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

Ladies and gentlemen, good day, and welcome to Isgec Heavy Engineering Q3 FY '22 Earnings Conference Call hosted by YES Securities. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Viral Shah from YES Securities. Thank you, and over to you, sir.

[Audio Gap] everyone. And on behalf of YES Securities, I would like to welcome all for 3Q FY '22 earnings con call of Isgec. The management is being represented by Mr. Aditya Puri, Managing Director; Mr. S.K. Khorana, Executive Director and Company Secretary; Mr. Kishore Chatnani, Whole Time Director and CFO; Mr. Sanjay Gulati, Whole Time Director and Head of Manufacturing Units. We will start the call with the opening remarks, results and recent outlook by Mr. Aditya Puri. Following that, we'll have a Q&A. I would like to hand over to Mr. Puri for his opening comments. Thank you, sir.

Thank you. 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. We have uploaded our presentation on the BSE, NSE and on our website, www.isgec.com, earlier today. We look forward to a fruitful interaction. For the benefit of the new investors and analysts joining for the first time, I will give a brief introduction about our business. As you know, we are a diversified heavy engineering company engaged in manufacturing and project businesses. We manufacture process plant equipment, presses, iron and steel casting -- and iron and steel casting. We execute turnkey projects for setting our boilers, power plants, air pollution control equipment, sugar plants, distilleries, factories and bulk material handling facilities. We've also developed strength in construction. We addressed the requirements of a wide spectrum of industries, namely power, fertilizers, sugar and distilleries, oil and gas, automobile components, steel, cement, chemicals, railways and defense. Our presence across multiple industries and geographies helps us to spread any sectoral or geographical risks. There is a lot more information about our business on our website and the investor presentation we have uploaded on the stock exchanges today. Let me talk about our consolidated financial results for the third quarter of the financial year. The total consolidated revenue for Q3 of FY '22 is INR 1,403 crores, which is about 1.4% lower compared to INR 1,423 crores for Q3 of FY '21. The total consolidated revenue for 9 months of FY '22 is INR 3,915 crores, which is 1.7% higher compared to INR 3,850 crores for 9 months of FY '21. The consolidated EBITDA for Q3 of FY '22 of INR 114 crores is sharply lower compared to INR 132 crores for Q3 of FY '21. The consolidated EBITDA for 9 months of FY '22 at INR 217 crores is also lower compared to INR 375 crores for 9 months of FY '21. Consolidated profit after tax for Q3 of FY '22 INR 52 crores as compared to INR 65 crores for Q3 of FY '21. The consolidated profit after tax for 9 months of FY '22 is INR 76 crores as compared to INR 185 crores for 9 months of FY '21. The profitability has been sharply lower in the EPC segment and the sugar segment. The EPC segment has been adversely affected by the impact of commodity price increases, particularly on steel, copper, aluminum and nickel. Time will cause overrun in EPC projects due to impact of COVID-related disruptions, coupled with shortage of skilled manpower. Sharp increase in freight costs, both for purchase of materials and supply of goods to customers. And normal employee cost of increments, as you know, last year, we had salary cuts. In sugar segment, profits were lower because of lower quantity of sugar sales as there was in export this year. The profits will come in as and when the sugar is sold. Regarding sugar exports, as you know, last year, we exported a good quantity of sugar under the government's export subsidy scheme. This year, there is no government export subsidy scheme, and we've been located very far from the ports, find it uneconomical to export sugar in comparison to sugar factories located in coast areas and near to the ports. All the other factors contributed to a lower profitability. The lower profitability on the EPC segment will continue for some more time as the fixed priced long duration orders presently under execution were booked before the increase in commodities. For the newer orders, we have taken into account higher contingency and margins on costs. I will now talk about order booking. Consolidated order booking for Q3 of FY '22 is INR 893 crores compared to INR 1,468 crores on orders booked in Q3 of last year. The consolidated order booking for 9 months of FY '22 is INR 4,166 crores compared to INR 339 crores for 9 months of last year. The orders in hand on 31st December 2021, of INR 7,224 crores compared to INR 6,863 crores on 31st December 2020. The order booking position is satisfactory. Of our consolidated order book, 77% is for the project business and 23% for the product business. The order includes INR 944 for export orders, which is just over 13%. The order book for Hitachi growth is also good. It has INR 616 crores of orders as of 31st December 2021. The overall demand trend is encouraging as the inquiry position is very good. As we are well booked, we are being choosy in booking new orders and focusing on orders which offer reasonable margins. You will be glad to note that the new ethanol plant at Saraswati Sugar Mills has commenced commercial production in December 2021, which is running very well. Regarding Cavite Biofuels Ethanol plant in the Philippines, we're preparing for starting construction, but we're also evaluating some offers for the possible spill. They are still at an initial stage. We have given emphasis on vaccination and also organized a cancer vaccination at our offices and factories. 99.9% of the original manpower, our employees and contracted workers have received the second dose. My colleagues and I will now be happy to answer any questions.

[Operator Instructions] The first question is from the line of Ranjeet from Mahindra Manulife.

Congrats on good set of numbers. Sir, if I look at our quarter performance, like it's glad to see that the EPC division's margins have improved. But then when do we see this going to the normalized level? And is this in addition to this fixed price contract, is there an impact of FGD of NTPC also in this, which is leading to this lower margin?

So the lower margin will continue for a few quarters. For a few quarters, 1 or 2 more quarters, they will continue so. And this is basically because of the fixed price contracts, which are there and the unprecedented hike in commodity prices. But there are some other reasons also, as I've explained. The order booking is -- some exports is lower. Export orders normally give a much better margin. Because of COVID-and-other-related issues, people have not been able to move, we've not been able to get export orders. So we changed our strategy when export orders were not coming, which are at a higher margin. We booked orders from the PSU sector. PSU sector with payment terms are adverse, so interest costs go up. They are long contracts. Although they do have price escalation clauses, the price escalation clauses are not -- we don't cover you 100% for the -- you're not 100% pass-through. Some part of the escalation is not covered. So these are some of the reasons which led to a lower margin. But now, as we progress into successive quarters, the proportion of the orders are from the older orders, which have been taken at lower prices. They will somehow -- they will keep reducing and the newer orders that we've taken at better margins, their billing and revenues will kick in. So I think, we should start to improve. And as far as the FGD is concerned, not particularly, I would say, yes, FGD has also contributed, but not disproportionately.

Okay. And sir, we hear a lot of this policy-related angle, which is actually supporting this -- the ethanol plant, like a lot of players are putting this ethanol plant and that opportunity is huge. One of -- some of our competitors have booked huge orders in that. So are we also looking at that segment in terms of capabilities? Do we have the capabilities to participate in this ethanol-related opportunity? Because currently, as per the new policy, you can convert the sugar -- the cane juice into ethanol. And a lot of players are putting up CapEx in that front. So are we also there as a player in this segment where we can also get some fair share of the market. Because I don't see that in your order book -- orders booked.

No. So yes, we are very much there. And we should be getting some orders before the close of this year for the distilleries. We are executing some at this point in time. We're executing at least one large one we are executing. We should get a couple more before the close of this financial year. And let me say, we are close to getting some before the close of the financial year.

Okay. Because as per the initial analysis, if every sugar company goes for this 1G conversion, then probably, there will be a INR 12,000 to INR 13,000 crores of market out there. So what can be our likely share, you believe, that in this ethanol opportunity?

So do you know, as far as boilers are concerned, boilers for ethanol plants, we've been there for a long time, and we have a lot of orders for that. The ethanol plant per se, we got into later in time, and we've executed a few distilleries and we are hopeful of getting more orders. We've executed some. We are in the process of execution and we hope to get more orders. Now I can't tell you whether the market will be INR 12,000 crores to INR 13,000 by that time, but we hope whatever market rectifies that we will strive to get a 20% market share of that.

Okay. And are we participating in any future FGD orders? Or we are -- we don't want to get more orders in FGD. So what's your thought process in this FGD front?

So if opportunities come by, we will participate.

Okay. Because we saw some of this private guys and some of the smaller-state selling out FGDs. But -- so have -- did we participate in those tenders or we stayed away from this?

Yes, we are executing a large FGD for the state sector. For a particular state, we are executing.

Okay. So we are there. That means we are -- so this FGD opportunity is something which we are still on.

Yes, yes, yes. Depending on the market, yes, we are on it. We are not saying that we will not take more FGD orders.

Okay. And in waste heat recovery also, we are there. Hello?

Yes? Yes, Ranjeet?

Yes, in waste heat recovery, also, we are a prominent player. Is that understanding correct?

Right.

And last one, data point, if you can share the order intake for this quarter, what was the order intake number?

I think I said this in my speech, it is about INR 800-something crores.

INR 800 crores. Okay, okay.

[Operator Instructions] The next question is from the line of [Anish Mehta ] from AB Securities.

So I had a couple of questions on ethanol. So what is the outlook on ethanol as the demand is very high? And the second one is, what is your current utilization and the capacity for ethanol?

So are you talking about our own ability to manufacture the ethanol, the capacity over there, or to setup labs?

Sir, both, sir. If you could throw some light on.

Okay. So ethanol is a substitute is a substitute for fuel, so it reduces a valuable foreign exchange outgo. And therefore, the government has giving it a lot of impetus. Some incentives were also there in terms of interest I've mentioned for the capital expenditure. So we see that there would be a lot of factories going in for ethanol, and they're doing well because of ethanol, there is no doubt about that. As far as our capacity to do ethanol plants, we probably can do about 4 to 5 plants a year. And our own ethanol plant is 100 KLPD per day, and it's running well.

[Operator Instructions] The next question is from the line of Zaid from ValueQuest.

Sir, my question relates to the order book. So how much of our order book has fixed their price clause and how much is the variation clause, if you can quantify?

Kishore, would you like to answer this question, please?

Yes, please. So all the private sector orders, they are fixed price contracts. So that is roughly about 58% of the order book. The PSU order book that some of the PSUs actually allow for price variation clauses on certain items. The PSU order book is about 42%. They do allow price variation clauses on items like steel, fuel oil and in diesel and so on. But that's only part of the product cost. Also, as Mr. Puri had also mentioned in his opening remarks, the pass-through is not 100% because we include benchmark based on indexes. What we need to buy is actually from limited amount of the good company, good players in the market. And that doesn't really -- the price variation by these people doesn't deliver the index 100%. So to reply in a short form, 42% of the order book is from PSUs. Most of them, they allow price variation clauses. But we process is not 100%.

[Operator Instructions] The next question is from the line of [ Mayur Lalwani ] from Profitmart Securities.

I just wanted to ask what is the outlook for next quarter? Can you share your thoughts on that?

Kishore, I think you have to answer.

I think -- I don't think we are able to comment on any numbers. But Mr. Puri also mentioned about the EPC will behave almost similar to what it was in this quarter for the next couple of quarters. After which the newer orders will be under execution and things will improve after that.

[Operator Instructions] Next question is from the line of Amber Singhania from Nippon India.

My question is just a follow-up on the previous participants on the order book front. As you mentioned, 58% of the order book is fixed price contract of total INR 700 crore orders. And at the same time, in the opening remarks, you mentioned that in other 2 quarters, you will be through with the lower-margin fixed price contracts? So just wanted to understand, out of this 58%, how much of the projects, or much of the orders are old price contracts and how much is already building on the current pricing? And secondly, once through with all the products in the next 2 quarters, what kind of margin trajectory you see for the company on a sustainable basis?

So what we are saying is that after a few quarters, the proportion of these old contracts will reduce significantly. That is our point. At this point in time, we will not be able to exactly tell you how much of those fixed price contracts are new or old. I don't think we have the figures readily available right now. But we hope to see improved margins after a couple of quarters coming in. And they should improve from the current levels. So we hope that more export orders will come in. And these orders taken at lower prices could start getting built.

So sir, would it be fair to assume the orders which you have got in last 2, 3 quarters are already built at a price which you factored in a complete price escalation, which has happened in the current scenario? And also, we are still being...

It will be the last 2 quarters here.

Okay. So sir, what would be the sustainable margin on a longer-term basis, where any trajectory, if you can give us like -- would it be fair to assume like we would be in trajectory of margins on an estimated basis or longer-term horizon?

I don't think we should. We will be able to give you any guidance on the margins, except to saying that they will -- except for saying that they will improve.

Okay. And just sorry to again hop on the margin, but on the sugar business, as you mentioned that last year, there was an export incentive, which was there, this year, it is not there. So going forward, assuming that these incentives will not be there, would it be fair to assume the margin you see are flocking in Q2 and Q3, roughly around 13%, 14% of EBIT margin in sugar business is something which is the normalized margin?

Kishore?

Let me answer that. So it's not that the margins were getting improved because of the exports. Somebody is speaking in the background, I'm not able to answer very well. But nevertheless, let me repeat. In the case of sugar, it's not -- it is not that the export we are offering more margins. It was basically compensating for a lower price in the international market. So the effective price at which we were selling was roughly the same as the domestic price. The difference is in the quantity of sugar that we sold. So because in exports -- in domestic sugar, as you know, there is a government quota and we are allowed to sell only that much. Once the government decides, based on their understanding of demand and supply. But in the case of export, we've sold more quantity last year. This year, that quantity has not been sold. So the sale has been down. Obviously, that quantity will be sold over the months as and when the government gives us the quota. The point is that the inventory is valued at lower of market price and cost price. So inventory is valued at cost, the market price is higher, the margins will get realized when the inventory gets sold. I hope I have been able to...

Got it. Sir, and lastly, just last question from side is on the ethanol side. We have started this plant recently, correct me if I'm wrong, this, KLPD plant. So within the scale of broad economics of this plant on a full-scale basis when we expect this to be operational on 100% capacity and what kind of economics it will give in terms of revenues and the profitability on a normalized working?

So that -- the financial figures will be available to us at the end of the quarter. But barring a few days when weather in Northern India was very bad and the super factory outside to be stopped because of excessive rains came not being available. The distillery is already running at 100% capacity.

Sir, just on a -- as a thumb rule, 100 KLPD plants gives -- can give what kind of revenue, sir, on a full-scale basis full year?

About, I think, INR 180 crores to INR 200 crores. Okay.

[Operator Instructions] The next question is from the line of Deepesh Agarwal from UTI MF.

Congrats for managing tough times well. My first question is, can you help us with some of the order inflow prospects. As we can see, in the last 2 quarters, your order inflows have not been exciting despite strong ordering in your industry.

So do you know, as I said earlier, because of the price hike, commodity price hike, we have become choosy in taking orders? And we've also -- and we've done it because we are fully booked. So we are fully booked, and it doesn't make sense to become aggressive in taking orders at this point in time when the commodity prices -- to take orders -- we did not want to take too many orders when the prices are volatile. So that is why the order booking is slightly low. The market is growing, but we are comfortably booked. So it should be okay. It's been a conscious decision.

Okay. Okay. Can you help us what percentage of your order book would be from, say, noncoal-based boilers or something which you will term as a green kind of orders?

So boilers, I suppose, just within the boiler segment, I don't know, I cannot disclose the figures to you. But within the boiler segment, I think maybe 50% of the orders are from noncoal-based boilers, even more.

Okay. Okay. Any road map you have in mind in improving the green offering for Isgec in the near future?

Yes, we are looking at a couple of things. We are evaluating a couple of things and we would like to -- we don't want to disclose them right now.

Okay. Okay. And sir, lastly, sir, can you highlight what is the ultimate road map for the Philippines project? You have been guiding for starting work in this project since a couple of past quarters. But nothing seems to be moving on ground out there. So what is the challenge out there? And how will you get out of this?

Yes. So as far as the Philippines project is concerned, the COVID is, I would think that it prevented us from going into construction. We are ready to start construction. At the same time, we have some offers for people to purchase it. So I will -- we'll take a decision very soon, maybe in the next couple of months, either to start the construction or to sell the plant. We are also now reducing, and we think that, practically speaking, it would be -- we would be in a position to start construction if we wish to do that.

The next question is from the line of Samir Rachh from Nippon AMC.

My first question is I just wanted to know what is the total debt as of December?

Maybe, just additional louder, sorry for that. I couldn't hear you.

Total debt. He wanted to know the total debt as of 31st of December. So the net borrowing on a stand-alone basis, INR 226 crores as of 31st of December. It is INR 16 crores higher than it was on the 30th of September. So the incremental borrowing during the quarter is INR 16 crores on a stand-alone basis. On a consolidated basis, the net borrowing is INR 756 crores.

And how much it was in September?

It is down by about INR 100 crores since September.

Okay. And my second question is in reply to your previous participant's question, you said that like regarding Philippines sugar plant, you -- like one option is that you complete the construction and other option is you sell out, right? So in case you decide to complete the construction, what is the more amount which you'll have to spend?

Kishore?

So the amount that needs to be spent -- so we have a loan sanction from StanChart of about 24 -- pardon me, I shouldn't have named the bank. It's about $24 million. That's the loan that we have sanctioned from the bank. So it's about that amount.

Right. So basically, like if we decide to go ahead and complete the construction, then we'll sell only after construction is complete, right?

Yes. So it's a call that we have to take -- as the construction keeps going on, probably the valuation will keep moving. So that's a call that we will take. Yes. But if we start the construction, most probably, we'd sell it after the construction is completed.

Okay. And once the construction start, how much time it will take for us to complete this?

12 months. It could complete in 12 months.

So basically, like maybe like 12 months from now, we would have, either way, either we would have completed the construction and then maybe we're getting more attractive offers or, perhaps, you may decide to go and sell now also. So within next 12 to 15 months, we will have certainly like ahead of this transaction.

You're right.

And sir, like now like, as you explained to previous participants that raw material price is very volatile, so you were a little like slow in terms of booking the orders. But now like since the large part of price hike has already happened, and also, I think budget was one, which was expected to fuel the CapEx. So how we are seeing overall order pipeline? And will you be more aggressive now in the coming quarters? Or you still want to wait and see?

We will not -- we will certainly be more -- let me furnish about it, the commodity price hike has sort of forced us to look very carefully -- much more carefully at the even cost because -- so we will be choosy, but we will take orders. We will not let order booking be a deterrent to either our sales and profitability. So we think that the commodity price hike may be behind us, and we can certainly become a little more aggressive in taking orders. And this is subject to capacity being available.

Right, right. And then lastly, in terms of capability building. So again, you highlighted that you're trying to build some capabilities in the green -- on green energy front and all. So which are the newer areas where you would want to have capabilities and where competition would be less and we will have some technological edge so that we don't have to really like take orders at very low margins?

So do you know, we are in the continuous process of evolving as far as technology is concerned. And we are also in the continuous process of looking for new technology. So I will not be able to name anything in particular. But all I can say is that the last 2 years have brought about a lot of changes in the way we think the future will be. And we are sort of gearing ourselves to be a part of that story.

The next question is from the line of Manish Goyal from Enam Holdings.

Sir, a couple of things. When I look at the stand-alone and consolidated numbers in the manufacturing segment, we see that seems to be subsidiaries have done really well in this quarter. So maybe if you can just -- despite turnover not growing so much, so I wanted to just understand as to what has led to such a significant improvement in the PBIT for the subsidiaries.

So the subsidiaries have had a good order book. We have built capabilities. [indiscernible] So one subsidiary is sugar. Sugar, we just explained that, actually, the profit was slightly -- was lower.

No, sir. I'm asking particularly for manufacturing of machinery and equipment.

Machineries? Okay. Okay. Sorry. So the main subsidiary over there is Isgec Hitachi Zosen. The order booking is good. The turnover was good. They're venturing into -- they ventured and they have delivered more complex equipment with better margins. So that -- in the manufacturing segment in the subsidiaries, that is something that has caused an improvement basically. The subsidiary is...

Basically, Isgec Hitachi Zosen, as we had mentioned in the last quarter, they had substantial equipment ready for dispatch, which were not being lifted by the customers due to transport problems are continuing in some other regions. So obviously, the margins get booked only when the equipment gets sold, dispatched invoice to the customers. So in this quarter, the loss in the previous quarter in this company and the profit in this quarter were both related to the dispatch. So last quarter, the dispatches were less. This quarter, the dispatch has picked up. All the equipment, which were ready were dispatched.

Okay. Okay. And what was the order book of Hitachi Zosen averaged in the initial remarks?

INR 616 crores.

INR 616 crores. Okay. So that is quite a good improvement on a sequential basis also. So and second thing on the other income, which is down in the consolidated, is it due to last year in the other income we had sugar subsidy element, that is why it is down?

Yes. That's right, Manish. Some of that was appearing as other income. Some of the subsidy was appearing as other income. That's right.

Okay. Okay. And just like -- just to get a better perspective, no doubt a couple of participants have asked. But maybe like order pipeline wise, especially in exports, how do we see -- because last couple of years, export inflows, order inflows has been quite low. So are we seeing improved prospects? And also if you can comment which areas you are seeing this improvement.

Yes. We are seeing and we think -- and our people have begun to travel last quarter also, I said that they had begun, but then again, as you know, a lot of countries imposed restrictions because of Omicron and the COVID-related restrictions. So they have started traveling, and we think the next couple of months, we should be able to book good orders. And this is Africa, Southeast Asia, basically. And for some segments, there could be some orders in Europe also, but not a high amount from Europe.

Okay. And sir, how is Eagle Press doing now? Has it probably recovered from the losses?

So as I have said last time, this year is going to show some loss, but we hope that by next year, it should be positive. This year, because of the Canadian-U.S. border being shut, we could not get lots of orders from the U.S. But things have opened up in the last 1 month in that part of the world, and order bookings have also been good for you.

Okay. Okay, sir. And sir, last question on the order inflow number, if Mr. Chatnani, if you can just repeat the order inflow number for the current quarter and comparable and 9 months also. It was not [indiscernible].

So current quarter, the consolidated order booking was INR 893 crores. The number was INR 849 crores for the previous quarter, September quarter. And the 9 months looking at INR 4,109 crores.

And what was the comparable number, sir?

Comparable number 9 months last -- the previous year was INR 3,390 crores.

The next question is from the line of Anurag Patil from Roha Asset Managers.

Sir, how much investment we have done for the 100 KLPD distillery?

Kishore?

The investment, including GST, which is going to be recovered as we said, is about INR 178 crores.

And sir, a similar investment till date in the Philippines Biofuel plant, what is the number there?

Philippines, we haven't done an investment as yet in the sense that when we bought over that group of companies, we bought it over for only $100. But we have been owning it and taking care of the plant and salaries and insurance and those kind of things. So up to now, we have spent about INR 49 crores as a loan in the last 2.5 years.

And sir, what would be the quarterly fixed cost there?

About INR 6 crore, INR 7 crores, please.

The next question is from the line of Anshul Saigal from Kotak PMS.

In this period, the last maybe 2, 3 quarters when we've seen raw material prices go up so much. And our margins have compressed as a result. Is there some -- I mean, are there some checks and balances we can bring to the business to ensure this doesn't happen again? Or this will remain the model and this volatility will, in times of raw material volatility, they will -- this will come up every such time?

So we are aware of the fact -- or we were always aware of the fact that steel prices and other prices could go up, but not to the extent that they have. So we always used to keep it -- and we've always kept a contingency margin. We always keep a contingency margin when we take an order for these sort of hikes. But at this time, it was unprecedented. So there are various strategy measures that we are looking at to see how this effect can be mitigated. Although I have to contest that it cannot be brought down to 0. But including keeping a higher contingency entry into back-to-back with the steel manufacturers, although they are not very conducive to such a derailment these days because prices are going up, so these are -- they will be sacrificing on their margins. And we have also seen hedging of steel and some metals like copper, aluminum and nickel, if that is possible. So we're exploring all the possibilities to see if we can minimize the effect of volatility, which could be positive or negative effective on volatility. So we are trying to see if we could minimize that.

Right. My second question is with regards to Hitachi Zosen. One, when does the contract gets renegotiated with Isgec? That is one. And second, the consolidated uptick because of this subsidy in margin, is that a one-off? Or we are likely to see this to be a trend going forward?

So as Kishore had said, this year -- this quarter, there was also the effect of the previous quarter equipments not being lifted in that quarter because of shipping arrangements, which were to be made by the customer, not by Isgec Hitachi Zosen. And as far as the agreement is there, the agreement is continuing and we don't see a break to that agreement in the near future.

Okay. On the Philippines question and what you mentioned that you have to decide in the next few months whether you want to sell or you want to complete the project and then sell it. What will be the decider on that decision? Meaning how will you -- what is the tradeoff? And what will make you decide one way or the other?

The offer, the offer, how good is the offer and what is the security of the payment.

And since you mentioned that you have been in some discussions already, has an offer been made? Or this is just discussions on due diligence?

I don't know whether I can disclose or not. Kishore, I don't know. Kishore?

We are just considering some offers. That's what -- we're evaluating now.

Okay. Got it.

But it is -- initially, you must recognize that it's in initial stage. If something is going to happen, we will inform in due course.

Yes. And my final question, actually, on the margins -- and this question of volatility because of raw materials. I think 2 quarters back, the general belief that the Street had, but this volatility will continue for 2 quarters, which meant that this would be the last quarter. But now it looks like in the ensuing maybe a couple of quarters, this volatility will sustain. What has led to this sort of a development?

This is a question for the PSU thesis that you've asked, volatility in commodity markets.

No, no, no. I'm not asking about volatility in the commodity markets. I'm saying that -- I mean in the con call, 2 quarters back, it was mentioned that this volatility, for us, for our business should continue for 2 quarters. And it looks like it's broadly extended a little bit. So I just want to understand where is the difference in assessment?

There had been a hike in -- there was a volatility in the commodity market a few months ago also. So it actually only stabilized about 40, 50 days ago.

The next question is from the line of Nishith Shah from Aequitas Investments.

Sir, we were in the process of debottlenecking some of our manufacturing facilities. So what is an update over there?

So we were expanding one of our units. That unit has got -- the expansion is over and production has started in full swing and that thing. But these things contribute towards a much smaller part of our total revenue. But yes, the expansion was finished a little before time. The production is happening, yes.

Sir can you quantify how much will it increase our revenue rise?

Manufacturing, maybe about INR 50 crores, INR 60 crores.

Okay. And sir, my second question will be that since you are seeing good demand across, so are we planning more CapEx in this division?

Let things stabilize. Yes, we do have some proposals, let me call it further investment, but we haven't taken a final decision and they're not big numbers in terms of investment.

The next question is from the line of [ Upkesh Somya ], an individual investor.

Can you please throw some light on the FGD opportunity in India and how the company is placed to benefit from it?

So the major FGD orders have been done. Now some state governments are coming up and some private sector, people are going to go into FGD. That's what the market tells us. So the company is poised to get -- the company is there in FGDs? It's not withdrawing itself from FGDs. It's going to be participating in the market and hope to get some models.

Okay. Now how big is the FGD market?

So I will not be able to give you numbers because now it's in the hands of -- see where it is NTPC making the investment, one is very clear, how many plants wanted -- needed FGDs and what was their time frame for ordering. Now it's -- the market is a little more fragmented, but it's still in thousands of crores, I can tell you that.

So can we assume this to be a multiyear opportunity, if not for the company, then for the industry?

Multiyear opportunity? Is that what you asked?

Yes. Because their deadline is 2024, right?

Yes, but I don't think everybody is going to be ready by 2024, honestly speaking, if you ask me. The government will probably extend it.

The next question is from the line of Ranjeet from Mahindra Manulife.

Just a clarification. You told this INR 178 crores, which we had invested for the distillery, that will have a top line of INR 180 crores to INR 200 crores, right?

So this INR 178 crores. It includes GST. It also includes some investment that we made in improving our boilers, changing some boilers and some -- it's not pure distillery. It is distillery plus some changes in our boilers and cooling towers and so on and sometimes for storage.

And for this, we have -- we are planning to convert the juice into ethanol? Or is it like C-heavy molasses?

So the distillery is capable of doing everything, but we are right now, working on the heavy molasses.

Okay. So we are still not considering to convert the juice in this.

Not right now. It depends on the economics of it. Because there are different prices fixed for ethanol from various -- from different sources.

Okay. So probably, it can contribute around INR 180 crores to INR 200 crores in terms of top line.

Yes. Yes.

So around 3 years of payback.

That is for you to conclude.

Okay. Okay. And sir, one more thing, which I was looking for some clarity is that what will be our CapEx for this year and next year, excluding this distillery? Is there anything else that we are planning to increase capacities?

No, we haven't firmed up from that, and it's not going to move the CapEx, it's not going to be very easy.

And this auto is currently picking up. So are you seeing signals in terms of our press machine? Because that is related to auto. So are you seeing an increased amount of inquiry in our press division?

Yes. Yes. Yes.

Okay. And you have mentioned this oxygen plant in your order intake. Is that a big number or it's a smaller kind of a size? 25 oxygen plant.

It's something new that we did, and we did it in record time. So that's -- we put it, it's not a very big number.

The next question is from the line of [ Vikrant Arya ] from Green Edgewell.

My question is that in the project division, in the last 4 quarters, we have booked a revenue of around INR 3,420 crores, which is less than what we did in the last 2 years. So despite this record order book, our execution in the project division has not reached a record level. Is it because there were COVID-related disruption? And can FY'20 be free from all these disruptions? Can we see a much higher execution number?

Yes, you're right. And I would also like to point out that in the project business, particularly, it's not only the COVID period when work doesn't happen at site or it didn't happen at site. But it's also a fact that a lot of government offices and all were not functioning. They did not give approvals, withdrawing approvals. So given the whole schedule gets disturbed because of that because once withdrawing approval comes, you manufacture things then the COVID period comes. So in many things -- many times, the effect of COVID multiplies. Because during the COVID period, you can't work at site. But because during the previous COVID period, approvals were delayed, material is not ready to reach the site before the COVID period or after the COVID period. So COVID has really distorted operation.

Got it. Sir, so FY '23, even if we have to do like INR 4,000 crore, INR 4,500 crores of execution, we have the capability, right? If all these external forces are in place.

Yes. Yes.

Okay. Okay. Sir, and second question is mainly on a lot of other companies are also reporting record orders and execution. So are you facing any neighbor-related challenges or not, just at the lower level, but even at the mid-level, say your engineers and that -- anything just discussed?

Nothing significant. It's not impacting work.

Okay. Okay. Okay. Sir, and last question, a lot of participants have asked, but I will just delve a little further that if steel prices were to go up further, will the hit be lower than what we saw in the last 12 months? That's one. And second is, at an industrial, are you seeing anything -- any change in the way other players are also behaving with respect to this passing on of the steel prices? So that's it from my side.

No. So we are not seeing any change that way. I don't know what the policies of other companies are. But the point is that we have to look in-house and see how we can minimize the impact of this sort of volatility.

[Operator Instructions] The next question is from the line of [ Ritika Gupta ], an individual investor.

Sir, I wanted to know that the private sector orders that we have, which represent 58% of our order book, do we have any clause in them which will account for commodity price fluctuations?

Very few. Very few. Very few order book.

Even the new ones that we are booking, like the INR 800 crore order book that we have for this quarter include that we have for this quarter, so we do not have commodity price fluctuations covered in those?

Right. Because the point is that you are in a competitive environment. So if your competitors are not asking for a commodity price hike, you also cannot -- you cannot become rigid on that.

Okay. And so these new orders are being put -- are being taken, keeping what margins in mind?

Higher margins, higher contingency.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Viral Shah for his closing comments. Thank you, and over to you, sir.

Thank you. Thank you, everyone, for participating in the call. And we once again thank the management for giving us an opportunity to host the call. Sir, any closing comments from your end?

No, thank you so much. Thank you for attending the conference, and wishing you all -- everyone all the best. Thank you so much.

Thank you. On behalf of YES Securities, we conclude today's conference. Thank you all for joining. You may now disconnect your lines.