Garden Reach Shipbuilders & Engineers Limited (GRSE) Q3 FY2026 Earnings Call Transcript & Summary

Good evening, everyone. I'm Gaurav Girdhar from Concept Investor Relations. I welcome you all to the Analyst Meet of Garden Reach Shipbuilders & Engineers Limited to discuss its Q3 and 9-month FY '26 results. We have with us today, Commodore P.R. Hari, Indian Navy retired, Chairman and Managing Director; Shri Niranjan Mukund Bhalerao, Director, Finance and Chief Financial Officer; and Shri Sandeep Mahapatra, Company Secretary and Compliance Officer. Please note, this conference is being recorded. I would now like to hand over the floor to Commodore P.R. Hari, sir, to give his opening remarks. Sir, over to you. Thank you.

Thank you, Gaurav. Once again, good afternoon, ladies and gentlemen. It is indeed a pleasure to be here with you today, and I eagerly look forward to this particular meeting, which we have once in a year when we interact with you all in person. And thank you all for attending this conference to discuss our financial results of your company for the quarter ending 31st December 2025 and the 9 months ending 31st December. And also to provide you a glimpse of the future outlook. As I normally do, I shall first touch upon the financial highlights, then provide you all an overview of the physical performance that has translated into this financial performance, then touch upon the current order book status and also an update on the projects that we are currently executing and then give you a glimpse again of the future outlook and also our expansion plans. Coming to the financial performance, yes, Q3 has been a good quarter for all of us, and the results have been encouraging. Revenue from operations year-on-year has gone up from INR 1,271 crores to INR 1,896 crores that is registering a growth of 49%. And so have all the financial parameters coming down to the bottom line. Our profit after tax has moved up from INR 98 crores during the last that is Q3 FY '25 to INR 171 crores during the current -- recently concluded quarter. That is registering a growth of 74%. If you take the 9-month period, I'll just put things in perspective, our revenue from operations so far has been INR 4,883 crores. And if you compare the FY '25 revenue from operations was INR 5,076 crores. We almost touched that figure in a 9 months span. So on the whole, Q3 and the 9-month period has been interesting, good. And I can assure you that better times are yet to come. This financial performance is, of course, obviously the result of a strong physical performance. And again, to place things in the right perspective, we have delivered 5 major platforms that is ships during the last 9 months. That is the first 9 months of the financial year. And that is translating almost a ship every 2 months. These include 1 frigate P-17 Alpha, 2 anti-submarine -- 3 anti-submarine shallow water crafts and 1 survey vessel. And the way the projects are progressing, we intend delivering 3 more major vessels in the next 3 months. All the major projects are progressing satisfactorily, I should say. I will just give you a glimpse of the ongoing projects. And before that, I'll touch upon the order book. Our order book position as of 31st December is INR 18,482 crores. And interestingly, this is the first time we are dipping below INR 20,000 crores, which is a good news for you, which means our execution rate has picked up. I've been attending investors meet. This is the 13th quarter since 2022. I think we did the investors meet, of course, in virtual mode sometime in April 2022. So this is the 13th quarter on a trot where we are showing year-on-year growth. Now I mentioned the order book position is INR 18,482 crores, and this comprised of 10 projects consisting of 42 platforms. And these include 4 projects of the Indian Navy, the P-17 Alpha projects. We have delivered 1 of the 3 ships and 2 more ships are under construction. The second ship has almost touched 93% physical progress, and we intend delivering the ship in the next 3 months. That is one of the ships which I mentioned that we'll be delivering in the next 3 months. The third ship of this project is on track. And this calendar year, we'll be delivering the third ship. Coming to the next project, there is a survey vessel large project. It's a 4-ship project. Three ships have already been delivered, and the fourth ship has touched almost 95% physical construction, in a month, that is next month, March, we'll be delivering the third (sic) [ fourth ] ship and closing the project. Coming to the anti-submarine shallow water craft project. It is an 8-ship project, 3 ships have already been delivered. And the fourth ship almost touched about 92%, 93%. And in the next 3 months, in May -- April, May, we'll be delivering that platform. The other 4 ships of the project are on track, and we intend closing this contract during the next financial year. Coming to the fourth Naval project, that is a next-generation oceangoing patrol vessel project. It is moving on track. The deliveries will start from 2027, that is financial year '27, '28 and culminate -- it's a 4-ship project and culminate in financial year '28, '29. So far, the progress of the project has been good with the first 2 ships having achieved almost 60% progress and the next 2, about 45% to 48% progress. Now in addition to these defense platforms, we are also executing 1 project for the government of West Bengal. It's a small project, but a very interesting project that is for hybrid ferries. It's a 13-vessel project and 2 different sizes, 7 ships of 100 passenger and 6 ships of 200 passenger. We will start commencing the delivery during this financial year, that means -- the coming financial year, with the first 2 vessels will be delivered during the first quarter. And that project will be closed during the first half of FY '28. We are also doing 3 different projects of research vessels, 1, an ocean research vessel for the Ministry of Earth Sciences, project moving on track. Around 20% physical construction has been achieved. The targeted -- there is a -- contractual delivery is during the financial year '27, '28, well on track. An acoustic research ship for the Ministry of Defense, that is a DRDO, Kochi-based lab of theirs, project on track. The production has already commenced. The delivery is during the financial year, again, '27-'28 and 2 coastal research vessels for the geological survey of India that comes into the Ministry of Mines interestingly. And this project will be completed during calendar year 2027. That means the first half of FY '28, we'll close this project. In addition to that, we are also doing 2 export projects. One, a small project for the government of Bangladesh. It's 100-meter cube dredger, on track so far. We're crossing our fingers, so far, there have been no red flags. The stage payments are coming in. So nothing for you to worry as of now. This project will be completed during the first half of the -- no, the third quarter of financial year '27. And we are also executing 12 -- project for 12 multipurpose vessels for a German client. I think last time when we met, we had a contract of 4 of these vessels, then after seeing our performance and inspecting our site and the progress, they increased to 8. And as of now, it has been increased to 12. So this 12-ship project is in hand. We have done the keeling of 2 of these vessels and the third ship keeling is planned later this month, project on track. The delivery of the last of these vessels, the deliveries will commence during the second quarter of financial year '27 and will stretch to financial year '29. So it's a slightly long-drawn project. This is the status of the ongoing projects that we are executing. And to give you a glimpse of what are the orders, what we expect and what is likely to come out in the near future. We -- as you are aware, last time, again, when we met, I had mentioned that we would be bidding in such a fashion as to win the next-generation corvette order. Yes, we have won it. We have become the L1, and it's a big project. The price -- it's a 5-ship project amounting to approximately INR 33,000 crores. And the price negotiations have been completed, and the contract negotiations are in final stages. It requires certain approvals. But we are confident of this contract getting concluded during the current financial year, which means next month, we intend closing this contract -- signing the contract with the Indian Navy. They also indicated that the approval process is well on track, which means we are hopeful and confident of ending the current financial year with an order book around INR 50,000 crores. In addition to -- this is what is assured. In addition to these orders, what we are executing and what is on the anvil, the Navy has already obtained -- Navy and Coast Guard have already obtained approval of necessity from the Defense Acquisition Council for 7 projects. These include 3 big-ticket projects. One is the P-17 Bravo project. It's a 7-ship project, approximately INR 70,000 crores is the AON amount. It could be around that, maybe marginally higher, again, to be split between 2 shipyards, then the LPD, landing platform dock, it's again, a big project, attractive project, which has been lingering for a very long time. So the AON has finally been accorded, and the AON value could be to the tune of around INR 35,000 crores. And the third big project is a 12-ship mine countermeasure vessel project, 8 and 2 -- 8 and 4, 8 ships for the L1 shipyard, 4 ships for the L2 shipyard. This -- the AON value is around INR 32,000 crores. So in addition to these, there are other smaller projects, but all put together for the projects where AON has already been accorded and where we expect the RFPs to come out from now, which means something could come out in the next month onwards for the next 12 months is approximately INR 155,000 crores. In addition to -- of course, of course, these are all on -- none of them are on nomination basis. These are all on competitive bidding, but the pool of competitors is limited. So we have confidence in winning at least 20% of these orders. Keeping the P-17 Bravo project, what I mentioned, the biggest ticket item among these, there, we stand an edge because we are already executing the P-17 Alpha project. We have the design. We know the equipment manufacturers. We know exactly how it functions. So like what I assured you last year when we met physically, so this year, my KRA is to win the P-17 Bravo project. So let us see. And this is only for the defense segment. Now on the nondefense segment, as you are aware, the government has already promulgated publicized a slew of initiatives. And one important thing for all of us is that for the first time, they've aggregated the demands of the government entities, that is ONGC and such agencies. That demand alone is coming to -- is available in open media. It's coming to 207 platforms starting from smaller sized platform support vessels to VLGCs and beyond. So a conservative -- very conservative value of these projects could be plus INR 1 lakh crores. Naturally, they will come out in a staggered fashion. Two tenders are already out and 1 EOI is already out, 2 tenders for platform support vessels and MR tankers are live as of now. And one expression of interest for the VLGC is also live. So this is moving. But of course, the pace at which the other orders, what I mentioned on the defense segment perhaps could be faster. And here, the competition pool is bigger, so we are all on the same page. So all in all, the defense segment and the non-defense segment put together in the next -- if I'm adding the nondefense segment in the next 12 to 18 months, we have around INR 2.5 lakh crores plus in the -- on the table for us to get a substantial chunk. Now having said this, now the demand is good, but what about our capacity to handle this? We are good to handle the defense projects because we have been brought up, groomed, nurtured in that fashion. Now that the market has opened up for the nondefense segment, especially for large platforms, we -- I repeat, we had a constraint. We still have a limit. We have deconflicted the situation. The constraint has become lesser. And with this in mind, what we have done is we have systematically increased our production capacity. Two years back, we had a capacity to construct 24 platforms concurrently. Today, that is in 2025, we increased it to 28 platforms, that is big and small and medium-sized put together. And with the ongoing modernization that we are executing, by the end of this calendar year, we intend enhancing this to 32 ships. But this also will not be adequate to meet the demand that is existing. So within our geographical present confines, we will not be able to meet this requirement. And it is with this intent that we intend moving -- growing out of Kolkata first and thereafter out of West Bengal. So just to give you a glimpse, some of them are in liquid terms, some of them already action has been taken. We are going in for brownfield as well as greenfield expansion. As far as brownfield expansion, 3 sites we have taken over from the Syama Prasad Mookerjee Port in addition to what we had earlier. Of them, 2 of these sites, we have physically started the modernization activities to get them to production level readiness. And the third site, the negotiations are in final stages, and we intend -- we already engaged a consultant for the DPR. So this brownfield expansion, we are good to go. With 2 of these facilities, we'll be able to commence production by end of the calendar year. And the third facility, which is a bigger facility, we expect the production to commence there after the modernization efforts are completed in a span of 2 years. This is what we are planning within West Bengal, but even then -- even that is not good enough. So we have moved ahead with the finalization of sites, 2 sites in Gujarat, 1 in Kandla and one near Bhavnagar. The -- one is with the government entity. We are partnering a government entity for the Kandla site and a private entity for the Bhavnagar site. The -- for the private entity, we already engaged a consultant for finalizing the DPR. And for the second that is with the government entity, they have engaged a consultant already. So this is where it stands. But these 2 facilities will take a finite time for getting production ready. Our conservative estimate is 3 years from now. And this should meet the demand for large-sized platforms, both in India and for abroad because we are getting a lot of queries from abroad. We are not able to meet as of now. So our long-term plan is to get these facilities up and about so that the demand which is coming from within India definitely and what is coming from abroad, we can meet. In addition, what we are currently doing to offset the capacity constraint is what we started about 5 years back or 6 years back on a public-private partnership model where we wanted to test the system. So at that point of time, a private shipyard had spare capacity, and we had excess load. So we outsourced part construction of these vessels. And believe me, that model has been successful, and we have been able to -- of the 7 platforms, which we had offloaded in partial or 75% construction, we have been able to take out 5 of them. In addition, this is a big player, a private player. And in addition, we are also engaged business relationship with a smaller shipyard and 2 of the ships we have taken out from there. So what we are doing currently to offset the capacity constraint in terms of building certain types of vessels, we are following a PPP model. So I think I've covered the financial performance. I've just given you a glimpse then the status of the order book -- order book position and the status of the orders, what is expected and what is our plan to address the demand -- huge demand that is existing. As I mentioned, I just sum up my interaction, not interaction actually, my conveying the address or whatever you can call it, that the year so far has been good, especially the last quarter. But as I mentioned, the better times are yet to come. Thank you. I'm open for questions, all your queries.

Thank you, sir. We'll now open for the question-and-answer session. [Operator Instructions].

One -- may I take a second, what Director Finance was mentioning that I missed talking about the initiatives which the government has promulgated already and some of them are active live as of now, the various schemes for incentivizing or revitalizing the shipbuilding segment. So the total financial outlay what they have provided is about INR 69,725 crores divided into 2, 3 pillars. The first is about the shipbuilding financial assistance, which is a very attractive scheme where certain kind of platforms, which are constructed in India based on the type of platforms get incentivized, subsidy ranging from 15% to 30%. It's a very, very attractive scheme. And that amount, what has been earmarked for this is INR 24,736 crores. In addition to that, the government has also promulgated an attractive scheme. Again, it's a very interesting scheme. It is called the shipbuilding and shipbreaking credit note. The funds allocated for that is INR 4,001 crores. And again, what is interesting is that if you -- if any of the shipowners break a ship in India, and he gets a credit of 40% of the amount realized from the breakage. And this gets parked, transferable. And when the company owner builds a ship in an Indian shipyard, he can utilize this credit. So one way, it is very good for the shipbuilding ecosystem that whoever is breaking -- because people are looking at India as a ship breaking hub also. So we are coaxing them to come to India and binding them in so that they avail this credit facility. And in addition to this, they also come out with a INR 25,000 crore scheme for Maritime development fund. And this scheme caters for brownfield expansion, wherein x percent, a certain percentage of the investment made towards brownfield expansion is subsidized by the government. And also around INR 5,000 crores has been earmarked for an interest incentivization policy. So here, the interest is unfortunately very, very high, and none of the shipowners are able to afford that kind of interest. So a 3% interest subsidy has been provided. This scheme is also active. And the last, of course, is development of maritime clusters. So there, again, the third, I think I covered INR 25,000 plus INR 24,000 crores. So whatever remaining out of that INR 69,000 has been earmarked. If my memory is right, it comes to about INR 29,000, I think. So that has been earmarked for -- INR 19,000 crores, INR 19,989 crores has been earmarked for development of shipbuilding clusters where greenfield facilities once you set up, you get up to 50% subsidy. So these schemes are very, very interesting. And we -- including the activities, which I had mentioned that in 2 areas, we have commenced the brownfield expansion, we will definitely be leveraging these schemes of the government, including the shipbuilding financials. Thank you. I'm open for your questions, please.

So my first question is on Corvettes. So if you receive this order by this financial year, what is your execution cycle? And second question on Bravo, at what stage the talks has been came?

Thank you. The next-generation corvettes, yes, if we -- I mean if we conclude the contract during the current financial year, the first phase is the preproduction phase where the design activities are progressing, based on the design activities, the equipment procurement actions commence. But as far as you are concerned, the revenue accrual will commence 2 years down the line, which means if FY '26 end we are concluding the contract, FY '28 end, that means the fourth quarter of FY '28 we can expect revenue accrual. Is that what you meant to ask?

Yes.

And the second part on the P-17 Bravo, as I mentioned, the AON of the Defense Acquisition Council has already been accorded almost 6 months back. And it is moving very fast because this is a project which Navy really wants to go. And there was at a point of time, a thought process for giving a repeat order, but that did not fructify. So Navy is very keen on this project. And I expect the RFP to come out, let us say, in April. If April, the RFP -- I'll give you further -- RFP is expected to come out in April, then the bid submission time and all. Akin to NGC, we expect the contract for P-17 Bravo to be signed maybe February, March 2027. This is where it stands.

Sir, first of all, thanks for meeting as usual, every year and as usual, increasing the order except this year. Sir, sometime back, we had an MOU with Swan Defense. And we don't know anything about what is the -- so kindly elaborate on that Swan Defense. And recently, a few days back, you have tied up with Hindustan Shipyard. So what is the position for these 2 entities?

So you said except this time order book, but I can assure you by end of the financial year, we'll surpass...

Cumulative of all last 3 years.

Last 3 years, we'll be able to touch that. Having said that, yes, we have a live MOU with Swan Defense. The intent of this MOU was for bidding and executing large platforms, the platforms which we cannot handle at our premises. So we are in discussion with a couple of foreign owners for vessels above 250 meters length. Like as you fully would appreciate, some of these negotiations take as long as 1 year, the contract discussions, some tender conditions, not tender, the contractual conditions, something which we don't agree. We are in discussions with the contract -- I mean, the MOU is very much live. We expect this to see light of the day, I mean, translating into an order in the next financial year. So it is live. Coming to HSL, we have signed a consortium agreement with them, an MOU with them very recently. This is with an intent to put our hat in the ring for the LPD project because we, as GRSE, purely because of the dock size, we would not have been able to bid for that. So with this MOU, we'll be able to bid because you may be aware from the media reports that Swan had an MOU signed with MDL for this project. So the moment we realized that we didn't want to miss the bus. So we got hold of HSL. And with HSL, we have signed an MOU. It's a good, let us say, way ahead for both the shipyards, our expertise and their infrastructure availability. It will benefit both the shipyards for the LPD project. That is the intent why we went in for that.

And sir, regarding the platforms, we are moving from 24 platforms to about 32 within next 1 year. Sir, any outlook for next 3 years where we would like to be to fructify all the orders?

Okay, sir. As far as these platforms are concerned, yes, by the end of this calendar year, we'll be able to get it to 32 ships concurrent construction within our own premises. And I had mentioned in passing that 2 of the facilities, brownfield facilities in Kolkata, we already started the revitalization process. We expect that to be put to operation from end of this year -- calendar year. So I'm keeping a conservative figure. As far as the shipbuilding capacity is concerned, we should be able to get to around 35 ships by 2026 -- end of 2026. That means this year by end. But the order book, I think -- did you want to know about this or the order book?

No, platform and order book.

Order book. So now this year, if we are ending with INR 50,000 crores and with next year likely to be -- next financial likely to be one of our peak years with respect to revenue, you consider drop plus the P-17 Bravo. P-17 Bravo also, I would like to go conservative at this stage that hypothetically, if GRSE becomes a L2 shipyard, the order book -- order value is likely to be to the tune of around INR 30,000 crores. So if things gone well, we would like to look at ending FY '27 with an order book plus around INR 70,000 crores. I would like to go only up to there, sir, then we'll see. Next year, you can ask me, sir.

And sir, about -- what about margins? Orders are not at the cost of margin, I assume.

None of these -- what I just discussed, none of them, yes, we have taken a few orders at very low margins. That is for sustenance and entry. Like I'll give you an example. There was a point of time when we are doing -- we were not sure about the NGC project. So we had to take a couple of orders to sustain. So we have taken them at low margins. The first -- I don't know whether you remember or not, the first ferry project that we took, the electric ferry project that we took, very small project, but we took it at -- actually, we subsidized the project. It was to make an entry. But right now, having consolidated our position in both the defense shipbuilding as well as to an extent in commercial shipbuilding, margins will be let us say, healthy. It will not be at the cost of -- order book enhancement will not be at the cost of margins. I think that answers your question.

And sir, regarding next 2 years, financial year '27, then '28 is landmark INR 10,000 crores executable, '28, INR 10,000 crores.

So this year, we -- okay, I'll put it. Last 5 years, we have been able to provide a CAGR of around 25% plus. This year, I think in my opening statement, I had mentioned that in 9 months, we have touched INR 4,883 crores. So -- and this quarter is also going to be healthy. So with that, again, we'll be able to provide a CAGR between 25% to 30% in this financial year. Next financial year, that is FY '27 is going to be a peak year because that is when one P-17 Alpha would have just come out now. I mean maybe by April means we'll get a substantial amount there. But the last one will definitely come out during FY '27. So '27 is going to be the peak year. I'm putting in a roundabout fashion [indiscernible].

Could you please give us the order book breakup in terms of the ship wise order book breakup?

Yes. I mentioned our order book -- total order book is at INR 18,482 crores. And of this, still P-17 Alpha takes the major chunk, it's around 46% at INR 8,236 crores; survey vessel large, INR 343 crores; anti-submarine shallow watercraft INR 2,559 crores, the OPV project, INR 3,136 crores. So from the Defense segment, it is INR 14,276 crores. That comes to around 77% of our total order book. The nondefense segment, the ocean research vessel, acoustic research ship, the coastal research ship and the West Bengal ferries, put together, it comes to about INR 900 crores, INR 897 crores. The export, both the projects put together come to around INR 1,481 crores. So the defense segment is contributing about 77%. The non-defense segment, around 18% and the balance 5% is from the other smaller verticals like the portable steel bridges, the diesel engine plant, the naval surface guns as well as the ship repair. Ship repair, we started with point-something percentage when we started, now we have crossed 1%, and it will keep increasing because we were initially testing waters with ship repairs, but now we are good to go. So this is our order book breakdown.

Sir, just an added question here. In the -- just in the order book, which you mentioned at the year-end that you want to reach INR 70,000 crores, are you assuming...

50, 50, this year end 50.

But next year will be...

Next year is based on an assumption that we are getting the P-17 Bravo, at least as the L2 shipyard. And if we get that, then that is a figure which would automatically arrive at.

Right. But in history, sir, we haven't seen any tender in shipping, which has come out and got executed as in got awarded in a year's time frame. Look at the NGC order. So is that something that you can tell us that progress has been very good or it's an extension of the earlier order, so the time lines are much lesser?

Okay, I'll explain. See, there was -- you're absolutely right. There was a time when the tender used to come, then it used to take 1.5 years. We ourselves have got -- we have also experienced similar like the OPV tender. From the time L1 declaration to contracts and it took 1 year. We got declined somewhere 2022, '23, we said. But you see the P-17 Alpha project -- sorry, NGC project. The tender was out in August. The L1 was declared in October, and now we are almost good to go. So definitely, there is an improvement because there has been a total change in the way -- I mean at least my Ministry is pushing the cases. So again, I would like to reiterate, if the RFP comes out in April 2026, then the contract signing would happen in the next financial year.

Okay, sir. Okay. That's a good news. And sir, third question is just on the tie-ups which you have done, one on with Swan and the other which HSL, Hindustan Shipyard. Now who will get the technology, sir? As -- we have to look at foreign companies for a tie-up for getting technology either on the commercial side or on the LPD side, so -- because who will be getting the technology. So that remains the key. You've got the depth, now you've got the capacity, but where will the technology come from?

See, as far as the medium-sized platforms or less complex platforms like what we are doing or what is being currently executed by the Indian shipyards, there is no need for a technology partner. But like Kochi is building certain hybrid vessels, they don't need a technology partner for that. My vessels, what I'm building or what MDL is building, we don't need a technology partner. We are fully good to go. But for the LPD project or the VLGC project, the VLGC EOI conditions itself stipulate that an experienced and proven VLGC manufacturers. So we got to collaborate with perhaps a Korean company who has built. So there would definitely be a need to collaborate for the design of a VLGC. And there, again, the positive aspect is that naturally, it cannot go on forever. That could be for the first project. For the next project, the Indian company, Indian shipyard, whoever is doing it will have competency. Similarly, for the LPD project because it's a complex project, there would be a need for a design partner, which we have identified together along with our partners.

Sir, Ashok from Ekalavya. Sir, we have done 2 tie-ups with Hindustan Shipyard and Swan. So are we through the requirement of next 5 years with 2 tie-up or still we are prospecting much bigger than this?

See, these tie-ups are with a specific intent. The intent of having a tie-up with Swan [indiscernible] is still active, is to handle large-sized commercial vessels, which we cannot physically handle purely because of infrastructure constraints. I mentioned that a couple of foreign projects are still in liquid form, discussions are in progress. As far as HSL is concerned, it is with an intent to qualify us and use their -- our expertise, their facilities for the LPD project. There would be a time. I had more or less stated our expansion plan, though I had not given the capacity in terms of size of dock and all this stuff. But with -- once we develop this capacity, which will take a finite amount of time, let us say, 3 years for a full-fledged operational readiness, 5 years, then we would use these partnerships only to supplement them. We may not need them because of capacity constraints. But if we get excess load, we can utilize that capacity of other shipyards. Right now, these are specific to one for Swan for last year's commercial vessels and with HSL for LPD and similar platforms.

Are we looking at still some tie-up?

At this juncture, no.

Not bigger size, no.

At this juncture, I'm talking about bigger size only. See, in India, there are shipyards, which capacity -- infrastructure capacity, one, Swan has got the biggest dry dock available. It's around 650 meters. L&T has got certain capacity, which is slightly more than us with respect to size of ships, not number of platforms. I'm only speaking about size. And of course, HSL. So we already have tie-up, one active with L&T, which we have not tapped so far, one with Swan and of course, with HSL what we mentioned.

So nothing NCLT or Bharati or something, nothing like that, NCLT, any projects.

No, no, no, because what is available in the yards, which have either undergone NCLT or which is still -- they are just not adequate to meet the expectations of the requirements. No. Absolutely no.

So first question on the capacities, which you said from 24 to 28 and 32 and by end of this CY, 35, plus the 2 capacities you said probably in Gujarat. So first question is in the -- will the Gujarat capacities will be jointly developed. And with that capacities plus 35, what would be the number of vessels we'll be able to produce? And you said 3 years, I think, for Gujarat at least?

Three years, it's a very optimistic figure. And again, for creating a shipbuilding facility, one is putting it to operation. We can start manufacturing. But for a full-fledged facility, which has got end-to-end capability, which means starting from plate cutting to ship launching to delivery, I'm talking about large-size platforms, it takes 3 to 5 years. I have gone this side of the 3 to 5 years band so that the production can commence there. So if you take a mid-path of 4 years, let us say, 4 years for both these facilities to come up, then in that case, we would be having a capacity to build around 12 ships in these facilities, large sized ships. That is the aim. Ultimate aim is large sized ship, VLGC or above, I mean, 300 meters -- around 300 meters length vessels, 12 of them between these 2 facilities, while utilizing the existing facilities for the weapon that is defense platforms and the smaller multipurpose vessels and so on. So 12 vessels is what we are targeting in these 2 facilities, large sized vessels. In a span of -- I put a band of 3 to 5 years. That's all I can say at this moment because the DPR is still not confirmed. I mean it's not at out. So we don't know the real time lines, but based on our experience, it could be between 3 to 5 years.

So in terms of pipeline, which you highlighted, 1.5 lakh for defense and about 1 lakh for nondefense, what is the number you're looking for yourself in line with the capacities you're creating? So cumulatively, what is a broad number or conversions you're looking for in the next 2, 3 years?

See, this mix of 7 projects, what I -- I don't think you mentioned the 7 projects. I just highlighted 3 of them, big ticket items. These 7 projects alone comes to INR 155,000 crores to be exact, 52.5 or something. So these comprise large platforms like P-17 Bravo, the LPD and the mine countermeasure vessels, plus smaller platforms like interceptor boats and fast interceptor boats -- FICs, fast interceptor crafts and waterjet FICs, very small platforms, maybe 50 meters, 35 meters and so on. So these can easily be handled with the existing facilities or through a partnership yard. In a nutshell, with the current capacity what we have or what we are going to have by end of this year, the projects which -- I'm only speaking about this 155,000 of defense alone, we will be able to handle if we get P-17 Alpha and around 20% only of the balance projects. Coming to the other segment, that nondefense segment, which I mentioned, approximately about INR 1 lakh plus crores, they contain large-sized platforms. For that, at this juncture, we may not be able to handle them within our premises. It is with that intent that we are getting into partnership with a couple of shipyards. When our facilities come up, let us say, in 3 to 5 years, again, around 15% because here, the pool of competitors is large. unlike defense manufacturing, here the pool of competitors, it could range from the public sector shipyards to 3 or 4 private shipyards. So considering that, I'm keeping a very conservative figure of around 15% of these orders at this stage directly and working through the collaboration with others.

Sure. So you mentioned about the outsourcing models. I just wanted to understand in terms of capability building for you and the volumes of orders you're looking for, what is the indigenous component now? And with the new book massive orders coming in, will it require some imports or -- you can highlight on all this aspect in terms of capability building for the upcoming book.

See, as shipbuilders, we are primarily platform integrators. The customer, be it a private customer, domestic, abroad or a defense customer, in 90% of the cases, 95% of the cases, they indicate -- they say, I need a platform, let us say, a frigate or if you go to the commercial shipbuilding segment, they say a multipurpose vessel. They indicate the equipment. To the extent private players, they say, I want so and so engine from so and so manufacturer. In case of a defense system, they say, I want so and so engine from 1, 2, 3 manufacturers, 1 of the 3 manufacturers, a weapon system from so and so, so and so. Therefore, as platform integrators, our responsibility is to get the best commercially beneficial for us and also meeting the customer requirements, one. But the government trust is very much on indigenization. So we play a major role in promoting Indian entities who are into indigenous manufacturing. Having said all this, the indigenous content of the 3 projects that we completed in the last 5 years, completed, completed means done and dusted. It's plus 85%. The balance 15% so far is coming -- it is comprising mostly of the propulsion package where India still does not have the maturity yet -- technological maturity yet to do a fully indigenously developed marine diesel engine, marine gas turbine and weapon systems to an extent. So this is where that 15% gap is coming. Now again, on a positive note, the government is very serious about indigenization. Already, you must be aware of the schemes called MAKE-I, MAKE-II, MAKE-III and so on. So MAKE-I means is a government-funded project to incentivize the indigenous manufacturers. The propulsion engines are getting indigenous. But we, as a nation must have patience because it takes a finite amount. It doesn't come like a switch on. It will take 3 to 5 years for a product to get developed. When that gets developed, naturally, the indigenous content will increase. As far as weapon systems are concerned, there is a tremendous improvement in the indigenous content in the weapon systems. I mean I'll just give you an example, like when we got into this naval surface guns, we got into the naval surface gun project about 1.5 years back. We had to collaborate with the foreign partner that is to make entry into the market. and an Indian firm, around 10 Indian companies are involved in the component manufacturing as of now. It is a success, 60% plus indigenization has been achieved. But we had the patience and so had our customer that the Navy had the patience. So that's where we stand today.

Sir, lastly, on the recently released draft DAP 2026, what is your understanding in terms of implication for GRSE and the shipbuilding industry versus DAP 2020?

DAP 2026 as it would be called, yes, they have -- after a lot of consultative discussions over the last 1 year, finally, the draft is now open for all of us. It is -- they've sought comments from all of us, including the general public. And it focuses definitely -- I'm just carrying this point what you mentioned on indigenization, indigenization and the indigenization incentivization would be a major part of this DAP and a little more flexibility for public-private industry entry into defense manufacturing and also for public-private partnership. So let us see how it finally pans out because now that it is open for everybody to comment. So India being a democratic country, it will take a finite time for it to get finalized.

Vikas from i-SEC. Sir, just one question. Do we run a risk of commodity price inflation eating up our margins?

Commodity price increase has got minimal impact on our margins because in our case, in a project, if you take 100% as a project cost, around 65% come out of equipment. Most of this equipment being customer nominated or in a pool of customer-nominated band. So fluctuations really don't affect because they all would have been finalized at the commencement of the contract. Then comes the yard material like steel. So in case of steel, which is a major component of our shipbuilding industry, so we have tie-ups with most of the major steel manufacturers, including MOUs with the biggest manufacturer in India, SAIL. So the impact is minimal. Yes, there is an impact, but the impact is very minimal and logically it should not have any impact on the margins.

Sir, my question is, a few months ago, we disclosed an MOU with Andhra Pradesh Maritime Board for another greenfield facility. So can you please help...

We are fishing. We were fishing. What I meant by the thing we were fishing at the point of time, we were touching base with Gujarat. We were touching base with Andhra Pradesh. So finally, we honed -- the first action was to show our intent. That's why we concluded the serious only to show intent, yes, we are there. Then we backtracked because we found it was not required, having identified 2 other locations. That is the reason.

Sir, my question is, we spoke about that FY '27 could likely be a peak revenue recognition year for us. So what are we looking at? So do we think that FY '28 would like be a plateau year and then growth can continue when NGC comes in as to how we can look or there are chances that the revenue can come down a little bit before we start accelerating again?

It's an interesting question. Yes, with the 27 being a good year, a peak year. See, when I had -- somebody had asked about the order book balance position. So like, for example, P-17 Alpha, I had mentioned that the order book balance is INR 8,200-odd crores. In this INR 8,200-odd crores, x percentage, a small percentage, not so small, it's 10-plus percentages for the base and depot spares, which are required for a sustenance of the ship through the life cycle. So -- and similar figure is factored in every project. So when we complete a project, the revenue accrual would be limited to the amount balance order book minus the base and depot. Base and depot runs independently. Independently, as in we have concluded contracts with most of them, but these deliveries could be after the delivery is completed, which means the revenue accrual from a particular project would continue beyond the delivery date. That will give us some cushion in FY '28. Plus all these platforms like -- that's why we decided to take one-off projects. We had no reason because when we had the big projects in hand, it is with a strategic intent that we went in for one-off project. they're technically very challenging, and it gives us a lot of national hype, by the way, these research vessels. Why we took them is with an intent that all these guys will come for delivery during FY '28. Most of them are coming up for delivery. Multipurpose vessels, a series of them will get delivered, at least 4 of them should -- 3 of them should get delivered there. And yes, we need to pull back the revenue accrual of NGC. What -- there was a question which was asked to me, when will the NGC start giving us revenue? What stops us from moving faster? So we will try and avoid a plateauing out in '27, but FY '28. That is the intent of the management. Maybe I'll be able to give you a better clarity on this next time when we meet. I think that would be the right time.

Sure, sir. Sir, second question is on our exports. So considering the geopolitical situation evolving now, and we are looking at a lot more procurement happening globally. So what kind of opportunities that you foresee coming in and some opportunities that may currently be under discussion or in pipeline, if you can throw some light on that?

See, international business, you can just segregate into 2 buckets. One is defense and one is nondefense. In defense, it is mostly government driven. It will be either through a line of credit or a G2G grant. So I'm just keeping that aside and say if it comes, it is bonus. Coming to the nondefense segments, today, the opportunities are phenomenal. We are not able to take the orders because of collective capacity constraint. If I did not have the capacity, if somebody else had the capacity, I would have pushed it to him and partner. The potential is huge. Most of the European countries, be it Netherlands, be it Germany, be it Sweden, be it Norway, they are actually looking at India. Most of the customers who approached us and whom -- and Belgium, most of them whom we are engaging are all European customers. They were going to China, Korea, they are no longer taking orders for the kind of platforms which they approached us. The numbers are large. The order value is good. I see huge potential in this, not only for me, but for all -- not only for GRSE, but for all the Indian shipyards. And certain Middle East countries are also approached, though we have not been able to break the ice so far. But once that break is made, I feel -- but right now, we are focusing on Europe.

Sir, I just wanted to know when you start a next-generation corvette signing, will you get an advance payment for that? Or how will be [indiscernible] because in the past, we had advance payments.

Very interesting. Whenever we interact with the finance people in the various ministries, they ask advance. I say, I don't want any advance. Don't give me any advance. I want a stage payment. It is as per the DAP, there's a stage payment. I don't get any advance. I get a stage payment. So to answer your question, yes, we'll get a stage payment as soon as we sign the contract. There is a first stage payment with an intent to facilitate the preproduction activities, which involves the same commitment, certain OEM commitment and so on. So yes.

So just on the numbers I'm talking about here. So current order book, INR 18,000 crores plus. Next-generation corvette, INR 33,000 crores, which is there in front of us. Going forward next financial year, the potential opportunity, the P-17 Bravo, which is maybe at least INR 30,000 or INR 40,000 crores either which ways. Then we are talking about INR 1 lakh crores of potential order book from the nondefense, of which maybe a possibility of a 20%, which translates to about INR 20,000 crores. Then again, if we take the defense order, which is INR 155,000 crores minus the P-17 Bravo, which is the INR 70,000 crores, which keeps about INR 85,000 crores. And again, a 20% possibility over there gives me another additional INR 17,000 crores. If I add all these numbers, it gives a potential of about INR 115,000 crores plus kind of an order book over a period of time purely for GRSE, is the thought process in the right direction.

How -- I mean, how I wish what is -- I'll also play in the same line. No, but on a serious note, sir. See, there was a time when -- before we are listed, of course, we used to take the system for granted that orders used to come aplenty on nomination that now every order, every -- I repeat, every order is on competition, except what we work and get from the foreign clients. All these what you talked about, they are all on competition. And today, the field has expanded. So we are there, plus along with us, my 4 sisters, that is MDL, GSL, Cochin Shipyard and HSL plus comes Larsen & Toubro Shipyard, now they are mature and Swan fledgling -- I mean, they're coming up, plus a couple of small shipyards like SHOFT, Chowgule, Chowgule, of course, maybe to a limited extent. Plus there is a shipyard in this place in my city, Kolkata, Titagarh Shipyard. So the field has expanded. Theoretically, what you're telling is perfect, sir. Like if out of INR 155,000 and if Navy gives the RFPs as what we are -- we understand that they should be giving because their intent is very much there. INR 155,000, minus INR 70,000. The other -- of the balance, INR 85,000, there are 2 major projects, LPD project plus the mine countermeasure vessel project. In the mine countermeasure vessel project, it is 8 and 4. So theoretically, what you're telling is correct. It is purely depend on the -- our bid strategy at that time. I can only assure you that we would be bidding to win the P-17 Bravo in because that is what will keep the company moving for another 10 years, 8 years. So that is a project which we will go all out to win without compromising at all on the margins. So it's a big project. And with our experience in P-17 Alpha, I feel we are good to go in that. Commercial shipbuilding, this INR 1 lakh crores, again, it's a very conservative estimate because we actually do not have the cost of some of these platforms, which are going to be built in India for the first time. There -- I suggest we just wait and watch for maybe another 6 months. The talks on RFPs coming out has been going on for the last 1 year. So far, only 2 RFPs have come out in the last 1 year plus 1 EOI. So let us just wait a bit and watch for the nondefense. Defense segment is more or less streamlined. Nondefense segment, I suggest just wait and watch. Maybe 6 months, we'll have better that.

Sure. Sir, again, the numbers on the other side in terms of the capacity, 35 is what we are targeting by the end of the current calendar year, 35 from 32 since we are refurbishing the other 2 locations there. Apart from that, once after a 4-year period, maybe when Bhavnagar and Kandla comes into play, that will give us another capacity of another 12, yes. Then we are looking at HSL, which is for perhaps 2 LPD plus the very large gas carriers. Now that is 9 in number, which is there from Shipping Corporation. So there, 9 is what is also the potential capacity at HSL also apart from the LPD, that's -- is the understanding correct, yes.

I would like to clarify this because HSL, if you are aware, they're already building the fleet support ships, large ships. Though they have -- like us, they have partnered a shipyard. Three of these vessels are being constructed at HSL. Again, I -- again would like to go back to my previous statement that as far as this -- not regarding the capacity, capacity, what we have said, we will meet. But as far as the inflow is concerned, for the nondefense segment, we should just wait and watch for a while.

Sir, I think waiting and watching is right from the IPO days that we are all here. So that's not a problem. It's just about the conversion of all this potential into numbers. So waiting is something which maybe majority of us can easily.

So for -- as you rightly said, from the IPO days, you have been waiting, but you're seeing the results today.

Undoubtedly. That's not the point. The point is about the patience...

I cannot comment on what comes from the nondefense segment at this juncture, sir. It will take a finite amount of time. Defense segment, I can tell you straight away because their system is streamlined. As far as nondefense segment is, sir, I would wait. You can add advise sir.

Harshit from Elara again. Just on the margin front, since you now have the NGC order, which will be given in March, I know you don't like to discuss on margin, but just wanted to just check...

I try and sidestep the margin, but you...

So would the margin of NGC will be similar to P-17 Alpha? That's the first question.

So P-17 Alpha was a nominated project. NGC is a competitive project. But what sir had asked earlier that we are not compromised on the margins. Similar again as a perspective term, yes, it will be similar, if you take it.

And assuming that you bid for and win the LPD and the MIMCV (sic) [ MMCV ] order, since it's in collaboration mode, so their margins will be similar to what we are right now having, would that be a correct...

If it is a collaboration mode, naturally, the overall margin will be good. But when we share the profit, there would definitely be an impact. P-17 and Bravo, definitely, we are not partnering anybody. We are going independent. I thought you asked about P-17. P-17 and Bravo, we are going independent. There we'll look after the projects.

I'm so sorry, but my question again happens to be with respect to the margins. So between the P-17 Alpha completion in FY '27 and meaningful NGC revenue, which flows in from Q4 FY '28 onwards, which will also -- so there is also a risk of execution tapering, while we do say that there will be some sort of a cushion, which will be provided by the other orders. But then what about the margins in those times?

In FY '28, I partially answered a question on an earlier -- based on an earlier query, that all the projects what we had indicated as cushion for this financial year would have adequate margin to maintain -- I mean, to sustain the margins we are giving now. The P-17, not P-17. NGC, our endeavor would be to pull back -- pull back means pull ahead the revenue accrual. That's all I can promise. And we also have other verticals like ship repair, to be frank, we have not gone all out. We have taken facilities. We tested waters for a couple of years where the margins are right. So we have not yet executed a very big order on ship repair. So we have time. We will take on ship repair orders also in a bigger way than what we are currently doing to push up our margins and revenue.

Sir, my second question happens to be with regards to the 30 mm guns that we are doing. Can you give us some outlook on the same with regards to the manufacturing capacity margins? And how is the segment supposed to grow in the next 3 to 5 years?

The 30 mm gun project started about 1.5 years. We had a collaborator from abroad and an Indian partner. And as I mentioned earlier on 10 local manufacturers getting various components made here, the margins are good. Margins are, let us say, healthy margins are there. Currently, we got order for 17 guns and all from the Indian Navy. And of these 17 guns, 4 guns have already been installed on board the various platforms and the seed trials and so on have been completed. What we -- as far as the execution of these 17 guns are concerned, we intend completing this project by mid of 2027. I mean all the 17 guns will be supplied. In addition, Coast Guard has shown interest. We are having a discussion with Coast Guard for 49 more naval surface guns. We expect the contract to be concluded by mid of this year. That means in the first quarter of FY '27, we intend concluding the contract. In addition, these guns effectively use as the primary guns on board small platforms and secondary guns on board the larger platforms. So opportunities are huge. And we also got an agreement with our partner that we can export these guns. So what we intend doing is once the naval product stabilizes, once they run in operation for more -- once they run at sea for more than 6 months, then we'll start our export process. The potential is huge here. And so far, there is no competition in the Indian so far. So far, in this segment, there is no competition. So we see this business picking up in the coming years.

Shweta from Eqilion. I wanted to know about the nondefense platforms that we are making or we'll make, how long it takes to get the order, means the to and fro till the final order we get? And how means are the -- is the time like because there's no flow in that. So is there more time given in the to and fro with the clients? If you can explain that process?

Okay, ma'am, Nondefense orders, again, I'll put it in 2 buckets. One is the nondefense orders coming from government entities like the research vessels, they're all coming from government entities. And second is the orders which are coming from nongovernment entities like the German client.

Yes, I'm talking of nongovernment.

Nongovernment. So the overall nondefense order book composition -- contribution is about 20% [indiscernible] 18%. In this, the export content is almost about 8%. So here, we -- it takes time. The time is not taken for the contract conclusion, time is actually taken for establishing a relationship. We took nearly 6 months to get into the -- more than 6 months to get into the first contract for the 4 vessels to the German client. Then the next 4 and the next 4 came almost back to back. So it is just a question of making the break. And I mentioned that one project where we wanted a collaboration with another shipyard because of the size of the ship, the discussions have been going on for almost 1 year. But when it happens, then the flow becomes...

So after that 1 year, the approvals again and again, we have to go...

There is no approval involved, ma'am. It is the owner and the shipyard. They are the ones who are giving the approval. The 1 year -- 1 year, I'm exaggerating. But let us say, in the first project of MPV, it took 6 months. The 6 months was not for any -- it is only for the negotiations to close because some of the conditions, what they demand, and they expect are not acceptable to us. So we reached a midpart, which is financially viable for both the parties. So once that relationship and the contractual terms are established, then it's a question of concluding the contract. So -- as I said, it's a question of the first break. We already got it. And now one, we are not able to handle because of the capacity constraints. Second thing is in the major project what I discussed; it's a question of concluding the negotiations. Approval is between us and them. There's no government involved in this.

This is Hardik Rawat from IIFL Capital. Sir, my first question would be with regard to the NGC order. Just wanted to understand that we're expecting the order finalization by the end of this financial year. Could you say as to when the orders for the equipment, especially electronic equipment that goes on to that platform, by when -- if we are able to receive that order by the end of this financial year, would the order for the equipment be placed right away? Or could that spill over to the next financial year, that is FY '27.

The order for the equipment will spill over to the next financial year. The contract signing is the kickoff for the equipment decision, finalization and the decision. But on a proactive note, we have already commenced discussion with most of the major OEM because now we know who are the OEMs. In some of the cases, the technical requirements have been already frozen because here, we need to take the concurrence of the customer also. This process commenced almost from the time we became -- we were known that we were the L1 shipyard. And we expect to sign the contract with our OEMs within the first 6 months of placement of -- receipt of contract, which means in the first half of the next financial year, we'll be able to place, and that is what is the realistic time, and we also would like to maintain because if we cannot place too early also, you also need to ensure that the deliveries are just in time, I mean, when we need the production. That's the reason.

That is helpful, sir. One last question with regards to the NGC execution. Now we appreciate the fact that you're looking at the fact that '27 is going to be a peak year in terms of revenue, and there's no -- not a lot of plateauing of growth in FY '28, which is why NGC-related revenue is being booked in 4Q. But since that revenue will only come in 4Q, it would be safe to assume that at least on a 9-month basis for FY '28, growth could slow down on a year-to-year -- on a Y-o-Y basis.

Not necessarily, not necessarily because what I had mentioned was that almost 10 to 15 percentage of project cost is from the spares. So these will start coming in and we contractually are supposed to provide them after the -- within x period after the -- I mean ship delivery -- last ship delivery completes. So we will be able to pad up FY '28 with adequate cushion. At this juncture, no concern. That's all I can say.

I had a question around people and automation, mechanization, given that in the next 3 to 5 years, the scale is going to be very different. Could you talk us about any initiatives you are doing to train people, attract more people, #1. And secondly, investments in mechanization and automation from a perspective that the execution excellence is maintained.

Very interesting question. Yes, people first -- I'll cover both the people as well as the -- you maybe tracking our induction plans. We are actually inducting -- see, ours is a manufacturing company, but as a permanent strength, we intend maintaining a reasonably lean strength where the non -- let us say, the blue-collar force is limited to handling core activities. So we are maintaining a lean strength, which means the white-collar strength would increase. So as recently, there's a live -- I think it is concluded, which is concluded as in the window is concluded, we are inducting another 150 executives -- 137 executives. So -- and all of them, I can assure you come from top institutions of the country, the best. That's what we pick up. This is for the -- in addition, as the skilled workforce depletes, we are inducting for the core jobs. We have an excellent vendor base, subcontracted vendor base in Kolkata, some of the best in India from various companies, handling -- some handling block fabrication, the welding, specialized welding and so. At this juncture, skill resources wise, not a red flag as of now. As far as automation is concerned, yes, this is an imperative, and we already started investing. And should you visit our facilities, we have some of the best in terms of the welding machines, the plasma cutting machines, robotic welding machines and so on. And we'll continue investing in that. Naturally, it will be need-based because we don't want to unnecessarily pump in capital. But yes, there is a need, and we are investing, we are seized of this responsibility. Robotics has also been brought in. We have a robotic welding machine, which is being almost used to certain capacity. So there is no issue with that.

We'll take that as the last question and conclude the conference. I would now like to hand over the floor to Commodore P.R. Hari sir, for his closing remarks. Thank you, sir. Over to you.

Thank you, ladies and gentlemen, for an interesting session. As I said, I -- personally, I look forward to this particular session where interesting questions come. Sometimes you answer straight, sometimes you side step. It is just an occupational asset. But believe me, 100% efforts is being put in by the company, and the results are here for you to see. On a positive -- proud note, I mentioned that this is the 13th quarter that -- on a trot that -- and we would like to maintain it as long as we can. And the visibility is very much there. Thank you.

Thank you. Thank you so much, sir. I would request everyone to join us for a group photo, please, and then we can proceed to the high tea. Thank you.