 21st of this month. And we believe in that subsequent committee meeting, they will take it up. Once they communicate to us, it will be communicated to you immediately. However, the update, I think they have published today, which we have also uploaded. And that clearly states that whatever operational issues they were looking at have been resolved in totality.

Last -- on my last question on the internal control system, especially what we have seen in the last 6 to 8 months, one is the ratings thing. The second is the exit of professional product, the way balance sheet was structured, and we offered a little bit of equity, our own equity stock. What are steps that we are taking for a better internal control system which also enhances shareholder value creation? Some thoughts there, sir.

First of all, Rahul Katyal was earlier the Managing Director and CEO prior to Mr. Saroj Pati coming in. Saroj has not been keeping well for more than 6 months now. And therefore, the company, while it's thankful for his contribution, we have to let go when a health issue comes up. Therefore, on the other hand, we have added 2 Chief Operating Officers. The company is manned with 3 Chief Operating Officers at the moment in time, who report in to the MD and CEO. The overall strength of the company from operational -- operations perspective remains to be one of the best in the industry. The [ we ] vouching is one thing, clients vouching is more appreciable. And I'm sure if you speak to any of our clients, that would be the case. Number two, shareholder value basically comes from revenue increasing and profitability increasing while the debt level has been under normal control. That's what we have been executing. Yes, we do appreciate that we have not been able to ramp up the operations to our own expectations. But that in no way means that it diminishes the company's track record of the last 9 years. We do believe that we have been more cautious after the IL&FS debacle and then we all industry-wide had to face the COVID crisis. The order books remain robust with MHADA starting, and we will be able to include that revenue in our operations, hopefully from Q3 onwards, gives serious visibility to revenue growth. And we are very confident that once the revenue growth happens with the orders which we have, with 100% pass-through as far as our commodity prices are concerned, it will add surprise on the positive side as far as profitability is concerned. Surprise on positive side obviously creates shareholder value because then the market cap of the company also increases. Apart from this, there have been no exits basically. And therefore, the investor at large should not be disturbed because all the key positions of the company are very, very well manned.

Just 2 clarifications. One on the MHADA side. So it's a JV. So the revenue booking will happen at the JV or the number will come at the capital level?

No, it's a joint operation. There is something known as joint venture and something as joint operation. This model is a joint operation between Tata Projects Limited and Capacit'e Infraprojects Limited. So they will be taking their share of income and expenses and profit, and we will be recognizing our share of income that is revenue, expenses and profit. Obviously, the balance sheet at the SPV joint operation -- joint venture level will be made. So you cannot have taking the income or the expenses without that balance sheet being prepared. So having said that, to clarify, balance sheet will be prepared at the LLP level. However, we will be enticing to our share of 35% from operations revenue and expenses both.

Okay. And sir, last question, when you ramp up the business, let's say INR 1,900 crores revenue this year and higher number next year, how should we see the debt figures moving for us, the net debt figure?

The net debt figure, if you study over from September 2018 to date, the net debt figures basically have been between INR 61 crores to peaking at INR 127 crores during the COVID period. We do believe that the net debt figures due for the next 2 quarters, which can be foreseen at the moment in detail depth, will be at that level between that INR 127 crores and INR 50 crores level.

And on non-fund limit number, how will it rise?

This includes a long-term limit number.

No, non-fund limits.

Non-fund-based limits, excluding MHADA, including CIDCO and MCG, which are project-specific limits, the remainder requirement is totaling to about INR 1,000 crores. Out of this, one base is INR 190 crores, so about 810, and those sanctions are already in place.

So non-fund limits will rise or you will be able to manage within the INR 1,000 crores?

You see that current utilization is INR 454 crores. Therefore, we believe that within -- we should be within that range of INR 900 crores.

The next question is from the line of [ Regal Hawa from AGN Company ].

You have new orders and I mean, residential real estate has picked up really well. This should cause the developer to really go fast on your projects. So are developers willing or ready to deal with you at even higher costs so that they are more guaranteed towards faster execution and delivery? And till even when are we placed on the ratings upgrade with the agency? Do you feel that, that could happen soon?

So the rating upgrade update has been published by India Ratings and I had just answered that we should see the IR rating upgrade happening in all probability before this month-end because the cooling period gets over on 21st of the current month. That's one part of your question. The second question is on the private sector side, we have added about INR 244 crores in the quarter, which are essentially repeat orders from existing clients. And we see this momentum continuing. On the front of new projects, obviously, there is good momentum. However, project announcing and awarding of that project to a construction company by the developer could take 3 to 4 months. We see good traction in the public sector EPC design-build projects also. The company has bid for a couple of projects. And hopefully, we should be able to give you a good news in the current quarter.

Sir, we were also vying for some hospital orders. Is it possible that we get some hospital orders in this fiscal [ intel ]?

Absolutely. Health care is an important aspect of the government spend. And including state and the central governments put together, the figure is quite large. So it's impossible for any construction company engaged in SMB with the top 7, 8, and fortunately, we are part of that elite group, to not -- to ignore the health care segment. We already execution 2 -- executing 2 projects. We have qualified already in another 4 of them, and those bids will be going in the current quarter. So we do expect that you should see some health care projects in quarter 4 of the current fiscal.

The next question is from the line of Dhananjay Mishra from Sunidhi Securities and Finance.

Yes, sir, congrats on improvement or operating performance. I just wanted to check with this 10 total day loss, how much revenue we have lost in this quarter? And in last 3 months, because of our current status on rating, is it affecting our ability to participate in new tender?

So number one, on the private sector side, as I told you, we have already taken INR 244 crores of additional orders. So that rating action taken for these justifications were given and our side of the facts were posted on the stock exchanges. It has not impacted the private sector at all. On the government side, I just mentioned, we have submitted 2 bids. So again, it has not impacted our ability to bid for any projects. The other part is that 12-day loss of -- additional loss due to heavy monsoon, especially in the September month, has close to about INR 38 crores to INR 42 crores of revenue. And hopefully, you will see that figure coming back much more stronger in the current quarter.

Okay. So INR 30 or INR 32 crores we have lost because of this?

INR 38 crores to INR 42 crores, say INR 40 crores.

And sir, earlier, we were guiding [ unanswered co-part ], like monthly run rate will reach INR 70 crores, INR 80 crores. Kind of now we are saying INR 30 crores and INR 40 crore monthly run rate in Q4?

So we were expecting the [ 7 to let ] project, [ 7 nabarre ], sector 43 put together, which constitutes 60% of the project to kick start in Q2, Q3, which has not happened thus far. We have received the first interim extension of 16.4 months from the client. And therefore, we wouldn't like to add the revenue of the seventh location until work actually begins. And therefore, I have mentioned in my answer to an earlier question on this conference call that we are tabulating the project-wise revenue figures, and that shall be intimated to all the attendees by our Investor Relations team.

Okay. So existing project can reach to INR 50 crores, INR 60 crores by monthly run rate by next year, peak revenue?

First of all, it's an ongoing project. There are 7 locations [indiscernible] delay for which the client has given an extension. The second interim extension will also be given to us. However, we wouldn't like to speculate on the date of the handover and add the revenue at the moment. Having said that, without even CIDCO will add whether INR 40 crores or INR 70 crores in quarter 4, whether it adds INR 100 crores per month in next financial year, the company has a total of 26 projects. And all 26 projects are running quite well. And they should be able to give us the targeted revenue, which is our internal target in the next financial year of close to INR 200 crores going forward. We have to take into consideration some delays of handover, though they are not attributable to us, but then they definitely affect the revenue. So we wouldn't like to speculate at this moment in time the exact date of handover of that seventh location of CIDCO. However, having said that, we are very happy to see MHADA project underway, and that should add for any loss which is COVID loss.

So in MHADA project, what is the kind of mobilization we have to put from our side? And what is the kind of advances we would receive?

The mobilization advance in MHADA project is 2% of the entire contract value of INR 11,744 crores. Out of that, we have availed 1%. 1% will be availed by the SPV in quarter 4 or as required, we are eligible to take that. Work front, as I mentioned, of INR 3,800-plus crores is already available, and we have started work on 2 towers. The working capital cycle over there, we don't see any fund-based limit requirements. Whatever term requirements will come up in quarter 4 will be taken by the SPV from NBFCs or from banks who have equipment loans. So from -- since the billing breakup is already approved, the cash flows have been drawn up. And likewise, in CIDCO, we don't see any fund-based requirements in this project figure.

We don't need to put any equity in that activity, right?

All equity was to be put has been put by the partners.

Okay. Okay, sir. So -- and lastly, on private real estate side, so how we are going in terms of because market is very -- I mean all agency are giving very strong outlook for the sector for next 3, 4, 5 years. So in terms of our -- what is our policy in terms of bidding for these, put it, private developers in upcoming types?

You have been following the company for quite some time now. There is no change in strategy, client quality, client balance sheet. We wouldn't like to bid for projects on basis of a sanction of NBFC or an institution because we have burnt our fingers in the past, and we wouldn't like to repeat that mistake. So we have the [ global agencies ] of the world and [ orbras ] of the world and [ group freezes ]. You know our entire client list. And if any new client will be added, maybe [ Walda ] is joining hands with Marubeni and there will be projects coming up from there. We have Raymond's also joining hands with our [ AL ] multinational funds. We already are having work from them. Puravankara has joined hands and we already are working, and we will continue to work for them. So the existing list of those 20, 25 clients which we have itself gives us a very strong visibility as far as order inflow and also visibility on the revenue happening over the next 4 to 5 years. So that strategy remains unchanged. And obviously, in the public sector, also the strategy would be working with good clients.

Okay. And sir, what is order inflow guidance for this year, next year and capital expenditure?

Next year, we will give you when we meet in quarter 3 numbers. However, the current year, we had -- continue to have a guidance of INR 2,000 crores, out of which 500-plus or INR 600 crores has already been received, and we expect close to INR 700 crores in this quarter and remainder in quarter 4.

And capital expenditure for this year?

Sorry?

Capital expenditures.

Capital expenditure will be INR 75 crores to INR 85 crores, as I said earlier. So far, the total additions have been INR 27.23 crores in the year so far.

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

Sir, you mentioned about this positive surprise on the profitability side, right, because you have a 100% pass-through on the commodity. So can you just elaborate more on the margins front now? I think we reported quite a decent margin, about 18% this quarter. Now as the scale pick up maybe in the third quarter and fourth quarter, so how do you see the margin traction?

The margins for the current you see, the margins of any construction company are established on the basis of the terms of contract price variation, pass-throughs on the day the order is received until you have surprises like unwanted surprise, surprises like COVID. So our cost to complete superimposed for all the projects is the basis of which we give you a projection of the EBITDA. On basis of that, we do believe that the EBITDA level will be maintained at the levels which we have seen over the last 2 quarters going forward in quarter 3 and quarter 4.

Will it be maintained what we are seeing last? Because in the first quarter, margins were quite low, right? So the second quarter, you're saying it's sustainable going forward?

You see the first quarter margin cannot be compared because we lost a serious revenue. We lost INR 40 crores of revenue this quarter. Okay. Now if you are going to lose, let's say, INR 100 crores of revenue in quarter 1, then the indirect cost is -- sorry, the fixed costs which are directly proportional to the revenue will go up, thereby hurting your EBITDA and net profit margin. As soon as your margins go up, you have to look at what was for the quarter ended 31st March 2021 where the company did a revenue of INR 382 crores. The EBITDA margins were close to 20%. So as our revenue picks up, you will see the improvement. And obviously, as a percentage, the depreciation also will fall and therefore, give up a little of your net profit numbers also. The cash profit has been very consistent over the last 3 years, which is available for you to see.

I understood. That's a fair point. And now on the revenue side, you did mention that we lost about INR 40 crores odd of revenue. So even if I adjust, we would have done about INR 380 crores, INR 385 crores kind of a execution level. And we are talking about maybe INR 400 crores execution in third and 550 in fourth quarter. So are we being conservative here, because we are already at INR 380 crores in a rain quarter, September, which is generally kind of a low quarter. So yes.

I'll explain to you the quarter. The 2 revenue was lower on 2 accounts. One was the monsoon, of course. And second one was that we couldn't take our share of revenue of MHADA in Q2 because of technical issues. Obviously, that revenue numbers will come in, in quarter 3. Quarter 4 also will have certain revenue numbers from MHADA. So while I'm being conservative because of the seventh location not still being handed over by CIDCO because my earlier 2 guesses have failed, and I wouldn't like to take any further guesses. So yes, it is conservative, but we are extremely clear that the numbers which we have told you will be met and bettered.

[Operator Instructions] The next question is from the line of Jiten Rushi from Axis Capital.

Sir, one question on the MHADA side. So as you said, we are expecting to book revenue from Q3 and Q4 and which will form part of our income. So what kind of revenue run rate we see in terms of our share or going forward and probably in FY '22?

At this moment, the SPV has estimated that they will be booking a revenue of close to INR 200 crores by 31st of March. And in the next financial year, we should be close at the SPV level of INR 700 crores plus. So 35% will be our share.

So that will be -- and sir, the margins under it, what we see in our stand-alone books, we will see the same margin then maybe in that SPV?

Because that is even more detailed engineering and design, you will see the margins at slightly better levels, if not the same.

So we can expect a better blended margin, the stand-alone level of between 18% to 20% going forward, if I may ask.

So because whatever margin projections we give, as I said, I reiterate that it is given on the basis of cost to complete the value of all the projects superimposed and therefore, MHADA obviously is included in that. So our projections which we have given is that we will be at the same EBITDA levels. The PAT ratios will improve as the revenue improves because the fixed cost as a percentage will fall. And therefore, the EBITDA level guidance for this project also is no different from other projects.

Sir, and on the CapEx, are we doing any CapEx in this project of MHADA?

Yes, we will require CapEx for aluminum formwork and certain tower cranes. That is being organized at the SPV level. We have already placed our order on MSE Malaysia for the aluminum formwork for 2 buildings that should arrive in December, and therefore, we believe that the casting of the job to start in January.

Those cranes you are buying from, [indiscernible]?

That we do not -- that's a matter of the purchase committee to decide. I only authorized on ....

2 cranes, you said.

Sorry?

2 cranes, you said, no?

No. I said we will be buying equipment and formwork. Orders of formwork has already been placed. Whatever equipments are available with partners, they will get it for the project. If something additionally is required, we'll be purchasing that.

Does that number will get consolidated to 35% will come in the standing also CapEx and investment in SPV?

Yes, it will.

Okay. Okay. And sir, this INR 400 crore obviously includes MHADA, INR 550 crore obvious includes MHADA. But I just would like to understand what could be the revenue [indiscernible] ex of MHADA and CIDCO kind of run rate we are expecting in H2 and FY '23.

Dear friend, this question is -- answer is a very long one. What I suggest is that we can -- you can put a mail to Amit from SGA. But Amit would be the right person for this. He will give you the project-wise revenue, which will give you why such a conservative positions have been given. But how the revenue buildup is happening on month over month.

The next question is from the line of Mohit Kumar from DAM Capital.

Congratulations on good set of numbers. So my first question is while our EBITDA margin was pretty strong in this quarter, so I just want to know what is the fixed price contract in order book or is it entirely we have price variation clause in each of our contracts? That's the first question.

Yes, there is a price variation clause in all our projects. Concrete steel -- steel, cement and fuel is a 100% pass-through as far as the CIDCO project is concerned. MHADA project also has a price variation clause, that's on the government side. In private sector side, it is 100% pass-through for all commodities.

Understood, sir. Secondly, sir, how is the ordering pipeline looking at this point from public sector, especially in Mumbai? And do we have some number which you're targeting in FY '22 and FY '23? Of course, I have to understand that we have the order book is very large at this point of time. But is some number you're targeting and your ordering pipeline, if you can comment.

I believe we would like to maintain this INR 12,000 crore order book, so whatever you've executed ideally will be added. So private sector, I already informed that the pipeline is strong. Repeat orders continue to flow in. That's what we have seen in quarter 1 and quarter 2. On the public sector front, we see strong traction from all the big corporations in the state as well as MHADA. So MHADA is coming up with 30, 35 story residential towers across Mumbai and MMR. And as usual, we are one of the qualified parties and we will -- we are participating and we'll continue to participate. I had given an indication in the last 2 investor conference calls that we will be a bit conservative for the next 4 quarters as far as geographies are, in fact. And therefore, you will see that the order inflows which will come in the remaining part of the current fiscal will also come from Maharashtra. And we do expect, as I told you, a total inflow of about INR 2,000 crores, of which close to INR 600 crores has already been received and 650 million to 700 million is expected in the quarter 3 and the remainder in quarter 4. For FY '23, we will come back to you when we are on the call for Q3.

Best of luck, and hope to see a strong momentum of revenues as we enter FY '23.

The next question is from the line of [ Janam Shah ] from Equirus Securities.

Am I audible?

Yes.

Yes. Sir, just one clarification about this MHADA project revenue recognition. So you said that it will be part of our consolidated or it will be coming under our stand-alone numbers, the revenue and the PAT number?

It is a joint operation. So it will be in our stand-alone number.

It will be under stand-alone. And the number that you have given about that INR 400 crores and INR 550 crores, it is inclusive of this MHADA execution?

Again, I told you, as I explained earlier, we are consolidating our numbers for the next 18 months, and that should be ready in a couple of days. And our Investor Relations team or if you know Amit in our company, you can mail it to him, and he will give you the details in a day or 2.

Okay, okay. And sir, one follow-up question. Sir, as rating has been moved to the D, so has there been any impact on the interest rate for the borrowing? So as in general, the interest rate moves up with the rating of D. So can we see some higher interest portion for some next 6 months or so?

No. Banks have been supportive, and I believe that the rating will be in place before this month end. And banks have been supportive because they are aware of the fact of the states, which we have provided backed with documentation. So we only are waiting for some release of additional BG limits, which would happen by month end, and that is more than sufficient for the next 6 months or foreseeable future. By that time, we will have to go for a reassessment for the next financial year, which is a normal routine work for any organization.

The next question is from the line of Parikshit Kandpal from HDFC.

Congratulations on our detailed performance. Just referring to the letter which the credit has been uploaded on the exchanges, it's about INR 620 crores of unbilled revenue still continues despite not of any meaningful pickup in execution. So just onto yourself, when we move towards INR 550 crores -- partly towards INR 550 crores in the fourth quarter and INR 400 in third quarter, so how do you see this funding revenue moving? Just wanted some thoughts on that.

Very good question. Now unspecified bills is INR 129.32 crores. We take the bifurcation down INR 129.32 crores is the unspecified bills, which will get certified over the next 2, 3 months. So we see this figure coming down in March to about INR 70 crores. The cost compensations from inception of the company billed so far on the clients after the clients are testing. has been close to INR 200 crores, out of which INR 156 crores has been realized and recognized. Cost compensation is INR 44.4 crores balance receivable. I'm giving you a bifurcation of INR 615 crores and work-in-process is INR 440 crores, of which INR 103 crores is for CIDCO and INR 15 crores to INR 17 crores is for J J Hospital. We see this figure coming down by INR 75 crores by March. So in totality, you will see a figure of INR 500 crores to INR 514 crores by March 22. The fixed INR 20 crores unbilled revenue is they are [ a thought ] process, I cannot comment on that. Then we must have taken some provisional numbers or something on that front.

Okay. No, I was guessing the credit note, it is mentioned there.

But the bifurcation is what to us is important.

Yes, yes.

We have already done the work. Bills have been submitted. Once certified, we move to [ go get us ].

This -- so more or less, I have about INR 550 crores quarterly run rate, and it should be around a similar number, about INR 500 crores on a sustainable basis, 500 to 550?

What I just told you, 614, we should be looking out by March end at INR 500 to INR 514 crores.

Okay. Second question is on during this period of -- since the rating downgrade happened and now the 90 days [ period ] is getting over. So in the interim, did you see any challenge effect, any challenges in getting your limits increased on the fund and nonfund [indiscernible] credit rating matters almost 91% in clients, and you're looking at taking more orders now. So just wanted a sense how was the passing towards increasing the limits so that we can keep it in the [ grow occasion come up ] in the future?

Yes. So we had repaid RBL Bank because of bill discounting requirements in quarter 1 before the rating issue happened. So we have sanctioned limits of INR 120 crores, and the asset limits are INR 190 crores. Once the rating exercise is completed, we will not be having unutilized limits of INR 70 crores on the funded side. Number one. Number two, as far as the LC utilization is concerned, we utilized about INR 110 crores to INR 115 crores at the peak. But because of increase in the commodity prices, this increase may go to INR 150 crores by end of quarter 3. So I said that we have not faced any challenges. And LC limits sanctioned at the moment is INR 190 crores. So what happens is many times, the rating agencies do not take into consideration the unutilized LC limits because no one today buys steel on cash. You are getting healthy discounting at between 4.5% to 5.5%. So why would we utilize an LC -- a DC limit of 9% and 9.5% when LC discounting even by HDFC is a little less 5.2%, 5%, 5.25%, even at 4.5%. HDFC at 4.5%. So basically, LC unutilized limit also should be taken into consideration when talking about the limits available to the company for operations, isn't it?

Right. Just the last question on the CIDCO project. So earlier you had mentioned that the ultimate site which will be handed over to us, there were some challenges in one of these sites. So what's the view there? And on the last advance, when is it likely to come that INR 125-odd crores which you're spending?

Yes. So once the seventh plot work starts, we will be claiming the mobilization advance, remainder of about INR 110 crores or INR 111 crores. The -- there was one impediment of the CR rate which you could be aware that because you track real estate also, that the CR rate, the line has been reduced from 100 to 50 meters. So the Sector 43 is the little bit buildings, which are falling in that zone. That impediment also has been cleared and metal has been issued to the client requesting for immediate handover. So this is the current status of the CIDCO project. Did I miss any part of your question?

Yes, yes. So just one request, if we can arrange some sites to the CIDCO [indiscernible].

I would be happy. You can please touch base with Amit, and he'll be very happy to take you around, and you will be pleasantly surprised also.

[Operator Instructions] The next question is from the line of Bharani from Spark Capital, please.

Yes. Sir, we used to give a total of an opportunity pipeline that may...

No, I can't hear you.

Is it audible enough?

There's something in the background. I can't hear you.

Is it better now?

Yes.

So just wanted to check the overall opportunity or potential for us to bid over the next 1 to 2 quarters. I think we used to give it earlier, like INR 20,000 crores kind of an opportunity split across different segments like health care, airports, hospitals, data, data centers, et cetera. Could you highlight what is the status on this particular thing?

So the bidding opportunity is obnoxiously high. It is INR 40,000 crores, INR 45,000 crores visibility. However, our order book is already very robust. Orders which are EBITDA-accretive will be added. And as I've already explained, we have ordered -- we have already added about INR 600 crores. Majority of that is without the value of steel and concrete in quarter 1 and quarter 2. And quarter 3 and quarter 4, we expect to add another INR 1,400 crores of, which I expect to add INR 650 crores to INR 700 crores in quarter 3 and remainder in quarter 4. So answering your question, big pipeline is very strong. All our existing clients are on the verge of announcing new projects, closing the construction contracts, but then we also have limitations of how much we can take on our books because until MHADA was not opening up, we were okay. But now MHADA has opened up and obviously, order book of INR 11,700 crores, of which our share is INR 4,300 crores, is equally big as CIDCO. So over there, also, we need to put our resources. But having said so, the strategy always has been that whatever we execute, we book that much orders at least. So you should be looking over the next 2 years that the company will maintain -- at least to maintain the existing profile of about INR 12,000 crores.

Okay. And now given we have close to 60% of the order book in public -- with public clients and in light of the recent document from a department of expenditure from Ministry of Finance regarding general instructions on this public procurement, there are a lot of positives there, of course, I'm sure you are going through. So how do you see this really being implemented? Is it just on paper? Or if it is implemented, how is it going to change the landscape? How is it going to be impactful for us?

The Ministry of Finance has, prima facie, there are 2 things which are noteworthy. Number one, they have clarified many things. And one of the clarification is that if a bidder has bid the project 20% above the department's estimate, a proper justification can be prepared by the executive of the concerned engineer. And we did not worry about that. Which earlier was you have to be very close to the estimated price. And that is always a difficult proposition to do. Let us say, a tender has been planned 1 year earlier. Steel prices were INR 30 kt. Today, they are INR 60 kt. Concrete has gone up by 2,000 plus cubic meter. How can the estimate remain the same? Isn't it? So that's one relaxation which has happened. And second very big relaxation is, that single tender can be approved, which was not the case earlier.

Correct.

So apart from all the clarifications which they have given, and to tell you that this is for the CDC guidelines, all the guidelines by the Ministry of Finance are followed by all agencies across India. And these guidelines will therefore make the billing more realistic, especially when in our sector, the total competition generally happens between 8 to 9 players in a bigger ticket size project. So this is a big positive, and I'm sure all the agencies, because it is a dicta from Ministry of Finance on behalf of CDC, will be followed very positively and diligently by all the agencies or our public sector and autonomous bodies of public sector, both.

[Operator Instructions] The next question is from the line of Parikshit Kandpal from HDFC Securities.

Just a question on earlier we were planning to do [ the belated charge ] through a single line consolidation. So why the sudden change in recognizing it in the [ stand ], separating on the order book and then recognizing on a standalone revenue than a big line level?

You know that in a joint venture, we -- if you call it a joint venture, we own 35%. But auditors have ruled out consolidation, you can only take the profit. So the other -- however, we are executing this work as a joint operation. And India of provides that if the work is being done on joint operation, our joint operations like the bank signatories, therefore both our bank signatories, there are representation from both on the Board, reserve matters are well in place. That is a true joint operation, then we are in a position to take our share into stand-alone, now that accounting norms convention.

Yes. So you said that's INR 200 crores in FY '22 and INR 700 crores [ revenue ] only, which the [ rest will rebook ] the number of share will be 35%, which will accrue to our....

If you could just pick up your handset, please.

Yes. So you mentioned that about INR 200 crores of revenue and INR 700 in FY '23 that CV will be booking and 35% will be our share, right?

That's right.

So this project are CIDCO project put together doesn't require too much of capital employment here? So I think earlier, you have for CIDCO will not take any debt also, there won't be any requirement of funding the...

We haven't taken any debt. We were planning to take equipment finance which is a part of the overall annual budget. But so far, we haven't done that.

And same thing will be also in terms of BDD Chawl project, right? So there are also...

In BDD Chawl project, the work, as you are aware, the height of the buildings have gone up from 20 to 30 to 40 story in rehab portion, which means the number of buildings have reduced from 87 rehab to 33 rehabs, 1 SRA of INR 22 crores and 1 school of, or school or hospital of INR 7 crores. So obviously, the 3 buildings, we will have to fulfill the commitment given to the department and the government of Maharashtra. It had deployed at least 8 to 9 sets of aluminum formwork. So that CapEx will definitely happen. But that obviously, that will be happening over the next 18 months -- sorry, or next 12 months as the project building start. At the moment, we have started. We anticipate another 2 buildings to start in the current financial year. And total 10 buildings of rehab, that is 33% of the rehab portion, INR 1,500 crores is expected to start by May, June of next financial year. So this is the plan basically. So the CapEx will also move along with this plan. So since there are 33 buildings, I don't see that we will have more than 2 repetitions of any aluminum formwork because the delivery schedule committed accordingly.

That was coming more from the working capital side. So put together, these 2 projects...

No, we will not be requiring anything from [indiscernible] working capital. The cash flows are positive. We anticipate collection, as I told you, of nearly INR 150 crores in the current fiscal. And therefore, we do not foresee out of which, obviously, you know that it's a design engineering project, design engineering itself will be close to INR 80 crores, INR 90 crores. So we don't see any reason why any requirement of working capital will come up.

So these 2 projects, CIDCO and BDD, will be about to 60%, 62% of the order book, and they will not contribute much to the working capital investment? So I think in totality, the working capital should see a substantial improvement in the years to come, next 2 years from the current level?

101%. So we are going to share with you what -- how we have paid from September 18. That's a quarter when the ILFS issue happened, and to the quarter where we are in September, and what do we anticipate. So the point is you will be able to satisfy ourselves with those numbers itself because comparing 2 quarters, 3 quarters in a construction company, to my mind, is not fair.

We maintain the net that we were stated for next year?

That contains [indiscernible].

The next question is from the line of Anupam Gupta from IIFL Securities.

Rohit, just a couple of clarifications which I needed. Firstly, on the CIDCO project, based on the time lines now, what is the execution period for the balance order book which is there in CIDCO now?

For CIDCO, the first interim extension is 16.4 months. The original completion was 43 months out of which 50% time has already lapsed. So you can take another 16.4 months. But obviously, for the seventh location, they will have to give suitable extension. So at the moment, documented it is September 9 -- 2021, 2023 -- so '25 will be the end of CIDCO project as for the first interim extension.

So for the sixth site, which is 50% of work, it is in '25?

For the first 6 sites, which they have handed over, they have given a 16.4 months extension with escalation. That's important. Now when the seventh site they give us notice to proceed, the second interim extension or the second extension will come into play. That will depend on the execution schedule which we have committed while submitting the bid. So I cannot comment on that; it would be premature. However, at the moment, with the revised completion period for interim extension, the completion will be in 2025. However, the peak execution has to happen in the next 3 financial years. That means '23, '24, '25.

Okay. I understand. And on MHADA, similarly, what has -- so for the INR 4,500 crore order book, what is the execution period, because you said INR 700 crores next year? So what is the execution period for MHADA right now?

See, I tell you, MHADA has 2 components. One is the fixed price -- fixed price means square feet, lump-sum turnkey, design-build component of INR 10,000 crores and INR 1,800 crores is the infra works. So let me give you only for the INR 10,000 crores. In INR 10,000 crores, rehab portion is INR 5,300 crores. About INR 4,000 crores is the sale building component, construction cost. And the commercial building, which was originally INR 800 crores, will go up to INR 6,600 crores, okay? So basically, the contract will be revised upwards from INR 10,000 crores to INR 10,800-odd crores. Of this, by March end, as of today, we have a workfront visibility of INR 3,800 crores. And by March, we are very confident of having revenue visibility of INR 4,860 crores. Okay? Therefore, in the current year, the revised engineering and design builds are being submitted. Physical work at site, I'll be very happy if you can -- it's just next door to you. You should visit the site and to come out with a report. The filing work is going on for the foundations. And we should start with the actual building works by January. The aluminum formwork is already ordered. And therefore, the conservative guidance of approximately INR 200 crores for the current fiscal and INR 700 crores for the next fiscal.

Okay. And understood that. And one question there. When you say joint operations, so you will take the -- your share in stand-alone P&L, but balance sheet, nothing will come in there?

It will. It will be there.

Okay. So 35% of everything will reflect in PLM...

Yes, yes. So what happens is as simple as that, that it's a joint operation. Only thing is that Tata projects follows the input method. That means whatever expenditure into the percentage is revenue, while we follow the output method. So PwC, who is the auditor for this MHADA project will have to convert our financial statements on the output measure for us. That's all. Nothing else.

Okay, okay. And you will report consolidated numbers from 3Q onwards, and it will still be stand-alone numbers reported?

So in the consolidated, there is hardly any addition to the revenue, as we have all the projects on our name, except the MHADA project. One project of IGM, that's already completed. So only the final builds are going on. So except that we do not have any other joint venture.

Understood.

The next question is from the line of Jiten Rushi from Axis Capital Limited.

I have 2 questions on the balance sheet and cash flows. So in the cash flow, so we can see the increase in debt by almost INR 25 crores, but probably in the cash flow, cash flow from financing activity, we can see increasing debt over September last year by INR 25 crores. But in the -- overall, our debt has come downward. So any -- sort of what kind of accounting, if I can understand. And the second question is on the other financial assets, which was around [ INR 127 crores ] in March, has come down to almost INR 54 crores. So what is in that?

One minute. Now you were talking about the cash flow. One, one minute, please. Actually, first of all, the industrial bank loans of about -- have been repaid, prepaid, whatever you may permit in the first half of the financial year. Increase what you see is reflecting the promoter's long-term loan, which has been given over quarter 1 and quarter 2. I think that's what you're looking at.

Okay. But sir, it is not reflected in the balance sheet, like it is showing INR 288 crores...

INR 288 crores includes INR 53.74 crores of promoters loans at SBI, MCLR rate, plus 1%.

So my question was, it has to be the loan amount should -- borrowing should go up because the others, we see the increase in borrowings. So it should go up, actually was the question.

I don't see the increase in borrowings. So you are talking from last September to this September or you're talking about June quarter to September quarter?

Yes, September to September or June quarter, obviously, I know, but in cash flow September.

If you can please take down the total loans in September, one minute because I don't have the number. The total debt as on September was INR 289 crores.

Yes.

All right?

Yes.

In March of '21, it was INR 286 crores. INR 308 crores. So today, it stands at -- gross stands at INR 288 crores. [ INR 30 crores ] of the promoter loan, long term. So where is the increase?

Okay. I will just take it offline and discuss this.

However, you maybe send a mail to Alok, and he will clarify immediately.

Yes. Yes. And sir, on the other financial set, we are seeing reduction. So what is the reason for reduction in the financial set?

Please try to understand, after the IND AS 116, 115 earlier, the bid which was earlier as a stock is identified as contract effect. Contract effect consistent comprises of 3 things: with cost compensation, balance sheet is billed and received, and uncertified bills.

No, no, sir, I'm coming -- I'm looking at the noncurrent portion of other financial assets, which includes your bank margin money.

Okay. It was the remainder is the retention, which is not due a receivable within 1 year.

So this bank margin money has 11, 3 months, so this now reflecting in other financial assets, current portion. Am I right?

So whichever below that, below 1 year will be in the current. Whichever is beyond 1 year will be in noncurrent, fixed deposits and the retention deposit.

Thank you very much. I now hand the conference over to the management for closing comments.

Thank you all for joining the call. We hope that we were able to answer all of your questions clearly. Please contact SGA, our Investor Relations advisers, if you require any additional information. Thank you very much, and look forward to meeting you soon. Bye-bye.

Thank you very much. On behalf of IIFL Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.