Cochin Shipyard Limited (COCHINSHIP.NS) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. I am Faizaan, moderator for this conference. Welcome to the conference call of Cochin Shipyard Limited, arranged by Concept Investor Relations to discuss its first quarter results ended June 30, 2020. We have with us today, Shri V. J. Jose, Director, Finance; Shri Rajesh Gopalakrishnan, General Manager, Business Development and New Projects; Shri Sivaram Narayana Swamy, Deputy General Manager, Business Development; Shri Shibu John, Deputy General Manager, Finance; Shri Syamkamal N., Company Secretary. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Shri V. J. Jose, Director, Finance. Thank you, and over to you, sir.

Yes. Good evening, all. Welcome to the con call of Cochin Shipyard for Q1 June 30. And I have with me -- I'm Jose V. J., Director, Finance. I have with me Mr. Rajesh Gopalakrishnan, General Manager, Business Development; Mr. Shibu John, DGM, Finance; and Mr. Syam, Company Secretary. Hope all of you have seen our audited/limited reviewed results, which has been published and also the PowerPoint presentation uploaded on the website today. I'll just give you a brief on the performance of the last quarter. As stated, the COVID pandemic has affected the performance of CSL adversely, but we were able to report a PAT of around INR 43 crores as against INR 120 crores reported last quarter despite various constraints. And turnover for the quarter was INR 332 crores as against INR 737 crores reported last year same period, a drop of around 55 percentage; and PBT of around INR 58 crores as against INR 186 crores reported last year same period, a drop of 69 percentage; and PAT of around INR 43 crores, a drop of around 65 percentage. The main constraints faced by the yard despite resuming operations on 6th May were: We were having 100% production loss for 25 days in Q1. Then while the operations resumed on 6th May, we could only -- we could operate only with 50% strength, complying social distance and other safety norms. And there were nonavailability of materials and equipment, both in shipbuilding and ship repair front, since all the suppliers have invoked force majeure clauses. And our Mumbai ship repair unit was fully closed during the entire Q1. And certain -- in the ship repair area -- certain confirmed ship repair orders planned for Q1 were either canceled or deferred. In certain cases, the ship owners reduced the scope of work due to liquidity issues, and international and interstate travel restrictions still continues. Hence, there is a nonavailability of service and OEM engineers to do physical commissioning and other works. These factors have adversely affected the financial performance of the company in Q1. In the CapEx front also, both our ISRF and dry dock projects have been impacted adversely. Both the projects were having substantial portion of civil work, and these works are being carried out by a large number of migrant laborers in 2 shifts. Consequent to outbreak of COVID, all the migrant laborers went back to their native places. While we were able to bring back certain number of laborers during the month of July, some of them, again, went back now since the number of cases in Kerala is increasing now. Further, due to the night curfew imposed by the local administration, no works have been happening during the night also. And there also, we have faced difficulties with nonavailability of materials and equipments. So on account of the above factors, the physical progress on both CapEx projects are very low during Q1. Despite the above, the company is taking all approach to ramp the operations in both shipbuilding and ship repair through various proactive measures. The company has already introduced 2-shift system for employees on a permanent basis. Now the company is working from 7 a.m. to 10 p.m. every day. Similarly, various cost-cutting measures are being introduced to ensure liquidity and to improve productivity. We have also resumed our operations in Mumbai ship repair unit. Therefore, you can see improvement in financial performance from Q2 onwards. With this, I conclude my opening remarks, and we'll now take your questions one by one.

[Operator Instructions] The first question is from the line of Ramesh Damani from Ramesh Damani Finance.

One second, sir. Can you hear me?

Yes. Yes. Yes, we can hear you.

Yes. I just have a couple of quick questions to you. The first question is, I want to understand your ship repair business. I understand this is a tough quarter. But if you look at over a 5-, 10-year view, what do you expect the ship repair business to grow once we assume we come back out of CV-19? Over a 10-year period, what is the compound annual growth rate that we can foresee in the ship repair business? Considering you're putting so much CapEx and so much effort on this business and the fact that it's almost a monopolistic business for you, I want to understand what is the growth trajectory. Secondly, I want to know how this Aatma Nirbhar policy on the defense, particularly what the Defense Minister laid out, how does that help our company? Can you give us some factors as to how they help you? And last but very short question. You have an order book currently of about INR 14,000 crores. I'm wondering if you are a bit worried that the order book is too small, considering that the cycle for this business is maybe 6 or 7 years. So would you just comment on these 3 questions, please?

In ship repair, we have been growing around 20% to 25% every year for the last 3 years. And considering the additional capacity being introduced in Mumbai, Calcutta and all, we assume that we will grow at the same 20%, 25% level every year. And in 3 years, we'll reach around INR 1,200 crores in turnover. That's what we expect.

And beyond that, your visibility, do you think you can grow this business for 10 years at 20% maybe?

14% would be difficult to sustain, but around 12 percentile, we can sustain the growth.

Over a decade or so? 12%, 15% for a decade or so?

Yes, yes, yes. And regarding the Aatma Nirbhar.

Yes. Mr. Damani, this is Rajesh here. Aatma Nirbhar actually, definitely, there is going to be a little bit of impact on that. But actually, what CSL is right now thinking of is, we want to actually tap into the international business because a new dry dock, which is coming up is a big dry dock, 300 meters, where we want to bring in the bigger commercial vessels. So for -- on the ship repair side, while Aatma Nirbhar will definitely fill up the upcoming infrastructure and capacities that we're building up, our focus would be to bring in the bigger, larger commercial vessels from the international liners, so that, that would be big business that we're looking at and that is where we want to actually expand our marketing into the -- into, what, international stronghold, like Singapore and Hong Kong, where you have big shipping companies, predominantly managed by Indians, and we want to tap into the vessels that take the sea route past -- international sea route past India. Yes, that is one area that we have been planning, and we are planning to move ahead. Aatma Nirbhar, definitely, definitely, because all captive projects definitely will now have to be done in India, so that is going to have an impact as well. Sure.

Okay. And the third one is, we're concerned that the size of order book is too small in an industry that it books for 6-, 7-year projects, you only have visibility for 3 years?

Yes. I appreciate that because we -- our target is also like the -- if you look at it, based on our current revenues, 3 to 4 years is what we should always have in the order book. So that is why we are not letting off any of the major defense tenders that are coming. And we need a couple of big orders as well to make sure that we are safe on that side, and we are going after these big high-value tenders and things that are coming up. We are not missing out on any of those. So that definitely is on our mind while we also feel that all these additional capacities will also help us in ramping up the order book. Because again, coming back to the big dock, while I speak, we would also be wanting to target major conversions and upgradations of offshore and vessels and rigs, which again are high value. So again, there are certain conversions. So these are areas which we have in mind, and we should actually be able to tap into those few areas. So that, like you said, comfort is always 3 to 4 years ahead compared to the turnover that we have each year. So even our targeted -- the targets that we have for the business development group is worked out accordingly.

Right. But there -- is the order pipeline robust enough that you are expecting some bigger orders over the next few years?

Hopefully, because, as I said, there are a lot of projects that we're bidding for. And I'm sure that it's not that we'll end up losing everything. So definitely, we would -- all projects, of course, we go in and bid competitively and aggressively. But we are not a company that would go and do some hera pheri. It's not our -- the way we do it. But definitely, we would land -- we would like to land a couple of major ones over the next year or so.

Just on a follow-up. If you were addressing -- so aggressive in the ISRF and the dry dock facilities, and you mentioned you want to get international business, if you manage to secure that, can you grow at 20%, you think? Is it possible that you shape up the ship repair business at about 20%?

40% on top line?

20%, 20%, yes, on the top line.

20%, 20%. Yes, I think we should be able to, definitely. I heard it as 40%, sorry. Yes.

No. 20% over the next 10 years, say, can you compound at 20% over the next 10 years, that business?

I might be -- I mean, I might be asking for too much if I commit that now but like DF was mentioning, we would aim for around 15%, but 12% is what we always sort of commit when we are on such calls with our investors.

The next question is from the line of Jonas Bhutta from PhillipCapital.

Rajesh and Jose, hope you are safe and healthy. So firstly, congratulations on a decent set of numbers given the challenges. Sir, one comment that you'd made in the Q4 call was that Navy had sharply curtailed its budget starting April, so -- and that was likely to create some bit of stress on working capital. If you can highlight if there's been any improvement to that account? And has the Navy or the MoD now given you some bit of line of sight on cash flows during the year?

Yes, Jonas. Now we have started receiving some money from Navy. So IAC around INR 900 crores, they have released during Q1. That is as I expected. And in the ship repair front also, we have received some money, but the major chunk is yet to receive, but they have started releasing funds.

Okay, okay. And -- so you do not expect the working -- level of stress of working capital that you've expected at the start of the year? Or you think that, that is still...

No, we don't see the -- we don't see any liquidity issue as of now. We can manage it, and we are constantly following with Navy. And they are -- they have started releasing money in bits and pieces.

Sure. My second question, sir, was on -- if Rajesh can sort of comment on. So the Next-Gen Missile Vessels was made part of that list of 100-odd products or projects that the Ministry of Defense announced that they need to necessarily be made in India. So what -- is that -- that was always going to be the case. So there was no surprise element in that, right, that the Next-Gen Missile Vessels will be made only in India? Or does this sort of even warrant you to now completely make the components or source the components also from India? If you can elaborate how the tenders will shape up given the recent announcements by the MoD, whether -- yes, yes.

No. I think, Jonas -- yes. Yes, yes. Jonas, you're right. All along, this project was actually what they call the IDDM, Indigenously Designed and Developed (sic) [ Indigenously Designed Developed and Manufactured ] in India. But having said that, there is a provision there also for a certain extent of foreign content to come in because, as you would appreciate, India doesn't right now manufacture the entire -- all the equipment or the systems that go on board for ships. So there's a provision, but like you said, there's no surprises there. This RFP was already there. But it's been included probably so that in the future, we -- these are projects where we would -- India would like to do 100% of it in the country.

Got it. So has there been any movement during the quarter on this? Or it's still -- the tender still remains in the RFP thing?

No. As regards the missile vessels, bid was already submitted. So we are just waiting for the next move from the Navy.

Okay. And my last question, and then I'll come back in the queue is, sir, if Jose sir can give us the breakup of the shipbuilding revenue into IAC, non-IAC and then cost plus and fixed price?

Yes, yes. Shipbuilding, total revenue from shipbuilding is INR 316 crores. Out of that, IAC is INR 261 crores and other shipbuilding is INR 56 crores. And out of INR 261 crores of IAC, cost plus part is INR 186 crores and fixed price is INR 75 crores.

The next question is from the line of Swechha Jain from ANS Wealth.

Sir, I have few questions. One is just a follow-up question on the order book of INR 14,000 crores. Typically, in how many years can we assume this would be completed? And were there any new orders bidded for in Q1 FY '21? Especially, there were some bids, which the company was supposed to submit to Navy regarding the FMV and MPV vessels.

Yes, the order book currently will suffice for around 3 years right now at this stage, and the bids which you have mentioned are actually -- we had mentioned about bids going in for new-generation offshore patrol vessels and some multipurpose vessels. So those -- and there was one more which we were talking about -- one second. Yes. There was this NGMVs and the multipurpose vessels and the offshore patrol vessels. So all together, that's sort of INR 12,000 crores to INR 13,000 crores value of bids that are being submitted. So those are still in the process of being submitted.

Okay, okay. And sir, from the current order book, will you be able to give us a breakup in terms of percentage as to what percentage is on cost plus basis and what percentage is on fixed price?

Cost plus is around INR 3,500 crores.

Cost plus is INR 3,500 crores, okay.

Yes, yes, yes. One second, one second, one second. Cost plus is INR 3,800 crores and fixed price is around INR 2,470 crores.

INR 2,470 crores. Okay, okay. And sir, just 2 more questions. If you can just help us with the cash position as on June 30. And the EBITDA has kind of reduced to 25% in this quarter. So can we assume for this year or for next couple of quarters, we would maintain the EBITDA margin at 25% on an overall basis?

Yes. The cash position as on 30th June is around INR 1,948 crores, INR 1,950 crores, 1-9-5-0. And EBITDA, the 25% EBITDA is including other income. If you remove the EBITDA -- other income from the EBITDA, our normal EBITDA is around 20 percentage to 21 percentage. But this year, it must be around 19 -- 19% to 20%.

Hello?

This is the operator. Sir, we are not able to hear you.

Hello?

Yes, sir. Now it's audible.

It's audible?

Yes. I think we had completed with that response. So maybe...

Next question.

Is there anything else?

No, sir.

[Operator Instructions] The next question is from the line of Harshit Kampani from JM Financial.

Sir, I have two questions. Firstly, in regards to the ban on the 101 import items, which areas, in the sense, corvettes or cargo vessels or fishing vessels, which areas can we see a big pickup in inflows? That's the first thing. And the second thing is that, given of more indigenization that is going to happen in India, is it a fair understanding that in the long run, shipbuilding orders will be coming in at around 7.5% margins?

Yes. As regard to your first question, basically, the -- this 101-list items on which India is planning to put this embargo is all defense-related. So it doesn't really affect the other set of vessels, like fishing vessels or whatever. This is predominantly the -- there are around 11 to 12 type of -- variants of defense vessels that have come into that list. I didn't get your second question. Can you just repeat that?

Yes, absolutely. Yes. So in the future, it's more of indigenization that's going to happen and more of Make in India. Is it a fair understanding, as per the MoD's norms, of giving orders at 7.5% margins? Is it what that the shipbuilding margins in the long run can be 7.5% for the new orders we book?

See, actually, the MoD doesn't really give -- earlier, actually long back, MoD had this method of cost-plus contracts. Nowadays, it's all competitive tenders and fixed-price contracts. So this 7.5% margin as a standard margin across contracts is not applicable even as we speak. So it's only in special cases where we have this cost-plus provisions, where you have that margin. Otherwise, it's the margin that you've managed through a competitive bidding process. And that's what's been going on for all the current projects as well.

Okay. Sure. And can I get the revenue for ASW corvettes and the existing backlog for that order?

See, the existing backlog is around INR 6,311 crore because so far we have not booked any revenue from ASW until Q1. So we may -- from Q3 onwards, we may start booking revenue from ASW.

The next question is from the line of Umesh Raut from YES Securities.

I hope you and everyone at -- yes, I hope you and everyone at Cochin Shipyard are safe and healthy. So -- sir, my first question pertains to ASW shallow watercraft order. So as you said, we are starting booking -- we will start booking revenue from that project in third quarter. So do you see, sir, any delay happening on that front because of the nonavailability of material or because of the travel restrictions which are in place right now or because of some of the concern that you have in terms of labor? So any thought on that project?

As we speak, the project is going through the design and the planning phase. And -- so as such, we are not expecting anything. Hoping by the time we get into the production, as DF was mentioning, if situation worldwide eases out and we have -- we are not having any major challenges on the material front, we shouldn't actually -- we are not planning for any major delays on that project as of now.

Okay, okay. Sir, second question is on the export orders. You have received 1 order in the quarter. So I just wanted to understand the 3- or 5-year horizon -- from the 3-year, 4-year, 5-year horizon period, what kind of potential or target we are seeing from the export market?

The export shipbuilding segment has been very, very low over the last 5 to 6 years. Post 2008, it's not really picked up. Not only -- it's almost a decade now. And it was just showing signs of picking up, when we ran into this pandemic. But having said that, I think where we are also trying to focus nowadays is where there is more innovation and technology, and that is why this particular order, which we picked up this quarter is extremely important for us. Value-wise, it's 2 vessels of 100-and-odd -- INR 106 crores, but -- INR 120 crores, but these are probably going to be the first autonomous ro-ro vessels in the world, which means vessels which can run without any operator on board or crew on board. So in that sense, India getting a chance to do this is something really big for us and for the country as well. So maybe going into the future and looking at the way things are changing, whether it is technology or disruptions all over, probably technology is where we should focus on. And that's why we were very keen on taking this order. So we -- and what helped us was the track record on earlier export orders that we had. Because you would appreciate that during this COVID scenario, there was no way that the client could come and assess us physically. So it all happened remotely. So all our previous deliveries and track records and goodwill helped a lot. So right now, we are, as we speak, we have 2 orders for those 2 autonomous vessels. And there is an option for 2 more, which the owner will decide whether or not to exercise. He will just -- he has been given -- we have given a window of around 6 months before he can take a decision. So what I'm trying -- I was trying to say is, when you talk about exports, the conventional export market is still down and out. And the recent situation, whether it is the pandemic or the overall business scenario is not really going to help it -- help that market swing in towards, what you say, a favor of shipbuilding very quickly. We felt probably technology is where we need to look at. And at least, we've got the breakthrough, we would like to build up on that further.

Okay. Got it. Sir, if I squeeze in one more, on the ship repairing side, you discussed in the last call that you would be targeting somewhere around INR 550 crores for FY '21 and you are also expecting INS Vikramaditya order to come in, in FY '22 or maybe in early part of FY '23. So just wanted to have your updated guidance on it.

Yes, the targeted turnover, what we have mentioned, still remains, and we are on course. As regards to Vikramaditya, nothing -- no movement has been seen from the Navy as of now. So we are still waiting. We do not know whether they have any change in plans or anything. But till now, there is nothing that has been officially communicated. But what we understand is, like we said, latter half of '22 or early '23, the vessel is due for repair. So that was what we had mentioned last time.

The next question is from the line of Aditya Mongia from Kotak Securities.

Hello, everyone. Am I audible to you?

Yes, sir. You're audible.

Yes, yes.

Okay. The first question was on this -- on the Aatma Nirbhar thing. I wanted to check with you, you talked about the 11 to 12 vessel types that are now included in this list. I wanted to get a sense of you whether past ordering of these vessels were largely given to domestic vendors or the foreign vendors?

Can you repeat that question? Sorry, it was -- we didn't get you.

Sir, the question was that the 11 to 12 vessel types that are now included in the list of 101 items, as per the Aatma Nirbhar plan, were the orders given for these vessels in the past typically going to domestic vendors or the foreign vendors? [Technical Difficulty]

Hello? Can you hear us?

Sir, please, go ahead.

Yes, yes. These -- there are, I think, around 11 to 12 types of vessels which have been included in the 101 list -- item list issued by MoD. These vessels are -- which have either been built or which are currently being built, already built or currently being built or -- and there are a few vessels which are under tendering stage. So these are vessels that are already sort of -- which we all of us are aware that can be built in India.

Okay. Sir, the second question was more on the pipeline of orders for this year beyond the INR 13,000 crores of orders that we have already highlighted. If you could share more color on the pipeline?

That was what I just mentioned. We are putting in bids for around INR 10,000 crores. 3, 4 major projects from the Navy, which are all in the bidding stage, while we carry on looking out for private and commercial orders as well.

Okay. Any large essentially private or commercial orders that are in the fray for this year?

A couple of strong inquiries and -- which we are pursuing very closely, but too early stages to indicate any, what do you say, anything concrete.

Sure. The last question from my side, you obviously have a cost-plus portion of the backlog. Once that cost-plus portion gets completely executed, do you see any meaningful change in your overall margin profile?

No. Actually, in the cost plus, we get around 12 -- around 10% to 12% only in cost plus. Actually, the margin is more in the fixed price component.

Sure. So what you're suggesting is that the margin profile should be steady or improved once the INR 2,000-odd crores of cost plus part is taken off?

Not really, not really. Because now the Navy is following a bidding system for all the tenders, though the margin will be slightly lesser because here, the cost plus part, in the IAC, it is a nomination order. So the margin is slightly higher than what they normally -- than what we normally get. But hereafter, Navy will be doing all the tenders through bidding process. So we have to quote competitively. And naturally, the margin will be slightly lesser.

The next question is from the line of Hiten Boricha from Sequent Investment.

Sir, my first question is on the CapEx side. You mentioned that our CapEx plans is going slow because of migrant labors issue. So any changes in our guidance of INR 290 crores?

No. We will be sitting in the -- still, we will be sitting around INR 290 crores because our earlier target was INR 600 crores. Due to the COVID, we have revised downwards to INR 290 crores. So that remains.

Okay, okay, okay. And my second question is on the revenue side, sir. You mentioned that we are facing certain equipment issue due to lockdown and other supply chain issues. So just wanted to understand what kind of revenue are we looking for FY '21?

FY '21, see, we were always guiding around 12 percentage growth every year. But this year, we may not be able to grow at that size. What we are trying is at least at par with the last year or near to that. That's what we are targeting now.

Okay, okay. So we will see a slight kind of revenue in this year, right?

Yes, yes, yes.

The next question is from the line of Tanmay, individual Investor.

Hello? Can you hear me?

Yes, sir, we can hear you. Please go ahead.

Yes.

Yes. My question was already answered. Thank you.

Okay.

The next question is from the line of Devesh Jhanwar from Jhawar Tradecom Llp.

Yes, sir, my question is that euro has moved up about -- it has moved up significantly. Will it impact the margins of shipbuilding? How much will...

Can you repeat that question once again?

Yes. Euro has moved up significantly. So what will be the impact of that on the shipbuilding margins? Hello?

You're talking about euro?

Yes, correct.

Yes, right now, as we speak, there is no project which has a major implication, but there is a euro component on our antisubmarine warfare corvette project, which is not yet moved into the full-scale procurement phase, so we're just waiting and watching. So hopefully, by that time, things will improve.

Okay, sir. And my second question was, any updates on Tebma Shipyard? And how much is it contributing towards revenue in the shipbuilding or ship repair side?

Yes. Tebma Shipyard is, right now, you're aware that the NCLT order has been passed, and we are a successful resolution applicant. So there was a period of 90 days. 90 days from the effective date by which we should have paid up and completed the process. But then due to this lockdown and related constraints, there has been a further extension. And right now, we are looking at concluding the process by around middle -- mid- to end September. So you're also probably aware that, that facility has been lying idle for a few years now. And so once we take over, we would need a few months for the initial maintenance and bringing the -- bringing it -- making this facility live again. So it will be only after that, we would start physical production in that facility. So it's, I think, 4 to 5 months before I think -- and hopefully, if things don't worsen out on the pandemic front, we are actually trying to see whether we can move a team immediately there, but you would appreciate that the current situation doesn't permit that. But anyway, we would like -- we are aiming to complete this resolution process over the next 1 month and take over and start maintenance so that at the earliest possible, we can start production and generating revenues there.

The next question is from the line of Anurag Patil from Roha Asset Managers.

So sir, out of this INR 1,950 crores cash, how much are the owned funds?

Pardon me?

Pardon?

Out of INR 1,950 crores total cash position, what will be the owned funds content?

See, owned funds will be around -- almost 100% is full -- owned funds. But out of that, around INR 1,100 crores is earmarked for the CapEx and INR 118 crores is for IPO. Out of INR 1,950 crores, INR 118 crores is relating to IPO, the parent IPO proceeds. The remaining is company's owned funds. But out of that, INR 1,100 crores has been earmarked for the 2 CapEx.

Okay, sir. And second question, this INR 12,500 crores backlog of Indian Navy order, can you give possible revenue bookings of this order over the next 3 years, any ballpark numbers?

Maybe around INR 2,000 -- between INR 2,000 crores and INR 3,000 crores every year from Navy.

The next question is from the line of Jonas Bhutta from PhillipCapital.

Two quick questions. Firstly, have we committed to the Navy on the revised delivery date of the IAC? Or that is still open-ended as of now?

So for now, there is around -- because basin trial, we were planning in April '19. Now that has been shifted to September or mid-October. So for -- similar shift will be there in the delivery period also.

Okay. So you're saying that, sir, almost INR 6,000 crores of revenues, or thereabout, almost INR 5,000 crores of revenues will be booked post delivery or post basin trial? Fair assumption?

No. Please repeat, Jonas.

Sir, basically, today, we have an unexecuted order book on the IAC of almost INR 6,200 crores. By September, October or maybe even by December, you will -- would have booked maybe about INR 1,000 crores of revenue on that. So once the basin trial -- so there will still be a pending order book of almost INR 5,000 crores, which will be revenue recognized only post delivery? That's the fair assumption?

No. Post-delivery revenue will be around -- total -- 2 years, it will be around INR 2,000, INR 2,500 crores post delivery. The remaining...

INR 2,500 crores would be booked when, sir?

See, out of INR 6,000 crores, around INR 4,000 crores will be -- INR 4,000 crores will be booked before delivery -- predelivery and post-delivery will be around INR 1,500 crores to INR 2,000 crores.

Okay. So the INR 4,000 crores is by September next year as in September '21?

Yes, yes, yes. Again, ballpark figure around INR 2,000 crores, INR 2,300 crores every year from IAC, for next 2 years, this year and next year.

And so this year also, despite this doing about INR 200 crores, INR 300 crores in the first quarter, you think that you should be able to get to that INR 2,400 crore number on the IAC that you did last year?

That's what we are trying.

Okay. Sir, the other question I had was the non-IAC, non-ASW part of your shipbuilding order book is about INR 1,300 crores, INR 1,400 crores as of now, whereas the revenue last year was about INR 450-odd crores or INR 475 crores on that. How will this INR 1,400 crores get executed? Over what time frame should we assume, sir? Should we assume that same run rate of INR 450 crores?

No. This year, it will be more than that. This year, we are expecting around INR 800 crores to INR 900 crores because 2, 3 vessels are scheduled for delivery this year.

Okay. So this year, the nondefense shipbuilding will be about INR 800 crores to INR 900 crores?

Yes, yes, yes, including ASW.

Including ASW?

Yes, including ASW. So you can take out around INR 150 crores from that to remove ASW.

Okay. And the last one was, sir, and maybe you can help me understand. So when we bid for the ASW corvette order, which was almost 24 months now, what was the level of localization at that point in time in the bid that was assumed? And now has there been a major change given what has happened to the currency? So if you can talk in, if at all possible, precise numbers, like at the time of the bid, you'd assumed, what, 30% localization content of the equipment, excluding Hull? And now has there been a material change in that? That will help us understand the margin trajectory of that business -- of that particular project at least in the near term, sir. And that's my last question.

Jonas, right now, as we speak, we do not see much of an impact of Aatma Nirbhar coming in. But this is a long-drawn project. So if there is a specific improvement or India is able to deliver for major -- there are certain set of major equipments which even otherwise coming through BHEL or BEL and all that -- so BEL and all that. So otherwise, I think the major equipment that we're looking at for import on these projects is still likely to come from abroad. I don't think -- for at least by the time we are moving into this project, there could be a change. But something like that...

Sir, that is my question -- sorry. My question was more from the perspective of the ForEx movement that we've seen ever since you -- the bids have been open to when you're going to start execution. Have you sort of managed to offset a bit of that negative impact through trying to procure stuff locally? And then it was not more from -- and it's not from the 101 negative list?

Yes. Yes, exactly. I think this was -- we had explained this once, Jonas. What we have done is we have sort of working out a package deal with BEL so that you will be -- we are able to handle a lot of things through BLS. And we are including now -- it's the total package that we're trying to work out and that goes -- that's under discussions. So that you negate a certain percentage of the risk that is coming from the ForEx thing that we were talking about. And that is moving ahead. So that's moving ahead. That actions have already been sort of taken on the procurement side.

So the margin profile that you expected on the project remains, right? Like...

Yes, yes. As of now, it still remains, yes, yes.

The next question is from the line of Swechha Jain from ANS Wealth.

I just have one follow-up question regarding the ASW backlog for -- of INR 6,500 crores. Sir, you mentioned that INR 150 crores is likely to be received this year. So the balance INR 6,350 crores, what should we assume? In, typically, how many years do we expect this revenue to be booked?

Yes. I would say it is actually the -- revenue recognition is based on the percentage completion, actually not based on the actual amount received. Because if you see that we have already received 10% of the amount, like INR 6,300 crores -- 10%, we have already received on signing the contract. And another 10%, we have already raised the invoice, but we have not received the money so far. But revenue recognition based on the physical progress of -- was actually completed in this yard. So this year, we are expecting a turnover of around INR 150 crores from that project. And from that, next year onwards, around INR 1,000 crores will be recognized from the ASW project. So we can see -- in the next 3 years, you can see the turnover from ASW.

Okay, okay. So sir, I can assume INR 1,000 crores for the next 3 years?

On an average, on an average.

On an average. Okay. Okay. That helps.

The next question is from the line of Ramesh Damani from Ramesh Damani Finance.

Yes. Sir, this is just a follow-up question on the ship repair business. Based on what I understand you telling me that for the next 3 years, you can grow this business at about 25%, and after that, at 12%. So if you're starting at INR 600 crores, by the end of the decade, you'd [ do a ] INR 2,500 crores for the ship repair business? And can we assume a 25% EBITDA margin for that business over a long term? Is my understanding correct?

See, we are expecting around -- the ship repair business to reach around INR 1,200 crores in the next 2 to 3 years. And EBITDA margin is around -- you can expect around 25% from the ship repair.

Now after 3 years, if I look at year 4 or 5, can you grow that business at about 12%? And if you do that, then it should double again to INR 2,500 crores?

Yes, but...

Yes, you're talking about INR 2,500 crores by when? That is by...

By 2030, 10 years.

Yes, that is for sure.

Yes. Yes. That's what we have in mind as well.

And you would have a 25% EBITDA margin in that business sustainably?

Yes. Typically, ship repair, that's been remaining consistent in that region, so we would -- but what we think is that -- because once we grow the business, because we'll have to bring some export orders also. We have to enter some AMC MOU repair also with the big companies like Maersk and all. There, we may have to price it competitively.

Yes. When we were talking about the commercial foreign business, there, the margins might not be as much. So that is where a little bit of averaging out may happen. So that is all that we are trying to say.

And are these contracts denominated in -- the international contracts will be denominated in dollars, right, I assume?

So typically, international contracts are all private shipowners. They would pick and choose their yards based on the -- both the technical capabilities as well as the commercial competitiveness. So whenever we have actually -- today, as we speak the challenge we're having is our dry docks are full and booked for next 6 months always. We're not able to go and really pitch for commercial business because they always want the vessel to be dry docked at short notice. So with expanding capacities, we hope to have that availability of dry dock at short notice, and that is why we want to pitch in for these bigger vessels. The advantage there is, while margins may be slightly lesser than what we're talking about today, these are all faster turnaround. And it's just 10, 15 days of project. So it's the faster turnaround, and it helps build a lot of efficiency and professionalism into the system. And typically, whenever we have tried to do that in earlier times, we have been managing, we've been successful. Because 5, 6 years back, when we decided to do -- go for -- venture out and seek some foreign business, we were able to get around 13 vessels that we have from foreign clients. So these -- I mean we can manage. And wherever we have been -- I mean, tried to compete, we've been able to handle it. So I think that business is available. It's just a fact that we don't have the capacity yet.

The denominated currency for export is either euro or dollar.

Euro or dollar. Sir, just a quick follow-up. Based on the fact that quarter 1 was basically no revenue from ship repair, are you still confident that you can do a INR 550 crores, INR 600 crores turnover this year in ship repair?

Yes. We are not expecting INR 600 crores. We are expecting around -- between INR 500 crores and INR 550 crores.

INR 500 crores, INR 550 crores. Okay.

As there are no further questions, I would now like to hand the conference over to the management for closing comments.

Yes. Thank you. Thanks a lot to all who have participated today. I hope we've been able to clarify the queries that you have raised. As already conveyed by our DF in the opening remarks, we have had the challenges related to the lockdown and loss of production that have -- that were there. And as you would all appreciate, although we started operations in May, early May, ramping up takes time. And then by the time you are able to generate the momentum, which is -- there is a consequential effect as well. But having said that, Cochin is still comparatively better off compared to a lot of other places in terms of this pandemic situation. Although the numbers in Kerala and Cochin as well are going up in recent weeks, we're only hoping that we don't end up in too much of a problem, and that we can actually continue to pick up momentum. Internally also, we have made certain adjustments. We have started shift working arrangements, trying to generate more productive hours. So our efforts will continue. And hopefully, we should be able to sort of like, DF was mentioning, sustain the levels. We're trying to reach the levels what we achieved last year, at least. So hopefully, we should be there. And thanks for all the support, and thanks for participating.

Thank you. Thank you all for being a part of conference call. If you need any further information or clarification, please mail at [email protected]. Ladies and gentlemen, this concludes your conference for today. Thank you for using Chorus Conference Call service. You may disconnect your lines now. Thank you, and have a pleasant day.