GE Power India Limited (532309) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the investor call of GE Power India Limited. [Operator Instructions] Please note that this conference is being recorded. Participants, please note, you may join the webcast link to view the presentation. I now hand the conference over to Mr. Prashant Jain, Managing Director of the company. Thank you, and over to you, sir.

Hello, Yashasvi, thank you, and hello, everyone. A very warm welcome to all of you for joining this call today. I hope you have gone through our investor presentation, which is available on our website as well as on the stock exchanges. During today's discussion, I will take you through the pages of our investor presentation live as we move along, and you can follow the pages on the link provided on the notification. For this call, I welcome my team, who will join me to answer your queries and update as and when needed. I have with me Mr. Yogesh Gupta, the CFO; Mr. Puneet Bhatla, the CEO for Service business; Mr. Aashish Ghai, the CFO for Service business and my team here today. In today's call, we want to focus on the status of current strategy of the company. And of course, the important rationale behind the announcement of the planned sale of the hydro business and the gas business as disclosed on the 10th of July 2024. As we move to the second page, I want to bring to life the context of the company, then we begin with what we have been sharing with you, what is the business strategy that we have been working on so far. Then we talk about the two dynamics on the hydro business, then we talk about the gas business. We will also share with you what is the strategy that we have been talking about in the last couple of calls with you and the progress on this strategy so far with the recent wins and we will continue thereafter with ample time for question and answers. So moving to the context of the company. Since 2019-2020, the company has been focusing on -- the next page, please. Since 2019, the company has been focusing on trying to solve the issue of losses. As you can see, the performance from profit and loss after tax, we have been losing hundreds of crores in the last three years. The working capital, you can see that we have no current assets -- current liabilities and assets as we have had depleting net worth year-on-year due to the ongoing losses. This has put us in a difficult situation with depleting net worth and we have been reporting the net worth depletion from time to time that the net worth has depleted, which is coming very close to 0, which is roughly about INR 27 crores to INR 57 crores as we speak. And this is where we wanted to share with you that today we are in a situation that the credit rating of the company has deteriorated to BBB negative from an A-plus negative in '21. The implication if the company does go into negative net worth would be very difficult to source the working capital for the bank guarantees and the working capital for executing the backlog and growth. And that is the challenge that the company wanted to mitigate. Going to the next page, what we've been doing so far in the strategy to mitigate the net worth is what I would share with you for a moment to recap. Can we move to the next page, please? Thank you. So the business strategy since FY '19/'20, the management has been focusing on high-margin cash-accretive business with faster cash conversion cycle. To give you a context, in the portfolio of the company, there are three levels of portfolio in terms of working capital conversion. Hydro projects have a working capital cycle of 10-plus years. EPC projects that we have been taking in FGD, those projects we have seen a working capital cycle of 5 to 8 years. During the last couple of years, the company has started taking projects on EP basis, which has limited engineering procurement scope, which is slightly better in cash and margins. And the cash conversion cycle for that is about 3 years. So the company has been focusing to grow service business. The company has been focusing to derisk EPC projects in the company's scope and grow service business because service has the most attractive margin and cash conversion cycle. For core services, it is about 6 months and for upgrades, it's about 2 years. So that is the most attractive part in terms of cash and margin conversion in the company. From the recent conversion from EPC to EP, we have seen also a significant improvement in the margin and the cash profile of the projects with a better risk-reward ratio. So the backlog of the company that we have been reporting on a quarter-on-quarter has now started to improve with a better working capital cycle mix. As we move into this strategy, into the next couple of years, we see the average working cycle capital of the company which used to be in the range of 7 years plus will be able to come down to about 3 years. So this is where we have been focusing on. And if you see the initiatives that we have been sharing with you, have been in line with these initiatives. Moving to the next page. I wanted to share a bit about the hydro business. In hydro business, as you can see on the left chart, we have lost hundreds of crores in the last few years. The nature of the long gestation projects is that in the initial years of the project, there is cost escalation due to delays, and we are not able to realize the cash. It is consuming a lot of working capital. As the revenue is going up, unfortunately, it is consuming -- due to cost escalation and project delays, a lot of working capital, and it is also requiring very high amount of bank guarantee limits. And that is the implication owing to which, in the balance sheet, the net liability of hydro is about INR 214 crores, which means the net worth of the company is impacted to a level of INR 214 crores negative due to performance of these hydro project contracts. The aggregate cash consumption projection for the next couple of years is about INR 500 crores additional. What we have also noticed in the last couple of years is that these projects like Upper Silleru has -- we have almost been announced for a year, but we have not been able to conclude due to delays. In existing projects, there are delays locking in about INR 700 crores of bank guarantee limits as of March '24. There is a consistent margin deterioration, which I have explained a bit on the graph on the left, due to project delays, creating pressure on cash consumption and debt. The nature of long gestation projects in hydro, we have also seen in the recent PSP projects that we booked, which was under suspension for 2 years. So the company was hoping that in the last couple of years that there will be PSP projects, the cycle would improve, but we have seen even in the recently signed projects, there have been delays and Saundatti has been delayed by 2 years. So overall, due to the consistent underutilization of the factory driven by significant project delays, the hydro manufacturing facility was shut down way back in August 2018, and also which has led to an optimization of head count. Today, if you look at the project and the load and future forecast, it even does not justify a full utilization of a factory facility owing to the nature of the projects and the long gestation cycle of the projects. The company is dependent on technology to GE Vernova, and the company does project management engineering services in the company that is working in association with the headquarter for engaging in execution of these contracts. So the three challenges that we are trying to solve for is to derisk the high working capital requirement, the long gestation projects. And with the proposed transaction on the day one, the company will see a positive impact of INR 214 crores in the balance sheet, as this is a direct impact on the net worth of the company. And I will explain a bit more as we move to the next page. When we look at the market on hydro, we know that there is a plant of about 47 gigawatts without PSP and about -- 47 gigawatts is the installed base going to 67 gigawatts and 4.7 gigawatts planned to go to 27 gigawatts. Of this, about 22 gigawatts are under construction and 14.6 gigawatts are likely to be ordered by 2031-'32. For the last couple of years, what we have seen is that the reasons for slippages in the project are factors which are external to the company and external to what management can influence. The factors like geology, hydrology, topology, critical electrical mechanical works, delays in various clearances like environmental, et cetera, local issues, contractual disputes, enabling infrastructure, land acquisition and so and so forth. And this we have also experienced in the recent projects, as we mentioned earlier. Therefore, we are also seeing pressure in the market with price sensitivity and customers are still seeking lowest cost per megawatt. And we are continuing to see delays and execution challenges in projects like Tehri, Subansiri, Teesta VI projects, et cetera. So that is kind of the overall situation that we are seeing. And we do not see the cycle time or the working capital requirement of the company and the cash conversion cycle of the company improving with the new projects. We still believe with the new projects that we plan to book three projects in the near term would also take time and the working capital cycle will be high. And that working capital cycle time would also be subject to delays due to the reasons that we have outlined above. Therefore, the management has recommended to make a slump sale of the hydro business to be able to encash on the contracts that we have in the book. Going to the next page, I will give you a bit about the business dynamics of the gas business. In the gas business, your company operates in project management, sourcing, engineering of projects for a single customer, which is GE Vernova worldwide. This business, as you are aware, has been on the downside on new installation of gas turbine units. And therefore, the company has been rightsizing the head count. And since this is a primarily fuel business, the head count has been dropped down by 48% to keep in pace with the demand that we are seeing in the market. So the demand has been reducing. Skill sets are limited to GEV technology, they are not portable and not core to your company and therefore, nonstrategic. The business is not scalable and just adds to about 5% revenue share in GEPIL. And there is a limited ability in the company to drive demand. And on the other hand, if you look at the economics, the net liabilities to the company is about INR 38 crores, which is INR 380 million, which is impacting the negative net worth of the company. Owning to the future forecast, the valuation and the consideration for this business is about INR 43.8 crores. And if you look at this transaction, this would bring in about INR 82 crores as a day one positive impact to the company. And therefore, considering the depleting net worth of the company and the urgent need for the company to be able to improve the net worth situation of the company, the management has recommended to make a slump sale, combine these two businesses and do a strategic slump sale to get the most value for the company. Moving on to the next page, I want to share with you on the strategy that I have shared with you earlier in the year. The company has been focusing in these areas to increase the working capital cycle and also to reduce quarter-on-quarter surprises. The challenge that the company has been facing due to the large EPC nature of the contracts in the backlog, the quarter-on-quarter performance has been very choppy. We have either a large project update in one single project or you book one large project and then you have no order bookings for a long time, and that creates a big choppiness on the business quarter-on-quarter. So therefore, the company has been focusing and updating since 2020 -- since 2019-'20 on the progress -- on the growth on service business, which has been fairly robust. And we are very pleased to report that this area has been doing quite well, where the company has been focusing on the core services of the thermal power plants, which is providing parts, repairs, services outages for the entire thermal power plant, and the company has a very wide range of knowledge and competence all locally within the company, which is towards boilers, turbines, generators, air quality control systems. The company also has a very strong capability to serve the Chinese and the other fleet in the country and has a very versatile technology to also help with the decarbonization road map of the country. The second area is service upgrades. In service updates, in the last four years, we have seen a variation in demand. But this year, the company is seeing that this is an area that government has out-layed about 60 gigawatts of plants that they want to do R&M. And the company has been very successful in the past in this area, where there is a strong local competence in upgrading power plants and end-to-end competence to be able to improve the carbon footprint by providing a retrofit and upgrade to an existing power plant. So there is a 60 gigawatt worth of potential in this market, which your company will continue to focus to address. The third area the company will continue to focus is FGDs. And here, as I have mentioned previously, now we are focusing on EP portfolio and not the complete EPC to reduce the working capital cycle and provide a faster turnaround and better risk-reward ratio for the company. The fourth area is the Durgapur factory, where we have extremely strong welding capabilities, best-in-class fabrication capabilities. And here, the fact that the company is now focusing on exports on service components and we have also started to focus in areas on non-coal, for example, pressure vessels and cryogenic vessels in India. So that is just an additional area that the company has been focusing for the strategy. If you look at these four segments where we have a very strong local capability, end-to-end competence, the market potential is about INR 18,000 crores and that is a market the company is continuing to focus quarter-on-quarter to be able to improve the working capital cycle and also to reduce quarter-on-quarter choppiness that we see today in the demand. Moving to the next page. I would ask my colleague, Puneet Bhatla, who is our CEO for Services, to share an update on the recent events in the areas of focus for the company.

Thanks, Prashant, and good evening all. I'm really pleased to present before you our recent wins and the past trends, which clearly gives a strong confidence to the management moving towards the new GEPIL strategy, which Prashant has just now explained. So I'll take your attention towards the left column, which is for the core services. So your company operates for all the products like turbine, generators, boilers for both OEM as well as the other OEM segment. Other OEM segment primarily means the BHEL and the Chinese fleet, which constitutes about 95% of the installed base. The growth witnessed by your company has been very good at a CAGR of 30% for the last few years. And it has got a very, very attractive cash cycle of 6 to 9 months. From the upgrade perspective, your company has been a differentiator in terms of the technical solutioning, the execution excellence. Recently won Wanakbori and Vedanta boiler upgrades stays as strong testimony for the same. The policy announced by Government of India to progressively go for 60 gigawatts of thermal upgrades would be really a good market for us for the future. The cash cycle is about 18-plus months or so. As we are moving towards the strategy to derisk our EPC, we are moving very strong on our FGD equipment strategy, wherein we have won about 1.7 gigawatts of projects worth INR 780 crores plus from Jaypee. And still this segment has to be served for 97 gigawatts for the next few years. Durgapur, we have recently got ourselves approved by Petroleum and the Explosive Safety Organization for the production of pressure vessels and the cryogenic vessels apart from our coal and the export market. Orders worth INR 7 crores plus are being under execution right now and several under bidding. So this gives a quite good robust confidence to us that this new strategy will serve our business purpose and it is a cash-accretive segment for us. Thank you. Thank you, Prashant.

Thank you, Puneet. Moving to the next page. I want to summarize that your company is focusing on high-margin cash accretive deals with faster cash conversion cycle. The company has been working to derisk EPC and focus on equipment supply. EPC has long gestation, as I've earlier mentioned, and especially hydro, has been consuming a very large amount of working capital owing to a very long project cycle subject to delays. We have also now started to move towards FGD EP and especially the growth in services and Durgapur by penetration through other OEM and pressure vessel and cryogenic markets gives us confident that this is the right path to provide stability quarter-on-quarter to the company and to be able to show a path for higher profitability, lower working capital requirement and higher free cash flow generation. So with this, ladies and gentlemen, I would like to conclude my presentation and summarize that what we are proposing with the carve-out of hydro and gas sale as a slump sale is in the best interest of the company. We need to focus to improve the net worth and ensure that the company has the ability to bid for standards, maintain a robust credit rating and ensure working capital lines are available from the banks. Hence, it is very crucial to support and we ask for your support for the transaction. With this transaction, we expect to improve the net worth of the company by about INR 296 crores on day one. This includes a significant advantage for the company. This transaction would also unlock about INR 700 crores of non-funded limits for the bank guarantees and help in us being able to secure the working capital to be able to bid and win new orders and also avoid additional working capital of about INR 500 crores that would be needed to continue to execute the current hydro projects. This is a strategic sale with a fair valuation of INR 44 crores of gas and a premium of INR 100 crores for hydro on the valuation that would generate immediate wealth for the company and for its shareholders. All this put together would enable profitable unrestricted free cash flow for the company and also a better return of equity for the company. With that, I would like to stop here and open the floor for questions.

[Operator Instructions] We have a first question from the line of Rahul Modi from Nippon India Asset Management.

Thank you, Mr. Jain, for the elaborate discussion on the issue.

Mr. Modi, may I request you to use your handset more, please?

Okay. Am I audible now?

Yes, please go ahead.

So I would just like to thank Mr. Jain for his initial remarks. So just a couple of questions. I appreciate the reason for this, but some color on how the P&L of our company would look post this because after around 35%, 36% of the revenue which goes out, is there any proportionate reduction in the fixed costs that we incur, which is around INR 500 crores plus? Do you see that over a period or with this sale also getting reduced? And sir, secondly, is my understanding correct that today, we have an interest cost of INR 60 crores plus on an annual basis? Now with the hydro business gone, do you see a substantial reduction in the interest cost because of the BG limits that gets released?

Thank you, Mr. Modi. First, yes, in the steady-state strategy, it has to go forward. Once we are with a new backlog, we are anticipating a double-digit EBITDA. That is what we are aiming for. And if you look back at the last 3-years performance of the company, we are very far from that level of performance. And that was due to the high motion of EPC and long gestation cycle of the projects. If I have to comment on the working capital cycle and fixed costs, yes, on the working capital cycle, the current working capital cycle is, if I have to say, on an average 7 years. If I have to refer that just to our three projects in hydro, for a reference, these projects have been -- for example, we have a project of Tehri which has been since July 1, 2011. And we are still expecting that to be on the current forecast, but then have been seeing this forecast just moved, though we are working in the best interest both from the government to expedite and close the project. And we're expecting -- so that is just an example to explain. Now in the backlog, there are these projects, which are since 2011, 2012 and 2015, which we are still working to see if they can progress forward. Also the things that we -- the way we are looking at this transaction, as I said, is a bridge to the strategy from high-risk, long cycle that we are not able to generate positive cash and margins to be able to give back to shareholders. And if I go back, if I just look to in the future, we will see a very stable quarter-on-quarter performance with positive margin, positive cash. And that's something that we are very positive about the strategy that look, today, the quarter-on-quarter is because of a large project cost update. The way our hydro projects and the large FGD EPC projects are structured, in the first 7 years, you end up exceeding your cost and your cost of goods. And those costs are then eventually loaded towards the end, and then we have to wait for claims and to resolve and to be able to get your margin and cash back. And therefore, we are actually investing in working capital for a very long time in these projects and the free cash flow becomes quite unpredictable. The choppiness is very high. The second issue is that the big projects, even the claims, because of the delays [indiscernible] on the price dilution clause. Sometimes it's 10% in the contract, 15%. And then it becomes elaborate, independent engineering evaluation, going to arbitration claim, et cetera, to find a solution to be able to bring. So then this claim becomes a big lever to say can we do that? But the period is so long that if we start a project to the end of the project, you're talking about a cycle of 10, 15 years plus to be able to realize the cash. And that, we don't see changing with the new projects that we have built, unfortunately. That cycle continues. So therefore, yes, as we move into the new stabilized business, we are looking at a debt-free company in 2 years from now, which is a positive cash and therefore, the interest burden is gone. And as we are taking out the large project structure into the future with the carve-out and also with the change in mix of backlog, we will move towards a much optimum structure which will reflect a very stable business as we move into the future. So that is what we are proposing for your support. And in terms of the structure and the interest cost, yes, this will be in two parts. One, of course, will be with the carve-out. But second also, as we will be executing also some of this new backlog, which is this old EPC projects that we have seen in the books. So that's why I would give a 2-year window for executing these projects and moving completely to the new backlog. And the service, for sure, has been fantastic. Quarter-on-quarter, we have been reporting progress, double-digit growth, a very strong end-to-end competence in the team and the market is really appreciating our products and solutions. And that is also bringing value to Durgapur, which is the last piece of the strategy. In Durgapur, we had about 800,000 hours capacity. And because we did not have any orders for the last 3, 4 years, we have downsized the capacity to about 200,000 hours ballpark, here and there based on the calculations. About 3 years ago, we have 10,000 hours load on the factory from service. Today, we have moved about 170,000 hours. And now we have got the strategy approved. We also focus on industrial segment, which is nonfossil, which is oil and gas for pressure vessels and cryogenic. And we have seen some early successes, and we have notified that to the stock market, which is again from a return of investment point of view, this is something that is the existing capability in the factories, where there is potential to create value as we see in the factories. So that will also take away the under recovery that we are seeing today to the tune of about INR 30-odd crores in the factory because of under recovery that we see will move away. And we will start recovering below for the factories 2 years from now as we are building this new backlog into the system. So that is what I wanted to briefly share with you, and I'm asking my colleague, Yogesh, to add. Yogesh?

Thank you, Prashant. And I would say you have perfectly responded to the query raised by Mr. Modi. And maybe just one I would like to add with regard to the Durgapur under recovery. This will be reduced to the extent of about INR 8 crores to INR 10 crores. Like so this is the only thing that I wanted to add and the rest all, you have, I think, perfectly responded to. And you are very right, Mr. Modi, the interest cost has been in the range of INR 60 crores, and which was a number as of March '24 for the full year. And with these actions that we will be taking, our fund requirement, our working capital requirement and getting a consideration for selling off our gas business, we would be definitely better off so with regard to the projection from cash. And as Prashant has indicated, that we are likely to be debt free within 2 years. So this is how we would be reaching a level of like eliminating all the interest costs. Thank you, Prashant.

We have our next question from the line of Sanjay Kohli from Goldstone Capital.

So my query is on your core business, which is boilers and turbines, and now we are going to be basically bidding only for upgrades and not fresh greenfield projects. And is there any synergy also with the new nuclear turbine facility, which is there in Sanand with Durgapur? Will there be any business connection over there?

So I'll address both the questions. The first question on new coals. As I have been sharing in the past, the GE Vernova has exited new coal -- GE has exited new coal business. And as far as GE Vernova is concerned, we will not participate in new coal. And earlier also, as stated, that any participation in new coal will be subject to de-promoterization. And at this point in time, the biggest challenge that we have been facing is not related to the strategic decision, but to the balance sheet issues that participating in the new coal project requires very large working capital and bank guarantees. So for example, if you bid for a new coal project, you need about INR 4,000 crores worth of order, you need about INR 500 crores plus credit lines. And the balance sheet of the company does not support participating in such bids. And therefore, the company was reporting also in the annual report last year and also we have updated in the annual report current year that we are facing a big challenge in being able to participate in these large projects. And therefore, not waiting for this, the company was focusing on building the service business and the R&M business. And also creating a new line in Durgapur to get additional jobs from exports and also from the pressure vessels, cryogenic apart from building from services, and that has ended. And today, we have a good momentum in that regard, and we are making good progress on that strategy. We have also been sharing the recent -- in fact, even today, it has been shared the good successes we are receiving in the four pillars. The next question on synergy with Sanand. Sanand is, of course, supplying the key machining and key parts for assembling of the generator rotor, et cetera, for the R&M project that we have announced. And for the additional R&M projects, we will be sourcing from Sanand some of the key critical equipment. Durgapur, on the other hand, brings in a good amount of capability for servicing of boiler components, wind components, air quality control systems. And now we have also started using the facility for pressure vessels and cryogenics. So we are utilizing also for certain repairs the Durgapur facility. But yes, from the Sanand facility which we launched to R&M -- to the Sanand facility, we are working with a very good arrangement for the R&M where we leverage [indiscernible].

We have our next question from the line of Subhadip Mitra from Nuvama.

Hello. So 2, 3 sets of questions from my side. Firstly, with regard to the slump sale that we have done, both for the hydro and the gas business, you have clearly mentioned that there are some net liabilities associated with each of these. If you could also give us some color as to what is the split of these net liabilities, what are the nature of the liabilities? And how did you arrive at the fair value of the slump sale? Is it on some kind of a discounted cash flow basis or some other manner? that's my first question.

On the fairness of the valuation, I want to take you through what you have done. We had [indiscernible] that we mandated for the valuation, and we also hired RBSA to check the fairness of the valuation. And I would like to highlight on hydro. While if you look at the past 5 years, we have had almost every year significant cost updates and project delays, which has impacted as we've seen our balance sheet significantly. For the purpose of valuation, what we have assumed for all the contracts is that these contracts will be executed as per how they have been contracted, and we have not projected those delays in the future. So from the management point of view, we said, look, when we want to do the slump sale we should consider that these contracts will be executed on time. So if I have to say in short, the past was in red. But with the contracts which are in the backlog, we have assumed they will be executed after the contract. And therefore, the entire value has been considered in the present value today. So that was one. The second, including -- we have assumed that we would continue to do 3 more projects. And we would also, we have also assumed that the underutilization or the non-utilization of the people would then also be utilized fully by way of assuming that would support formula into the valuation. So that has helped in reducing the liability that sits in the book in terms of valuation. And therefore, if I have to say that the valuation has considered our fair value today for hydro. Regarding the valuation method, I would ask Yogesh to add. Yogesh, please?

Thank you Prashant. And valuation has been done based on the discounted cash flow of the projected business that we have for the coming 5 years. Plus finally, the terminal value was also added in that to arrive at the value for the enterprise. And then we have used the intercompany like borrowings, et cetera, and all the debt-like items which have been removed or reduced from this enterprise value that has been calculated based on the discounted cash flow value of the flows -- future flows of the business and like driven value of the terminal valuation. So this is how the valuation has been arrived at. And we had evaluated different methods which are in the public domain and which method should be used. So we clearly look back to the publicly traded comparable method. You looked at the comparable transaction method, but there were no relevant data or no similar companies which are available in the market for which like we are -- like we could relate to. And this led us to like the valuation method which was advised by the valuation agency of [ Grand Sutton ] And even the net asset value was not relevant and right for us because this was like a valuation would have even a...

I'm sorry, sir, your voice is muffled.

Yes. I hope I'm audible?

Yes.

Okay, wonderful. And so this is the basis and the discount rate has been calculated based on the adjusted capital asset pricing matter. And moving on to your next part of the question with regard to the ability on the color of the liability, the INR 214 crores worth of net liabilities that Prashant was mentioning with regard to the hydro. These comprise of trade payables, which is INR 180-odd crores, borrowings from our related cash pool, INR 54 crores, advance from customers that we have, almost about INR 370 crores. And then because these are POC contracts, so we have a billing in excess of almost about INR 200 crores. So these are the -- like I would say the key components of the liabilities that we had, which resulted into this next like liability for the hydro business.

Understood. Just 1 point of clarification, the billing of INR 200 crores that you mentioned, that is the net receivables, which is the asset that you are going to adjust against the liabilities, correct?

This is when I mentioned billing. This is basically billing in excess of revenue. Like which is like we have done an advanced billing. And this is reflected on the net liability side of the balance sheet. This is not coming other...

when you have a cost subject on the project and then you have to spend which you can't -- so that's -- the basically the cost adjusted how to change that.

The billing has been done, but we have not like recognized revenue because cost is still we can't.

The customer has not agreed to the change in price et cetera, et cetera. So when you read the price variation clause, et cetera, et cetera.

Understood. And there would also be a certain quantum of receivables that would have gotten adjusted against is, right, which would be on the asset side. How much would that be?

The receivables are INR 384 crores.

INR 384 crores. Understood. Understood. Okay. And similarly, if you can give us a breakup on the gas side of the business as well?

Gas business is relatively smaller on the scale, and this is the affiliated business. So we have about liability of about INR 74-odd crores for payables there. And the receivables will be also to a similar extent. Just give me second, I would just pull out that number as well, yes? The number for the receivables is INR 69 crores, I mentioned INR 74 crores. And the payables is what I mentioned in the range of about INR 74 crores.

Understood. Understood. Now moving on to the second part...

Some other payables also we have in addition to the INR 70 crores, we had another INR 16 crores payables to some related parties as well. So total payable will be INR 86 crores; receivable will be in the range of INR 69 crores, INR 70 crores.

Got it. Got it. So the net reduction on the debt on your balance sheet would be how much after this transaction?

The net reduction of the liabilities on the balance sheet for hydro will be INR 214 crores. And this will be like -- if we look at this -- I'm talking of net liability, which will be knocked off. And on the gas side, it will be INR 38 crores, which will be the net liability reduction, which will comprise of both assets and liabilities. Plus on the cash side, as Prashant mentioned, will be an improvement of about INR 43.8 crores, which is the consideration that we'll be receiving for hiving off the gas business.

No, I understand. Is there any repayment of debt that you will do because of this fresh cash inflow, so your debt would come down by a certain quantum because of this?

Yes, the debt will come down because of whatever assets and liabilities we are transferring because this slump sale will be for each and every component that we have on our books of account from like hydro and gas driver. And I have shared with you the net impact. So definitely, overall receivables will also come down and the payables will also come down. Payables will come down more to the extent of almost about INR 250-odd crores. And the receivable side also would be like coming down. The net impact will be what I mentioned as INR 290-odd crores like reduction on the total net liability.

Understood. Understood. Secondly, is there a threshold or breakeven...

May I request you to join back the queue, please, as we have other participants waiting?

Sorry. Thanks.

We'll take our next question from the line of Rajesh from AlfAccurate Advisors.

And since I think this is something very historic for the company, very big event for the company, I'm sure I think every analyst or the fund manager would have more than 2, 3 questions because this is something very, very important. So I request you to kindly allow everyone to ask enough questions. That's my first request. Second, very important thing I wanted to know that post you do all this entire restructuring, if you redraw your FY '24, then what is the revenue?

The revenue, if we redraw, it will be like removing our business of hydro and gas revenue that we have. And presently, if we look at our revenue has been INR 1,700 crores. And from this, if we remove about -- so this will be in the range of about INR 1,000 crores. So exact number will be like we give you, this will be in the range of INR 1,000-plus crores.

So INR 1,000 crores, kind of net be retained, am I right? That's what you are saying?

Yes. Yes. INR 1,000 crores will be the steam business revenue.

INR 1,300 crores.

Sorry, I'm confused. INR 1,000 crores or INR 1,300 crores?

INR 1,000 crores.

Okay, INR 1,000 crores is the net revenue. And if you redraw your pro forma based on EBITDA, then how that will look like?

This is a difficult question.

Yes, we will come back to you on that. We are still working on that.

Let me put it in this way. Whether -- because you mentioned in your closing remarks that you are basically likely to see kind of a double-digit margin. So that basically you are saying this INR 1,000 crores or whatever the net retention broadly, this would have kind of a double-digit margins?

Not in the year '23-'24 or '24-'25. What I said is this strategy. We have in the thermal as well, the mix of EPC business of FGD. We have certain [indiscernible] projects which have been undertaken on EPC subscribe contract. And then we have the more big orders in the last few years based on the new strategy. There's a mix of that. As we move to the current backlog as per the new strategy, the steady state, yes, would be around this number, with double-digit EBITDA for sure. That is what we [indiscernible] in 2 years from now.

Two years from now. Understood. So basically, you are saying you have some legacy orders that probably might have low profitability and the new orders probably would have the higher profitability?

We are very optimistic that the steady state would be, operationally we are on the -- in that range, but we have legacy issues. And therefore, we see that the benefit that we will start seeing would be in '26-'27.

And basically, at least till that time as you move towards that, would it be safe to assume that it will be profitable because at EBITDA level?

No, not at the EBITDA level. We will still have some pressures coming in from the cost of base. And those pressures, we continue to see in '24-'25 and '25-'26. They will come down, but we will be positive from '26-'27 onwards that's how we are...

So basically, you're saying even at EBITDA level, it remains kind of a loss-making because of the legacy issues. That's what you are trying to say?

Yes.