Garden Reach Shipbuilders & Engineers Limited (GRSE) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. I'm Zico, the moderator for this conference. Welcome to the conference call of Garden Reach Shipbuilders & Engineers Limited arranged by Concept Investor Relations, to discuss its Q2 and H1 FY'24 ended September 30, 2023. We have with us today, Commodore P. R. Hari, Chairman and Managing Director; and Shri R. K. Dash, Director of Finance and CFO. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand over the floor to Commodore P. R. Hari, Chairman and Managing Director. Thank you, and over to you, sir.

Thank you, Zico. Ladies and gentlemen, a very good afternoon to each one of you. I'm Commodore P. R. Hari, Chairman and Managing Director of Garden Reach Shipbuilders & Engineers Limited. And with me here Mr. R. K. Dash, the Director of Finance and the Chief Finance Officer; Mrs. Aparajita Ghosh, General Manager of Finance; and the Company Secretary, Mr. Sandeep Mahapatra. I thank you all for taking time out to attend our earnings call to discuss Q2 of financial year '24. Before I dwell up on the financial results, let me highlight some of the salient aspects of our physical performance, the current order book position, the order book execution plan and what the future holds for us. Our order book as on 30th September 2023 stands at INR 23,739.59 crores. This comprises of 4 projects for the Indian Navy consisting of 19 war ships, that is 3 P-17 Alpha stealth frigates, 4 survey vessel large, 8 anti-submarine shallow water crafts and 4 next-generation ocean going patrol vessels. In addition to these orders for the naval ships, we also have an order like from the Government of Bangladesh for 6 patrol boats; Government of West Bengal for next-generation electric ferry; and from the DRDO for an unmanned surface vessel. In addition, happy to inform you that we have just been given a letter of intent for an oceanographic research vessel for the Ministry of Earth Sciences. This LOI has been received very recently. Now coming to the current status of the ongoing projects and also the execution plan. First, the P-17 Alpha ship. As you are aware, we are constructing 3 ships under this project for the Indian Navy. This is a 7-ship project with 4 ships being constructed by Mazagon Docks Limited and 3 by GRSE. All the 3 ships have been launched and they're presently undergoing various stages of outfitting. Happy to inform you that on 17th of August this year, our Honorable President had launched the third and the last of these vessels. The first ship has already attained more than 60% physical progress of construction with the second ship at around 51% physical construction and the third ship has crossed 40% of construction. We intend delivering these ships from mid-2025 to mid-2026. Coming to the Survey Vessel Large project. This is a 4-ship project again for the Indian Navy. All the 4 ships have been launched. The first ship has already completed machinery trials, both at harbor and all the relevant trials at sea. And now the ship is getting ready for delivery, and we intend delivering the ship to the Indian Navy the next month, that is December '23. This ship has already -- considering that the ship is ready for delivery, the ship has already attained over 90% physical progress of construction with the second ship at around 76% of construction, the third ship closely following with 66% and the fourth ship at 52%. The second ship is currently around 6 months behind the first ship, and we intent to completing this project during the next financial year. Coming to the anti-submarine shallow water craft project. This is a 16-ship project, of which 8 ships are being built by GRSE and 8 ships by another public sector undertaking shipyard. Of these 16 ships and among the 4 ships -- 8 ships that we are constructing, 4 have already been launched. Happy to inform you that of these 16 ships, all the 4 ships launched so far have been constructed by GRSE. The first of these ships has already attained 66% of construction; the second at 60%; the third at 51%; the fourth closely following at 42% and so on. We intend delivering these ships from the beginning of the next calendar year and this project will get completed by 2026. All the 8 ships will be delivered by 2026. Coming to the next-generation OPV project. The contract for -- this project is a 4-ship project for Indian Navy. The contract was concluded on 30th of March 2023. Happy to inform you that the production -- the physical production of two of these ships has already commenced and the various other activities like equipment, procurement, design finalization such activities, the preparatory activities for major construction are in progress. The project is on the right track. The project for 6 patrol vessels for the Bangladesh Government, we intend completing this project in the current financial year. The next-generation electric ferry for the Government of West Bengal, the project is moving in the right direction. We already reached around 70% of construction. And in another couple of months, that is by January, we intend delivering this ship to the Government of West Bengal. This is the breakthrough that the company would be having in the field of green vessels that is electric carbon -- zero carbon emission vessels. And this, we expect huge market potential in the future. We also have a project going on for the DRDO, which is an unmanned surface vessel. The project is on the right track and we intend delivering this platform to DRDO in March this year (sic) [ next year ]. The order -- the LOI that I had mentioned for the oceanographic research vessel for the NCPOR under the Ministry of Earth Sciences, it is worth around INR 840 crores. We also have an order for manufacture and supply of 10 in number, 30mm guns to the Indian Navy. The order value is around INR 240 crores. Our ship repair segment is moving on, chugging along fine. We have been regularly getting orders from the Indian Coast Guard for conduct of refits of their vessels and also a few commercial ships. The order book position of ship repair stands at a modest INR 80 crores where we have already completed the 6 refits so far. Another business vertical that we have is the portable steel bridges segment, that is a Bailey Bridges Division. In the current financial year, we have already executed orders worth around INR 60 crores, and we already have an order book of around INR 79 crores outstanding. Happy to inform you that we had concluded an MoU with the Border Roads Organisation for manufacture and supply of 50 bridges. This MoU has been enhanced by another 15 more bridges in the recent past. This in a nutshell gives you a glimpse of the orders that we have currently, the progress and the status of each of these orders and our execution plan. Coming to the orders on the anvil. What we expect from the inputs from our major customers, that is Indian Navy and the Coast Guard, an RFP for 5 in number next-generation Survey Vessel for the Indian Navy is expected to be floated in the next 6 months. This would be followed by the RFP for the Next Generation Corvettes, that is 18 number Next-Generation Corvettes. As per the AoN that has been accorded by the DAC sometime during last year with the 8 ship project and the L1 shipyard would get 5 ships and the L2 shipyard would get 3 ships. So we are preparing for bidding for this prestigious project. Why this is prestigious is with the experience that we have, you may be aware that we are the only Indian Shipyard that has delivered 9 Corvettes, both surface, that is, Missiles Corvettes and Anti-Submarine Warfare Corvettes and all of them are in active service with the Indian Navy. So with that kind of experience and expertise that we have, we intend bidding for this project in an aggressive manner. The next project that is likely to come out is the P-17 Bravo ship, which is a 7-ship project. This in effect will be a follow-on of the ongoing P-17 Alpha project. Of this 7, one of the shipyards, the lead shipyard would get 4 ships and the second shipyard could get 3 ships. The order value for this project for the 7 ships could be to the tune of around INR 70,000 crores. The next project on the anvil is the Next Generation Destroyer. It is a big project, where in 4 NGDs, Next Generation Destroyers, are expected to be manufactured and built by Indian shipyards, high-value project. And of course, projects for the Indian Navy, again, for 21 in number Waterjet Fast Attack Crafts, this again we expect the RFP to come out in the next year. Coming to the new products that we have developed. One of the projects that we had undertaken was development of an unmanned surface vessel. As we have mentioned, we already have an order in hand and another prototype with a larger unmanned surface vessel is expected to be launched this year. We have already launched an autonomous underwater vessel. And this project has been successfully completed. And with both the navy and even the army showing interest in this project -- in this product, we expect orders for the AUV, or the autonomous underwater vehicle, in the near future. We're also developing marine-capable drones. What I'm trying to convey is that as far as autonomous platforms are concerned, GRSE is developing marine-capable drones, underwater vehicles and also surface vessels basically to address the autonomous requirements of the customers that is the armed forces in all 3 domains of operations, surface, subsurface and air. Coming to the green energy vessels. This is another area of focus. We have already developed the next generation ferry, what I had mentioned for the Government of West Bengal, expected to be delivered in a couple of months. We'll also be bidding for a project for the Kerala Metro Rail Corporation, that is KMRL. They have come out with an RFP. GRSE would be bidding for this. This is 15 green vessel project -- electric vessel project. Coming to exports. Export has been a focus area, and we have managed a breakthrough to Bangladesh in addition to the projects that we have completed earlier for the Government of Guyana, for the Government of Seychelles and for the government of Mauritius. We expect opportunities to come again in Bangladesh, in Sri Lanka, Guyana and a few Scandinavian countries. These are all at various stages of negotiations, and we expect positive results in the coming months and years. Our Bailey Bridge segment has been in the forefront towards manufacturing and -- development and manufacturing of new products. One of the project -- products that we have successfully brought into the industry was the 4.25 meter double-lane bridge. It is for this bridge that we've got an MoU with the Border Roads Organisation. We are also developing a new type of bridge that is a 5.3 meter carriageway bridge, which would be a proprietary item of the shipyard. We also have collaboration with Rolls Royce, that is MTU Rolls Royce Germany, for development and coproduction of high-speed diesel engine -- marine diesel engine. Last time when I had a brief during the con call -- investor con call, I have stated that we have signed an MoU with them. Now the MoU is being translated into a license agreement, and this license agreement is expected to be signed within a month. We also have a collaboration with Kongsberg Finland for coproduction of marine water jets. This is at an MoU stage. We already signed the MoU and we will again be translating this into a license agreement. The intent of both these license agreements is to address the requirements of the Indian Armed Forces, that is both the Navy and Coast Guard both in terms of marine diesel engine requirements and also for water jets. This, in a nutshell, gives you, again, an overview of what is on the anvil. Now coming to the financial results. We have been maintaining the upward trend in our financial performance, and this -- the results for the quarter ending and half year ending 30th September have been definitely encouraging. Again, both revenue from operations and profit after tax have touched new heights, that is the best performance in the history of the company. Coming to the revenue from operations. For the Q2 FY'24, revenue from operations stand at INR 897.97 crores, registering a growth -- year-on-year growth of 32%. The last Q2 of '23 was INR 681.60 crores. The total income, again, has increased by 34% year-on-year, and our Q2 total income stands at INR 969 crores. Similarly, the profit after tax recorded has been INR 80.74 crores, registering a year-on-year growth of 37%. Both in terms of share price and in turn market capitalization, there has been a definite increase as evident to all of you. So I have completed my opening address, and we are open for questions any, and we would like to provide -- we'll definitely attempt to provide answers to each and every query of yours. Thank you.

[Operator Instructions] The first question is from the line of Rohit Natarajan from Anitque.

So my first question is on, you addressed the physical progress in the order backlog. I will appreciate if you could help us with the outstanding vessel wise. I said P-17, how much is the outstanding order backlog? Similarly, survey, ASW and NGOPV?

Thank you, Mr. Rohit. Okay, the total order book stands at outstanding orders. That is orders in hand stand at INR 23,739.59 crores. Of this, the P-17 Alpha, the order book outstanding is INR 13,132.46 crores. Survey Vessel Large 1,291.79 crores. The anti-submarine shallow watercraft INR 5,319-odd crores. Next-generation ocean going patrol vessel, INR 3,404 crores. And of course, the Naval standard guns, INR 235 crores.

Sure, sir. And sir, if you could help me understand this ASW. I understand we are working currently only on the 4 vessels, but what was the time line to deliver all the 8? And how are we planning to start the remaining 4 vessels as well?

Thank you again, Mr. Rohit. ASW shallow water craft at the outset we can state that the production of all 8 ships have commenced. Now coming to the progress I had mentioned earlier, but I'll repeat: the first vessel, 66% completed; the second 60%; third 51%; fourth 42%; the fifth is 26%; sixth, again, around 26%; seventh, 16%; the eighth one is 13%, which means the production has already commenced. Of these in ships inspection, after we start the production, we get the hull into -- the ship's mouth, the hull is constructed, equipment are lowered. And after the equipment are lowered into the finished hull form, the ship -- this would be done in a dry dock or a building. But after this is completed, the ship is put to water for the first time. That is when the term we use launch takes place. Four of these out of these 8 have already been launched. Launching generally we do after we cross physical progress of construction of around 40%. Now this is the state. So 4 ships already launched, all 8 construction at various stages. And of these 4 ships that have already been launched, the first ship we expect to be delivered in the next 4 months. But as mentioned, this stands at 66%. And the next ship is closely following around 60%. So from then on, we'll be able to deliver a ship every 5 to 6 months. The entire project -- you see the time lines, the entire project would get completed by 2026.

Got it, sir. Got it. Sir, if I -- just a follow-up on this. Sir, the -- how many dry docks will be available or maybe they will be sitting idle to say, so that you can win new orders and start the work like by the end of this fiscal.

Okay. Now you got it bang on. You're right. The major requirement for any shipbuilding company is availability of dry docks or building berths. So in our case, we have captive dry docks available both in our main unit. And also, we have a dedicated facility, the Rajabagan unit where we have an end-to-end facility for construction of small and medium size ships. In both these facilities, we have dry docks available. Right now, 70% of these docks are occupied, which means even at this juncture, we have around 30% spare capacity. We have also adopted a strategy. We have also adopted a strategy wherein we partner capable shipyards, be it private or public, who have got spare capacity. This strategy has been adopted. One, we're using their spare capacity. Second, we can facilitate concurrent construction. And at the same time, I maintained a certain amount of, let us say, dock and berth availability with me, which means should I get a new order. I will not be caught by wanting for a dock or berth availability. So we always keep around 25% to 30% of dock captive and available with us. So this is the current status. We have adequate berth and dock capacity.

Got the point, sir. But if I understand, because you had this Bangladesh order that will also get concluded this year. A lot of ASWs will be launched as well. So technically speaking, there will be further spare capacity in dry dock level, right?

But at the same time, we have just started the production of 4 in number next-generation ocean going patrol vessels, and these are big ships. They are 100-plus meter ships. Second, as I mentioned, we just got an LOI for a oceanographic research vessel, again a big ship. It is around 85 meters as well. In addition, I had made a statement in passing that with respect to exports and commercial ships, we have definitely made advances. At this moment, I cannot commit because I'm not sure about it. But we are very confident that in the coming months, we'll be getting orders on this front also. So again, this is what we are doing at this moment. The next part is, again, I had mentioned that both the Navy and the Coast Guard will be coming up for new projects in the coming years and months. So when I finish this next-generation OPVs the dry dock and building berth requirements. But definitely, we would be getting fresh orders.

Got it, sir. Got it. From the prospect order perspective, you mentioned Next Generation Destroyer of 4, but the industry buzz is that it's actually 8, and it could be in the size of INR 80,000 crores as such. Is that right way to understand?

Yes, your buzz is partially correct. One, yes, it is 4 plus 4, but it is 4 plus 4. Once the 4 is completed, then only the next 4 will come, that's why I had mentioned the 4. What is available immediately on the anvil, yes, I would not even say immediately. The RFP could come out only maybe in '25 -- early to mid of '25. So the initial requirement would be for 4, which could be enhanced to 8. Maybe it's not even taken an AoN from DAC as of now.

But sir, from a capacity perspective, NGD is technically speaking at 10,000 deadweight tonnage kind of vessel. Will you be in a position to do that at your yard? I mean is size a constraint?

Absolutely. Absolutely, we have got adequate capacity and capability for this. There has been a capacity assessment, which is being carried out by the customer, that is the Navy. And we intent to get -- we aim to get a stick with respect to our capability. No issues with respect to capacity or capability, since you mentioned the displacement and also the dimensional requirements.

Our next question is from the line of Venkatesh Subramanian from Logic Tree Consultants Private Limited.

So two questions. One is you mentioned about the current order book and what is pending. Continuing from previous con call, sir, is it fair to assume that the current order book that we have would be exhausted over the next 3 years, broadly? That's my first question. Second, in terms of exports, you mentioned some very interesting places like Scandinavia and a few other things. What could be the size of the opportunities, the order size one can expect over the next 1 year in terms of if you are able to capture any orders?

I'll answer your second question first. See, as I had mentioned that we are attempting for orders in Guyana where we already made up a deal. We're also trying the Scandinavian countries. The background is that, one, Guyana, definitely, we have delivered a ship there, then they have requirements. Second, Scandinavian countries have actually opened up. Europe is now looking at India for commercial shipbuilding. But at this juncture, I will not be able to give any further details because most of these are at negotiation stage. And perhaps I'll be able to hopefully give you a good news in the next con call or the next to next con call. Coming to -- but the bottom line is there are opportunities available, and we are moving aggressively towards this. Second, coming to the order book. Order book position, as you are aware, it's around INR 23,739 crores. It will not get -- see we are only in the mid of 2023, that is FY'24 just finished the second quarter. As per the current execution plan, the NGOPVs would definitely spill over to financial year '27 and mid-year '28 because as per contract, these ships are to be delivered only by FY '28. So right now we have enough in our hand to last us for the next 5 years. That is mid of 2023 to at least till mid of 2028. Of these projects, the deliveries will be definitely staggered. We intend starting the first of the deliveries of the 19 ships currently under construction commencing next month. And what we are aiming is between the projects a ship every 5 to 6 months is what we are targeting.

So P-17 Alphas, the remaining would be completed over the next 2 years, FY'24 and '25?

No. P-17 Alpha right now, we've got around INR 13,000 plus crores remaining. As per the delivery time lines, what has been mutually agreed between the customer, Navy and us, these ships are to be -- our 3 ships are to be delivered between mid of calendar year 2025 and mid of calendar year 2026, which means definitely it'll go to financial year '27 -- FY '27.

Okay. Okay. My last question, sir, which is you've talked about the shipbuilding cycle, how the revenues -- you have actually educated a lot of us. My question is considering that we are almost coming to another 6 months to go, 4 months to go in terms of financial year, what would be the peak revenue recognition here? So would it be FY '25 or FY '26?

It could be -- see, definitely not FY'24. '24, you have definitely seen that -- you've already seen that you have touched around INR 1,700 crores already. So we are actually moving vertically upwards. We would be maintaining the same trend as per the present progress of construction and the revenue accrual plan in the next financial year also. So it could be either FY '25 or '26. It could be either of these years, it could be...

Or both could be big years for us probably?

Both will be definitely big years. Definitely FY '25 and FY '26, both are going to be big years.

Our next question is from the line of Amit Dikshit from ICICI Securities.

[indiscernible].

Sorry to interrupt, sir. May we request you to use your handset sir. Your audio is not clear.

[indiscernible].

No sir, your audio is not clear, sir.

Am I clear now?

Yes. Now it is clear.

Congratulations for a good set of numbers, sir. I have a couple of questions. Maybe at the risk of being repetitive because I joined the call a little bit late. If you could just let us know the status of Next Generation Corvettes where we are in there? And when can we expect RFP to be floated? That would be helpful.

Thank you, Mr. Amit. See the Next Generation Corvettes, the process, I hope you are clear. As per the DPP, the process I am sure you are clear. First, the basic requirements are made, [indiscernible] are made by the Navy. And after that, this estimated cost goes for a DAC approval. This DAC had accorded an AoN sometime during the first half of the last year, that is 2022, for a value of INR 36,000 crores. This is an 8-ship project, 5 plus 3, L1, L2 shipyards. So this is the background. Now the statement of technical requirements are being finalized by Navy in consultation with the concerned shipyards. And in my appreciation, depending -- I mean, based on the current progress of their readiness, we expect the RFP to come out in the latter half of next calendar year that is '24 end is what we expect the RFP to come out.

Sir, why I'm asking this question is because in the Standing Committee of Parliament report, we saw that Next Generation Corvettes was clearly mentioned as one of the ordering point till FY '25. So if RFP comes out at the end of FY '25, that means ordering would happen maybe 1 year after that. Is it fair to assume that?

See, if the RFP is issued towards end of the next calendar year, hypothetically let's say, in the third quarter of FY '25, from then considering the minimum time required for the bid submission, evaluation. So realistically, the ordering would happen, that is the contract conclusion would happen -- is likely to spill over to FY '26. That is the first half of FY '26.

Okay. Got it. The second one is on destroyer. So this is -- your commentary is slightly different from the PFO. Maybe my understanding is a little bit different. Where they mentioned that all 8 destroyers will be ordered and they will be kind of -- the order will be split between 2 shipyards, that's what was told to us. But now you are saying that it will be ordered in 2 tranches of 4 plus 4. So is it fair to assume that even the first tranche of 4 will be split in between 2 shipyards? Or it will be like the winner takes all kind of game?

See, as per the present understanding and what we are given to understand, it is likely to be in 2 tranches with 2 plus 2, that is, 4 in the first tranche with 2 shipyards, that is 2 plus 2, followed by another 4, again 2 plus 2. That means two shipyards will definitely be involved in this project.

Okay. And how much time do you think it will be between the tranches in terms of order?

There is no clarity at this moment on that. There is no clarity -- even because this project has not even gone for DAC approval, the admin accord of AoN. So what I'm trying to convey is, it is still under deliberation stage. We expect clarity on this only maybe in another 6 months or so. At this moment, there is no clarity except for the input that these ships are required for the Navy and the requirements are being finalized.

Okay. Sir, the last question that I have is a bookkeeping question. If you can let us know the contract asset and customer advances on the balance sheet.

First thing before I go to that, there are no customer advances. Customers, if we are so lucky -- customers are not giving us any advances. So only stage payment takes based on -- as per the DPP, certain conditions -- in shipbuilding, there are 15 stage payments. So there are no advance. As of now, our bank balance stands at INR 4,397 crores, own fund is INR 270 crores and the project-related fund was [ INR 4,127 crores ]. These are for all the projects put together.

[Operator Instructions] Our next question is from the line of Harshit Kapadia from Elara Capital.

Congratulations and thanks for the opportunity. Sir, on the order front, what I saw, which probably you have not mentioned is the landing platform dock order. Is it that the order has now canceled the project or we are not qualified for it? That's the reason why we are not highlighting that particular order?

Thank you, Mr. Harshit. There has been a lot of talk going on. I actually -- on one of the investor con calls I had mentioned about this, but it has been going on for quite a long time. That's why I said to pull it off my, let us say, subset. Otherwise, this is a project which has been in the horizon for a very long time. As far as I can remember, it is more than 5 to 7 years, the discussions have taken place. And even at this moment, there is no clarity as to when the AoN would be accorded or when the RFP would convert. That's the reason why I did not mention about it.

Okay. Fair enough. On P-17 B, which you had mentioned. So the similar thing will also happen in that the way the NGC order is going to be placed as in one -- sorry, NGD order is going to be placed, that is once your P-17 Alpha will get delivered, then P-17 Beta will be taken into account in terms of ordering? Or is it that P-17 Beta can be ordered before that as well?

See, as per the current delivery schedule, the P-17 Alpha project is expected to be concluded by FY '26 -- sorry, FY '27, that is mid of -- calendar year -- August '26 I think. So the project would get completed. Even if the process of AoN and the subsequent formalities start now, it will take that kind of time. What I'm trying to convey is that the construction of these ships automatically would commence only after this project is completed.

But the ordering -- when would the ordering happen, sir, according to you? Will it be '25 that we will see the RFP coming out and your -- you will be bidding for it? Or it could happen post '27?

At this moment, there is no clarity on that. All that is known is that there is a requirement for the Indian Navy for another 7 ships of the same class with minor tweaking of the specifications and maybe whatever is the latest weapon system that would come in. But there is no clarity with respect to the time lines. The requirement very much exists. It has been an acknowledged requirement, but the time lines are still not known.

Fair enough, sir. So in this regard, previously, it was mentioned that FY '25, '26 would be the best of the year. But then going up to '27, since a lot of this big ticket or high-value orders, which are not right now in the clear stage of when it will come on board, when the tender will happen and the awarding will happen, do you think '27, we may see a sharp decline in terms of revenue as most of your chunky orders will get executed and revenue booking will happen?

See, we have the NGOPV project still going on during that time, plus the new order, which is, of course, just about INR 840 crores, the oceanographic research vessel, which were confirmed orders that we have in our hand as of now. This is exactly the reason why we are moving aggressively for other avenues of business group that is with respect to commercial shipbuilding, exports and so on. So I don't see any major dip in the revenue from operations during these years because, see, we are only in '23 now -- FY '23 now. We still got '24, '25 year -- we are in FY '24, so '25, '26, '27 to go. Definitely, we expect orders at least next year or next to next year, which will mature into revenue generation in FY '27. So I don't see any major dip, I don't think so. I mean we should not be really concerned about dip during FY '27 or '28 at this juncture.

Understood, sir. And so what brought GRSE to get into autonomous vehicle, anything if you can highlight was that either driven by DRDO, was it that you guys figured out that this is a vacuum piece and we could be the one who could be the starting company to get into this? It would be helpful. And on the commercial shipbuilding part, if you can share something in terms of size, in terms of orders which you look at, not just from 1 year perspective, but in terms of opportunity size, that would be of great help because we probably are looking to build up this piece. Any color on this would be helpful.

Okay. And you asked two questions. In fact, one is regarding the autonomous platforms. What are the initiatives that we have taken? And second, on the commercial vessels. As far as autonomous platforms are concerned, I had mentioned during the -- in my introductory address that we are fully seized of the requirements of both -- of the armed forces, both marine arms, that is, the Coast Guard and the Navy and also the Army interestingly and the DRDO. So the requirement is known. And at this denture, in affirmation, we are still in a developmental stage with respect to autonomous platforms. Most of our autonomous platforms be it surface, subsurface or even drones are imported at this juncture. What we had decided was this was an opportunity -- this is an area where huge opportunity exists in future. So we started with the basics that is we went to start-ups and MSME -- Indian start-ups and MSMEs with huge potential, but they have capacity constraints. So through a process, we have identified capable start-ups, both in terms of autonomous underwater vehicles, which is successfully proved. The prototype has been tested satisfactorily. Both the Navy and the DRDO have come out with RFPs for these vessels. At this juncture, they are all very, very -- the order value maybe very, very moderate, but we expect potential in this. Coming to the surface vessel. We have tested and proved unmanned surface vessel. And for the same platform, same design, we have already got an order from the DRDO. So both from the research and development wing of the armed forces that is DRDO and from the combat forces, we expect orders. The marine drones, another interesting segment. Here, we have not yet developed the product fully. It is still in trial phase. We expect this also to get developed maybe in another 3 to 4 months. Again, the partnerships with the start-up. The advantage of doing this collaboration with the start-up is that the niche product and its IPR rests within India. There is market potential in this. This is coming to the autonomous vessels. Another area which we are focusing is on the green energy field, which a breakthrough has been made. We are the only second Indian shipper, of course, Cochin Shipyard has made ahead-way earlier with the KMRL Kerala. Now we have -- our product is almost ready. In the next 2 months, we'll be delivering next generation electric ferry to the Government of West Bengal. Here, the potential is huge. If the government policies materialize in the coming 3 to 5 years, almost all the platforms which are used in -- for inland water transportation could get reengined or the new platforms are inducted into this area would be green energy platforms. Coming to commercial vessels. We have recently delivered a commercial vessel to the Government of Guyana. That is the first vessel that we delivered after a long gap because we have taken a break from commercial shipbuilding, but we have tested our capability and successfully delivered one vessel to Guyana ahead of schedule. This has given us the confidence to go in for more and more opportunities, pursuing more and more opportunities in this field. We have targeted certain countries where -- who have shown interest in India, be it the Scandinavian countries and some of the Middle East countries. And here, at this juncture, I can only state that things are moving in the right direction. Several projects are under negotiation stage and we will be able to provide clarity on this maybe in the next call or the next to next call. Hopefully, by that time some of the orders could fructify. Thank you.

What would be the size of the Kochi Metro for tenders which you are participating in?

It's a 15-platform order. This could be to the tune of around INR 150 crores to INR 180 crores.

Okay. Okay. Understood, sir. Okay. And sir, last question on the diesel engine. Apart from Rolls Royce, there are a couple of other companies who also are supplying diesel engine to the Indian Navy. So do you think the competition on this indigenous type of a green energy vessel will also rise? How do you see this thing playing out?

Okay. Marine diesel engines has been an area where in as a nation, imports was being resorted to. So what -- within the marine diesel engines, there are 2 types of engines. One is the low power that is low to medium power engines, which is called high-speed marine diesel engine. And the second segment is the high-power, but low speed engines. Now what we have collaborated with Rolls Royce is for high-speed and low-power engines. And these are the types of engines which are normally used in fast patrol vessels, the waterjet FACs, the inshore patrol vessels and so on. The numbers -- the volumes are very, very high. So in this, we don't expect much competition. Since you said there are other manufacturers also, most of them are global OEMs like the Caterpillar, MAN or the Rolls Royce or Yanmar. Their product strength is on the high-powered, low-speed engines. So there will not be any clash of requirements. So what we have collaborated with Rolls Royce is for -- I would like to reiterate, that is for high-speed, low-power engines, which if -- once the collaboration is successful, would give a huge potential with both the Navy and the Coast Guard.

I'm sorry, just lastly, so you would be manufacturing this in India or it would be assembled in India? Or what would be your role in terms of this marine diesel engine, sir?

Okay. We have a diesel engine -- dedicated diesel engine plant at Ranchi, Jharkhand. And we have been -- we have -- we had and have an association -- already existing with MTU Rolls Royce for assembly of engines. Now what we are talking about now is translate -- transiting from this assembly to manufacturing. It is actually the term used through a license agreement coproduction. A certain percentage of the entire -- the components of marine diesel engine will be manufactured in India. What we are targeting is that it is in line with the government mandatory indigenization plus 50% indigenization to start with.

Our next question is from the line of Viraj Mithani from Jupiter Financial.

Congratulations on the good numbers, sir. Sir my question is, as this order book peaks out, would the margins be affected or there's been a higher or lower trajectory?

Very interesting question. Every time I get this question, I was wondering why it had not come so far which -- margins have been consistent in my views. Ours is not a routine industry, ours is a highly specialized industry wherein the margins are reasonable good. Any PAT margin above 7.5 is considered healthy in shipbuilding. As I've stated, we have been maintaining a profit margin that is the PAT margin plus 8% this year -- under, sorry, 8.99%, we will maintain this during our -- the coming months and years.

And sir, any update on the repair business? Any color on that? We were still planning to exist?

Ship repair currently, as I had mentioned earlier, we have taken over 3 docks from the Kolkata Port Trust, 3 medium-sized docks, all of them, almost 100% occupancy. And currently, we are executing refits -- 6 refits of Coast Guard ships plus we keep getting commercial ship refits too. We are at a modest position at this moment. Our order book stands just about INR 80 crores in this segment. As I had mentioned earlier, we were just pulsing the system. We expect this to increase in the coming years because more and more refits will come considering the fleet strength of Coast Guard and the Navy. We have not yet got a break into the Naval repair yet because they've got captive repair facilities. We are pulsing the system and having experienced the success so far, we intend to ramp up the ship repair vertical in the coming years. Right now, it is at a modest INR 80 crores order book outstanding as of now.

My last question is, sir, about this green ferry, how -- what kind of market potential do you see? If you could give you some color on that in terms of growth margins in future to come.

Yes. Green ferry or any green vessel, the potential is huge. As with every other nation, even our country is also going in for zero emission vessels. This is the process which has already commenced. The first step would be to meet the requirements of the state governments to meet their inland motor transportation requirements. And even in both Kerala and West Bengal have evinced strong interest in this. Kerala has gone ahead with green ferries in a big way. I had mentioned that there's another RFP, which is live, 15 more vessels for Kerala. In a nutshell, this is an area where opportunity exists, a huge opportunity. The ports would ultimately resort to green tugs, all the barges which move in our rivers and inland motors would be green. The aim would be to eliminate the conventional powered platforms. So at this juncture, I can only state that's huge, H-U-G-E, huge potentially exist. Quantification at this stage may not be possible. And just to put things in perspective, some of the nations like Norway has already given a dictum that they must grow 100% green by 2030. So that is the kind of impetus that is there. Opportunity exists and we didn't want to miss out the first movers advantage. That's why we have taken this order from the Government of West Bengal.

Ladies and gentlemen, that was the last question of our question-and-answer session. I would now like to hand the conference over to the management for closing comments.

Thank you, investors, for listening patiently to the introductory address, and I hope to have answered almost all your queries. And in case of any further query, please contact us -- feel free to contact us. We will ensure that all your queries are addressed. We also thank Concept Investor Relations for coordinating this conference call. And we are -- we have started the financial year with a strong, robust Q1. We have maintained the tempo during Q2 also and we intend maintaining this tempo in the coming quarters too. Wish you all a belated Durga Pooja and Diwali. Thank you.

On behalf of Garden Reach Shipbuilders & Engineers Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.