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

Ladies and gentlemen, good day, and welcome to Kalpataru Power Transmission Limited and JMC Projects Limited Q3 FY '21 Earnings Conference Call hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Bhoomika Nair from DAM Capital Advisors Limited. Thank you, and over to you, Mr. Nair.

Yes. Thanks, Sriram. Good morning, everyone. Welcome to the Q3 FY '22 earnings call of Kalpataru Power Transmission Limited and JMC Projects. We have the management today being represented by Mr. Manish Mohnot, Managing Director and CEO; Mr. Amit Uplenchwar, Director, Group Strategy and Subsidiary Operations; Mr. Ram Patodia, President, Finance and CFO; and Mr. S K Tripathi, Managing Director and CEO. I'll now hand over the call to Mr. Manish Mohnot for his initial remarks, post which, we open up the floor for Q&A. Over to you, sir.

[Audio Gap] to you for attending this earnings call of KPTL and JMC. I hope that you are all staying safe and healthy. Let me begin by talking about key updates and then cover our performance in the quarter. We have delivered robust performance at consol level with top line growth of 11%, stable EBITDA margins, notable drop in the net debt levels and record order inflows despite a challenging operating environment. Commodity prices and freight costs continue to remain at elevated levels leading to pressure on profitability. We have achieved divestment of Kohima-Mariani transmission and received sale consideration in December '21. With this, we have completed divestment of all T&D BOOT assets. We continue to widen our international reach and have added 3 new countries during the year. We've also strengthened our market position in some of our focused business verticals as we acquire new clients and demonstrate our strong capabilities. Coming to road BOOT assets. We have provided for shortfall in termination payment and expected credit loss for Kurukshetra to an amount aggregating INR 86 crores in this quarter. However, we will continue to pursue the claims and termination payment against NHAI. Our total provision in KEPL for Q2 and Q3 is at INR 364 crores. We have also received consent from lenders for restructuring and Wainganga road BOOT assets, and we hope to close administrative formalities in the March '22. The deal for sale of Vindhyachal road asset is still under discussion. The terms are under negotiations at this stage. Our sales in Indore project is gaining traction with additional bookings and inquiries. Till date, we have completed a sale of 45% of the total sellable area. We plan to complete the sale of balance units in the next 12 to 15 months. We have received orders of over INR 14,000 crores -- INR 14,300 crores at a consol level during the year and have an additional L1 position of INR 5,300 crores. Coming now to the financial BOOT performance, first at a KPTL consol level. Our console revenue grew by 11% to INR 3,889 crores on back of strong execution in B&F, water and international T&D subsidiaries. Our EBITDA margin in Q3 was 9.3% at a console level. Our EBITDA margins remain under pressure with elevated level of commodity, freight and other input prices. Our exceptional items in Q3 '20 include the following: gain on sale of KMTL of INR 262 crores; value of fixed assets of Shree Shubham written down by INR 22 crores; an amount erecting to INR 86 crores for shortfall in termination payment and expected credit loss for Kurukshetra Expressway Private limited. Our decline in EBITDA and exceptional items have led to fall in PBT impact. Our consolidated debt is at INR 2,044 crores, which is a decline of 13% compared to last year and 27% compared to previous quarter. Now, at a stand-alone KPTL level, our revenue for Q3 was affected due to lower dispatches in T&D business and lower order inflows in the first 6 months of the year. T&D revenues, including Linjemontage and Fasttel grew by around 17%. Decline in oil and gas was around 30% and railways around 7% in Q3 '22. Our subsidiary in Sweden Linjemontage reported revenue of INR 364 crores with a growth of 13% and Fasttel Brazil recorded revenue of INR 139 crores in Q3 '22. We were able to maintain EBITDA margin of 9.1% in Q3 '22 and 9.5% for 9 months '22. Our exceptional item in Q3 '22 pertains to gain on sale of KMTL. Our lower revenue growth and foreign EBITDA margin has led to fall in PBT impact. At a stand-alone level, our net debt has declined by around INR 600 crores in Q3 '22 to INR 547 crores at the end of December '21, largely in account of inflows from sale of KMTL. KPTL received orders of INR 4,364 crores till date in '22, including new orders of INR 803 crores secured in month of Jan and Feb. Additionally, we have L1 of approximately INR 4,000 crores. We expect to convert most of this L1 orders in the next few months. Our stand-alone order book at the end of December '21 was INR 12,646 crores. Now, for stand-alone JMC numbers. At JMC, revenue grew by 26% to INR 1,348 crores in Q3 '22, driven by robust execution in B&F and water business. JMC's EBITDA margin was at 9% in Q3 '21. We expect margins to improve going forward as most of the projects have price escalation provisions in JMC. JMC has provided for an amount aggregating to INR 88 crores for shortfall in termination payment and expected credit loss for KEPL. As communicated earlier on the call, we have adopted a prudent approach and booked these losses upfront, while we continue to pursue our claims with NHAI. Our net debt at JMC was INR 603 crores at the end of December '21, with a decline of around INR 100 crores from previous quarter, despite a robust growth in turnover. JMC received order inflows of INR 9,984 crores till date in '22, and order book is at an all-time high of INR 19,192 crores at the end of December '21. Let me now conclude with the outlook. We expect our consol revenues to grow in the range of 10% to 15% for full-year '22, with JMC expected to deliver revenue growth in excess of 20%. Our EBITDA margins will continue to remain under pressure. We expect EBITDA margins to remain in the range of 9% to 9.5% as a stand-alone and consol levels for '22. Our debt levels for KPTL stand-alone and JMC expected to remain similar levels at the end of March '22. We expect order inflows to reach around INR 8,000 crores for KPTL and INR 12,000 crores for JMC for full-year '22, wherein at a consol level will have order inflow of approximately INR 20,000 crores for the current year. The current operating environment remains challenging with inflated input prices and competitive pressure. However, with a wide and diversified portfolio and extended international reach, we are comfortably placed to face the uncertainties. With that, we can open up the call for questions.

[Operator Instructions] The first question is from the line of Swarnim Maheshwari from Edelweiss Securities.

Yes. Sir, a couple of questions here. First one is, you had mentioned this that there was a strategic shift in dispatches. Can you please elaborate on that? Is it related to the -- [ owing to change in the ] -- or volatile commodity prices? What is it really?

So strategic shift primarily has 3 components. The first biggest component is freight prices and availability of containers, right? I think that's a big shift from an international perspective because freight prices, as all of us are at record high, but sometimes availability of container itself is becoming a challenge. A lot of our clients have come back and extended our delivery period because they can see that it's a global issue, not driven by any individual company. So that's a key reason for a strategic shift. Second, on projects where we know that on EPC projects that the site requires it much later than now, we have slightly shifted deliveries to make sure that at least if at all, we can catch the commodity cycle at the right time. But that's not significant. A significant portion is because of the freight cost and the availability of containers.

Okay. So basically, this is specifically with respect to the international projects, but how about the domestic projects? Are we facing similar kind of issues? Or is it much better [ domestically ]?

So as far as the domestic projects are concerned, I think delivery is on routine, except that some of our projects, we've seen stoppages, primarily some of our projects in Rajasthan in January, primarily on account of some environment issues, which is beyond our control. But otherwise, domestic projects has been very robust. I think we have delivered on what they had budgeted for 9-month level. So not many delays as far as the domestic projects are concerned.

And sir, just one related question with this one. So, are we still maintaining 5% to 10% revenue growth guidance given our 9-month is at negative 5%?

So I think we are changing our revenue guidance for a stand-alone company. We do not believe that we will be growing in the current year. There is a likelihood that there could be some degrowth for the current year as a whole at a stand-alone level. Although at a consol level, we continue to be confident of a double-digit growth. But at a stand-alone level, where we are today, it does not seem likely that we could have -- we would have a growth for the current year. But at the same time, given the visibility of order book, given the L1 position, things are looking much better from our next...

Ladies and gentlemen, the line for the speaker dropped. [Operator Instructions] Ladies and gentlemen, thank you for your patience. We have the line for the speaker reconnected. Sir, you may go ahead.

Extremely sorry, everyone, my line just got disconnected. So as I was saying that at a stand-alone level growth looks difficult for the current year. But even though the visibility, things have started looking better from a next year perspective, all the biggest challenge continues to be -- the volatility and commodity prices. And that's something which is completely beyond our expectations, as well as beyond our own benchmarks of where things could be.

Sir, sorry to interrupt you. Sir, your voice is coming slightly distorted.

Hello?

Yes, sir.

Is that clear now?

Sir, no, it's still not clear. Let me reconnect your line. Participants please stay connected. Ladies and gentlemen, thank you for your patience. Sir, you're reconnected.

Sure. Extremely sorry, some problems with the connection. Swarnim, did you hear my response or...

Yes. Yes, sir. No, no, sir, got your comments on that one. My other question quickly is actually on the bidding process. If you just see on the transmission BOOT side, I think you have mentioned that you will be actively participating in the [ bid ] and all. So I just wanted to understand how is the bidding environment over there because we have seen a couple of new entrants in that sector? And also, what will be our average ticket size that we are targeting in this segment?

So Swarnim, on the transmission side, if I divide this into domestic and international, right? Let me first start with visibility. As far as visibility is concerned, over the last few months, we've seen a lot many tenders being rolled out by the state government at a domestic level, by the government at a domestic level, whether it's on TBCB, whether it's on PGCIL getting some of the large lines on North India, whether it's on state-level utilities. So at least on the transmission side, after long, I believe that transmission domestic will start seeing reasonably good growth getting into next year, both on order flows, as well as [ earnings ]. As far as international is concerned, I think we had our own challenges of not being able to bid for a lot of [ well back ] and sorted projects till October. We are out of it completely now. And we started bidding and as you can see, a significant portion of our L1 position today is on transmission international only, maybe around 80% of our L1 is transmission international. As far as competition is concerned, I think it's at the same 6, 7, 8 players on majority of the large projects. On smaller projects, all the times, we see 10, 12 people coming in. But competition continues to be at similar levels, which is healthy competition. It's not as bad as some of the other segments where you are even seeing 25 to 30 players coming in. But as far as transmission is concerned, I think we continue to see 7, 8 players only.

I have a couple of more question. I'll come back in queue.

[Operator Instructions] The next question is from the line of Parikshit from HDFC Securities.

Sir, my first question is on JMC. So I just wanted to understand, you have seen robust order inflows, but the equation seems to be still lacking. Any update on that if you can highlight what is the contribution of the JJM orders in the order book? And how much has been the execution in the 9-month and the third quarter? That's my first question.

Okay. Yes, yes. So out of this, about 40% or 35% to 40% order book pertains to water. And out of that -- so you know the old maximum water thrust in the country is driven by this through the JJMs only, right? And out of that, about 75% to 80% is driven by JJM and the rest is the existing project, which are basically other than the JJMs. So to answer your question, it is -- about 80% is through the JJM. Yes, there is a small about 5% portfolio, which comes from the international. We are doing a couple of things in Maldives, right? So JJM weightage remains still heavy, and this is where the government is bullish. And we can see next 4, 5 years, good investment coming in the JJM across the all states in the country.

My question was how much of this order book has been executed in the 9-month of FY '22 and the third quarter of FY '22?

Your question is specific to the quarter?

Yes, yes. For JJM, specifically because there has been delays getting the DPRs and all in place. I just wanted to understand, is it because of these orders constituting a large part of order book, but still not contributing substantially to the order execution? So just wanted a sense there.

No. So, I think the situation is contrary to what you are saying. Our maximum -- so compared to the last year, which was -- we did about INR 700 crores in the water business. This year, we are doing INR 1,800 crores. There is almost 200% or more than that, the jump is there, and maximum of this execution is coming from the JJM only. There are pockets of the JJM where there is a dip. But there are states like Orissa, states like Jharkhand, where the execution is quite fast. There is a tremendous momentum building up in UP, which is currently little dissipated due to the elections. But -- so I think execution is on the track in all our JJM projects. If you ask the delayed side, as such, the water projects, there is a general traction delay because the government level, the mindset to drive these projects, some of the state governments, they are very strong, like Orissa, and places like UP, they are building up the momentum, and we will see the execution coming forward in the Q4 and the next year.

Okay, sure. So my second question is on the BOT portfolio, the road. So I think we are now out of the power transmission asset. But on the BOT road, if you can update what's the status there and how -- any update on this restructuring and monetization of these projects, if you can just update us better?

Right. So we can go asset-wise. So KEPL, which was our largest asset in joint venture with Shree, that we have terminated after 1 years of farmer agitation, during which the toll plazas were closed and there was no revenue. And as for the contract, we were entitled to do so. We have terminated and now we are working with the NHAI on the compensation and the termination payments, which I think in next 2 quarters, we will be able to resolve this. Part of the -- major part of the problem as far as the bankers are concerned, and we'll be also pursuing the uncompensated claim, which will arise to recover the equity. This is as far as the KEPL is concerned. But this also -- and you can see, this year, we are -- this quarter, we have provided INR 88 crore anticipated future liabilities, which will arise in KEPL. Coming to the WEPL and one more thing, as you are aware, in case of KEPL, we are already pursuing arbitration with NHAI on the breach of their covenant on the diversion making the alternate roads around the project. Coming to the WEPL, here also, you will see some spurt in the revenue, but this is all seasonal. Here also, the project -- we do not see much upside in terms of the revenue. But on the restructuring side, we have moved well and we expect to complete the restructuring of WEPL by March, which will definitely insulate us from the cash outflow next year. Coming to BBEPL. This remains a neutral project. So there is hardly any impact on the overall cash outflow or the revenue. VEPL, we are still in discussion with the investor to divest the asset. At the same time, this asset has a long tail of balance 23, 24 years, and our debts are to be repaid in the next 4 to 5 years. So we are also looking at the restructuring options. So overall, we can see that next year, the pressure from the overall JMC BOOT portfolio should come down, and it should come down to -- in terms of the building of the cash flow pressure or otherwise. And as we [ place ], we are pursuing, they may start maturing maybe the next year onwards, which will give a lot of relief to, not only the -- to the BOOT project, it will give a relief to overall JMC balance sheet.

Okay. Just the last thing, sir, just a bit on the pledge, if you can just comment on the pledge? And any plans to IPO the parent entity Kalpataru Real Estate, so any color there? And if that happens, then how does the pledge thing works? Is there are plans of doing this now?

Parikshit, so let me take that question. I think on a pledge perspective, the pledge has finally not gone up or has not moved significantly because of any borrowings. The borrowings continue to be constant. We've not seen the pledge come down as anticipated at the beginning of the year, but we believe that it should come down gradually during the current year, given that the sales of real estate has picked recently, that's what we've understood from the promoters. We might also not see any major happening by March. But we expect slowly pledge to come down to reasonable levels over the next -- over the first 3 quarters of the next year. As for your second question, the question about Real Estate for Kalpataru Limited IPO, I have no clue of that even that's something which is completely with the KL management.

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

First one, the JMC. Sir, we have provided so far, first on this KEPL INR 380 crore. So out of that, how much that cash outflow do we expect in case -- and if that will be there, then how do we -- the claim will be -- the amount of the claim that which can really match those outflows? Second, sir, any investment during 9 months in our road BOT?

So, Manish ji, you are answering or shall I take them?

You can take the [indiscernible].

So, Bharat, let us break your question in 2 parts. One is on the cash outflow side, I think as far as the KEPL is concerned, as we have taken a further impairment of INR 88 crores. This will cover any future exigency in terms of the cash inflow to the projects, at least for next 1, 1.5 years, right? And within that time, we expect to resolve the issue with NHAI. As far as the claims are concerned in KEPL, as earlier also said, we have 2 claims which are going on. On one claim, we have an award of about INR 50 crore. Second claim is in the advanced stage of arbitration. Thirdly, we will be lodging depending on the out of the box this termination payment to what they finally gave us, right? But to answer your question, we do not see cash coming out of these claims in the near future because it is a long-drawn process, 3 to 4 years. And that to initially, if we have to take out the cash, we have to provide the BG. So we are really not looking at the direct cash inflow coming from these claims, right?

And how much will be the cash outflow of this [ INR 380 crores ] that we may have to do?

So maximum has already gone. There will be nothing. That's what I'm saying.

Okay.

So there will be nothing in this financial year and in the next 2 quarters also, we do not see any cash outflow going forward from -- in KEPL from anywhere.

Okay. And any investment during 9 months or this current year, we expect other than these projects in other BOT asset?

Other BOTs, whereby there we -- because of the obligations on the VEPL, Agra and Nagpur continues. So that will come. Also, some of the projects are going to come in to the maintenance cycle, right? So some projects will go into the maintenance cycle. However, overall, next year, it should be in the range of INR 60 crore to INR 70 crore for the '22/'23 overall investment in BOT.

And how much this year?

This year, we have already done, how much?

[ INR 113 crores ].

We have already done INR 113 crores, and some more will come in the Q4 because some projects we have to do the regular maintenance work.

Okay. Now, sir, coming to -- I mean, on the JMC guidance for the current year and approximately next year, so what kind of a growth? Because we have already achieved 62% top line growth. So we were maintaining guidance of 20%. So do we expect a substantial decline in Q4?

So we do not expect a decline. I think we've given the heavy order book. We don't expect any decline. Rather, the same momentum will continue in Q3 and -- Q4, sorry, Q4. And still -- so that little dissipated momentum will continue next year, right? So we can expect even for the next year growth in the range of 10% to 15%.

And current year EBITDA margin, sir? Because...

So currently, we are at -- for the quarter at 9%. Overall, we are at 7.6%. We expect the year to close something closer to 9%. Because -- yes.

And next year?

Next year, it should be -- so let us see -- by the way, there is a lot of volatility in the market on the international side, logistics side and the steel and cement, the commodity side. It's still -- I think, given our order book, we should be in the range of 9% to 10% next year.

Okay. Now, last question for Manish. Manish that in the renewable side, we are hearing that government is planning around 370 gigawatt in next 9, 10 years. And the total investment is required around INR 30 lakh crore. So out of that, how much is our addressable market? And how do we look at that business apart from what you said, good traction in the domestic T&D side?

So, Bharat, from a KPTL perspective, the biggest benefit of all this investment comes into requirement of more lines in transmission and distribution, including substations, right? So the green energy corridor, the first one, a lot of orders have been placed. We're seeing now a few large more tenders coming up and there are huge plans at the government level to even connect -- enhance the connectivity for Northeast as well as the north. So from that perspective, I think the visibility has significantly improved in the last 60 days with a lot of tenders, a lot of orders being floated by the government. And I personally, after long has started believing that at least the transmission domestic space should start seeing growth again and reasonably good growth. It's not that 2%, 3%, 4%, 5%, which we have seen for the last 3 years. Reasonably good growth.

Medium-term perspective, sir, I mean any...

So my view would be getting into next year, the transmission is going to be same, including the neighboring countries should look at at least 10%.

And, I mean, over next 2, 3 years time frame, the kind of investment that government is planning on the...

So from a perspective of -- if I look at different segments, transmission domestic, next 2, 3 years, growth has started looking good. Railways has been muted growth for the current year, at least for electrification, we're seeing a lot of tenders coming on expansion in metros and all of that. Oil and gas, things have started picking up. although first 6 months we've not book many orders. But still started picking up, we bid for a lot of tenders. And we just declined an order also in our [ wins of Friday ]. So I think oil and gas should come back to track for 10% to 15% growth getting into next year.

And international, sir?

So international continues to be a big thrust for us. And as I said earlier today, also, we have an L1 position in excess of INR 3,000-plus crores on international. And we believe that would be a big area, both from a KPTL India perspective, as well as from a Linjemontage and Fasttel perspective.

Okay. And, sir, last question, if I ask, I mean, EBITDA for full-year KPTL? Because I believe that Q4 will have a little -- I mean, much better than the current run rate. So how do we expect full-year EBITDA?

So, Bharat, I think it's becoming more and more difficult to start projecting EBITDA. Yes, our order book looks healthy, but that's as of the 31 December price. After 31 December, we have seen 2 hikes in steel already in the last 45 days. So, right now, I'm keeping the guidance limited to 9% to 10%. But if this volatility comes down or it's at least still stable even if it has not come down, we should be targeting going back to the old days of double-digit margin in the next year.

[Operator Instructions] The next question comes from the line of Swarnim Maheshwari from Edelweiss Securities.

Sir, now we intend to be tax free. So we are right now at about INR 2,000 crores. Now, what are our other strategic projects that we actually plan to exit? And by what time do we intend to completely delinkage ourselves?

So I think let me take this question from a larger group level. I think if you look at it, we have already declared a lot of our investments as non-core earlier itself, right, because at T&D and that's fully done. So one of them we have exited in terms of the termination, one of them we are in discussion with a large player for signing offer sooner than later, and one of them is getting into restructuring mode. Shubham Logistics also has been declared non-core, while the business continues to be cash positive, and we would not need any support, but that's non-core for us, and I expect in the next few years, maybe not immediately, but sometimes in '23 or '24, we should look at either a strategic investment or divestment in any other form in Shubham Logistics. As far as Indore concerned, I think the project is nearly done. And 45% we have sold, we have good traction. We sold 7-odd flats in Q3, and the target for Q4 is 9 to 10 flats, flats plus shops. So we expect Indore also all sales to happen in the current year and in the entire financial [ lift ], and we expect that by March '23, we should collect all our dues on Indore also, which is INR 300-plus crores. So from a strategic perspective, I think we continue to be focused on making sure that a lot of our non-core -- technically non-core investments get divested over the next 12 to 24 months.

Sir, I got that. I mean, if you can just help us quantify what kind of money do we expect from the sale of road assets from Indore and from SSL, that would be helpful?

So today, it's going to be difficult to quantify on SSL and road assets. There's some discussions happening, which are confidential in nature. But Indore, our investment is around INR 300 crores, and I believe that, that entire amount we should definitely collect in the next 12 to 15 months. We do not expect any significant risk to come on Shubham because the markets look attractive there from a long-term perspective. On the short-term, we've seen a lot of commodities move out of our warehouses because of the high prices and the commodity market. But from a long-term perspective, we've signed up for a couple of more PPPs. So we've signed up with Haryana in the Q3, and we expect a few other states in Q4 and Q1 of next year. So from an overall business perspective, Shubham will continue to do well, and we don't expect any hits there. And Indore is what I told you in the range of INR 300-plus crores.

So clearly, the heavy lifting has to be done by the road BOOT assets, right?

Yes, right. But strategically, we're moving in a direction. I think everything takes time, given the kind of headwinds we are in today. But hopefully, Q4, we should be able to at least make sure that the restructuring of one of the assets is done and we might be pushing hard to see if we can reach an agreement in terms of the terms on the third asset, at least sign a non-binding offer in Q4. But that's something which depends on reaching an agreement in terms of terms because today, right now, what we're discussing is no more about value, but about terms. And at the current value we're discussing, we don't see a significant hit coming on that asset also.

Right, right, right. And just one related question. So do we expect to be net debt free by, say, H1 '23 or FY '23 end? I mean, any time lines over there?

So I think we continue to be focused on keeping debt at minimal levels. And we will not be -- we might not reach that target maybe by H1. But maybe by March '23 our debt should further come down, unless we plan to do any strategic investments at a global level, which is nothing on the cards today. But otherwise, yes, you should see debt coming down gradually quarter-on-quarter over the next 4 to 5 quarters.

Got it. And sir, my other question was about the -- you were contemplating the merger of [ KPP ] and JMC, which actually could have yield at significant synergies. So, I mean, any update over there?

So I think, Swarnim, as I said earlier, we continue to focus on both the businesses as they are today. We continue to explore various structuring options which we have. So we definitely believe that the synergies would help us in terms of improving margins and bidding for larger projects. But that's something which at an appropriate time, the call will be taken by the senior management and the Boards of the company, if at all. But as of today, I think we continue to focus on growth of both the companies from a long-term perspective.

The next question is from the line of Shreyans from Equirus Securities.

My questions are pertaining to JMC. So, sir, of late, we've seen JMC projects bidding for road projects. So is that we are targeting on a serious note? And if yes, will it be restricted to EPC or we are looking at HAM projects or something of that stuff as well?

No. Shreyans, I think we have not done any bidding in the Indian road sector, in the last at least 1 year, except some strategic projects like some tunnels and all that. So currently, we are not looking at the EPC or HAM or BOT in India as far as the road is concerned.

Got it. Sir, my next question is pertaining to EBITDA margins. We were targeting roughly, I mean, double-digit, 10% to 11%, and now the guidance is at 9%, 10%. So just wanted to understand what is it exactly that why is it being brought down?

So, Shreyans, if you look at last 1 year, it is full of the uncertainty, whether it is the commodity or the logistics, all these are indeed most of the costs have gone up. And though our most of the contracts, they are having the escalation provisions, but there is a 3- to 5-month lag between the indices and the actual price. Correct? So you are right, initially, we forecasted in the range of double-digit. Now, we are cautiously saying that in the range of -- at around 9%. But as I see, going forward, if these uncertainties they settle down post elections, and then we can see the numbers improving going forward next year.

Got it. Sir, then a few bookkeeping questions from my side. Can you just let us know the CapEx number we've done for 9 months? And what is the target for this year and for next year?

We have already done about INR 137 million, if I recollect, INR 137 crores.

Okay.

And by year-end, it should be about INR 180 crores, INR 185 crores.

Okay. And, sir, for next year?

Next year, the CapEx -- so it will be in the range of about INR 150 crores or so.

INR 150 crores. Sure. And, sir, what would be our order inflow guidance for FY '23?

The '23 -- so having got this order book, next year, we'll be focusing on stabilizing and the delivery of the projects rather than looking at the -- targeting any particular order book. But, of course, we will be -- depending on the opportunity, we can look at a number of about INR 6,000 crores to INR 7,000 crores.

INR 6,000 crores to INR 7,000 crores. Okay. And, sir, one last question from my side. Are we eligible for Central Vista project?

In terms of the PQ size, we don't qualify. We are eligible, but we don't qualify.

Okay. Sir, any plans to bid for that project?

Central Vista, yes, if we get the project of our appetite and our size, we'll definitely bid.

[Operator Instructions] The next question is from the line of Pooja Virmani (sic) [ Teena Virmani ] from Kotak Securities.

Sir, this is Teena Virmani from Kotak Securities. My question is more on the non-T&D segment, like you mentioned that oil and gas is looking to pick up and you may target around 10% to 15% growth next year. But on a broader level, what kind of opportunities are coming up in this segment and even in the railways? Or like how do you plan to grow the non-T&D segment for KPTL stand-alone in terms of what opportunities are you looking? And how do we see this growth panning out over the next 2 to 3 years? And are there any new segments that you would be planning to add up in this if -- for example, if, let's say, railways is -- electrification is a little slower or if oil and gas failed to kick off the way you are expecting? So are there any more incremental segments that you may want to add up in the non-T&D to grow this segment? This is my first question.

Yes. Let me just first answer your last question about saying that, are we planning to add anything specific from a diversification perspective, oil and gas and railways? As I said earlier, nothing on the cards right now, but we'll continue to explore anything within the value chain where we exist today, whether it's in manufacturing or design or our specific project-specific skills. As far as oil and gas is concerned, we're seeing traction coming from all the large oil peers news, whether it's GAIL, whether it is ONGC, whether it is IOCL, whether it's Gujarat Gas, whether it is private sector investment through some of the large players, and we've started seeing that traction and tenders have started coming in. This is one area for us. And the second area, which I said earlier also is that the international market. Today, as KPTL, we qualify in a lot of markets in Middle East and Africa, even in oil and gas. And we have submitted a lot of tenders. We've not been lucky till now, or we've not been successful till now. But that's something which is sooner than later. So from a larger perspective, I think we're looking at both domestic opportunities improving and second, international able -- we should be able to take something sooner than later. And that's helping us keep that momentum of growth as far as oil and gas is concerned. As far as railways is concerned, electrification, yes, we've seen some slowdown and excessive competition coming in there. But again, on whether it is a metro electrification or whether it is broadening of the lines or new lines, we see some tenders coming in. Also, in railways, we had a very healthy order book. If you look at it today, the railways order book is closer to 18 to 21 months of delivery as of now. So more focused on closure of projects, making sure that we deliver on maximum projects that we have committed, and we will start -- we're looking at rebuilding that order book. Even in railways, we're looking at the international segment in Africa, and we should be submitting a few tenders in the next 3 to 6 months. And that would again be an important area of growth for us from a long-term perspective.

Sir, in railways, are you seeing or are you witnessing any kind of payment delays from railways?

So we see delays periodically. But on an overall basis, if you ask me on a 10-month basis, there we are fine. So sometimes some months, there are some payments which come delayed and all of the that. But on a 10-month basis, my net -- my reserve business has [ hold ] surplus cash and I have not been a drag from a cash flow perspective.

Okay. Got it, sir. And my second question is related to the provisioning, the way you did it last year for the expected increase in the commodity prices. Given the fact that prices are still moving up or they have stayed at higher levels, so do you expect any further provisioning by end of this year for the current set of order book for the next fiscal? Or you would take it as and when it happens?

So as of now from a [ CPP ] provision perspective, we have a provision of approximately INR 145 crores on our books on 31 December. This is what we have started the year also at similar numbers. And besides that in the last 9 months, we have actually incurred a cost in excess of INR 175 crores only on steel, aluminum, copper and freight increase. So where we stand today, it looks good. But as I said earlier, this is all a perspective at a given point of time. 31 December looks good. But again, you've seen INR 2,000 increase in the last month happening on steel, right? So, yes, but the new order book, which we're building, we're obviously keeping this question in mind without saying that things don't look like coming down and this is the steel price we'll have to live it. So the new order book does not -- would not have such kind of hits coming in, but the overall order book still continues to bleed and I think it will take us a few more quarters to get out of this whole order book, given the delay happening across the freight and a few other things. And again, some of our projects in international, which have stopped, where there's Afghanistan, Myanmar, all of that.

Okay. So was there any provision made in the current quarter in the December quarter?

So we've not made any provisioning additional. I think it's in the same [ average ]. Technically, the provisioning as of 1 April continues as of now. And whatever we have incurred is all been booked as a cost.

Okay. Got it, sir. My last question is on JMC. I might have missed out on the comment. Are we expecting any kind of incremental write-off on JMC or for Kurukshetra it is largely done taking into account any future exceptional items?

Yes. So SKT here. So as far as the KEPL is concerned, we have already done -- we have taken a write-off of INR 86 crores this quarter. And this is also anticipating some liabilities which may arise in next 2 or 3 quarters.

Beyond 2, 3 quarters, you may not expect any further write-off on the same? And for the other road projects, is any such thing expected? Or it will depend on how restructuring and the stake sale pans out?

So we do not expect anything major write-off there. And also it depends how the -- so if the restructuring goes, we are -- on [ WTPL ], we do not expect anything to happen there in the near future. And the other 2 assets, any way, they are self-sustaining currently. So we do not see any major write-off coming on these 3 leftover projects.

[Operator Instructions] The next question is from the line of Renjith from Mahindra Manulife Mutual Fund.

Yes. Sir, a couple of things like one of our competitors have recently entered into this oil and gas pipeline space. So are you seeing impact in your market share in that segment? So is that something that you have to rework on? What's your strategy there?

I know the specific question what you're asking. So from a competitive perspective, healthy competition is always good because the company we have required was always in competition. So it's not that there's a new player which has come in. And when there's a reputed player which comes in who has reasonable margin projections and who has more long-term views, it's always good to have healthy competition. Do we expect a lot of things to change from our own perspective? I don't think so. Because the kind of pre-qualifications we have, the kind of asset base we have, the kind of team we have built over the last 10 years, I think it's going to take a lot of time for any new player to do it over a shorter or even a medium time frame. And again, our focus on the international market is something which will help us grow much faster from a long-term perspective. So, have we changed any of our projections or plans because of competitive pressure? My answer is, no, I don't think it will change anything.

Okay. And again, when I look at your growth, if I adjusted for the inflation portion, it seems to be a pretty challenging or in terms of a declining trend. So what's your view like? How do you want to address this? And is there something which we are getting back into our thinking hat and trying to address this growth concern?

So I think from a growth perspective, yes, it's been a challenging year, right? And there's a lot of factors for it. We have some internal, some external and a mix of things beyond our control. So, clearly, order book wasn't growing for the last 12 to 15 months, right? And that would have impacted growth at a stand-alone level at some point of time, which we are seeing immediately now itself. Order business was impacted because of delays in orders because of our own world bank issues and a few other things. So -- and because of the volatility because at some period of time, we're not sure how to [ build ] in volatility [indiscernible] it looks good that we did not [indiscernible] projects which should last [indiscernible] because still we have further hit in the last 6 months, but you can't [ guess these ]. But when I say so, that's the reality, we'll have to live with. So yes, growth has been a challenge. But given the visibility of L1 orders, given that we are now allowed to bid on every kind of project across the globe, given the enhanced visibility of some of our international subsidiaries. And given the new targeted orders coming from transmission domestic, our personal view is that, we should be getting back into the growth mode next year. How much would be the exact growth as far as stand-alone is concerned, we'll have to come back to you in our next call, but stand -- but at a consol level, definitely we'll continue to be growing at a double-digit percentage even next year.

Sir, even if it's double-digit, the commodities have increased by 15% to 20%. So still in a volume terms, it's still flat. So that's what I'm trying to understand.

So you're right. In the first 9 months, it's been a drag on everything, on physical output, on plant manufacturing, on dispatches, on sites, everything. But from here onwards, even for existing -- we are expecting the commodity inflation not to continue at the same 15%, 20% levels. I just think the minimalization, you should see some reasonable growth coming into the next year, not definitely in the current quarter.

And our order intake, I just missed what -- previously, we're looking at INR 9,000 crores. So is that number still valid or you're cutting it down?

So at a stand-alone level, we are reducing our order intake target to around INR 8,000 crores. At a consol level, we are committing at around INR 20,000 crores. We are at around INR 14,000 crores plus, and including L1, we are at closer to INR 20,000 crores. So, on a stand-alone, we're cutting our guidance to INR 8,000 crores, which is what the L1 positions we have, which we believe should all get concluded by 31 March.

And this is largely due to the domestic T&D, which are getting delayed?

Yes. So significant -- I think it's across a lot of segments, even railways has said earlier, we're not seeing a lot of traction. And railways have seen, there has been huge competition. T&D, the domestic, yes, tenders have got delayed, but now we see a lot of tenders coming in. International, we're back to growth, and that's something which is going to help us in a big way going forward.

Okay. And regarding the percentage of fixed price contracts in our order book, how much will that be?

So as of today, our fixed price order book at a KPTL stand-alone level is around 70%, whereas the JMC, the fixed price order book is less than 10%. So on a consol basis, our fixed price is lower than 50%, but stand-alone KPTL, the fixed price is around 70%.

Okay. So that will be a challenge for us to negotiate next 2 quarters till the commodity plant is normalized?

True. But that's the nature of our segment because today, you don't have any tenders coming in our core businesses, except railways in both in TLD, TLI, as well as international, which is variable in nature. There are no tenders there. So what we have to do is load that into a cost at the time of tendering and assume that the same headwinds don't continue in the future.

Okay. But don't we do this back-to-back ordering? And doesn't that help us in arresting the gross margin or it doesn't work over?

So as far as aluminum and copper and currency is concerned, you can hedge that. You can hedge your future requirement. But as far as steel is concerned, there are no hedging mechanism except for keeping high inventory, but you can't keep inventory beyond the point, right? Because really, [indiscernible] investment all of that. But otherwise, there's no form of closing your exposure on steel.

Okay. Sir, all the best, hopefully, things normalizes.

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

Yes, sir. My question is on KEPL. So is it for all practical purpose now this asset has been handed over to NHAI after the independent engineers report? And we are not servicing anything, any debt, any loss funding? So as of now, nothing to do with this project?

Right. Except that we have to travel the journey with the bankers and get them there, get the due from the NHAI and also take the required contractual actions with the NHAI depending on the outcome, how much they repay to the bankers.

And who is servicing? I mean, NHAI is servicing this debt?

No. So there is -- once it is terminated, NHAI has an obligation to pay the debt deal [indiscernible]. So there is no servicing as such. But NHAI has informed to the bankers also that they are in the process of working out this amount and settling it.

Sir, this quarter's write-off of INR 87 crores, it's a non-cash write-off or it's a cash write-off? And you have to pay this much money as cash, which...

It is a non-cash item.

Okay. But you have incurred -- the understanding right that for INR 48 crores expected credit loss, you have -- that is the loss funding you have done on this project for this year until now?

That's right.

Okay. So INR 48 crores last funding you have done. So out of the INR 113 crores odd, which you are expecting for this FY '22. So if you can give a broad breakup of that, how much goes into Kurukshetra and how much in the other project?

So about INR 59 crores has gone into KEPL, INR 39 crores in VEPL and about INR 15 crores in WEPL.

And next crore, how do you see this number? You said about INR 60 crores to INR 70 crores will be incurred on this. So how will be the split be INR 60 crores to INR 70 crores?

Repeat your question?

You said for next year, we are expecting a loss funding of about INR 60 crores to INR 70 crores to continue versus our earlier number of about INR 10 crores, which you had guided that after the restructuring and monetization you may have, the losses will get cut into closer to 0. But now again, you're saying INR 60 crores to INR 70 crores of loss funding may need to be incurred in the next financial year, FY '23. So just wanted to know why that difference is coming now again, I mean, we are coming back to historical levels of loss funding? And if you also think give a breakup of which project this loss funding will be incurred on?

Right. So WEPL, we are going through the restructuring. So there what we have funded INR 15 crores in terms of the servicing the debt and that obligation will come down. But there will be required EBITDA of maintenance cycle on WEPL, which we have to fund, right? So there will be some cash funding requirement of WEPL for the asset maintenance. Coming back to VEPL, this year, we have done INR 39 crores. They are also the -- either the divestment or the refinancing will bring down the obligation of paying the funding for the debt. But at the same time, there also we are expecting some requirement for the maintenance cycle, maybe INR 15 crores to INR 20 crores or so. KEPL anyway, there won't be any requirement. So -- and BBEPL there will be a requirement of maintenance cycle of to the tune of about INR 10 crores or so. So, out of the INR 60 crores to INR 70 crores what I'm saying next year will be -- majority of it for the maintenance of the assets or for the -- and a part of that will be major maintenance, a substantial part of it because all these assets are now 7 to 8 years old and they are -- they have to go through the cycle of maintenance.

Yes. So that was my next question. So you said all these 3, which is INR 60 crores to INR 70 crores is largely going into MMR and not into like debt service, debt shortfall, right?

That's right.

So FY '24, we should not reoccur. I mean, these will be incurred in FY '23. So that should not come back on FY '24 then, maybe after 5, 6 years, maybe then again you're doing some MMR. But for FY '24, we are not seeing any significant loss funding for these [ whole assets ]?

Right. And by that time, I think there'll be other developments. As far as the WEPL is concerned, we can see there could be some fixating options on those assets NHAI considering. VEPL will go under [indiscernible] is expected to go in next 1, 1.5 years. So there could be more development on these areas going forward.

Okay. And is this extension happens, so we will look to retain it or we'll give it back to NHAI?

No, we'll give it back. I think we don't intend to keep it.

And just last thing, sir. So as per the contractual obligations with NHAI, so I understand that you have invested close to about INR 90 crores to INR 100 crores as pure equity, which was as per the -- in KEPL as per the concession agreement time. So what kind of termination payments you're expecting, if you can highlight on that? And also, how much of the claims you would have filed till now in this project?

So KEPL, we already have about of INR 55 crores or -- yes, INR 55 crores, which is already in the court. And by providing the BG, we can take the money. So this is the claim number one, which is already awarded as in our favor. The second play which we have launched is for about INR 910 crores. This is for the breach of NHAI for construction of parallel roads. This arbitration is in advanced stage, and we can expect award in '22, '23 Q3, Q4. Third claim we'll be lodging depending on, as I said, in the -- earlier in the call, that NHAI, though, concession obligation is very clear, NHAI has to pay the debt due, 100% debt due they'll have to pay to the banker and the adjusted equity. Right? Now, knowing NHAI, they will definitely do the [indiscernible], reading between the lines, increase the maintenance obligation because while exiting the asset, all kind of such pressures will come. Depending on what we get, we will be lodging another claim to recover the full equity, which we have invested in the project because this is what we are entitled to. But it will not come in straight way. It will come through the contractual and the legal process only.

Thank you very much. As there are no further questions, I'll now hand the conference over to Ms. Bhoomika Nair for closing comments.

Yes. Thank you, everyone, for participating in the call. And I would like to thank the management for giving us the opportunity to host the call. And wishing you all the very best for the upcoming quarters. Thank you very much, sir.

Thank you, Bhoomika. Thank you, everyone.

Thank you.

Thank you very much. On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.