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

Good morning, ladies and gentlemen, and welcome to the Capacit'e Infraprojects Q3 FY '22 Earnings Conference Call hosted by YES Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Viral Shah from YES Securities. Thank you, and over to you, sir.

Thank you, Inda. Good morning, everyone. I welcome all the participants to the 3Q FY '22 Results Conference Call of Capacit'e Infraprojects Limited. We have with us Mr. Rohit Katyal, Executive Director and CFO of the company; Mr. Alok Mehrotra, who is the President, Corporate Finance; Mr. Nishith Pujary, who is the Head of Accounts. We will commence the call with the opening remarks from Mr. Katyal to give an overview on the company's performance, which will be followed by a Q&A. Before we begin the call, I would like to mention that some of the statements related to today's conference may be forward-looking in nature. I would now request Mr. Katyal to begin with opening remarks. Over to you, sir. Thank you.

Thank you very much. Good morning, everyone. We would like to extend a warm welcome to our Q3 FY '22 earnings call. I hope you and your loved ones are doing well. Along with me, I have Mr. Alok Mehrotra, Mr. Nishith Pujary, and SGA, our Investor Relations team. I hope everyone has had an opportunity to review our results. The presentation and press release have been posted on the stock exchange and our company's website. Before I take you through the operational and financial performance, I would like to highlight a few points. The construction industry as a whole has seen substantial growth in Q3 FY '22. The BDD chawl project at Worli, an integrated JV with the Tata Projects Limited, has begun to show signs of progress. We are working to increase the execution space. Total billing done at SPV level until December '21 was INR 127 crores, share of Capacit'e Infraprojects being INR 44.45 crores, which could not be recognized in the standalone or financial statements of the company. CIDCO projects. The site handed over by the client has been fully mobilized along with equipments, and we expect increased execution in the current and ensuing quarters. Work was suspended at Vashi Truck Terminal due to flamingo birds issue as there was an old government resolution prohibiting work within 10 kilometers radius of flamingo habitat. Subsequently, the same was changed to 5 kilometer radius and therefore, the work would restart in January '22. The impact of this temporary suspension on the revenue was INR 40 crores in Q3. I'm pleased to inform that we have received a repeat order for civil works from Raymond's worth INR 231.5 crores from a premium project at Raymond, Thane. Order inflows to date stood at INR 660 crores in the current year. The company is in advanced stages of negotiation in orders worth INR 1,859 crores and therefore, expects to close the current year with fresh order inflows or additions of INR 2,400 crores or thereabouts. Our credit rating has also been reinstated to investment grade to BBB stable by India Ratings. Now allow me to give you an overview of our operational performance during the quarter. The overall order book, public and private, excluding MHADA, stood at INR 8,473 crores as on 31st December 2021. At the end of December '21, our order book from the public sector was 62%, while the order book from private sector accounted for 38% of the order book. Work is progressing at a good pace on all fronts. In the third quarter of FY '22, the company collected cash of INR 301 crores, suggesting stable collection efficiency. Similarly, the collection for the first 9 months of the current financial year stood at INR 874 crores. The pace of execution is projected to pick up. Working capital cycle, excluding retention, improved from 160 days in March 2021 to 99 days in December 2021, indicating positive trends. Our business model has clearly benefited from our ongoing focus on client service and cash flow management. Our stand-alone financial performance for Q3 FY '22 is as follows: Total income for Q3 FY '22 is INR 370.6 crores as compared to INR 347.4 crores in Q2 FY '22 and INR 311.1 crores in Q3 FY '21. EBITDA for Q3 FY '22 is INR 62.3 crores as compared to INR 59.9 crores in Q3 FY '21, up by 3% year-on-year. EBITDA margins in Q3 FY '22 were at 16.8%. PAT for Q3 FY '22 stood at INR 12.8 crores. Cash PAT for the same period stood at INR 40.1 crores. The gross debt was stable at INR 274 crores and net debt at INR 88.2 crores as compared to INR 89.3 crores in Q2 FY '22 with net debt-to-equity ratio at the end of 31st December 2021 being 0.09x. With this, I now leave the floor open for questions. Thank you.

[Operator Instructions] First question is from the line of Faisal Hawa from H.G. Hawa and Company.

Sir, any part of the MHADA design element, which we had gained, is reflecting on the profit and loss for Q3? We had said that there is a lot of design element that is there and that will result in exceptional gains in one of these quarters.

So that first bill of INR 53.3 crores plus price variation has been submitted. We expect a payment in this week and for the price variation in 14 days. So yes, there will be booking of design and engineering charges for the partial rehab portion in quarter 4 of the current fiscal. I hope that answers your question?

You mean to say Jan to March, we will have a gain of almost INR 53 crores, which will almost go to the bottom line?

The SPV level, which is Tata Projects and Capacit'e Infraprojects, is following an input method, whereas Capacit'e Infra follows the output method of accountancy. So as per the input method in there, as followed by Tata Projects, they do not recognize profit until 10% of the contract is over. And therefore, there will be subcontracts placed on Capacit'e Infra and Tata Projects proportionate to their shareholding pattern, which is 65% and 35%, respectively, so that we can raise our bills and recognize revenue and the bottom line at the same time. So yes, you will see some profit, not [indiscernible] profit, but profit in quarter 4 as far as Capacit'e Infra is concerned. However, you will see substantial profit accruing in the next financial year as the total engineering and design portion is close to INR 320 crores in this project. I would like to add that we've started work on 3 buildings. The formwork is already at the project site. And therefore, you will see billing of close to INR 180 crores at the SPV level until the end of this fiscal and close to INR 600 crores in the next fiscal.

[Operator Instructions] Our next question is from the line of Dhananjay Mishra from Sunidhi Securities and Finance.

This INR 1,859 crore order, which is in advanced stage. So could you explain the nature of this order in terms of developer order or installment orders.

So out of this, INR 650 crores is an order from an international client who has had a joint venture with a local strong player and the balance 2 are from public sector clients. So approximately INR 1,200 crores coming from public sector and the remainder coming from private sector.

Sir, in terms of execution, even if I include INR 40 crore, you would have lost because of suspension at Vashi works. Then also, we are reaching at about INR 400 crores. But we had been given the indication that we will reach about INR 500 crores quarterly run rate. So why we are lacking in terms of basically on overall basis. Our run rate is INR 500 crores.

I would like to clarify that I had given a INR 550 crore figure for Q4 and not INR 500 crores. However, you are right. There have been unexpected stoppages at the work, which could not have been foreseen when I was discussing with you the last time. The company is well seized of the matter and all efforts are being taken to ramp up the execution, which already has been ramped up. We are having more than 16,000 feet at the site level in terms of labor. We have 1,500 engineering staff at various project sites. So you can be rest assured that you will only see positive as far as revenues are concerned here on as we get into the next financial year, which will be a high growth year. We don't expect any surprises on COVID comp. We believe COVID is behind us. The third wave was only a scare and it did not honestly impact any reverse migration of labor. So you are right that there has been a shortfall in execution. We admit to that. However, necessary steps have already been taken. And you will see the ramp-up here on over the next quarters and quarter-on-quarter the growth will be substantial.

So this INR 550 crores revenue, there should be no major variations in Q4, right? We will reach the...

I just told you that this was when we spoke last time. If you can send your e-mail ID to either Amit or to SGA, you will receive a detailed note on the revenue for Q4 and for the next financial year.

And lastly, sir, what is the share in Q3 from CIDCO? And what will the share in Q4?

Sorry?

CIDCO revenue shares from Q3.

CIDCO revenue share was only INR 37 crores. It was supposed to be about INR 90 crores. I just mentioned that we have lost INR 40 crores due to the suspension of work at Vashi Truck Terminal. That work has already started from 12th of January, and we don't expect any stoppages at any of the 6 locations which have been handed over and are under execution.

So Q4 will cross 100 crores?

We are on that. However, project-wise revenue of the first top 5, 6 projects can be informed once you just drop a mail and that will be informed to you.

Our next question is from the line of Rishikesh Oza from RoboCapital.

So my first question is whether our MHADA execution has started, and what will be the MHADA revenues for Q4 and FY '23?

Yes. MHADA execution has started. We have started execution of 3 buildings. The piling work of 2 buildings has been completed. The aluminium formwork per monolithic casting is already at the project site. And from the revenue perspective, at the SPV level, I repeat at the SPV level, we have already recognized revenue of INR 127 crores. We should be in a position to recognize revenue of close to INR 200 crores in the current fiscal -- INR 180 crores to INR 200 crores. In the next financial year, we should be confident of achieving revenue at the SPV level of INR 600 crores. Capacit'e's share is 35%, which it should be in a position to recognize from next financial year. I would like to clarify, we will not be able to recognize any revenue from MHADA project, even though the share is 35%, in the current financial year, because of the Ind-AS accounting norms.

Okay. So this revenue will be recognized from next year, you are saying, right?

Yes.

Okay. Got it. Got it. Okay. And my second question is, sir, if you could provide any revenue and EBITDA margin guidance for FY '23?

The order book is available. However, the budgets are still being worked out. We will be in a position to give you the exact revenue figures, but it should be a historic high that the company has ever achieved, close to 10th of March and not immediately, because project-wise plan is still under progress for the next financial year. Once the Board approved the budget, we shall inform you immediately.

[Operator Instructions] Our next question is from the line of Priyanka Singh from Atidhan Securities.

So first thing, how much have we planned for this year in terms of CapEx? And how much have we spent on a 9-month basis?

The total additions in the first 9 months has been in core effect INR 33.49 crores. We should be adding another INR 20 crores. So your current fiscal should close at close to INR 53.5 crores to INR 54 crores as far as CapEx is concerned. For the next financial year, the CapEx plan also again would be close to INR 50 crores to INR 55 crores. So you will see a dip in the CapEx of approximately 30 years on back of increasing revenues.

And what are our plans in terms of becoming a debt-free company?

So our net debt still stands at INR 88 crores. Cash flows are strong at the moment in time. We do continue with our vision to be debt-free by September of 2023. All efforts are going on. And as I had informed last time that to be debt-free, it will be on basis of 2 accounts, reduction in margins towards bank guarantees and LCs, which stand at INR 189 crores as of today, including accrued interest. The margins, if they come down to 5%, will release more than INR 120 crores of margin money, which will only be used to reduce the debt level. And similarly, we expect that over the next 20 months, 18 months, INR 140 crores of free cash will be available in the company to take care of the balance debt. Having said that, we clarified in the last quarter also, there could be a temporary increase in debt in a particular quarter to ramp up the operations, which should not be forgotten. However, the vision to be debt-free is maintained at September '23. We shall continuously update you on a quarter-on-quarter basis.

Our next question is from the line of Khushboo Gandhi from YES Securities.

So I had 2 questions. One is about like how is the tender pipeline looking for FY '23? And what is the impact of raw material prices -- the rise which has happened in raw materials, so what is the impact on our projects? Are we having any impact on our EBITDA margins going forward?

Good question. First, I will take your question on the pipeline of projects for FY '23. Extremely strong from both government and private sector. Private sector bid pipelines have opened big time from December of last calendar year. And we believe that there is a serious good look ahead as far as both fresh orders from the good clients and repeat orders from existing clients as far as the private sector is concerned. Government also, in the budget INR 48,000 crores has been allotted for PMAY projects, which is low cost affordable housing projects. And all these projects now are invited on EPC basis. So Capacit'e will also be vying for its share. Hospital pipeline continues to be strong, both at the center and the state level. Therefore, all in all, the bid pipeline for the next financial year, answering your question, is quite robust, and we don't see it changing for the bad or on the negative side as the budgetary allowances and allocations have already been done. Second question was on the price variation on raw material. We have clarified earlier that all our projects have price variation clauses. In private sector, price variation is full pass-through. And government, price variation for CIDCO and MHADA is full pass-through. Balance, fuel is covered under the relevant indices published by the office of economic advisors. So answering your question, we do not see any impact of increase of commodity prices on our order book. And maybe in one quarter, you may see 1%, 1.5% increase in the cost of material consumption. But if you compare this over the last 4 years, our cost of consumption has been quite stable. And that 1.5% also or 2% increase in a particular quarter can be only attributed to price variation having been built at indices of 1 quarter earlier. So I don't foresee any impact on our overall EBITDA for the full financial year due to any price increase for the reasons already explained. Thank you.

Sir, one more question. You said that order pipeline seems good for you for FY '23. Any approx number you can just give us as a guidance how much we will be expecting or how much we have already bidded in FY '23?

FY '23, we have not bid anything. We have bid in FY '22. And as I explained that we are in close discussions to receive orders worth INR 1,859 crores. Addition of INR 1,859 crores will take the order book back to close to INR 10,000 crores. You can reduce the revenue of Q4 from that. And therefore, the order bid backlog in its own will be substantially strong. However, taking into consideration the internal targets for the next financial year's revenue, the order inflow has been pegged at INR 3,000 crores. Generally, for this year also, we had said INR 2,000 crores, but we should be doing better than that. So it's for next year INR 3,000 crores. And we wish to maintain an order backlog of close to INR 10,000 crores or thereabouts, excluding MHADA project.

Our next question is from the line of Parikshit Kandpal from HDFC Securities.

Just 2 questions. So one is, sir, we are ramping up our execution given the strong order book. So we need to have cash flows on our side. I just wanted to pick your brains first of all on the collection side. So on the stuck receivables, which have been quite dated, some of the painful accounts like Radius and some other accounts. Then CIDCO also, I understand last quarter you had mentioned about INR 100 crores is still pending to be collected. So from the collections, what's the progress? How do you expect this to happen from there? Secondly, you mentioned that there could be spike in debt in some of the near quarters because of the execution ramping up. So just wanted to understand from the liability side, how other banks are integrated, how are the fund and non-funded when it's getting ramped up, so that we can get some release in funding from there. So if you can connect these things, both on the asset and the liability side, it will be better to understand the execution ramp-up.

Yes, just a minute. I will just try to understand your question. First question is collection. Second question is your status on the payments held up with Radius and other people. Third is the ramp-up of bigger projects and the tie-up of banking limits. Am I right?

Yes. So basically, I wanted to connect the liability and asset sides in terms of like how the stuck payment receivables are getting recovered over the next few quarters. Secondly, on the banking side, how are we securing fund and non-fund based limits, so that you can ramp up the growth and execution given the strong order book which we have. So just want to connect that entry.

So we should have, by this month end, about INR 100 crores tie-up and release to take care of our incremental working capital. This money will be in part in our CC accounts and utilized for ramp-up of execution. Apart from this, State Bank of India, Indian Bank, and Union Bank of India have committed additional exposure of INR 70 crores, INR 70 crores, and INR 85 crores each. With this, the financial tie-up will be completed latest by March and April 15. This is point number one. Point number two, so answering your question, before February end, the company shall have enough cash availability to ramp up the project to the desired level, A. B is on the collection side. We have been historically collecting close to 80% to 85% of our revenues certified. And we believe that at least over the quarter 4 and the quarter 1 of the next financial year, this will continue. We have seen realization of old receivables, which were in the form of cost compensation from Wadhwa, from Puravankara, and a receivable of old monies to the tune of INR 10 crores in the current financial year from Kalpataru. Radius exposure, we have not received any money as yet. But I would like to update that their Chembur project is in advanced stages of negotiation with a buyer to whom NOC has been given by HDFC Limited -- the NBFC arm of HDFC Limited, and therefore, we are very hopeful that some money from this group will be realized between March and April. Having said so, our total ECL provision stands at INR 72 crores as on December 31, 2021, which is substantial enough to take care of any shock absorber in case our assessment of realization takes hit from a time perspective. Having said so, we do not expect any bad debts, and we are only carrying it in the provision side. So that answers your second question as far as cash flows are concerned. What was the third question, please?

No, I think these were the 2 questions. The third one I'm going to ask now. So you're saying that INR 75 crore to INR 80 crores each will be a financial tie-up with SBI and Indian Bank and UBI, which should be about INR 240 crores?

Yes. INR 240 crores.

So I have to increase our fund-based limits by INR 240 crores?

No. Fund-based limit is not required INR 240 crores. Fund-based limit is only INR 70 crore requirement, right? So that we don't require anything more than that. Balance is non-fund based limits and non-fund based limits will be utilized to get realization of retentions. So out of the total INR 159 crore retention, INR 90 crores is due and payable to us immediately. So the efforts are on to issue the bank guarantees in March partially and in April to get this INR 79 crores to INR 80 crores realized by end of quarter 1. Subsequent to that we do not require any fund-based limits. Maybe you will have substantial portion of fund-based limits unutilized in the system.

You're saying using these INR 240 crores of non-fund based limits, we should be able to realize INR 90 crores of retention money, which is lying with us?

Absolutely, because out of INR 240 crores, again, if I consider INR 70 crores at fund base limits, balance available, because all the projects; in private sector, now performance guarantee is not required; in the government, performance guarantees have come down to 2% to 2.5%. Therefore, the overall guarantee requirement is down. So a substantial portion of these monies will be utilized -- these guarantees will be utilized for taking back our retentions, which is held with the clients, which I just mentioned to you, approximately INR 90 crores is due on receivable, and we are hopeful of collecting about INR 80 crores out of this.

Okay. And second part of that question was on the bank guarantee side. You said that you're looking to reduce your cash margins on bank guarantee to 5%, which could release some amount; out of INR 180 crores, there could be substantial release there also. So I think INR 120 crores you said we would get additional strength. So what are the workings there? I mean, will the bank be agreeable to reduce your cash margin from its 20%, 25%, down to 5%? So how long this journey will take to reduce it? Because that's a big negative. I mean for companies which are younger like your company. Because other companies have those kind of limits, but that's a huge disadvantage we had.

So our guarantee in the consortium is at 10% margin, project-specific guarantees are at 15% margin. Some of our fixed deposits are held up against term loans, which will get cleared over the next 6 months' time. So it is not only margins. It is also the term loan repayment. For example, in HDFC Bank, we have INR 19.5 crores or INR 20 crores of fixed deposit and the total outstanding in term loan is only INR 10 crores. So we believe that term loan will get over, over the next 6 to 7 months period. And these margins or fixed deposits would get released into the working capital system. So when I said INR 120 crores, I am taking a ballpark figure. So in the consortium, it is not a reduction of 10%, it is a reduction of 5%. In project-specific, it is a reduction of 10%. Now having said so, the company is in a practice of collecting back advance guarantees on a quarterly basis. So answering your question, will the banks be agreeable. The banks will be agreeable to reduce this margin only after we have reinstated our rating to A. And therefore, I gave you a timeline that by September of 2023, we believe that on release of this INR 100 crores, we'll be approaching the rating agencies again, because their only concern was we didn't have the banking lines to have enough adequate liquidity, though we had provided 2 months of repayment at [indiscernible]. So on release of this INR 100 crores, there will be more than sufficient liquidity in the system for the rating agencies to reconsider their stance of not giving us the A rating and going back to BBB. So this is what is the clarification as far as reduction of debt and how that will pan out.

So both put together, so INR 120 crores on the bank guarantee and about INR 90 crores you said on account of the retention money. So roughly over the next 15 to 24 months, you will have about INR 200 crores of releases happening?

Yes.

And that INR 90 crores will happen much earlier. So INR 90 crores, you are expecting by when? You said it's immediately due.

Please, please, please, just listen me out. INR 62 crores is the term loan outstanding, out of which majority gets paid over the next 18 to 20 months. So that is self-liquidating loan, which is on the books, which has some current maturity and some has long-term maturity. All right? Number two, on the front of working capital, whether as working capital demand loan or cash credit limit, that today as on date is INR 120 crores. Please note that the promoters have given INR 55 crores or thereabout as long-term loan of 18 months. And if need be, they will extend this loan and we are not drawing any interest to improve the liquidity of the company. So when you reduce that INR 55 crores from the overall debt of INR 280 crores, the debt would come down to INR 225 crores, out of which you just calculated INR 200 crores. However, you have to take into account the repayment of term loans, which will happen over the next 18 months.

But this INR 90 crores, sir, which is lately due retention. So that will happen within 2, 3 months?

So we are expecting that to happen in Q1 of next fiscal, all right? And therefore, that releases a substantial amount on the long-term working capital of the company. It reduces the total outstanding with the client by equivalent amount. Therefore, the debtor days fall substantially, all right? Number three, these debtor levels falling will have impact on the creditor level falling. So the balance sheet, in my view, will be much lighter in FY '22, '23.

Just lastly on the CIDCO project, sir. We had about INR 125 crores of pending mobilization advance to be taken. So just wanted to understand from you, have we taken all the sites now and the entire order book is now with us for execution. And if yes, then when do we intend to take up that balance mobilization advance on that project?

No, no, no. We have not got the location 7, [indiscernible]. But once the last location is made available, only then we will be claiming for the last tranche of INR 127 crores. That's one part of it. However, the revenues for the next fiscal are being drawn out on the availability of the current locations, which is in excess of INR 2,500 crores. And I will tell Amit to share the details with you project-wise, all right? It also needs to be remembered that as far as Oberois is concerned, we requested and the client agreed to remove the steel and concrete supply as free issue and similar efforts have been taken with all the clients because the commodity prices have actually doubled over the last 2 years. So INR 3.6 crores LC was required for procuring 1,000 tonnes material, today INR 7.2 crores is required to procure that quantity. And that was only resulting in margin getting held up, working capital getting held up. So these efforts which have been taken, I believe that they will yield much higher results. For example, in January, in pure labor, without value of steel and concrete, we have billed INR 14 crores on Oberoi. If you take the value of steel and concrete, at the current price level, it would have been close to INR 38 crores, INR 39 crores. So that's the billing which we are doing per site. And as I told you, I will request Amit to send you the details project wise for the next 15 months as far as the execution is concerned as it will be easier for you to monitor.

Besides this debt, I mean, we are self-sufficient to ramp up execution, so we don't require any external equity. So this liquidity seems to be like a little bit of like tying up of limits and all should sort it out, but in the interim we don't require -- I mean there is no as such big stress here to raise external equity to ramp up execution...

I just clarified that you should not treat the promoter debt as debt. It's basically quasi equity, all right, number one. Number two, and more importantly, the question of giving away equity at this level is ruled out. All right? Number three, I mentioned that INR 100 crores tie-up will be completed this month. The day it is disbursed, you will get a message from me. So that this question doesn't come up in the next quarter.

[Operator Instructions] We'll take our next question from the line of Faisal Hawa from H.G. Hawa and Company.

Sir, there are so many developers now announcing new projects, and they are also expecting that the current inventory will get sold out. And there are so many tie-ups taking place for land and for joint ventures and all. So how are these topmost developers like Prestige or even, for example, Godrej, sounding you out on future projects? And are they asking you to be ready for a lot of new construction sites to begin?

Mr. Hawa, your voice is not clear. If you can just repeat the question a bit slowly.

So we are seeing a lot of new projects and new developments being announced by Prestige, by Godrej, and a lot of old developers who have land or who have some permissions taken. So you can probably see a huge lot of new projects coming up once these old inventories are actually absorbed. So how are these developers actually sounding you out on new projects?

You have just seen that Raymond started with a INR 300 crore order, went to INR 400 crore, INR 500 crore, now it is INR 800 crores. That land parcel on its own has an order opportunity of INR 2,000 crores for us. And till the time the client feels that Capacit'e is doing the job to their satisfaction, which so far they feel, we have good opportunity. Similarly, we see that clients like Oberoi will start developing maybe their Thane project in the coming months. So opportunity to a large extent exists with our current clients. Like, for example, Phoenix and Canadian Pension Fund, who are developing the Puna Mall, Phoenix City Mall, which we are executing, will be constructing 2 commercial buildings on top of the mall. And I'm sure that we will be giving our fair share of opportunity. So answering your first question, yes, there is overall buoyancy. The buoyancy is for good clients. The sales are happening with good clients, and we are practically there with all of us. And therefore, I said we do see a very strong pipeline in the private sector. You see new companies like Keppel of Singapore coming into India. You see companies like Brookfield expanding their geographies. You look at Puravankara entering a big turn into Puna. You see Lura, who was earlier our client, though we are not executing a project at the moment, we have started receiving inquiries for them for Puna and Mumbai. So there is enough traction, as you rightly mentioned. However, a number cannot be attributed because we will continue to follow the philosophy of working with a client with a strong balance sheet. We do not want to burn our fingers like what happened post IL&FS debacle. And we have learnt our lessons. We do not want to fall in the same trap again. And therefore, clients with strong balance sheet will be those with whom we will be working. That's the private sector. Government equally holds a large opportunity as I have already mentioned. Thank you.

Our next question is from the line of Avinash Varma, an individual investor.

I had one question. I just wanted to check what you mentioned on the rating change. So when is it likely to happen? When would you apply to the rating agency you said?

So the developments, as a practice, the company keeps giving them every month basis. So once the INR 100 crore temporary debt is raised, that will provide more than sufficient liquidity in the system. The rating agencies will be apprised. However, we see the rating being restored in quarter 1 after our full year financial results are published and the rating agency takes up the re-rating exercise.

And in the past, sir, generally, the PAT margin has hovered around 6%. And in the past con call you had said since there was design and engineering portion in the MHADA project, there were chances of it going to 6.5%, 7%. So can we expect that in the next financial year?

So the question has been on 2 fronts, EBITDA and PAT. I have maintained that the company will continue to maintain its cash PAT level on the full year. Even for the first 9 months, our cash PAT is at 9.63%, and I hope that by March it should be close to the 10% mark, which we have been projecting. Net profit would be 0.25% plus/minus depending on the depreciation and the tax and the credit for deferred tax. Besides that, I do not see any change. So whatever positions we have given in the past hold true and will happen in the quarters to come.

Our next question is from the line of V.P. Rajesh from Banyan Capital.

So our gross margin declined about more than 300 bps this quarter. And given your comments on the cost pass-through to the customers, if you can just elaborate if there was any one-off or that is just related to the CIDCO project. If you could just give some clarification.

So the total raw material consumed in the quarter was 43.38 as against an average of 40.57. And the construction expenses was 27.99, all right, as against an average of 28.25. So overall, there was an increase in the direct expenditure by 2%, which transforms into INR 7 crores or thereabouts. However, I clarified in my earlier question that the price variation in the government projects have been taken up to September of 2021 indices. The indices have substantially increased thereafter. Once they are published in January, February, we shall be claiming this escalation. So this is only a temporary shortfall of INR 7 crores, or increase in the cost of consumption in the current quarter. For the full year, we expect this to remain at 40.5% to 41%, taking the EBITDA back to 18.5%, because the EBITDA stands at 16.8%, a 2% reduction. Similarly, the increments, which were announced in quarter 2 have been affected in quarter 3, thereby increasing the salary bill by INR 2.98 crores. So these are the only 2 parameters, which have very temporarily reduced the EBITDA by likewise margin. You will see the correction in quarter 4. It will be back to the stable 17.8% to 18.5%.

Understood. That's very helpful. My second question is what is the guidance for revenue for Q4 given this INR 40 crores is probably shifted into this quarter?

What has shifted?

The INR 40 crores?

Yes, we lost INR 40 crores in the last quarter. It doesn't shift. You start the work and you complete as per the revised schedule, because we have received 16 months extension from CIDCO. Already the first interim extension has been received. This was informed in the last conference call also. As far as our estimate for next financial year, that will be approved in the Board meeting in first week of March and informed to all our investors by 10th or 11th project wise. So top 15 projects account for 95% or 97% of our order book. So those will be informed around 10th or 12th of March, as I explained earlier also.

Our next question is from the line of Parvez Akhtar Qazi from Edelweiss Securities.

So 2 questions from my side. First, you said that private sector bid pipeline has improved significantly from December '21. So just wanted to get some idea about what are the kind of orders or segments which fits into this? Is this largely residential real estate? Or is this in other segments also? And the second one is, you mentioned that hospital pipeline continues to be strong, both at center and state level. So what would be the quantum of let's say bid pipeline in the hospital segment?

So as far as Capacit'e is concerned, the bid live pipeline from hospitals is seen at INR 2,000 crores. It may be INR 2 lakh crores, but these are the projects which we are targeting. As I told you, one of the hospital projects is under final closure. And hopefully, we should have that order in Q4 of the current fiscal, substantially decent size. Apart from these, we see a lot of traction in the EPC segment in government as far as mixed use, which means residential and some portion of commercial is concerned, more of residential, affordable housing. In the private sector, we are seeing all segments do well. Retail is now looking up because bigger players like [indiscernible], along with Canadian Pension Fund or Blackstone with respective partners that are in Pune are investing substantially into the retail and hospitality segment also. So they are not looking at the current situation. Maybe their look ahead is over the next 2 to 3 years' time. However, yes, apart from this, we are executing the Commerz III for Oberoi as you're aware. And that project is on extremely fast pace. I recommend that we visit that project site to believe what is happening at that site. So across all segments, the progress is very well as far as the traction is concerned. However, I would say, surprisingly, none of us would have believed it maybe 14 months back or 15 months back, the residential segment is seeing a huge traction within the reputed developers because the presale components have surprisingly shot up like anything. You are seeing record registrations, you are seeing record sales numbers with many of our clients, which is a very heartening time. However, we should be cautious over the next 3 to 4 quarters. And therefore, we would like to stick with our existing clients. And new clients will be only if they are as good or better than our existing clients. So yes, traction is very strong. And therefore, we have given a guidance of INR 3,000 crores for the next financial year.

Our next question is from the line of Pritesh Chheda from Lucky Investment Managers.

Sir, for FY '22 now, what kind of revenues do you think you will end at?

Sir, you just drop me a short mail and I will send you the details immediately.

Second, sir, when you were mentioning that the BG guarantee or the BG margin money will get released. So incrementally, where should the BG on the contingent liability that we have on our balance sheet should move down to? So what is the contingent of the BG that we have there on the balance sheet. And does it mean that when we now incrementally expand or increase our top line, the BG requirements will come down? And to what extent the total BG or contingent liability should come down?

So sorry, but I think you have mixed 2 questions. Number one, BG margin is the percentage of FD to be kept with the bank against the outstanding bank guarantee utilized. So for example, if we have utilized INR 700 crores of bank guarantee and the margin is 15%, so FDR of INR 90 crores has to be kept with the bank, okay? What we have mentioned, the margin coming down is directly related to the rating of the company. And once we restore the rating to A in Q1, hopefully, the margins will fall by 5% to 10% across the bank guarantee and LC limits, right? Now this reduction will open free the cash into the system for reduction of debt. This is what I meant. Second part of your question, which you mixed up was that do we see our overall bank guarantee requirement coming down vis-a-vis what it was 2 years back. The answer is yes. Because the performance guarantees which used to be between 5% to 10%, 15%, have come down to 3% in most government plans, number one. Number two, even in private sector, we have seen reduction of 2.5% from 5% to 2.5%. Therefore, we believe the performance guarantee levels have come down. As far as advance is concerned, if you take a 10% advance, you will have to give 10% bank guarantee. That doesn't change. In government, again, the retention plus performance guarantee at most places has been restricted to 5%. All right. And therefore, the overall guarantee requirements will come down. If the guarantee requirements come down, the margin requirements additional will come down, thereby making additional money, which would have otherwise gone into fixed deposits, available for long-term working capital of the company.

Okay. And sir, my last one clarification is, we could understand that the MHADA project, SPV, whatever is your portion will come to your revenue from next year. When it comes to CIDCO project, will it be JV accounting or again, a portion of that revenue?

CIDCO is a stand-alone project, sir. It is on stand-alone financials of the company. There is no JV in that.

Okay. So you mentioned INR 600 crore SPV execution in case of MHADA next year. In CIDCO, what can be the execution number?

As I just mentioned, sir, by 10th, our budget will be approved. And therefore, we will forward you and whoever sent the short mail the details of the revenue for the next financial year. Till such time the Board approves the budget, please excuse me from commenting anything.

We'll take the next question from the line of Deepak Poddar from Sapphire Capital.

Just I have one query. Now in the last call I think we were talking about execution level of maybe around INR 550 crores in the fourth quarter. Now on the backdrop of this bank margins and liquidity, so any kind of change in that outlook that we had given earlier.

Yes, I just mentioned that the quarter 4 projections, numbers will be mailed over the next 2 to 3 days, so that the precise number can be known. And for the next financial year, it will be informed on 10th of March. You have rightly mentioned that we only ramped up our execution to the level that current cash flows and the limits would support. However, since there's a INR 100 crore release expected by this month, we do believe that the execution will be ramped up sooner than later, and you will start seeing the difference from February and onwards in the current quarter as well as the ensuing quarters.

Our next question is from the line of Avinash Varma, an individual Investor.

Sir, if you could just repeat on the INR 1,859 crores order which you mentioned. I just missed it, what was it. Was it order coming through in the current year which is expected, or what was it?

Yes, the orders are expected in the current financial year before March 31, 2022.

Okay. So for the 9 months, what is the orders we have got, it's close to INR 450 crores, yes?

INR 680 crores approximately.

As there are no further questions from the participants, I now hand the floor back to Mr. Viral Shah from YES Securities. Over to you, sir.

Yes. We thank the management for giving us an opportunity to hold the call. Rohit sir, any closing comments from your end?

Yes. Thank you for participating in the call. We hope we were able to address your concerns, if any. If you require any additional information, please contact SGA, our Investor Relations advisor. Thank you very much and see you next quarter. Thank you.

Thank you so much, sir. Bye-bye.

Bye.

Thank you. On behalf of YES Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.