Isgec Heavy Engineering Limited (533033) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Isgec Heavy Engineering company earnings conference call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Renjith Sivaram. Thank you, and over to you, sir.

Thanks, Bilal. Good afternoon all. On behalf of ICICI Securities, I'm pleased to invite you all to Q4 FY '21 results conference call [indiscernible]. Management is represented by Mr. Aditya Puri, Managing Director; Mr. S.K. Khorana, Executive Director and Company Secretary; and Mr. Kishore Chatnani, the CFO. We will have an initial presentation by Mr. Aditya Puri on the results and the outlook, and we'll follow up with Q&A. Mr. Puri, you can start with your initial dialogue.

Thank you. Thank you, Renjith. Good afternoon, everyone, and thank you for joining us on our earnings conference call. I hope that you and your loved ones are all well and safe. This is our fifth conference call, and I look forward to your fruitful interaction. We have also uploaded our presentation on BSE, NSE and our website earlier today. Many of you are familiar with our business. For the benefit of the new investors and analysts joined for the first time, I will give a brief introduction about our business. We are a diversified heavy engineering company engaged in manufacturing and project businesses. We manufacture a process plant equipment, presses and iron and steel castings. We execute turnkey projects for setting our boilers, power plants, air conditioned control equipment, sugar plants, distilleries, factories and bulk material handling facilities. We've also developed strength in construction. We address the requirements of a wide spectrum of industry, mainly power, fertilizer, sugar and distillery, oil and gas, automotive -- automobile components, steel, cement, chemicals, railways and [indiscernible]. Our presence across multiple industries and geographies helps us spread any sectoral or geographical risks. Let me now talk about our consolidated financial results for the quarter. The total consolidated revenue for Q4 of FY 2021 was at INR 1,628 crores, which is up 4% compared to INR 1,560 crores of -- for Q4 of FY '20. For the full year of FY 2021, our consolidated revenue is at INR 5,477 crores and it declined by about 7% compared to INR 5,915 crores in FY '20. The consolidated EBITDA for Q4 of FY '21 is at INR 131 crores, which is 86% higher compared to INR 71 crores for Q4 of 2020. For the full year FY 2021, our consolidated EBITDA is at INR 507 crores, that is 42% higher compared to INR 357 crores for FY '20. The EBITDA margin improved by 228 basis points, driven by savings in employee costs, reduced legal expenses, reduction in travel expenses due to the lockdown and increased efficiency and because of higher sales and profitability in our subsidiary company. The consolidated profit after tax for Q4 of 2021 was INR 69 crores as compared to INR 13 crores for Q4 of FY '20. This is an increase of 445% compared to last year. For the full year of FY '21, our consolidated profit after tax is INR 253 crores, which is 70% higher than the profit after tax of INR 149 crores for the full year of FY '20. I will now talk about the order booking. The consolidated order booking for the full year FY '21 was at INR 4,862 crores, which is higher by 27% compared to the previous year. The orders in hand as of 31st March 2021 are INR 6,765 crores against INR 6,935 crores in previous year. The order booking position continues to be satisfactory. Of our consolidated order book, about 80% is for the project uses and 20% for the product business. The order book includes INR 969 crores worth of export orders, which is about 14%. Order bookings for Isgec Hitachi Zosen, it has INR 444 crores -- sorry, it has INR 433 crores of order booking -- INR 433 crores of orders as of 31st March 2021. During FY '21, the overall demand trends were encouraging after the lockdown was lifted. Many new orders were booked from sector, which is railways; power, which includes boilers, air condition control equipment; energy, water, process industry, construction, fertilizer, cement, refinery, steel, Sugar, ethanol plants, chemicals, food, oil and gas, renewables, automotive, aeronautics, refractory, mining, potash, paper and [indiscernible] dye. We've also increased our focus on booking more orders for operational maintenance of power plants and distilleries, and we have booked more. With the onset of the second wave of COVID-19, since the last few months, work was again adversely affected. Factories were running normally until the fall week of April 2021. In spite of their being any COVID positive cases, there was no shortage of [indiscernible]. However, there was a shortage -- shorting in production because of nonavailability of oxygen and argon gas. The availability of oxygen and argon gas [indiscernible] 2021. In the EPC project businesses, we had to keep our offices in Noida, Pune and Chennai closed to 6 to 8 weeks in the current quarter, and employees worked from home. offices have reopened in June to 20% to 50% attendance we submitted on a rotational basis. Our projects are operational with completing the VRS. Retention of existing manpower and contractors became a challenge. Some difficulty was also experienced in resource organizations such as tying up with agencies and securing tools and trade. Supervision of [indiscernible] and commissioning was also adversely affected due to some of the engineers being COVID positive. The working at project side will improve in June 2021 and is now near done. The turnover and profitability for the current year will therefore be less. We've given special vaccinations and also organized some camp vaccination at our offices and factories. 97% of the eligible manpower, our employees and contractor workers have received at least 1 dose. Q1 FY 2022 has been good in terms of new orders finalization. We booked orders worth over INR 1,500 crores, though some advances are yet to be received. This includes some export orders, though export on the finalization will take some time to pick up after the COVID situation will ease. As you may be aware, commodity prices, especially steel have gone up steeply. Prices of steel plates, structures in PMT bars have gone up 16% to 18% since 1st January 2021. This may have adverse impact on our cost and profitability. About 48% of our order book, that is PSU customers, has cash variation [indiscernible] and the price increase can be passed on to the customer. For the rest of the order book, we have fixed-price contracts from customers that keep continuing margin on costs. These will not be enough to cover the cost on fees, which has moderated in the recent weeks, which is good. Regarding the Cavite Biofuel project in the Philippines, we have decided to start construction in the plant. We think it's a good business and will be profitable to [indiscernible], though we will keep the option to sell it when it's complete. In general, Isgec continues to be optimistic about our overall positioning in the market. And with our presence in multiple sectors and geographies, robust balance sheet, state-of-the-art infra and manufacturing capabilities, technology partnerships and right quality of people, we will continue to focus on increasing our shareholder wealth, strengthen financial metrics and serve the community and people. Thank you. Hello, could you hear me?

Yes, sir. Should we open the line for Q&A session?

Yes.

[Operator Instructions] We have the first question from the line of Viraj Mehta from Equirus PMS.

Sir, I just wanted to understand the kind of order booking that we are hearing from the ethanol side, how much of the new orders that you talked about this quarter and last quarter, if you can give a rough understanding how much comes from more profitable segments like ethanol and presses for autos?

Yes, sure. The one area where the order book [indiscernible] for the orders, although in the last month or so, we have got some orders, but it's still not as good as the other sectors. So I would not say that there is a very high percentage of new orders from them. And also, we've been selective in booking orders. We are going to commission our own distillery soon. So we haven't booked any very significant orders for the distillery sector. INR 1,500 crores is basically from other sectors.

Got it. Got it. And sir, just if you can quantify, You said that there is going to be margin pressure because of -- like almost 60% of our projects do not have pass-through cost. Quantify in terms of whether the hit will be how much? Will it be like 100 basis points, 200 basis points?

We are still in the process of quantifying that because steel has been very volatile, and we can see it again started showing some signs of coming down. In fact, it has come down a little bit. And it's expected to come down in July further. So we will take a pause soon, but this could be a slight from what we are projecting.

Understood. Understood. And sir, last question was on capital allocation. If you look at our policy of taking orders even on lower advances because it doesn't make sense, like the interest that we pay, will we continue with that policy for government orders?

So government orders, we cannot dictate the payment terms. So we would have to build up the interest cost, usher the cost to us and then see the margin and on that basis decide to take the order or not. But it's not that we will stop taking government orders.

Understood. And sir, has the competition in the FGD segment reduced? Because what we are hearing is probably a year back, the number of bidders and the year -- and today, the number of bidders have reduced by almost half. Is that correct?

It has reduced. I'm not sure whether it's half, but it definitely has.

And so has the margin -- I mean the quality of work and the margin in that business, is it expected to be better than what it was last year and the year before?

Yes. Yes. Yes.

Including the recent Orissa order that we won?

Yes. Yes.

[Operator Instructions] The next question is from the line of Siddharth from Equitas Investment.

Heartiest congratulations, Mr. Chatnani, on your appointment to the Board. And I must -- and congratulations. So my question is regarding our EPC business, right? I look at our numbers, we do nearly INR 1,000 crores of revenues every quarter, and our EBIT margins are just 4.5% on that business. And if I look at our manufacturing business, I would believe that we would work on advances. So the return on capital employed for that particular business would come out to be very low. at 4.5% EBIT margins for the kind of products that we have and for the kind of capabilities that we have, it is one of the lowest margins that I see within the entire EPC space.

Yes. So I do agree with you over this, the margins are low and are lower than the products business. But as I told you in the previous calls, that we got into new sectors and we are now improving on our efficiency, and we've come up with. So margins should improve barring external shocks, like -- the margins would be better barring the external shocks such as steel prices going up or other commodity, copper, nickel, aluminum going up. So these shocks, I think, everybody has to bear. But we are pretty confident that our efficiency is going up and margins would go up given...

So Mr. Puri, have you tried benchmarking ourselves to our peers in terms of margins on EPC front? Because at no point in time in the last 3, 4, 5 years, have our margins in the EPC segment gone, EBIT margins are in excess of 5%. And for the kind of capabilities that we have, the skill sets that we have, typically when we see -- look at your competitors, most of them would be edging closer to 9% to 10% as far as EBIT margins are concerned.

Right. So we have benchmarked ourselves. We've seen what sort of work they are doing, what sort of work we are doing. That we need to catch up. And we're certainly making an effort towards that. And I think -- and I'm sure that it has actually improved. Had these shocks not been there, it would have been even better. But we are still striving for better margins. Your point is well taken.

Okay. And I must congratulate you, Mr. Puri again, on appointing Mr. Chatnani and Mr. Gulati on the Board. Very nice to see professionals getting appointed on the Board.

Thank you.

[Operator Instructions] The next question is from the line of Dushyant Mishra from SageOne.

I just want to know, I think, one of the previous participants mentioned that there is a different margin profile from each project segment that we cater to. Could you tell me which ones are sort of higher margin businesses? Because I would imagine some of them like sugar, what you mentioned, will have a and save a higher margin as compared to something like [indiscernible]. Which ones are the...

No. I think what he was referring to is projects versus products, so EPC versus manufacturing basically. So manufacturing has a much higher margin than the EPC project is concerned.

But would the different industries we cater to are pretty much longer term or margin profile, is that so?

There are similar margins. It depends on order to order basically. Basically it depends on order to order. There is no generalization to say that these orders would be at lower margins, but we will be at higher margins. Yes, of course, we know that when we take the order. But as of now, we are not -- we're taking the orders on the of basis of the margin and say that this particular segment will give you a lower margin and this will give you a higher margin because of all the competition for that particular lender or order.

Understood. Okay. And on the debt book side, have you -- do we know what our debt book stands for? What kind of products?

Have we -- sorry, what was your question? On the big...

What is the [indiscernible]?

It's good. It's got a lot of projects. And as of now, we seem to be in a good position as far as what we think our potential order booking in the near future would be.

Understood. And what is the mobilization of banks we get from private guys on project orders that we're doing?

Private guys, we normally get between 5% and 10%. Sometimes [ 15% ], but mostly 5%.

5%. And for government orders, there is no advantage, right?

So government orders are 2 things. Many government orders do also advances, but we do not many times take the advances because their interest vary.

Understood. Got it. And going forward on the private side, would you want more orders to be in the pass-through clause or escalations that we've seen? Or will you keep them at a constant price -- fixed price contract only?

So that's not in our hands. It's the way the private sector orders. So it's for us to decide whether to take the order or not. And most private sector orders are without the pass-through clause. So we really don't have the clause in that.

The next question is from the line of Pritesh Chheda from Lucky Investment Managers.

For the flat backlog that we have versus last year, what kind of revenue growth do you envisage in the forthcoming year? And my second question, pardon my lesser understanding. So when in the consolidated, we have a division called as sugar. Is it sugar there or it is sugar business there?

Sugar, manufacturing of sugar.

So from a capital allocation standpoint of view, are we looking forward to do anything on the sugar business in terms of any unlocking? Because we have a INR 1,000 crore type debt on the balance sheet and our ROCs are also less. So from that point of view, any thought plan process that we have?

No, not as yet. Not as yet. Not as yet.

Okay. So what we'll be doing to improve the ROCEs in the business, overall company ROCEs, which are at about less than 15% for the last 3, 4 years? How would we improve the ROCEs in the business?

Looking at improved profitability and looking at FGD businesses and all, whenever the in the next year, 5 months, the NTPC types, a lot of money will come in, which I would say it's stuck there according to the payment terms. But capital is deployed over there.

And on my first question on the flat backlog and what kind of revenue growth or revenues do you see for FY '22?

So we certainly -- we are impacted with the effects of COVID. But we certainly see a very healthy year. This year initially cannot be, in any case, worse than the year which has gone by. We are pretty [indiscernible] on the fact that it will be better. But we have to see whether the third wave comes or what happens.

You're seeing growth in revenue, but with a slightly lower margin?

I'm not saying that. I'm saying that it could be a revenue. We don't expect a dip in revenue. We expect a growth in revenue. But we are cautious of the fact that there may be another prologued lockdown that may have an impact.

Okay. Sir, on the bid book side and on the visibility, since you cater to a lot of process industry and sectors. You mentioned power, fertilizer, sugar, steel, cement and a whole lot of sectors. But from a bid book perspective, what kind of movement or bid books or order tenders that you are seeing vis-a-vis what you would have seen versus the last 2, 3-year activity on the CapEx side of the -- of your customers? Some thoughts or light there would be very useful.

So we are generally seeing an increased level of business activity in spite of the COVID. We have seen that. But it is more on the government side. The private sector is also investing now. There is no doubt about it. But it is still being more cautious.

So from a bid book perspective, there is no...

The bid book is good.

Bid book, is it moving higher? Or it is still where it was...

No, it's moving higher. It is moving higher.

Okay. Based on your experience, and that's my last question, do you see -- so if you look at the larger CapEx' in the system, it has largely been flat for so many years. And for us also, if you look at the engineering business, be in a certain range for, let's say, about 7, 8 years that I see. Based on your experience, do you see that the capital cycle or the CapEx cycle by your clients is going to strengthen? And there will be probably a long runway for us in terms of growth and in terms of size of business, as we have been largely flat for the last 5, 6 years or 7 years?

I think it's because we have gone into a few new areas that we will see that we are not short of orders, and the order book remains healthy and grows. But as regards the CapEx cycle, as the [indiscernible] and it's opening up, the economies are very robust over there. So if we can get over this COVID phase, people are allowed to travel, people are -- foreign countries, let me use that word, et cetera, we -- I certainly think that India and our company will grow fast. But even if it doesn't, we do not see any shortage of orders in our company, barring maybe a few months here and there on a secular trend. And in the short term, we are very comfortably placed and hope that we will be comfortably placed in the future.

The next question is from the line of Deepak from Birla Mutual Fund.

Am I audible?

Yes.

Sir, I have a couple of questions. First is regarding this ethanol opportunities. I just wanted to understand your presenting the small business? And do you have any plans to go into or setting up [indiscernible] ethanol production? And what kind of opportunity can you see in this business? And do you have any new order books from ethanol aspects? Number one. And number two is what is the -- you have delivered somewhere around 8% margin in this year as you look at FY '21. So do you have further scope of improvement from CRE on what is your target? And from where you're targeting to improve your margins?

Yes. So as far as your question on ethanol is concerned, I'm not very clear about what your question was. Was it about our own ethanol plant coming up? Or was it different? What was your question on that? I'm sorry, I did not get that.

Correct me if I'm wrong, sir. But you have the -- you set up distilleries in North.

Right, right.

You set up distilleries for customers also, and there is a lot of talk and a lot of legislation in this regard by.

Okay. So we are not currently into the second generation of ethanol. it is yet to prove its cost effectiveness. So -- and we are not into 2G ethanol. And regarding your question about margin improvement? Yes, there is...

And sir, in 1G? What kind of opportunity you have in 1G?

1G, we will book orders. As and when we get orders at a decent price, we will definitely -- we will book orders. There is opportunity. And in the next few months, we feel that a number of ethanol plants will be decided. And secondly, as regard to our margin improvement question, there is scope for margin improvement shops, still commodity shops have been there. The slowdowns during COVID times has been there. But barring the external shops, there is scope for margin improvement, and we are working towards that.

So what is your big margin in the existing projects. If you are delivering 4.5% margin, what is the kind of your big margin in these projects?

We are not facing too many variations. So good margin would also -- would have been this previously, but it has improved now. The book margin has improved now. So when these projects are executed, we could -- if you see margins in the coming years.

So I just wanted to know, sir, that this 4.5% real -- the actual [indiscernible] of margins, is it -- there is a lot of cost overrun you are giving higher? Or that we are giving at this level only?

I'm saying that There are no too many cost overrun. They did not too many surprises. No.

[Operator Instructions] The next question is from the line of Digant Haria from GreenEdge Wealth.

I have 3 questions. Sir, the first question is that our order book has been in the range of INR 6,000 crores to INR 7,000 crores for a few years now despite adding a lot of new verticals, a lot of new technology partnerships. So let's say that if the CapEx cycle really picks up in the next 2, 3 years, do we, as a company, have the capability to execute orders over, say, INR 10,000 crores? Or that will require more capacity build up? Or we are ready for that if it comes?

We are not ready for it as of now. But doing INR 10,000 crores over a period of another 2 years or 2.5 years, we can easily build up our capability. Over 2 years, we can easily build our capability to do INR 10,000 crores. Manufacturing, yes, it takes a little more time. But otherwise, we can build up our capability.

Okay. Sir, my second question is, again, on this sugar and ethanol thing that the ethanol policy big government is announced, and there is a lot of talk that ethanol production has to triple and maybe quadruple over the next few years. And we are present only in 1 of the 3 technologies, which are there. So for the other 2 technologies, which is the 2G and 3G, are we planning to do some sort of technology tie-ups with somebody who knows that or -- because it may be a very big opportunity. And if we are not ready at the right time, maybe we will not be able to capture that. So any...

No. We are talking to 1 or 2 companies, but we ourselves are not very convinced about the economics of 2G and 3G as yet.

Okay. Okay. Sir, so maybe when you see a right time that maybe the scale has become profitable, we may jump into it.

Exactly. Exactly.

Okay. Okay, sir. Okay. That's the second question. Sir, the third question which I had is you just responded to the previous participant that in EPC business, our bid margins and the actual margins that we make are between 4% to 5%. So is it -- we are bidding at the levels of 4% to 5% because are we new in some of these areas? Or is it just because we want to keep our plants and workers busy that we are taking orders even on low margins and surviving this low CapEx of the last 5 years? How should we look at this?

Okay. So let me just answer your question. To say that we -- for our EPC business, we manufacture very different. So it is not that we are -- most of them, we manufacture nothing. So more than 60% of them, we manufacture nothing. So I would -- so we are not taking this business to keep our manufacturing facilities busy. It's the nature of competition. It's some of the businesses we've entered for the first time. And the learning curve has been good. And as I said, the recent orders, the margins have also improved because we have learned. So this is a deliberate move to get into these sectors even with the lower margins. And our learning process in the execution has also helped us now to improve on further execution.

Okay. Okay, sir. So just for some sectors where we have already a lot of experience, would the EPC margins in those segment will be a little better, say, 6%...

They're beginning to -- yes, they're beginning to improve. Some of the recent orders, they are at better margins.

Sir, if I may ask 1 more question, sorry, the operators can -- if I'm still online, I would like to ask 1 more question?

Please go ahead, Mr. Haria.

Yes. So sir, you just mentioned that the foreign country is not accepting Indian travelers. So does it become really difficult for us to get orders and to monitor the execution? And then if that things goes away in the next 12 months that we can travel and roam around freely like before COVID, would the foreign business also had a big fill up?

Yes, it would. It would. It definitely would. It has been very difficult actually, but we have not faltered. It has been difficult finishing the projects overseas and sort of remotely commissioning them from here, giving them remote support from here. A lot of that has happened. But we managed that successfully. But for new orders, for meeting new clients, that confidence has to be there. First of all, there is this perception in overseas that there is a lot of COVID in India. So if we give an Indian company an order, it will get delayed. Then they always say don't -- COVID is not a cause for force majeure, which we do not expect because, again, it is a cause of force majeure. So -- and they want to reach you face to face. So I think once the COVID situation improves and we are able to travel or they are able to come here -- we have had lots of clients who in the first wave said that in the next 2 months, we'll be here in India to see, and nobody is turned off. Now also people are asking July, August will be there. Let's see what happens.

We have a next question from the line of Ankit from Bamboo Capital.

Sir, on the machine manufacturing side, we have seen significant improvement in margins for almost 13.5% in the quarter. And even for the full year, margins have been around 10.5%. So -- and this is despite the significant increase in commodity prices over the past 6 months or so. So what was the reason for such significant improvement in margins? And how do you see this margin spanning out over FY '22 and FY '23?

So one reason for the good margins was that in manufacturing, if you are able to get more out of your facilities, you could stretch your capital investments, more the returns -- much more than in the project business. So we had good order booking, good turnover, lot of control and efficiencies. And our factory locations were not as -- even if they were impacted by COVID, we could control the situation much better because we've been there for a long time, we know the area, not like sites which are spread all over and in remote locations. So it was a good order book, efficiencies and operations, which actually led to this improvement.

Because if I look at it, last year also we did close to INR [ 1,600 ] crores of revenue from this segment and our margins were almost half of what you did in this current year. So it was somewhere around 5.23%. And this year, we have almost doubled our margin. So I just wanted to understand...

So we worked very efficiently on manufacturing, and we have also -- we are doing marginal investments to increase our capability at few places -- increase our capacity, sorry, at few places because we've reached the situation where we are actually having to refuse orders.

Sure. Sure. So how do you see margins panning out in the machinery segments over the next 2, 3 years?

They should be good. They should be good. This quarter is not going to be good because of COVID and because of lack of oxygen. A lot of our facilities could actually not function. But even for the year, they should be good.

So can we expect 10%, 11% kind of margins? Or we can even touch 13%, 14% kind of margins?

That's very fine-tuning it very -- too much fine-tuning over here. But yes, 10%, 11%, yes. Hopefully yes.

Sure, sir. And sir, on the orders inflow side, last 2, 3 years, we have seen significant slowdown. And over the past few months, bearing this COVID impact, we are seeing and we are hearing of significant pickup in private as well as government sectors. So how do you see the order inflow over the next 2 years, in FY '22 and FY '23? And hopefully, factoring in there is no third wave in the country.

No. I think the order booking should be good. As you've seen in our first quarter also, order bookings continued to remain robust.

Sure. Sure. And sir, on larger -- from a strategic point of view, over the past few years, we have indexed more towards government orders, and we have entered a lot of new as well, in railways and others. And now we are also seeing some pickup in private CapEx as well from industries of cement, steel, et cetera -- sugar, et cetera. So over the next few years, how do you see the mix changing between public and -- between government and the private orders in our order book? And how will that be impacting our working capital requirements? Because over the past 2, 3 years, even if we factor in this -- even if we remove the impact of the Philippines refinery, our working capital requirements have increased significantly. So how do you see this mix panning out over the next 2, 3 years? And its impact on our working capital requirements?

So it's difficult to say, but we will not probably go beyond what we are in the government sector today. But there are good opportunities over there. We will not even fall drastically from this mix if there are opportunities in the government sector. We may not go beyond this mix. But it's not that the government will fall also very -- will come down to low 2 digits, 10%, 12%. I don't see that happening obviously. Because there is a lot of trust from the government on the expenditure -- investment to expenditure side. So one cannot ignore that.

Sure. And so the working capital cycle should not worsen from this, is what you are also trying to say?

Yes, yes.

And last question from my end. Given our scale in the EPC of around INR 4,000 crores and in -- on equipment side of around INR 1,500 crores. As a company, have we built capability and capacities to take that EPC turnover to, let's say, INR 6,000 crore, INR 7,000 crore and machine manufacturing to INR 2,000 crore to INR 2,500 crore over the next 3, 4 years? Or there will still be -- we are still building that up?

No. So if we wanted, we could have booked another -- very many more orders. But we ourselves are being selective, and we do not want -- like I think one of the previous participants was saying, we could build capabilities of going to INR 10,000 crores in 2 years, but we will be selective with the orders and then gradually increase. So both on the manufacturing and the project side, we will gradually increase and not suddenly say that tomorrow we are going to do INR 10,000 crores. That's not the aim. The aim is to grow, but to grow steadily and to grow in a way that we can deliver.

[Operator Instructions] The next question is from the line of Avadhut Joshi from NewBerry capital.

2 questions, sir. Hello?

Yes, yes, please.

Yes, yes. So we -- fortunately, we have a very long history of our company. I mean -- so just wanted your assessment as to where are we on the capital cycle as such? Do you see that we are at the beginning of the cycle, somewhere what our company had done from 2004 to 2007 onwards? Or can you relate -- are there some signals that you are monitoring, which indicates a broader level CapEx recovery of something of that sort? And the second...

Of the economy -- in the economy?

Yes. Economy and the -- and also of the company, in the sense what the -- how the order booking was there from 2004 to 2007. Do you envisage that kind of a scenario? Is there a possibility or...

Order booking. See, I am very optimistic about the future. And it's not -- I'm an optimistic person per se, but it's just not based on that. It is based on certain things that one reads and hears. So India will probably -- we're probably seeing the beginning of the capital cycle going up. And our company is well placed to take advantage of that. So barring external factors, I think -- I would say that we are in the right business and things should improve in terms of order booking and [indiscernible] .

Okay. And sir, my second question is any status update on the Philippines plant, I mean in terms of sale or in terms of...

Yes, yes, yes. So we are going to complete the Philippines plant and -- because we want the study done also, a formal study done. It's now very clear that it's going to be very profitable to run the plant. But once we've completed it and the right opportunity comes, we might even sell it. But we are going to complete and run the plant. We're going to complete the plant and start running it.

Okay. And there are no impending litigations or any prolonged litigations on that plant now from...

No. No.

The next question is from the line of [indiscernible].

Congratulations on great set of numbers, sir. I have 2 questions, sir. One is about on distillery of 110 kilometer. Have we commenced the production, sir?

No. We'll finish it by July, and then some government approvals are required. So in the next few months, the commercial production will start.

So what will be the cost of that distillery, sir?

Pardon? Sorry, I didn't?

Cost of Projects?

Kishore, will you just give the numbers?

Cost of projects of the distillery?

Kishore? We will get you the numbers. We will get you the numbers, yes. What's your second question?

Second question is regarding [indiscernible]. When it will commence the production, sir?

Maybe 12 months from now.

12 months from now?

Yes.

How much spending, sir?

About 50% of the erection -- 40% of the erection work is there. The supplies are 97% there.

The next question is from the line of Sunil Kothari from Unique PMS.

Hello? Are you getting my voice?

Yes, yes.

Sir, my question is looking at your so many years of experience on EPC products and engineering sector, which of the area internally you would like to improve upon? Where you feel you require to maybe do better than what currently we are doing? Which are the area where you see lack of some technological gap? We like to talk about the internal improvement, which you may be planning or you think you should do?

No. So I cannot talk about the internal improvements in detail. I cannot talk about it over there. But we are -- if I may say, we are continuously striving to perform better, whether it's in terms of deliveries, in terms of costs -- delivery times, cost [ times ], we are striving. We are making good progress over there. And as far as technology is concerned, we are quite alive. We have a department which keeps looking at it. We have some people who keeps looking at the new trends coming in the economy and where we should be looking for potential partners. And as -- and when anything fructifies, we inform everybody about it. So I can't talk to you about any concrete technology right now. But I can only tell you that we are alive to it and in the market for some technology. But it's with time we'd be seeing, as and when something happens, I'll tell you. But as of now, I'm not seeing in the work that we are doing, right now, I'm not seeing a huge technology gap. Yes, if we want to get into other areas, we would require to...

And sir, last question is on basically, our manufacturing products gives us roughly 30% of revenue, between 27%, 28%. Do you see over in next 2, 3 years, the major shift happening towards manufacturing our product segment? Because it's a very -- you are very competitive in terms of manufacturing products and it is giving better margin and better returns. So do you see any change in those ratios?

So what I would -- I would put it this way that we are, with marginal investments, expanding our manufacturing setup in certain lines of businesses. So what the future brings in terms of the mix between projects and -- between EPC projects and manufacturing, I cannot say right now. But yes, we are certainly in certain niche areas of our -- expanding our manufacturing base.

The next question is from the line of Kenil Mehta from Omkara Capital.

Sir, with the manufacturing margin increase, does the increase in demand for presses from North American markets?

North American market presses are no longer manufactured. They are manufactured in the Canadian setup.

Yes, yes. On consolidated basis, I'm saying.

Yes. So we've seen a very good order booking from the North American team in the Canadian subsidiary in the last few months. With those economies opening up, the order booking has been very good.

And also I want to ask, sir, why was the -- what was the reason for drastic falling margins for sugar business in this quarter, both on year-on-year terms and quarter-on-quarter terms?

Sugar business, where are -- Kishore?

I think it's a function of the quantity of sugar sold. So sugar is valued at lower of cost to market size. And we realize the margin as and when the sugar is sold. So in the previous quarter, quantity of sugar sold, including exports, was high in this quarter. There was -- we exhausted the export quota. So this quarter, we were selling only the domestic market, so the quantity was less. And that changes the margin -- I mean, that changes the turnover in margins, sorry.

Okay. Moreover, we are selling last year quota.

And sir, for our ethanol distillery, are we going to transfer sugar production into that segment for ethanol production on a large scale?

Yes. The -- so let me put it in this way. The plant has the capability of using a B-heavy molasses and producing ethanol. And as of now, yes, we will be using some B-heavy ethanol to produce -- sorry, B-heavy molasses to produce ethanol, which will reduce sugar production. But this decision will be taken almost on a spot basis depending upon the sugar pricing at that time and the sugar recoveries at that time. But yes, if the plant has the capability, and we see -- in our probability, we will be doing that. The extent of which will be variable depending upon the relative pricing at that point in time.

[Operator Instructions] The next question is from the line of Paras Adenwala from Capital Portfolio.

I had several questions, but I'll try and prioritize them. I was looking at your business segments and the segment that -- the customer segments as well. It looks like you are into several things, a whole host of things, and you touch almost each segment of the economy. Do you think there is any scope for kind of improving your focus on a few segments as far as your competencies are concerned? And also from the customer segment, do you think you can rationalize that segment and focus on a few rather than on so many?

So some of that scope -- your question is very valid. But some of the scope comes from the fact that some of our products may not be very differentiated, but can be used by a number of segments. So for instance, we manufacture boilers. Now over the years, we've learned the technology of burning various types of fuels in different sorts of technology. But it's not that one particular industry per se will use only 1 sort of boiler. So it is that boilers are used in almost all process industries. So all process industries do become our customers. And we have to do nothing very special on the product designing or manufacturing from one -- but it doesn't depend so much on which industry is going because our end product is still producing some boilers, right? So we are not dependent on the process of the other end industry. But yes, having said that, this also provides us a sort of -- if one industry is down, we get orders from the other. But your question is valid. And over the period of time, there may be some industries where we -- some segments where we see [ low ] margin business. Let's not get into it.

Okay. I'll just squeeze in one, a very short question. I'm focused on the time problem. In the last 5 years, your top line growth has been around -- CAGR has been about 4%, and the bottom line, maybe about 5% to 6%. Do you think over the next 5 years, this could improve both in the top line and the bottom line? And if yes...

Yes. It could. Yes, yes. It could because we are now into new areas. Investments are happening in the economy. And we believe that we have a greater share of the market than we had previously.

The next question is from the line of Viraj Mehta from Equirus PMS.

All of my questions have been answered.

The next question is from the line of Digant Haria from GreenEdge Wealth.

Sir, my question is on Philippines. What will be the total investment once we complete and start running the plant in Philippines? And the second question is that once you get biased, because we understand COVID was making difficult for buyers to come and evaluate. Like, do you think the value of the plant is still very much intact and we -- there is a possibility of selling it without any loss of money or...

Yes. Yes. To answer your second question, yes.

Okay. Okay, sir. And the first question, like what will be the max total capital invested?

We'll let you know. We will let you know. Kishore?

We are working on that.

While you work out that number, sir, we said that we'll run the plant. But is it more likely we'll run the plant because till we find a reasonable buyer -- because we think it's a good plant, we will run the plant and not just let it go for loss or something like that? Is that the strategy?

No. The plant itself -- the running of the plant itself is -- looks to be highly profitable.

Right. I understand, sir, but it is not our original objective to run that plant. And it was because of the unfortunate events which -- turn of events that...

I know. I know.

Yes. So but if given a choice between running and selling, if we find a good seller, we would like to sell it, right?

If we find a good seller and we get a price, which is going to give us a very, very big profit, yes, we might sell it. And we will certainly be looking for a seller because ultimately, we do not want to concentrate our energies in the Philippines. Obviously, there is some division of energies over there. But it's not that we are running it for the sake of just running it. We've done a thorough study to see the payback, the profitability and everything.

Right, sir. Great, sir. Only at the end of the call, if you can provide me those numbers, the total matched investments that will go in the plant.

We'll take our last question the line of Pritesh Chheda from Lucky Investment Managers.

Sir, 1 question. Between the stand-alone debt and the consol debt, I see consol debt at about, let's say, INR 900 crores to INR 1,000 crores and stand-alone at about, let's say, INR 100 crores or INR 150 crores, whatever be the number. So the difference in debt, if you could give the bridge, why the consol debt is high and where it stands throughout?

Kishore?

The debt is largely in 2 -- in 3 companies. Firstly, the sugar company because the season was in full swing as of March, so -- and they have a huge amount of sugar. So there is debt there or working capital debt for sugar. Besides that, there is...

Can you quantify it as well, sir?

I don't have the numbers readily. You will soon see our balance sheet on the website, yes. Or I can separately send you if you...

Okay. So that is sugar company then?

And also the economic plant under construction. So that -- there is a loan of about INR 90 crores -- INR 97 crores as of 31st of March, term loan from HDFC Bank for the ethanol plant under construction. That is one. Second is the Philippines company. That has a debt of about INR 280 crores from the Land Bank of Philippines. The third is Isgec Hitachi Zosen. That has a debt of about INR 140 crores as of 31st of March. And lastly, Eagle Press...

Isgec Hitachi is how much?

About INR 140 crores. And lastly, Eagle Press has a debt of about INR 70 crores.

And you said that ethanol plant has a debt of INR 90 crores from HDFC Bank. That is what plant in India?

That is the plant being set up in Saraswati Sugar Mill.

Okay. Okay. Okay. So -- and if you could quantify -- is this the number correct that you have INR 1,000 crore debt on consol and INR 175 crore on stand-alone. Is this number correct or...

Sir, you can check it from the balance sheet. I can also get it for you.

Whatever I could interpret from the balance sheet is what I have taken. Consol long-term plus short term, but the balance sheet are made weird with other financial liability and then there is other liability...

Total debt is about INR 880 crores.

And that is consol. And stand-alone?

Stand-alone? Give me a second.

Sir, with the new accounting method, it's very difficult even to interpret the balance sheet without asking the management actually. Sorry for that.

No, that's okay.

The previous accounting methods were good.

Stand-alone debt is INR 173 crores.

So I got that right. Okay.

Due to the time constraint, that was the last question. I would now like to hand the conference over to Mr. Renjith Sivaram for closing comments.

I thank the management for taking time out to answer the questions. I thank all the participants for their insightful questions. Sir, do you want to make any closing remarks?

Yes, thank you very much. Thank you, everybody, for attending the conference. Stay safe. Thank you.

Yes, thanks.

Thank you, participants. On behalf of ICICI Securities, that concludes the conference call. Thank you for joining us, and you may now disconnect your lines.