JMC Projects (India) Limited (KPIL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Kalpataru Power Transmission and JMC Q1 FY '21 Earnings Conference Call hosted by IDFC Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Bhoomika Nair. Thank you, and over to you, ma'am.

Yes. Thanks, Ayesha. Good morning, everyone. On behalf of IDFC Securities, I would like to welcome you to the Q1 FY '21 earnings call of Kalpataru Power Transmission Limited and JMC Projects. The management today is being represented by Mr. Manish Mohnot, our Managing Director and CEO; Mr. Ram Patodia, President, Finance and CFO; with Mr. S.K. Tripathi, Deputy Managing Director and CEO of JMC Projects; and Mr. Vardhan Dharkar, CFO, JMC Projects. I'll now hand over the floor to Mr. Manish Mohnot for his opening remarks, post which we'll open up the floor for Q&A. Over to you, sir.

Thank you, Bhoomika. Good morning, everyone. I trust each of you and your dear ones are safe and healthy. I'm thankful to you for your continued interest in attending this earnings call of KPTL and JMC. Before I move into the details of our financial performance for quarter 1 '21, I will quickly share an update on business operations, key strategic initiatives and how we are gearing ourselves to move ahead in these challenging times. Both KPTL and JMC have reported noteworthy performance in the midst of a challenging environment. We started to witness partial recovery from May onwards and a good recovery starting June. All of our sites are fully operational with productivity levels of around 90% in KPTL and around 75% in JMC. Our plants are already nearing 100% utilization, and we plan to recover our production losses in the second half of '21. Labor availability at site continues to improve as we move ahead in Q2, and we believe in the next few months, we should be at pre-COVID levels. We expect site operations to normalize and achieve pre-COVID status getting into Q3 '21. We have implemented stringent guidelines and COVID SOPs at sites and office, ensuring health and safety of employees. We are advocating work-from-home for most of our office staff. But as far as sites and plants are concerned, people are at the sites and the plants. Our investment in technology-backed operations has increasingly helped us to run smooth operations during these testing times. We'll continue to move ahead with the agenda to implement mechanization for site-level activities and automation in our plant operations. We are now aggressively implementing various cost optimization initiatives to maintain and improve profitability, both in KPTL and JMC. We have made significant progress on sale of our T&D assets. We have signed definitive agreements to sell Jhajjar and Alipurduar Transmission assets and have successfully commissioned Element 1 and 3 of Kohima-Mariani transmission asset. We expect to close sale of all T&D assets in '21, subject to requisite approvals. We plan to use proceeds from sale of T&D assets to lower our debt as we target to become debt-free company by end of FY '21. In JMC, we moved ahead in terms of reservation of road BOOT assets. We have made good progress on restructuring of 2 of our road BOOT assets. We expect definite outcome on a couple of road BOOT assets in the second half of financial year '21. This steps, along with a strong order book and L1 position gives us the confidence to achieve revenue and profitable guidance for both KPTL and JMC in 2021. Getting into more details on our performance. First, at stand-alone level. At KPTL, revenue and profitability growth was impacted by lockdown and restrictions. Revenue for Q1 was INR 1,459 crores, and our T&D business remained flat. Our Oil & Gas and Railways business declined by 20% and 35%, respectively. Our subsidiary, Linjemontage, reported a revenue growth of over 100% to INR 272 crores for Q1. As guided earlier, we expect KPTL to deliver revenue growth of 5% to 10% for full year '21, and we are sticking to our guidance as of now. Our core EBITDA was INR 156 crores in Q1 '21 with 10.7% EBITDA margin even after a full month of loss on productivity. Our PBT at INR 101 crores and PAT at INR 69 crores is what was expected around COVID times. Our net borrowing at the end of June 2020 declined -- '21 declined to INR 765 crores compared to March '20 and June '19 quarter on back of good working capital management. We are on target to be a debt-free company by end of financial year '21. Our order book as on June 30, 2020 is at INR 13,522 crores. This is excluding new orders of INR 604 crores received in Q2 and declared yesterday. Our order intake till date in financial year '21 is INR 2,470 crores. Incrementally, we have a L1 position of approximately INR 1,000 crores as on date, which is majorly an international T&D business. At JMC, our revenue for Q1 '21 was INR 470 crores compared to INR 904 crores in Q1 '20. Decline in revenue was due to lockdown given the pandemic. However, we remain confident to scale up our execution and deliver positive growth for full year '21. This is a big commitment, which we're giving to shareholders and stakeholders. And I think as a team, we are confident that both JMC and KPTL, we would be growing in the current year as compared to the previous year. Our lower turnover and nonrecovery of cost has affected profitability in JMC. Our core EBITDA for Q1 was INR 28 crores with margin of 5.9%. Our net debt at INR 819 crores at the end of June 2020. Our interest cost in absolute terms has declined to INR 29 crores compared to INR 34 crores in Q4 '20 for JMC. And our average utilization of debt remained lower compared to March '20 level. As for our guidance, we will maintain debt at around INR 800 crores by the end of '21 for JMC. At JMC, our order book is INR 11,412 crores at the end of June 2019. Our order inflow till date is around INR 3,432 crores, largely driven by commercial B&F and water projects. Additionally, we have L1 position of around INR 1,700 crores. So at JMC, on the order book front, we have visibility of around INR 5,000 crores, which is equivalent to what we got in the entire previous year. Our road BOOT assets witnessed slowdown in traffic due to restrictions of movement of people and vehicles. Our average daily revenue was INR 36.6 lakhs per day in first quarter '21 even as compared to INR 58.5 lakhs per day in Q1 '20. This should slowly improve, and we expect by Q3, we should be back on track. At consol level, KPTL consol revenue for quarter 1 '21 was INR 2,330 crores and consol core EBITDA was INR 269 crores, with a margin of 11.5%. PAT was INR 28 crores. Consol order book is around INR 24,934 crores, which is well diversified across T&D, B&F and other infrastructure business. Our YTD consol order inflows is around INR 5,900 crores, with L1 in the range of INR 2,500 crores. Our order visibility across all our businesses remain good, giving us reasonable confidence to deliver on our growth targets. At Shree Shubham, revenue for Q1 was INR 33 crores, EBITDA was INR 11 crores, and they have delivered profitable numbers, both at PBT and PAT levels. We expect them to continue being profitable going forward. Thank you, once again. I'm happy to take your questions now.

[Operator Instructions] The first question is from the line of Renu Baid from IIFL.

I have 3 questions. My first question is, if you can help us give some insight on the revenue patterns. You did mention of the growth numbers. But within T&D, how is the performance of domestic and international T&D? And overall, what was the revenue mix in terms of split across all the 3 segments?

So you want to finish all the 3 questions? Or you want me to answer?

Sure. The second question is, despite a fairly strong profitable performance of TL of 10.7% in 1Q. Any reason why for the full year, we're still keeping the expected guidance flat at 10.5% to 11%. So are we expecting any headwinds in the second half with respect to mix? Or it's more to be on the conservative side? And the third question is on the ordering outlook. How are you looking at the order inflow and project closures on the domestic market? In specific, with respect to the Rail EPC business, I think we have seen some circular being floated around within the zonal offices, putting a lot of new project awards in abeyance. So do you think there could be a headwind for domestic rail orders in this year? And how are we targeting to scale up inflows for the current year?

Okay. So Renu, the first question in terms of how was the growth as for the TL and other businesses, so if you look at the actual quarter 1 in financial year 2021, the TL business did a revenue of around INR 950 crores, which was a growth -- slight growth as compared to last year. Last year, they were at around INR 930 crores. If you look at the Railways and Oil & Gas and the other businesses, they were at INR 718 crores in last year Q1, they were only at INR 511 crores in the current quarter. But they will come back and pick up growth. You need to remember that as far as TL business is concerned, there's a plant which supplies. There's a bought out, which is significant, whereas our Railways and Oil & Gas has to do a lot with site operations. On an annualized basis, we are confident that both these businesses would have a definite double-digit growth, both Railways and Oil & Gas, and TLI will also continue to be at double-digit and TLD could be anywhere between 5% to 10% growth on an annualized basis. Second, on the margin front, Renu, I think we still believe will be at 10.5% to 11%, primarily due to the volatility. The volatility in the current environment is so high. I'm not sure, but if you're aware, but for example, last 15 days, steel prices have gone up by INR 2,000 to INR 3,000, right? And they were lower by that same amount a month ago. So we, as of now, want to be slightly conservative on that. Yes, we're confident of 10.5% and 11%, maybe more towards 11%, given the cost -- focus on cost reduction initiatives. But the volatility is something which we need to be very watchful of, whether it's on commodities, whether it is on FX, whether it is on labor -- the labor prices at the site level and any of those. So I believe 10.5%, 11% is definite. Yes, if we can improve, we definitely would focus on that. On your third question, which is visibility of order book, as I said earlier, transmission, we still see a lot of tenders. Tenders got deferred in the last 2 months. They've all been announced, but they've got deferred in the last 2 months, but all of them have come for bidding in this -- in August, September. TLI continues to be -- we have continuous bidding in a lot of countries globally, and we're also L1 in 1 large tender at a global level. Railways, yes, we have also seen that circular. I'm not sure that, that actually applies to the plan on the electrification side and the expansion side. We're still bidding. We bid for 2, 3 large EPC projects in the last 3 weeks. Right? And that was totaling to around INR 1,500 crores to INR 2,000 crores. So whatever is planned in terms of electrification and expansion, I don't think they're going to put that on hold. It's more for the smaller zonal railway projects, which happens on smaller initiatives where there could be some restriction. So we're very confident that from an order book perspective, reaching that number of INR 9,000 crores to INR 10,000 crores, given that today, we have visibility of around INR 4,000 crores, should not be a challenge. But we would like to be cautious. Because of the environment, volatility is high, competition is high, so we would like to be cautious, but we remain confident of achieving what we had planned.

Sure. And sir, if I can ask one more question. On the recent implications of restrictions on sourcing from China by PowerGrid and some of the domestic large T&D entities. So many projects are going for retendering. So do we expect the overall pricing environment to improve for us? Or there could be a bit of -- or it could be a mixed bag?

So I think this will have very minimal impact on us as far as Indian projects are concerned because anyway, on the T&D and subscription side, while there were some Chinese suppliers, it was not that they were predominant like some other sectors. So it would have very minimal impact as a contractor, but developers, there could be some impact. But for EPC contractor, it would be a very minimal impact. You'll follow whatever guidelines is prescribed by PGCIL or by the Government of India or by any of the agencies for which we're submitting the tender.

The next question is from the line of Renjith Sivaram from ICICI Securities.

Contracts on good numbers, better than expectations. For this transmission line, you had mentioned that Q1, we have grown, but how about the split between domestic and overseas? How has been that? How has been the domestic and how has been the overseas transmission?

So Q1 overseas transmission did much better than domestic in terms of performance as compared to the previous year Q1. So the transmission international grew by revenue of around 12%, 12.5%, and in domestic grew at the level of around 5.5% to 6%.

Okay. So going forward, will it be more overseas now because domestic in terms of order book composition is also a bit lower in the transmission. So how do you see that? And also, we are seeing some of the projects like Green Energy Corridor, we are hearing that it's planning for rebidding and probably it might get delayed. So will it be more of an overseas now, at least for the next 2 to 3 quarters?

So Renjith, from a revenue perspective, I don't think the mix is going to change significantly because we have visibility of order books for the current year and significant portion of next year. From an order inflow perspective, yes, you'll see a lot more TLI coming in. And as you saw, Q1 was primarily TLI and small TLD. Q2, till now has been primarily TLI. Order book inflow, yes, Q2 will still continue to be TLI and Oil & Gas. And clearly, order inflow visibility might start from early October, getting into December. But from an overall revenue and plans perspective, I think we'll still be there because current year revenue is based on order book, which we already have, even next year revenues order book visibility we have. Infra, yes, slight delay could be there on the domestic front.

And is Linjemontage making profit?

For sure. Yes, they've delivered some very good set of numbers. Their EBITDA from the time we took it has gone up significantly. They are at 5.5% to 6% EBITDA levels. They've doubled their growth as compared to what they were on overall basis, and their EBITDA and PBT are very similar because the European side, the interest flows are very, very low. So they're doing exceptionally well, and we have a lot of visibility there, which will help us further strengthen our position in Sweden, Norway and the entire Nordic countries.

Okay. And regarding the balance sheet, the debt -- the 0 debt target for March 2020, is that on? And what's the status of those asset sales which we were planning? Where are we now?

So Renjith, March 2020 is gone. But yes, March '21, we definitely need to be on our target. Signed binding agreements on our asset sale, and all of them are commissioned except for 1 small line at Kohima-Mariani which is expected to happen in the next -- whenever we get a 15-day window, we'll be, that line will also be done. All approvals are at advanced stage. And at least on the couple of assets, we expect approval to come in between September and October, so that the cash flow should come in anytime between December to Jan. We still -- we remain committed to what our plans is, to be a debt-free company at the stand-alone level by March 31, '21.

Okay. Because I think CLP is not. Because it's a Chinese company, they won't be allowed -- is there any hindrance in terms of a sale to them because currently Indian government is at least having an anti-China stand. To the CLP agreement, is there any risk to that?

As of now, we've not heard or seen anything as being a risk to that. We are watching. We are seeking all the approvals. We -- as of today, to me, that does not look like a risk, but in case there's any developments, we'll come back to everyone. But as of today, it's on track.

The next question is from the line of Swarnim Maheshwari from Edelweiss.

A couple of questions. Firstly, sir, at the beginning of the call, you mentioned about the cost optimization that you have actually started doing. I mean if you can just share some more color on that? What exactly are we looking at? And how much of it could be sustainable?

Okay. So I know this has 2 aspects. One is to quantify how much cost optimization we'll achieve. Clearly, if you are saying that even after losing 2 months of revenue and even after paying everyone, all our laborers, all our employees, all of that, if we are targeting 10.5% to 11% margin still to come, clearly there's a significant amount which comes in from there. Cost optimization primarily is driven by 2 or 3 aspects, right? One aspect is productivity at the site level. What more can you do, can you reduce the subcontractor rates, can you bring in mechanization? Because you've now recently seen that you can work with less people, right? You can work with automation. You did that in May, June. Can you continue doing that? The second aspect comes in is the entire focus on traveling, the entire focus on CapEx, the entire focus on recruitment, right? Because work continued without travel. Yes, some things suffered. But I think there's a mindset which is that you don't need such large offices. You don't need to be traveling as much as you used to be traveling. You can still work remotely. You don't need to be doing a lot of things, which was being done in the past. And those are big numbers. To look at our number of travel, it was INR 250 crores number annually, right? To look at our rent number, it's a number of similarly INR 30 crores to INR 40 crores annually, right? And savings on that would be significant and would be more long term because this is a mindset which has come in. Third aspect is coming in interest cost, where I think for people like us with good credit rating and with good history, I think funds are available, even long-term funds are available at a very attractive rate, both on domestic as well as foreign currency. So with the combination of the 3, 4, it should be a significant number. I don't want to quantify it today. I can say that Q1, we have done exceptionally well. In Q1, we've got our saving, which has been -- which has been closer to what we had planned. But on annualized basis, maybe by Q3, Q4, we should be able to quantify that number. As I said, a lot of that is permanent in nature. Some of them could be temporary in nature. Two months, there was no administrative cost, no one was in office, but that's temporary. But a lot of it is going to be permanent in nature.

Fair enough, sir. I understand that. So sir, I do believe this should actually cushion us for any volatility because of the margin headwinds -- of the commodity headwinds that is likely to come over the next 2 to 3 quarters?

Yes, for sure. So that was -- I was just answering Renu in the first call, saying that we still want to be focused on 10.5%, 11%. Yes, if we can do well, we'll come back and say we've done well, right? It's always good to do better than what you had targeted.

Fair enough, sir. Sir, secondly, what is the status on actually our international diversification in the Railways and the Oil & Gas projects. So where are we over there?

So on the international business, on both these divisions, I think we have now moved into Stage 3. Now how do I define Stage 3? Stage 1 is the strategy and business plan of which countries to go, how to bid all of that. Stage 2 is build a team and get your PQ in those countries. Stage 3, start bidding. So even in Oil & Gas, as of now, 3, 4 countries, we have already bid. And we've qualified in closer to 5 or 6 countries. So it's -- we're moving in that direction of saying, let's start bidding, let's winning. In Railways, we already had a project in a neighboring country in Bangladesh, and now we're qualified in a few more countries. And the team is in place to focus on starting bidding. So at least I'm personally very hopeful that both this division should have at least 1 significant win in Q2, Q3 of the current year in the international side. And my definition of significant because they are relatively a division who've not done so much international business would be around $50 million to $100 million.

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

I have just 1 question. So recently, KPTL submitted a bid for station redevelopment. Can you help us understand what would be the kind of capital commitment and our strategy out here? Would it be a pure EPC, or it would be a concession-based contract?

So from a capital commitment perspective on station redevelopment, we might not commit a lot of capital. We're trying to primarily focus on more the EPC side. And even if we go as the developer side, we'll go with a partner who would have -- who'd come with a long-term development focus and significant capital would come from them. So yes, we have got a team in place. We have qualified. We're looking at those bids, but it's not -- it's primarily for EPC and limited capital commitments, so the significant capital commitment should come in from partners once we win the project.

[Operator Instructions] The next question is from the line of Amber Singhania from Asian Markets Securities.

Just a couple of things, sir. As -- just following up with the previous question, we are also -- are we all bidding for this TBCB projects on the power T&D side? And if yes, then what is our strategy as capital commitment on an annual basis going forward once you become debt-free and monetize the noncore assets, what is our strategy as a -- how much commitment we are comfortable with on an annual basis, so that we should -- we do not leverage further on the capital commitment side?

Yes, we definitely are looking at bidding for a few TBCB assets, not all of them, but at least 2, 3 of them to make sure that we continue to be in this business and we continue to build as we have seen in the past. We've been very successful in bidding, building and exiting, right? So as far as capital commitment is concerned, I think our strategy is very clear, Amber, and that was in the past also, that a lot of these investments would happen from free cash flows. So if you look at the debt today of KPTL, right, a debt of around INR 750 crores net debt after investing more than that money in all the TL BOOT assets, clearly gives a signal that we build only out of our free cash flow. So going forward also, our plan is whatever free cash flow is visible, some portion of it would be invested in long-term BOOT assets. And again, with a strategy that you win, you build and you exit. So it's no longer a strategy of saying that we want to build a -- build a long big portfolio, but you bid, win and exit. So I don't think it would have an impact on debt from a bidding perspective, a lot of this would be out of free cash flows.

Okay. And secondly, what is your -- what is the status and your thought process towards the logistics business on monetization or continuation on that part? And also what kind of funding the Road BOTs will require this year from JMC side?

So let me answer the first one. And for the second one, I'll ask SKT and Vardhan to chip in. As far as Shubham Logistics is concerned, I had said that earlier also, we are -- we have appointed some advisers. We are revisiting the entire strategy of how do we get a strategic investor on board, a strategic or a financial because there is a lot of interest in that space. We were too busy in Q1 because that's the business we did not -- was shut-- it was not shut even for a day because they fall in essential commodities. But very soon, we should be spending a lot of time, and I'm hoping that Q4, sometime of Q1 next year, we should have some commitment from some large bidders who are interested in this space. But advisers have been appointed, the process has started. It's only a matter of time. As far as the road is concerned, I request Vardhan or SKT to just chip in for that. SKT? Vardhan? Sorry, please.

Yes. So as far as road assets are concerned, first quarter, we have not made any investment in the road assets. And overall, so for the year, we expect the investment to be much lower than what we had done in FY '20. FY '20, it was around INR 75 crores. I expect that this year, it should be in the region of INR 50 crores or less than that.

Sir, despite the lower toll collection we are confident of that?

Yes. Yes.

Okay. And Manish, just lastly, if I may ask slightly different in the business side. If you can comment on some thought process towards the pledge by the promoters? And also, there are a lot of -- a couple of rumors, which keeps on floating on the street about the reality business having a significant trouble on the books as such, which might impact on the listed entity. If you have any thoughts or any comments on that?

Sure. I think we have officially been communicated by the promoters over the last week about their exact plan on the pledge of shares, right? And I'm pleased to share that with -- and it's an official communication by the promoters to us. The promoters in the last 5 months from March till now have reduced the debt against pledge of shares by around INR 60 crores. They were at around INR 780 crores in March, and they are at around INR 730 crores now. And they have a clear plan to reduce further INR 70 crores to INR 80 crores in the next 4 to 5 months. Even during these difficult times, their focus was to reduce the debt against pledge of shares. And they have a clear plan of further reducing it. And that's a commitment we've made to the Board as well as to the KPTL management. So from that perspective, once that number comes down to INR 650 crores, INR 600 crores, you'll start seeing a lot of release of pledge of shares also. At INR 650 crores, we might not see much. It is driven by a lot of factors, including the market cap and the price and all of that. So and those -- that data is available to everyone, if you can collect that data from various sites, and you'll reach that number of around INR 730 crores, it's reduced by INR 50 crores, INR 60 crores in the last -- from March till now. So as far as KPTL is concerned, I think that commitment is good enough for us because it does not impact our business, but it's clear commitment to shareholders and stakeholders that the promoters have a plan to reduce the loan against pledge of shares.

The next question is from the line of Ajay Sheth from Quest Investment Advisors.

I have 2 questions. One question is, I'm not sure whether my understanding is correct. But if you take rough figures, I'm not going to go into the exact figure, KPTL today has a stand-alone around INR 800 crores debt, and JMC on a consol basis has around INR 800 crores. So total debt -- our debt is INR 1,600 crores. And we have pledged that more or less, this capital will become debt-free. So is my understanding correct that over a period of next 2 or 3 years, if we don't invest substantial money, KPTL at a consol level also can become debt-free in the next 3, 4 years?

So Ajay [Foreign Language], yes, if you ask me from a 2-year perspective, we should be there because a lot of money blocked in the Indore real estate and Shubham and also the restructuring of road assets, right? It would release a lot of debt. A lot of cash flows. So if you ask me, JMC stand-alone and KPTL stand-alone without JMC Road BOOT assets, I think end of '22, mid '23, we should be there. Road BOOT assets, clearly it's a perspective of restructuring and what happens there. But as far as KPTL and JMC stand-alone, including Shubham, for whatever portion we will continue to hold, we should be there closer to being a low debt, if not a nil debt in the 12 to 18 months after March '21.

Okay. The second question is that how do you see KPTL, JMC on a consol level in terms of the top line margins and bottom line over a period of next 3 to 5 years? I'm not talking about next 2 to 3 quarters, but 3 to 5 years.

So we have a plan. And since you have asked me the specific question, we want to be a INR 20,000 crore top line company in 3 years from now. We are at around INR 12,000 crores now. Clearly, we want to be aiming to that. This was a plan we had done pre-COVID. This plan could be plus/minus a quarter or 2 quarters depending upon this impact. But today with a visibility of around -- order book of INR 25,000 crores, L1 of INR 3,000 crores, we have INR 28,000 crores, INR 29,000 crores, even if it comes to 2 years order book, we should be doing a revenue of INR 14,000 crores, INR 15,000 crores consol in '21, '22 itself. So clearly, we're aiming towards INR 20,000 crores in the next 3 to 4 years with EBITDA margins being at double digit. And hopefully, with low interest costs, keeping EBITDA and PBT very close to each other.

The next question is from the line of Parikshit Kandpal from HDFC Securities.

By this year-end, the stand-alone level, almost no debt will be there. So are we looking to deploy some of the capital for any international acquisitions? Are you evaluating any acquisitions in the international market?

So within the core businesses, where we exist today, which is TL, Railways, Oil & Gas, Infrastructure business, we continue to look at opportunities globally where it can add value to us. So there are a lot of geographies globally where you cannot be successful being an Indian company, right? The entire Nordic is an opportunity. We were trying Nordic for 10 years. We finally, after -- we got a company, and now we are among the top ones there. We do continue to look at opportunities in some of these markets, but smaller opportunities, not very big, right? So our belief is take a small company with a good management and then build it up. Yes, we continue to look at it. There are a few geographies we're looking at it. And as and when things materialize, we'll come back to all of you.

Sir, but how big could be the deployment investments or acquisition size in terms of outgo on these opportunities?

They would not be very significant. As I said, our philosophy continues to be same. So all of this would happen out of our free cash flows. They wouldn't be very big, $20 million, $30 million, something in that range, $20 million, $30 million, whatever. Something in that range, but not very big. It's not going to be like...

20, 30?

Million dollars.

$20 million, $30 million. Okay. The second question was for JMC So one thing is -- one bit is that we are looking at restructuring of these assets. The second thing is that there is a huge debt repayment, which is coming up, and there's a NHAI premium which may kick in. So if you can quantify a little more granularity on how these 2 liabilities will be dealt with, without restructuring and with restructuring, so what could be the numbers which are coming up due for repayment next 2 years on debt side and premium? And post restructuring, how this will basically get distributed?

Vardhan, can I just request you to take this question?

Yes. So as Manish had pointed out, we are actively engaged with the lenders in terms of restructuring 2 road assets, and we expect actually that process to get completed or to at least have a good progress made in the second half of current financial year. And once that happens, then the debt repayment pressure on account of this will significantly reduce in the near future, and it will get aligned with the liquidity and the cash flow of the projects. So to that extent, I think we are making good progress, and we are on track to achieve that. And as far as the premium is concerned, I think that is something which, once this issue is tackled and handled, I think NHAI premium is something which we will be able to handle more peacefully and in a good fashion. So I don't expect both this to remain a challenge going forward once the restructuring activity is completed.

Okay. Now the RBI has allowed a case-to-case basis, they've allowed onetime restructuring. So your own interaction. So there's 1 process which you are already running before RBI coming up with policy and the guidelines will come shortly. So in your own interaction with the bankers -- so you will be comfortable in both the sides, like even with the current way the restructuring discussions are progressing, and even if there is a guideline of on the OTR side, so there also you stand to qualify? Are you complying with both conditions as of now, the indicative ones?

So we have already initiated discussions pre-COVID with the lenders. The current guidelines that RBI has announced are explicitly to address the stress which has been caused due to COVID. So I'm not very sure whether the current guidelines will be applicable to the road assets of JMC. In any case, with lenders, we have initiated discussion and there is a progress that is being made. So I expect things to move forward positively.

Okay. And just lastly, if all these discussions, which are progressing, I mean on a, say, very less likely chance, suppose remotely it may not reach to a conclusive conclusion, so is there a possibility that KPTL may give a loan or -- because at the stand-alone level, you may be debt free, so the possibility that they can invest and support JMC to come out of this loan thing, which there are large repayments, which are coming up in the next 2 years? So can it be made good from there? So any backup plan on that?

As of now, we do not have any backup plan. We're confident that the original plan would work. But historically, wherever this was required, we had provided that support as KPTL. But as of today, I think the JMC team as well as when we look at the operations, we don't believe that they would need any support. But in case they would need support, we would look at it at that appropriate time.

[Operator Instructions] The next question is from the line of Vijay Karpe from Bryanston Investments.

My question pertains to JMC. Sir, we have already like almost met the order inflow guidance that we had given of INR 5,000 crores. My question was on the sales growth guidance of 5% in FY'21. This one looks a little tougher. What is the probability of this getting met because the asking rate in H2 is very high? Also, what is the sales mix of B&F and Infra this quarter? What was it last quarter and last year?

Yes. Vijay, SKT here. So as you are saying, the order inflow, we are meeting the target -- I mean we are close to the target by Q2 itself. That gives us confidence that we should be able to grow by 5% based on our earlier guidance. As far as the mix is concerned, that remains largely 50-50 basis. Even the order inflows are in the same ratios. So since the order inflows are in the ratio and also luckily, these orders have the good payment visibility, whether it's the B&F or Infra and that is why we are reasonably confident that we stick to our earlier guidance of 5% growth.

Yes. And coming back to the restructuring. So BOV has put SREI on the watchlist. So what is the implication of this on the restructuring of those assets?

Your voice got broken. Can you repeat your question?

Yes. So I was asking in Kurukshetra project, which we are trying to restructure, SREI is one of the JV partner. So BOV has put them on the watchlist. So what is the implication of this on the proposed restructuring?

So so far, the process is going smoothly. We are not facing any headwinds from the BOT side. So it is going on smoothly because banks are also looking for a reprieve.

And the gross margin improved this quarter substantially. What has been the reason? Are they sustainable? The -- what is the reason for the increase in debt? And lastly, what are the claims that we have lodged to NHAI, the loss claims? And what is the status on this?

So I'll answer your last question first. We have launched the revenue loss claims on the BOT jobs and they are in the various stages of arbitration commencement. As far as the -- your first question is concerned, the revenue loss -- can you repeat your first question? Your voice is breaking in between.

Okay. My question was, the gross margins have improved a lot this quarter. What was the reason? Are they sustainable?

Yes, yes, they are sustainable. Definitely, they are sustainable.

Not the EBITDA, but the gross margin?

Yes, yes, they are sustainable.

Okay. But what was the reason for increase in gross margins?

So this is basically the business mix which we are currently handling. That is good enough to give this gross margin.

So I think I'll just answer that specifically, Q1, a lot of revenue of JMC came from Infra business, Water and not as much from B&F. Water business comparatively is slightly better in terms of margin as of now. So that's why the gross margin. So it was -- as SKT explained, it was primarily the business mix. On an annualized basis, we should be -- we're confident of delivering what we have targeted.

So the mix was 50-50, right? So this is an improvement compared to the last quarter and last year, right? B&F was a little higher in the last year and last quarter, right?

Yes. Exactly. So this time it was lower, Water was higher. So that's why that mix and improvement in the gross margins.

Okay. And what is exactly the claim that we have lodged with NHAI, the amount? And what is the reason for increase in claims this quarter?

So the claim exactly, as I said, is the loss of revenue claims as well as the diversion road, which have been constructed around the project. Total value for all the 3 assets is -- the claim value is about INR 1,200 crores.

[Operator Instructions] The next question is from the line of Bharat Sheth from Quest Investment Advisors.

Manish-ji, in your remark on Shubham, you said there is a lot of interest. And since recently, government has also announced about a huge investment in agri infra. So what sense are we getting? I mean, earlier, we wanted to hive up fully, now we are talking of strategic. So if you can give a little more color from a little more time -- a 2, 3-year time perspective?

Bharat [Foreign Language], I think from a long-term perspective, we're clear that we do not want to be a majority shareholder in this business, right? Now if it means I need to divest x or 2x, whatever that number is, because we believe that there is an opportunity in that business, but there could be other players who might be best fit to run the business. It requires a very different mindset of running it. We can continue to be minority shareholders. We can exit full or continue. Exactly it depends on who is the offer and at what price and at what time and all of that.

Okay. And sir, I mean, on JMC side, if one can give, I mean, a little more color on the bidding pipeline as well as, I mean, color on this L1 position, which we have and earlier, we were looking Africa market too, where we are in the whole process?

SKT?

Yes, Bharat [Foreign Language], the order pipeline looks to be good in all the 3 fronts, in the B&F, Water as well as International. And as we said last year, our focus remains towards the -- as far as International is concerned on Africa and where other opportunities are coming. And domestic side, particularly the water sector is seeing a lot of traction, and that is where you must have seen the orders coming in the Q1 and now in this month. B&F, luckily, we are placed very well towards south, as you know, historically. And that has not been affected by COVID much so far. I mean this is what we have seen even the -- on our customers with whom we have 10 to 15 projects. They have been paying regularly. They are launching new projects. So order visibility side, Bharat [Foreign Language], we have good confidence, and you have seen. I mean we are already INR 2,500 crores, roughly, we have booked the order. We are lowest position in about INR 1,700 crores. And as we clearly can see next quarter, we will be putting bids of another INR 6,000 crores to INR 7,000 crores. It will be in the -- mixed in all the 3 areas. So there is a good business visibility as far as the order pipeline is concerned.

And just to add to what SKT said, sorry to intervene, there's also 1 very big tender, international, I think, where we are expecting the LOI to be there in the next few weeks, SKT?

Yes, yes.

It's a 3-digit million dollar in that range. So we're expecting that order to be -- I mean the LOI to come in as early as any time in August itself. We're already L1 in that.

Yes.

Okay. Yes. I mean, in this INR 1,700 crores this L1, what is, I mean, mix, I mean, roughly?

So that's what Manish said, one will be a large 800 to 900 -- INR 800 crores from overseas, and balance INR 1,000 crores from domestic.

Okay. Again, same Africa reason -- or we are expanding beyond also Africa?

We are going beyond Africa also. So it is other than Africa.

Okay. So it means, sir, our order book, what target we had given, INR 5,000 crores will be exceeded much large?

So we will be definitely able to achieve it. And our endeavor will be there that how much further we can get the orders since the opportunity size looks to be good, and we are placed well to harness that opportunity. I won't give a number today. But yes, there is a good visibility available.

The next question is from the line of Prem Khurana from Anand Rathi.

So 2 questions on the JMC. So first one was, I think, in your summary and your comments, you said, I mean, you're looking at almost around 5% kind of growth -- revenue growth in this year. So I mean, if I have to adjust for Q1 numbers, it seems like you would have to deliver more than 20-odd percent in the balance of the FY '21. And if I look at historical numbers, we've not been able to do that on a consistent basis, at least, in the recent past, wherein we have delivered more than 20% of growth. So one, how do you intend to achieve that? Second would be -- I mean, is it fair to assume that Infra would have to do heavy lifting in this year because I mean you would want to be very sure of private sector residential real estate orders given the fact that the market is still fluid, and you're not sure how the residential real estate demand pan out?

So you are right. We have a high asking rate in second half, but we are confident because the business mix proportions have changed compared to the last few years. And the -- as our Water business and the -- particularly water business as it gets traction, that is significantly contributing in the second half. And we are confident that, that is the business which is going to give the traction to the number what we want to achieve. As far as the B&F is concerned, I said in my previous reply also, yes, we are very watchful in every geography before taking the order, the payment capability of the customers. But we have seen, even in last month, the last 3 months, even in the COVID times, the developers in South, they have paid as the due becomes payable. There was not even a weak delay, right? So it was a normal business as far as the South developers are concerned. So yes, we are very cautious in the other areas. But at the same time, where the visibility is good, we are moving ahead as business as usual.

Sure. And also, if you could help us understand why was the debt up this quarter despite our top line down by almost around 50-odd percent, what would explain the rise in your net debt number sequentially?

So net debt has gone up marginally because the -- while we did the good collection in these tough times, the payables were also due. So we had large LC payments of about INR 200 crores, INR 250 crores during this quarter, and that is why the debt has marginally gone up. And now the -- when the execution cycle starts, we expect this to come back again to the normal times.

Sure. And just one last, if I may. I mean, the bid pipeline that you spoke about almost around INR 6,000 crores to INR 7,000-odd crores, is any mix in terms of, I mean, how many of these could be private sector, how many would be public or buildings or infra?

So roughly, we can say it will be a mix of 50-50 or 60-40, 60 could be government and 40 could be private. Today, we are at 50-50. It will hover around the same range.

The next question is from the line of [ Rakesh Rai from Ing Securities. ]

Sir, my first question is regarding the Railways. How much order L1 in Railways side, sir, and Oil & Gas?

So as of today, on the Railways side in KPTL, we don't have any L1. We have a small project of around INR 80 crores where we are L1, around INR 70-odd crores, but there's no significant L1 as of today as far as Railways business is concerned.

Oil & Gas pipeline?

Oil & Gas, also, as I said earlier, Q1, we bid for a lot of projects, but we don't have L1 as of now. We've got a few projects in March. We are not L1 as of now in any, but we bid for a lot of projects in Oil & Gas over the last few months.

Right, sir. Sir, my next question related to this one, how much order we are looking at industry level from Railways and Oil & Gas pipeline?

So oil and gas pipelines, if I look at the large 4 or 5 players, we should see orders of approximately INR 8,000 crores to INR 10,000 crores coming in the next 6 to 8 months. And these are the big ones, IOCL, GAIL, ONGC, GSPL at India level. We've been a large player in this market. We've been among the few players who've been in this business for long, and we expect to have a significant share of that. As far as international business is concerned, we've seen some traction in Middle East and Africa on Oil & Gas. We submitted some large bids also. And as I said earlier, that's something where we're expecting at least a $50 million to $100 million win in the current year. So from a totality perspective, there's reasonable business in that space. As far as Railways business is concerned, I think the entire electrification space itself has a lot of orders in the domestic front and the international is just opening up. So I think electrification itself will have bids of around INR 5,000 crores to INR 6,000 crores over the next 3 to 5 months.

Right. So my next question regarding your European business, Linjemontage. Currently, we are taking order from the Nordic region or we are looking for the other country -- different country also?

As far as Linjemontage is concerned, that's more focused on the Nordic region. As far as KPTL is concerned, the entire world is our market.

Right, sir. So how much order book as on 30th June for Linjemontage, do we have any further decisions?

I think the number was around INR 1,500 crores, if I'm not mistaken. I can just -- Ram, if someone can help me on that number?

Yes. This Nordics company, we have orders about INR 1,500 crores, Manish.

Sir, INR 1,500 crores -- I think right till the March on also this is INR 1,500 crores. For Q1, there's no order inflow for Linjemontage or any order inflow...

We received some orders during this year also. Do you need an exact number how much order we've received during this year? I can't hear you properly. Can you just speak a bit loud?

Sir, my question is -- how much order inflow in Linjemontage in Q1, sir?

We have about close to INR 200 crores in this year.

Right. Sir, my other question is related to Linjemontage. Currently, we have a margin of 5% to 6% for Linjemontage. Are we targeting to increase the margin in the near future? And how much, sir?

So we have already improved margins from 4.5% to 5.5% levels in the last 1 year. We would continuously be focused on improving that margin. It's a continuous process. Obviously, it's not going to be reaching the levels at which we are very soon because that's a different part of the world. But we definitely are targeting 5.5%, 6% for the current year and then we'll again target some improvement for the next year.

The next question is from the line of Ajay Sheth from Quest Investment Advisors.

Manish-ji, just a follow-up question of what you said over a period of, say, 3, 4 years, if we talk about KPTL, JMC, et cetera, going to a turnover level of INR 20,000 crores per annum. And obviously, with the economies of scale, with some improvement in margin, are we talking about something like INR 2,200 crores, INR 2,500 crores kind of operating profit?

Ajay [Foreign Language], you are much better in numbers than what I am. But definitely, we would like to keep a double-digit EBITDA. And this should [ continuously fall ] given that we'll start from a 0 debt and a lower debt numbers with clear strategy on exiting noncore assets. So yes, the PBT margin should improve. There would still be depreciation. But as I said, improvement is given, exact quantification is difficult today. But yes, we would improve from 8% levels going up.

Yes. And also then you have only 25% tax, if the government continues that 25% level. So the bottom line could look very, very healthy?

Sure. Sure, Ajay [Foreign Language]. That is something which is beyond us, so we'll be happy with whatever is [ as on that date ]. Our entire organization is focused a lot more on EBITDA and PBT.

The next question is from the line of [ Mihir from Capco Capital. ]

You threw your light on the pledging side of the promoters. If you can throw some more light on the real estate side of the promoters, that will be really helpful.

Unfortunately, we do not have a lot of clarity in that. That's a completely different business run by a different set of people. We've never gone into those details. Our interaction with the real estate team is primarily on pledge of shares and the lending against that. So unfortunately, we'll not be able to -- we are not aware of it. Our business itself has so much potential and opportunity that we're not spending too much time on that.

As there are no further questions, I would now like to hand the conference over to Bhoomika Nair for closing comments.

Yes, thank you very much for giving us an opportunity and answering all the queries very patiently. Thank you all the participants. And on behalf of IDFC Securities, I would like everyone for being on the call today.

Thank you very much. Thank you, everyone.

Thank you, sir.

Thank you. On behalf of IDFC Securities, that concludes today's conference call. Thank you for joining us, and you may now disconnect your lines.