Dilip Buildcon Limited (DBL) Earnings Call Transcript & Summary

Ladies and gentlemen. Good day and welcome to Dilip Buildcon Limited Q3 FY '22 Results Conference Call hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Jiten Rushi from Axis Capital. Thank you, and over to you, sir.

Thank you, Tanvi. Good evening. On behalf of Axis Capital, I would like to welcome everyone for the Q3 FY '22 Earnings Conference Call Of Dilip Buildcon. From the management, we have with us today, Mr. Devendra Jain, Executive Director and CEO; Mr. Rohan Suryavanshi, Head, Strategy and Planning; and Mr. Radhey Shyam Garg, CFO. And also we have the Investor Relations team from S-Ancial. We thank the management for giving us this opportunity. We shall begin with opening remarks from the management followed by Q&A session. I would like to now hand over to the management for opening remarks. Thank you, and over to you, sir.

Thank you, Jiten-ji. Good evening to all. Thank you for joining us today. We hope all of you are doing well and staying safe in these definitely extraordinary times and we hope that your family is also doing well. First of all, I along with the whole DBL family would like to welcome all our investors and partners to this conference call for the quarter ending 31st, December 2021. It is my great pleasure and honor to be able to host this call and update all our partners with the important updates for this quarter and our plans going forward. Well, to start with, the global pandemic has right now reached a certain stage where there are certain things which are still uncertain as how this disease might spread or what new variants you might come across, but with the number of vaccines being produced by prominent players around the world at least there is lot of optimism as well -- unlike the situation that was there 2-years ago. In India, also many vaccines have been licensed and inoculations have been very, very successful. The government on its part, they did a phenomenal job of spreading the vaccine and programs very, very well. We are hoping that this deep vaccination program will provide safety from future variance and eventually business momentum will be restored and the larger economy can come back to its feet as was the pre-vaccination era. And recent updates, the big one was the union budget, which was announced by the Honorable Finance Minister. This was a very balanced and progressive budget with -- without any negative surprises. There has been an uptick in the allocation of capital towards the infrastructure sector, which kind of reiterates the budget as a growth-oriented one. Outlay of capital expenditure of INR 7.5 lakh crores is up of almost by 35% year-on-year. This expands the scope of private CapEx through PLI for new age segment, which is expected to deliver inclusive growth, job creation and welfare for all. Overall, the budget laid both for a long-term economic recovery, relying heavily on infrastructure and agriculture reforms and government spending. In an endeavor to ramp up the infrastructure space, the budget has allocated INR 12.2 trillion which is upwards of 10% compared to the INR 11.1 trillion in the previous fiscal. Further to this, very specifically to our road sector, the Finance Minister announced the PM Gati Shakti master plan for expressway, which would be formulated in FY '23 to facilitate faster movement of people and goods. The national highway network will be expanded by 25,000-kilometer in FY '23. On the awarding front, NHAI awarding activities for the 9 months in this fiscal stood at 2,583-kilometer. We believe that this space of awarding needs to pick up substantially over February-March 2022 as seen historically to meet its target of 4,500 kilometers. Now let me move on to some company -- recent company updates. DBL along with its wholly-owned subsidiary DBL Infra Assets Pvt. Ltd executed a non-binding term sheet which showing in with on 21/01/2022 for transferring the invested equity in a portfolio of 10 Hybrid Annuity Models -- Hybrid Annuity Model projects comprising of 3 and 7 near completion projects. Equity transfer to the same unit shall be completed in a progressive manner after the completion of the projects and subject to the receipt of approvals from the respective project lenders and NHAI. The total equity valuation of the set 0 project is expected to be INR 23,490 million against the required equity investment of INR 15,010 million crores. Besides this there should be a reduction in the consolidated debt of the company by the piece INR 4,218 million crores upon consummation of the transaction. The company along with DIAPL is in the process of execution of definitive agreements for InvIT to consummate the transaction and we're expecting that to be completed very, very soon. The above evaluation obviously may undergo certain changes based on the outcome of final due diligence or other matters such as prevailing bank rate at that point of time when the projects are actually moved into the InvIT, the outstanding actual debt at that point of time and the inflation adjusted balance completion cost et cetera of that -- on that transfer date. Obviously, we are very happy to announce this as the company have evaluation of almost 1.6 times against its invested equity, and this would be a good thing for all the shareholders especially in these tough times, where the company will be receiving almost INR 800 crores to INR 900 crores additional capital above the invested equity in those projects. This is, I'm talking about both Shrem deal and the Cube deal in totality. So we will be earning that kind of additional profit on these assets, which will offset some of the losses that the company have had to -- have come through to us in these times because of projects getting stretched over time. And because of the extraordinary rise in material prices. Now talking about the Cube deal. We have received INR 2916 million crores out of the INR 4296 million crores from Cube against transfer a 49% equity stake, plus unsecured loan in 3 HAM projects. The balance INR 1380 million crores will be received after COD plus 6-months, which is expected in Q1 FY'23 against the remaining 51% equity stake transfer. In this quarter, I'm also happy to tell you guys that we have completed 5 HAM projects and 3 EPC projects in this year on or before time. We've also won 2 large projects worth INR 33,200 million crores, one is the Amadand mine OCP project in Madhya Pradesh and the second is a tunnel project in Bilaspur and which is in Himachal Pradesh. That is INR 637 million crores rupees project, I mean INR 6370 million crores project. Now moving from business to financial performance. Revenue unfortunately decreased by 11% in Q3 FY'22 on a year-on-basis. As opposed to quarter 3 of last year. This was largely on account of rainfall happening in South of India and till end of November. A lot of our projects are based there and unfortunately all those projects, even after the monsoon that we experienced in North and Central India because there was a long, elongated rainfall session there. Those projects would not take off. And the revenue that we were expecting did not yet. Similarly, EBITDA also decreased by 98% in quarter 3 FY'22. The decrease in EBITDA is because of the following reasons. Usually in the past DBL executed a 24-month project in 20-months and less than that. This used to help us in saving our fixed overheads, and also getting early completion bonuses. Besides the early completion bonuses also, the costs that we were saving, they were all helping us get higher margins, but because of COVID-19 all projects are now getting executed upwards of 27 to 30 months. This additional fixed cost incurred during the EOD period and the non- receipt of early completion bonus have impacted profitability, because all of our teams, our manpower, our equipment is mobilized at the site and they're not able to do the revenue that they were built for. Similarly, the second big reason we have increase in material prices like cement, bitumen, diesel, steel, aggregates. Out of the increased price of material 50% to 60% has passed through escalation clause given in contract and while and the remaining price increase is factored at the time of bidding. However, this exceptional increase in prices were obviously not captured and has affected our EBITDA margin and because majority of the projects that are getting completed were won during the year 2018, March of 2018 was when we had done almost INR 20,000 crores worth of orders and those projects have got elongated. So all those cost have sort of impacted us. The third reason, the coal projects that we do, where fuel cost approximately contribute 45% to 50% has also been impacted by the sudden spike in diesel price so that has also impacted us. These are the broad 3 reasons. All of this ultimately culminates into the profit after tax, which decreased by almost 187% on account of decrease in EBITDA. Now let me take you through some important items on the balance sheet. Expenditure on fixed assets is INR 260 million crores in this quarter. INR 260 million in this -- investment has decreased in Q3 FY '22 as compared to Q2 FY '22 due to sale of 49% equity stake in the 3 HAM projects to Cube highways and the sale of stake in 4 HAM projects to DBL Infra Asset traffic. Early inventory has marginally increased by INR 37 million from last quarter to this quarter. Debtors have also increased to INR 15,041 million in Q3 from INR 13,181 million in Q2, this is on account of delay in receipt of money which has been now received in January '22. Decrease in loans is mainly on -- given on account of repayment of loan given to SPVs created for HAM projects. Net debt to equity ratio remained the same at 0.73 in Q3 FY'22 viz a viz 0.73 in the same -- in the last quarter. However, in absolute terms, the debt has decreased by INR 1,096 million. Working capital days has increased from 102 days in as of December 31, in this quarter viz a viz 96 days as of September 30, 2021. This is my -- primarily one of the reason that I mentioned about in terms of debtor. This would be all for me right now. We can now open the floor for question and answers. Thank you.

[Operator Instructions] First question is from the line of Shravan Shah from Dolat Capital Markets.

Sir, my first question, actually I have many questions to be answered. The first let's start with the basics. Last quarter, we were confident that now put into 15% EBITDA margin is the new normal. So that the call was in the middle of the quarter and this quarter we are posting lowest ever EBITDA margin, so kind of a flattish 0.3% EBITDA margin. So not able to understand that one. Second is on the execution front, now previously what we guided INR 9,500 crore to INR 10,000 crore for this year. So definitely there also, what's the new number. So just first thing trying to understand where we are going wrong. So that's the first question.

[Foreign Language]

Middle of November, there also we were not aware that this kind of fall can come to the EBITDA margin. Though, we were saying that 14%, 15% is the new normal that we can now seeing from the third quarter. So that's where -- so that time also we were aware that the input prices are higher, steel, cement, diesel were higher. So my question is not why the margin has come down. The thing is that we were still saying in the middle of the quarter that it will be at a 14%, 15% and actually, it is coming to the 0%. So that's the only thing I'm not able to understand.

Shravan-ji, actually we were not expecting that where the project, where we have received the appointed debt because we will not be able to progress on that part, okay? So that is the one reason and we were, if you would have achieved the revenue of INR 2,500 crore and more so this EBITDA would have decreased, then we would have come because our fixed overhead under recovery are there. Okay. Because our manpower is there, then we are taking them on the lease. There are certain overheads, which are under recovered. And thus another thing is that the project which we have won in 2018, so explanation is not fully passed on. So -- but, it is again partly compensated by the increase in the equity valuation, which is visible in the deals where we have done the non-binding term sheet times the shell InvIT, there we are getting the valuation of 1.56x. So that is the reason primarily.

Okay. Sir, other thing is that have we tried to sell equity stake, a significant equity stake at DBL standalone to other business house or are we also looking at our open to sell significant equity stake 20%, 25% to some other house.

Shravan-ji, if at all such an event going to happen, we will inform the market and whenever such a thing happens. I mean these rumors have floated around in the market for some time, but I'm -- there is nothing for me to comment on rumors. But like I said, if there was anything that will happen, we will inform the market at the appropriate time.

Okay, sir. Now just to give the new guidance on top line margin, order inflow, CapEx. So if you can help me with the new number for this year and next year also, if you can help me. And then maybe I can come to the Ham monetization part.

[Foreign Language] Total revenue will be equal to the last year's total revenue.

Okay. And margins, in fourth quarter, how we can see the EBITDA margins?

Shravan-ji, [Foreign Language]. But it will be positive. So because we don't know that the -- how this will pan out the progress or [Foreign Language], so just wait for the margin.

Okay. And lastly, sir monetization [Foreign Language] some detail, more thing. So we created a Infra holding company. So this Ram deal, so how much will be given to that and how much will come to the standalone entity and maybe broadly in terms of the time line. How much time line are we are looking at when this will come and ultimately, how the -- our gross debt will reduce by this year, next year. Whatever you can help me with that.

Yes, sure Shravan-ji. So if you see like -- as we have intimated also the required equity investment in these tenants is around INR 1,500 odd crores, out of which like approximately INR 600 crores is the investment from our holding company that is DBL Infra Holdings and remaining investment would be from DBL, so some part of the investment is yet to take place. As we informed that the projects, some of the 7 projects are still under construction. So some equity to the tune of around INR 170 odd crores is still required to be infused in these assets for the completion of the projects. So as and when the projects are getting completed. So there are 2 ways in which the equity investment take place, one is the unsecured loan and second is the pure equity component. So in these assets, there is a unsecure loan component of around INR 600 odd crores. So that unsecure loan component will be realized in form of cash from each of the SPVs pursuant to their transfer to the InvIT and against the remaining equity investment, which is both combined together by DBL and DIAPL which is -- which will be around INR 900 crores. We will be receiving the units of the InvIT, so that way units of the InvIT will be to the tune of around 1750 -- close to around INR 1,750 odd crores. So these units will be held by DBL as well as DIAPL in proportion to their equity holding in the respective SPVs as and when the transfer take place.

Okay. So the cash, any time line in the next year, the cash will come INR 600 crores by end of FY '23?

Yes, definitely, it will be realized by end of FY '23 and as Devendra also explained, so that is where you can see against the monetization of INR 1,500 crores worth of equity, company has a price discovery of INR 2,350 crores. So that is the valuation, which has been established, so that valuation will be received and further this valuation like -- this is an approximate valuation because there are certain variable parameters like the bank rate on the transfer debt -- actual debt which is drawn and the balance completion cost which was the basis for the calculation of annuity in future. So these would be the variable parameters as and when the transfer happens, on that whatever is the crystallized number basis that the final valuation would be ascertained. So it is going to be in and around this particular range.

So date, previously where we are looking at INR 500 crore reduction for -- by this year, so what's the now new status?

So Shravan-ji, the date will be from this number. The -- there will be decrease of around INR 200 crore to INR 300 crore by margin.

[Operator Instructions] The next question is from the line of Mohit Kumar from DAM Capital.

Yes, good evening, sir. And thanks for the opportunity. My first question is, there is a huge EBITDA margin miss. Is it because they are mostly Ham assets with fixed cost contract though the SCV. And related question is that coal contracts, I understand that they have a -- they were better escalation clause, right. Why you think they miss in the coal contract also, is the first question.

Mohit-ji, we have not told that this is a fixed price contract. The contract with the Ham, so SCV is also not the fixed price contract and Pole also not fixed price contract. What we are saying, this kind of increase doesn't get compensated through the explanation growth which is you will have to understand. It's okay, in the Ham project only 40% of explanation is given by the NHAI during the construction period, remaining 60% is spread along with the annuity for the next, next 15-years. So whatever increase is there in the explanation is converted into the equity increase and the remaining comes with the construction.

Just to clarify over here Mohit-ji, like the 60% component on with the inflation is received, so we estimate that inflation, while in our bid price while we under -- while we put our bid. But what has happened because of the escalation in the material prices because the prices have move behavior more than 40%, 50%, most of the commodities and commodities like bitumen has increased by more than 100%. So what has happened is that whatever was the original estimate of inflation for -- against the 60% which we are not receiving during the construction period from NHAI, so that has really initiated the entire costing of the raw materials for each of the projects. And this additional money is getting realized through the equity divestment because that has helped in increment of the balance completion cost for each of the Ham assets. So that is where you see that the valuation of the Ham projects, there is a reflection while we are undertaking the monetization of the assets.

The question is that whatever remaining order book we have to INR 30 billion to INR 20,000 crore, is there the risk that this thing of low EBITDA margin will continue for some more time before we go back to our old margin?

Mohit-ji, this was due to because the project, which we have won in 2018 and we were executing that there was a higher percentage of the old project then new projects now. But this percentage has changed. Now the old project, which you have won in 2018 are around the progress of the 75% to 90%. And the new project, which we have won and we have started working on that has been bid on the new price and after this new price bidding, there is no -- there is not sudden increase in the material prices. So this 3 year, actually gone down.

[Foreign Language]

[Foreign Language]

Out of 12 Ham projects, 6 and 6 is in the range of 75% to 90%.

[Foreign Language]

Understood, sir. Secondly sir, on the InvIT the -- [Foreign Language]?

InvIT is already listed InvIT. So it is a list of -- it is a private listed InvIT. Once we transfer the asset, so as per the agreed valuation, we will be allotted the units of the InvIT.

[Operator Instructions] The next question is from the line of Rohit Natarajan from Antique Stockbroking.

Sir, if you could help us understand, what this early completion bonus, as a percentage of total project cost used to be, how it came down over the period of years? And what is the situation now? Now I understand, there is no early completion bonus, but can you just help us understand what that number used to contribute?

Sure, sir. Sir historically speaking, [Foreign Language] it accounted to 1.5% to 2% of the top line [Foreign Language]. So that's how much it would come every year and bottom line [Foreign Language] Along with this when you get early completion [Foreign Language] along with that what used to happen was like, we have explained in past [Foreign Language] project if you're doing in 20 months or 18 months or whatever 21 months, your fixed costs, your salaries, your equipment, all those costs also used to -- you used to get a benefit out of them because you will would have completed it before what you had anticipated in the bid for. So you would save [Foreign Language] another 1.5% [Foreign Language] So both these things put together [Foreign Language]. Now -- what has happened, early completion bonus has gone out of the window. Then on top of it, our expenses have piled -- model was always keeping everything on our own books, our own people, our own equipment. Now we have not removed people and our equipment so fixed costs month on month [Foreign Language]. So all those costs have now added up from that instead of the 20-month now finishing them in 27 to 30-months. So the 6, 7 to 10-months additional cost has come on your project and that's what is basically now hitting these things because of 2 waves of Corona and the exceptional monsoons that have happened. Also it is important to note sir, both the waves of Corona came at the peak time of working. [Foreign Language] these were the biggest months of working. [Foreign Language] but unfortunately because of all the reasons -- revenue got hit [Foreign Language]. So we are not able to extract the maximum that we are able to -- that we would use to do in the past because of these factors which are extraneous to us.

Sure. Sir. My second question is more to do with this Siarmal open cast, [Foreign Language]. Our date of start was supposed to be in June '21, what exactly you have done around progress over there?

[Foreign Language]

[Foreign Language] SECL OCP project [Foreign Language] which is INR 2,200 odd crore kind of number. [Foreign Language]?

That's a EPC project, so [Foreign Language]

And sir, final question is on InvIT. [Foreign Language] Is there a time line that you have to withhold at or do you plan to offload it, sell it further, encash it. [Foreign Language] future monetization plan.

Just to answer it one by one, further is that there is no time line or there is no restriction upon us with respect to the monetization of units of the InvIT, so upon the allotment of the units the Company can monetize. The reason why this is like, we cannot like really say, when do we plan to exactly monetize, because the reason of company opting for this InvIT route is that because today as we know that we are at the historically low bank rate, today the bank rate is at 4.25% and despite that we are having such a good valuation and today with the -- as you can see with the market trends. So there is a likelihood that the interest rates are going to get harder and once the interest rate hardening it start -- starts happening, Ham is the only product in the market, which is counter interest cycle, like if the interest rate moves up, then your valuation of the asset also has a favorable impact. So with that, it is always beneficial for the company that we should try to hold the units in the long run, because that is going to -- that is -- there is a likelihood that the overall earning of the Company against these units is going to have a favorable impact. Secondly, there is also a tax advantage. Like if you encash the units or if you sell the units then immediately there is a capital gain tax implication of volume. So which otherwise if you are retaining the units any which way you are entitled to the quarterly distribution against the units. So that is going to be a cash inflow to the company on a quarter on quarter basis against the distributions, which would be made by that in the trust. And that is like mostly it is going to be like having a tax benefit because the -- if the SPVs are continuing in the old regime pursuant to transfer, old tax regime, then there is a -- there is no tax implication on the dividend distributions from the SPVs. So with this, there is a tax advantage also going to come upon the Company. So endeavor is that to hold the units. But nonetheless, if any time, if there is any requirement of cash flow, then again funding can be raised against these units, so that way -- so that flexibility is also available with the company.

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

Sir, on the divestment side. So in the last quarter presentation, we were talking about 12 Ham projects getting divested which is 5 to Q1, the next 7, we were transferring to DBL Infra and then gradually through InvIT routes, we shall be doing it and we were expecting a value of INR 2,500 crore. And now in the current presentation, you're talking about the 13 Ham projects in which you have mentioned the 10 Ham projects from this transfer to the Shrem InvIT, with the older ones. And the 3 which we have done it with Cube. Sir but the older Ham projects with the Shrem was more of a cash deal, not the InvIT unit deal, so what has changed with this or my understanding is incorrect like, just wanted to understand from your side?

So Jiten-Ji, initially as you mentioned that we had mentioned that we will be operating through the InvIT route. So that hasn't changed. So, exactly we have done the same thing. So with Cube also like, this is a -- this was a pure cash monetization against like 3 assets. We have divested the equity of 3 assets of around INR 300 odd crores against which the bid valuation is IRN430 crores and against which 49% equity transfer has already taken place to Cube and the unsecured loan invested by the company has already been realized, so approximately INR 290 odd crores has already been realized from the Cube and balance will be realized upon completion of 6 months of each of the projects. So now we are left with that remaining 7 assets, so one asset is out of the lot, which we had one in FY2021. So that is why total is coming to 13 instead of 12, okay. So against these 10 assets, so as we had maintained in past also that the divestment will be through the InvIT route that is the preferred route. So we have done exactly the same thing. So I think that answers your question.

No. My question was more on the Shrem side. So we are getting the units now from Shrem because they have come out in the InvIT, so earlier.

Sorry to interrupt, but had the Company like floated its own InvIT platform also then also the Company would have received units only against the InvIT. Shrem that -- it is going to give cash only. It is the platform that we are talking about.

I got your point. But if -- was that the part of the original deal where Shrem had to vision that they might go for an InvIT and you will be getting units as against the cash that is what my question was.

No sir that was never the deal, if you're talking about the old deal that we did with Shrem way back in 2017.

INR 1,600 crore.

We didn't won the -- yeah we had not even won these projects, so to make a deal, which was not even there would --

Sir at that time we had transferred 23 asset deal right sir, 23 asset, the old, the original deal with the Shrem group right sir, which had 11 Ham -- 24 asset which had 11 Ham projects and --

No sir, which had 5 Ham projects in that.

So, my understanding is sir this 10 Ham projects, it includes those 5 Ham projects also?

No.

Jiten, sir [Foreign Language]

[Foreign Language] So sir the conclusion now is that 13 Ham projects asset, 5 you are selling it to Cube and 7 we are transferring to Shrem or we are transferring only 3 to Cube and remaining to Shrem. That is the understanding, correct?

Sir, we are transferring 3 assets to Cube and 10 assets to --

So, earlier you used to transfer 10 -- 5 asset to Cube.

Earlier, sir just let me please allow me to complete.

Sorry, yes.

Earlier plan was to sell 5 assets to Cube, against which we now are only selling them 3 assets because we are getting a better valuation at.

Yes. So that was the thing. So when we look at. And also to answer your question if there was ever a deal with Shrem [Foreign Language] we would have not gone with other partner at all. I would now add you to Cube and done that. So this was much later because when we were setting up, we also had offers from other investors who were interested in our assets. All of them wanted to buy out the assets completely. And we wanted to set up the platform because of the long-term strategy for DBL what you mentioned because we are constantly making these assets and we are constantly need to monetize it. Because we need to monetize them, having a bilateral sale arrangement every time and giving the market that -- having that hanging, when will that happen, not happen, we wanted to reduce that uncertainty, which is why we talk about, setting up our own individual account because you are aside. Now the reason why we joined another InvIT platform is -- just allow me to complete.

Yes, please continue sir. Please, sir. Sorry sir, please continue. Yeah.

The reason why we have joined another platform is because we wanted the size of the platform to be large, where if you're putting up a InvIT platform, where we want to monetize our asset for a different investor also if we -- when we will be selling in future and monetizing our assets when we feel the InvIT time is right, it will be a much better value proposition for any investor with a wide range of assets in that portfolio. That was the reason why we decided to join certain InvIT.

[Foreign Language]

Yes.

[Foreign Language] total INR 300 crores.

[Foreign Language]

And sir. [Foreign Language] Got it. So INR 430 crores [Foreign Language] INR 290 crore you have received. Correct, sir?

Yes.

And the INR 600 crores, you will receive from Shrem next year. And balance the units you will be holding it. Sir of the DBL Infra platform which you had built, where we had raised, you were supposed to raise INR 9.95 billion from CPPIB, we had raised up to Q2 some INR 5.8 billion and Q3 when we must have raised something, just now how this deal is spanning like 5-year [Foreign Language] 13% IRR [Foreign Language] So how and we are supposed to pay 25% -- we can pay 25% in next one year and then another 25%. So what is the money so far received from CPPIB and now what is the status of this deal. Sir. Thank you.

The status of the deal is the way it was originally structured. So in -- till Q2 we had drawn INR 580 crores and other one in INR 20 crores has been drawn down in Q3. So if you see the aggregate draw down is around INR 700 crores from CPPIB again the sanction facility of INR 995 cores. So we have the ability to draw the balance INR 295 crores from CPPIB going forward, based on the equity that we invest in the upcoming or the new Ham projects.

New Ham projects.

And as you have mentioned like the repayment, there is the interest moratorium for 2 years Q on Q onwards, that is going to start paying the interest and after expiry of 3 years. So that is from year 4 onwards, we need to start the repayment of the capital, but nonetheless at an appropriate time after completion of 12 months, we have the ability to prepay 25% and another 25% after completion of 15 months. So that is how the deal is, so based on our this plan and our InvIT route and future monetization. We will decide for the quantum of prepayment. So that is purely discretion on the part of the company. Otherwise, the repayment is starting from the year 4.

Okay, so basically 12 -- after 12 months you can pay 24%, 25%. And next 3 months after that. So that is 15 months, you can -- you will be -- you can pay 25% and the actual principal repayment will be starting from the end of the fourth year, right sir?

From the beginning of the fourth year.

Beginning of -- so end of the third year basically.

Yes.

Okay. So, sir. Now hence for any new asset, we win, we will be bided, where the bid will go through DBL or DBL parent company or through the DBL Infra which is the holdco for the SPV?

As of now, like the bidding is from DBL because -- only. But going forward we may look for bidding from our holding companies as well because once the credentials are built up because for building up the credentials also there has to be -- there is a minimum cooling period or minimum threshold period for which you need to hold the equity of the SPVs.

Okay. So the next 6 months or one year that --

Yes, whatever is as per the guidelines.

Right. And sir. Now with the -- with new wins from NHAI, the bonus clause will again reinstated because this were -- we were not getting the bonus because we were getting -- we got the EOT for the older projects. Hence, we were not able to receivable. But with new wins there won't be any EOT. So the bonus clause will be reinstated. So directionally, can we see not in FY '23 but probably FY '24 or FY' 25. We are able to win additional 1.5% to 2% additional margin or because of the competition, our EBITDA, non-recurring EBITDA would be coming down from like 15% to 12% to 13% and plus, you add bonus 1.5% to 2% will be 14% to 15%.

Jiten-ji the bonus clause was always there and it is there in the new projects also. The only thing this now the NHAI strengthened the -- this -- they shortened the period and the projects are complex. So it is, they have made almost impossible to complete the projects before time. And won the early completion bonus of like 4 to 6-months. So this is right now, what we are looking at that it is not possible to earn the early completion bonus in the range of 1.5 to 2.3.

So okay. So bonus is there. But because of the complexity and shorter execution cycle, we shall be not able to win the bonus going forward. That is the conclusion.

Yes sir, it is really difficult and -- able to -- too early to comment on that.

Right. Sir, last question, sorry I'm asking. So the power T&D segment. So, any update on that segment. How are we shaping because we are able to win projects from irrigation, water ad mining. But new -- not new projects we have seen from Metro or power T&D, so any update on that sir?

So, sir, on the power transmission, there is nothing to update right now, we haven't got anything that we had looked at. There is nothing that had come up. In terms of metro and other sections, we are continuing to bid those segment.

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

Sir, thanks for the opportunity once again. Sir how is InvIT going to fund [ INR 6 billion ], does it have enough cash and the related question is which is the platform through which all the future deals will happen?

Mohit-ji, can you repeat the second part of your question, I couldn't hear it.

[Foreign Language] is there any ROFR given to the InvIT?

Yes. So I'll just answer it 2 ways. One is that you asked about the source of funds of INR 600 crores within this. So that is going to be organized by the Shrem Group because Shrem infrastructure is the sponsor of the [ Shrem bid ]. So, they are going to put in the requisite cash towards like retirement of our unsecured loan in these SPVs. So that is how that monetization is going to happen. And secondly, regarding the ROFR for the future Ham projects. Yes, as per -- as a part of the deal, we have agreed for an ROFR that the future Ham projects with the company is going to bid. So they would have the right of first user from the Board -- that second resident.

Devendra sir, how the other segment order inflow is looking out especially from a Q4. I think you mentioned some large number, but can you just please elaborate on that, which are the segment which we're targeting in the Q4?

Sir, we had -- with the road sector, we have about 16 -- for INR 70,000 odd crores worth of orders right now lined up in the road sector and the other sectors that you are looking at there is about INR 16,000 crores of orders in the other sectors that we're looking at so that's the breakup of the orders that are right now in the order pipeline that is available right now.

[Foreign Language]

Sir, all sorts of sector in there.

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

This is Anupam Gupta here. [Technical Difficulties]

[Foreign Language]

Yes sir, sir your voice is breaking up, Mr. Agarwal.

Is this better? Hello.

Yes. Please proceed.

[Technical Difficulties] Presentation which totals up to close over INR 1,050 crores over Q4 and the next 2 years in the road segment, specifically, if you can break down that in [Technical Difficulties]

Sir, your voice is not coming [Foreign Language]

This is better?

No sir. It is fluctuating in between, between it is coming --

You have to dial again.

[Foreign Language]

I will dial back, yes sir.

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

Sir, 2 questions, Devendra Ji sir. [Foreign Language] So what will be the right according to you, what will be the balance margins in order book now?

Okay. Order book [Foreign Language]

[Foreign Language] because of the COVID and commodities. When you have taken the hit. But the issue here is that [Foreign Language] Is it right understanding maybe because of lower share of financial order, we have more for severe impact on the margins?

[Foreign Language]

[Foreign Language]

[Foreign Language]

Basically.

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language] Anyone can answer. So on InvIT. So [Foreign Language] so what is the total with 3 deals, what is the total cash flows or distribution from this InvIT and after your, these 10 assets get added [Foreign Language] assuming that this ultimately becomes a vital for us to monetize and it keeps growing, this vehicle keeps growing from the dividends which we may get from the InvIT. So annually [Foreign Language] investment, how much of that can fund your equity requirements?

[Foreign Language] So approximately like between 10% to 11% of the valuation. So that is going to come in form of distribution. Or so this is the split like frequency is quarterly basis. So every quarter we will be receiving this dividend and this will accumulate to 10% of the total investment. So the -- let us say, we are receiving units worth 17, 50 odd crores from the InvIT. So you can safely assume between INR 175 to INR 180 crores of cash flow will be accruing against the units, which we will be getting a allotted from the InvIT. And going forward like as in with the addition of future assets, so more units are going to come to the company. So that way, the cash flows are going to increase in a slow manner.

[Foreign Language]

[Foreign Language]

So as this InvIT grows bigger, so maybe you can get at an appropriate time. So you want to capture the benefit of rising interest rate now, so interest rate increases your distribution increase, you assumption increase and then and you can keep growing this in platform and eventually when it becomes very sizable you may get some more investors to come in and participate right. So broadly that would be the more longer-term strategy?

Yes. Absolutely right.

Okay. Just lastly, sir. [Foreign Language] can we look at opportunities that Devendra sir like some of your peers have got very large orders and they don't have their own cap institution capability. So now we are not enjoying benefit of bonus. We have a strong gross block. So can we look at those select opportunities and keep growing our revenues because [Foreign Language] and they are saying 13% to 14% margin [Foreign Language]

So Parikshit-ji [Foreign Language] are we looking at doing --

Yeah so are you looking to selectively look at those opportunities at your liking margin, margins which you like [Foreign Language] you will still not do any subcontracting work.

No if we get a good opportunity, where we are comfortable with the payment that we need to come with the partner that might be there, so we might take those opportunities. There is nothing that we have against that.

But you are evaluating it. You are open to evaluating those opportunities.

We are open to evaluating all those things. So we are open to evaluating.

[Foreign Language]

[Foreign Language] in terms of both monetization as well [Foreign Language] So if there are partners that want to think about even their long term O&M and all those things, so we are open when -- to such opportunities [Foreign Language]

Got it [Foreign Language] given that if the margins are up our liking [Foreign Language] So we may -- it may not be margin dilutive to you, the payment terms and margins are accretive, right?

[Foreign Language] So one of our key things even right now is from [Foreign Language] we were really happy getting all these sorts of orders. In future if there is some tweak that is needed from our strategy in terms of who we need to work with, we are more than happy to look at that, there is nothing that you can say. In a business, it's a dynamic situation. And you have to adjust yourself according to the external environment.

Okay. Just last thing sir [Foreign Language] so the cost of completion estimate for the entire order book wherever like there was excessive. So has everything been accounted now or there could be some potential hit also may accrue in the fourth quarter. So I just want to understand that in FY '23, we move -- we will leave from first quarter to the normal margins of 13%, 14%, the sale of commodity at the current level will continue for like even some part of FY'23.

[Foreign Language]

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

Sir, 2 questions, sir. Firstly, INR 10,50 crores balance equity commitment over a fourth quarter and the next 2-years. [Foreign Language] How much will go from DBL and how much will go from DBL Infra Holding?

Yeah. So like in DBL Infra Holding, we have a undrawn line of around INR 300 crores from CPPIB. So that can be utilized to meet the equity commitment from DBL Infra and balance will be from DBL.

Okay, understand. And second question is in terms of competition you have [Technical Difficulties] competition and they have been [Technical Difficulties] tighten the qualification norm. So are you hearing that Devendra ji or is that still not visible beyond margins.

Anupam-ji, [Foreign Language]

I'll try once again. So basically there was expectation that the easy pre-qualification norms, which has resulted in higher competition will be reversed at the birth of time. So are you seeing something happening at NHAI for that or is it still not visible?

[Foreign Language]

Okay, from that angle, margins will keep on -- be under pressure effectively till it’s happened -- whenever it happens.

Yes.

The next question is from the line of Shravan Shah from Dolat Capital Markets.

Yes. Sir, just wanted to know, a couple of data points. First is mobilization advance, retention money and unbilled revenue as on December?

The mobilization advance is INR 1150 crore, retention money INR 800 crore and unbilled revenue is around INR 800 crore.

Okay. And how much we need to spend on CapEx in the fourth quarter?

Fourth quarter it will be nominal. What we are making to -- it will be -- can be in the range of INR 10 crores to INR 15 crores only.

Okay. And sir. Now we have only 2 Ham appointed date pending that we are expecting by March and we will be receiving that?

Yes.

And sir, what will be the gross consolidate?

Just give us a second.

Okay. And sir. Just wanted a clarification, anything pending in terms of the CBI inquiry of -- so anything negative surprise still can come or everything is now closed.

[Foreign Language] So nothing on the negative impact on the business [Foreign Language]

Consolidated debt is around INR 9,000 crores.

Thank you. That was the last question for today. I now hand the conference over to management for closing comments.

Thank you very much everyone for coming on the call today on a Saturday. And we appreciate all your questions. In case you have any more questions, we and our team look forward to getting them offline, and let us know. We're more than happy. So our IR team or our internal team would be more than happy to help you out with any details that you might need. Thank you again, everyone.

Thank you. On behalf of Axis Capital Limited that concludes this conference. Thank you for joining us. And you may now disconnect your lines.